<PAGE>   1
Date Filed: July 3, 1997

                       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, 1997 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
             (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 1502, TORONTO, ONTARIO, CANADA      M5G 1Z8
          (Address of Principal Executive Officer)               (Zip Code)

                                 (416) 595-6222
              (Registrant's Telephone Number, Including Area Code)

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

  Securities registered pursuant to Section 12(g) of the Act:  NONE

<PAGE>   2
     Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes /X/ No / /

     Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. / /

     As of June 30, 1997, there were issued and outstanding 16,823,277 shares
of the Registrant's Common Stock, par value $0.001 per share, and 4,830,394
shares of the Registrant's Class B Voting Common Stock, par value $0.00000007
per share. Thus, in aggregate, as of June 30, 1997, there were issued and
outstanding 21,653,671 shares of the Registrant's common and Class B voting
shares, of which 16,963,905 shares of the Registrant's voting stock are held by
non-affiliates. The aggregate market value of the common and Class B voting
shares held by non-affiliates at such date was $2,544,586 (calculated on the
basis of $0.15 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 such
date).

                       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 ("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).


                                   -- None --


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                                TABLE OF CONTENTS

Item Number and Caption                                                     Page

PART I

1.      Business                                                               4
2.      Properties                                                            19
3.      Legal Proceedings                                                     20
4.      Submission of Matters to a
        Vote of Security Holders                                              20

PART II

5.      Market for Registrant's Common Equity
        and Related Stockholder Matters                                       20
6.      Selected Consolidated Financial Data                                  22
7.      Management's Discussion and Analysis
        of Financial Condition and Results of Operation                       22
7A.     Quantitative and Qualitative Disclosures About Market Risk            32
8.      Financial Statements and Supplementary Data                           32
9.      Changes in and Disagreements with Accountants
        on Accounting and Financial Disclosure                                32

PART III

10.     Directors and Executive Officers of Registrant                        32
11.     Executive Compensation                                                35
12.     Security Ownership of Certain Beneficial Owners
        and Management                                                        46
13.     Certain Relationships and Related Transactions                        47

PART IV

14.     Exhibits, Financial Statement Schedules
        and Reports on Form 8-K                                               53
15.     Signatures                                                            56


FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA                                   58


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                                     PART I

                                ITEM 1. BUSINESS

CORPORATE HISTORY

     Tracker U.S.'s predecessor was originally incorporated in Utah in February
1986 under the name Equitec Capital Corporation to serve as a vehicle to acquire
or merge with an operating company. It changed its name to E-Tech Capital
Corporation in March 1986 and to E-Tech, Incorporated in February 1987. In July
1992, Tracker U.S.'s predecessor changed its state of incorporation from Utah to
Nevada through a change in domicile merger and, in connection therewith, changed
its name to Ultra Capital Corp. Prior to the Reorganization discussed in the
next paragraph, Tracker U.S.'s predecessor had been inactive for the preceding
several years and had conducted no significant operations or activities.

     In July 1994, Tracker U.S. changed its state of incorporation from Nevada
to Delaware through a change in domicile merger and, in connection therewith,
changed its name to The Tracker Corporation of America and changed its fiscal
year end from December 31 to March 31. Also in July 1994, Tracker U.S. succeeded
to its current line of business through a reorganization (the "Reorganization")
in which it acquired all of the issued and outstanding voting shares of The
Tracker Corporation, an Ontario, Canada corporation ("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. See "CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS - Reorganization."

     Tracker Canada, which originated the Company's present line of business,
was incorporated in May 1993 and is now a wholly-owned subsidiary of Tracker
U.S. Prior to the Reorganization, Tracker Canada engaged in organizational
efforts, including the hiring of technical and management personnel, 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 Canada and the United States.

BUSINESS OVERVIEW

     The Company is a development stage company that has developed and has begun
to market, sell and operate a personal property identification and recovery
system which uses advanced bar code and laser scanning technology to aid in the
identification and recovery of lost or stolen personal possessions.

     The Company launched its service in a limited test market in Toronto,
Canada in October 1994 and is slowly continuing to expand its service throughout
Canada. The Company has begun to introduce its service to various communities in
the United States. The Company offers its services through diverse marketing
channels such as joint promotional partners, selected retailers, direct
response, telemarketers, and network referral marketers. To facilitate its
identification and


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recovery service, the Company is attempting to organize a network of strategic
partnerships and scanning locations in high traffic public areas, including
courier companies, law enforcement agencies, lost and found departments and
major tourist attractions. There can be no assurance, however, that the Company
will be able to establish and maintain such a network or successfully market its
service through such channels. In addition, there can be no assurance that
competitors will not enter the market with similar or superior products and
services. See "BUSINESS - Competition". The continuation of the Canadian and
United States roll-outs and the development of future markets will depend on
certain factors, including demand for the Company's service and adequate
financing and capital, over which the Company may have little control.

     The Company's longer-term strategy is to develop an umbrella of recovery
services ranging from the current identification and recovery service packages
to laser etching the Company's symbology at point of manufacture. There can be
no assurance, however, that the Company will be able to implement its
longer-term strategy. See "BUSINESS - The Company's Solution".

     In addition to recovery services, the Company has implemented and offers a
card registration service.

The following diagram illustrates the corporate structure of Tracker U.S. and
its subsidiary:

                           ---------------------------
                           | The Tracker Corporation |
                           |       of America        |
                           |    ("Tracker U.S.")     |
                           ---------------------------
                                        |
                           ---------------------------
                           | The Tracker Corporation |
                           |   ("Tracker Canada")    |
                           |(wholly-owned subsidiary |
                           |    of Tracker U.S.)     |
                           ---------------------------
                                        |
                           ---------------------------
                           | 614593 Alberta Limited  |
                           |   ("614593 Alberta")    |
                           |(wholly-owned subsidiary |
                           |   of Tracker Canada)    |
                           ---------------------------

     Tracker U.S. is the parent company of Tracker Canada and generally provides
management, accounting, tax and capital raising functions. Sales and contractual
relationships are made through both Tracker U.S. and Tracker Canada. Tracker
Canada is a wholly-owned subsidiary of Tracker U.S. and generally provides all
support services and operational functions to support sales activities,
including staffing and facilities. 614593 Alberta is a wholly-owned subsidiary
of Tracker Canada which has no material assets and conducts no activities.


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NEED FOR THE COMPANY'S PERSONAL PROPERTY IDENTIFICATION AND RECOVERY SYSTEM

     The Company believes that only a portion of the population has taken steps
to label or otherwise identify its belongings in the past because of skepticism
concerning the possibility of recovery and the value of taking measures to
increase the likelihood of recovery. In addition, the Company believes that
various existing methods of labeling or otherwise identifying valuables have not
achieved mass market acceptance, create concerns for security conscious owners,
or have been ineffective in returning valuables to their owners because many
owners record only the serial numbers of their possessions, thus making it
almost impossible for the police or a "Good Samaritan" to trace the owners and
return the possessions.

THE COMPANY'S SOLUTION

     Based upon research conducted by the Company, management believes that
there is a need for a personal property identification and recovery service
that:

     *    makes it convenient for members to identify their possessions;

     *    enables members to identify their possessions without placing personal
          information on the possessions;

     *    provides a better method of identification that will remain on
          possessions and will remain intact;

     *    provides a system that will make the identification process easy;

     *    motivates more people who find valuables to be "Good Samaritans" by
          returning the valuables to their rightful owners; and

     *    thereby improves the chances that members will recover their lost or
          stolen possessions.

The Company believes that its personal property identification and recovery
system meets these needs.

     The Company plans to expand its recovery service by having manufacturers of
products such as computer chips, bicycles, power tools, electronic equipment,
cameras and auto parts apply the Company's coding, through laser etching or
other methods, directly onto or into products at the source of manufacture. The
Company believes that this expansion of its service will be attractive to
manufacturers because (i) it will add value to their products by showing that
they care about their customers and their customers' ability to recover lost or
stolen items and (ii) the coding will enhance the ability of manufacturers and
distributors to combat retail and warranty fraud. Currently, however, the
Company does not have a contract with any manufacturer to laser etch the
Company's coding or to directly apply the coding at the source of manufacture
using any other method. 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). There can be no assurance, however, that the Company will be able
to successfully expand its service in this fashion.


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<PAGE>   7
THE COMPANY'S PERSONAL PROPERTY IDENTIFICATION AND RECOVERY SYSTEM

     The Company provides a totally integrated personal property identification
and recovery system. The Company's strategy is to provide a personal property
identification and recovery system that does not merely provide another method
of identifying articles, but instead provides a simpler method of identifying
articles as well as a complete identification and recovery service that will
help return the articles back to members when the articles are located. The
Company's system is comprised of four key elements: (1) an identification
device; (2) a scanning network; (3) a computer database; and (4) a pick up and
delivery system.

     THE IDENTIFICATION DEVICE. The Company offers its members special encoded
labels that are attached to the members' personal possessions and contain
ownership information in advanced bar code form (PDF 417 symbology). In addition
to the coding, a North American 1-800 number, a toll free worldwide number, and
the "call to action" phrase "IF FOUND CALL TRACKER" are printed on the labels.
The Company believes that its labels provide a better method of identification
that will remain on possessions and will remain intact because the labels: (i)
use a 1.0 mil strong, permanent acrylic adhesive; (ii) have high cohesion; (iii)
have good resistance to heat, cold and ultraviolet rays; (iv) have good
quick-stick, peral and shear strength; (v) include a hard layer coating on the
exterior of the label for abrasion resistance and resistance to solvents; and
(vi) are read by PDF 417 technology which allows scanning even if the labels are
partially defaced. There can be no assurance, however, that the Company's labels
will not be removed. Any failure of the labels to adhere properly could damage
the credibility of the Company's property identification and recovery service
and could have a material adverse effect on the Company's business, operating
results and financial condition.

     THE SCANNING NETWORK. The Company has begun to locate the scanning
equipment required to scan the PDF 417 encoded labels at key points of recovery
in major metropolitan areas in North America. The average cost to the Company to
install scanning equipment is $2,500 per installation. Scanning locations are
expected to include police stations, major transportation lost and founds, and
certain high traffic public facilities, such as theme parks and other tourist
attraction venues. In addition, arrangements have been made with a national
courier company in Canada, Purolator Courier Ltd. ("Purolator"), to maintain
scanning locations. As of June 30, 1997, the Company had placed scanners into 39
police stations and other sites in Canada (15 in Ontario and 24 outside
Ontario). Negotiations to place scanners in the United States have begun. As of
June 30, 1997, the Company had letters of intent from more than 125 police and
sheriff locations throughout the United States to accept the Company's scanners,
and had already installed 29 scanners in the United States pursuant to those
letters of intent. There can be no assurance that these letters of intent will
result in additional placed scanners or that the Company will be able to
continue to establish strategic or centrally located scanners throughout a wide
geographic area. Any failure to place additional scanners could damage the
credibility of the Company's property identification and recovery system and
could have a material adverse effect on the Company's business, operating
results and financial condition.

     THE COMPUTER DATABASE. After a member's lost item has been found and then
scanned, the labels are linked electronically to a central computer database.
Each label is registered to a particular member, and the computer database
contains membership information


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that permits the Company to identify the member who owns a retrieved article.
The Company's computer database operates in a fast, multiple-user environment
with easy-to-read and easy-to-fill-in screens that accommodate multiple member
service entries and minimize member waiting times.

     To ensure the security and integrity of its membership and recovery code
databases, the Company uses a combination of program design, technology and
Company policies. The integrity of the label/member relational link is critical
to the proper operation of the Company's personal property identification and
recovery system as it provides the facility through which the rightful owner of
a recovered item is identified, thus enabling the Company to return the
recovered property to the member. The Company uses five methods to establish a
secure member/label relation: (i) the Company policy of "zero tolerance" for
matching errors; (ii) the use of two secure servers, an NT member database
server and unix label database server; (iii) the use of FoxPro database software
across all platforms; (iv) the process of linking and verifying the member ID
number and summary or "master" recovery code during order assembly and
fulfillment on two levels using a bar code scanner to reduce the risk of human
error; and (v) the use of a data entry screen with mandatory prompts and a
verification algorithm by the link established during direct response
activation.

     The privacy and protection of the membership and recovery code databases
are secured through: (i) the Company policy not to release membership
information to any third party (other than police agencies); (ii) the use of
four levels of system redundancy -- tape backup, equipment replacement
inventory, off-site redundant system, and hard copy record keeping; and (iii)
the prevention of unauthorized server access through the use of (a) serialized,
password protected copy written proprietary software used by recovery terminals;
(b) a separate communication server for remote access; (c) distinct
communication and network protocols between the remote access server and the
membership database server; and (d) a system audit by an independent third party
which indicated that the membership database could not be accessed remotely and
that system integrity is high.

     No security system or procedures are foolproof. Any material breach of
security may damage the credibility of the Company's personal property
identification and recovery service and could have an adverse effect on the
Company's business, operating results and financial condition.

     THE PICK UP AND DELIVERY SYSTEM. Once the label has been scanned and the
computer database has notified a Company service representative of the location
and owner of an article, a Company service representative then notifies the
member that his or her possession has been found and informs the member of the
item's location. The identified item may then be picked up by the member or,
upon the member's request, delivered to the member safely and promptly by
courier.

THE COMPANY'S CARD REGISTRATION SERVICE

     In addition to the Company's personal property identification and recovery
system, the Company has implemented and is currently offering a card
registration service marketed through


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telemarketers. This service permits a member, with a single toll free phone
call, to: (i) cancel all of the member's lost or stolen cards (whether they be
debit cards, gas cards, automated bank teller cards, department store cards or
other credit cards); (ii) request replacement cards; (iii) request a change of
address for all cards; (iv) receive $15,000 in travel insurance on common
carriers; (v) receive $2,000 in Accidental Death & Dismemberment insurance; (vi)
receive $500 in airline discounts; and (vii) be covered on fradulent charges up
to $10,000.

PRODUCT DEFINITIONS

     The following describes many of the products offered by the Company. The
typical retail pricing for the basic Tracker service is $39.95. The consumer
usually pays for the Company's services unless the consumer receives the service
in connection with a promotional deal with a manufacturer or retailer. The
product configurations offered vary and are subject to change.

     BASIC TRACKER SERVICE. This is a service to aid in the identification and
recovery of members' lost or stolen possessions. The initial purchase is
packaged as a membership service term, typically between one to three years, and
a supply of Tracker identification products. Subsequent purchases of Tracker
products or membership term renewals and upgrades are sold separately. The
package includes 24 possession labels, 8 clothing labels and an assortment of 10
shoe, key, luggage, and pet tags.

     TRACKER CARD REGISTRATION SERVICE. The Company offers members of this
program the benefit and convenience of card registration. For a description of
the Company's card registration business, see "BUSINESS - The Company's Card
Registration Service". This 1 year renewable service includes 24 identification
labels, a card registration form and an indemnification certificate.

     RENEWALS. Membership may be renewed for a specified period of time for
which there is a renewal fee. The renewal terms offered by the Company vary but
are typically between one to three years. To induce members to renew their
service, the Company may offer, from time to time, extra items or incentive
renewal bonuses.

     UPGRADES. All members, regardless of the program they originally sign up
for, have the opportunity to purchase upgrade products or services offered by
the Company such as increasing the number of years of service, adding "Tracker
Plus" to their membership, which covers the full cost of returning possessions
to members, purchasing the card registration service, or purchasing extra cloth
or adhesive labels or shoe, pet, key, or luggage tags.

     CHILD IDENTIFICATION. The Company is offering a special "Tracker Basic
Service" package to parents for added protection for their children. The package
includes 8 possession labels, 24 clothing labels, an assortment of 10 shoe, key,
and luggage tags, a photo and fingerprint kit and special safety tips for
parents and kids.


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     SAMPLE LABEL PROMOTIONS. Tracker offers businesses an opportunity to
provide their clients or customers a special value added incentive in the form
of Tracker labels.

     OP-ID-IACP REGISTRATION SERVICE. Tracker is offering its basic service to
the former members of Operation ID, previously managed by the International
Association of Chiefs of Police, in a special two year program at an
introductory discounted price.

     ASSET MANAGEMENT. Tracker offers businesses a simpler method to inventory
and keep track of their fixed assets by providing on-site service for data
collection and off-site service for inventory management and recovery. The
Company provides confidential identification, recovery and asset management
services by linking the label on a corporation's physical assets to the
Company's worldwide 24 hour recovery network, dispatching mobile scanning
technicians on-site, and providing reporting "on-demand." This reduces the
in-house inventory control burden and provides a simpler method of tracking
changes in a company's physical assets inventory.

     LASER ETCHING THE TRACKER RECOVERY INSIGNIA. In order to push demand
through to retail level consumer purchase and registration of marked products,
the Company is encouraging the volume purchase by manufacturers of licenses for
"Recovery Insignia" laser etching on consumer products at point of manufacture
with PDF 417 capable laser drivers. Currently, the Company does not have a
contract with any manufacturer to laser etch the Company's coding or to directly
apply the coding at the source of manufacture using any other method. There can
be no assurance that the Company will be able to successfully expand its service
in this fashion.

THE IACP ENDORSEMENT

     The Company has secured, for its personal property identification system,
the endorsement of the International Association of Chiefs of Police (the
"IACP"), a nonprofit organization of approximately 14,000 members from the
world's law enforcement community founded in 1893. The Company's present license
agreement with the IACP runs through February 12, 1999. Under the license
agreement with the IACP, the Company has agreed to pay the IACP 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 Subscriber 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>


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THE COMPANY'S MARKETING STRATEGY

     THE PERSONAL PROPERTY IDENTIFICATION AND RECOVERY SYSTEM. The Company is
attempting to position itself as a credible and worthwhile, but not fail safe,
service that provides peace of mind (like insurance) and has a favorable
price-to-value relationship. The guiding principle behind the Company's
marketing strategy is that the Company is in the business of providing a totally
integrated personal property identification and recovery service, not merely
selling identification labels. The benefit of this service to the Company's
members is an increase in the probability of recovery of the members' lost and
stolen possessions. Thus, one key to the Company's long-term success will be the
effectiveness of the Company's personal property identification and recovery
system in helping to improve the existing low recovery rates. There can be no
assurance, however, that the Company will be able to achieve any particular
increase in these recovery rates for its members or to increase the overall
recovery rate for lost and stolen items in general. As of May 31, 1997, the
Company had made 136 successful recoveries of its members' personal possessions.
In addition, although the Company's service is not predicated on reports of
losses, the Company encourages its members to notify the Company of any such
losses.

     Another portion of the Company's marketing strategy is to pursue an
aggressive and preemptive North American roll-out of the Company's service. By
establishing a critical mass of labels in the marketplace, the Company hopes to
establish a de facto "identification" standard. The Company believes that this
can be done if (1) the initial distribution of labels is performed on a large
scale and done quickly and (2) the public is confident that the Company's
personal property identification and recovery system improves recovery rates and
therefore is of value to the consumer. The Company is attempting to establish
credibility and confidence in the marketplace by, among other things, utilizing
fusion marketing through the establishment of affiliations, alliances,
sponsorships, and promotional programs with well recognized, stable and
reputable organizations that have an interest in the protection, security, loss
prevention or insurance industries. There can be no assurance that the Company
will be able to establish a critical mass of labels and a broad network of
compatible scanners early enough to establish a leading and sustainable market
position or that the Company will be able to establish credibility and
confidence in the marketplace. Any inability by the Company to do so may have an
adverse effect on the Company's business, operating results and financial
condition.

     THE CARD REGISTRATION SERVICE. The Company is currently gaining a small
market share in the card registration industry. The Company believes that it not
only offers a competitive product, but also adds the extra feature of its
recovery services to the list of benefits offered to members of the card
registration service. As of May 31, 1997, the Company had assisted 190 members
within its credit card registration program. See "BUSINESS - Competition".

THE COMPANY'S PLAN OF DISTRIBUTION

     THE PERSONAL PROPERTY IDENTIFICATION AND RECOVERY SYSTEM. The Company is
approaching the distribution of subscriptions to its personal property
identification and recovery service in several ways.


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     First, the Company is selling its service at the "grass roots" level via
direct marketing. The Company anticipates that this direct marketing will be
through door-to-door canvassing in major urban high density locales, through
telemarketing, through direct mail solicitations, through multi-level marketing
or through a combination of more than one of these techniques. On April 8, 1996,
the Company entered into a marketing agreement with Tracker Referral Network
International, Inc. ("Tracker Referral"), a direct sales company in the business
of marketing through independent distributors using a proprietary marketing
plan. Under the agreement, Tracker Referral was appointed as the Company's
exclusive multi-level marketing company in the United States and was granted
non-exclusive rights to make direct commercial sales to third party businesses
in the United States, in both cases provided that certain sales quotas are
achieved. The agreement is for an initial term of five years and automatically
renews for an additional five years upon Tracker Referral's attainment of the
specified sales quotas. Additionally, the Company is obligated to provide the
Company's products and marketing materials to Tracker Referral at prices
specified in the agreement.

     Second, the Company is beginning to establish promotional programs with
retailers of consumer specialty products that have a high potential for loss
such as home electronics, luggage, sporting goods, bicycles, cameras and higher
valued fashion items. For example, the Company has entered into an agreement
with Samsonite Canada, Inc. ("Samsonite") pursuant to which the Company will
supply to Samsonite 70,000 tags that Samsonite will affix to its merchandise to
provide Samsonite customers an explanation of the benefits of the Company's
personal property identification and recovery system and receive a free luggage
tag with a Tracker recovery label. The Company agreed to reimburse Samsonite for
the cost of affixing and shipping the tags and granted exclusivity to Samsonite
in the luggage industry in Canada through March 6, 1997. Upon achievement of
certain sales quotas, Samsonite may continue the promotion and its exclusivity
in Canada for an additional year. To date, Samsonite is still waiting to
evaluate program results due to a late start of the program (i.e. Nov. 1996).

     The Company also has entered into an agreement with Sony of Canada Ltd.
("Sony") pursuant to which Sony store representatives will resell to Sony's
retail customers kits purchased from the Company by Sony. For the life of the
program, Sony will include a write up on the program in each of its monthly
newsletters. Sony also will include a feature on the program in a one-quarter
page advertisement within Sony's national brochure. Under the agreement, the
Company is obligated to provide to Sony a yearly commission equal to 20% of the
renewal revenues received by the Company related to kits sold by Sony for two
renewal terms. The agreement also provides the Company with the right, subject
to Sony's ability to cancel such right at any time, to promote the kits using
the name "Sony." To date, subscribers under this program are not up for renewal
as yet.

     The Company also has entered into an agreement with Liberty Health, a
division of Liberty Mutual Insurance Company ("Liberty"), to provide its travel
insurance customers with the added protection of the Tracker recovery system.
Under the one year agreement, the Company will not offer its recovery service to
any other provider of individual travel health insurance in Canada. Liberty
plans to launch with the introduction of Tracker in the Summer of 1997.


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     The Company also has entered into a one year agreement with Schwinn Cycling
& Fitness Inc. ("Schwinn"), a United States manufacturer of quality bicycles and
accessories which plans to promote the Tracker service along with its bicycle
protection kits. The Company has granted Schwinn an exclusive for the Tracker
service in the bicycle accessory industry in the United States for the term of
the agreement. The Company has also granted Schwinn a one year exclusive in the
entire bicycle industry in the United States, during which time the Company will
not sell its laser etching symbology to any manufacturer in the bicycle industry
in the United States.

     The Company also plans to establish promotional programs with other
selected national retail chains chosen for their potential to lend credibility
to the Company's service and for their reach in selected markets. The Company
believes its service adds value to retailers' products because the service shows
that the retailers care about their customers and their customers' ability to
recover lost or stolen items. To encourage such retailers to promote the
Company's service as a value added to the items purchased from the retailers,
the Company may provide retailers with commissions, limited time exclusivity
within a particular market, cooperative marketing and advertising funding, and
special timed promotions. In addition, the Company has entered into an agreement
with Merchant Partners Limited Partnership ("Merchant Partners") through which
Merchant Partners will actively introduce and promote the Company to, among
others, Montgomery Ward & Co. Incorporated ("Montgomery Ward"), ValueVision
International, Inc., and all subsidiaries of Montgomery Ward (collectively,
"Prospects"). To date, the Company has not entered into any agreements with the
Prospects. There can be no assurance that the agreement with Merchant Partners
will result in any sales to the Prospects.

     Third, although the Company does not anticipate that such programs will
constitute a large percentage of its sales, the Company is developing other
joint promotions (such as the arrangement with Samsonite described above), a
sales program in which the Company would sell its service in bulk to, for
example, product manufacturers, and a fixed asset management program.

     The Company's long-term strategy is to become (i) the name-brand provider
of property and inventory control for individuals, businesses and organizations,
and (ii) the branded product consumers think of when looking for the added
assurance of protection provided by a property identification and recovery
system. There can be no assurance, however, that the Company will be able to
achieve its long-term strategy. Ultimately, if successful, the Company could 
offer a complete outsourcing service for the following:

     1.   Inventorying property of individuals and organizations

     2.   Monitoring and controlling inventory distribution channels from
          manufacturer to final consumer purchase


                                       13
<PAGE>   14
     3.   Monitoring and controlling the date individual items are sold by
          retailers to their final customers and the exact expiration of
          warranty obligations relating to each individual product sold

     4.   Providing customers with a value-added service by marking individual
          items with their own unique identifying alphanumeric bar code that is
          registered at Tracker with identifying ownership data in order to aid
          in the recovery of property that may be lost or stolen and recovered

     Typical products amenable to utilizing Tracker's service include (i) high
dollar value items such as laptop computers, cellular telephones, cameras,
luggage, electronic goods and sports equipment; (ii) items frequently
transported including calendars, day-timers, electronic organizers and key
chains; (iii) sentimental items such as photographs, family memorabilia and
children's stuffed animals; and (iv) furniture and electronic goods in high
traffic areas such as hotels, offices, airports and tourist attractions.

     THE CARD REGISTRATION SERVICE. The Company is currently marketing
subscriptions in its card registration service through telemarketing. The
Company also plans to attempt to develop contractual relationships with credit
card issuers for sales of subscriptions to the issuers' cardholders. As of the
date of this Report, however, the Company had no contractual relationships with
any credit card issuers and there can be no assurance that it will be able to
develop any such relationships. See "BUSINESS - Competition".

     GENERAL. The Company has no material backlog of orders because the Company
fills orders for its personal property identification and recovery system and
card registration service 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 services. 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 began test marketing in the United
States. In addition, the Company has signed an exclusive licence agreement with
Executive Trading Ltd. ("Executive") pursuant to which Executive will sell the
Company's products and services on an exclusive basis in the countries of
Germany, Switzerland and Austria. The Company anticipates that revenues from
this agreement will commence in the fourth quarter of fiscal 1998.

     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.


                                       14
<PAGE>   15
     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, sell and operate its personal property
identification and recovery system depends in part on its ability to procure the
necessary scanning equipment, labels and courier services. In this regard, the
Company has agreements or preliminary understandings in place with Symbol
Technologies Inc. ("Symbol"), Purolator Courier Inc. ("Purolator"), Mail Boxes
Etc. USA ("Mail Boxes Etc."), and DHL International Express Ltd. ("DHL").
Although the Company has preliminary understandings and agreements with
suppliers of such equipment, labels and services, the Company's 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 such
equipment, labels and services will be available when needed by the Company or
on terms favorable to the Company. Any unavailability of such equipment, labels
or services on terms favorable to the Company could prevent or delay the
development, marketing, sale, operation and effectiveness of the Company's
personal property identification and recovery system and could have a material
adverse effect on the Company's business, operating results and financial
condition.

     The Company procures scanning equipment from 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 this two-dimensional bar
code. The PDF 1000 laser scanner scans thirty times faster than current
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 through the end of calendar year 1996.
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, 1995 and 1996 in order to maintain its exclusive right. The
Company did not meet the minimum commitment level for 1994, 1995 or 1996.
Although it does not have a formal agreement to do so, the Company has been
working in conjunction with Symbol and has obtained an informal understanding to
maintain the Company's exclusive right provided the Company purchases at least
500 laser scanners during calendar year 1997. As of June 30, 1997 the Company
had purchased 30 scanners during the 1997 calendar year. There can be no
assurance that the Company will be able to meet this commitment. Further, the
Company's understandings with Symbol are informal, may be difficult to enforce,
may be subject to early termination, and are set to expire at the end of
calendar year 1997 in any event. Thus, there can be no assurance that the
Company has an enforceable exclusive right to use, for personal property
identification and recovery purposes, Symbol's PDF 1000 laser scanners in these
geographic areas. The Company believes that it will be able to continue its
relationship with Symbol after the current understanding expires at the end of
1997. If the Company is unable to do so, the Company believes that comparable
scanning equipment will be available from other


                                       15
<PAGE>   16
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.

     In the United States, the Company has entered into an agreement with Mail
Boxes Etc. pursuant to which Mail Boxes Etc. will accept, pack and ship items
for the Company. For courier services, the Company uses Purolator in Canada,
uses UPS (through Mail Boxes Etc.) in the United States and has engaged DHL for
use in other parts of the world.

COMPETITION

     The Company is aware of one company that it believes is planning to
introduce a personal property identification and recovery system similar to the
Company's. The Company believes that this competitor may offer a service that
provides labels for identification purposes and an 800-number through which the
finder and the owner of an item may be put in contact with each other to make
their own arrangements for the return of the item to the owner. The Company
believes that this company will not offer an integrated system, like the
Company's, which not only provides a means of identifying an item, but also
provides a complete pick-up and delivery system.

     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 expansion of services or an increase in the level of
competition by this competitor, or 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.

     The Company also may face 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. Such insurance typically also
provides reimbursement for items that are destroyed by fire, flood or acts of
God. Further, conventional insurance has high market acceptance and conventional
insurance companies typically have substantial resources to market their
products effectively and aggressively. Although the Company's personal property
identification and recovery service differs from conventional insurance in that
its objective is to return its members' personal possessions, there can be no
assurance that the Company will be able to compete effectively with conventional
insurance providers.

     With respect to the Company's card registration service, the Company's
market share is small and the market is highly competitive. Competitors include
Signature, CUC International, American Express and others. These competitors
have longer operating histories, benefit from substantially greater market
recognition and have substantially greater financial and marketing resources
than the Company. In addition, certain competitors have contractual
relationships with credit card issuers for sales of subscriptions to the
issuers' cardholders. Competition in this third


                                       16
<PAGE>   17
party endorsed segment of the credit card industry is intense. Factors affecting
the outcome of competition with respect to the third party endorsed segment
include the quality and reliability of the services offered, subscriber
acquisition strategy and expertise (which is highly dependent upon creative
talents), operational capability, reputation, financial stability of the company
supplying the services, the confidence of credit card issuers in the company's
management, the compensation or fee paid to the credit card issuer and the
security maintained by the company with respect to the credit card and credit
data of which it has custody. As of the date of this Report, the Company had no
contractual relationships with any credit card issuers and there can be no
assurance that it will be able to develop any such relationships. This may place
the Company at a competitive disadvantage with respect to its card registration
service. In addition, an increase in the level of competition from existing
competitors, or the entry of new competitors, may 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 card registration business.

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 and trademark 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. The Company has filed for trademark and service mark protection in the
United States and Canada over the following: (i) "All is not lost(TM)"; (ii)
"Use it or lose it(TM)"; (iii) "Tracker: The Ultimate Warranty(TM)"; (iv)
"Tracker(TM)"; and (v) the Tracker logo. The applications in the United States
for all marks except "Tracker(TM)" and the Tracker logo have been restricted to
services only as opposed to goods. In addition, the Company has filed an
international patent application pursuant to the Patent Cooperation Treaty for
its personal property identification and recovery system. There can be no
assurance, however, that these will mature into an issued patent or issued
trademarks or service marks or that any patent, trademark or service mark
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 trademarks 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.

CAPITAL REQUIREMENTS

     Although the Company has been generating gross cash receipts from sales of
approximately $1,000,000 per month since December 1996, it anticipates that it
will require


                                       17
<PAGE>   18
additional capital in order to meet the needs for its strategic Canadian and
United States roll-outs and otherwise implement its business plan in the manner
contemplated. The continual acquisition of equipment, establishment of
additional distribution channels and the conducting of a comprehensive marketing
campaign will enhance the Company's chances for success. During the upcoming
twelve 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 1998. 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 June 30, 1997, the Company employed a total of 55 persons, including
4 in management, 8 in administration and accounting, 36 in operations (29 of 
whom are part-time), 3 in sales and marketing and 4 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.

     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 is marketing its services through the use of telemarketing and
may be subject to state regulation of telemarketing if it is deemed to be a
telemarketer within the meaning of such regulations. Although such regulations
vary greatly from state to state, they generally require telemarketers (as
defined in the regulations) to (i) apply for and obtain a state registration or
license before conducting telemarketing; (ii) disclose certain information to
consumers (for example, the identity of the telemarketer, information regarding
gifts or premiums that customers


                                       18
<PAGE>   19
may be eligible to receive, and that sales made as a result of a telephone
solicitation are not final unless followed by a signed contract); and/or (iii)
file a surety bond or a certificate of deposit with the state. Further, state
regulations typically confer on consumers certain rights, such as the right to
cancel a sales agreement made with a telemarketer. A telemarketer's failure to
comply with the regulations may result in civil and/or criminal liability.

     In addition, the Company, through Tracker Referral pursuant to a marketing
agreement with Tracker Referral, is marketing its personal property
identification and recovery services through the use of multi-level marketing.
See "BUSINESS - The Company's Plan of Distribution - The Personal Property
Identification and Recovery System." Tracker Referral's multi-level marketing
system is or may be subject to or affected by extensive government regulation,
including but not limited to federal and state regulation (which varies from
state to state) of the offer and sale of business franchises, business
opportunities and securities. Various governmental agencies monitor multi-level
marketing activities. Although such multi-level marketing is performed by
Tracker Referral rather than by the Company, and although the Company believes
that Tracker Referral's multi-level system is in substantial compliance with all
currently applicable regulations, there can be no assurance that Tracker
Referral will be found to be in compliance with existing regulations as a
result of, among other things, misconduct by independent contractors over whom
Tracker Referral has limited control, the ambiguous nature of certain of the
regulations, and the considerable interpretive and enforcement discretion given
to regulators. Any assertion or determination that Tracker Referral or its
independent contractors are not in compliance with existing regulations, or the
enactment of additional regulations in the future, could have a material
adverse effect on the Company's business, operating results and financial
condition. Further, any failure to comply could cause Tracker Referral or the
Company to pay fines as well as to quit doing business in any state where it is
out of compliance.

     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

     Tracker Canada currently leases office premises in Toronto and has entered
into a lease agreement for these premises. The term of the lease is ten (10)
years, which commenced on January 1, 1994. The lease requires payment of an
annual base rent of $22,000 for the first five years. Thereafter the lease calls
for rent at market value less twenty percent (20%). If the present lease cannot
be renewed or if Tracker Canada elects not to renew the lease, Tracker Canada
does not anticipate any difficulty in securing adequate new space. Tracker US 
has leased space in Smyrna, Georgia to house its fulfillment and processing
center as well as a telemarketing and


                                       19
<PAGE>   20
verification center. The term of the lease is for three (3) years, which
commenced on May 15, 1997. The lease requires payment of an annual base rent of
$41,772.


     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"), has recently
been served with a complaint filed by Datastrip (IOM) Limited ("Datastrip") 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 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.

     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, 1997, 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


                                       20
<PAGE>   21
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. 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, 1995                                           $  3.0625       $ 0.6250
September 30, 1995                                      $  2.8750       $ 0.3750
December 31, 1995                                       $  2.6250       $ 0.5000
March 31, 1996 *                                        $  0.8125       $ 0.0625
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
</TABLE>

----------

*    Excludes January 8, 1996, for which the National Quotation Bureau, Inc. was
     unable to provide information.

     On June 30, 1997, the high and low bid quotations for the Company's Common
Stock on the OTC Bulletin Board were $0.1415 and $0.0625, respectively. As of
June 30, 1997, there were 16,823,277 shares of Common Stock outstanding held by
approximately 335 holders of record, including broker-dealers and clearing
corporations holding common shares on behalf of their customers, and 4,830,394
shares of Class B Voting Common Stock outstanding held by Montreal Trust Company
of Canada, as Trustee, on behalf of approximately 78 holders of record.

     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. In addition, Tracker U.S. has agreed not to declare and pay cash
dividends on its Common Stock unless it also causes Tracker Canada to declare
and pay cash dividends on the Tracker Canada Exchangeable Preference Shares at
the same time and in the same manner as the dividends paid on the Common Stock
of Tracker U.S. Tracker U.S. must provide Tracker Canada with adequate funds,
through a contribution to capital surplus, to pay such dividends. Further, state
law restricts the Company's ability to pay dividends until its financial
condition improves. See "CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Investment by Saturn Investments, Inc."


                                       21
<PAGE>   22
                  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 Price Waterhouse LLP,
independent accountants.

     For accounting purposes, the Reorganization with Tracker Canada is being
treated as a reverse merger/acquisition with recapitalization of Tracker Canada
as the acquirer because, among other factors, the assets and operations of
Tracker Canada significantly exceeded those of Ultra Capital Corp. (Tracker
U.S.'s predecessor) and the shareholders of Tracker Canada control Tracker U.S.
after the Reorganization. The Reorganization is being treated for accounting and
financial reporting purposes as an issuance of shares by Tracker Canada. Thus,
pro forma information is not presented as the Reorganization is 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.

<TABLE>
<CAPTION>
                                                   INCEPTION (MAY 6,
                                                   1993) TO MARCH 31,   FISCAL YEAR ENDED   FISCAL YEAR ENDED    FISCAL YEAR ENDED
CONSOLIDATED STATEMENT OF OPERATIONS                    1994             MARCH 31, 1995      MARCH 31, 1996        MARCH 31, 1997
DATA
<S>                                                 <C>                  <C>               <C>                   <C>
Revenues                                              $          --         $    10,187       $   106,522           $ 2,348,169
Net income (loss)                                        (2,043,425)         (5,068,583)       (6,090,730)           (3,708,078)
Net income (loss) per share of common stock                   (0.38)              (0.71)            (0.57)                (0.22)

<CAPTION>
CONSOLIDATED BALANCE SHEET DATA                       MARCH 31, 1994      MARCH 31, 1995      MARCH 31, 1996        MARCH 31, 1997
<S>                                                 <C>                  <C>                   <C>                   <C>
Total assets                                            $ 2,675,527         $ 1,669,452       $ 1,193,742           $ 4,238,345
Total current liabilities                                   275,660           1,446,543*        2,393,631*            6,026,589*
Long-term debt                                                   --                  --                --                    --
Stockholders' equity (deficit)                            2,399,867             222,909        (1,378,772)           (2,401,375)
Working capital                                           2,195,349            (445,686)       (1,728,529)           (2,583,835)
</TABLE>

* Included in total current liabilities for March 31, 1997 are $590,746 of
convertible subordinated debentures and $4,509,401 of current deferred revenues
(as compared with $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).


           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


                                       22
<PAGE>   23
27A of the Securities Act of 1933, as amended, 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 and its card registration service; 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
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, 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 Canada
and the United States. The Company is a development stage company that has
developed and begun to market, sell and operate a personal property
identification and recovery system and a card registration service. The Company
launched its personal property identification and recovery service in a limited
test market in Toronto, Canada in October 1994 and is slowly continuing to
expand its service throughout Canada. The Company began test marketing in the
United States and has begun to introduce its service to various communities in
the United States. The Company offers its services through diverse marketing
channels such as joint promotional partners (i.e., Samsonite Canada, Inc.),
selected retailers (i.e., Sony of Canada Ltd.), telemarketers (i.e., Datatrack,
Inc., Executive Industries Ltd., Metro Marketing Inc., and Quest Enterprises)
selling the Company's card registration service), and network referral marketers
(i.e.,


                                       23
<PAGE>   24
Tracker Referral Network International, Inc. selling home-based business
opportunities utilizing the Company's products and services).

     The Company has been generating gross cash receipts from sales of
approximately $1,000,000 per month since December 31, 1996 and management
believes there is a substantial market for the Company's service. 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, 1997, the Company incurred a net loss of $3,708,078 and, at the
end of such period, had an accumulated deficit of $16,910,816. The Company
expects to continue to incur lossess through at least the 4th quarter of fiscal
1998. From the date of inception (May 6, 1993) through March 31, 1997, the
Company had realized revenues of $2,464,878. Although the Company has begun to
achieve ongoing significant cash sales (approximately $1,000,000 per month since
December 1996, which are all absorbed in their entirety by cash flows used in
operating activities as noted in the Consolidated Statement of Cash Flows), 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, 1997, the amount of deferred revenue (current and long term) was
$5,122,532 compared with $294,124 as of March 31, 1996.

     The Company continues to develop its website on the internet under the
address "www.tracker.com" which will enable clients, subscribers, suppliers,
shareholders, brokers and investors, access to information about the Company and
its current activities on a 24 hour basis. The Company's website was operational
at the end of November 1996.


RESULTS OF OPERATIONS

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.


                                       24
<PAGE>   25
<TABLE>
<CAPTION>
                         March 31,                March 31,
                           1997                     1996
<S>                    <C>                        <C>
Cash Sales             $  7,977,881               $   382,632
Revenue                $  2,348,169               $   106,522
Net Income(losses)     $ (3,708,078)              $(6,090,730)
</TABLE>

     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 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.

          In November 1996, the Company opened a processing and fulfillment
center in Atlanta, Georgia. The decision to expand to Atlanta was made to help
facilitate the Company's growth plans by supporting operations currently housed
in Toronto and managing and operating the Company's fulfillment and card
processing functions.

     In December 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
canceled in treasury.

     The Company is continuing in its efforts to minimize its operating cash
"burn" rate and has reduced its expenditures by an additional 28% when comparing
the fiscal year ended March 31, 1997 to the fiscal year ended March 31, 1996.
The largest reduction in expenditures when comparing the fiscal year ended March
31, 1997 to the fiscal year ended March 31, 1996 can be noted in the General and
Administrative category of Development Costs as the Company reduced its
expenditures in all expense categories and primarily focused on reducing
expenditures in the investor and public relations area.


                                       25
<PAGE>   26
     FISCAL YEAR ENDED MARCH 31, 1996 COMPARED TO FISCAL YEAR ENDED MARCH 31,
1995. During the fiscal year ended March 31, 1996, the Company had net revenues
of $106,522 as compared to $10,187 net revenues for the fiscal year ended March
31, 1995. Cost of goods sold for the fiscal year ended March 31, 1996 was
$40,230 as compared to $4,029 cost for the fiscal year ended March 31, 1995.
This resulted in a gross profit of $66,292 for the fiscal year ended March 31,
1996 as compared to $6,158 gross profit for the fiscal year ended March 31,
1995.

     During the fiscal year ended March 31, 1996, the Company incurred a net
loss of $6,090,730 as compared to a net loss of $5,068,583 for the fiscal year
ended March 31, 1995. These losses included expenses in the amount of $6,157,022
for the fiscal year ended March 31, 1996 as compared to $5,074,741 for the
fiscal year ended March 31, 1995. These expenses consisted of operational costs
of $592,880 for the fiscal year ended March 31, 1996 as compared to $687,681 for
the fiscal year ended March 31, 1995, information systems costs of $262,942 for
the fiscal year ended March 31, 1996 as compared to $465,827 for the fiscal year
ended March 31, 1995, sales and marketing costs of $1,031,041 for the fiscal
year ended March 31, 1996 as compared to $1,737,438 for the fiscal year ended
March 31, 1995, and general and administrative costs of $4,270,159 for the
fiscal year ended March 31, 1996 as compared to $2,183,795 for the fiscal year
ended March 31, 1995.

     Included in the deficit for the fiscal year ended March 31, 1996 are
non-operating expenditures in the amount of (1) $1,059,447 for investor, media
and public relations services; (2) $138,000 for legal, audit and tax
professional costs associated with the Company entering the process of filing a
required registration statement with the Securities and Exchange Commission; (3)
$181,311 in interest expense incurred as a result of raising capital through
convertible debentures; (4) $1,078,785 of ongoing costs reflecting non-cash
outlays and monthly adjustments for prepaid expenditures being utilized and
expensed, which include (a) $912,273 associated with the development of the
Company's direct selling commercial through its contract with The L.L.
Knickerbocker Company and the costs associated with fees to cover its celebrity
spokesperson, Angie Dickinson, (b) $118,360 relating to the amortization of
rent, and (c) $48,152 associated with the administration services provided under
the Centry contract; (5) $85,646 relating to the amortization of deferred
charges on the commission incurred from the securing of investors for the
Company's Convertible Debentures; (6) $826,875 associated with the non-cash
outlay relating to the issuance of 630,000 shares of Common Stock, restricted as
to transferability, to certain officers of the Company; and (7) $429,061
associated with the non-cash outlay relating to the issuance of 770,000 shares
of Common Stock 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
through September 30, 1996 (at March 31, 1996 the unamortized portion was
$340,939). All other major expense groups for the fiscal year ended March 31,
1996 have been reduced in comparison to the fiscal year ended March 31, 1995 and
the Company is continuing in its efforts to minimize its operating cash "burn"
rate.

     FISCAL YEAR ENDED MARCH 31, 1995 COMPARED TO FISCAL YEAR ENDED MARCH 31,
1994. During the fiscal year ended March 31, 1995, the Company had net revenues
of $10,187 as compared to no net revenues for the fiscal year ended March 31,
1994. Cost of goods sold for the year ended March 31, 1995 was $4,029 as
compared to no cost for the fiscal year ended March 31,


                                       26
<PAGE>   27
1994. This resulted in a gross profit of $6,158 for the fiscal year ended March
31, 1995 as compared to no gross profit for the fiscal year ended March 31,
1994.

     During the fiscal year ended March 31, 1995, the Company incurred a net
loss of $5,068,583 as compared to a net loss of $2,043,425 for the fiscal year
ended March 31, 1994. These losses included developmental costs in the amount of
$5,074,741 for the fiscal year ended March 31, 1995 as compared to $2,043,425
for the fiscal year ended March 31, 1994. These developmental costs consisted of
operational costs of $687,681 for the fiscal year ended March 31, 1995 as
compared to $149,260 for the fiscal year ended March 31, 1994, information
systems costs of $465,827 for the fiscal year ended March 31, 1995 as compared
to $157,277 for the fiscal year ended March 31, 1994, sales and marketing costs
of $1,737,438 for the fiscal year ended March 31, 1995 as compared to $606,271
for the fiscal year ended March 31, 1994, and general and administrative costs
of $2,183,795 for the fiscal year ended March 31, 1995 as compared to $1,130,617
for the fiscal year ended March 31, 1994.

     The results of operations stated above for the fiscal year ended March 31,
1994 are not for a full year, but instead are for the period from May 6, 1993
(the date of inception of Tracker Canada) through March 31, 1994. Accordingly,
results for the fiscal years ended March 31, 1995 and March 31, 1994 are not
necessarily comparable.


LIQUIDITY AND CAPITAL RESOURCES

     From inception at May 6, 1993 through March 31, 1997, the Company has
received approximately $10,347,061 in net cash from financing activities, some
of which are noted below.

     During the year ended March 31, 1997, the Company's net cash used in
operations was $465,828 as compared to $3,501,557 for the year ended March 31,
1996. The cash used in operations was devoted primarily to funding the
development of identification and recovery systems and software, a card
registration service, labels, packaging, marketing and advertising materials and
plans, and the procurement and installation of additional recovery and scanning
stations for the Company's scanning network.

     As of March 31, 1997, the Company had total current assets of $3,442,754 as
compared to $665,102 at March 31, 1996. Current assets consisted of cash in the
amount of $105,213 as of March 31, 1997 as compared to $78,844 at March 31,
1996, short-term investments in the amount of $0 as of March 31, 1997 as
compared to $221,190 at March 31, 1996, accounts receivable in the amount of
$133,613 as of March 31, 1997 as compared to $7,361 at March 31, 1996, prepaid
expenses and deposits in the amount of $359,526 as of March 31, 1997 as compared
to $168,345 at March 31, 1996, inventories in the amount of $24,338 as of March
31, 1997 as compared to $115,612 at March 31, 1996, and current deferred charges
in the amount of $2,820,064 as of March 31, 1997 as compared to $73,750 at March
31, 1996. As of March 31, 1997, the Company had amount due from stockholders in
the amount of $61,487 as compared to $58,226 at as of March 31, 1996, long-term
deferred charges totaling $315,837 as compared to $66,234 at March 31, 1996, net
property and equipment totaling $418,267 as compared to $353,729 at March 31,
1996, and long-term investments in the amount of $nil as compared to $50,451
at March 31, 1996. As of March


                                       27
<PAGE>   28
31, 1997, the Company had liabilities of $6,026,589 as compared to $2,393,631 at
March 31, 1996. Such liabilities consisted of accounts payable in the amount of
$468,764 as of March 31, 1997 as compared to $551,553 at March 31, 1996, accrued
liabilities in the amount of $1,161,942 as of March 31, 1997 as compared to
$266,837 at March 31, 1996, deferred revenues in the amount of $4,509,401 as of
March 31, 1997 as compared to $115,241 at March 31, 1996, debentures in the
amount of $83,991 as of March 31, 1997 as compared to $0 at March 31, 1996, and
convertible subordinated debentures in the amount of $590,746 as of March 31,
1997 as compared to $1,460,000 at March 31, 1996. The Company had long-term
deferred revenues in the amount of $613,131 as of March 31, 1997 as compared to
$178,883 at March 31, 1996.

     The increased sales activity of the Company caused material changes to the
Company's long-term deferred charges and long-term deferred revenues. During the
year ended March 31, 1997, the Company experienced rapid growth of sales
activity with respect to its card registration service. For the year ended March
31, 1997, the Company experienced cash sales of approximately the following
amounts: card registration service - $7,882,785, and personal property
identification and recovery services - $95,006. The Company anticipates,
however, that sales of its personal property identification and recovery
services will continue to increase and ultimately will surpass the card
registration service as the Company's largest source of revenues. Although
management believes that sales activity will continue to grow, there can be no
assurance that the Company's sales will increase or that these trends will
continue.

     As of March 31, 1997 and March 31, 1996, respectively, the Company had
accumulated deficits of $16,910,816 and $13,202,738. To date, the Company has
financed its research and development activities and operations primarily
through ongoing sales of its card registration program and the private placement
by Tracker U.S. of First Series Convertible Debentures aggregating $1,000,000
from July to October 1995, the private placement by Tracker U.S. of Second
Series Convertible Debentures aggregating $1,189,529 through March 1996, the
sale by Tracker U.S. 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


                                       28
<PAGE>   29
$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.

     Tracker U.S., the parent corporation, is dependent upon the liquidity of
its subsidiary, Tracker Canada. The terms of the Exchangeable Preference Shares
restrict, under certain limited circumstances, Tracker Canada's ability to fund
the liquidity requirements of Tracker U.S. by paying dividends or making other
distributions to Tracker U.S. The Company believes that such terms have no
material impact on Tracker Canada's ability to fund the liquidity requirements
of Tracker U.S., however, because such terms prohibit Tracker Canada from making
a distribution to Tracker U.S. without the consent of the holders of the
Exchangeable Preference Shares only if all dividends accrued on the Exchangeable
Preference Shares have not been declared and paid in full or an amount set aside
for such payment. Because dividends on the Exchangeable Preference Shares do not
accrue unless and until a dividend is declared on the Tracker U.S. Common Stock,
and because Tracker U.S. has never paid any cash dividends on its Common Stock
and does not intend to pay any cash dividends in the foreseeable future (see
"MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS"), the
Company believes it is extremely unlikely that there will ever be any
prohibition on distributions by Tracker Canada to Tracker U.S.

     The Company has 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.

     In July 1994 and January 1995, the Company entered into two separate
agreements to acquire interests in other companies, Page-Direct Ltd.
("Page-Direct") and C.E.M. Centry Electronic Monitoring Corporation ("Centry"),
which management believed at that time could enhance the Company's
infrastructure and marketing capabilities. As further described in "Aborted
Acquisitions; Acquisition Policy," these investments were subsequently aborted
without burdening the Company's cash flows too significantly. Management is now
focusing its attention on its core businesses.


CAPITAL REQUIREMENTS

     Although the Company has been generating gross cash receipts from sales of
approximately $1,000,000 per month since December 1996, it anticipates that it
will require additional capital in order to meet the needs for its strategic
Canadian and United States roll-outs and otherwise implement its business plan
in the manner contemplated. The continual acquisition of equipment,
establishment of additional distribution channels and the conducting of a


                                       29
<PAGE>   30
comprehensive marketing campaign will enhance the Company's chances for success.
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 cashflows.

     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.


ABORTED ACQUISITIONS; ACQUISITION POLICY

     On July 22, 1994, the Company entered into an agreement to acquire
Page-Direct, a wireless communications company. Prior to cancellation of the
agreement, the Company had issued 271,052 Tracker Canada Exchangeable Preference
Shares to the owner of Page-Direct for 46.2% of the outstanding shares of
Page-Direct and had advanced $178,350 to Page-Direct at an interest rate equal
to the Royal Bank of Canada prime rate plus 2%. In June 1995, the owner of
Page-Direct exercised his option under the agreement to re-acquire his interest
in Page-Direct, he returned the Exchangeable Preference Shares to the Company,
Page-Direct repaid the loan, and the agreement was canceled. The Company
recorded the exercise of the reversionary option by the owner of Page-Direct as
if it had occurred as of March 31, 1995.


                                       30
<PAGE>   31
     By agreement dated January 31, 1995, the Company, through Tracker Canada,
committed to purchase up to 35.9% of the voting common shares of Centry through
a private placement of an 8% convertible debenture in the principal amount of
$405,260 (CDN $575,000). Tracker Canada advanced certain funds to Centry under
the debenture and agreed to provide, over nine months, administrative services
in the amount of $50,746 (CDN $72,000). In consideration therefor, Tracker
Canada received 510,275 common shares of Centry, which represented
approximately 9.87% of Centry's common shares then issued. Tracker Canada also
secured a voting trust and option agreement over 1,248,087 common shares
(approximately 17.2%) of Centry from the founders of Centry and prepaid
consulting services agreements in exchange for 78,005 Exchangeable Preference
Shares. The agreement contemplated that as payments were made under the
debenture, Tracker Canada would receive additional shares in Centry such that
upon payment of the entire convertible debenture, Tracker Canada would have
voting control of 53.1% of Centry.

     Tracker Canada advanced $50,451 under the debenture to Centry and received
a further 122,727 common shares for a total of 633,002 common shares
representing approximately 11.96% of Centry's common shares issued.
Subsequently, the Company entered into agreements with Centry which released the
Company from its obligation to fund the balance under the debenture and which
provided that the Company would receive a 3% commission of total gross revenues
on any deal entered into by Centry with certain companies, while Tracker gave
up the voting trust and option agreement. The Company has satisfied all of its
administrative services obligations to Centry. In October 1996, the Company sold
its interest in Centry for $37,037 as management wished to keep focused on its
core businesses and Centry did not fit into future plans.

     The above-described acquisitions were completely independent. To the
Company's knowledge, no common ownership or management exists between Centry and
Page-Direct and their principals or promoters. The Company's original purpose in
entering into the acquisitions was to acquire companies which the Company at the
time believed would assist it in advancing its longer-term strategy of locating
lost or stolen possessions through real-time asset tracking technologies. The
acquisitions were aborted because the Company was unable to generate sufficient
capital to support both its own marketing launch and the capital requirements of
the acquisitions. Since making these acquisitions, management has determined
that it is in the best interests of the Company to concentrate on the
development of its core business (i.e., its personal property identification and
recovery system and its card registration service) and to use its capital and
other resources to support the development of that business. Accordingly , the
Company has no present plans to make other acquisitions in the future.

INFLATION; SEASONALITY

     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.


                                       31
<PAGE>   32
            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, 1997 are included beginning at page 53.


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

                                   -- None --


                                    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 June 30, 1997:

NAME                    AGE                     POSITION

I. Bruce Lewis           56   Tracker U.S.: Chief Executive Officer, President
                              and Chairman of the Board of Directors; Tracker
                              Canada: President, Chief Operating Officer, Chief
                              Executive Officer and Chairman of the Board of
                              Directors

Mark J. Gertzbein        42   Tracker U.S.: Executive Vice President, Chief
                              Financial Officer, Secretary, Treasurer and Deputy
                              Chairman of the Board of Directors; Tracker
                              Canada: Senior Vice President of Finance, Chief
                              Financial Officer, Secretary and Director

Ed J. Korhonen           61   Tracker U.S.: Director

Quincy A.S. McKean III   41   Tracker U.S.: Director

Wolfgang Kyser           50   Tracker U.S.: Director

Leonard Yakobovits       38   Tracker U.S.: Director

     I. BRUCE LEWIS has been the Chairman of the Board of Directors and Chief
Executive Officer of Tracker U.S. since June 30, 1994. Mr. Lewis has also served
Tracker U.S. as President since August 12, 1995. Mr. Lewis also serves Tracker
Canada as its Chief Executive Officer and Chairman of the Board of Directors and
has so served since May 1993. For the period from 1980


                                       32
<PAGE>   33
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.

     MARK J. GERTZBEIN has been the Deputy Chairman of the Board of Directors,
the Executive Vice President and the Chief Financial Officer, Secretary and
Treasurer of Tracker U.S. since June 30, 1994. In addition, Mr. Gertzbein has
served as the Senior Vice President of Finance, the Chief Financial Officer and
Secretary of Tracker Canada since his appointment in July 1993 and as a Director
of Tracker Canada since May 1993. From August 1984 to June 1988, he served
Albert Berg Limited as Vice President, Finance and Administration. Albert Berg
was petitioned into bankruptcy by its creditors in May 1990. From June 1988 to
August 1990, he served as the Chief Financial Officer of Cape Breton Chemical
Corporation, a start-up PVC flexible stretch wrap manufacturer. From August 1990
to June 1991, Mr. Gertzbein consulted various companies on administrative,
accounting and tax related issues. From June 1991 to July 1993, he served as the
Corporate Controller for Summit Cosmetics, Inc., an exclusive warehouse and
distributor in the cosmetics and fragrance industry.

     ED J. KORHONEN has been a Director of Tracker U.S. since November 1, 1995.
He was the President, Chief Operating Officer and a Director of Tracker Canada
from May 1993 through May 1996. Since resigning from his positions with Tracker
Canada in May 1996, Mr. Korhonen has been the Executive Vice President of Eco
Logic International Inc. Mr. Korhonen served Nabisco Brands Limited as President
of Confectionery, Industrial Products and Grocery Divisions from 1977 to 1988
and was President of Maple Leaf Flour Products from 1989 to 1991. He has
subsequently engaged in business consulting with a company, Ed Korhonen
Management, he founded in 1991 and was a partner in the management consulting
firm of Sniderman & Wood from January 1992 through May 1993. Mr. Korhonen also
consults with Tracker Canada.

     QUINCY A.S. MCKEAN III has been a Director of Tracker U.S. since June 30,
1994. Mr. McKean was a director of Ultra Capital Corp., the predecessor entity
of the Company, from February 1992 to June 1994. From January 1987 through March
1990, Mr. McKean was employed by First Fidelity Bank, N.A./First Fidelity
Brokers of Newark, New Jersey, where he managed retail and institutional
accounts. From March 1990 through July 1994, he was a registered representative
with Kidder Peabody & Co. in New York City. Since July 1994, Mr. McKean has been
associated, as a registered representative, with the New York securities firm of
Mercer, Bokert, Buckman and Reid, Inc.

     WOLFGANG H. KYSER has been a Director of Tracker U.S. since June 30, 1994.
Since 1986 Mr. Kyser has been a principal and the Chief Executive Officer of KHB
Investments Corporation, which deals with foreign investments in Canada and the
United States. Since 1995, Mr. Kyser has been a principal and the President of
Kyser Pacific Group, which invests in and develops real estate. From December
1987 through September 1992, he was the sole director of "687292", an Ontario
company which held real estate. In November 1992, "687292" was petitioned into


                                       33
<PAGE>   34
bankruptcy by its creditors. Mr. Kyser also is a Director of AEG Sorting
Systems, Inc. and Olympia Business Machines Ltd.

     LEONARD YAKOBOVITS has been a Director of Tracker U.S. since September 8,
1995. Since 1985 Mr. Yakobovits has been the President of Dezco Holding &
Trading, a North American clear-out specialist and distributor for branded
consumer products. Mr. Yakobovits also consults with Tracker Canada.


CLASSIFICATION OF BOARD OF DIRECTORS OF TRACKER U.S.

     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 1997 annual meeting of stockholders,
approximately one-third will continue to serve until the 1998 annual meeting of
stockholders, and approximately one-third will continue to serve until the 1999
annual meeting of stockholders. Messrs. Lewis, Gertzbein and Yakobovits have
been elected to serve until the 1997 Annual Meeting of Stockholders. Messrs.
Kyser and Korhonen have been elected or appointed to serve until the 1998 Annual
Meeting of Stockholders. Mr. McKean has been elected to serve until the 1999
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 OF TRACKER U.S.

     The Executive Committee is comprised of I. Bruce Lewis and Mark J.
Gertzbein. The Audit Committee, which is comprised of Messrs. Korhonen, McKean
and Gertzbein (Chairman), 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 is comprised of Messrs. Kyser (Chairman) and
Yakobovits. The Compensation Committee, which is comprised of Messrs. Yakobovits
(Chairman) and McKean, 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.


                                       34
<PAGE>   35
                        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. On
May 3, 1996, the Company issued 10,000 shares of Common Stock to each of Messrs.
Coronella and McKean in lieu of $4,500 compensation owed to them for their
services as directors, issued 5,556 shares of Common Stock to Mr. Kyser in lieu
of $2,500 compensation for his service as a director, and issued 8,889 shares of
Common Stock to Mr. Yakobovits in lieu of $4,000 for his service as a director.
On October 16, 1996, the Company issued 83,333 shares of Common Stock to each of
Messrs. Yakobovits and Kyser in lieu of $10,000 compensation owed to each of
them for their annual fees as directors and 41,667 shares of Common Stock to
each of Messrs. McKean and Korhonen in lieu of $5,000 compensation owed to each
of them for one-half of their annual fee as a director. On January 17, 1997, the
Company issued 45,913 shares of Common Stock to Mr. Coronella in lieu of $5,601
compensation owed to him by the Company for his service as a director. Mr.
Coronella resigned on May 17, 1997. 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 sets forth the compensation paid in cash or shares or
accrued by the Company to the Chief Executive Officer and to the other executive
officer (the "Named Executive Officers") for services rendered in all capacities
to the Company during the fiscal year ended March 31, 1997, 1996 and 1995.


                           Summary Compensation Table

<TABLE>
<CAPTION>
                                                                                                                      Long-term
                                                                                                                     Compensation
                                                                                  Fiscal       Annual                 Restricted
Name and Principal Position                                                       Year      Compensation                Stock
                                                                                  Ended        Salary                  Award(s)
                                                                                 March 31,      ($)                       ($)
<S>                                                                              <C>        <C>                      <C>
I. Bruce Lewis, Chief Executive Officer & President(1)                             1997       175,000                        --
I. Bruce Lewis, Chief Executive Officer(1)                                         1996       175,000                        --
I. Bruce Lewis, Chief Executive Officer(1)                                         1995       178,350                        --
Mark J. Gertzbein, Chief Financial Officer & Executive Vice President(2)           1997       175,000                        --
Mark J. Gertzbein, Chief Financial Officer & Executive Vice President(2)           1996       175,000                   413,437
Mark J. Gertzbein, Chief Financial Officer & Executive Vice President(2)           1995       178,350                        --
</TABLE>

(1)  Through BL Consulting Services, Mr. Lewis contracted with Tracker Canada
     for annual compensation in the amount of $178,350. In connection with the
     Reorganization, the Company and Mr. Lewis entered into a
     stockholder-approved


                                       35
<PAGE>   36
     employment agreement which originally provided for base annual salary in
     the amount of $440,000. The Company had amended the employment agreement
     with Mr. Lewis, and coordinated the consulting agreement between Tracker
     Canada and BL Consulting Services, to terminate the consulting agreement
     between Tracker Canada and BL Consulting Services as of the effective date
     of the employment agreement between the Company and Mr. Lewis, to provide
     for a total compensation for the year ended March 31, 1995 in the amount of
     $178,350 and to reduce the annual base salary under the employment
     agreement between the Company and Mr. Lewis to $175,000 effective April 1,
     1995. On September 24, 1996, the Company entered into a three year
     agreement with Mr. Lewis, which provides for an annual base salary of
     $175,000, with increases of $37,500 each year based upon certain
     performance criteria beginning April 1, 1997.

(2)  Through MJG Management Accounting Services Ltd., Mr. Gertzbein contracted
     with Tracker Canada for annual compensation in the amount of $178,350. In
     connection with the Reorganization, the Company and Mr. Gertzbein entered
     into a stockholder-approved employment agreement which originally provided
     for base annual salary in the amount of $350,000. The Company had amended
     the employment agreement with Mr. Gertzbein, and coordinated the consulting
     agreement between Tracker Canada and MJG Management Accounting Services
     Ltd., to terminate the consulting agreement between Tracker Canada and MJG
     Management Accounting Services Ltd. as of the effective date of the
     employment agreement between the Company and Mr. Gertzbein, to provide for
     a total compensation for the year ended March 31, 1995 in the amount of
     $178,350 and to reduce the annual base salary under the employment
     agreement between the Company and Mr. Gertzbein to $175,000 effective April
     1, 1995. On April 11, 1995, the Compensation Committee granted Mr.
     Gertzbein 315,000 shares of restricted stock under the 1994 Plan. On
     September 24, 1996, the Company entered into a three year agreement with
     Mr. Gertzbein, which provides for an annual base salary of $175,000.


EMPLOYMENT CONTRACTS, TERMINATION OF EMPLOYMENT AND CHANGE OF CONTROL

     On June 30, 1994, the Company, in connection with the Reorganization,
entered into stockholder approved employment agreements with Messrs. Lewis and
Gertzbein. The agreements originally provided for base salaries at annual rates
equal to $440,000 and $350,000, respectively. Effective July 12, 1995, upon
recommendation of the Compensation Committee of the Board of Directors and with
the agreement of each of Messrs. Lewis and Gertzbein, each of these employment
agreements was amended to reduce annual base salaries to $175,000, with a
maximum relocation allowance of $25,000 and a maximum car allowance of $10,000.
In addition, each such person is eligible for discretionary bonuses.

     The agreements for Messrs. Lewis and Gertzbein have an initial term of
three years with one year renewal terms thereafter, and provide for the payment
of a relocation allowance equal to the lesser of the actual relocation expenses
or $25,000 per each occurrence. Each agreement provides that the executive 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 either Mr. Lewis' or Mr. Gertzbein's employment is terminated by the
Company for cause (as defined in the executive's employment agreement) or by the
executive for any reason (other than for good reason (also as defined)), the
executive 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 the executive's death or disability, by the Company other than
for cause or by the executive for good reason, the executive 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 Messrs. Lewis
and Gertzbein for 12 months, or, if earlier, through the date the executive
obtains alternative employment, such executive's participation in the employee
benefit plans of the Company in which the executive was eligible to participate
immediately before termination, to the


                                       36
<PAGE>   37
extent permissible under such plans. The executive (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 the executive at termination. If the executive's employment is
terminated after a change of control, either by the executive for good reason
or by the Company without cause, the executive 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 the executive 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.


1994 STOCK INCENTIVE PLAN

     GENERAL. On June 30, 1994, the stockholders approved the 1994 Stock
Incentive Plan and on November 1, 1995 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 shareholder value. Individuals are selected for
participation in the 1994 Plan by a Compensation Committee of the Board of
Directors (the "Committee"). An aggregate of 1,250,000 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 Company intends to submit to its
stockholders at its Annual Meeting presently scheduled for August 22, 1997 a
proposal to increase the number of shares available under the Plan to 5,000,000.
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


                                       37
<PAGE>   38
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 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.

     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


                                       38
<PAGE>   39
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 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


                                       39
<PAGE>   40
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. On April 11, 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.

     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 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


                                       40
<PAGE>   41
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:

     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.


                                       41
<PAGE>   42
     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 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.


                                       42
<PAGE>   43
     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 June 30, 1997, no grants had been made under the 1994 Plan, other
than the automatic option grants to the non-employee directors and the grants
totalling 630,000 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 twenty-one (21) 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
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 "Wage Plan") on September 28, 1995. The purpose of the Wage Plan
was to retain and motivate participants in the 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 Wage Plan. Under the Wage Plan, the participants agreed
to receive an


                                       43
<PAGE>   44
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 Wage Plan. The
Wage Plan may not be altered, amended or modified except by written agreement
signed by the participants, Tracker U.S. and Tracker Canada. As the Wage Plan is
a contract among the participants, Tracker U.S. and Tracker Canada 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 Wage Plan. The Company
has registered the shares issued under the Wage Plan under the Securities Act of
1933, as amended (the "Act").

1996 STOCK WAGE AND FEE PAYMENT PLAN

     The Board of Directors recently approved 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. The Company filed on October 16, 1996 a
registration statement on Form S-8 concerning the shares to be issued under the
1996 Wage Plan. 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 Tracker Canada
and non-employee (outside) director of the Company may elect, after a
registration statement on form S-8 relating to the 1996 Wage Plan was filed, 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 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 terminates service before the end of the
Designated


                                       44
<PAGE>   45
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 must agree that if he terminates
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. 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, Tracker U.S. and Tracker Canada. As the 1996 Wage Plan is a
contract among the participants, Tracker U.S. and Tracker Canada relating to a
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.


                                       45
<PAGE>   46
          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 June 30, 1997 by (i) each person known to
the Company to own beneficially more than 5% of the total voting stock of the
Company (i.e., Common Stock and Class B Voting Common Stock), (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 and the Class B Voting Common Stock, from which the holders of
Exchangeable Preference Shares acquire their voting rights, are the only
outstanding classes of equity securities of Tracker U.S. As of June 30, 1997,
there were 335 record holders of Common Stock and 78 record holders of Class B
Voting Common Stock.

<TABLE>
<CAPTION>
                                                                  Number of      Number of Shares
Beneficial Owner                                                  Shares of      of Class B Voting       Total         Percentage of
                                                                 Common Stock      Common Stock        Number of        Total Number
                                                                                                         Shares         of Shares(1)
<S>                                                              <C>             <C>                  <C>              <C>
I. Bruce Lewis(2)(3) ..................................            728,578          2,210,668          2,939,246               12.1%
180 Dundas Street West,
Suite 1502, Toronto, Ontario,
Canada M5G 1Z8

Mark J. Gertzbein .....................................            628,578                  0            628,578                2.6%
180 Dundas Street West,
Suite 1502, Toronto, Ontario,
Canada  M5G 1Z8

Ed J. Korhonen(2) .....................................            101,750            142,864            244,614                1.0%
2206 Pineneedle Row,
Mississauga, Ontario, Canada
L5C 1V3

Quincy A.S. McKean III(8) .............................             91,082                  0             91,082                  *
75 West Front Street
Red Bank, New Jersey 07701

Leonard Yakobovits ....................................              8,989                  0              8,989                  *
P. O. Box 243
Concord, Ontario, Canada  L4K
1B4

Wolfgang H. Kyser(4)(8) ...............................            121,841              2,858            124,699                1.0%
121 Richmond Street West, #1000
Toronto, Ontario, Canada  M5H 2K1

Saturn Investments, Inc.(2)(5) ........................                  0          1,052,564          1,052,564                4.3%
c/o Anthony Bonanno, Esq
Gibson, Dunn & Crutcher
1050 Connecticut Ave. N.W
Washington, D.C. 20036-5306

Ismail A. Abudawood(2)(6)(9) ..........................            228,572          1,052,564          1,281,136                5.3%
P.O. Box 227
Jeddah, 21411
Kingdom of Saudi Arabia
</TABLE>


                                       46
<PAGE>   47
<TABLE>
<CAPTION>
                                                                  Number of      Number of Shares
Beneficial Owner                                                  Shares of      of Class B Voting       Total         Percentage of
                                                                 Common Stock      Common Stock        Number of        Total Number
                                                                                                        Shares          of Shares(1)
<S>                                                              <C>             <C>                  <C>              <C>
Ayman I. Abudawood(2)(6) ..............................                  0          1,073,264          1,073,264                4.4%
P.O. Box 227
Jeddah, 21411
Kingdom of Saudi Arabia

Osama I. Abudawood(2)(6) ..............................                  0          1,115,564          1,115,564                4.6%
P.O. Box 227
Jeddah, 21411
Kingdom of Saudi Arabia


Anas I. Abudawood(2)(6) ...............................                  0          1,067,264          1,067,264                4.4%
P.O. Box 227
Jeddah, 21411
Kingdom of Saudi Arabia

Executive officers and directors ......................          1,052,240          2,356,390          3,408,630               14.1%
as a group including those named
above (six persons)(2)(7)
</TABLE>

* Less than 1% of the outstanding Common Stock.

(1)  Percentage of ownership is based upon 24,230,307 shares of Common Stock
     beneficially owned on June 30, 1997, including 16,823,277 shares of Common
     Stock, 4,830,394 shares of Class B Voting Common Stock ("Voting Stock"),
     currently exercisable warrants to purchase 750,000 shares of Common Stock,
     currently exercisable options to purchase 13,332 shares of Common Stock,
     713,304 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)  Pursuant to that certain Exchange Agency and Trust Agreement dated July 12,
     1994 among the Company, Tracker Canada and Montreal Trust Company
     ("Trustee"), the Trustee holds, for the benefit of the holders of
     Exchangeable Preference Shares, that number of shares of Voting Stock as
     are held by the owners of Exchangeable Preference Shares. By contractual
     agreement, prior to the exchange of the Exchangeable Preference Shares,
     holders of Exchangeable Preference Shares receive their voting rights from
     the Voting Stock held by the Trustee.

(3)  Includes 767,150 Common and Exchangeable Preference Shares over which Mr.
     Lewis has voting power pursuant to agreements with Mr. Gertzbein, Mr.
     Johnson and Mr. Jonathan Lewis, Mr. Lewis' son.

(4)  Includes 2,858 shares of Class B Voting Common Stock held by Kyser
     Investment Corporation, a company of which Mr. Kyser is a stockholder.

(5)  Includes 1,052,564 Exchangeable Preference Shares owned by Saturn. In
     addition, 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.

(6)  Includes 1,052,564 Exchangeable Preference Shares owned by Saturn. Ismail
     A. Abudawood is the sole stockholder, and Ayman I. Abudawood, Osama I.
     Abudawood, and Anas I. Abudawood are directors of Saturn. Accordingly, they
     may be deemed to be beneficial owners of such shares.

(7)  Includes currently exercisable options to acquire 13,332 shares of Company
     Common.

(8)  Includes currently exercisable options to acquire 6,666 shares of Company
     Common.

(9)  Includes Convertible Debentures which are currently convertible into
     228,572 shares of Tracker Common 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


                                       47
<PAGE>   48
"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 of the Company has entered 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, or one year
after October 21, 1996, whichever is longer, the Company will not make loans to
its officers, directors, employees, or principal shareholders, 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.

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."

     Pursuant to the Reorganization Agreement, Tracker U.S. authorized a new
series of Class B Voting Common Stock ("Voting Stock") having full voting
rights, which were conferred upon the Tracker Canada shareholders as part of the
Reorganization in each case equal to the number of Exchangeable Preference
Shares held by the Tracker Canada shareholder. See "DESCRIPTION OF SECURITIES
Class B Voting Common Stock." Tracker U.S. delivered 6,235,225 shares of its
newly authorized Voting Stock to Montreal Trust Company of Canada ("Montreal
Trust") to be held pursuant to the terms of an Exchange Agency and Voting Trust
Agreement (the "Exchange Agreement"). The Exchange Agreement permits the Tracker
Canada shareholders to direct the voting of the Voting Stock.

     The common shares of Tracker Canada, other than the Class A common shares
issued to Tracker U.S., were reclassified into Exchangeable Preference Shares, a
new class of Tracker Canada stock. The Exchangeable Preference Shares are
exchangeable for Reserved Common Shares (as defined below) of Tracker U.S. on a
one-to-one basis commencing July 12, 1995. On July 12, 2002, all of the
Exchangeable Preference Shares then outstanding shall be automatically


                                       48
<PAGE>   49
exchanged for shares of Tracker U.S. Common Stock. Upon any exchange of
Exchangeable Preference Shares for Common Stock, whether voluntary or automatic,
the Exchangeable Preference Shares will be canceled and a corresponding number
of shares of the Voting Stock will be returned to Tracker U.S.

     The holders of the Exchangeable Preference Shares have voting, dividend and
liquidation rights that are in parity with those of the shares of the Tracker
U.S. Common Stock. These parallel rights were created in the following manner:

     a.   Tracker U.S. placed 6,235,225 shares of the Voting Stock with Montreal
          Trust for the benefit of the holders of the Exchangeable Preference
          Shares. The beneficial owners of the Voting Stock (i.e., the holders
          of the Exchangeable Preference Shares) have the right to vote the
          Voting Stock under procedures set forth in the Exchange Agreement and
          collectively controlled approximately 90% of the voting power of
          Tracker U.S. at the time of the closing of the Reorganization
          Agreement. Although the Voting Stock is redeemable by Tracker U.S.,
          Tracker U.S. has agreed not to redeem the Voting Stock until such time
          as the Exchangeable Preference Shares are exchanged into Reserved
          Common Shares (as defined below).

     b.   Tracker U.S. irrevocably reserved 6,235,225 shares of its authorized,
          unissued Common Stock for issuance to holders of Exchangeable
          Preference Shares. Under the terms of the Reorganization Agreement,
          these shares will be used for the exchange of the Exchangeable
          Preference Shares into shares of the Tracker U.S. Common Stock on a
          one-to-one basis. These reserved and unissued shares are referred to
          herein as the "Reserved Common Shares."

     c.   The exchange of the Exchangeable Preference Shares for the Reserved
          Common Shares will be accomplished through an exchange trust created
          under the Exchange Agreement. Under the Exchange Agreement, Montreal
          Trust, as Trustee, has agreed, at any time on or after July 12, 1995,
          to (i) exchange with any holder of the Exchangeable Preference Shares
          any or all of the Exchangeable Preference Shares held by such holder
          for Reserved Common Shares on a one-to-one basis, and (ii) return to
          Tracker U.S. a certificate representing the corresponding number of
          shares of Voting Stock.

     d.   Under the Exchange Agreement, Tracker U.S. has agreed not to declare
          and pay any cash dividends on its Common Stock unless it also causes
          Tracker Canada to declare and pay cash dividends on the Exchangeable
          Preference Shares at the same time and in the same manner as the
          dividends paid on the Tracker U.S. Common Stock. Additionally, under a
          Guarantee Agreement with Tracker Canada, Tracker U.S. must provide
          Tracker Canada with adequate funds, through a contribution to capital
          surplus, to pay such dividends to the holders of the Exchangeable
          Preference Shares. The Guarantee Agreement also obligates Tracker U.S.
          to satisfy the liquidation value of the Exchangeable Preference Shares
          in the event of the liquidation of Tracker Canada. Under the Guarantee
          Agreement, the liquidation value per share is calculated as if Tracker
          U.S. were liquidated on the same date and


                                       49
<PAGE>   50
          each issued and outstanding Exchangeable Preference Share were an
          issued and outstanding share of Tracker U.S. Common Stock. Tracker
          U.S. has the option to pay the liquidation value of the Exchangeable
          Preference Shares in cash or in Reserved Common Shares.

     In the Reorganization Agreement, Tracker U.S. agreed to file a registration
statement relating to the Reserved Common Shares.

     At a special meeting of stockholders held June 30, 1994, the stockholders
of Tracker U.S. (then Ultra Capital Corp.) approved the Reorganization and
several corporate proposals, including the change in domicile from Nevada to
Delaware, the change in corporate name, the adoption of the Delaware certificate
of incorporation and bylaws, employment agreements with senior management and
the 1994 Plan.

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 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


                                       50
<PAGE>   51
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.

     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.


                                       51
<PAGE>   52
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 its Tracker Canada Exchangeable
Preference Shares to Saturn, an affiliate of Stalia. Stalia also transferred to
Saturn 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 tradeable 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.


                                       52
<PAGE>   53

                                     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.
                                                                        --------
          Report of Independent Accountants                                59
          Consolidated Balance Sheet                                       60
          Consolidated Statement of Operations                             61
          Consolidated Statement of Cash Flows                             62
          Consolidated Statement of Shareholders' Equity (Deficit)         63
          Notes to Financial Statements                                    66

     2.   Financial Statement Schedules

                                    - None -

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


b.   REPORTS ON FORM 8-K

     During the three months ended March 31, 1997, the Company filed no reports
     on Form 8-K.


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

  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


                                       53
<PAGE>   54
  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

 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


                                       54
<PAGE>   55
 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.

 10.34           Exclusive Agent Licence 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.

 21.1++++        List of subsidiaries of the Registrant

 23              Consent of Independent Accountants

-------------------
+          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 Current Report on
           Form 10-K dated March 31, 1996 (filed July 15, 1996).


                                       55
<PAGE>   56
                               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/ I. Bruce Lewis
       --------------------------------------------------------------
       I. Bruce Lewis, Chairman of the Board, President and Chief
       Executive Officer (Principal Executive Officer)

Dated: July 3, 1997

       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: July 3, 1997                By:   /s/ I. Bruce Lewis
                                          ------------------------------
                                              I. Bruce Lewis
                                              Chairman of the Board, President
                                              and Chief Executive Officer
                                              (Principal Executive Officer)


       Dated: July 3, 1997                By:   /s/ Mark J. Gertzbein
                                          ------------------------------
                                              Mark J. Gertzbein
                                              Executive Vice President,
                                              Secretary, Treasurer, Chief
                                              Financial Officer and Director
                                              (Principal Financial Officer and
                                              Principal Accounting Officer)


       Dated: July 3, 1997                By:   /s/Leonard Yakobovits
                                          ------------------------------
                                              Leonard Yakobovits
                                              Director


                                       56
<PAGE>   57
       Dated: July 3, 1997              By:   /s/ Quincy A.S. McKean III
                                          ------------------------------
                                              Quincy A.S. McKean, III
                                              Director


       Dated: July 3, 1997              By:   /s/ Wolfgang H. Kyser
                                          ------------------------------
                                              Wolfgang H. Kyser
                                              Director


       Dated: July 3, 1997              By:   /s/ Ed J. Korhonen
                                          ------------------------------
                                              Ed J. Korhonen
                                              Director


           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, 1997. 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.


                                       57
<PAGE>   58
THE TRACKER
CORPORATION
OF AMERICA
(A DEVELOPMENT
STAGE COMPANY)



CONSOLIDATED
FINANCIAL STATEMENTS
MARCH 31, 1997 and 1996
<PAGE>   59
                       REPORT OF INDEPENDENT ACCOUNTANTS

June 24, 1997

To the Board of Directors and Shareholders of
The Tracker Corporation of America

In our opinion, the accompanying consolidated balance sheet and the related
statements of operations, of cash flows and of shareholders' equity present
fairly, in all material respects, the financial position of The Tracker
Corporation of America and its subsidiary at March 31, 1997 and 1996, and the
results of their operations and their cash flows for the three years ended March
31, 1997 and the periods from inception at May 6, 1993 through March 31, 1997,
1996 and 1995 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 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.


PRICE WATERHOUSE LLP
<PAGE>   60
                       THE TRACKER CORPORATION OF AMERICA
                         ( A DEVELOPMENT STAGE COMPANY)
--------------------------------------------------------------------------------

                           CONSOLIDATED BALANCE SHEET


<TABLE>
<CAPTION>
                                     ASSETS
                                                                                   MARCH 31,           MARCH 31,
                                                                                     1997                1996
                                                                                 ------------        ------------
<S>                                                                             <C>                  <C>
CURRENT ASSETS
  CASH AND CASH EQUIVALENTS                                                      $    105,213        $     78,844
  SHORT-TERM INVESTMENT                                                                    --             221,190
  ACCOUNTS RECEIVABLE                                                                 133,613               7,361
  PREPAID EXPENSES AND DEPOSITS                                                       359,526             168,345
  INVENTORY                                                                            24,338             115,612
  DEFERRED CHARGES                                                                  2,820,064              73,750
                                                                                 ------------        ------------
       TOTAL CURRENT ASSETS                                                         3,442,754             665,102

DUE FROM SHAREHOLDERS                                                                  61,487              58,226
DEFERRED CHARGES                                                                      315,837              66,234
PROPERTY AND EQUIPMENT (NET)                                                          418,267             353,729
LONG-TERM INVESTMENT                                                                       --              50,451
                                                                                 ------------        ------------

       TOTAL ASSETS                                                              $  4,238,345        $  1,193,742
                                                                                 ============        ============


                  LIABILITIES & SHAREHOLDERS' EQUITY (DEFICIT)

CURRENT LIABILITIES
  ACCOUNTS PAYABLE                                                               $    468,764        $    551,553
  ACCRUED LIABILITIES                                                                 373,687             266,837
  DEFERRED REVENUE                                                                  4,509,401             115,241
  DEBENTURE PAYABLE                                                                    83,991                  --
  CONVERTIBLE DEBENTURES                                                              590,746           1,460,000
                                                                                 --------------------------------
       TOTAL CURRENT LIABILITIES                                                    6,026,589           2,393,631


DEFERRED REVENUE                                                                      613,131             178,883

COMMITMENTS (NOTE 12)                                                                      --                  --

SHAREHOLDERS' EQUITY (DEFICIT)
  $1000 6% CONVERTIBLE PREFERRED STOCK, $.001 PAR VALUE, 500,000 SHARES
    AUTHORIZED, NIL (NIL - MARCH 31, 1996) SHARES ISSUED AND OUTSTANDING                   --                  --

   COMMON STOCK, $.001PAR VALUE, 30,000,000 SHARES AUTHORIZED,
     15,925,505 (6,130,929 - MARCH 31, 1996) SHARES ISSUED AND OUTSTANDING             15,925               6,131



  CLASS B VOTING COMMON STOCK, $0.00000007 PAR VALUE, 20,000,000
    SHARES AUTHORIZED, 4,862,537 (6,126,362 - MARCH 31, 1996) ISSUED
    AND OUTSTANDING                                                                        --                  --

  PAID-IN CAPITAL                                                                  15,207,895          14,013,062
  OTHER CAPITAL                                                                      (394,333)         (1,954,327)
  ACCUMULATED DEFICIT                                                             (16,910,816)        (13,202,738)
  CUMULATIVE TRANSLATION ADJUSTMENT                                                  (320,046)           (240,900)
                                                                                 ------------        ------------

    TOTAL SHAREHOLDERS' EQUITY (DEFICIT)                                           (2,401,375)         (1,378,772)
                                                                                 ------------        ------------


    TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)                         $  4,238,345        $  1,193,742
                                                                                 ============        ============
</TABLE>



THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL
STATEMENTS.
<PAGE>   61
                       THE TRACKER CORPORATION OF AMERICA
                         ( A DEVELOPMENT STAGE COMPANY)
--------------------------------------------------------------------------------

                      CONSOLIDATED STATEMENT OF OPERATIONS


<TABLE>
<CAPTION>
                                                             YEAR ENDED
                                                              MARCH 31,
                                          ------------------------------------------------
                                              1997               1996              1995
                                          -----------        -----------       -----------  
<S>                                       <C>                <C>               <C>
REVENUE                                   $ 2,348,169        $   106,522       $    10,187

COST OF SALES                               1,613,422             40,230             4,029
                                          -----------        -----------        ----------
GROSS PROFIT                                  734,747             66,292             6,158
                                          -----------        -----------        ----------
DEVELOPMENT COSTS
  OPERATIONAL                                 639,862            592,880           687,681
  INFORMATION SYSTEMS                         289,552            262,942           465,827
  SALES AND MARKETING                         906,093          1,031,041         1,737,438
  GENERAL AND ADMINISTRATIVE                2,607,318          4,270,159         2,183,795
                                          -----------        -----------        ----------

TOTAL DEVELOPMENT COSTS                     4,442,825          6,157,022         5,074,741
                                          -----------        -----------        ----------

NET LOSS APPLICABLE TO COMMON STOCK       $(3,708,078)       $(6,090,730)      $(5,068,583)
                                          ===========        ===========       ===========


LOSS PER SHARE OF COMMON STOCK            $     (0.22)       $     (0.57)      $     (0.71)
                                          ===========        ===========       ===========


WEIGHTED AVERAGE NUMBER OF SHARES
   OUTSTANDING                             17,177,476         10,637,237         7,100,488
                                          ===========        ===========       ===========
</TABLE>

<TABLE>
<CAPTION>
                                                 FOR THE PERIOD FROM INCEPTION ( MAY 6, 1993)
                                                              THROUGH MARCH 31,
                                           -------------------------------------------------------
                                                1997                1996                 1995     
                                           -------------------------------------------------------
<S>                                        <C>                 <C>                 <C>            
REVENUE                                    $  2,464,878        $    116,709        $    10,187    

COST OF SALES                                 1,657,681              44,259              4,029    
                                           -------------------------------------------------------
GROSS PROFIT                                    807,197              72,450              6,158    
                                           -------------------------------------------------------
DEVELOPMENT COSTS
  OPERATIONAL                                 2,069,683           1,429,821            836,941    
  INFORMATION SYSTEMS                         1,175,598             886,046            623,104    
  SALES AND MARKETING                         4,280,843           3,374,750          2,343,709    
  GENERAL AND ADMINISTRATIVE                 10,191,889           7,584,571          3,314,412    
                                           -------------------------------------------------------

TOTAL DEVELOPMENT COSTS                      17,718,013          13,275,188          7,118,166    
                                           -------------------------------------------------------

NET LOSS APPLICABLE TO COMMON STOCK        $(16,910,816)       $(13,202,738)       $(7,112,008)
                                           =======================================================


LOSS PER SHARE OF COMMON STOCK             $      (1.66)       $      (1.70)       $     (1.14)   
                                           =======================================================


WEIGHTED AVERAGE NUMBER OF SHARES
   OUTSTANDING                               10,161,648           7,755,584          6,255,379    
                                           =======================================================
</TABLE>

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL
STATEMENTS.
<PAGE>   62
                       THE TRACKER CORPORATION OF AMERICA
                          (A DEVELOPMENT STAGE COMPANY)
--------------------------------------------------------------------------------

                      CONSOLIDATED STATEMENT OF CASH FLOWS


<TABLE>
<CAPTION>
                                                                                                    YEAR ENDED
                                                                                                     MARCH 31,
                                                                                 -------------------------------------------------
                                                                                     1997              1996               1995
                                                                                 -----------        -----------        -----------
<S>                                                                              <C>                <C>                <C>
CASH FLOWS FROM (USED IN) OPERATING ACTIVITIES:
  NET LOSS                                                                       $(3,708,078)       $(6,090,730)       $(5,068,583)
  ADJUSTMENTS TO RECONCILE NET LOSS TO NET CASH FROM
  OPERATING ACTIVITIES:
    DEPRECIATION                                                                     131,780            111,070             94,161
    LOSS ON SALE OF LONG-TERM INVESTMENT                                              13,414                 --                 --
    RENT, CONSULTING AND MARKETING SERVICES, EMPLOYEE
     COMPENSATION SETTLED VIA THE ISSUANCE OF COMPANY
     SHARES                                                                        1,245,473          2,749,208            799,249
    CHANGES IN ASSETS AND LIABILITIES:
        PREPAID EXPENSES AND DEPOSITS                                               (191,181)           376,087           (219,317)
        ACCOUNTS RECEIVABLE                                                         (126,252)            (2,380)            (4,981)
        SHORT-TERM INVESTMENT                                                        221,190           (221,190)                --
        INVENTORY                                                                     91,274             50,391           (166,003)
        DEFERRED CHARGES                                                          (2,995,917)          (139,984)                --
        DEFERRED REVENUE                                                           4,828,408            283,126             10,998
        ACCOUNTS PAYABLE AND ACCRUED LIABILITIES                                      24,061           (617,155)         1,159,885
                                                                                 -----------        -----------        -----------

  NET CASH USED IN OPERATING ACTIVITIES                                             (465,828)        (3,501,557)        (3,394,591)
                                                                                 -----------        -----------        -----------

CASH FLOWS FROM (USED IN) INVESTING ACTIVITIES:
  ACQUISITION OF FIXED ASSETS                                                       (194,688)           (13,006)          (329,840)
  LOAN TO SHAREHOLDERS                                                                (3,261)            (8,911)          (211,022)
  REPAYMENT OF LOANS TO SHAREHOLDERS                                                      --            142,611            152,006
  NOTE RECEIVABLE                                                                         --                 --           (200,317)
  REPAYMENT OF NOTE RECEIVABLE                                                            --            178,350             21,967
  LONG-TERM INVESTMENT                                                                    --            (10,929)        (2,290,443)
  UNWIND OF LONG-TERM INVESTMENT                                                      37,037                 --          2,250,921
                                                                                 -----------        -----------        -----------
  NET CASH FROM (USED IN) INVESTING ACTIVITIES                                      (160,912)           288,115           (606,728)
                                                                                 -----------        -----------        -----------

CASH FLOWS FROM (USED IN) FINANCING ACTIVITIES:
  ISSUANCE OF COMMON SHARES                                                               --          1,177,445          3,030,897
  ISSUANCE OF PREFERRED SHARES                                                     1,050,000                 --                 --
  ISSUANCE OF CONVERTIBLE SUBORDINATED DEBENTURES                                         --          2,189,529                 --
  REPAYMENT OF DEBENTURES AND CONVERTIBLE SUBORDINATED DEBENTURES                   (130,263)                --                 --
  DUE TO SHAREHOLDER                                                                      --                 --            108,390
  REPAYMENT TO SHAREHOLDER                                                                --                 --           (108,390)
  SHARE ISSUE COSTS                                                                 (224,741)          (214,357)           (779,495)
                                                                                 -----------        -----------        -----------

  NET CASH FROM FINANCING ACTIVITIES                                                 694,996          3,152,617          2,251,402
                                                                                  ----------        -----------        -----------

EFFECT OF EXCHANGE RATE CHANGES                                                      (41,887)            32,578           (155,976)
                                                      
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS DURING                               26,369            (28,247)        (1,905,893)
  THE PERIOD

CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD                                        78,844            107,091          2,012,984
                                                                                 -----------        -----------        -----------

CASH AND CASH EQUIVALENTS, END OF PERIOD                                         $   105,213        $    78,844        $   107,091
                                                                                 ===========        ===========        ===========

</TABLE>

<TABLE>
<CAPTION>
                                                                                          FROM INCEPTION (MAY 6, 1993)
                                                                                                THROUGH MARCH 31,
                                                                                --------------------------------------------------
                                                                                    1997                1996              1995
                                                                                 -----------        -----------        -----------
<S>                                                                             <C>                 <C>                 <C>
CASH FLOWS FROM (USED IN) OPERATING ACTIVITIES:
  NET LOSS                                                                       (16,910,816)       $(13,202,738)       $(7,112,008)
  ADJUSTMENTS TO RECONCILE NET LOSS TO NET CASH FROM
  OPERATING ACTIVITIES:
    DEPRECIATION                                                                     367,126             235,346            124,276
    LOSS ON SALE OF LONG-TERM INVESTMENT                                              13,414                  --                 --
    RENT, CONSULTING AND MARKETING SERVICES, EMPLOYEE
     COMPENSATION SETTLED VIA THE ISSUANCE OF COMPANY
     SHARES                                                                        5,118,274           3,872,801          1,123,593
    CHANGES IN ASSETS AND LIABILITIES:
        PREPAID EXPENSES AND DEPOSITS                                               (376,799)           (185,618)          (561,705)
        ACCOUNTS RECEIVABLE                                                         (133,613)             (7,361)            (4,981)
        SHORT-TERM INVESTMENT                                                             --            (221,190)                --
        INVENTORY                                                                    (24,338)           (115,612)          (166,003)
        DEFERRED CHARGES                                                          (3,135,901)           (139,984)                --
        DEFERRED REVENUE                                                           5,122,532             294,124             10,998
        ACCOUNTS PAYABLE AND ACCRUED LIABILITIES                                     857,096             833,035          1,450,190
                                                                                ------------        -------------       ------------

  NET CASH USED IN OPERATING ACTIVITIES                                           (9,103,025)         (8,637,197)        (5,135,640)
                                                                                -------------       -------------       ------------

CASH FLOWS FROM (USED IN) INVESTING ACTIVITIES:
  ACQUISITION OF FIXED ASSETS                                                       (784,633)           (589,945)          (576,939)
  LOAN TO SHAREHOLDERS                                                              (417,899)           (414,638)          (405,727)
  REPAYMENT OF LOANS TO SHAREHOLDERS                                                 356,412             356,412            213,801
  NOTE RECEIVABLE                                                                   (200,317)           (200,317)          (200,317)
  REPAYMENT OF NOTE RECEIVABLE                                                       200,317             200,317             21,967
  LONG-TERM INVESTMENT                                                            (2,301,372)         (2,301,372)        (2,290,443)
  UNWIND OF LONG-TERM INVESTMENT                                                   2,287,958           2,250,921          2,250,921
                                                                                ------------        -------------       ------------
  NET CASH FROM (USED IN) INVESTING ACTIVITIES                                      (859,534)           (698,622)          (986,737)
                                                                                ------------        -------------       ------------

CASH FLOWS FROM (USED IN) FINANCING ACTIVITIES:
  ISSUANCE OF COMMON SHARES                                                        8,922,530           8,922,530          7,745,085
  ISSUANCE OF PREFERRED SHARES                                                     1,050,000                  --                 --
  ISSUANCE OF CONVERTIBLE SUBORDINATED DEBENTURES                                  2,189,529           2,189,529                 --
  REPAYMENT OF DEBENTURES AND CONVERTIBLE SUBORDINATED DEBENTURES                   (130,263)                 --                 --
  DUE TO SHAREHOLDER                                                                      --             108,390            108,390
  REPAYMENT TO SHAREHOLDER                                                                --            (108,390)          (108,390)
  SHARE ISSUE COSTS                                                               (1,684,735)         (1,459,994)        (1,245,637)
                                                                                ------------        -------------       ------------

  NET CASH FROM FINANCING ACTIVITIES                                              10,347,061           9,652,065          6,499,448
                                                                                ------------        -------------       ------------

EFFECT OF EXCHANGE RATE CHANGES                                                     (279,289)           (237,402)          (269,980)

INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS DURING                              105,213              78,844            107,091
  THE PERIOD

CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD                                            --                  --                 --
                                                                                ---------------------------------       ------------

CASH AND CASH EQUIVALENTS, END OF PERIOD                                        $    105,213        $     78,844        $   107,091
                                                                                =================================       ============

</TABLE>

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 SHAREHOLDERS' EQUITY (DEFICIT)

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

<PAGE>   63
                       THE TRACKER CORPORATION OF AMERICA
                          (A DEVELOPMENT STAGE COMPANY)
--------------------------------------------------------------------------------

            CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY (DEFICIT)
                                        



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

                                                                                                                CLASS B
                                                                                PREFERRED      COMMON           COMMON
                                                                                  STOCK        STOCK             STOCK
                                                                                -----------------------------------------

<S>                                                                             <C>         <C>             <C>
SHARES ISSUED TO OFFICERS AT INCEPTION (CASH - $NIL)                                                           5,089,286

SHARES ISSUED FOR CASH (CASH - $4,714,188)                                                                       884,729

SHARES ISSUED IN LIEU OF RENT  (NOTE 11-XI) (CASH - $NIL)                                                         60,871

SHARE ISSUE COSTS

TRANSLATION ADJUSTMENT

NET LOSS
                                                                                -----------------------------------------
BALANCE AT MARCH 31, 1994                                                                                      6,034,886
                                                                                -----------------------------------------

SHARES ISSUED FOR CASH (CASH - $1,175,797)                                                                       234,517

SHARES ISSUED IN LIEU OF RENT  (NOTE 11-XI) (CASH - $NIL)                                                          5,777

REVERSE MERGER WITH THE TRACKER CORPORATION
ON JULY 12, 1994 (CASH - $100)                                                                  739,219

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
SHARE PROCEEDS TO BE RECEIVED SUBSEQUENT TO MARCH 31, 1995

SHARES ISSUED FOR CONSULTING AND MARKETING SERVICES (NOTE 11) (CASH-$NIL)                       825,000           78,005
LESS: CONSULTING AND MARKETING SERVICES NOT YET RECEIVED                                       (814,583)*

SHARES PROCEEDS RECEIVED FROM PRIVATE PLACEMENT
  ON MARCH 15, 1995 (CASH - $350,000)                                                           500,000

SHARES ISSUED TO EMPLOYEES FOR EMPLOYMENT SERVICES (NOTE 11-XI) (CASH-$NIL)                                       25,063

SHARE ISSUE COSTS

TRANSLATION ADJUSTMENT

NET LOSS
                                                                                -----------------------------------------

BALANCE AT MARCH 31, 1995                                                          --         2,109,636        6,378,248
                                                                                -----------------------------------------
</TABLE>

<TABLE>
<CAPTION>
                                                                                                 AMOUNTS
                                                                                ------------------------------------------
                                                                                                                  PAID-IN
                                                                                                                 CAPITAL IN
                                                                                PREFERRED     COMMON              EXCESS
                                                                                   STOCK       STOCK               OF PAR
                                                                                ------------------------------------------

<S>                                                                             <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 11-XI) (CASH - $NIL)                                                          324,344

SHARE ISSUE COSTS                                                                                                 (466,142)

TRANSLATION ADJUSTMENT

NET LOSS
                                                                                ------------------------------------------
BALANCE AT MARCH 31, 1994                                                           --            --             4,572,390
                                                                                ------------------------------------------

SHARES ISSUED FOR CASH (CASH - $1,175,797)                                                                       1,175,797

SHARES ISSUED IN LIEU OF RENT  (NOTE 11-XI) (CASH - $NIL)                                                           30,121

REVERSE MERGER WITH THE TRACKER CORPORATION
ON JULY 12, 1994 (CASH - $100)                                                                   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             2,900,840
SHARE PROCEEDS TO BE RECEIVED SUBSEQUENT TO MARCH 31, 1995                                                        (819,459)

SHARES ISSUED FOR CONSULTING AND MARKETING SERVICES (NOTE 11) (CASH-$NIL)                        825             2,204,153
LESS: CONSULTING AND MARKETING SERVICES NOT YET RECEIVED                                        (815)

SHARES PROCEEDS RECEIVED FROM PRIVATE PLACEMENT
  ON MARCH 15, 1995 (CASH - $350,000)                                                            500               349,500

SHARES ISSUED TO EMPLOYEES FOR EMPLOYMENT SERVICES (NOTE 11-XI) (CASH-$NIL)                                         74,409

SHARE ISSUE COSTS                                                                                                 (779,495)

TRANSLATION ADJUSTMENT

NET LOSS
                                                                                ------------------------------------------

BALANCE AT MARCH 31, 1995                                                           --         2,109             9,707,617
                                                                                ------------------------------------------
</TABLE>

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

                                                                                                  CUMULATIVE
                                                                                  OTHER           TRANSLATION
                                                                                  CAPITAL         ADJUSTMENT
                                                                                -----------------------------
<S>                                                                             <C>              <C>
SHARES ISSUED TO OFFICERS AT INCEPTION (CASH - $NIL)                                    --         $      --

SHARES ISSUED FOR CASH (CASH - $4,714,188)

SHARES ISSUED IN LIEU OF RENT  (NOTE 11-XI) (CASH - $NIL)

SHARE ISSUE COSTS

TRANSLATION ADJUSTMENT                                                                              (129,098)

NET LOSS
                                                                                -----------------------------
BALANCE AT MARCH 31, 1994                                                               --          (129,098)
                                                                                -----------------------------

SHARES ISSUED FOR CASH (CASH - $1,175,797)

SHARES ISSUED IN LIEU OF RENT  (NOTE 11-XI) (CASH - $NIL)

REVERSE MERGER WITH THE TRACKER CORPORATION
ON JULY 12, 1994 (CASH - $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)
SHARE PROCEEDS TO BE RECEIVED SUBSEQUENT TO MARCH 31, 1995

SHARES ISSUED FOR CONSULTING AND MARKETING SERVICES (NOTE 11) (CASH-$NIL)
LESS: CONSULTING AND MARKETING SERVICES NOT YET RECEIVED                        (2,086,685)

SHARES PROCEEDS RECEIVED FROM PRIVATE PLACEMENT
  ON MARCH 15, 1995 (CASH - $350,000)

SHARES ISSUED TO EMPLOYEES FOR EMPLOYMENT SERVICES (NOTE 11-XI) (CASH-$NIL)

SHARE ISSUE COSTS

TRANSLATION ADJUSTMENT                                                                              (159,026)

NET LOSS
                                                                                -----------------------------

BALANCE AT MARCH 31, 1995                                                       (2,086,685)         (288,124)
                                                                                -----------------------------
</TABLE>

<TABLE>
<CAPTION>
                                                                                                 AMOUNTS
                                                                                -------------------------------------
                                                                                 DEFICIT ACCUMULATED
                                                                                       DURING
                                                                                      DEVELOPMENT
                                                                                        STAGE                 TOTAL
                                                                                -------------------------------------

<S>                                                                             <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 11-XI) (CASH - $NIL)                                                     324,344

SHARE ISSUE COSTS                                                                                            (466,142)

TRANSLATION ADJUSTMENT                                                                                       (129,098)

NET LOSS                                                                         (2,043,425)               (2,043,425)
                                                                                -------------------------------------
BALANCE AT MARCH 31, 1994                                                        (2,043,425)                2,399,867
                                                                                -------------------------------------

SHARES ISSUED FOR CASH (CASH - $1,175,797)                                                                  1,175,797

SHARES ISSUED IN LIEU OF RENT  (NOTE 11-XI) (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 (NOTE 11) (CASH-$NIL)                                   2,204,978
LESS: CONSULTING AND MARKETING SERVICES NOT YET RECEIVED                                                   (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 11-XI) (CASH-$NIL)                                    74,409

SHARE ISSUE COSTS                                                                                            (779,495)

TRANSLATION ADJUSTMENT                                                                                       (159,026)

NET LOSS                                                                         (5,068,583)               (5,068,583)
                                                                                -------------------------------------

BALANCE AT MARCH 31, 1995                                                        (7,112,008)                  222,909
                                                                                -------------------------------------


</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL
STATEMENTS.
<PAGE>   64
                       THE TRACKER CORPORATION OF AMERICA
                          (A DEVELOPMENT STAGE COMPANY)
--------------------------------------------------------------------------------

            CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY (DEFICIT)



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

                                                                                                                        CLASS B
                                                                                 PREFERRED              COMMON           COMMON
                                                                                   STOCK                 STOCK           STOCK
                                                                                ------------------------------------------------

<S>                                                                             <C>               <C>               <C>
SHARE PROCEEDS RECEIVED RE REGULATION S OFFERING
   MADE BEFORE MARCH 31, 1995 (CASH - $225,280)

CONSULTING SERVICES RECEIVED RE SHARES ISSUED                                                          14,582 *
   BEFORE MARCH 31, 1995  (NOTE 11-XI) (CASH - $ NIL)

MARKETING SERVICES RECEIVED RE SHARES ISSUED                                                          266,664 *
    TO LL KNICKERBOCKER CO. (NOTE 11) (CASH - $ NIL)

SHARES ISSUED TO DIRECTORS AS COMPENSATION  (NOTE 11-XI) (CASH - $NIL)                                 98,858

SHARES ISSUED TO AMERASIA FOR MARKETING SERVICES (NOTE 11-XI) (CASH - $NIL)                                               30,000
LESS: SERVICES NOT YET RECEIVED                                                                                          (12,500)*

SHARES CANCELLED (CASH - $NIL)                                                                           (171)

SHARES ISSUED PURSUANT TO S-8 FOR EMPLOYEES, CONSULTANTS AND                                          770,000
     A DIRECTOR (NOTE 11-VII) (CASH - $NIL)
LESS: EMPLOYMENT AND CONSULTING SERVICES NOT YET RECEIVED                                            (340,939)*

SHARES ISSUED TO R. ZUK (CASH - $83,000)                                                              200,000
LESS: SHARES PROCEEDS TO BE RECEIVED

SHARE PROCEEDS RECEIVED FROM PRIVATE PLACEMENT (CASH - $250,000)                                      250,000

SHARES ISSUED UPON EXERCISE OF WARRANTS AT CANADIAN $1 PER SHARE                                                         849,803
   (CASH - $619,166)

SHARES ISSUED TO OFFICERS (NOTE 11-IV) (CASH - $NIL)                                                  630,000

SHARES ISSUED TO A CONSULTANT (NOTE 11-XI) (CASH - $NIL)                                                7,500

SHARES ISSUED FOR INVESTOR RELATION SERVICES (NOTE 11-VI) (CASH - $NIL)                               200,000
LESS: SERVICES NOT YET RECEIVED                                                                      (200,000)*

SHARES ISSUED TO EMPLOYEES FOR EMPLOYMENT SERVICES (NOTE 11-XI)                                                           14,176
   (CASH - $NIL)

SHARES EXCHANGED AS PER EXCHANGE AGREEMENT (CASH - $NIL)                                            1,133,365         (1,133,365)

SHARES ISSUED FOR CONVERSION FROM DEBENTURE HOLDERS (CASH -$NIL)                                      991,434

SHARE ISSUE COST FROM APRIL 1, 1995 TO MARCH 31, 1996

TRANSLATION ADJUSTMENT

NET LOSS FROM APRIL 1, 1995 TO MARCH 31, 1996
                                                                                ------------------------------------------------

BALANCE AS AT MARCH 31, 1996                                                       --               6,130,929          6,126,362
                                                                                ------------------------------------------------
</TABLE>

<TABLE>
<CAPTION>
                                                                                                  AMOUNTS
                                                                                ----------------------------------------
                                                                                                                PAID IN
                                                                                                              CAPITAL IN
                                                                                PREFERRED      COMMON           EXCESS
                                                                                  STOCK         STOCK           OF PAR
                                                                                ----------------------------------------
<S>                                                                             <C>          <C>            <C>
SHARE PROCEEDS RECEIVED RE REGULATION S OFFERING                                   --             -          $   819,459
   MADE BEFORE MARCH 31, 1995 (CASH - $225,280)

CONSULTING SERVICES RECEIVED RE SHARES ISSUED                                                    14
   BEFORE MARCH 31, 1995  (NOTE 11-XI) (CASH - $ NIL)

MARKETING SERVICES RECEIVED RE SHARES ISSUED                                                    265
    TO LL KNICKERBOCKER CO. (NOTE 11) (CASH - $ NIL)

SHARES ISSUED TO DIRECTORS AS COMPENSATION  (NOTE 11-XI) (CASH - $NIL)                           99               86,402

SHARES ISSUED TO AMERASIA FOR MARKETING SERVICES (NOTE 11-XI) (CASH - $NIL)                                       44,496
LESS: SERVICES NOT YET RECEIVED

SHARES CANCELLED (CASH - $NIL)                                                                    1                   (1)

SHARES ISSUED PURSUANT TO S-8 FOR EMPLOYEES, CONSULTANTS AND                                    770              769,230
     A DIRECTOR (NOTE 11-VII) (CASH - $NIL)
LESS: EMPLOYMENT AND CONSULTING SERVICES NOT YET RECEIVED                                      (341)

SHARES ISSUED TO R. ZUK (CASH - $83,000)                                                        200              199,800
LESS: SHARES PROCEEDS TO BE RECEIVED                                                                            (117,000)

SHARE PROCEEDS RECEIVED FROM PRIVATE PLACEMENT (CASH - $250,000)                                250              249,750

SHARES ISSUED UPON EXERCISE OF WARRANTS AT CANADIAN $1 PER SHARE                                                 619,166
   (CASH - $619,166)

SHARES ISSUED TO OFFICERS (NOTE 11-IV) (CASH - $NIL)                                            630              826,245

SHARES ISSUED TO A CONSULTANT (NOTE 11-XI) (CASH - $NIL)                                          8                9,836

SHARES ISSUED FOR INVESTOR RELATION SERVICES (NOTE 11-VI) (CASH - $NIL)                         200              262,300
LESS: SERVICES NOT YET RECEIVED                                                                (200)

SHARES ISSUED TO EMPLOYEES FOR EMPLOYMENT SERVICES (NOTE 11-XI)                                                   22,716
   (CASH - $NIL)

SHARES EXCHANGED AS PER EXCHANGE AGREEMENT (CASH - $NIL)                                      1,134               (1,134)

SHARES ISSUED FOR CONVERSION FROM DEBENTURE HOLDERS (CASH -$NIL)                                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                                                      $--        $6,131          $14,013,062
                                                                                ----------------------------------------
</TABLE>


<TABLE>
<CAPTION>
                                                                                             AMOUNTS
                                                                                ---------------------------------
                                                                                                       CUMULATIVE
                                                                                      OTHER           TRANSLATION
                                                                                     CAPITAL           ADJUSTMENT
                                                                                ---------------------------------
<S>                                                                             <C>                  <C>
SHARE PROCEEDS RECEIVED RE REGULATION S OFFERING                                 $        --            $      --
   MADE BEFORE MARCH 31, 1995 (CASH - $225,280)

CONSULTING SERVICES RECEIVED RE SHARES ISSUED                                         87,486
   BEFORE MARCH 31, 1995  (NOTE 11-XI) (CASH - $ NIL)

MARKETING SERVICES RECEIVED RE SHARES ISSUED                                         666,400
    TO LL KNICKERBOCKER CO. (NOTE 11) (CASH - $ NIL)

SHARES ISSUED TO DIRECTORS AS COMPENSATION  (NOTE 11-XI) (CASH - $NIL)

SHARES ISSUED TO AMERASIA FOR MARKETING SERVICES (NOTE 11-XI) (CASH - $NIL)
LESS: SERVICES NOT YET RECEIVED                                                      (18,630)

SHARES CANCELLED (CASH - $NIL)

SHARES ISSUED PURSUANT TO S-8 FOR EMPLOYEES, CONSULTANTS AND
     A DIRECTOR (NOTE 11-VII) (CASH - $NIL)
LESS: EMPLOYMENT AND CONSULTING SERVICES NOT YET RECEIVED                           (340,598)

SHARES ISSUED TO R. ZUK (CASH - $83,000)
LESS: SHARES PROCEEDS TO BE RECEIVED

SHARE PROCEEDS RECEIVED FROM PRIVATE PLACEMENT (CASH - $250,000)

SHARES ISSUED UPON EXERCISE OF WARRANTS AT CANADIAN $1 PER SHARE
   (CASH - $619,166)

SHARES ISSUED TO OFFICERS (NOTE 11-IV) (CASH - $NIL)

SHARES ISSUED TO A CONSULTANT (NOTE 11-XI) (CASH - $NIL)

SHARES ISSUED FOR INVESTOR RELATION SERVICES (NOTE 11-VI) (CASH - $NIL)
LESS: SERVICES NOT YET RECEIVED                                                     (262,300)

SHARES ISSUED TO EMPLOYEES FOR EMPLOYMENT SERVICES (NOTE 11-XI)
   (CASH - $NIL)

SHARES EXCHANGED AS PER EXCHANGE AGREEMENT (CASH - $NIL)

SHARES ISSUED FOR CONVERSION FROM DEBENTURE HOLDERS (CASH -$NIL)

SHARE ISSUE COST FROM APRIL 1, 1995 TO MARCH 31, 1996

TRANSLATION ADJUSTMENT                                                                                     47,224

NET LOSS FROM APRIL 1, 1995 TO MARCH 31, 1996
                                                                                ---------------------------------

BALANCE AS AT MARCH 31, 1996                                                     $(1,954,327)           $(240,900)
                                                                                ---------------------------------
</TABLE>

<TABLE>
<CAPTION>
                                                                                            AMOUNTS
                                                                               -----------------------------------
                                                                               DEFICIT ACCUMULATED
                                                                                     DURING
                                                                                   DEVELOPMENT
                                                                                      STAGE                TOTAL
                                                                               -----------------------------------
<S>                                                                             <C>                   <C>
SHARE PROCEEDS RECEIVED RE REGULATION S OFFERING                                  $         --         $   819,459
   MADE BEFORE MARCH 31, 1995 (CASH - $225,280)

CONSULTING SERVICES RECEIVED RE SHARES ISSUED                                                               87,500
   BEFORE MARCH 31, 1995  (NOTE 11-XI) (CASH - $ NIL)

MARKETING SERVICES RECEIVED RE SHARES ISSUED                                                               666,665
    TO LL KNICKERBOCKER CO. (NOTE 11) (CASH - $ NIL)

SHARES ISSUED TO DIRECTORS AS COMPENSATION  (NOTE 11-XI) (CASH - $NIL)                                      86,501

SHARES ISSUED TO AMERASIA FOR MARKETING SERVICES (NOTE 11-XI) (CASH - $NIL)                                 44,496
LESS: SERVICES NOT YET RECEIVED                                                                            (18,630)

SHARES CANCELLED (CASH - $NIL)                                                                                  --

SHARES ISSUED PURSUANT TO S-8 FOR EMPLOYEES, CONSULTANTS AND                                               770,000
     A DIRECTOR (NOTE 11-VII) (CASH - $NIL)
LESS: EMPLOYMENT AND CONSULTING SERVICES NOT YET RECEIVED                                                 (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                                           619,166
   (CASH - $619,166)

SHARES ISSUED TO OFFICERS (NOTE 11-IV) (CASH - $NIL)                                                       826,875

SHARES ISSUED TO A CONSULTANT (NOTE 11-XI) (CASH - $NIL)                                                     9,844

SHARES ISSUED FOR INVESTOR RELATION SERVICES (NOTE 11-VI) (CASH - $NIL)                                    262,500
LESS: SERVICES NOT YET RECEIVED                                                                           (262,500)

SHARES ISSUED TO EMPLOYEES FOR EMPLOYMENT SERVICES (NOTE 11-XI)                                             22,716
   (CASH - $NIL)

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

NET LOSS FROM APRIL 1, 1995 TO MARCH 31, 1996                                       (6,090,730)         (6,090,730)
                                                                               -----------------------------------

BALANCE AS AT MARCH 31, 1996                                                      $(13,202,738)        $(1,378,772)
                                                                               -----------------------------------
</TABLE>



THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL
STATEMENTS.
<PAGE>   65
                       THE TRACKER CORPORATION OF AMERICA

                         (A DEVELOPMENT STAGE COMPANY)
--------------------------------------------------------------------------------

            CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY (DEFICIT)



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

                                                                                                     PREFERRED       COMMON
                                                                                                       STOCK          STOCK
                                                                                                     ------------------------
<S>                                                                                                  <C>           <C>

MARKETING SERVICES RECEIVED RE SHARES ISSUED
    TO LL KNICKERBOCKER CO. (NOTE 11) (CASH - $ NIL)                                                                  133,336 *

SHARES ISSUED TO DIRECTORS AS COMPENSATION  (NOTE 11-XI) (CASH - $NIL)                                                 34,445

MARKETING SERVICES RECEIVED FROM AMERASIA (NOTE 11-XI) (CASH - $NIL)

EMPLOYMENT AND CONSULTING SERVICES AND DIRECTORS' FEES RECEIVED RE S-8
(NOTES 11-VII AND 11-XV) (CASH - $NIL)                                                                              1,740,938 *

SHARES ISSUED FOR CONVERSION FROM DEBENTURE HOLDERS (NOTE 11-X) (CASH -$NIL)                                        1,433,443

PREFERRED SHARES ISSUED FROM PRIVATE PLACEMENT (NOTE 11-XII) (CASH - $1,050,000)                         1,050

COMMON SHARES ISSUED FOR CONVERSION FROM PREFERRED STOCKHOLDER (NOTE 11-XIII)                           (1,050)     4,365,136
  (CASH - $NIL)

SHARES EXCHANGED AS PER EXCHANGE AGREEMENT (CASH - $NIL)                                                            1,268,825

SHARES ISSUED TO EMPLOYEES FOR EMPLOYMENT SERVICES (NOTE 11-XI) (CASH-$NIL)                                            26,000

SHARES ISSUED FOR CONSULTING SERVICES (NOTE 11-XI) (CASH-$NIL)                                                        208,250

SHARES ISSUED IN LIEU OF FINDER FEE FOR DEBENTURE HOLDERS (NOTE 11-XI) (CASH -$NIL)                                    52,906

SHARES ISSUED IN LIEU OF FINDER FEE FOR PREFERRED STOCKHOLDERS (NOTE 11-XI) (CASH -$NIL)                              112,500

SHARES ISSUED PURSUANT TO W.MARCHES S-8 STOCK PAYMENT PLAN (NOTE 11-XVI)                                              333,272

SHARES ISSUED FOR OFFICE RENTAL EXPENSE ( NOTE 11-XII) ( CASH -$ NIL)                                                  615,780
LESS: RENTAL EXPENSE NOT YET AMORTIZED                                                                               (530,255)*

SHARE ISSUE COST FROM APRIL 1, 1996 TO MARCH 31, 1997

TRANSLATION ADJUSTMENT

NET LOSS FROM APRIL 1, 1996 TO MARCH 31, 1997
                                                                                                      -----------------------

BALANCE AS AT MARCH 31, 1997                                                                                --     15,925,505
                                                                                                      ========     ==========
</TABLE>

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

                                                                                                       CLASS B
                                                                                                        COMMON
                                                                                                        STOCK
                                                                                                     ----------
<S>                                                                                                 <C>
MARKETING SERVICES RECEIVED RE SHARES ISSUED
    TO LL KNICKERBOCKER CO. (NOTE 11) (CASH - $ NIL)

SHARES ISSUED TO DIRECTORS AS COMPENSATION  (NOTE 11-XI) (CASH - $NIL)

MARKETING SERVICES RECEIVED FROM AMERASIA (NOTE 11-XI) (CASH - $NIL)                                      5,000

EMPLOYMENT AND CONSULTING SERVICES AND DIRECTORS' FEES RECEIVED RE S-8
(NOTES 11-VII AND 11-XV) (CASH - $NIL)

SHARES ISSUED FOR CONVERSION FROM DEBENTURE HOLDERS (NOTE 11-X) (CASH -$NIL)

PREFERRED SHARES ISSUED FROM PRIVATE PLACEMENT (NOTE 11-XII) (CASH - $1,050,000)

COMMON SHARES ISSUED FOR CONVERSION FROM PREFERRED STOCKHOLDER (NOTE 11-XIII)
  (CASH - $NIL)

SHARES EXCHANGED AS PER EXCHANGE AGREEMENT (CASH - $NIL)                                             (1,268,825)

SHARES ISSUED TO EMPLOYEES FOR EMPLOYMENT SERVICES (NOTE 11-XI) (CASH-$NIL)

SHARES ISSUED FOR CONSULTING SERVICES (NOTE 11-XI) (CASH-$NIL)

SHARES ISSUED IN LIEU OF FINDER FEE FOR DEBENTURE HOLDERS (NOTE 11-XI) (CASH -$NIL)

SHARES ISSUED IN LIEU OF FINDER FEE FOR PREFERRED STOCKHOLDERS (NOTE 11-XI) (CASH -$NIL)

SHARES ISSUED PURSUANT TO W.MARCHES S-8 STOCK PAYMENT PLAN (NOTE 11-XVI)

SHARES ISSUED FOR OFFICE RENTAL EXPENSE ( NOTE 11-XII) ( CASH $ NIL)
LESS: RENTAL EXPENSE NOT YET AMORTIZED

SHARE ISSUE COST FROM APRIL 1, 1996 TO MARCH 31, 1997

TRANSLATION ADJUSTMENT

NET LOSS FROM APRIL 1, 1996 TO MARCH 31, 1997
                                                                                                     ----------

BALANCE AS AT MARCH 31, 1997                                                                          4,862,537
                                                                                                     ==========
</TABLE>

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

                                                                                                     PREFERRED      COMMON
                                                                                                       STOCK         STOCK
                                                                                                     ---------------------
<S>                                                                                                  <C>           <C>
MARKETING SERVICES RECEIVED RE SHARES ISSUED
    TO LL KNICKERBOCKER CO. (NOTE 11) (CASH - $ NIL)                                                    $--        $   135

SHARES ISSUED TO DIRECTORS AS COMPENSATION  (NOTE 11-XI) (CASH - $NIL)                                                  34

MARKETING SERVICES RECEIVED FROM AMERASIA (NOTE 11-XI) (CASH - $NIL)

EMPLOYMENT AND CONSULTING SERVICES AND DIRECTORS' FEES RECEIVED RE S-8
(NOTES 11-VII AND 11-XV) (CASH - $NIL)                                                                               1,741

SHARES ISSUED FOR CONVERSION FROM DEBENTURE HOLDERS (NOTE 11-X) (CASH -$NIL)                                         1,434

PREFERRED SHARES ISSUED FROM PRIVATE PLACEMENT (NOTE 11-XII) (CASH - $1,050,000)                          1

COMMON SHARES ISSUED FOR CONVERSION FROM PREFERRED STOCKHOLDER (NOTE 11-XIII)                            (1)         4,364
  (CASH - $NIL)

SHARES EXCHANGED AS PER EXCHANGE AGREEMENT (CASH - $NIL)                                                             1,269

SHARES ISSUED TO EMPLOYEES FOR EMPLOYMENT SERVICES (NOTE 11-XI) (CASH-$NIL)                                             26

SHARES ISSUED FOR CONSULTING SERVICES (NOTE 11-XI) (CASH-$NIL)                                                         208

SHARES ISSUED IN LIEU OF FINDER FEE FOR DEBENTURE HOLDERS (NOTE 11-XI) (CASH -$NIL)                                     53

SHARES ISSUED IN LIEU OF FINDER FEE FOR PREFERRED STOCKHOLDERS (NOTE 11-XI) (CASH -$NIL)                               113

SHARES ISSUED PURSUANT TO W.MARCHES S-8 STOCK PAYMENT PLAN (NOTE 11-XVI)                                               332

SHARES ISSUED FOR OFFICE RENTAL EXPENSE ( NOTE 11-XII) ( CASH $ NIL)                                                   616
LESS: RENTAL EXPENSE NOT YET AMORTIZED                                                                                (531)

SHARE ISSUE COST FROM APRIL 1, 1996 TO MARCH 31, 1997

TRANSLATION ADJUSTMENT

NET LOSS FROM APRIL 1, 1996 TO MARCH 31, 1997
                                                                                                        ------------------

BALANCE AS AT MARCH 31, 1997                                                                             --        $15,925
                                                                                                        ==================
</TABLE>

<TABLE>
<CAPTION>
                                                                                                                AMOUNTS
                                                                                                     -------------------------------
                                                                                                        PAID IN
                                                                                                       CAPITAL IN
                                                                                                         EXCESS             OTHER
                                                                                                         OF PAR            CAPITAL
                                                                                                     -------------------------------
<S>                                                                                                  <C>                <C>
MARKETING SERVICES RECEIVED RE SHARES ISSUED
    TO LL KNICKERBOCKER CO. (NOTE 11) (CASH - $ NIL)                                                  $  (999,600)       $1,332,800

SHARES ISSUED TO DIRECTORS AS COMPENSATION  (NOTE 11-XI) (CASH - $NIL)                                     15,466

MARKETING SERVICES RECEIVED FROM AMERASIA (NOTE 11-XI) (CASH - $NIL)                                      (11,124)           18,630

EMPLOYMENT AND CONSULTING SERVICES AND DIRECTORS' FEES RECEIVED RE S-8
(NOTES 11-VII AND 11-XV) (CASH - $NIL)                                                                    316,054           340,598

SHARES ISSUED FOR CONVERSION FROM DEBENTURE HOLDERS (NOTE 11-X) (CASH -$NIL)                              653,566

PREFERRED SHARES ISSUED FROM PRIVATE PLACEMENT (NOTE 11-XII) (CASH - $1,050,000)                        1,049,999

COMMON SHARES ISSUED FOR CONVERSION FROM PREFERRED STOCKHOLDER (NOTE 11-XIII)                              (4,363)
  (CASH - $NIL)

SHARES EXCHANGED AS PER EXCHANGE AGREEMENT (CASH - $NIL)                                                   (1,269)

SHARES ISSUED TO EMPLOYEES FOR EMPLOYMENT SERVICES (NOTE 11-XI) (CASH-$NIL)                                12,474

SHARES ISSUED FOR CONSULTING SERVICES (NOTE 11-XI) (CASH-$NIL)                                             49,634

SHARES ISSUED IN LIEU OF FINDER FEE FOR DEBENTURE HOLDERS (NOTE 11-XI) (CASH -$NIL)                        52,853

SHARES ISSUED IN LIEU OF FINDER FEE FOR PREFERRED STOCKHOLDERS (NOTE 11-XI) (CASH -$NIL)                   44,887

SHARES ISSUED PURSUANT TO W.MARCHES S-8 STOCK PAYMENT PLAN (NOTE 11-XVI)                                   87,668

SHARES ISSUED FOR OFFICE RENTAL EXPENSE ( NOTE 11-XII) ( CASH $ NIL)                                      153,329
LESS: RENTAL EXPENSE NOT YET AMORTIZED                                                                                     (132,034)

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                                                                          $15,207,895         $(394,333)
                                                                                                     ===============================
</TABLE>

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

                                                                                                       CUMULATIVE
                                                                                                      TRANSLATION
                                                                                                       ADJUSTMENT
                                                                                                     -------------
<S>                                                                                                 <C>
MARKETING SERVICES RECEIVED RE SHARES ISSUED
    TO LL KNICKERBOCKER CO. (NOTE 11) (CASH - $ NIL)                                                 $      --

SHARES ISSUED TO DIRECTORS AS COMPENSATION  (NOTE 11-XI) (CASH - $NIL)

MARKETING SERVICES RECEIVED FROM AMERASIA (NOTE 11-XI) (CASH - $NIL)

EMPLOYMENT AND CONSULTING SERVICES AND DIRECTORS' FEES RECEIVED RE S-8
(NOTES 11-VII AND 11-XV) (CASH - $NIL)

SHARES ISSUED FOR CONVERSION FROM DEBENTURE HOLDERS (NOTE 11-X) (CASH -$NIL)

PREFERRED SHARES ISSUED FROM PRIVATE PLACEMENT (NOTE 11-XII) (CASH - $1,050,000)

COMMON SHARES ISSUED FOR CONVERSION FROM PREFERRED STOCKHOLDER (NOTE 11-XIII)
  (CASH - $NIL)

SHARES EXCHANGED AS PER EXCHANGE AGREEMENT (CASH - $NIL)

SHARES ISSUED TO EMPLOYEES FOR EMPLOYMENT SERVICES (NOTE 11-XI) (CASH-$NIL)

SHARES ISSUED FOR CONSULTING SERVICES (NOTE 11-XI) (CASH-$NIL)

SHARES ISSUED IN LIEU OF FINDER FEE FOR DEBENTURE HOLDERS (NOTE 11-XI) (CASH -$NIL)

SHARES ISSUED IN LIEU OF FINDER FEE FOR PREFERRED STOCKHOLDERS (NOTE 11-XI) (CASH -$NIL)

SHARES ISSUED PURSUANT TO W.MARCHES S-8 STOCK PAYMENT PLAN (NOTE 11-XVI)

SHARES ISSUED FOR OFFICE RENTAL EXPENSE (NOTE 11-XII) ( CASH $ NIL)
LESS: RENTAL EXPENSE NOT YET AMORTIZED

SHARE ISSUE COST FROM APRIL 1, 1996 TO MARCH 31, 1997

TRANSLATION ADJUSTMENT                                                                                 (79,146)

NET LOSS FROM APRIL 1, 1996 TO MARCH 31, 1997
                                                                                                     ---------

BALANCE AS AT MARCH 31, 1997                                                                         $(320,046)
                                                                                                     =========
</TABLE>

<TABLE>
<CAPTION>
                                                                                                         AMOUNTS
                                                                                              -----------------------------------
                                                                                              DEFICIT ACCUMULATED
                                                                                                     DURING
                                                                                                   DEVELOPMENT
                                                                                                      STAGE              TOTAL
                                                                                              -----------------------------------
<S>                                                                                           <C>                     <C>
MARKETING SERVICES RECEIVED RE SHARES ISSUED
    TO LL KNICKERBOCKER CO. (NOTE 11) (CASH - $ NIL)                                               $      --          $   333,335

SHARES ISSUED TO DIRECTORS AS COMPENSATION  (NOTE 11-XI) (CASH - $NIL)                                                     15,500

MARKETING SERVICES RECEIVED FROM AMERASIA (NOTE 11-XI) (CASH - $NIL)                                                        7,506

EMPLOYMENT AND CONSULTING SERVICES AND DIRECTORS' FEES RECEIVED RE S-8
(NOTES 11-VII AND 11-XV) (CASH - $NIL)                                                                                    658,393

SHARES ISSUED FOR CONVERSION FROM DEBENTURE HOLDERS (NOTE 11-X) (CASH -$NIL)                                              655,000

PREFERRED SHARES ISSUED FROM PRIVATE PLACEMENT (NOTE 11-XII) (CASH - $1,050,000)                                        1,050,000

COMMON SHARES ISSUED FOR CONVERSION FROM PREFERRED STOCKHOLDER (NOTE 11-XIII)                                                   -
  (CASH - $NIL)

SHARES EXCHANGED AS PER EXCHANGE AGREEMENT (CASH - $NIL)                                                                        -

SHARES ISSUED TO EMPLOYEES FOR EMPLOYMENT SERVICES (NOTE 11-XI) (CASH-$NIL)                                                12,500

SHARES ISSUED FOR CONSULTING SERVICES (NOTE 11-XI) (CASH-$NIL)                                                             49,842

SHARES ISSUED IN LIEU OF FINDER FEE FOR DEBENTURE HOLDERS (NOTE 11-XI) (CASH -$NIL)                                        52,906

SHARES ISSUED IN LIEU OF FINDER FEE FOR PREFERRED STOCKHOLDERS (NOTE 11-XI) (CASH -$NIL)                                   45,000

SHARES ISSUED PURSUANT TO W.MARCHES S-8 STOCK PAYMENT PLAN (NOTE 11-XVI)                                                   88,000

SHARES ISSUED FOR OFFICE RENTAL EXPENSE (NOTE 11-XII) ( CASH $ NIL)                                                       153,945
LESS: RENTAL EXPENSE NOT YET AMORTIZED                                                                                   (132,565)

SHARE ISSUE COST FROM APRIL 1, 1996 TO MARCH 31, 1997                                                                    (224,741)

TRANSLATION ADJUSTMENT                                                                                                    (79,146)

NET LOSS FROM APRIL 1, 1996 TO MARCH 31, 1997                                                     (3,708,078)          (3,708,078)
                                                                                              -----------------------------------

BALANCE AS AT MARCH 31, 1997                                                                    $(16,910,816)         $(2,401,375)
                                                                                              ===================================

</TABLE>

(*) 730,255 COMMON SHARES HAVE BEEN SUBSCRIBED FOR BUT REMAIN UNISSUED AS AT
    MARCH 31, 1997

THE ACCOMPANYING NOTES ARE INTEGRAL PARTS OF THESE CONSOLIDATED FINANCIAL
STATEMENTS.
<PAGE>   66
                       THE TRACKER CORPORATION OF AMERICA
                          (A DEVELOPMENT STAGE COMPANY)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 1 - DESCRIPTION OF BUSINESS/CORPORATE HISTORY:

The Tracker Corporation of America (the "Company"), through a wholly-owned
subsidiary, The Tracker Corporation ("Tracker Canada"), is engaged in the
development, marketing and operation of a unique system to aid in the recovery
of lost or stolen items using advanced bar code and laser scanning technologies.

The Company was formed under the name Ultra Capital Corp. ("Ultra") in February
1986 under the laws of the State of Nevada to serve as a vehicle to acquire or
merge with an operating company. The Company changed its name from Ultra on July
1, 1994 when, as more fully discussed below, Ultra merged with Tracker Canada.

The Company was reincorporated in Delaware on July 1, 1994. Effective July 12,
1994, the Company merged with Tracker Canada. Concurrent with the merger
effective date, Ultra changed its name to The Tracker Corporation of America and
changed its year end from December 31 to March 31. In conjunction with the
merger, the common stock of Tracker Canada was reclassified as exchangeable
preference stock which is exchangeable on a one-for-one basis for shares of the
common stock of the Company beginning July 12, 1995 through July 12, 2002. An
equal number of Class B voting common stock ("Class B shares") is held in trust
for exchangeable preference shareholders who can direct the voting of the Class
B shares. The Class B shares will be cancelled upon the exchange of the
exchangeable preference shares for the Company's common stock.

For accounting purposes, the merger was treated as a reverse merger/acquisition
with recapitalization of Tracker Canada as the acquirer because, among other
factors, the assets and operations of Tracker Canada significantly exceed those
of Ultra and the shareholders of Tracker Canada control 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 has been recorded at the value of Ultra's net
tangible assets as of the effective date. The accumulated deficit of Tracker
Canada is carried forward and the common stock and paid-in capital of Tracker
Canada prior to the merger have been retroactively restated for the equivalent
number of shares received in the merger and carried forward.

The Company utilizes state of the art proprietary technology providing a service
to aid in the recovery of lost or stolen possessions. The Company's members
receive a series of individualized, digitally-encoded labels that can be applied
to personal belongings. In the event a labelled item is recovered, the Company's
technology allows for the identification of the item's owner. After
identification, the Company's 24-hour service network coordinates the return of
the item to its owner via an international courier network. The Company's
Worldwide Identification & Recovery Service is endorsed by the International
Association of Chiefs of Police.

NOTE 2 - GOING CONCERN:

The Company has been in a development stage since May 6, 1993, its inception.
The Company's successful launch to the marketplace, and ultimately to the
attainment of profitable operations, is dependent on its ability to obtain
adequate sources of financing and revenue generation. Management is currently
working to secure adequate sources of capital through private placements of
securities. The accompanying consolidated financial statements have been
prepared assuming that the Company will continue as a going concern. The
consolidated financial statements do not include any adjustments that might
result from the outcome of this uncertainty.
<PAGE>   67
                       THE TRACKER CORPORATION OF AMERICA
                          (A DEVELOPMENT STAGE COMPANY)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 3 - SIGNIFICANT ACCOUNTING POLICIES:

PRINCIPLES OF CONSOLIDATION

The accompanying financial statements include the accounts of The Tracker
Corporation of America and its wholly-owned subsidiary, The Tracker Corporation.
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.

DEFERRED CHARGES

Deferred charges relate primarily to unamortized commissions net of a 30%
cancellation reserve,and 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 membership agreement varies from
monthly to a five-year period.
<PAGE>   68
                       THE TRACKER CORPORATION OF AMERICA
                          (A DEVELOPMENT STAGE COMPANY)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 3 - SIGNIFICANT ACCOUNTING POLICIES (CONT'D)

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 the Company's wholly-owned Canadian subsidiary 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.
<PAGE>   69
                       THE TRACKER CORPORATION OF AMERICA
                          (A DEVELOPMENT STAGE COMPANY)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 3 - SIGNIFICANT ACCOUNTING POLICIES (CONT'D)

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 - SHORT-TERM INVESTMENT:

The short-term investment represents 288,462 shares of Stratcomm Media Ltd., a
public company on the Vancouver Stock Exchange ("VSE"), and represents less than
a 4% interest in the company. The common shares owned by the Company were
restricted from trading for a period of 12 months starting May 30, 1995. Due to
a permanent decline in value as the underlying shares were delisted from the
VSE, in fiscal 1997 the Company wrote off this investment ($ 221,190 at March 
31, 1996).


NOTE 5 - PREPAID EXPENSES AND DEPOSITS:

Prepaid expenses and deposits comprise the following:

<TABLE>
<CAPTION>
                                                        March 31,       March 31,
                                                          1997            1996
                                                        --------        --------
<S>                                                     <C>             <C>
Security deposit for merchant facility                  $300,000        $     --
Marketing and celebrity                                       --         120,992
Other                                                     59,526          47,353
                                                        --------        --------
                                                        $359,526        $168,345
                                                        ========        ========
</TABLE>
<PAGE>   70
                       THE TRACKER CORPORATION OF AMERICA
                          (A DEVELOPMENT STAGE COMPANY)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 6 - DUE FROM SHAREHOLDERS:

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

NOTE 7 - DEFERRED CHARGES:

Deferred charges consist of the following:

<TABLE>
<CAPTION>
                                                    March 31,            March 31,
                                                       1997                1996
                                                    ----------           -------
<S>                                                 <C>                  <C>
Current:
 Deferred sales commission                          $2,658,446           $47,222
 Other                                                 161,618            26,528
                                                    ----------           -------
                                                    $2,820,064           $73,750
                                                    ==========           =======
Long term:
 Deferred sales commission                          $  281,163           $61,680
 Other                                                  34,674             4,554
                                                    ----------           -------
                                                    $  315,837           $66,234
                                                    ==========           =======
</TABLE>

NOTE 8 - PROPERTY AND EQUIPMENT (NET):

Property and equipment consist of the following:

<TABLE>
<CAPTION>
                                                          March 31,    March 31,
                                                            1997         1996
                                                          --------     --------
<S>                                                       <C>          <C>
   Scanning equipment                                     $120,737     $106,471
   Computer equipment                                      310,047      257,189
   Computer software                                        32,501       31,988
   Office furniture and equipment                          163,979       67,254
   Leasehold improvements                                   99,608       66,840
   Kiosk equipment                                          63,789       63,496
                                                          --------     --------
           Total original cost                             790,661      593,238
   Less: Accumulated depreciation                          372,394      239,509
                                                          --------     --------
                                                          $418,267     $353,729
                                                          ========     ========
</TABLE>

Depreciation expense for the year ended March 31, 1997 was $ 131,780 and was
$111,070 for the year ended March 31, 1996.
<PAGE>   71
                       THE TRACKER CORPORATION OF AMERICA
                          (A DEVELOPMENT STAGE COMPANY)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 9 - LONG-TERM INVESTMENT:

In October 1996, the Company sold its 11.96% interest in C.E.M. Centry
Electronic Monitoring Corporation ("Centry"), a publicly listed Canadian company
trading on the Vancouver Stock Exchange for $37,037 cash, resulting in a loss of
$13,414.


NOTE 10 - ACCRUED LIABILITIES:

Accrued liabilities comprise the following:

<TABLE>
<CAPTION>
                                                       March 31,        March 31,
                                                         1997             1996
                                                       ----------       --------
<S>                                                    <C>              <C>
Directors fees                                         $   27,399       $ 11,000
Finder fees for convertible debentures                         --         52,906
Others                                                    346,288        202,931
                                                       ----------       --------
                                                       $  373,687       $266,837
                                                       ==========       ========
</TABLE>


NOTE 11 - CAPITAL STOCK:

(i) The common stock and Class B voting common stock share ratably as to
dividends. The Class B voting common stock is 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 permits
the persons holding the exchangeable shares to direct the voting of the Class B
common shares and provides 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 are exercisable during the
one-year period commencing July 12, 1995 to July 12, 1996 at a price of $5.00
per share. In the event that the common stock underlying the warrants cannot be
purchased legally on margin at a marginable price, then the exercise period will
be 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. On April 11, 1995, the Company issued stock, pursuant to stock
grants, of 630,000 shares of common stock, restricted as to transferability, to
certain officers of the Company.
<PAGE>   72
                       THE TRACKER CORPORATION OF AMERICA
                          (A DEVELOPMENT STAGE COMPANY)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 11 - CAPITAL STOCK (CONT'D):

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


<TABLE>
<CAPTION>
                                                     FOR YEAR                 FOR YEAR
                                                      ENDED                    ENDED
                                                    MARCH. 31,    EXERCISE    MARCH 31,    EXERCISE
                                                       1997         PRICE       1996        PRICE
                                                    -----------------------------------------------
<S>                                                 <C>           <C>         <C>          <C>
            OPTIONS:
              Opening                                 40,000         n/a       40,000       $7.95
                Granted during the period (*)              0                   10,000       $1.81
                Exercised during the period                0                        0         n/a
                Expired/cancelled during period            0                  (10,000)      $7.95
                                                      ------                   ------
              Closing                                 40,000                   40,000
                                                      ======                   ======
</TABLE>

(*):    40,000 options were issued in July 1994 and 10,000 options were issued
        in September 1995 to non-employee directors and vest proportionately
        over a period of three years.



<TABLE>
<CAPTION>
                                                      FOR YEAR                 FOR YEAR
                                                        ENDED                   ENDED
                                                      MARCH 31,    EXERCISE   MARCH 31,     EXERCISE
                                                        1997         PRICE      1996          PRICE
                                                    -----------------------------------------------
<S>                                                 <C>           <C>        <C>           <C>
            WARRANTS (COMMON STOCK AND CLASS B):
              Opening                                 767,348         n/a    1,685,880            n/a
                Issued during the period                    0                  250,000          $5.00
                Exercised during the period                 0                 (849,803)      Cdn$1.00
                Expired during the period             (17,348)                (318,729)     Cdn$14.00
                                                      -------                  -------
              Closing                                 750,000                  767,348
                                                      =======                  =======
</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 are exercisable during the one-year period commencing
July 12, 1995 to July 12, 1996 at a price of $5.00 per share. In the event that
the common stock underlying the warrants cannot be purchased legally on margin
at a marginable price, then the exercise period will be extended until the first
day that the common stock becomes marginable.

(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.
<PAGE>   73
                       THE TRACKER CORPORATION OF AMERICA
                          (A DEVELOPMENT STAGE COMPANY)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 11 - CAPITAL STOCK (CONT'D):

(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, 1997, 730,255 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,
                                                1997            1996           1997
                                            -----------      ----------     ----------
<S>                                         <C>              <C>            <C>
OPENING,
    Marketing services not yet received     $ 1,332,800      $1,999,200     $       --
    Deferred compensation costs                 340,599              --             --
    Deferred consulting costs                   280,928          87,485             --
    Rent                                             --              --             --
                                            -----------      ----------     ----------
                                              1,954,327       2,086,685     $       --

SHARES SUBSCRIBED BUT NOT ISSUED,
    Marketing services not yet received        (999,600)             --        999,600
    Deferred compensation costs                 441,734       1,706,031      2,222,174
    Deferred consulting costs                   116,201         910,819      1,809,224
    Rent                                        153,329              --        507,794
                                            -----------      ----------     ----------
                                               (288,336)      2,616,850      5,538,792

CHARGED TO EXPENSE AS SERVICES ARE
RECEIVED,
    Marketing services not yet received         333,200         666,400        999,600
    Deferred compensation costs                 782,333       1,365,432      2,222,174
    Deferred consulting costs                   134,629         717,376      1,546,724
    Rent                                         21,496              --        375,961
                                            -----------      ----------     ----------
                                              1,271,658       2,749,208      5,144,459

CLOSING,
    Marketing services not yet received              --       1,332,800             --
    Deferred compensation costs                      --         340,599             --
    Deferred consulting costs                   262,500         280,928        262,500
    Rent                                        131,833              --        131,833
                                            -----------      ----------     ----------
                                            $   394,333      $1,954,327     $  394,333
                                            ===========      ==========     ==========
</TABLE>

(x) For the year ended March 31, 1997, 1,433,433 common shares were issued
pursuant to the conversion of convertible subordinated debentures totalling
$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. As of March 31, 1997 there remains
outstanding $590,746 ($1,460,000 at March 31, 1996) in convertible subordinated
debentures with a maturity date of June 1, 1997. The remaining balance of 
$83,991 ($Nil at March 31, 1996) has been reclassified as debentures which have
repayment terms over 12 months at a 4.75% interest rate.
<PAGE>   74
                       THE TRACKER CORPORATION OF AMERICA
                          (A DEVELOPMENT STAGE COMPANY)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 11 - CAPITAL STOCK (CONT'D):

(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 1997, the Company issued 1,050 shares of
$1,000 6% Cumulative Convertible Preferred Stock (the "Convertible Preferred
Stock"). The Convertible Preferred Stock is not redeemable and, except as
otherwise provided by law, is non-voting. Subject to the prior right of the
holders of any shares of any series of Preferred Stock ranking prior to the
shares of Convertible Preferred Stock with respect to dividends, the holders of
the Convertible Preferred Stock are entitled to receive when, as and if declared
by the Board of Directors: (i) quarterly dividends payable in cash out of funds
legally available for such purpose on the last day of July 1996 and October 1996
(each such date being referred to herein as a "Quarterly Dividend Payment Date")
at an annual rate of $60 per share; or, (ii) at the sole option of the Company,
quarterly dividends payable on each Quarterly Dividend Payment Date in
additional shares of Convertible Preferred Stock at an annual rate of 0.06
additional shares per share of Convertible Preferred Stock then outstanding.

In the event of any liquidation, dissolution or winding up of the Company, the
holders of the Convertible Preferred Stock are entitled to receive, prior to any
distribution of any of the assets or funds of the Company to the holders of the
Common Stock or any other shares of stock of the Company ranking as to such a
distribution junior to the Convertible Preferred Stock, an amount equal to
$1,000 per share (as adjusted for any stock dividends, combinations or splits
with respect to such shares) plus an amount equal to any accrued but unpaid
dividends thereon to the date fixed for payment of such distribution. Upon
payment of the full preferential amount, the holders of the Convertible
Preferred Stock are not entitled to any further participation in any
distribution of assets by the Company.

Each share of Convertible Preferred Stock is convertible, at the option of the
holder, without the payment of any additional consideration, and at any time,
into such number of shares of Common Stock as is determined by dividing $1,000
plus the amount of any accrued but unpaid dividends through the date such
holder's conversion notice is received by the Company by the Conversion Price
(as hereafter defined). The "Conversion Price" shall be equal to that amount
which is 33% less than the average of the published OTC Bulletin Board closing
bid prices for the Company's Common Stock for the five (5) trading days
preceding, at the election of the holder, the date such holder's subscription to
purchase the Convertible Preferred Stock was accepted by the Company or the date
such holder's conversion notice is received by the Company; provided, however,
that the Conversion Price shall in no event be less than $0.15. If the number of
shares of Common Stock outstanding at any time after the date of issuance of the
Convertible Preferred Stock is increased or decreased by a stock dividend, stock
split, or combination or reclassification of the outstanding shares of Common
Stock, the Conversion Price shall be appropriately decreased or increased so
that the number of shares of Common Stock issuable on conversion shall be
increased or decreased in proportion to such increase or decrease in the
outstanding shares of Common Stock.

During May 1996, the Company issued 250 shares of Series B $1,000 6% Cumulative
Convertible Preferred Stock (the "Series B Convertible Preferred Stock"). During
August, 1996, the Company issued 200 additional shares of Series B $1,000
Cumulative Convertible Preferred Stock. The Series B Convertible Preferred Stock
is identical in all material respects to the Convertible Preferred Stock except
that the Quarterly Dividend Payment Dates are August 1996 and November 1996
rather than July 1996 and October 1996.
<PAGE>   75
                       THE TRACKER CORPORATION OF AMERICA
                          (A DEVELOPMENT STAGE COMPANY)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 11 - CAPITAL STOCK (CONT'D):

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) As at March 31, 1997, 4,365,136 common shares were issued due to the
conversion of 1,050 shares of convertible preferred stock totalling $1,050,000.
As at March 31, 1997, no convertible preferred stock remains outstanding.

(xiv) 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 at 4:00 pm (Eastern time).

(xv) During the year ended March 31, 1997, the Company issued 1,740,938 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.

(xvi) 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. The Company issued 333,272 shares of common stock
pursuant to the registration statement on S-8 to Consultant as payment for
consulting fees. The shares were carried an aggregate value of $ 88,000.

NOTE 12 - COMMITMENTS:

LEASES

The Company has a lease agreement for its current office premises. The term of
the lease is ten years which commenced January 1, 1994 and requires payment of
an annual base rent of $22,000 for the first five years and thereafter market
value less 20%. In addition, the Company is required to pay its share of
property taxes and all operating costs. The Company has leased space in Smyrna,
Georgia to house its fulfillment and processing center as well as a
telemarketing and verification center. The term of the lease is for three (3)
years, which commenced on May 15, 1997. The lease requires payment of an annual
base rent of $41,772.

Rental expense for the year ended March 31, 1997 amounted to $ 214,470 and
$233,705 for the year ended March 31, 1996.
<PAGE>   76
                       THE TRACKER CORPORATION OF AMERICA
                          (A DEVELOPMENT STAGE COMPANY)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 12 - COMMITMENTS ( CONT'D):


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>
         1997                                   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 has 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.

THE IACP ENDORSEMENT

The Company has 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 founded in 1893. The
Company's present license agreement with the IACP began in February 1996 and
runs through February 1999. 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>
<PAGE>   77
                       THE TRACKER CORPORATION OF AMERICA
                          (A DEVELOPMENT STAGE COMPANY)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 12 - COMMITMENTS ( CONT'D):

INVESTOR MEDIA AND PUBLIC RELATIONS

The Company entered into an agreement dated November 20, 1995 with Corporate
Relations Group, Inc. ("CRG") of Winter Park, Florida to provide advertising,
printing and investor relations for investor media and public relations support
to the Company with services to commence in mid 1996. The agreement covers a
twelve-month period and may be cancelled without penalty at the Company's
option. As consideration for the services to be provided by CRG, the Company
will pay to CRG, at the Company's option, either $570,000 in cash or the
equivalent number of common shares assigned a value of $1.75 on the agreement
date. The Company has also agreed to issue options to purchase a total of
500,000 common shares noted as follows:

  100,000 common shares at $2.00 1 year from the date of the agreement
  100,000 common shares at $2.40 2 years from the date of the agreement
  100,000 common shares at $2.60 3 years from the date of the agreement
  100,000 common shares at $2.80 4 years from the date of the agreement
  100,000 common shares at $3.00 5 years from the date of the agreement

On November 4, 1996, the Company exercised its option and terminated the
services of Corporate Relations Group, Inc. ("CRG"). CRG had never provided
services under the agreement and the Company had not made any payment to CRG.

NOTE 13 - 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 totalling, in the aggregate, $ 648,231 for the year
ended March 31, 1997 and $589,390 for the year ended March 31, 1996.

Finders fees amounting to $25,870 for year ended March 31, 1997 and $Nil for the
year ended March 31, 1996 paid to related parties in connection with the
Company's private equity placement are included as a reduction in paid-in
capital.

Commissions amounting to $Nil for year ended March 31, 1997 and $85,646 for the
year ended March 31, 1996 were paid to related parties in connection with the
issuance of convertible subordinated debentures.

See also Note 11(iv) and (vii).
<PAGE>   78
                       THE TRACKER CORPORATION OF AMERICA
                          (A DEVELOPMENT STAGE COMPANY)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 14 - INCOME TAXES:

The estimated deferred tax asset of $4,127,000 and $3,696,000, representing
benefit for the income tax effects of the accumulated losses for the period from
inception (May 6, 1993) to March 31, 1997 and March 31, 1996 respectively, has
not been recognized due to the uncertainty of future realization of such
benefits. Estimated net operating losses aggregating $11,800,000 ($10,561,000 as
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,
                                        1997                 1996
                                     -----------         -----------
<S>                                  <C>                 <C>
Deferred tax liabilities             $         0         $         0
Deferred tax assets
         Net operating losses          4,127,000           3,696,000
                                     -----------         -----------
                                       4,127,000           3,696,000
Valuation allowance                   (4,127,000)         (3,696,000)
                                     -----------         -----------
                                     $         0         $         0
                                     ===========         ===========
</TABLE>

The valuation allowance increased by $ 431,000 during the year.

NOTE 15 - CONVERTIBLE SUBORDINATED DEBENTURES:

The Company has outstanding at March 31, 1997 convertible subordinated
debentures in the amount of $590,746 ($ 1,460,000 as at March 31, 1996) 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
             260,746              $0.9375 per share of common stock                        278,128
              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
         -----------                                                                      --------
         $   590,746                                                                       790,385
         ===========                                                                      ========
</TABLE>

Total interest paid and included in general and administrative expenses is $
222,791 and $181,311 for the years ended March 31, 1997 and 1996, respectively.
<PAGE>   79
                       THE TRACKER CORPORATION OF AMERICA
                          (A DEVELOPMENT STAGE COMPANY)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 16 - SUBSEQUENT EVENTS:

In April 1997, the Company issued 35,714 shares of common stock pursuant to the
registration statement on S-8 to the Consultant for March 1997 administrative
expense. The shares were valued at $0.28 per share. See Note 11(xvi) - Capital
Stock.

In May 1997, the Company issued 43,478 shares of common stock pursuant to the
registration statement on S-8 to the Consultant for April 1997 administrative
expense. The shares were valued at $0.23 per share.See Note 11 (xvi) - Capital
Stock.

In June 1997, the Company issued 56,180 shares of common stock pursuant to the
registration statement on S-8 to the Consultant for May 1997 administrative
expense.The shares were valued at $0.178 per share. See Note 11 (xvi) - Capital
Stock.