<PAGE>
--------------------------------------------------------------------------------
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                                 UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                              WASHINGTON, DC 20549
                            ------------------------
                                   FORM 10-K
 
<TABLE>
<S>        <C>
/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
</TABLE>
 
         OR THE TRANSITION PERIOD FROM            TO
 
                        COMMISSION FILE NUMBER: 0-26756
                            ------------------------
                               GEOGRAPHICS, INC.
 
             (Exact name of Registrant as specified in its charter)
 
<TABLE>
<S>                                       <C>
               WYOMING                                  87-0305614
   (State or other jurisdiction of                    (IRS Employer
    incorporation or organization)                 Identification No.)
 
   1555 ODELL ROAD, P.O. BOX 1750,                        98231
              BLAINE, WA
   (Address of principal executive                      (Zip code)
               offices)
</TABLE>
 
       Registrant's telephone number including area code: (360) 332-6711
 
        Securities registered pursuant to Section 12(b) of the Act: None
 
          Securities registered pursuant to Section 12(g) of the Act:
 
<TABLE>
<CAPTION>
                                              NAME OF EACH EXCHANGE ON WHICH
         TITLE OF EACH CLASS                            REGISTERED
--------------------------------------    --------------------------------------
<S>                                       <C>
      COMMON STOCK, NO PAR VALUE              NASDAQ NATIONAL MARKET SYSTEM
</TABLE>
 
                           --------------------------
 
    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. /X/
 
    Common stock, no par value per share ("Common Stock"), was the only class of
voting stock of the Registrant outstanding on September 8, 1997. Based on the
closing sales price of the Common Stock on the Nasdaq National Market System as
reported on September 8, 1997 of $.78, the aggregate market value of the Common
Stock held by persons other than officers, directors and persons known to the
Registrant to be the beneficial owner (as that term is defined under the rules
of the Securities and Exchange Commission) of more than five percent of the
Common Stock on that date was approximately $7,384,944. By the foregoing
statements, the Registrant does not intend to imply that any of these officers,
directors or beneficial owners are affiliates of the Registrant or that the
aggregate market value, as computed pursuant to rules of the Securities and
Exchange Commission, is in any way indicative of the amount which could be
obtained for such shares of Common Stock.
 
    The number of shares of Common Stock outstanding as of September 8, 1997 was
9,467,877.
 
                      DOCUMENTS INCORPORATED BY REFERENCE
                                      None
                               PAGE 1 OF 41 PAGES
                      Index to exhibits appears on page 39
 
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
<PAGE>
ITEM 1. BUSINESS
 
GENERAL
 
    Geographics, Inc. (the "Company" or "Geographics") was incorporated as a
Wyoming corporation on September 20, 1974. The Company is engaged in the
development, manufacture, marketing and distribution of specialty paper
products, generally made using pre-printed designs, including stationery,
business cards, brochures, memo pads and paper cubes. The Company also
manufactures and markets rub-on and stick-on lettering, stencils, graphics arts
products and other signage products.
 
    The Company's fiscal year end is March 31. The Company's executive offices
and domestic operations are located at 1555 Odell Road, Blaine, Washington
98231, and its telephone number is (360) 332-6711.
 
FORWARD-LOOKING STATEMENTS
 
    Statements herein concerning expectations for the future constitute
forward-looking statements which are subject to a number of known and unknown
risks, uncertainties and other factors which might cause actual results to
differ materially from those expressed or implied by such forward-looking
statements. Forward-looking statements herein include, but are not limited to,
those concerning anticipated growth in the preprint paper market; anticipated
growth in the Company's sales; anticipated growth in sales of specialty paper
products as a percentage of revenue; the Company's ability to increase its
market share within the preprint industry; the ability of the Company to
successfully implement price increases for the Company's products when and as
needed; trends relating to the Company's profitability and gross profits
margins; the ability of the Company to implement a management information
system, including an electronic data interchange system, adequate to meet
operations requirements in the future and to improve its internal controls; the
ability of the Company to refinance its existing revolving credit facility, to
identify potential buyers for all or part of its business or to raise additional
debt or equity financing sufficient to meet its working capital requirements;
and the ability of the Company to continue operations as a going concern.
Relevant risks and uncertainties include, but are not limited to, slower than
anticipated growth of the preprint papers market; loss of certain key customers;
insufficient consumer acceptance of the Company's specialty paper products;
unanticipated actions, including price reductions, by the Company's competitors;
unanticipated increases in the costs of raw materials used to produce the
Company's products; loss of favorable trade credit, supply terms, reliable and
immediately available raw material supply and other favorable terms with certain
key vendors; greater than expected costs incurred in connection with the
implementation of a management information system; inability to implement an
electronic data interchange system adequate to support the Company's operations;
failure to realize expected economic efficiencies of the Company's automated
production system; the inability to hire and retain key personnel; unexpected
increases in the overall costs of production as a result of collective
bargaining arrangements; unfavorable determinations of pending lawsuits or
disputes; and inability to secure additional working capital when and as needed.
Additional risks and uncertainties include those described under "Risk Factors"
below and those described from time to time in the Company's other filings with
the Securities and Exchange Commission, press releases and other communications.
 
BACKGROUND
 
    From its inception in 1974 until fiscal 1991, the Company was engaged
exclusively in the manufacture and wholesale marketing of various rub-on and
stick-on lettering, stencils, graphics arts products and other signage products.
In 1991, the Company began the development of "pre-print" or "specialty" paper
products consisting of paper on which photographs or other art images are
printed and which is then cut to size. In 1992, the Company introduced its first
specialty paper product under the Geopaper brand name. The Company now has
several specialty paper products made using Geopaper designs, including
stationery, business cards, brochures, memo pads and paper cubes which, in North
America, are sold primarily to office supply superstores, including Office Depot
and OfficeMax, and mass market retailers, such as Wal-Mart, and which are also
distributed internationally through the Company's subsidiaries in Canada,
 
                               Page 2 of 41 Pages
<PAGE>
Europe and Australia. The specialty papers group now constitutes the Company's
principal business, with approximately 71% of the Company's total sales in
fiscal 1997 attributable to sales of Geopaper products. Primarily as a result of
sales generated by the specialty papers group, the Company has experienced
substantial growth, with total sales increasing from $6,900,875 for fiscal 1994
to $23,840,506 for fiscal 1997, an increase of 245%.
 
    Primarily to develop its specialty papers group, the Company has made
substantial investments to expand facilities, purchase and install automated
production equipment and an integrated management information system and enhance
administrative and other infrastructure systems. The Company has experienced
delays, set-backs and unanticipated additional expenses in the installation of
the production equipment and the management information system. Moreover, the
management information system has failed to perform as promised by vendors. As a
result, the Company has not yet realized the originally anticipated economic
benefits and efficiencies from these capital expenditures. See "--Management
Information System--Operations Software" "--Management Information
Systems--Electronic Data Interchange (EDI)" and "--Risk Factors--Implementation
of Automated Production Equipment." These unanticipated expenses and operational
inefficiencies, together with price reductions for the Company's products and
cost increases for certain raw materials, have had a negative impact on the
Company's gross margins and contributed to a substantial net loss for fiscal
1997. In addition, since May 1997, the Company has been in default of several
financial covenants under its revolving credit facility, the Company's primary
source of working capital, and borrowings under the facility have exceeded
permitted borrowing base limitations. The existence of these defaults
constitutes a default under the Company's mortgage loans and equipment lease
facilities. The report of the Company's auditors included in this Report states
that the Company's fiscal 1997 losses and non-compliance with covenants under
its revolving credit facility raise substantial doubt about the Company's
ability to continue as a going concern.
 
    The Company currently projects substantial negative cash flows from
operations for at least the remainder of fiscal 1998. The exact amount and
timing of the Company's capital requirements will be determined by numerous
factors, including the level of, and gross margin on, future sales, the outcome
of outstanding contingencies and disputes such as pending lawsuits, payment
terms obtained from the Company's vendors and the timing of capital
expenditures. However, even if the Company's lender were to formally waive all
existing defaults under the Company's revolving credit facility, the Company
expects that available borrowings under the facility would not be sufficient to
satisfy its working capital requirements beyond mid-October 1997. Accordingly,
the Company is continuing to seek extended payment terms from its vendors,
delaying purchases of raw materials, instituting internal cost reduction
measures and taking other steps to conserve operating capital. As a result, the
Company's vendors may place the Company on credit hold or take other actions
against the Company, including the termination of their relationship with the
Company or the initiation of collection proceedings. See "--Risk
Factors--Dependence on Key Vendors." In addition, the Company is actively
pursuing possible sources of additional capital and has engaged an investment
banker to assist in the evaluation and pursuit of financing transactions, which
could include the issuance of debt or equity securities or the sale of all or
part of the Company's assets. However, as of the date of this Report, the
Company had received no firm commitments with respect to any such transaction
and there can be no assurance that any such transaction will be identified.
Further, there can be no assurance that the Company will be able to obtain
additional sources of additional working capital when and as needed or that the
terms of any such funding will be acceptable to the Company or in the best long-
term interests of the Company's shareholders.
 
    The failure to obtain an increase in borrowing availability under, and to
extend the expiration date of, the revolving credit facility, or to otherwise
obtain sufficient funds when and as needed to satisfy its working capital
requirements could force the Company to curtail operations, seek extended
payment terms from its vendors or seek protection under the federal bankruptcy
laws. See "--Risk Factors--Ability to Continue as a Going Concern; Defaults
under Credit Facility; Need for Additional Working Capital" and "Item 7.
Management's Discussion and Analysis of Financial Condition and Results of
Operations-- Liquidity and Capital Resources."
 
                               Page 3 of 41 Pages
<PAGE>
INDUSTRY
 
    The market for preprinted papers ("preprints") includes preprinted cut sheet
papers used for letterheads, brochures, flyers and bulletins. Suppliers within
the preprint industry also offer combination sets made up of multiple products
such as matching letterhead, envelopes and business cards, or software packages
that improve ease of use of preprints by the consumer. New designs and a large
variety of preprints and related specialty products have been important elements
of success and growth for businesses in the preprint market.
 
    The preprint market is segmented among two major methods of distribution:
retail, making up approximately 25% of the current total domestic preprint
market, and direct mail, which is estimated to represent approximately 75% of
the market. Within the retail segment of the preprint market there are numerous
sub-segments, including office supply superstores, mass market retailers, arts &
crafts stores, party stores, specialty paper retailers, and office supply
business-to-business retailers. The Company sells its specialty paper products
exclusively in the retail segment of the preprint market, primarily to office
supply superstores such as Office Depot and OfficeMax and mass market retailers
such as Wal-Mart.
 
    Large retailers somewhat dominate the retail segment of the preprint
industry, and as such, exert considerable influence over the operations of the
relatively smaller suppliers, such as the Company, that service them in the
preprint market. Of particular importance are the factors such as pricing,
monetary requirements for the retailers selling programs (including such
expenses as volume rebates and advertising allowances), prompt order turnaround
which in turn requires the maintenance of large inventories, and payment terms,
including prompt pay discounts and extended and seasonal terms. See "--Risk
Factors-- Competition", "--Risk Factors--Maintenance of Large Inventory of
Products" and "--Risk Factors-- Customer Concentrations."
 
    Compared to the preprint market, the market for the Company's lettering and
signage products is smaller, more mature, slower-growing and more narrowly
focused to the office supply and arts and crafts market. Though the total dollar
volume of this market segment is unknown, the Company has experienced little or
no growth in its lettering and signage revenues over the past five years.
 
PRODUCTS
 
    The products manufactured by the Company are separated into two major
product groups: (1) specialty papers, and (2) lettering and signage.
 
    The specialty papers group consists of paper on which photographs or other
art images are printed and which is then cut to size. In 1992, the Company
introduced its first specialty paper product under the Geopaper brand name. The
Company now has several specialty paper products made using Geopaper designs,
including stationery, business cards, brochures, memo pads and paper cubes.
These specialty paper products are often designed to be used with personal
computer printers. The specialty papers group now constitutes the Company's
principal business, with approximately 71% of the Company's total sales in
fiscal 1997 attributable to sales of Geopaper products. See "--Sales by Product
Category."
 
    The lettering and signage group manufactures and distributes rub-on and
stick-on lettering, stencils, electronic moving message signs, American
Disabilities Act signs in Braille, and other signage products. This product
group represented 29% of sales in fiscal 1997, down from 35%, 79% and 97% of
sales during fiscal 1996, 1995 and 1994, respectively. The Company expects this
product group to continue to decrease as a percentage of sales and that sales of
lettering and signage products as an industry will continue to decline over time
as the use of personal computers increases.
 
                               Page 4 of 41 Pages
<PAGE>
SALES BY PRODUCT CATEGORY
 
    The percentage of the Company's approximate total sales attributable to each
class of product offered by the Company for the last three years is set forth
below.
 
                            AS A PERCENTAGE OF SALES
 
<TABLE>
<CAPTION>
                                                                                                       FISCAL YEAR
                                                                                             -------------------------------
CLASS OF PRODUCT                                                                               1997       1996       1995
-------------------------------------------------------------------------------------------  ---------  ---------  ---------
<S>                                                                                          <C>        <C>        <C>
Designer stationeries and specialty papers.................................................        71%        65%        21%
Lettering, signage, stencil and graphic art products.......................................        29%        35%        79%
</TABLE>
 
                        STATED IN U.S. DOLLARS (ROUNDED)
 
<TABLE>
<CAPTION>
                                                                                      FISCAL YEAR
                                                                       ------------------------------------------
CLASS OF PRODUCT                                                           1997           1996           1995
---------------------------------------------------------------------  -------------  -------------  ------------
<S>                                                                    <C>            <C>            <C>
Designer stationeries and specialty papers...........................  $  16,900,000  $  14,800,000  $  2,100,000
Lettering, signage, stencil and graphic art products.................  $   6,900,000  $   7,800,000  $  8,100,000
</TABLE>
 
SALES/ASSETS BY GEOGRAPHIC LOCATION
 
    Financial information relating to foreign and domestic operations and export
sales (all foreign sales are export sales) is as follows:
 
<TABLE>
<CAPTION>
                                                                                      FISCAL YEAR
                                                                      -------------------------------------------
                                                                          1997           1996           1995
                                                                      -------------  -------------  -------------
<S>                                                                   <C>            <C>            <C>
Sales to Domestic and Foreign Customers
  United States.....................................................  $  18,426,816  $  19,477,370  $   8,755,853
  Canada(1).........................................................  $   3,872,621      2,854,935      1,271,898
  Europe............................................................  $     715,327        281,330        158,385
  Australia.........................................................  $     825,697              0              0
                                                                      -------------  -------------  -------------
    Total...........................................................  $  23,840,506  $  22,613,635  $  10,186,136
                                                                      -------------  -------------  -------------
                                                                      -------------  -------------  -------------
Operating profit or (loss):
  United States.....................................................  $  (5,250,250) $   2,081,817  $     680,806
  Canada(1).........................................................  $    (473,296)       377,328         98,831
  Europe............................................................  $    (727,467)        65,316         12,307
  Australia.........................................................  $     189,715              0              0
                                                                      -------------  -------------  -------------
    Total...........................................................  $  (6,261,298) $   2,524,461  $     791,944
                                                                      -------------  -------------  -------------
                                                                      -------------  -------------  -------------
Identifiable assets:
  United States.....................................................  $  27,464,715  $  24,263,181  $  10,705,943
  Europe............................................................  $     940,046        410,060              0
  Canada(2).........................................................  $   1,058,046         64,800        (91,270)
  Australia.........................................................  $     782,894              0              0
                                                                      -------------  -------------  -------------
    Total...........................................................  $  30,245,701  $  24,738,041  $  10,614,673
                                                                      -------------  -------------  -------------
                                                                      -------------  -------------  -------------
</TABLE>
 
(1) Effective April 1, 1996, Geographics--Canada succeeded Martin Distribution,
    Inc. ("Martin Distribution") as the exclusive importer of Geographics
    products into Canada. Martin Distribution was at the time owned and
    controlled by one of the Company's then-acting directors. All export sales
    to Canada in fiscal 1997 were to Geographics--Canada. All export sales to
    Canada in fiscal 1996 and fiscal 1995 were to Martin Distribution.
 
(2) In fiscal 1995, the Company's borrowings from International Geographics of
    Ontario, a Canadian partnership in which the Company had a majority
    interest, exceeded investments and other assets held in the partnership,
    resulting in a net liability in Canada.
 
                               Page 5 of 41 Pages
<PAGE>
    International sales accounted for approximately 22%, 14%, and 11% of the
Company's total net sales in fiscal 1997, 1996 and 1995, respectively.
International sales were concentrated in Canada, Europe and Australia. As a
result of such international sales, a significant portion of the Company's
revenues will be subject to certain risks, including unexpected changes in
regulatory requirements, exchange rates, tariffs and other barriers, political
and economic instability and other risks. See "--Risk Factors--International
Subsidiaries" and "--Risk Factors--Foreign Exchange and International Trade."
 
BUSINESS CONCENTRATIONS
 
    Historically, a substantial portion of the Company's sales have been to a
limited number of customers. Concentration of sales to the Company's five
largest customers is detailed below:
 
<TABLE>
<CAPTION>
                                                                                        FISCAL YEAR
                                                                           -------------------------------------
CUSTOMER                                                                      1997         1996         1995
-------------------------------------------------------------------------     -----        -----        -----
<S>                                                                        <C>          <C>          <C>
Office Depot Inc.........................................................          31%          40%          31%
OfficeMax, Inc...........................................................          26%          24%          16%
Martin Distribution, Inc.(1).............................................           0%          13%          12%
Business Depot, Inc.(2)..................................................          10%           0%           0%
United Stationers Inc....................................................           3%           3%           6%
Wal-Mart Stores, Inc.....................................................           4%           3%           1%
                                                                                   --           --           --
                                                                                   74%          83%          66%
</TABLE>
 
(1) Effective April 1, 1996, Geographics--Canada succeeded Martin Distribution
    as the exclusive importer of Geographics products into Canada.
 
(2) Business Depot, Inc. (Staples of Canada) sales were included in sales of
    Martin Distribution for 1996 and 1995.
 
    The Company expects that sales to relatively few customers will continue to
account for a high percentage of its net sales in the foreseeable future and
believes that its financial results depend in significant part upon the success
of these few customers. See "--Risk Factors--Customer Concentrations."
 
PURCHASING
 
    The Company's principal purchases are materials for use in the manufacture
of specialty paper and lettering and signage products. In particular, the
Company routinely purchases sheets, rolls and reams of commodity paper, as well
as other direct materials involved in the printing and packaging of its Geopaper
product lines, such as inks, packaging film, labels, shipping boxes and other
materials. In addition, the Company requires a steady supply of the vinyl sheets
used in the manufacture of its lettering products. Certain of the products used
in the manufacture of the Company's products are considered commodities, and as
such can vary significantly in cost from time to time. Though prices may vary,
the Company has not experienced and does not currently anticipate any market
shortages of supply of the specific raw materials that it purchases and uses in
the manufacture of its products.
 
    The Company's success depends in large part on reliable and uninterrupted
supply of raw materials from its major vendors. Although the Company purchases
goods from approximately 1,100 vendors, it generally practices a "sole source"
approach to vendor selection in that it typically relies on a single vendor for
all purchases on its various categories of production materials, and other major
categories of purchased goods and services. One key vendor of commodity paper
and other raw materials and supplies is Unisource, a broker/vendor who
represented 48% of the Company's total purchases during the fiscal 1997.
Unisource has provided the Company an immediately available and uninterrupted
supply of paper. In addition, Unisource and other key vendors have granted the
Company significant amounts of trade credit, along with favorable pricing and
payment terms. Although the Company may be able to find other sources of supply
for commodity paper and other major raw material categories, there can be no
assurance that potential new vendors, once sourced, would provide an
uninterrupted supply of raw materials or adequate levels of trade credit,
competitive prices or acceptable payment terms. See "--Risk Factors--Dependence
on Key Vendors."
 
                               Page 6 of 41 Pages
<PAGE>
DISTRIBUTION
 
    The Company sells its products on a wholesale basis primarily to retailers,
including office supply superstores, mass market retailers, arts & crafts
stores, party stores, specialty paper retailers, and office supply
business-to-business catalog retailers. The Company also markets its products to
office supply distributors in the U.S. and to distributors in those countries
where the Company does not service retailers directly. Historically, the Company
has sold a substantial portion of its products to a limited number of retail
customers, and the Company believes that this trend can be expected to continue
in the future. See "--Business Concentrations" and "--Risk Factors--Customer
Concentrations."
 
    The Company conducts its export operations through three subsidiaries:
 
    - Geographics Marketing Canada, Inc. ("Geographics--Canada") was
      incorporated as a British Columbia, Canada corporation on July 31, 1995.
      The offices of Geographics--Canada are located at 17735 1st Ave., Suite 1,
      Surrey, B.C. V4P 2K1, Canada, and its telephone number is 800-426-5923.
      Geographics--Canada was established to import the Company's products into
      Canada and market them to wholesale and retail distribution channels.
 
    - Geographics (Europe) Limited ("Geographics--Europe") was incorporated in
      England on December 12, 1995. The offices of Geographics--Europe are
      located at 4 Iceni Court, Letchworth, Herts SG6 1TN, England, and its
      telephone number is 01462-487100. Geographics--Europe was established to
      import, warehouse, market and distribute the Company's products throughout
      Europe.
 
    - Geographics Australia Pty. Ltd. ("Geographics--Australia") was
      incorporated in Brisbane, Australia on June 28, 1996. The offices of
      Geographics--Australia are located at 3/32 Lillian Fowler Place,
      Marrickville NSW 2204, Australia and its telephone number is
      61-2-9519-4488. Geographics-- Australia was organized to import,
      warehouse, market and distribute the Company's products throughout
      Australia.
 
MANAGEMENT INFORMATION SYSTEMS--INTEGRATED OPERATIONS SOFTWARE
 
    Over the course of fiscal 1996 and fiscal 1997, the Company invested
significant financial and operational resources in the installation of hardware
and software systems designed to integrate all major aspects of the Company's
operations. During this time period, the Company pursued the selection and
implementation of an integrated software package that would address the
Company's MIS needs in sales history, warehousing, manufacturing, distribution,
purchasing, inventory control, merchandise planning and replenishment, and
various financial systems. Through a process of elimination, the Company
selected an integrated package and began the installation in fiscal 1997. During
this time, the Company invested significant financial resources in outside
consultants for the design, installation and ongoing refinement of this system.
During fiscal 1997, the Company determined the need to replace this system and
therefore elected to write-off effectively all of its investment in the system
software, consulting fees and certain other implementation expenditures. The
Company has determined that it will need to invest further significant resources
to implement a new system of integrated software over the course of fiscal 1998
and possibly future periods. See "--Risk Factors--Management Information
Systems."
 
MANAGEMENT INFORMATION SYSTEMS--ELECTRONIC DATA INTERCHANGE (EDI)
 
    The Company currently utilizes EDI to transact business with its largest
customers. Presently, approximately 70% to 80% of customer orders and invoices
are transacted by EDI. In fiscal 1997, the Company invested significant
financial and operational resources toward the installation of a new, higher
capacity EDI software package in order to meet current demand and projected
increases in the volume and type of EDI transactions. In fiscal 1998, the
Company determined that the software package and related systems implemented may
not be adequate to support the Company's future EDI requirements. In addition,
the Company expended substantial resources with a consultant in the
implementation of this EDI software package and the Company remains highly
dependent on this consultant to support its current method of processing EDI
transactions. The Company has determined that it may need to find or develop
in-house EDI
 
                               Page 7 of 41 Pages
<PAGE>
expertise and implement new EDI systems to ensure reliable transactions, minimum
acceptable customer service, sufficient operational efficiency, and to provide
management with the ability to monitor critical performance factors with major
customers. See "--Risk Factors--Electronic Data Interchange."
 
COMPETITION
 
    The Company operates in a highly competitive environment. Competition can be
separated into two areas in which the Company conducts business: designer
stationery and lettering and signage. The Company's designer stationery products
compete in most of the Company's markets with Paper Direct, Inc., Taylor, Inc.,
American Pad and Paper, Inc., Z-International, Inc., and REDIFORM, Inc. (a
division Moore Corp Ltd.). The Company's designer stationery products compete
for limited shelf space in the office products superstores, office product
stores, mass market stores, contract stationers, wholesalers, office product
catalogs and mail order catalogs.
 
    The Company's traditional lettering and signage operation competes with
several companies that produce similar products (i.e. vinyl lettering, stencil,
rub-on lettering). These competitors include Visu-com, Inc., Chartpak, Inc. and
Duro-Art Inc. The Company's products compete for limited shelf space in the
office products superstores, office product stores, mass market stores, contract
stationers, wholesalers, and office product catalogs.
 
    The Company believes that its product designs, product quality,
merchandising programs, distribution channels, customer service and competitive
pricing distinguishes the Company from its competitors. However, many of the
Company's competitors, particularly in the designer stationery industry, are
larger, better capitalized and have substantially greater financial, marketing
and human resources. Moreover, the development and manufacture of new designer
stationeries and specialty papers are highly capital intensive. In order to
remain competitive, the Company may be required to continue to make significant
expenditures for capital equipment, sales, service, training and support
capabilities, investments in systems, procedures and controls, expansions of
operations and research and development, among many other items. Additional
financing might be required to fund the Company's investments in those areas.
There can be no assurance that additional financing will be available on terms
acceptable to the Company. See "--Risk Factors--Competition" and "Item 7.
Management's Discussion and Analysis of Financial Condition and Results of
Operation--Liquidity and Capital Resources."
 
    The Company implemented a series of price changes with respect to its
specialty paper products in part due to pressure to remain competitive with its
larger competitors and in part to increase market share within the preprint
industry. In April and August of 1996, the Company made significant reductions
in the prices it charged to substantially all of its specialty paper customers.
While these price reductions increased the Company's market share, they had a
direct material negative impact on the Company's gross profits and gross profit
margins in fiscal 1997, when compared to prior years. Subsequent to the end of
fiscal 1997, the Company implemented a further general reduction in the prices
of substantially all of its specialty paper products.
 
    In response to the reduced gross profits and gross profit margins in fiscal
1997, the Company implemented a general price increase on its specialty paper
products, which took effect on August 1, 1997. The Company may determine that
future price increases are necessary in order to offset increases of the costs
of raw materials, direct labor, production overhead or other components of the
Company's product costs and to improve or maintain gross profit margins. There
can be no assurance that the August 1, 1997 price increase or any future price
increases will be successfully implemented. The Company operates in a highly
competitive environment and even if price increases are successfully
implemented, there can be no assurance that the Company will be able to
successfully continue to compete against its competitors at the new, higher
price levels. Either the potential failure to successfully increase prices, or
the potentially diminished competitive position once a price increase is
successfully implemented could have material adverse effect on the Company's
business, financial condition or results of operations. See "--Risk
Factors--Competition."
 
                               Page 8 of 41 Pages
<PAGE>
TRADEMARKS AND COPYRIGHTS
 
    The Company maintains five registered trademarks in the U.S., Canada and
Australia: (1) GEOPAPER, (2) GEOTYPE, (3) GEOTAPE, (4) GEOSTENCIL, and (5)
GEOSIGN. In addition, the Company maintains two additional registered trademarks
in the U.S.: (1) SHIELD 'N' SEE, and (2) GEOFOIL and one additional registered
trademark in Canada: GEO. The Company's trademarks have various expiration dates
from 2002 to 2006 in the U.S., expiration dates in 2005 in Canada, and
expiration dates in 2011 in Australia. The Company has six applications pending
with the U.S. Patent and Trademark Office for federal trademark registration for
Geographics product lines. In addition, the Company has two registered U.S.
copyrights for the following products, "GEOCRUMPLED" and "GEOCLOUDS".
 
    The Company considers consumer awareness of its products and brand names an
important factor in creating demand for its products among office supply stores
and other existing or prospective customers. Part of the Company's strategy for
increasing consumer awareness is to establish consistent brand identity across
all of its major product lines. The Company believes that its trademarks and
copyrights play an important role in this effort.
 
    While the Company has made reasonable efforts to protect its intellectual
property, including registering them as trademarks and copyrights in the
countries where the product lines are marketed, to the extent that such
protections are inadequate, the Company could lose all or a part of these rights
which, in turn, could result in the diminution of the Company's overall brand
identity or individual product line identities. Either the loss of intellectual
property rights or the diminution of the Company's brand identities could have a
material adverse effect on the Company. See "Risk Factors--Uncertain Protection
of Intellectual Property Rights".
 
SEASONALITY
 
    A significant portion of the Company's customer orders are placed between
August and October of each year for shipment during the Company's third fiscal
quarter, which includes the Christmas season, with the largest levels of sales
historically occurring in the second half of the calendar year. As a result, the
Company has experienced, and is expected to continue to experience, seasonal
fluctuations in its operating results based upon past purchasing patterns.
 
BACKLOG
 
    The Company's backlog of orders as of September 8, 1997 was $2,180,117. The
Company expects to fill substantially all of these orders during the second
quarter of 1997. The Company includes in backlog the value of all purchase
orders received from customers for product not yet shipped and invoiced. Because
the Company only recently implemented internal controls necessary to determine
backlog, the Company is unable to determine backlog at March 31, 1997 or at the
end of any prior period. The Company's backlog is subject to fluctuations as a
result of seasonality in the Company's business and other factors and is,
therefore, not necessarily indicative of future sales. There can be no assurance
that current backlog will necessarily lead to sales in any future period. The
Company's inability to ship product with respect to a purchase order could
result in cancellation of such purchase order and reduction of backlog and could
have a material adverse effect on the Company's business, financial condition
and results of operations.
 
EMPLOYEES
 
    At March 31, 1997, the Company had approximately 250 employees, 235 of whom
were employed at its headquarters in Blaine, Washington, 7 of whom were employed
at the Company's facilities in the United Kingdom, and 8 of whom were employed
at the Company's facilities in Australia. At March 31, 1997, the manufacturing,
warehousing and product distribution aspects of the Company's business employed
211
 
                               Page 9 of 41 Pages
<PAGE>
employees, 20 employees worked in administration and 19 employees worked in
various managerial positions. As of the date of this Report, none of the
Company's employees were subject to a collective bargaining agreement. However,
during the second quarter of fiscal 1998, a group of the Company's employees
successfully petitioned for an election to determine if they would be
represented by a union, and an election date was set for October 2, 1997. If a
majority of the Company's employees elect to join the union, the Company will be
required to engage in good faith negotiations with the union for a collective
bargaining agreement. The Company cannot predict the outcome of the election by
its employees or the results of the negotiations of, or the terms of, the
collective bargaining agreement. The terms of any such collective bargaining
agreement could result in an increase in overall costs of production. In
addition, depending on the position taken by the union in its negotiations with
the Company, there could be an increased risk of labor strikes or work
stoppages. Any of these factors could have a material adverse effect on the
Company's business, financial condition or results of operations. As of the date
of this Report, the Company had never experienced a work stoppage and believes
that its relationship with its employees is good.
 
EXECUTIVE OFFICERS
 
    The information concerning certain executive officers of the Company which
is set forth in "Item 10. Directors and Executive Officers" of Part III of this
Report is incorporated into this Item 1 of Part I of this Report by this
reference.
 
RISK FACTORS
 
    PROSPECTIVE INVESTORS ARE STRONGLY CAUTIONED THAT AN INVESTMENT IN THE
COMPANY INVOLVES A VERY HIGH DEGREE OF RISK. PROSPECTIVE INVESTORS SHOULD NOT
DISMISS, AS "BOILERPLATE" OR "CUSTOMARY," DISCLOSURE OF THE RISK FACTORS SET
FORTH BELOW. THE CONTINGENCIES AND OTHER RISKS DISCUSSED BELOW COULD AFFECT THE
COMPANY IN WAYS NOT PRESENTLY ANTICIPATED BY ITS MANAGEMENT AND THEREBY HAVE A
MATERIAL ADVERSE EFFECT ON THE VALUE OF ITS COMMON STOCK. A CAREFUL REVIEW AND
UNDERSTANDING OF EACH OF THE RISK FACTORS SET FORTH BELOW, AS WELL AS THE OTHER
INFORMATION CONTAINED IN THIS REPORT IS ESSENTIAL FOR AN INVESTOR SEEKING TO
MAKE AN INFORMED DECISION WITH RESPECT TO THE COMPANY.
 
ABILITY TO CONTINUE AS A GOING CONCERN; DEFAULTS UNDER CREDIT FACILITY; NEED FOR
  ADDITIONAL WORKING CAPITAL
 
    As a result of the rapid growth of the Company's specialty papers group,
capital expenditures relating to the purchase and installation of an automated
production system and a management information system, operating losses and
other factors, the Company has required, and continues to require, substantial
external working capital. Moreover, subsequent to the end of fiscal 1997, the
Company has experienced working capital short-falls which have required the
Company to delay payments to certain vendors, delay purchases, institute
internal cost reduction measures and take other steps to conserve operating
capital.
 
    At the date of this Report, the Company's only available source of working
capital consisted of borrowings available under its revolving credit facility.
See "Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operation--Liquidity and Capital Resources." Since May 1997, the
Company has failed to comply with the net worth, debt-to-equity ratios and cash
flow coverage ratios under the revolving credit facility, and borrowings under
the facility exceeded the permitted borrowing base limitations. The Company's
lender has also provided the Company with several mortgage loans and equipment
loans, and the existence of the defaults under the revolving credit facility
constitutes a default under these other loans. The report of the Company's
auditors included in this Report states that the Company's fiscal 1997 losses
and non-compliance with covenants under its revolving credit facility raise
substantial doubt about the Company's ability to continue as a going concern.
 
    The Company entered into a forbearance agreement with its lender, effective
August 31, 1997, pursuant to which the lender agreed to extend the expiration
date of the revolving credit facility to
 
                              Page 10 of 41 Pages
<PAGE>
October 31, 1997, to increase the $12.0 million commitment by a $300,000
stand-by letter of credit, to permit borrowings of up to $2.25 million in excess
of the applicable borrowing base limitation (not to exceed the $12.0 million
revolving credit facility commitment) and to forbear from asserting is rights
with respect to the Company's non-compliance with the financial covenants as
well as the defaults under the Company's mortgage loans and equipment loans.
However, on September 12, 1997, the Company was required to request borrowings
in excess of the amended borrowing limits in order to meet payroll and other
expenses. Although the Company's lender permitted the requested borrowings, it
has not formally waived this additional default. There can be no assurance that
the lender will continue to permit borrowings under the revolving credit
facility, that the lender will agree to extend the facility beyond the October
31, 1997 expiration date or that the Company will be able to refinance or
replace the facility on acceptable terms when and as needed.
 
    The Company currently projects substantial negative cash flows from
operations for at least the remainder of fiscal 1998. The exact amount and
timing of the Company's capital requirements will be determined by numerous
factors, including the level of, and gross margin on, future sales, the outcome
of outstanding contingencies and disputes such as pending lawsuits, payment
terms obtained from the Company's vendors and the timing of capital
expenditures. However, even if the Company's lender were to formally waive all
existing defaults under the Company's revolving credit facility, the Company
expects that available borrowings under the facility would not be sufficient to
satisfy its working capital requirements beyond mid-October 1997. Accordingly,
the Company is continuing to seek extended payment terms from its vendors,
delaying purchases of raw materials, instituting internal cost reduction
measures and taking other steps to conserve operating capital. As a result, the
Company's vendors may place the Company on credit hold or take other actions
against the Company, including the termination of their relationship with the
Company or the initiation of collection proceedings. See "--Dependence on Key
Vendors." In addition, the Company is actively pursuing additional sources of
working capital, which could include the issuance of debt or equity securities
or the sale of some or all of the Company's assets. However, as of the date of
this Report, the Company had received no firm commitments with respect to any
such transaction and there can be no assurance that any such transaction will be
identified. Further, there can be no assurance that the Company will be able to
obtain additional sources of additional working capital when and as needed or
that the terms of any such funding will be acceptable to the Company or in the
best long-term interests of the Company's shareholders.
 
    The failure to obtain an increase in borrowing availability under, and to
extend the expiration date of, the Company's revolving credit facility, or to
otherwise obtain sufficient funds when and as needed to satisfy the Company's
working capital requirements could force the Company to curtail operations, seek
extended payment terms from its vendors or seek protection under the federal
bankruptcy laws. See "Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations--Liquidity and Capital Resources."
 
WEAKNESSES IN INTERNAL CONTROLS
 
    In connection with the Company's audit for the fiscal year ended March 31,
1997, management determined that, during fiscal 1997, the use of certain
accounting procedures and estimates based on historical results caused an
overstatement of gross margin and inventories on an interim basis. As a result
of the overstatement, inventory and gross margin at March 31, 1997 were reduced
by approximately $4,600,000 over the prior period. See "Item 7. Management's
Discussion and Analysis of Financial Condition and Results of Operations."
Management is taking steps to improve its internal controls, including
increasing the size and capabilities of its accounting department and improving
its management information systems. However, there can be no assurance that the
Company will be able to successfully implement these steps or that the Company
will not encounter other internal control weaknesses. The failure of the
Company's accounting and finance systems to provide accurate information
necessary to monitor the Company's financial position, results of operations and
liquidity could have a material adverse
 
                              Page 11 of 41 Pages
<PAGE>
effect on the Company's business, financial condition and results of operation.
See "--Management Information Systems--Integrated Operations Software."
 
DISPUTES AND LITIGATION
 
    The Company, Ronald S. Deans, the Company's President, Chief Executive
Officer and Chairman of its Board of Directors, and Terry A. Fife, the Company's
former Vice President of Finance and Chief Financial Officer, are named as
defendants in a securities action filed on July 17, 1997 in the U.S. District
Court for the Western District of Washington (the "Complaint"). The Complaint
was filed on behalf of a class of purchasers of the Company's Common Stock
during the period beginning on August 6, 1996 (the day the Company announced
financial results for the first quarter of its 1997 fiscal year) and ending on
June 12, 1997 (the "Class Period"). The Complaint alleges, among other things,
that, throughout the Class Period, the defendants inflated the price of the
Common Stock by intentionally or recklessly making material misrepresentations
or omissions which deceived the public about the Company's financial condition
and prospects. The Complaint alleges claims under Sections 10(b) and 20(a) of
the Securities Exchange Act of 1934 and seeks damages in an unstated amount. Two
separate but related complaints (the "Related Complaints") naming the same
defendants and alleging substantially the same claims as set forth in the
Complaint were filed in the U.S. District Court for the Western District of
Washington on July 22, 1997 and July 23, 1997. Although the Company intends to
vigorously defend the Complaint and the Related Complaints, it is unable to
predict the outcome of these actions. See "Item 3. Legal Proceedings."
 
    The Company owns insurance policies applicable to certain losses including
costs of defense. However, if the Company is determined to be liable for, or
otherwise agrees to settle or compromise, any claim, there is no assurance that
any or all of such liability, compromise or settlement would be covered by the
Company's insurance. If the amount of insurance is insufficient, or if the
policies are determined to be inapplicable, the Company could be required to
make a payment in the form of cash, indebtedness or equity securities. A payment
of this nature could have a negative material impact on the Company's capital
resources and issuance of additional equity securities could have a negative
material impact on the Company's existing shareholders. Moreover, the defense of
any pending or future litigation, investigation or dispute could result in
substantial legal and professional costs to the Company and could divert
management's attention from the other business affairs of the Company for
substantial periods of time.
 
COMPETITION
 
    The Company believes that its product designs, product quality,
merchandising programs, distribution channels, customer service and competitive
pricing distinguishes the Company from its competitors. However, many of the
Company's competitors, particularly in the designer stationery industry, are
larger, better capitalized, more established and have substantially greater
financial, marketing and human resources. Moreover, the development and
manufacture of new designer stationeries and specialty papers are highly capital
intensive. In order to remain competitive, the Company may be required to
continue to make significant expenditures for capital equipment, sales, service,
training and support capabilities, investments in systems, procedures and
controls, expansions of operations and research and development, among many
other items. Additional financing might be required to fund the Company's
investments in those areas. There can be no assurance that additional financing
will be available on terms acceptable to the Company. See "--Competition" and
"Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operation--Liquidity and Capital Resources."
 
    The Company implemented a series of price changes with respect to its
specialty paper products in part due to pressure to remain competitive with its
larger competitors and in part to increase market share within the preprint
industry. In April and August of 1996, the Company made significant reductions
in the prices it charged to substantially all of its specialty paper customers.
While these price reductions increased the Company's market share, they had a
direct material negative impact on the Company's gross profits and gross profit
margins in fiscal 1997, when compared to prior years. Subsequent to the end of
fiscal 1997,
 
                              Page 12 of 41 Pages
<PAGE>
the Company implemented a further general reduction in the prices of
substantially all of its specialty paper products.
 
    In response to the reduced gross profits and gross profit margins in fiscal
1997, the Company implemented a general price increase on its specialty paper
products, which took effect on August 1, 1997. The Company may determine that
future price increases are necessary in order to offset increases of the costs
of raw materials, direct labor, production overhead or other components of the
Company's product costs and to improve or maintain gross profit margins. There
can be no assurance that the August 1, 1997 price increase or any future price
increases will be successfully implemented. The Company operates in a highly
competitive environment and even if price increases are successfully
implemented, there can be no assurance that the Company will be able to
successfully continue to compete against its competitors at the new, higher
price levels. Either the failure to successfully implement price increases, or
the reduced competitive position once a price increase is successfully
implemented, could have material adverse effect on the Company's business,
financial condition or results of operations.
 
CUSTOMER CONCENTRATIONS
 
    The Company's three largest customers, Office Depot Inc., Office Max, Inc.
and Business Depot, Inc., in the aggregate accounted for approximately 77% and
67% of the Company's total sales for fiscal 1996 and fiscal 1997, respectively.
The Company expects that sales to relatively few customers will continue to
account for a high percentage of its net sales in the foreseeable future and
believes that its financial results depend in significant part upon the success
of a limited number of customers. See "--Business Concentrations." Although the
composition of the group comprising the Company's largest customers may vary
from period to period, the loss of a significant customer or any reduction in
orders by any significant customer, including reductions due to market, economic
or competitive conditions in the designer stationery or specialty papers
industry, would have a material adverse effect on the Company's business,
financial condition and results of operations.
 
    As a result of the concentration occurring in the office supply industry in
which the major office megastores are accounting for a greater percentage of
industry-wide sales, it is anticipated that an increasing number of the smaller
outlets and retail stores will discontinue operations in the years ahead. While
the Company anticipates that certain of such sales will be transferred to the
larger megastores to which the Company currently supplies its products, there
can be no assurance that any loss of sales to smaller outlets and retail stores
will be replaced in this manner.
 
DEPENDENCE ON KEY VENDORS
 
    The Company's success depends in large part on reliable and uninterrupted
supply of raw materials from its major vendors. Although the Company purchases
goods from approximately 1,100 vendors, it generally practices a "sole source"
approach to vendor selection in that it typically relies on a single vendor for
all purchases on its various categories of production materials, and other major
categories of purchased goods and services. One key vendor of commodity paper
and other raw materials and supplies is Unisource, a broker/vendor who
represented 48% of the Company's total purchases during the fiscal 1997.
Unisource has provided the Company an immediately available and uninterrupted
supply of paper. In addition, Unisource and other key vendors have granted the
Company significant amounts of trade credit, along with favorable pricing and
payment terms. Although the Company may be able to find other sources of supply
for commodity paper and other major raw material categories, there can be no
assurance that potential new vendors, once sourced, would provide an
uninterrupted supply of raw materials or adequate levels of trade credit,
competitive prices or acceptable payment terms.
 
                              Page 13 of 41 Pages
<PAGE>
MAINTENANCE OF LARGE INVENTORY OF PRODUCTS
 
    As of March 31, 1997, the Company maintained an inventory of lettering,
signage and specialty papers of $9,457,874. While the Company believes that the
maintenance of an extensive inventory affords the Company substantial
flexibility in responding to incoming orders, enhances its reputation as a major
supplier in the industry and offers certain economies of scale in its purchasing
program, the maintenance of an extensive inventory requires a substantial outlay
of funds which may not be recovered for extended periods of time. In addition,
the Company has generally observed that raw materials prices change more rapidly
than pricing for the Company's products. Consequently, the Company may be
required to absorb price increases on raw materials before it is able to pass
through such increases to its customer base. Also, to the extent that purchasing
preferences of the Company's customers change over time, such inventory may
become less marketable, which may require the Company to dispose of such
inventory on an unprofitable basis. See "Item 7. Management's Discussion and
Analysis of Financial Condition and Result of Operations." If the Company were
unable to recover a substantial portion of its investment in inventory, this
would result in a material adverse effect on the Company's business, financial
condition and results of operations.
 
IMPLEMENTATION OF AUTOMATED PRODUCTION EQUIPMENT
 
    The efficient manufacture of designer stationeries and specialty papers is
highly capital intensive. In order to remain competitive, the Company invested
significant financial and operating resources in the purchase and implementation
of automated production equipment over the course of fiscal 1996 and 1997,
including two high speed, automated printing presses and one high speed
automated packaging production line, among other equipment. The Company also
invested significant financial and operational resources in the form of
dedicated employees and outside consultants in the design, site preparation,
installation and ongoing refinement of these systems. However, the planned
efficiency improvements from these investments were not realized during fiscal
1997 due to significant delays and extra expenses incurred during the
implementation of this production machinery. There can be no assurance that the
machinery will be fully and successfully implemented and perform at the minimum
level required to deliver the efficiencies expected when the machinery was
purchased, or that the Company will be successful in its future plans for
implementing any new production machinery that it may require, either of which
could have a material adverse effect on the Company's business, financial
condition or results of operations.
 
MANAGEMENT INFORMATION SYSTEMS
 
    Over the course of fiscal 1996 and fiscal 1997, the Company invested
significant financial and operational resources in the installation of
integrated hardware and software systems designed to integrate all major aspects
of the Company's business including sales, electronic data interchange (EDI),
warehousing, manufacturing, distribution, purchasing, inventory control,
merchandise planning and replenishment, and various financial systems. The
Company also invested significant financial resources in outside consultants for
the design, installation and ongoing refinement of this system. In fiscal 1998,
the Company determined the need to replace this system and therefore elected to
write-off effectively all of its investment in the system software, consulting
fees and certain other implementation expenditures through March 31, 1997. The
Company has determined that it will need to invest further significant resources
to implement a new system of integrated hardware and software over the course of
fiscal 1998 and possibly future periods. There can be no assurance that the
current package will perform at the minimum level required to adequately support
the operations of the Company until implementation of a new system is completed,
or that the Company will be successful in its future plans for implementing a
new system, either of which could have a material adverse effect on the
Company's business, financial condition or results of operations.
 
                              Page 14 of 41 Pages
<PAGE>
ELECTRONIC DATA INTERCHANGE
 
    The Company currently utilizes electronic data interchange ("EDI") to
transact business with its largest customers. Presently approximately 70% to 80%
of customer orders and invoices are transacted by EDI. The Company believes that
its current systems may not be adequate to support the Company's future EDI
requirements. In addition, the Company is highly dependent on a single
consultant to support its current method of processing EDI transactions. The
Company has determined that it may be necessary to find or develop in-house EDI
expertise and implement new EDI systems to ensure reliable transactions, minimum
acceptable customer service, sufficient operational efficiency, and to provide
management with the ability to monitor critical performance factors with major
customers. There can be no assurance that the current methods and consultants
used by the Company to transact EDI will perform at the minimum level required
to adequately support the operations of the Company, or that the Company will be
successful in its future plans for implementing new EDI personnel and software,
either of which could have a material adverse effect on the Company's business,
financial condition or results of operations.
 
COLLECTION OF ACCOUNTS RECEIVABLE
 
    Difficulties encountered by the Company in fiscal 1997 in connection with
the installation and implementation of its new EDI software package resulted in
significant delays in the required electronic delivery of invoices to certain
key customers. These delays resulted in significant corresponding delays in the
collection of accounts receivable during the third and fourth quarters of fiscal
1997 which contributed to a substantial increase in the Company's trade
receivables balance and negative operating cash flow at the end of fiscal 1997.
While the Company continues to work to improve its ability to reliably invoice
via EDI, there can be no assurance that the Company will be successful in
adequately improving its collection of accounts receivable in the foreseeable
future. Continued invoicing or collection difficulties could have a material
adverse effect on the Company's business, financial conditions or results of
operations. See
"--Management Information Systems--Electronic Data Interchange."
 
DEPENDENCE ON KEY PERSONNEL
 
    At the present time, the Company is highly dependent on the continued
services of Ronald S. Deans, Mark G. Deans and R. Scott Deans, who serve as the
Company's principal executive officers as well as directors of the Company.
There can be no assurances that the Company will be able to replace any of these
key executives in the event their services become unavailable. The loss of
Ronald S. Deans, the Company's President and Chief Executive Officer, Chief
Financial Officer and Secretary and Chairman of the Company's Board of
Directors, or the other key members of the Company's management team could have
a material adverse effect on the Company's business, financial condition or
results of operations.
 
IMPACT OF COLLECTIVE BARGAINING AGREEMENT
 
    During the second quarter of fiscal 1998, a group of the Company's employees
successfully petitioned for an election to determine if they would be
represented by a union, and an election date was set for October 2, 1997. If a
majority of the Company's employees elect to join the union, the Company will be
required to engage in good faith negotiations with the union for a collective
bargaining agreement. The Company cannot predict the outcome of the election by
its employees or the results of the negotiations of, or the terms of, the
collective bargaining agreement. The terms of any such collective bargaining
agreement could result in an increase in overall costs of production. In
addition, depending on the position taken by the union in its negotiations with
the Company, there could be an increased risk of labor strikes or work
stoppages. Any of these factors could have a material adverse effect on the
Company's business, financial condition or results of operations. See
"--Employees."
 
                              Page 15 of 41 Pages
<PAGE>
TECHNOLOGY CHANGES AFFECTING PRODUCTS
 
    The design and manufacture of production equipment used in the designer
stationery and specialties paper industries has undergone and continues to
undergo rapid and significant technological change. In particular, developments
in the software industry may afford customers and consumers with the ability to
produce paper products which offer quality characteristics comparable with that
provided by the Company. Any such developments may, therefore, have a material
adverse effect on the Company's business, financial condition and results of
operations. In addition, the Company's business is, to a significant degree,
dependent on the enhancement of its current products and development of new
products. Product development and enhancement involve substantial expenditures
and a high degree of risks, and there is no assurance that product development
efforts of the Company will be successful, will have sufficient utility or will
be superior to efforts by others, including current customers and consumers of
the Company's products. There can be no assurances that future technological
developments will not render existing or proposed products of the Company
uneconomical or obsolete, or that the Company will not be adversely affected by
the future development of commercially viable products by others. The
development of superior products by others could have a material adverse effect
on the Company's business, financial condition or results of operations.
 
UNCERTAIN PROTECTION OF INTELLECTUAL PROPERTY RIGHTS
 
    The Company owns a number of trademarks and copyrights, and certain of the
Company's proprietary manufacturing processes are protected by trade secrets.
There can be no assurance that the Company's trade secrets, trademarks,
copyrights or other proprietary rights will be effective in discouraging
competition or held valid if subsequently challenged, or that others will not
assert rights in, or ownership of, any of such proprietary rights. In addition,
there can be no assurance that the actions taken by the Company to protect its
proprietary rights will be adequate to prevent imitation of its products, that
the Company's proprietary information will not become known to competitors or
that others will not independently develop products substantially equivalent or
superior to the Company's products without infringing on the Company's
proprietary rights. There can be no assurance that any pending trademark
application will result in the issuance or a registered trademark. In addition,
the laws of certain foreign countries do not protect proprietary rights to the
same extent as do the laws of the United States. While the Company has made
reasonable efforts to protect all of its trade secrets, trademarks, copyrights
and other proprietary rights, to the extent such protections are inadequate, the
Company could lose a part or all of these rights which, in turn, could have a
material adverse effect on the Company's business, financial condition or
results of operations.
 
CHANGING CONSUMER PREFERENCES AND INTERESTS
 
    The success of the Company's business depends to a significant extent on
consumer preferences and spending habits. Consumer preferences are influenced by
a number of factors, including general economic conditions affecting disposable
consumer income, such as employment, business conditions, interest rates and
taxation. Any significant decline in such general economic conditions or
uncertainties regarding future economic prospects that adversely affect
discretionary consumer spending generally could have a material adverse effect
on the Company's business, prospects, financial condition or results of
operations. Moreover, while the Company believes that its designs,
configurations and related artwork have received substantial acceptance by its
targeted market, there can be no assurances that consumers and other purchasers
of these materials will continue to favor the Company's products in light of the
constant shifting that occurs with regard to consumer preferences and interests.
 
INTERNATIONAL SUBSIDIARIES
 
    The Company has made substantial efforts to increase its product line sales
to international markets during fiscal 1996 and 1997. The Company has
established three wholly-owned foreign subsidiaries to
 
                              Page 16 of 41 Pages
<PAGE>
conduct business outside the United States. Acquisition, start-up and
organizational costs during fiscal 1996 and fiscal 1997 were significant for
these foreign subsidiaries, as was the commitment of executive management time,
attention and effort. Though the Company derives a significant percentage of its
total sales from these subsidiaries, collectively they generated net losses and
negative cash flows on a consolidated basis in fiscal 1997. There can be no
assurances that the results of these operations, individually or collectively,
will yield either net profits or positive cash flows in the foreseeable future.
Additional cash infusions may be necessary in the future to support these
subsidiaries, along with continued significant effort from the Company's
executive management team. As a result, the operations and requirements of the
Company's foreign subsidiaries may have material adverse effect on the Company's
business, financial condition and results of operations.
 
FOREIGN EXCHANGE AND INTERNATIONAL TRADE
 
    International sales accounted for approximately 22% of the Company's total
net sales in fiscal 1997. See "Sales/Assets by Geographic Location." As a result
of such international sales, a significant portion of the Company's revenues
will be subject to certain risks, including unexpected changes in regulatory
requirements, exchange rates, tariffs and various other import or export trade
barriers, political and economic instability, difficulties in receivable
collections, difficulties in staffing and managing foreign subsidiary and branch
operations and potentially adverse tax consequences. The Company is also subject
to the risks associated with the imposition of legislation and regulations
relating to the import or export of stationeries, specialty papers and office
supply products. The Company cannot predict whether quotas, duties, taxes or
other charges or restrictions will be implemented by the United States, Canada,
Australia or any other country upon the importation or exportation of the
Company's products in the future. There can be no assurance that any of these
factors or adoption of restrictive policies will not have a material adverse
effect on the Company's business, financial condition or results of operations.
 
POSSIBLE FAILURE TO QUALIFY FOR NASDAQ NATIONAL MARKET OR NASDAQ SMALLCAP MARKET
 
    In July 1997, Nasdaq informed the Company that its Common Stock and warrants
would be delisted from the Nasdaq National Market as a result of the Company's
failure to file this Report with the Securities and Exchange Commission by the
due date. Nasdaq has granted continued listing for the Company's Common Stock
and warrants provided the Company files this Report and its Quarterly Report on
Form 10-Q for the fiscal quarter ended June 30, 1997 by no later than September
18, 1997. The Company has been informed by Nasdaq that the letter "E" that has
been added to the trading symbols for the Company's securities will be removed
once these conditions have been satisfied. Although the Company expects that
these conditions will be satisfied, there can be no assurance that the Company
will continue to be able to satisfy the other requirements for continued listing
on Nasdaq or that, if necessary, it will be able to satisfy the listing
requirements of the Nasdaq Small Cap Market. If the Company is unable to satisfy
these listing requirements, trading, if any, in the Common Stock would
thereafter be conducted in the over-the-counter market, in which case an
investor may find it difficult to dispose of, or to obtain accurate quotations
as to the market value, of the Common Stock. This would have a material adverse
impact on the trading market and market price for the Common Stock.
 
POSSIBLE APPLICABILITY OF RULES RELATING TO LOW-PRICED STOCK
 
    The Securities and Exchange Commission has adopted regulations which
generally define a "penny stock" to be any equity security that has a market
price (as defined) of less than $5 per share, subject to certain exceptions.
Unless the Common Stock is listed on the Nasdaq National Market or the Nasdaq
SmallCap Market, it may be deemed to be "penny stock" and thus will become
subject to rules that impose additional sales practice requirements on
broker/dealers who sell such securities to persons other than established
customers and accredited investors. These rules could adversely effect the
ability and willingness of broker-dealers to sell the Common Stock, which could
reduce the liquidity of the Common Stock and have a material adverse effect on
the trading market and the market price for the Common Stock.
 
                              Page 17 of 41 Pages
<PAGE>
There can be no assurance that the Common Stock will continue to be listed on
the Nasdaq National Market or, if necessary, that the Common Stock will qualify
for listing on the Nasdaq Small Cap Market. See "--Possible Failure to Qualify
for Nasdaq National Market or Nasdaq SmallCap Market."
 
EXISTENCE OF WARRANTS AND OPTIONS AND POSSIBLE DILUTION
 
    As of September 8, 1997, there were outstanding warrants for the purchase of
an aggregate of 1,342,293 shares of Common Stock at an exercise price of $.77 to
$6.50 per share. In addition, as of September 8, 1997, there were outstanding
options granted under the Company's stock option plan to purchase up to 173,500
shares of Common Stock at exercise prices ranging from Cdn. $1.00 to Cdn. $4.15
per share. In the event that the outstanding warrants and options are exercised,
the holders will be given the opportunity to profit from a rise in the market
price of the underlying shares. This may have certain dilutive effects on, and a
materially depressive effect on, the market price for the Common Stock. The
terms on which the Company could obtain additional capital during the life of
such warrants and options may be adversely affected because the holders may be
expected to exercise them at a time when the Company might otherwise be able to
obtain comparable additional capital in a new offering of securities at a price
per share greater than the exercise price of such options and warrants. As a
result, the existence and possible exercise of such options or warrants could
have a material adverse effect on the Company's ability to raise capital through
the sale of its equity securities.
 
FLUCTUATIONS OF QUARTERLY RESULTS; SEASONALITY
 
    Management expects that the Company's financial results may vary materially
from period to period. Most of the Company's customers order products for
immediate delivery. As a result, a substantial amount of the Company's net sales
in each quarter results from orders received in that quarter. The Company's net
sales and operating results may, therefore, vary significantly as a result of,
among other things, volume and timing of orders received during the quarter,
variations and sales mix, and delays in production schedules. Accordingly, the
Company's historical financial performance is not necessarily a meaningful
indicator of future results. Moreover, a significant portion of the Company's
customer orders are placed between August and October of each year in
anticipation for shipment during the Company's third fiscal quarter (i.e., the
Christmas period). As a result, the Company has experienced and is expected to
continue to experience seasonal fluctuations in its operating results based on
such purchasing patterns. See "--Seasonality." These fluctuations in quarterly
operating results could have a material adverse effect on, among other things,
the market price for the Company's Common Stock.
 
VOLATILITY OF STOCK PRICE
 
    The market price of the Common Stock has been, and is likely to continue to
be, volatile. See "Item 5. Market for Registrant's Common Equity and Related
Stockholder Matters." The market price of the Common Stock could fluctuate,
perhaps substantially, in response to a number of factors, such as actual or
anticipated variations in the Company's quarterly operating results,
announcements of technological innovations or new products or enhancements by
the Company or its competitors, developments in the Company's relationships with
its customers or suppliers, changes in the general condition of, or trends in,
the designer stationery and specialty paper industry, paper prices, changes in
governmental regulations, or changes in securities analysts' estimates of the
Company's or its competitors' or industry's, future performance. In addition, in
recent years the stock market in general, and the market for shares of small
capitalization stocks in particular, including the Company's, have experienced
extreme price and volume volatility, which has had a substantial effect on the
market prices of securities of many smaller public companies for reasons
frequently unrelated to the operating performance of such companies. These broad
market fluctuations may have a material adverse effect on the market price of
the Common Stock.
 
                              Page 18 of 41 Pages
<PAGE>
YEAR 2000 ISSUES
 
    The Company has not yet made an assessment of the impact of the year 2000
problem on its computer software, hardware and other systems, including those of
vendors, customers and other third parties. The potential expense to ensure that
all of the computer and other systems are year 2000 compliant cannot be
determined until such an assessment is made. However, the cost of becoming year
2000 compliant, or the consequences for failure to become year 2000 compliant,
could have a material adverse effect on the Company's business, financial
condition or results of operations.
 
ITEM 2. DESCRIPTION OF PROPERTIES
 
    The Company considers its properties to be suitable and adequate for their
intended uses for the foreseeable future. These properties consist of the
following:
 
    EXECUTIVE OFFICES AND DOMESTIC FACILITIES
 
    The Company's headquarters and manufacturing facility in Blaine, Washington
has approximately 96,500 square feet of office, warehouse and manufacturing
space located on ten and one-half acres of Company-owned land. The Company's
Blaine, Washington facility was increased from 34,000 sq. ft to 49,000 sq. ft in
December 1994. The facility was increased to its current size during fiscal year
1996.
 
    OTHER WHATCOM COUNTY FACILITIES
 
    The Company leases a 19,050 sq. ft. facility in Bellingham, Washington. This
facility is used in warehousing and shipping functions. The lease payments are
$7,620 per month, triple net. The lease expires in October 1998, and the Company
has an option to renew for another three year term. During 1996 and 1997, the
Company also leased 4 additional 10,000 sq. ft. buildings at a business park
facility near Ferndale, Washington, each facility on a renewable six month lease
of $15,000 per month, triple net.
 
    EUROPEAN FACILITIES
 
    In connection with the distribution of the Company's products in Europe,
Geographics--Europe leases 6,700 square feet of warehouse space near London,
England. The lease requires quarterly lease payments of approximately $5,200,
triple net, and expires on February 14, 2006.
 
    AUSTRALIAN FACILITIES
 
    In connection with the distribution of the Company's products in Australia,
Geographics--Australia leases 5,000 square feet of warehouse space near
Brisbane, Australia. The lease requires lease payments of $3,400 per month,
triple net (with annual review of the rental rate beginning in August 1997), and
expires on August 31, 1999.
 
ITEM 3. LEGAL PROCEEDINGS
 
    The Company, Ronald S. Deans, the Company's President, Chief Executive
Officer and Chairman of its Board of Directors, and Terry A. Fife, the Company's
former Vice President of Finance and Chief Financial Officer, are named as
defendants in a securities action filed on July 17, 1997 in the U.S. District
Court for the Western District of Washington (the "Complaint"). The Complaint
was filed on behalf of a class of purchasers of the Company's Common Stock
during the period beginning on August 6, 1996 (the day the Company announced
financial results for the first quarter of its 1997 fiscal year) and ending on
June 12, 1997 (the "Class Period"). The Complaint alleges, among other things,
that, throughout the Class Period, the defendants inflated the price of the
Common Stock by intentionally or recklessly making material misrepresentations
or omissions which deceived the public about the Company's financial condition
and prospects. The Complaint alleges claims under Sections 10(b) and 20(a) of
the Securities Exchange Act of 1934 and seeks damages in an unstated amount. Two
separate but related complaints (the
 
                              Page 19 of 41 Pages
<PAGE>
"Related Complaints") naming the same defendants and alleging substantially the
same claims as set forth in the Complaint were filed in the U.S. District Court
for the Western District of Washington on July 22, 1997 and July 23, 1997.
Although the Company intends to vigorously defend the Complaint and the Related
Complaints, it is unable to predict the outcome of these actions. See "--Risk
Factors--Disputes and Litigation."
 
    The Company owns insurance policies applicable to certain losses including
costs of defense. However, if the Company is determined to be liable for, or
otherwise agrees to settle or compromise, any claim, there is no assurance that
any or all of such liability, compromise or settlement would be covered by the
Company's insurance. If the amount of insurance is insufficient, or if the
policies are determined to be inapplicable, the Company could be required to
make a payment in the form of cash, indebtedness or equity securities. A payment
of this nature could have a negative material impact on the Company's capital
resources and issuance of additional equity securities could have a negative
material impact on the Company's existing shareholders. Moreover, the defense of
any pending or future litigation, investigation or dispute could result in
substantial legal and professional costs to the Company and could divert
management's attention from the other business affairs of the Company for
substantial periods of time.
 
    The Company is also party to other routine litigation incident to its
business and to which its property is subject. The Company's management believes
that the ultimate resolution of these matters will not have a material adverse
effect on the Company's business, financial condition or results of operations.
 
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
 
    No matters were submitted to a vote of security holders during the quarter
ended March 31, 1997.
 
                                    PART II
 
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS
 
PRICE RANGE OF COMMON STOCK
 
    The Company's Common Stock began trading on the Nasdaq National Market under
the symbol "GGIT" on March 8, 1996. From May 5, 1995 to March 7, 1996 the
Company's Common Stock traded on the OTC Bulletin Board. The Company's Common
Stock also trades on the Toronto Stock Exchange under the symbol "GGI".
 
    In July 1997, Nasdaq informed the Company that its Common Stock and warrants
would be delisted from the Nasdaq National Market as a result of the Company's
failure to file this Report with the Securities and Exchange Commission by the
due date. Nasdaq has granted continued listing for the Company's Common Stock
and warrants provided the Company files this Report and its Quarterly Report on
Form 10-Q for the fiscal quarter ended June 30, 1997 by no later than September
18, 1997. The Company has been informed by Nasdaq that the letter "E" that has
been added to the trading symbols for the Company's securities will be removed
once these conditions have been satisfied. Although the Company expects that
these conditions will be satisfied, there can be no assurance that the Company
will continue to be able to satisfy the other requirements for continued listing
on the Nasdaq National Market. Delisting of the Company's securities from the
Nasdaq National Market could have a material adverse effect on the liquidity and
trading price of the Common Stock. See "Item 1. Business--Risk Factors--
Possible Failure to Qualify for Nasdaq National Market or Nasdaq Smallcap
Market."
 
                              Page 20 of 41 Pages
<PAGE>
    The following table sets forth the high and low closing bid prices or
closing sales prices, as the case may be, of the Common Stock, as reported on
the OTC Bulletin Board or the Nasdaq National Market System, as the case may be,
for each fiscal quarter beginning with the first fiscal quarter of the fiscal
year ended March 31, 1996.
 
                         NASDAQ NMS/OTC BULLETIN BOARD
 
<TABLE>
<CAPTION>
1996                                                                   HIGH        LOW
-------------------------------------------------------------------  ---------  ---------
<S>                                                                  <C>        <C>
First Quarter......................................................  $    1.88  $    1.13
Second Quarter.....................................................  $    3.44  $    1.45
Third Quarter......................................................  $    5.38  $    3.00
Fourth Quarter(1)..................................................  $    6.25  $    4.50
</TABLE>
 
<TABLE>
<CAPTION>
1997                                                                   HIGH        LOW
-------------------------------------------------------------------  ---------  ---------
<S>                                                                  <C>        <C>
First Quarter......................................................  $    6.94  $    4.75
Second Quarter.....................................................  $    5.69  $    2.88
Third Quarter......................................................  $    5.38  $    2.75
Fourth Quarter.....................................................  $    5.25  $    3.25
</TABLE>
 
------------------------
 
(1) The Company's shares began trading on the Nasdaq National Market System
    effective March 8, 1996.
 
    The foregoing quotations reflect inter-dealer prices, without retail
mark-up, mark-down or commission and may not represent actual transactions. As
of September 8, 1997, there were approximately 268 holders of record of the
Company's Common Stock.
 
DIVIDENDS
 
    The Company has not paid dividends at any time during the two fiscal year
period ending on March 31, 1997. The Company anticipates that any future
earnings will be retained for investment in its business. Any payment of cash
dividends in the future will be at the discretion of the Company's Board of
Directors and will depend upon, among other things, the Company's earnings,
financial condition, capital requirements, extent of indebtedness and
contractual restrictions with respect to the payment of dividends.
 
RECENT SALES OF UNREGISTERED SECURITIES
 
    In May 1996, the Company completed a private placement of 1,268,293 units at
a price of $5.125 per unit. Each unit consisted of one share of Common Stock and
a warrant to purchase one share of Common Stock at a purchase price of $4.25.
The warrants were immediately exercisable and expire on June 1, 1999. The
Company received approximately $6.1 million in net proceeds from the sale of the
units. The offering of the units was made to certain accredited investors in
reliance on Section 4(2) of the Securities Act of 1933 (the "Securities Act") as
an offer and sale of securities not involving a public offering. Purchasers of
the units entered into a registration rights agreement with the Company (the
"Registration Rights Agreement") pursuant to which the Company has agreed,
subject to certain conditions, to register the Common Stock and warrants
comprising the units and the Common Stock issued or issuable upon exercise of
such warrants (the "Registrable Securities"). Pursuant to the Registration
Rights Agreement, the Company has filed a registration statement with the
Securities and Exchange Commission (SEC File No. 333-10051) to register under
the Securities Act the public offer and sale of the Registrable Securities.
 
    In July 1996, the Company purchased substantially all of the assets of
Grahams Graphics Pty. Ltd. (the "Seller"). The purchase price consisted of (i)
the issuance to the Seller of 50,000 shares of Common Stock (valued at an
aggregate of $200,000 based on the then-prevailing market price for the Common
Stock); (ii) the issuance to the Seller of options to purchase an additional
50,000 shares of Common Stock at an exercise price of $4.00 per share; (iii) the
assumption of approximately $150,000 in unsecured trade liabilities; and (iv) a
one time cash payment of $40,000. Upon the completion of the transaction, the
 
                              Page 21 of 41 Pages
<PAGE>
acquired assets and liabilities were contributed to, or assumed by, Geographics
Australia Pty. Ltd., a wholly-owned subsidiary of the Company. The issuance of
the Common Stock and the stock options in connection with this transaction were
made in reliance on Section 4(2) of the Securities Act as an offer and sale of
securities not involving a public offering.
 
ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA
 
    The following selected consolidated financial data are derived from the
Company's Consolidated Financial Statements for the periods indicated. The
information set forth below should be read in conjunction with "Item 7.
Management's Discussion and Analysis of Financial Condition and Results of
Operations" and the Company's 1997 Consolidated Financial Statements and notes
thereto contained elsewhere in this Report.
 
<TABLE>
<CAPTION>
                                                                        YEARS ENDED MARCH 31,
                                                    --------------------------------------------------------------
                                                     1993(1)       1994         1995        1996(2)       1997
                                                    ----------  -----------  -----------  -----------  -----------
<S>                                                 <C>         <C>          <C>          <C>          <C>
STATEMENT OF OPERATIONS DATA:
Sales.............................................  $5,375,595  $ 6,901,845  $10,186,136  $22,613,635  $23,840,506
Cost of sales.....................................   3,035,862    4,488,176    5,881,649   14,194,505   20,378,594
                                                    ----------  -----------  -----------  -----------  -----------
Gross margin......................................   2,339,733    2,413,669    4,304,487    8,419,130    3,461,912
Selling, general and administrative...............   1,842,030    2,981,861    2,873,476    5,734,901    9,723,210
Amortization of goodwill..........................      --          479,300      639,067      159,768      --
                                                    ----------  -----------  -----------  -----------  -----------
  Income (loss) from operations...................     497,703   (1,047,492)     791,944    2,524,461   (6,261,298)
Other income......................................      88,532      209,521       15,398      130,684       24,907
Gain (loss) on sales of property and equipment....      80,194      (12,687)     (13,468)        (594)     (86,048)
Reserve for impairment on EDP
  installation-in-progress........................      --          --           --           --          (620.759)
Interest expense..................................    (257,287)    (356,060)    (457,499)    (787,848)  (1,063,075)
                                                    ----------  -----------  -----------  -----------  -----------
Income (loss) before provision for income taxes...     409,142   (1,206,718)     336,375    1,866,703   (8,006,273)
Income tax provision (benefit)....................     140,053       34,800     (411,367)     634,679      (55,972)
                                                    ----------  -----------  -----------  -----------  -----------
Net income (loss).................................  $  269,089  $(1,241,518) $   747,742  $ 1,232,024  $(7,950,301)
                                                    ----------  -----------  -----------  -----------  -----------
                                                    ----------  -----------  -----------  -----------  -----------
Net income (loss)
  per average common share outstanding............  $     0.07  $     (0.28) $      0.16  $      0.19  $     (0.85)
Weighted average shares outstanding
  used in computing per share data................   4,231,729    4,424,535    4,549,101    6,606,499    9,322,278
SUPPLEMENTAL OPERATING DATA:
  EBITDA(3).......................................  $  891,326  $  (111,226) $ 2,087,206  $ 3,649,460  $(4,889,006)
</TABLE>
 
<TABLE>
<CAPTION>
                                                                           AS OF MARCH 31,
                                                    --------------------------------------------------------------
                                                     1993(1)       1994         1995        1996(2)      1997(3)
                                                    ----------  -----------  -----------  -----------  -----------
<S>                                                 <C>         <C>          <C>          <C>          <C>
BALANCE SHEET DATA:
Working capital...................................  $1,998,656  $   869,651  $ 1,836,436  $ 5,886,703  $   401,550
Total assets......................................   5,358,937    6,788,067   10,614,673   24,738,041   30,245,701
Long-term obligations, less current portion.......   1,510,554    2,484,634    3,319,948    3,690,360    4,322,371
Stockholders' equity..............................   2,518,695    1,471,514    2,803,341    9,989,852    7,917,023
</TABLE>
 
------------------------
 
(1) As presented, the financial results for the fiscal year ended March 31, 1993
    have been restated to reflect adjustments to the carrying value of product
    display racks, inventory and investments in partnerships.
 
(2) Certain amounts for the fiscal year ended March 31, 1996 have been
    reclassified to conform to the current year presentation of the fiscal year
    ended March 31, 1997 amounts. Such reclassifications had no effect on
    previously reported earnings or financial position.
 
(3) As used herein, "EBITDA" is defined as operating income plus depreciation
    and amortization. EBITDA is commonly used to assess the non-cash effect on
    earnings of generally high levels of both amortization and depreciation
    expenses associated with capital equipment and acquisitions. EBITDA does not
    purport to represent cash provided by operating activities as reflected in
    the Company's consolidated statements of cash flow, is not a measure of
    financial performance under generally accepted accounting principles and
    should not be considered in isolation or as a substitute for measures of
    performance prepared in accordance with generally accepted accounting
    principles.
 
                              Page 22 of 41 Pages
<PAGE>
ITEM 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
         OF OPERATIONS
 
    The following discussion should be read in conjunction with the consolidated
financial statements of the Company and the Notes thereto appearing elsewhere on
this Report.
 
OVERVIEW
 
    Geographics, Inc. was incorporated as a Wyoming corporation on September 20,
1974. From its inception until fiscal 1991, the Company was engaged exclusively
in the manufacture and wholesale marketing of various rub-on and stick-on
lettering, stencils, graphics arts products and other signage products. In 1991,
the Company began the development of "pre-print" or "specialty" paper products
consisting of paper on which photographs or other art images are printed and
which is then cut to size. In 1992, the Company introduced its first specialty
paper product under the Geopaper brand name. The Company now has several
specialty paper products made using Geopaper designs, including stationery,
business cards, brochures, memo pads and paper cubes, which, in North America,
are sold primarily to office supply superstores and mass market retailers, and
which are also distributed internationally through the Company's subsidiaries in
Canada, Europe and Australia. The specialty papers group now constitutes the
Company's principal business, with approximately 71% of the Company's total
sales in fiscal 1997 attributable to sales of Geopaper products. Primarily as a
result of sales generated by the specialty papers group, the Company has
experienced substantial growth, with total sales increasing from $6,900,875 for
fiscal 1994 to $23,840,506 for fiscal 1997, an increase of 245%.
 
    Primarily to develop its specialty papers group, the Company has made
substantial investments to expand its facilities, purchase and install automated
production equipment and an integrated management information system and enhance
administrative and other infrastructure systems. The Company has experienced
delays, set-backs and unanticipated additional expenses in the installation of
the production equipment and the management information system. Moreover, the
management information system has failed to perform as promised by vendors. As a
result, the Company has not yet realized the originally anticipated economic
benefits and efficiencies from these capital expenditures. See "Item 1.
Business-- Management Information System--Operations Software," "Item 1.
Business--Management Information Systems--Electronic Data Interchange (EDI)" and
"Item 1. Business--Risk Factors--Implementation of Automated Production
Equipment." These unanticipated expenses and operational inefficiencies,
together with price reductions for the Company's products and cost increases for
certain raw materials, have had a negative impact on the Company's gross margins
and contributed to a substantial net loss for fiscal 1997. In addition, since
May 1997, the Company has been in default of several financial covenants under
its revolving credit facility, the Company's primary source of working capital,
and borrowings under the facility have exceeded permitted borrowing base
limitations. The existence of these defaults constitutes a default under the
Company's mortgage loans and equipment lease facilities. The report of the
Company's auditors included in this Report states that the Company's fiscal 1997
losses and non-compliance with covenants under its revolving credit facility
raise substantial doubt about the Company's ability to continue as a going
concern. See "--Liquidity and Capital Resources."
 
    The Company currently projects substantial negative cash flows from
operations for at least the remainder of fiscal 1998. The exact amount and
timing of the Company's capital requirements will be determined by numerous
factors, including the level of, and gross margin on, future sales, the outcome
of outstanding contingencies and disputes such as pending lawsuits, payment
terms obtained from the Company's vendors and the timing of capital
expenditures. However, even if the Company's lender were to formally waive all
existing defaults under the Company's revolving credit facility, the Company
expects that available borrowings under the facility would not be sufficient to
satisfy its working capital requirements beyond mid-October 1997. Accordingly,
the Company is continuing to seek extended payment terms from its vendors,
delaying purchases of raw materials, instituting internal cost reduction
measures and taking other steps to conserve operating capital. As a result, the
Company's vendors may place the Company on credit hold or take other actions
against the Company, including the termination of their relationship with
 
                              Page 23 of 41 Pages
<PAGE>
the Company or the initiation of collection proceedings. See "Item 1.
Business--Risk Factors--Dependence on Key Vendors." In addition, the Company is
actively pursuing possible sources of additional capital and has engaged an
investment banker to assist in the evaluation and pursuit of financing
transactions, which could include the issuance of debt or equity securities or
the sale of all or part of the Company's assets. However, as of the date of this
Report, the Company had received no firm commitments with respect to any such
transaction and there can be no assurance that any such transaction will be
identified. Further, there can be no assurance that the Company will be able to
obtain additional sources of additional working capital when and as needed or
that the terms of any such funding will be acceptable to the Company or in the
best long-term interests of the Company's shareholders. See "Item 1. Business--
Risk Factors--Ability to Continue as a Going Concern; Defaults under Credit
Facility; Need for Additional Working Capital" and "--Liquidity and Capital
Resources."
 
    OVERSTATEMENT OF GROSS PROFITS AND INVENTORIES.  In connection with the
Company's audit for the fiscal year ended March 31, 1997, management determined
that, during 1997, the use of certain accounting procedures and estimates based
on historical results caused in an overstatement of gross margin and inventories
on an interim basis. The anticipated lower gross margin is primarily
attributable to a decline in selling prices for the Company's paper products
coupled with modest cost increases and a continuing shift in mix of sales to
lower margin products. Planned efficiency improvements in the manufacture of its
paper products were not realized during the year primarily due to delays and
extra expenses incurred during implementation of automated production machinery.
As a result, the Company experienced increases in both the direct labor and
overhead elements of its product costs. These factors caused gross profit
margins as a percentage of sales to decline significantly to 18.9% for fiscal
1997 compared to 37.2% for fiscal 1996. In addition, the Company increased its
reserve for potentially obsolete inventory by $1,190,000 with a corresponding
reduction of gross margin. Actual gross profit margins as a percentage of sales,
which reflect both additional reserves for obsolete inventory and the prior
overstatement of gross margins, were 14.5% for fiscal 1997 compared to 37.2% for
fiscal 1996.
 
    WEAKNESSES IN INTERNAL CONTROLS.  In connection with the Company's audit for
the fiscal year ended March 31, 1997, management determined that several
weaknesses in the Company's internal controls occurred during fiscal 1997.
Management is taking steps to improve its internal controls, including
increasing the size and capabilities of its accounting department and improving
its management information systems. However, there can be no assurance that the
Company will be able to implement these steps or that the Company will not
encounter other internal control weaknesses. The failure of the Company's
accounting and finance systems to provide accurate information necessary to
monitor the Company's financial position, results of operations and liquidity
could have a material adverse effect on the Company's business, financial
condition and results of operations. See "Item 1. Business--Management
Information Systems--Integrated Operations Software" and "Item 1. Business--Risk
Factors--Management Information Systems."
 
    SEASONALITY.  A significant portion of the Company's customer orders are
placed between August and October of each year for shipment during the Company's
third fiscal quarter, which includes the Christmas season, with the largest
levels of sales historically occurring in the second half of the calendar year.
As a result, the Company has experienced, and is expected to continue to
experience, seasonal fluctuations in its operating results. See "Item 1.
Business--Seasonality."
 
    QUARTERLY FLUCTUATIONS.  The Company's operating results may fluctuate
significantly from period to period as a result of a variety of factors,
including product returns, purchasing patterns of consumers, the length of the
Company's sales cycle to key customers and distributors, the timing of the
introduction of new products and product enhancements by the Company and its
competitors, technological factors, variations in sales by product and
distributions channel, and competitive pricing. Consequently, the Company's
revenues may vary significantly by quarter and the Company's operating results
may experience significant fluctuations. See "Item 1. Business--Risk
Factors--Fluctuations of Quarterly Results; Seasonality."
 
                              Page 24 of 41 Pages
<PAGE>
    BACKLOG.  The Company's backlog of orders as of September 8, 1997 was
$2,180,117. The Company expects to fill all of these orders during the second
quarter of 1997. The Company includes in backlog the value of all purchase
orders received from customers for product not yet shipped and invoiced. Because
the Company only recently implemented internal controls necessary to determine
backlog, the Company is unable to determine backlog at March 31, 1997 or at the
end of any prior period. The Company's backlog is subject to fluctuations as a
result of seasonality in the Company's business and other factors and is,
therefore, not necessarily indicative of future sales. There can be no assurance
that current backlog will necessarily lead to sales in any future period. The
Company's inability to ship product with respect to a purchase order could
result in cancellation of such purchase order and reduction of backlog and could
have a material adverse effect on the Company's business, financial condition
and results of operations. See "Item 1. Business--Backlog."
 
    COLLECTIONS OF ACCOUNTS RECEIVABLE.  Difficulties encountered by the Company
in fiscal 1997 in connection with the installation and implementation of a new
EDI software package resulted in significant delays in the required electronic
delivery of invoices to certain key customers. These delays resulted in
significant corresponding delays in the collection of accounts receivable during
the third and fourth quarters of fiscal 1997 which contributed to a substantial
increase in the Company's trade receivables balance and negative operating cash
flow at the end of fiscal 1997. While the Company continues to work to improve
its ability to reliably invoice via EDI, there can be no assurance that the
Company will be successful in adequately improving its collection of accounts
receivable in the foreseeable future. Continued invoicing or collection
difficulties could have a material adverse effect on the Company's business,
financial condition or results of operations. See "Item 1. Business--Management
Information Systems-- Electronic Data Interchange" and "Item 1. Business--Risk
Factors--Electronic Data Interchange."
 
    MAINTENANCE OF LARGE INVENTORY.  As of March 31, 1997, the Company
maintained an inventory of lettering, signage and specialty papers of
$9,457,874. While the Company believes that the maintenance of an extensive
inventory provides it substantial flexibility in responding to incoming orders,
enhances its reputation as a major supplier in the industry and offers certain
economies of scale in its purchasing program, the maintenance of an extensive
inventory requires a substantial outlay of funds which may not be recovered for
extended periods of time. In addition, the Company has generally observed that
raw materials prices change more rapidly than the pricing for the Company's
products. Consequently, the Company may be required to absorb price increases on
raw materials before it is able to pass through such increases to its customer
base. Also, to the extent that purchasing preferences of the Company's customers
change over time, the Company's inventory may become less marketable, which may
require the Company to dispose of such inventory on an unprofitable basis. The
Company has addressed these problems by increasing the reserves for obsolete
inventory during fiscal 1997 from $100,000 to $1,290,000. However, if the
Company were not able to recover a substantial portion of its investment in
inventory, this would have a material adverse effect on the Company's business,
financial condition and results of operations. See "Item 1. Business--Risk
Factors--Maintenance of Large Inventory of Products."
 
                              Page 25 of 41 Pages
<PAGE>
RESULTS OF OPERATIONS
 
    The following table sets forth the percentages which the items in the
Company's consolidated statements of income bear to net sales for the periods
indicated:
 
<TABLE>
<CAPTION>
                                                                   FISCAL YEAR ENDED MARCH 31,
                                                                 -------------------------------
                                                                   1997       1996       1995
                                                                 ---------  ---------  ---------
<S>                                                              <C>        <C>        <C>
Net sales......................................................      100.0%     100.0%     100.0%
Cost of sales..................................................       85.5       62.8       57.7
                                                                 ---------  ---------  ---------
    Gross margin...............................................       14.5       37.2       42.3
Selling, general and administrative expenses...................       40.8       25.4       28.2
Amortization of goodwill.......................................     --             .7        6.3
                                                                 ---------  ---------  ---------
    Income from operations.....................................      (26.3)      11.1        7.8
                                                                 ---------  ---------  ---------
Other income...................................................       (2.8)        .6         .0
Interest expense...............................................       (4.5)      (3.5)      (4.5)
                                                                 ---------  ---------  ---------
    Other income (expense).....................................       (7.3)      (2.9)      (4.5)
                                                                 ---------  ---------  ---------
Income before provision for income taxes.......................      (33.6)       8.2        3.3
Income tax provision (benefit).................................       (0.2)       2.8       (4.0)
                                                                 ---------  ---------  ---------
Net income.....................................................      (33.4)%       5.4%       7.3%
                                                                 ---------  ---------  ---------
                                                                 ---------  ---------  ---------
</TABLE>
 
1997 COMPARED TO 1996
 
    NET SALES. Net sales increased 5.4% to $23,840,506 in fiscal 1997 from
$22,613,635 in fiscal 1996. This increase was primarily attributable to the
continued growth of the Geopaper product line, which offset certain factors in
the third and fourth quarters that negatively impacted fiscal 1997 sales.
Revenue growth with respect to the Geopaper product line slowed compared to the
two prior years. While unit sales for the year ended March 31, 1997 increased by
17% compared to fiscal 1996, Geopaper revenues in fiscal 1997 were negatively
impacted by declining average selling prices, product returns, inventory
management changes by certain key customers and shipment delays associated with
inclement weather and implementation of a new computer system in the Company's
shipping department.
 
    The Geopaper product line experienced a sales increase of 14% in fiscal 1997
to $16,900,000 compared to $14,800,000 for fiscal 1996. Geopaper sales increases
in 1997 were due primarily to sales for new store openings by Office Depot and
Office Max, and initial shipments of Geopaper products to new customers,
including Wal-Mart, Target and Kmart. In addition, Geopaper sales increased due
to the introduction of the Geoposterboard product line in over 900 Wal-Mart
stores, 500 Office Depot stores in the United States and Canada, and 80
Staples/Business Depot stores in Canada.
 
    The shift in the Company's sales mix toward Geopaper and related products
continued in fiscal 1997. In 1997, the percentage of total Company sales
represented by Geopaper increased to 71%, compared to 65% of total sales in
fiscal 1996, while signage and lettering sales declined to 29% of total sales.
In fiscal 1996, the sales mix of Geopaper products had increased to 65% of
sales, up from 21% of sales in fiscal 1995, while lettering and signage sales
had decreased to 35% of sales from 79% of sales for the same periods.
 
    Signage and lettering net sales for fiscal 1997 decreased 11.5% to
approximately $6,900,000 from $7,800,000 in fiscal 1996. The decline in the
sales of the signage and lettering product lines was attributable to a general
decline in the demand for products of this type and increased management
attention on the development of the specialty papers group. Management believes
that sales of signage and lettering products will continue to decline in the
future as the computerization of homes and offices will allow the efficient
production of lettering and signage products by current end-users.
 
                              Page 26 of 41 Pages
<PAGE>
    GROSS MARGIN.  Cost of sales includes product manufacturing costs, occupancy
and distribution costs. Gross profit as a percentage of sales decreased to 14.5%
in fiscal 1997, from 37.2% in fiscal 1996. The lower gross margin is primarily
attributable to a decline in selling prices for the Company's paper products
coupled with modest cost increases and a continuing shift in mix of sales to
lower margin products. Planned efficiency improvements in the manufacture of its
paper products were not realized during the year primarily due to delays and
extra expenses incurred during implementation of automated production machinery.
As a result, the Company experienced increases in both the direct labor and
overhead elements of its product costs. In addition, the Company increased its
reserve for potentially obsolete inventory by $1,190,000, with a corresponding
reduction of gross margin.
 
    SELLING, GENERAL AND ADMINISTRATIVE EXPENSES.  Selling, general and
administrative expenses ("SG&A") are those central expenses that are incurred to
support the Company's selling, marketing and manufacturing efforts. SG&A
expenses increased to $9,723,210 (40.8% of sales) in fiscal 1997 from
$5,734,901(25.4% of sales) in fiscal 1996. This increase is primarily
attributable to the addition in fiscal 1997 of the Company's three foreign
subsidiaries in Canada, Europe and Australia. These subsidiaries accounted for
an increase in expense of $1,628,728 for fiscal 1997. The remaining increase in
SG&A expense for fiscal year 1997 was attributable to an increase in advertising
rebates and other rebates and promotions to customers, an increase in salaries
and wages of administrative and sales & marketing personnel, and an increase in
legal and settlement expenses incurred during the third quarter of fiscal 1997
relating to a settlement reached with the National Labor Relations Board.
 
    AMORTIZATION OF GOODWILL.  There was no amortization of goodwill in fiscal
1997 compared to $159,768 (0.7% of sales) in fiscal 1996. This decline was due
to the completion in fiscal 1996 of the amortization of goodwill related to the
1993 purchase of the lettering division of E-Z Industries.
 
    INCOME/LOSS FROM OPERATIONS.  The Company incurred a loss from operations in
fiscal 1997 of $6,261,298, (26.3% of sales) compared to an operating profit of
$2,524,461 (11.1% of sales) during fiscal 1996. The operating loss was the
result of significantly lower gross margins and significantly higher sales,
general and administrative expenses.
 
    OTHER INCOME (EXPENSE).  There was no other income in fiscal 1997 (0.0% of
sales) compared to $130,090 (0.6% of sales) in fiscal 1996. In previous years,
this category included such items such as management fees, foreign exchange
gains, gains on disposition of fixed assets, and other miscellaneous items.
 
    INTEREST EXPENSE.  Interest expense increased to $1,063,075 (4.5% of sales)
during fiscal 1997, compared to $787,848 (3.5% of sales) during fiscal 1996. The
higher interest costs were caused by increased borrowings to support the
Company's operating losses, the acquisition of equipment used in the manufacture
of Geopaper and facilities expansion. In addition, the Company experienced
significant delays in the required electronic delivery of invoices to certain
key customers due to problems related to the installation and implementation of
a new EDI (Electronic Data Interchange) software package. These delays in
delivery of invoices resulted in a significant corresponding delay in the
collection of accounts receivable during the third and fourth quarters of fiscal
1997. Substantial additional borrowings were necessary to support operations
during this period.
 
    INCOME/LOSS BEFORE PROVISION FOR INCOME TAXES.  The loss before provision
for income taxes was $8,006,273 (33.6% of sales) in fiscal 1997 compared to
income before provision for income taxes of $1,866,703 (8.2% of sales) in fiscal
1996. The 1997 loss before provision for income taxes was primarily the result
of the Company's operating losses, increased interest expense and reduced other
income.
 
    INCOME TAX PROVISION (BENEFIT).  In fiscal 1997, the Company recorded a
current income tax benefit of $459,972, which represents the amount of income
tax recoverable from net operating loss carry-backs. The total potential income
tax benefit for fiscal 1997, and corresponding increase in the Company's
deferred tax asset as of March 31, 1997, was an estimated $3,162,000. The total
potential deferred tax asset (before
 
                              Page 27 of 41 Pages
<PAGE>
valuation allowance) as of March 31, 1997 was $3,774,000. Based on the Company's
current operating income and available projections for operating income, the
Company determined that future operating and taxable income may not be
sufficient to fully or partially recognize the deferred tax asset of $3,774,000
at March 31, 1997. As a result, the Company decided to provide a valuation
allowance on all of its deferred tax assets at March 31, 1997. This valuation
analysis was recorded in the fourth quarter and totalled $3,774,000.
 
    NET INCOME/LOSS.  Net loss of $7,950,301 in fiscal 1997, or 33.4% of sales,
compares to net income of $1,232,024 in fiscal 1996, or 5.4% of sales.
 
1996 COMPARED TO 1995
 
    NET SALES. Net sales increased 122% to $22,613,635 in fiscal 1996 from
$10,186,136 in fiscal 1995. This increase was primarily attributable to the
acceptance of the Geopaper product line. Geopaper experienced a sales increase
of 605% in fiscal 1996 to $14,800,000 compared to $2,100,000 for fiscal 1995.
Geopaper sales increases in fiscal 1996 were due to shipments of Geopaper
products to all Office Depot Inc. and OfficeMax stores in North America, as well
as shipments of Geopaper products to 248 Wal-Mart stores in March 1996.
 
    Signage and lettering sales for fiscal 1996 decreased 4% to $7,800,000 from
$8,100,000 in fiscal 1995. The majority of the decline in signage and lettering
sales was due to the Company discontinuing the sale of science fair presentation
boards. In prior years, the Company purchased presentation boards and bundled
them with Geographics stick-on lettering products. In fiscal 1996, the Company
continued to supply the lettering products, while the Company's customers began
purchasing the presentation boards directly from the manufacturer.
 
    The sales mix of Geopaper products increased to 65% of sales in fiscal 1996
from 21% of sales in fiscal 1995, while lettering and signage sales decreased to
35% of sales from 79% of sales for the same periods.
 
    GROSS MARGIN.  Gross margin as a percentage of sales decreased to 37.2% in
fiscal 1996, from 42.3% in fiscal 1995. The decrease in the gross margin was the
result of primarily two factors. The first factor was a change in sales mix to
products with lower gross margins. Geopaper represented 65% of sales while
lettering and signage represented 35% of sales in 1996, compared to 21% and 79%
of sales in 1995, respectively. Gross margins for Geopaper were approximately
31% while gross margins for lettering and signage were approximately 49% during
fiscal 1996. The second factor was manufacturing and labor inefficiencies
created by the Company's 122% growth rate in fiscal 1996. This rapid growth
forced the Company to substantially increase its facilities, equipment and work
force, as well as utilize leased warehouse space in order to meet the increased
sales demands.
 
    SELLING, GENERAL AND ADMINISTRATIVE EXPENSES.  SG&A expenses increased in
fiscal 1996 to $5,734,901 (25.4% of sales) from $2,873,476 (28.2% of sales) in
fiscal 1995. The percentage decline was due to the spreading of SG&A expenses
over significantly higher sales volumes.
 
    AMORTIZATION OF GOODWILL.  Goodwill amortization declined to $159,768 (0.7%
of sales) from $639,067 (6.3% of sales) for fiscal years 1996 and 1995
respectively. The decrease was due to the completion of the amortization of the
goodwill related to the 1993 purchase of the lettering division of E-Z
Industries. Fiscal 1996 included three months of amortization compared to twelve
months of amortization during fiscal 1995.
 
    INCOME FROM OPERATIONS.  Income from operations increased to $2,524,461
(11.1% of sales) during fiscal 1996, an increase from $791,944 (7.8% of sales)
in fiscal 1995. The improvement in income from operations was due to the
reductions in SG&A and goodwill amortization expenses as a percentage of sales,
which more than offset the decreased gross margin percentage.
 
                              Page 28 of 41 Pages
<PAGE>
    OTHER INCOME.  Other income was $130,090 (0.6% of sales) in fiscal 1996,
compared to $1,930 (0.0% of sales) during fiscal 1995.
 
    INTEREST EXPENSE.  Interest expense increased to $787,848 (3.5% of sales)
during fiscal 1996, compared to $457,499 (4.5% of sales) for fiscal 1995. The
acquisition of equipment used in the manufacture of Geopaper, in addition to
higher bank debt related to facilities expansion and working capital
requirements resulted in higher interest costs during fiscal 1996. The higher
interest costs were spread over a significantly higher sales volume in fiscal
1996, resulting in a decline in interest costs as a percentage of sales.
 
    INCOME BEFORE PROVISION FOR INCOME TAXES.  Income before provision for
income taxes improved to $1,866,703 (8.2% of sales) in fiscal 1996 compared to
$336,375 (3.3% of sales) in fiscal 1995. The improvement was due to the
increased income from operations noted above and the lower interest costs as a
percentage of sales previously discussed. In general, income before provision
for income taxes improved due to economies of scale available from the
significant increases in sales volumes.
 
    INCOME TAX PROVISION/BENEFIT.  The income tax provision in fiscal 1996 was
$634,679 (2.8% of sales), compared to a benefit of $411,367 (4.0% of sales) in
fiscal 1995. A tax benefit was recognized in fiscal 1995 as management
determined that future operating and taxable income was likely sufficient to
fully recognize all deferred tax assets existing at March 31, 1995. As a result,
the carrying value of the net deferred tax asset was increased and recognized as
a current (1995) period income tax benefit. This benefit was non-recurring in
nature and had no effect on fiscal 1996 results.
 
    NET INCOME.  Net income of $1,232,024 in fiscal 1996 (5.4% of sales)
compares to net income of $747,742 in fiscal 1995 (7.3% of sales). Net income as
a percentage of sales declined primarily due to the non-recurring tax benefit
discussed previously in fiscal 1995.
 
LIQUIDITY AND CAPITAL RESOURCES
 
GENERAL OVERVIEW
 
    As a result of the rapid growth of the Company's specialty papers group,
capital expenditures relating to the purchase and installation of an automated
production system and a management information system, operating losses and
other factors, the Company has required, and continues to require, substantial
external working capital. Moreover, subsequent to the end of fiscal 1997, the
Company has experienced working capital short-falls which have required the
Company to delay payments to certain vendors, delay purchases, institute
internal cost reduction measures and take other steps to conserve operating
capital. During fiscal 1997, operating losses totaled $6,261,298, and the
Company experienced negative operating cash flows of $6,601,926.
 
    At the date of this Report, the Company's only available source of working
capital consisted of borrowings available under its revolving credit facility.
The revolving credit facility permits borrowings of up to $12.0 million subject
to a borrowing base limitation of 80% of the value of the Company's eligible
accounts and 55% of the value of its inventory, net of certain reserves.
Borrowings under the facility bear interest at the prime rate and are secured by
substantially all of the Company's assets. Under the terms of the facility, the
Company is required to comply with a number of financial covenants relating to,
among other things, the maintenance of minimum net worth, debt-to-equity ratios
and cash flow coverage ratios.
 
    Since May 1997, the Company has failed to comply with the net worth,
debt-to-equity ratios and cash flow coverage ratios under the revolving credit
facility, and borrowings under the facility exceeded the permitted borrowing
base limitations. The Company's lender has also provided the Company with
several mortgage loans and equipment loans, and the existence of the defaults
under the revolving credit facility constitutes a default under these other
loans. The report of the Company's auditors included in this Report states that
the Company's fiscal 1997 losses and non-compliance with covenants under its
revolving credit facility raise substantial doubt about the Company's ability to
continue as a going concern. The Company's
 
                              Page 29 of 41 Pages
<PAGE>
1997 Consolidated Financial Statements included in this Report have been
prepared assuming that the Company will continue as a going concern and do not
include any adjustments that might result from the outcome of this uncertainty.
 
    The Company entered into a forbearance agreement with its lender, effective
August 31, 1997, pursuant to which the lender agreed to extend the expiration
date of the revolving credit facility to October 31, 1997, to increase the $12.0
million commitment by a $300,000 stand-by letter of credit, to permit borrowings
of up to $2.25 million in excess of the applicable borrowing base limitation
(not to exceed the $12.0 million revolving credit facility commitment) and to
forbear from asserting is rights with respect to the Company's non-compliance
with the financial covenants as well as the defaults under the Company's
mortgage loans and equipment loans. However, on September 12, 1997, the Company
was required to request borrowings in excess of the amended borrowing limits in
order to meet payroll and other expenses. Although the Company's lender
permitted the requested borrowings, it has not formally waived this additional
default. There can be no assurance that the lender will continue to permit
borrowings under the revolving credit facility, that the lender will agree to
extend the facility beyond the October 31, 1997 expiration date or that the
Company will be able to refinance or replace the facility on acceptable terms
when and as needed.
 
    The Company currently projects substantial negative cash flows from
operations for at least the remainder of fiscal 1998. The exact amount and
timing of the Company's capital requirements will be determined by numerous
factors, including the level of, and gross margin on, future sales, the outcome
of outstanding contingencies and disputes such as pending lawsuits, payment
terms obtained from the Company's vendors and the timing of capital
expenditures. However, even if the Company's lender were to formally waive all
existing defaults under the Company's revolving credit facility, the Company
expects that available borrowings under the facility would not be sufficient to
satisfy its working capital requirements beyond mid-October 1997. Accordingly,
the Company is continuing to seek extended payment terms from its vendors,
delaying purchases of raw materials, instituting internal cost reduction
measures and taking other steps to conserve operating capital. As a result, the
Company's vendors may place the Company on credit hold or take other actions
against the Company, including the termination of their relationship with the
Company or the initiation of collection proceedings. See "Item 1. Business--Risk
Factors--Dependence on Key Vendors." In addition, the Company is actively
pursuing possible sources of additional capital and has engaged an investment
banker to assist in the evaluation and pursuit of financing transactions, which
could include the issuance of debt or equity securities or the sale of all or
part of the Company's assets. However, as of the date of this Report, the
Company had received no firm commitments with respect to any such transaction
and there can be no assurance that any such transaction will be identified.
Further, there can be no assurance that the Company will be able to obtain
additional sources of additional working capital when and as needed or that the
terms of such additional funding will be acceptable to the Company or in the
best long-term interests of the Company's shareholders.
 
    The failure to obtain an increase in borrowing availability under, and to
extend the expiration date of, the revolving credit facility, or to otherwise
obtain sufficient funds when and as needed to satisfy its working capital
requirements could force the Company to curtail operations, seek extended
payment terms from its vendors or seek protection under the federal bankruptcy
laws. See "Item 1. Business--Risk Factors--Ability to Continue as a Going
Concern; Defaults under Credit Facility; Need for Additional Working Capital."
 
1997 COMPARED TO 1996
 
    NET CASH FLOWS FROM OPERATING ACTIVITIES.  The Company experienced negative
operating cash flows of $6,601,926 in fiscal 1997 and $4,931,017 in fiscal 1996.
The Company's principal cash flow requirements in fiscal 1997 were to fund
operating losses, which totaled $6,261,298, and to fund increased working
capital needs. The Company's working capital needs increased in fiscal 1997
compared to fiscal 1996 primarily as a result of an increase in trade
receivables balances. Trade receivables increased to $6,654,500 at the end of
 
                              Page 30 of 41 Pages
<PAGE>
fiscal 1997 compared to $4,974,156 at the end of fiscal 1996. This increase was
in part due to difficulties experienced in the installation and implementation
of a new electronic data interchange software package which resulted in
significant delays in the required electronic delivery of invoices to certain
key customers. These delays resulted in significant corresponding delays in the
collection of accounts receivable during the third and fourth quarters of fiscal
1997. See "Item 1. Business--Risk Factors--Electronic Data Interchange" and
"Item 1. Business--Risk Factors--Collection of Accounts Receivable."
 
    NET CASH FLOWS FROM FINANCING ACTIVITIES.  During fiscal 1997, the Company
received a net $11,273,049 from various financing sources, compared to
$8,555,704 during fiscal 1996. In fiscal 1997, the Company increased borrowings
under its revolving credit facility by $3,326,451 compared to an increase of
$3,139,463 in fiscal 1996. Proceeds from long-term debt in fiscal 1997 were
$2,333,526 compared to $1,003,029 in fiscal 1996. Repayments of long-term debt
in fiscal 1997 totaled $875,134 compared to $467,986 in fiscal 1996. The Company
received no loans from officers or directors in fiscal 1997, while in fiscal
1996 officers and directors had advanced $2,452,573 to the Company. Repayments
of notes payable to officers and directors totaled $414,710 in fiscal 1997
compared to $396,629 in fiscal 1996. In addition, the Company received proceeds
from private placements, option exercises and warrant exercises in the amount of
$6,459,945 in fiscal 1997 compared to $2,827,254 in fiscal 1996
 
    NET CASH FLOWS FROM INVESTING ACTIVITIES.  The Company experienced a net
negative cash flow from investing activities for fiscal 1997 of $4,312,394,
compared to a negative cash flow from investing activities of $3,590,007 for
fiscal 1996. The Company made significant investments in fiscal 1997 to increase
the production capacity of its specialty papers group by acquiring automated
production equipment, a new management information system, warehouse racking and
delivery vehicles.
 
1996 COMPARED TO 1995
 
    NET CASH FLOWS FROM OPERATING ACTIVITIES.  The Company experienced negative
operating cash flows during fiscal 1996 and 1995 ($4,931,017 for fiscal 1996 and
$379,162 for fiscal 1995). Contributing to the negative cash flow from
operations was the increase in trade receivable and related party trade
receivables balances. Total trade receivables for fiscal 1996 increased 106% to
$4,974,156 compared to $2,412,324 for fiscal 1995. The increase in receivables
of 113% at year end fiscal 1996 over fiscal 1995 year end balances is consistent
with the 122% increase in sales the Company experienced during 1996.
 
    Inventory increased to $9,139,273 at year end fiscal 1996 compared to
$2,901,155 for fiscal year end 1995, an increase of 215%. The 215% increase in
inventory is due in part to the building of North American inventories in
anticipation of higher sales levels in fiscal 1997 and the additional building
of inventories for the startup of the Company's European operations, which
require a paper size which is slightly different from the North American
standard.
 
    NET CASH FLOWS FROM FINANCING ACTIVITIES.  In fiscal 1996, the Company
received a net $8,555,704 from various financing sources, compared to $1,697,768
for the prior fiscal year. In fiscal 1996, the Company increased borrowings
under its revolving credit facility by $3,139,463, compared to $990,427 for the
prior year. Proceeds from long-term debt borrowings during fiscal 1996 were
$1,003,029, compared to $765,125 in fiscal 1995. Repayments of long-term debt in
fiscal 1996 were $467,986 compared to $232,685 in fiscal 1995. The Company
received $2,452,573 from officers and directors in the form of notes during
fiscal 1996, while $22,746 was received from officers and directors in fiscal
year 1995. Repayments of notes payable to officers and directors were $398,629
in fiscal 1996 compared to $134,888 in fiscal 1995. In addition the Company
received proceeds from private placements, option exercises and warrant
exercises in the amount of $2,827,254 in fiscal 1996, compared to $287,043 in
fiscal year 1995. The proceeds received from the above debt and equity
financings were primarily utilized to finance working capital requirements,
building expansion and equipment acquisitions related to the increased sales of
the Geopaper program.
 
                              Page 31 of 41 Pages
<PAGE>
    NET CASH FLOWS FROM INVESTING ACTIVITIES.  The Company experienced a net
negative cash flow from investing activities for fiscal 1996 of $3,590,007,
compared to a negative cash flow from investing activities of $1,303,258 for
fiscal 1995. During fiscal 1996, the Company made significant investments to
increase its Geopaper production capacity by acquiring printing presses, paper
cutting equipment, packaging equipment, computers, trucks and warehouse racking.
 
ITEM 8. FINANCIAL STATEMENTS
 
    The following consolidated financial statements of Geographics, Inc. are
incorporated into this Item 8 by reference to another section of this Report as
follows:
 
<TABLE>
<CAPTION>
(a)        Report of Moss Adams LLP regarding Financial Statements..........................        F-2
 
<S>        <C>                                                                                <C>
(b)        Consolidated Balance Sheets as of March 31, 1997 and 1996........................        F-3
 
(c)        Consolidated Statements of Income for the years ended March 31, 1997, 1996 and
            1995............................................................................        F-4
 
(d)        Consolidated Statements of Stockholders' Equity for the years ended March 31,
            1997, 1996 and 1995.............................................................        F-5
 
(e)        Consolidated Statements of Cash Flows for the years ended March 31, 1997, 1996
            and 1995........................................................................        F-6
 
(f)        Notes to Consolidated Financial Statements.......................................        F-7
 
(g)        Report of Moss Adams LLP regarding Schedule II--Valuation and Qualifying
            Accounts........................................................................        S-1
 
(h)        Schedule II--Valuation and Qualifying Accounts...................................        S-2
</TABLE>
 
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
  FINANCIAL DISCLOSURE.
 
    Not applicable.
 
                                    PART III
 
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
 
    The following table sets forth the names, ages and positions with the
Company of the executive officers and directors of the Company as of March 31,
1997. Directors will be elected at the Company's annual meeting of stockholders
and serve for one year or until their successors are elected and qualify.
Officers are elected by the Board and their terms of office are at the
discretion of the Board.
 
<TABLE>
<CAPTION>
NAME                                                AGE                      POSITION
--------------------------------------------------  ---   ----------------------------------------------
 
<S>                                                 <C>   <C>
Ronald S. Deans...................................  64    Chairman of the Board of Directors, President,
                                                            Chief Executive Officer, Chief Financial
                                                            Officer and Secretary
 
Mark G. Deans.....................................  32    Director, Executive Vice President-Sales &
                                                            Marketing
 
R. Scott Deans....................................  35    Director, Executive Vice President-Operations
 
Luis Alberto Morato...............................  36    Director
 
Alan D. Tuck, Jr..................................  54    Director
 
Robert S. Parker..................................  51    Director
</TABLE>
 
    RONALD S. DEANS has served as the Chairman, Chief Executive Officer and
President since he founded the Company in 1973. He has also served as the
Company's Chief Financial Officer and Secretary since
 
                              Page 32 of 41 Pages
<PAGE>
September 4, 1996. Mr. Deans has over thirty years experience in the graphics
arts and office products retailing industry. Prior to founding the Company, he
had served as sales manager for Letraset Canada Ltd.
 
    MARK G. DEANS joined the Company in May 1985 working in the marketing
department. Mr. Deans was promoted to Vice President-Marketing in April 1990,
and was promoted to Executive Vice President-Sales & Marketing in September
1995. Mr. Deans has served as a director of the Company since November 1994.
 
    R. SCOTT DEANS joined the Company in February 1985 working in the marketing
and operations departments. Mr. Deans was promoted to Vice President-Operations
in January 1990, and was promoted to Executive Vice President-Operations in
September 1995. Mr. Deans has served as a director of the Company since
September 1995.
 
    LUIS ALBERTO MORATO has been a director of the Company since October 1995.
From March 1993 to the present, Mr. Morato has been an independent civil
engineering consultant. From June 1982 to March 1993, Mr. Morato was a budget
manager with Bytsa Dc C.V., a construction company.
 
    ALAN D. TUCK, JR. served on the board of directors of the Company from
August 1995 until his resignation from the Company's Board in July 1997. Mr.
Tuck has served as President of Greenway Pump Inc., a privately held company
performing research and development of hydraulic pumps, since March 1992. Mr.
Tuck is also an inventor and holder of several U.S. patents. From July 1989 to
March 1992, Mr. Tuck operated Fluid Systems Engineering, a privately held
company performing research and development of hydraulic pumps. Mr. Tuck is a
graduate of the United States Air Force Academy and former U.S. Air Force
Officer and a recipient of a Juris Doctor Degree from the University of
California School of Law in Davis, California.
 
    ROBERT S. PARKER served on the Board of Directors from April 1996 until his
resignation from the Company's Board in August 1997. Mr. Parker has been the
President of Sanford Corporation, a manufacturer of writing instruments and
office supplies, since December 1990. Sanford Corporation is a subsidiary of
Newell Co., a publicly traded company.
 
FAMILY RELATIONSHIPS
 
    Ronald S. Deans is the father of Mark G. Deans and R. Scott Deans. Ronald S.
Deans serves as the Company's President, Chief Executive Officer, Chief
Financial Officer and Secretary and as Chairman of the Company's Board of
Directors. Mark G. Deans and R. Scott Deans serve as the Company's Executive
Vice President--Sales & Marketing and Executive Vice President--Operations,
respectively. Ronald S. Deans is a director of the Company and serves on the
Company's Audit Committee and the Compensation Committee. Mark G. Deans and R.
Scott Deans are each directors of the Company. Luis Alberto Morato, one of the
Company's directors, is the son-in-law of Fidel Garcia Carrencedo, a former
director of the Company and a current principal shareholder of the Company.
 
BOARD AND COMMITTEE MEETINGS
 
    During the fiscal year ended March 31, 1997, there were two (2) meetings of
the Company's Board of Directors. Each of the incumbent directors attended at
least seventy-five percent (75%) of the meetings of the Board of Directors
during fiscal 1997 except Mr. Morato and Mr. Parker.
 
    The Company has established two standing committees of the Board of
Directors: the Audit Committee and the Compensation Committee.
 
    The Audit Committee was established in April 1991. The Audit Committee's
function is to make recommendations concerning the effectiveness of the
Company's internal auditing methods and procedures, to determine through
discussions with independent auditors whether any limitations or restrictions
have been placed upon them in connection with either the scope of the audit or
its implementation, to
 
                              Page 33 of 41 Pages
<PAGE>
review the financial statements and related notes with the auditors to ensure
the statements and notes fully disclose all material facts of the Company, and
to recommend approval or non-approval of such financial statements and related
notes. The Audit Committee met one time during fiscal 1997, and all members of
the Audit Committee attended the meeting.
 
    The Compensation Committee was established in April 1991. The Compensation
Committee's function is to monitor and make recommendations with respect to
compensation of senior officers, as well as the granting of stock options and
stock awards. The Compensation Committee met one time during fiscal 1997 and all
members of the Compensation Committee attended the meeting.
 
    The Company does not have a nomination committee.
 
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
 
    Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), requires the Company's directors, certain officers and persons
who own more than ten percent (10%) of the Company's outstanding Common Stock
("Reporting Persons") to file with the Securities and Exchange Commission (the
"Commission") initial reports of ownership and reports of changes in ownership
of Common Stock and other equity securities of the Company. Reporting Persons
are required by Commission regulations to furnish the Company with copies of all
Section 16(a) reports.
 
    To the Company's knowledge, based solely on its review of copies of all
Section 16(a) reports furnished to the Company and written representations that
no other reports were required, all Section 16(a) filing requirements applicable
to the Company's directors and officers were complied with.
 
ITEM 11. EXECUTIVE COMPENSATION
 
CASH COMPENSATION
 
    The following table shows compensation paid by the Company for services
rendered during its fiscal years ended March 31, 1995, 1996 and 1997 to (a) the
Company's Chief Executive Officer, (b) the four most highly compensated
individuals (other than the Chief Executive Officer) who were serving as
executive officers of the Company at March 31, 1997 and whose total annual
salary and bonus for the fiscal year ended March 31, 1997 exceeded $100,000; and
(c) up to two additional individuals who would have been included under item (b)
above but for the fact that the individual was not serving as an executive
officer of the Company at March 31, 1997 (collectively, the "Named Executive
Officers").
 
                       SUMMARY ANNUAL COMPENSATION TABLE
 
<TABLE>
<CAPTION>
                                                                                                         SECURITIES
                                                                    YEAR ENDED                           UNDERLYING
NAME AND PRINCIPAL POSITION                                          MARCH 31     SALARY($)   BONUS($)   OPTIONS(#)
-----------------------------------------------------------------  -------------  ----------  ---------  -----------
<S>                                                                <C>            <C>         <C>        <C>
Ronald S. Deans .................................................         1997    $  275,000  $  86,379           0
  Chairman, President & CEO                                               1996       234,000     87,629      30,000
                                                                          1995       181,666          0           0
 
Mark G. Deans ...................................................         1997    $  149,903  $  29,531           0
  Director Executive Vice President--Sales & Marketing                    1996       111,694     28,184      32,000
                                                                          1995        79,243          0      30,000
 
R. Scott Deans ..................................................         1997    $  149,221  $  29,531           0
  Director Executive Vice President--Operations                           1996       111,694     28,184      32,000
                                                                          1995        79,243          0      30,000
</TABLE>
 
                              Page 34 of 41 Pages
<PAGE>
STOCK OPTION GRANTS
 
    The following table sets forth further information regarding grants of
options to purchase Common Stock made by the Company pursuant to the Company's
stock option plans during the fiscal years ended March 31, 1996 and 1997 to each
of the Named Executive Officers.
 
                         OPTION GRANTS IN 1996 AND 1997
<TABLE>
<CAPTION>
                                                                                                         POTENTIAL REALIZABLE
                                                                                                           VALUE AT ASSUMED
                       NUMBER OF       PERCENT OF                                                       ANNUAL RATES OF STOCK
                      SECURITIES      TOTAL OPTIONS                                                     PRICE APPRECIATION FOR
                      UNDERLYING       GRANTED TO       EXERCISE     MARKET PRICE                           OPTION TERM(4)
                        OPTIONS       EMPLOYEES IN      PRICE PER     ON DATE OF       EXPIRATION       ----------------------
NAME                 GRANTED(#)(1)    1996 AND 1997   SHARE($/SH)(2) GRANT($)(3)          DATE             0%($)       5%($)
------------------  ---------------  ---------------  -------------  ------------  -------------------  -----------  ---------
<S>                 <C>              <C>              <C>            <C>           <C>                  <C>          <C>
Ronald S. Deans...        30,000(5)           6.0%     Cdn $  2.30   Cdn $   2.30      August 18, 2000      --       $  19,063
Mark G. Deans.....        12,000              6.5%     Cdn $  2.00   Cdn $   2.00       April 25, 2000      --           6,631
                          20,000(5)                    Cdn $  4.15   Cdn $   4.15     October 10, 2000      --          22,931
R. Scott Deans....        12,000              6.5%     Cdn $  2.00   Cdn $   2.00       April 25, 2000      --           6,631
                          20,000(5)                    Cdn $  4.15   Cdn $   4.15     October 10, 2000      --          22,931
 
<CAPTION>
 
NAME                 10%($)
------------------  ---------
<S>                 <C>
Ronald S. Deans...  $  42,125
Mark G. Deans.....     14,652
                       50,672
R. Scott Deans....     14,652
                       50,672
</TABLE>
 
------------------------
 
(1) The options outstanding as of March 31, 1997 (the "Non-Plan Options") were
    not granted pursuant to a written stock option plan. All such options were
    fully exercisable immediately upon the grant thereof. The Company adopted a
    stock option plan in fiscal 1997 (the "1996 Stock Option Plan"), subject to
    shareholder approval. As of March 31, 1997, no options had been granted
    under the 1996 Stock Option Plan. At the date of this Report, the Company
    had reserved 1,000,000 of Common Stock for issuance upon exercise of
    previously granted Non-Plan Options as well as options granted under the
    1996 Stock Option Plan.
 
(2) The exercise price for Non-Plan Options may be paid by delivery of already
    owned shares, subject to certain conditions.
 
(3) With respect to Non-Plan Options, the market value of the Common Stock
    underlying such options on the date of grant, as reported in the Toronto
    Stock Exchange Trading Summaries.
 
(4) Potential realizable value is based on the assumption that the fair market
    value of the Common Stock appreciates at the annual rate shown (compounded
    annually) from the date of grant until the end of the option term.
    Disclosure of these assumed rates of appreciation are mandated by the rules
    of the Securities and Exchange Commission and do not represent the Company's
    estimate or projection of the future market price for the Common Stock. The
    actual value realized may be greater or less than the potential realizable
    value set forth in the table.
 
(5) Such options were granted during fiscal 1996 subject to approval of the
    Company's shareholders which occurred in fiscal 1997.
 
    The following table sets forth certain information as of March 31, 1997
regarding options to purchase Common Stock held as of March 31, 1997 by each of
the Named Executive Officers as well as the exercise of such options during the
fiscal year ended March 31, 1997. In addition, the following table reports the
values for in-the-money options, which values represent the positive spread
between the exercise price of such options and the fair market value of the
Company's Common Stock as of March 31, 1997.
 
                              Page 35 of 41 Pages
<PAGE>
    AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FY-END OPTION VALUES
 
<TABLE>
<CAPTION>
                                                                                                   UNEXERCISED
                                                                                  NUMBER OF       IN-THE-MONEY
                                                                                 UNEXERCISED       OPTIONS AT
                                                                                 OPTIONS AT          FY-END
                                                       SHARES         VALUE      FY-END (#)       EXERCISABLE/
                                                     ACQUIRED ON    REALIZED    EXERCISABLE/    UNEXERCISABLE ($)
NAME                                                EXERCISE (#)       ($)      UNEXERCISABLE          (1)
--------------------------------------------------  -------------  -----------  -------------  -------------------
<S>                                                 <C>            <C>          <C>            <C>
Ronald S. Deans...................................       --            --           0/30,000       $  0/12,408
Mark G. Deans.....................................       --            --           0/20,000       $   0/8,272
R. Scott Deans....................................       --            --           0/20,000       $   0/8,272
</TABLE>
 
------------------------
 
(1) Calculated on the basis of (a) the closing sales price of the Company's
    Common Stock on March 31, 1997, which was $3.50, less the exercise price;
    and (b) an exercise price expressed in Canadian dollars and converted into
    U.S. dollars assuming an exchange rate on March 31, 1997 of US $0.733 for
    Cdn. $1.00, as reported in The Wall Street Journal.
 
DIRECTOR COMPENSATION
 
    The Company pays each non-employee director a fee of $500 for each meeting
of the Company's Board of Directors attended. Directors are entitled to
reimbursement for reasonable travel and other out-of-pocket expenses incurred in
connection with attendance of meetings of the Company's Board of Directors.
Directors of the Company who are also employees of the Company do not receive
fees for their services as directors.
 
EMPLOYMENT AGREEMENTS
 
    The Company had no written employment agreements with any of its directors
or officers as of March 31, 1997.
 
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
 
    During fiscal 1997, Ronald S. Deans served as a member of the Compensation
Committee. Mr. Deans is the President, Chief Executive Officer, Chief Financial
Officer and Secretary of the Company and Chairman of the Company's Board of
Directors. Mr. Deans is also the father of Mark G. Deans and R. Scott Deans,
Executive Vice President--Sales & Marketing and Executive Vice
President--Operations, respectively, of the Company. None of the other
individuals who served as members of the Compensation Committee during fiscal
1997 has served at any time as an officer or employee of the Company.
 
    Ronald S. Deans is party to certain transactions involving the Company which
are described in "Item 13. Certain Relationships and Related Transactions" of
this Report and are incorporated into this Item 11 by this reference.
 
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
 
    The following table sets forth certain information regarding beneficial
ownership of the Company's Common Stock as of September 8, 1997 with respect to
(i) each shareholder known by the Company to be the beneficial owner of more
than five percent (5%) of the outstanding Common Stock; (ii) each director of
the Company; (iii) each of the Named Executive Officers; and (iv) all current
directors and executive officers as a group. Unless otherwise noted, the Company
believes that the beneficial owners of the Common Stock listed below have sole
investment and voting power with respect to such shares, subject to
 
                              Page 36 of 41 Pages
<PAGE>
community property laws where applicable. This table is based upon information
supplied to the Company by directors, officers, and principal shareholders.
 
<TABLE>
<CAPTION>
                                                                                AMOUNT AND NATURE
                                                                                  OF BENEFICIAL           PERCENT
NAME AND ADDRESS (1)                                                               OWNERSHIP(2)         OF CLASS(3)
---------------------------------------------------------------------------  ------------------------  -------------
<S>                                                                          <C>                       <C>
Ronald S. Deans (4)........................................................             757,440                8.0%
Mark G. Deans (5)..........................................................             442,279                4.7%
R. Scott Deans (6).........................................................             444,518                4.7%
Alan D. Tuck Jr. (7).......................................................             140,796                1.5%
Robert Parker (8)..........................................................              40,000              *
Luis Alberto Morato........................................................              20,000              *
All officers and directors
  as a group (5 persons) (9)...............................................           1,845,033               19.5%
</TABLE>
 
------------------------
 
*   Less than 1%
 
(1) Unless otherwise indicated, the address of each of the listed beneficial
    owners identified is 1555 Odell Road, Blaine, Washington 98231.
 
(2) Beneficial ownership of the Common Stock is determined in accordance with
    the rules and regulation of the Securities and Exchange Commission and
    includes shares of Common Stock subject to options, warrants or other rights
    which are currently exercisable or exercisable within 60 days of September
    8, 1997.
 
(3) Percentage ownership is based on 9,467,877 shares of Common Stock
    outstanding as of September 8, 1997. Each beneficial owner's percentage
    ownership is determined by assuming that shares of Common Stock subject to
    options, warrants or other rights which are held by such beneficial owner
    (but not those held by any other person) and which are exercisable within 60
    days of September 8, 1997 have been issued and are outstanding.
 
(4) Mr. Ronald Deans is Chairman of the Board, President, Chief Executive
    Officer, Chief Financial Officer and Secretary of the Company. Includes
    43,000 shares in the name of his wife, Ann Deans, and 69,308 shares held by
    the Company's 401(k) Plan for which Mr. Deans serves as trustee and
    exercises voting control. Also includes 30,000 shares of Common Stock
    issuable upon exercise of stock options and 9,756 shares issuable upon
    exercise of warrants.
 
(5) Mr. Mark Deans is the Executive Vice President--Sales & Marketing and a
    director of the Company. Includes 20,000 shares of Common Stock issuable
    upon exercise of stock options.
 
(6) Mr. Scott Deans is the Executive Vice President--Operations and a director
    of the Company. Includes 20,000 shares of Common Stock issuable upon
    exercise of stock options.
 
(7) Mr. Tuck was a director of the Company as of March 31, 1997. Includes 30,000
    shares of Common Stock issuable upon exercise of stock options and 9,756
    shares issuable upon exercise of warrants. Mr. Tuck resigned from the
    Company's Board of Directors in July 1997.
 
(8) Mr. Parker was a director of the Company as of March 31, 1997. Mr. Parker
    resigned from the Company's Board of Directors in August 1997.
 
(9) Includes 120,000 shares of Common Stock subject to stock options exercisable
    within 60 days of September 8, 1997 and 19,512 shares of Common Stock
    subject to warrants exercisable within 60 days of September 8, 1997.
 
                              Page 37 of 41 Pages
<PAGE>
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
 
    In fiscal 1996, Fidel Garcia Carrencedo, a former director of the Company,
and Ronald S. Deans, the Company's President, Chief Executive Officer, Chief
Financial Officer and Secretary and Chairman of the Company's Board of
Directors, made advances to the Company in the amounts of $52,004 and
$1,212,706, respectively. The advances were evidenced by promissory notes
payable on demand and bearing interest at a rate of prime plus 1% per annum.
During fiscal 1997, the note to Mr. Carrancedo was paid in full and payments of
$362,706 were made on the note to Mr. Deans. At March 31, 1997, the outstanding
principal balance of the note to Mr. Deans was $850,000. The note to Mr. Deans
was repaid in full subsequent to the end of fiscal 1997.
 
                                    PART IV
 
ITEM 14. EXHIBITS, FINANCIAL STATEMENTS, SCHEDULES AND REPORTS ON FORM 8-K
 
(a) The following documents are filed as part of this Report:
 
    1.  MANAGEMENT CONTRACTS OR COMPENSATORY PLANS OR ARRANGEMENTS
 
    The following is a subset of exhibits described below and contains all
compensatory plans, contracts or arrangements in which any director or executive
officer of the Company is a participant unless the method of allocation of
benefits thereunder is the same for management and non-management participants:
 
    (i) Geographics, Inc. 1996 Stock Option Plan
 
    2.  FINANCIAL STATEMENTS
 
    (i) Report of Moss Adams LLP regarding Financial Statements
 
    (ii) Consolidated Balance Sheets as of March 31, 1997 and 1996
 
   (iii) Consolidated Statements of Income for the years ended March 31, 1997,
         1996 and 1995
 
    (iv) Consolidated Statements of Stockholders' Equity for the years ended
         March 31, 1997, 1996 and 1995
 
    (v) Consolidated Statements of Cash Flows for the years ended March 31,
        1997, 1996 and 1995
 
    (vi) Notes to Consolidated Financial Statements
 
    3.  FINANCIAL STATEMENT SCHEDULES
 
    (i) Report of Moss Adams LLP regarding Schedule II--Valuation of Qualifying
        Accounts
 
    (ii) Schedule II--Valuation of Qualifying Accounts
 
    All other schedules have been omitted because the required information is
included in the financial statements or the notes thereto, or is not applicable
or required.
 
                              Page 38 of 41 Pages
<PAGE>
    4.  EXHIBITS FILED AS PART OF THIS REPORT
 
<TABLE>
<CAPTION>
 EXHIBIT NUMBER
 (REFERENCED TO
   ITEM 601 OF
REGISTRATION S-K)                                      DESCRIPTION OF DOCUMENT
-----------------  ------------------------------------------------------------------------------------------------
<C>                <S>
         3.1       Restated Articles of Incorporation of Geographics, Inc. (1)
         3.2       Restated Bylaws of Geographics, Inc. (2)
       *10.1       Business Loan Agreement, dated as of February 13, 1996 (the "Loan Agreement"), between
                     Geographics, Inc. and U.S. Bank of Washington, N.A.
       *10.2       Promissory Note, dated February 13, 1996, made by Geographics, Inc. payable to U.S. Bank of
                     Washington, N.A., pursuant to the Loan Agreement.
       *10.3       Loan and Security Agreement, dated as of July 10, 1992, between Geographics, Inc. and U.S. Bank
                     of Washington, N.A.
       *10.4       Master Equipment Lease Agreement, dated as of May 22, 1996 (the "Master Lease"), between
                     Geographics, Inc. and KeyCorp Leasing Ltd.
       *10.5       Subordination Agreement, dated as of May 22, 1996, among U.S. Bank of Washington, N.A., c/o U.S.
                     Bancorp Mortgage Company and KeyCorp Leasing Ltd.
       *10.6       Equipment Schedule No. 4 to the Master Lease, dated as of December 4, 1996, between Geographics,
                     Inc. and KeyCorp Leasing Ltd.
       *10.7       Equipment Schedule No. 4 to the Master Lease, dated as of May 23, 1997, between Geographics,
                     Inc. and KeyCorp Leasing Ltd.
       *10.8       Agreement for Sale of Business, dated November 26, 1996, between Geographics, Inc. and Graham's
                     Graphics Pty. Ltd.
       *10.9       Form of Stock Option Agreement relating to options granted by Geographics, Inc. prior to the
                     adoption of the Geographics, Inc. 1996 Stock Option Plan.
        10.10      Geographics, Inc. 1996 Stock Option Plan (3)
        10.11      Form of Stock Option Agreements issued pursuant to the Geographics, Inc. 1996 Stock Option Plan.
                     (4)
       *10.12      Form of Subscription Agreement (the "Subscription Agreement") between Geographics, Inc. and each
                     of the persons participating in a private placement of units consisting of common stock and
                     warrants completed in May 1996 (the "Private Placement").
       *10.13      Warrant Indenture, dated as of February 4, 1997 (the "Warrant Agreement") between Geographics,
                     Inc. and Montreal Trust Company of Canada relating to the warrants issued in the Private
                     Placement.
       *10.14      Form of Warrant to Purchase Common Stock issued in the Private Placement pursuant to the Warrant
                     Agreement.
       *10.15      Form of Registration Rights Agreement between Geographics, Inc. and each purchaser of units sold
                     in the Private Placement.
       *11.1       Statement re computation of per share earnings.
       *21.1       List of the subsidiaries of Geographics, Inc.
       *23.1       Consent of Moss Adams LLP.
       *27.1       Financial Data Schedule.
</TABLE>
 
------------------------
 
*   Exhibit is filed herewith.
 
(1) Incorporated by reference to an identically numbered exhibit to the
    Registration Statement on Form 10, as amended, as filed with the Securities
    and Exchange Commission on September 12, 1995 (SEC File No. 0-26756).
 
                              Page 39 of 41 Pages
<PAGE>
(2) Incorporated by reference to an identically numbered exhibit to the
    Registration Statement on Form 10, as amended, filed with the Securities and
    Exchange Commission on September 12, 1995 (SEC File No. 0-26756).
 
(3) Incorporated by reference to Exhibit 4(a) to the Company's Registration
    Statement on Form S-8 filed with the Securities and Exchange Commission on
    November 26, 1996 (SEC File No. 333-16791).
 
(4) Incorporated by reference to Exhibit 4(b) to the Company's Registration
    Statement on Form S-8 filed with the Securities and Exchange Commission on
    November 26, 1996 (SEC File No. 333-16791).
 
(b) No Current Reports on Form 8-K were filed by the Company during the fourth
    quarter of 1997.
 
                              Page 40 of 41 Pages
<PAGE>
                                   SIGNATURE
 
    Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this Report to be signed on
its behalf by the undersigned, thereunto duly authorized on this 11th day of
September 1997.
 
<TABLE>
<S>                             <C>  <C>
                                GEOGRAPHICS, INC.
 
                                By:             /s/ RONALD S. DEANS
                                     -----------------------------------------
                                                  Ronald S. Deans
                                         CHAIRMAN OF THE BOARD, PRESIDENT,
                                      CHIEF EXECUTIVE OFFICER, CHIEF FINANCIAL
                                                      OFFICER
                                                   AND SECRETARY
</TABLE>
 
    Each person whose individual signature appears below hereby authorizes and
appoints Ronald S. Deans with full power of substitution and full power to act
without the other, as his true and lawful attorney-in-fact and agent to act in
his name, place and stead and to execute in the name and on behalf of such
person, individually and in the capacity of such person stated below, and to
file any and all amendments to this Report together with any exhibits thereto
and any other documents in connection therewith, with the Securities and
Exchange Commission, hereby ratifying and confirming all that said
attorneys-in-fact, or his substitute or substitutes, may do or cause to be done
by virtue hereof.
 
    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 date indicated.
 
          SIGNATURE                       TITLE                    DATE
------------------------------  --------------------------  -------------------
 
                                Chairman of the Board,
     /s/ RONALD S. DEANS          President, Chief
------------------------------    Executive Officer, Chief  September 11, 1997
       Ronald S. Deans            Financial Officer and
                                  Secretary
 
      /s/ MARK G. DEANS         Director, Executive Vice
------------------------------    President--Sales &        September 11, 1997
        Mark G. Deans             Marketing
 
      /s/ R. SCOTT DEANS
------------------------------  Director, Executive Vice    September 11, 1997
        R. Scott Deans            President--Operations
 
   /s/ LOUIS ALBERTO MORATO
------------------------------  Director                    September 11, 1997
     Louis Alberto Morato
 
    /s/ DAVID P. MCCLEERY
------------------------------  Director                    September 11, 1997
      David P. McCleery
 
                              Page 41 of 41 Pages
<PAGE>
                         INDEX TO FINANCIAL STATEMENTS
 
<TABLE>
<CAPTION>
<S>                                                                                                           <C>
Report of Moss Adams LLP regarding Financial Statements.....................................................        F-2
 
Consolidated Balance Sheets as of March 31, 1997 and 1996...................................................        F-3
 
Consolidated Statements of Income for the years ended March 31, 1997, 1996 and 1995.........................        F-4
 
Consolidated Statements of Stockholders' Equity for the years ended
  March 31, 1997, 1996 and 1995.............................................................................        F-5
 
Consolidated Statements of Cash Flows for the years ended March 31, 1997, 1996 and 1995.....................        F-6
 
Notes to Consolidated Financial Statements..................................................................        F-7
 
Report of Moss Adams LLP regarding Schedule II--Valuation and Qualifying Accounts...........................        S-1
 
Schedule II--Valuation and Qualifying Accounts..............................................................        S-2
</TABLE>
 
                                      F-1
<PAGE>
                          INDEPENDENT AUDITOR'S REPORT
 
To the Stockholders
Geographics, Inc.
 
    We have audited the accompanying consolidated balance sheets of Geographics,
Inc. as of March 31, 1997 and 1996, and the related consolidated statements of
operations, stockholders' equity and cash flows for each of the years ended
March 31, 1997, 1996 and 1995. These financial statements are the responsibility
of the Company's management. Our responsibility is to express an opinion on
these financial statements based on our audits.
 
    We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
 
    In our opinion the consolidated financial statements referred to above,
present fairly in all material respects, the consolidated financial position of
Geographics, Inc. as of March 31, 1997 and 1996 and the consolidated results of
its operations and its cash flows for each of the years ended March 31, 1997,
1996 and 1995 in conformity with generally accepted accounting principles.
 
    The accompanying consolidated financial statements have been prepared
assuming that the Company will continue as a going concern. As discussed in Note
15 to the financial statements, the Company has incurred a substantial loss
during the current year and is out of compliance with its borrowing agreements,
which raise substantial doubt about its ability to continue as a going concern.
The consolidated financial statements do not include any adjustments that might
result from the outcome of this uncertainty.
 
    As described in note 14 to the consolidated financial statements, the
Company made certain material fourth quarter adjustments that have been
reflected in these consolidated financial statements.
 
/s/ Moss Adams LLP
Bellingham, Washington
August 26, 1997
 
                                      F-2
<PAGE>
                               GEOGRAPHICS, INC.
 
                           CONSOLIDATED BALANCE SHEET
 
                            MARCH 31, 1997 AND 1996
 
                                     ASSETS
 
<TABLE>
<CAPTION>
                                                                                         1997           1996
                                                                                     -------------  -------------
<S>                                                                                  <C>            <C>
CURRENT ASSETS
  Cash.............................................................................  $     408,757  $      50,028
  Accounts receivable
    Trade receivables, net of allowance for doubtful accounts, sales returns and
      cash discounts of $814,841 in 1997 and $146,926 in 1996......................      6,654,500      4,974,156
    Related party receivables......................................................       --              899,422
    Other receivables..............................................................        993,243         62,572
  Inventory, net of allowance for obsolete inventory of $1,290,000 in 1997 and
    $100,000 in 1996...............................................................      9,457,874      9,139,273
  Deferred income taxes............................................................       --              970,000
  Prepaid expenses, deposits, and other current assets.............................        893,483        849,081
                                                                                     -------------  -------------
      Total current assets.........................................................     18,407,857     16,944,532
 
PROPERTY, PLANT AND EQUIPMENT, NET.................................................     10,832,231      7,286,694
DEFERRED INCOME TAXES..............................................................       --              192,000
INVESTMENTS IN PARTNERSHIPS........................................................       --              (34,484)
OTHER ASSETS.......................................................................      1,005,613        349,299
                                                                                     -------------  -------------
TOTAL ASSETS.......................................................................  $  30,245,701  $  24,738,041
                                                                                     -------------  -------------
                                                                                     -------------  -------------
 
                                      LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
  Bank overdrafts..................................................................  $     467,445  $    --
  Note payable to bank.............................................................      8,649,390      5,322,939
  Accounts payable.................................................................      2,421,768      2,634,598
  Accrued liabilities..............................................................      2,145,030      1,033,905
  Income tax payable...............................................................       --              145,278
  Notes payable to officers and directors..........................................        850,000      1,264,711
  Current portion of long-term debt................................................      3,472,674        656,398
                                                                                     -------------  -------------
    Total current liabilities......................................................     18,006,307     11,057,829
LONG-TERM DEBT.....................................................................      4,322,371      3,690,360
                                                                                     -------------  -------------
    Total liabilities..............................................................     22,328,678     14,748,189
                                                                                     -------------  -------------
COMMITMENTS AND CONTINGENCIES
 
STOCKHOLDERS' EQUITY
  No par common stock--100,000,000 authorized, 9,467,877 and 8,004,584 issued and
    outstanding in 1997 and 1996, respectively.....................................     15,574,018      9,620,068
  Foreign currency translation adjustment..........................................        (76,478)      --
  Retained earnings (accumulated deficit)..........................................     (7,580,517)       369,784
                                                                                     -------------  -------------
    Total stockholders' equity.....................................................      7,917,023      9,989,852
                                                                                     -------------  -------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY.........................................  $  30,245,701  $  24,738,041
                                                                                     -------------  -------------
                                                                                     -------------  -------------
</TABLE>
 
             See Accompanying Notes to These Financial Statements.
 
                                      F-3
<PAGE>
                               GEOGRAPHICS, INC.
                      CONSOLIDATED STATEMENT OF OPERATIONS
                   YEARS ENDED MARCH 31, 1997, 1996 AND 1995
 
<TABLE>
<CAPTION>
                                                                          1997           1996           1995
                                                                      -------------  -------------  -------------
<S>                                                                   <C>            <C>            <C>
SALES
  Wholesale sales...................................................  $  23,840,506  $  19,758,700  $   9,129,886
  Related party sales...............................................       --            2,854,935      1,056,250
                                                                      -------------  -------------  -------------
    Total sales.....................................................     23,840,506     22,613,635     10,186,136
COST OF SALES.......................................................     20,378,594     14,194,505      5,881,649
                                                                      -------------  -------------  -------------
  Gross margin......................................................      3,461,912      8,419,130      4,304,487
SELLING, GENERAL AND ADMINISTRATIVE
  Expenses..........................................................      9,723,210      5,734,901      2,873,476
Amortization of Goodwill............................................       --              159,768        639,067
                                                                      -------------  -------------  -------------
  Income (loss) from operations.....................................     (6,261,298)     2,524,461        791,944
                                                                      -------------  -------------  -------------
OTHER INCOME (EXPENSE)
  Other income......................................................         24,907        130,684         15,398
  Loss on sales of property and equipment...........................        (86,048)          (594)       (13,468)
  Reserve for impairment on EDP installation-in-progress............       (620,759)      --             --
  Interest expense..................................................     (1,063,075)      (787,848)      (457,499)
                                                                      -------------  -------------  -------------
    Total other income (expense)....................................     (1,744,975)      (657,758)      (455,569)
                                                                      -------------  -------------  -------------
INCOME (LOSS) BEFORE PROVISION FOR INCOME TAXES.....................     (8,006,273)     1,866,703        336,375
INCOME TAX PROVISION (BENEFIT)......................................        (55,972)       634,679       (411,367)
                                                                      -------------  -------------  -------------
NET INCOME (LOSS)...................................................  $  (7,950,301) $   1,232,024  $     747,742
                                                                      -------------  -------------  -------------
                                                                      -------------  -------------  -------------
EARNINGS PER COMMON AND COMMON EQUIVALENT SHARE
  Primary...........................................................  $       (0.85) $        0.19  $        0.16
                                                                      -------------  -------------  -------------
                                                                      -------------  -------------  -------------
  Assuming full dilution............................................  $       (0.85) $        0.18  $        0.14
                                                                      -------------  -------------  -------------
                                                                      -------------  -------------  -------------
SHARES USED IN COMPUTING EARNINGS PER COMMON AND COMMON EQUIVALENT
  SHARE
  Primary...........................................................      9,322,278      6,606,499      4,549,101
                                                                      -------------  -------------  -------------
                                                                      -------------  -------------  -------------
  Assuming full dilution............................................      9,322,278      7,204,220      5,816,260
                                                                      -------------  -------------  -------------
                                                                      -------------  -------------  -------------
</TABLE>
 
       See accompanying notes to these consolidated financial statements.
 
                                      F-4
<PAGE>
                               GEOGRAPHICS, INC.
                 CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
                   YEARS ENDED MARCH 31, 1997, 1996 AND 1995
 
<TABLE>
<CAPTION>
                                                                         FOREIGN
                                                  COMMON STOCK          CURRENCY       RETAINED
                                            -------------------------  TRANSLATION     EARNINGS
                                              SHARES       AMOUNT      ADJUSTMENT     (DEFICIT)        TOTAL
                                            ----------  -------------  -----------  --------------  ------------
<S>                                         <C>         <C>            <C>          <C>             <C>
BALANCE, March 31, 1994...................   4,515,729  $   3,081,496  $   --       $   (1,609,982) $  1,471,514
Notes payable and debentures converted to
  common stock............................     334,762        297,042      --             --             297,042
Common stock issued for cash on exercise
  of warrants.............................     325,722        287,043      --             --             287,043
Net income................................      --           --            --              747,742       747,742
                                            ----------  -------------  -----------  --------------  ------------
BALANCE, March 31, 1995...................   5,176,213      3,665,581      --             (862,240)    2,803,341
Proceeds from issuance of common stock....     520,000      1,986,100      --             --           1,986,100
Notes payable, debentures and other
  liabilities converted to common stock...   1,540,371      2,169,233      --             --           2,169,233
Common stock issued for cash on exercise
  of stock options and warrants, including
  income tax benefit......................     768,000      1,799,154      --            1,799,154     1,799,154
Net income................................      --           --            --            1,232,024     1,232,024
                                            ----------  -------------  -----------  --------------  ------------
BALANCE, March 31, 1996...................   8,004,584      9,620,068      --              369,784     9,989,852
Proceeds from issuance of common stock....   1,269,293      6,114,062      --             --           6,114,062
Notes payable, converted to common
  stock...................................      30,000         52,005      --             --              52,005
Common stock issued for acquisition of
  subsidiary..............................      50,000        200,000      --             --             200,000
Common stock issued for cash on exercise
  of stock options and warrants...........     114,000        345,883      --             --             345,883
Revision of estimate of income tax benefit
  from exercise of stock options and
  warrants................................      --           (758,000)     --             --            (758,000)
Foreign currency translation adjustment...      --           --            (76,478)       --             (76,478)
Net loss..................................      --           --            --           (7,950,301)   (7,950,301)
                                            ----------  -------------  -----------  --------------  ------------
BALANCE, March 31, 1997...................   9,467,877  $  15,574,018  $   (76,478) $   (7,580,517) $  7,917,023
                                            ----------  -------------  -----------  --------------  ------------
                                            ----------  -------------  -----------  --------------  ------------
</TABLE>
 
       See accompanying notes to these consolidated financial statements.
 
                                      F-5
<PAGE>
                               GEOGRAPHICS, INC.
 
                      CONSOLIDATED STATEMENT OF CASH FLOWS
 
                   YEARS ENDED MARCH 31, 1997, 1996 AND 1995
 
                          INCREASE (DECREASE) IN CASH
 
<TABLE>
<CAPTION>
                                                                              1997         1996         1995
                                                                          ------------  -----------  -----------
<S>                                                                       <C>           <C>          <C>
CASH FLOWS FROM OPERATING ACTIVITIES
    Net income (loss)                                                     $ (7,950,301) $ 1,232,024  $   747,742
ADJUSTMENTS TO RECONCILE NET INCOME TO NET CASH FLOWS FROM OPERATING
  ACTIVITIES
    Depreciation and amortization                                            1,372,292    1,124,999    1,295,262
    Deferred income taxes                                                      404,000      125,000     (529,000)
    Loss on sales of property and equipment                                     86,048          594       13,468
    Reserve for impairment on EDP installation-in-progress                     620,759      --           --
CHANGES IN NONCASH OPERATING ASSETS AND LIABILITIES
    Trade receivables                                                       (1,500,098)  (2,561,832)  (1,471,823)
    Related party receivables                                                  899,422     (560,447)    (338,975)
    Other receivables                                                         (930,671)      (3,357)     (19,504)
    Inventory                                                                 (121,153)  (6,238,118)  (1,059,674)
    Prepaid expenses, deposits and other current assets                        (44,402)    (517,278)    (210,110)
    Accounts payable                                                          (212,830)   1,315,997    1,074,647
    Accrued liabilities                                                        920,286      814,756      (48,828)
    Income tax payable                                                        (145,278)     336,645      167,633
                                                                          ------------  -----------  -----------
        Net cash flows from operating activities                            (6,601,926)  (4,931,017)    (379,162)
                                                                          ------------  -----------  -----------
CASH FLOWS FROM FINANCING ACTIVITIES
    Increase in bank overdrafts                                                467,445      --           --
    Net borrowings on note payable to bank                                   3,326,451    3,139,463      990,427
    Proceeds from long-term debt borrowings                                  2,333,526    1,003,029      765,125
    Repayment of long-term debt                                               (875,134)    (467,986)    (232,685)
    Proceeds from notes payable to officers and directors                      --         2,452,573       22,746
    Repayments of notes payable to officers and directors                     (362,706)    (398,629)    (134,888)
    Proceeds from issuance of common stock                                   6,459,945    2,827,254      287,043
    Foreign currency translation                                               (76,478)     --           --
                                                                          ------------  -----------  -----------
        Net cash flows from financing activities                            11,273,049    8,555,704    1,697,768
                                                                          ------------  -----------  -----------
CASH FLOWS FROM INVESTING ACTIVITIES
    Purchase of plant and equipment                                         (4,159,500)  (3,296,165)  (1,463,768)
    Proceeds from sales of equipment                                            50,887       16,741       30,000
    Net advances from (repayments to) partnerships                             (34,484)     (56,786)     250,422
    Increase in other assets                                                  (169,297)    (253,797)    (119,912)
                                                                          ------------  -----------  -----------
        Net cash flows from investing activities                            (4,312,394)  (3,590,007)  (1,303,258)
                                                                          ------------  -----------  -----------
NET CHANGE IN CASH                                                             358,729       34,680       15,348
CASH, beginning of year                                                         50,028       15,348      --
                                                                          ------------  -----------  -----------
CASH, end of year                                                         $    408,757  $    50,028  $    15,348
                                                                          ------------  -----------  -----------
                                                                          ------------  -----------  -----------
NONCASH INVESTING AND FINANCING ACTIVITIES
    Financing obtained in acquisition of equipment                        $  1,989,895  $ 1,110,242  $   346,644
                                                                          ------------  -----------  -----------
                                                                          ------------  -----------  -----------
    Issuance of common stock on conversion of notes payable, debentures
      and other liabilities                                               $     52,005  $ 2,169,233  $   297,042
                                                                          ------------  -----------  -----------
                                                                          ------------  -----------  -----------
    Issuance of common stock for acquisition of subsidiary                $    200,000  $   --       $   --
                                                                          ------------  -----------  -----------
                                                                          ------------  -----------  -----------
    Income tax benefit (expense) related to exercise of stock options
      and warrants                                                        $   (758,000) $   958,000  $   --
                                                                          ------------  -----------  -----------
                                                                          ------------  -----------  -----------
</TABLE>
 
       See Accompanying Notes to These Consolidated Financial Statements
 
                                      F-6
<PAGE>
NOTE 1--DESCRIPTION OF OPERATIONS
 
    Geographics, Inc. (the "Company") is a Wyoming corporation with its offices
and main manufacturing facilities located in Blaine, Washington. The Company
also has warehouse/distribution facilities near London, England, and Brisbane,
Australia and a warehouse/distribution facility in Bellingham, Washington. The
Company is a manufacturer of designer stationeries, value-added papers,
lettering, signage and graphic art products.
 
NOTE 2--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 
    (a) Principles of Consolidation--The consolidated financial statements
include the accounts of the Company and its wholly-owned subsidiaries,
Geographics (Europe) Limited, Geographics Pty. Limited and Geographics Marketing
Canada Inc. Significant intercompany transactions have been eliminated in
consolidation. On July 1, 1996, a merger between the Company and Grahams
Graphics Pty. Ltd., an Australian distributor, was completed. In connection with
this transaction, the Company issued 50,000 shares of common stock, valued at
approximately $200,000 (approximate market value), assumed liabilities of
approximately $150,000 and paid cash of $40,000. This merger was accounted for
as a purchase, with no goodwill recognized on the transaction.
 
    (b) Cash and Equivalents--For purposes of the statement of cash flows, cash
and equivalents include cash on deposit with banks and other highly liquid
investments with original maturities of ninety days or less.
 
    (c) Accounts Receivable--The Company typically offers credit terms to its
customers, which generally require payment within sixty days. Management
considers all accounts receivable in excess of the allowance for doubtful
accounts to be fully collectible. Accounts receivable are not collateralized.
 
    (d) Inventory--Inventory is valued at the lower of cost on a first-in,
first-out (FIFO) basis or market.
 
    (e) Property, Plant and Equipment--Property, plant and equipment is stated
at historical cost. Depreciation is provided based on useful lives of three to
forty years, using primarily the straight-line method. Betterments, renewals and
repairs that extend the life of assets are capitalized. Repairs and maintenance
items are expensed when incurred. Depreciation expense was $1,280,801, $894,570
and $622,737 during the years ended March 31, 1997, 1996 and 1995, respectively.
 
    (f) Goodwill--Goodwill, representing the excess of purchase price and
related costs over the value assigned to the net tangible assets of businesses
acquired, was amortized on a straight-line basis over a period of two years.
Goodwill was fully amortized at March 31, 1997.
 
    (g) Federal Income Taxes--The Company accounts for income taxes using the
liability method. Under this method, deferred tax assets and liabilities
represent the estimated tax effects of future deductible or taxable amounts
attributed to differences between the financial statement carrying amounts and
the tax bases of existing assets and liabilities. This method also allows
recognition of income tax benefits for loss carryforwards, credit carryforwards
and certain temporary differences for which tax benefits have not previously
been recorded. The tax benefits recognized as assets must be reduced by a
valuation allowance where it is more likely than not the benefits may not be
realized.
 
    (h) Foreign Currency Translation--The financial statements of the Company's
non-U.S. subsidiaries whose "functional" currencies are other than U.S. dollars
are translated at current rates of exchange. Income and expense items are
translated at the average exchange rate for the year. The resulting translation
adjustments are recorded directly into a separate component of stockholders'
equity, if significant. Certain other translation adjustments and transaction
gains and losses are reported in net income in the period they are realized.
 
    (i) Investment in Partnership--International Geographics of Ontario, a
general partnership owned 70% by the Company, (the "Partnership") was dissolved
during 1996 and terminated operations during
 
                                      F-7
<PAGE>
NOTE 2--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
1997. The Company accounted for its 70 percent interest in the partnership using
the equity method. The effect of consolidating the accounts of the Partnership
would be immaterial to these consolidated financial statements. Advances between
the Company and the Partnership for working capital purposes are accounted for
as changes to investments in Partnership. The Partnership distributed the
Company's products in Canada prior to its dissolution.
 
    (j) Earnings per Common and Common Equivalent Shares--Primary earnings per
common share equals net income (loss) divided by the weighted average number of
common shares outstanding, after giving effect to dilutive stock options and
warrants. Fully diluted earnings per common share equals net income (loss) plus
after-tax interest incurred on convertible debentures divided by the weighted
average number of common shares outstanding after giving effect to dilutive
stock options, warrants and shares assumed to be issued on conversion of the
convertible debentures. There were no convertible debentures outstanding during
the year ended March 31, 1997. Fully diluted earnings per common share includes
$44,712 and $66,792 in after-tax interest on convertible debentures during the
years ended March 31, 1996 and 1995, respectively. Shares deemed outstanding for
stock options, warrants or convertible debentures are disregarded when such
terms are considered anti-dilutive or have the effect of reducing reported
losses per share.
 
    (k) Use of Estimates--The preparation of consolidated 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 at the date of the consolidated financial statements and the
reported amounts of revenues and expenses during the reporting period. Actual
results could differ from those estimates.
 
    The following significant estimates are included in the financial
statements.
 
    DEPRECIATION--Depreciation represents an expense allocation matching asset
costs to revenue earned over the estimated lives of assets owned by the Company.
Periodically, the Company re-evaluates the lives and methods of depreciation
applied to its property and equipment and considers such things as general
condition and utility, technological status and economic viability. Such
evaluations may result in the Company's revision and adjustment of asset
carrying values in relatively short-term time periods.
 
    INCOME TAX--The Company operates in a number of taxing jurisdictions and
endeavors to comply with all tax laws as applicable, consistent with minimizing
taxes paid by the Company where possible. To comply with these laws the Company
must allocate and prorate certain items of revenue and expense in addition to
establishing appropriate transfer pricing policies. These allocations and
policies are subject to scrutiny and audit which may result in the Company's
need to adjust its tax accruals and provisions as a result of its interactions
with taxing authorities.
 
    SALES RETURNS AND ALLOWANCE--The Company currently estimates an allowance
for sales returns as a percentage of sales, based on historical information.
Changes in market conditions and demand for the Company's products could result
in customers returning products in an amount greater than that currently allowed
for. Depending upon the volume of sales returns, such amounts could impact
future gross margins.
 
    INVENTORY--Gross margins on inventory sales have experienced a sharp decline
over prior years and previously reported interim periods, and certain product
lines have become slow moving and may be subject to eventual obsolescence. The
Company has recorded an estimate of the ultimate realizability of inventory in
anticipation of these factors. In addition, the Company has further developed a
program to provide substantial dealer incentives on purchases of the slow moving
product lines, and anticipates improving margins resulting from future sales
price increases and lower manufacturing costs. It is also reasonably possible,
however, that the program for sales of slow moving items will not be wholly
successful
 
                                      F-8
<PAGE>
NOTE 2--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
and anticipated changes in gross margins from lower production costs and
increased sales prices will not materialize, and, accordingly, losses could be
experienced in future periods.
 
    PROPERTY, PLANT AND EQUIPMENT--It is the Company's policy to record
property, plant and equipment and other long-lived assets at historical cost and
depreciate these assets over their expected useful life. The Company has
sustained significant losses as shown in the accompanying consolidated financial
statements and described in Note 15, and may be unable to continue as a going
concern. It is reasonably possible that the Company's estimate that it will
recover the carrying amount of long-lived assets from future operations will
change in the near term.
 
    (l) Advertising Costs--Advertising costs are charged to expense in the
period in which they occur except for direct response advertising which is
capitalized and amortized over its expected period of future benefits. Direct
response advertising consists primarily of advertisements placed with industry
related catalogs and are amortized over the period following the mailing date at
a rate approximating the rate and timing of customer response. Advertising costs
of $58,275 were capitalized during 1997, of which $40,950, remains unamortized
and is included as other assets at March 31, 1997. No advertising costs were
capitalized at March 31, 1996.
 
    The Company also participates with its customers in cooperative advertising
and other promotional programs, in which the Company reimburses the customers
for a portion of their advertising costs. Advertising expense amounted to
$1,924,442, $867,198 and $271,160 in 1997, 1996 and 1995, respectively.
 
    (m) Fair Value of Financial Instruments--Statement of Financial Accounting
Standard ("SFAS") No. 107, DISCLOSURE ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS,
requires disclosure of the fair value of financial instruments, both assets and
liabilities, recognized and not recognized, in the consolidated balance sheet of
the Company for which it is practicable to estimate fair value. The estimated
fair values of financial instruments which are presented herein have been
determined by the Company using available market information and appropriate
valuation methodologies. However, considerable judgment is required in
interpreting market data to develop estimates of fair value. Accordingly, the
estimates presented herein are not necessarily indicative of amounts the Company
could realize in a current market exchange.
 
    The following methods and assumptions were used to estimate fair value:
 
    CASH, RECEIVABLES, ACCOUNTS PAYABLE AND ACCRUED LIABILITIES--The carrying
amounts of cash, receivables, accounts payable and accrued liabilities
approximate fair value due to their short-term nature.
 
    NOTES PAYABLE AND LONG-TERM DEBT--Discounted cash flows using current
interest rates for financial instruments with similar characteristics and
maturity were used to determine the fair value of notes payable and long-term
debt.
 
    There were no significant differences as of March 31, 1997 and 1996 in the
carrying value and fair value of financial instruments.
 
    (n) New Accounting Standards--In February 1997, the Financial Accounting
Standards Board (FASB) issued Statement of Financial Accounting Standards (SFAS)
No. 128, EARNINGS PER SHARE. The new standard replaces primary and fully diluted
earnings per share with basic and diluted earnings per share. SFAS No. 128 is
required to be adopted by the Company in the year ending March 31, 1998. The
Company is studying the new accounting standard to determine its impact, and
plans to adopt SFAS 128 in the year ending March 31, 1998.
 
    In June 1997, the FASB issued SFAS No. 130, COMPREHENSIVE INCOME and SFAS
No. 131, DISCLOSURES ABOUT SEGMENTS OF AN ENTERPRISE AND RELATED INFORMATION.
SFAS No. 130 establishes standards for reporting
 
                                      F-9
<PAGE>
NOTE 2--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
and display of comprehensive income and its components. SFAS No. 131 establishes
standards for reporting about operating segments, products and services,
geographic areas, and major customers. The standards become effective for fiscal
years beginning after December 15, 1997. Management plans to adopt these
standards in the year ending March 31, 1999. Management has not determined the
effect that adoption of these standards will have on its financial condition or
reported results of operation.
 
    (o) Reclassifications--Certain prior year amounts have been reclassified to
conform to current year presentation. Such reclassifications had no effect on
previously reported earnings or financial position.
 
NOTE 3--INVENTORY
 
<TABLE>
<CAPTION>
                                                                        1997          1996
                                                                    ------------  ------------
<S>                                                                 <C>           <C>
Raw materials.....................................................  $    672,635  $  1,325,837
Work in progress..................................................     3,396,754     3,304,407
Finished goods....................................................     6,678,485     4,609,029
                                                                    ------------  ------------
                                                                      10,747,874     9,239,273
Less allowance for obsolete inventory.............................     1,290,000       100,000
                                                                    $  9,457,874  $  9,139,273
                                                                    ------------  ------------
                                                                    ------------  ------------
</TABLE>
 
NOTE 4--PROPERTY, PLANT AND EQUIPMENT
 
<TABLE>
<CAPTION>
                                                                        ACCUMULATED
                                                                        DEPRECIATION        NET BOOK VALUE
                                                                            AND       ---------------------------
                                                             COST       AMORTIZATION      1997           1996
                                                         -------------  ------------  -------------  ------------
<S>                                                      <C>            <C>           <C>            <C>
Land...................................................  $     114,563   $   --       $  114,563.00  $    114,563
Buildings..............................................      3,833,291      763,057       3,070,234     2,770,491
Machinery and equipment................................      3,024,039    1,389,021       1,635,018     1,181,242
Machinery and equipment under capital lease............      4,948,977      667,822       4,281,155     1,641,477
Display racks..........................................      2,356,205    1,200,381       1,155,824     1,066,350
Computers and software.................................        456,463      232,234         224,229       194,407
Automobiles............................................        460,447      202,107         258,340       214,231
Leasehold improvements.................................         34,757        7,967          26,790        27,792
EDP installation-in-progress, net of allowance of
  $620,759 in 1997.....................................         66,078       --              66,078        76,141
                                                         -------------  ------------  -------------  ------------
                                                         $  15,294,820   $4,462,589   $  10,832,231  $  7,288,690
                                                         -------------  ------------  -------------  ------------
                                                         -------------  ------------  -------------  ------------
</TABLE>
 
    During the last quarter of 1997, the Company recorded reserves of $620,759
for hardware, software and implementation costs classified as EDP
installation-in-progress, relating to the implementation of a new management
information system. The Company recorded the reserves in response to an
evaluation of the functionality of the new management information system,
implementation difficulties and the possible need for additional expenditures to
obtain desired operating efficiencies and requirements.
 
                                      F-10
<PAGE>
NOTE 5--OTHER ASSETS
 
<TABLE>
<CAPTION>
                                                                          1997         1996
                                                                      ------------  ----------
<S>                                                                   <C>           <C>
Equipment deposits..................................................  $    556,390  $   --
Other...............................................................       236,168      78,749
Trademarks..........................................................       109,480      80,262
Setup costs.........................................................       103,575     190,288
                                                                      $  1,005,613  $  349,299
                                                                      ------------  ----------
                                                                      ------------  ----------
</TABLE>
 
NOTE 6--FINANCING ARRANGEMENTS
 
<TABLE>
<CAPTION>
                                                                                            1997          1996
                                                                                        ------------  ------------
<S>                                                                                     <C>           <C>
Installment notes payable to a bank, fixed interest rates ranging from 8.825% to 10%,
  payable in monthly installments through November 2010, collateralized by real
  estate..............................................................................  $  2,408,948  $  2,341,057
Capital lease obligations collateralized by certain equipment and fixtures............     5,133,327     1,609,424
Installment notes payable to banks, interest rates ranging from fixed and 9.75% to
  variable rates from prime plus and 1% to prime plus 1.5%, payable in monthly
  installments through October 2000, collateralized by certain equipment..............       252,770       396,277
                                                                                        ------------  ------------
                                                                                           7,795,045     4,346,758
Less current portion..................................................................     3,472,674       656,398
                                                                                        ------------  ------------
                                                                                        $  4,322,371  $  3,690,360
                                                                                        ------------  ------------
                                                                                        ------------  ------------
</TABLE>
 
    The prime rate was 8.50% and 8.25% at March 31, 1997 and 1996, respectively.
 
    The Company has a revolving credit agreement with a bank for up to
$12,000,000, subject to borrowing base limitations of 80% of eligible accounts
receivable and 55% of inventories, net of reserves. Interest on outstanding
advances is payable monthly at the bank's prime rate, with a stated due date of
June 30, 1997. Subsequent to year end the Company received extensions of the due
date to October 31, 1997. Total outstanding advances under revolving credit
agreements were $8,649,390 and $5,322,939 at March 31, 1997 and 1996,
respectively. Subsequent to year end, the Company utilized the remaining balance
of this revolving credit facility.
 
    The Company also has installment notes with the same bank. The revolving
credit agreement and installment notes are collateralized by substantially all
of the assets of the Company. As a result of the Company's non-compliance with
covenants under the revolving credit agreement, as discussed in Note 15, the
Company is also out of compliance with debt covenants on installment notes
payable to the same lender at March 31, 1997, and accordingly, all outstanding
balances on these related financing arrangements have been classified as current
liabilities.
 
    At March 31, 1997, the terms of the agreements provide principal payments on
long-term debt and capital lease obligations as follows:
 
<TABLE>
<S>                                                 <C>
1998..............................................  $3,472,674
1999..............................................     901,459
2000..............................................     975,906
2001..............................................     991,902
2002..............................................     696,694
Thereafter........................................     756,410
                                                    ----------
                                                    $7,795,045
                                                    ----------
                                                    ----------
</TABLE>
 
                                      F-11
<PAGE>
NOTE 6--FINANCING ARRANGEMENTS (CONTINUED)
    Future minimum lease payments under capital leases together with the present
value of minimum lease payments as of March 31, 1997 are as follows:
 
<TABLE>
<S>                                                               <C>
1998............................................................  $1,249,811
1999............................................................   1,240,078
2000............................................................   1,228,210
2001............................................................   1,165,112
2002............................................................     794,023
Thereafter......................................................     815,225
                                                                  ----------
Total minimum lease payments....................................   6,492,459
Less amount representing imputed interest.......................  (1,359,132)
                                                                  ----------
Present value of minimum lease payments.........................  $5,133,327
                                                                  ----------
                                                                  ----------
</TABLE>
 
    In prior years, the Company had convertible subordinated debentures
("debentures") outstanding. The debentures were convertible at the holder's
option into common shares of the Company at a conversion rate of 904 common
shares per $1,000 principal amount of debenture. At March 31, 1996, all
debentures have been converted.
 
NOTE 7--FEDERAL INCOME TAXES
 
    The provision (benefit) for income taxes consists of the following:
 
<TABLE>
<CAPTION>
                                                                                1997         1996        1995
                                                                             -----------  ----------  -----------
<S>                                                                          <C>          <C>         <C>
Current provision (benefit)................................................  $  (459,972) $  509,679  $   117,633
Deferred provision (benefit)...............................................      404,000     125,000     (529,000)
                                                                             -----------  ----------  -----------
        Total income tax provision (benefit)...............................  $   (55,972) $  634,679  $  (411,367)
                                                                             -----------  ----------  -----------
                                                                             -----------  ----------  -----------
</TABLE>
 
The total tax provision differs from the amount computed using the statutory
federal income tax rate as follows:
 
<TABLE>
<CAPTION>
                                                                           1997           1996           1995
                                                                       -------------  -------------  -------------
<S>                                                                    <C>            <C>            <C>
Tax expense (benefit) at statutory rate..............................  $  (2,721,000) $     635,000  $     114,000
Exercise of stock options and warrants...............................       (758,000)      --             --
Other differences, net...............................................       (350,972)          (321)       (64,367)
Change in valuation allowance for deferred tax assets................      3,774,000       --             (461,000)
                                                                       -------------  -------------  -------------
        Total income tax provision (benefit).........................  $     (55,972) $     634,679  $    (411,367)
                                                                       -------------  -------------  -------------
                                                                       -------------  -------------  -------------
</TABLE>
 
                                      F-12
<PAGE>
NOTE 7--FEDERAL INCOME TAXES (CONTINUED)
The significant components of deferred income tax expense (benefit) are as
follows:
 
<TABLE>
<CAPTION>
                                                                                1997          1996        1995
                                                                            -------------  ----------  -----------
<S>                                                                         <C>            <C>         <C>
Change in valuation allowance for deferred tax assets.....................  $   3,774,000  $   --      $  (461,000)
Depreciation of plant and equipment.......................................        244,000      88,000       43,000
Change in tax credit carryforward.........................................         34,000     105,000     (137,000)
Amortization of goodwill and intangibles..................................         31,000     (31,000)    (175,000)
Change in charitable contributions carryforward...........................         (4,000)     31,000        2,000
Other differences, net....................................................         (4,000)    (20,000)      13,000
Change in allowance for doubtful accounts.................................         (8,000)    (38,000)       4,000
Increase in cash surrender value of life insurance........................        (35,000)     --          --
Increase in accounts for financial reporting purposes.....................        (50,000)     --          --
Inventory differences.....................................................       (416,000)    (10,000)      43,000
Effect of net operating loss carryforwards................................     (3,162,000)     --          139,000
                                                                            -------------  ----------  -----------
        Total deferred income tax expense (benefit).......................  $     404,000  $  125,000  $  (529,000)
                                                                            -------------  ----------  -----------
                                                                            -------------  ----------  -----------
</TABLE>
 
    The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and deferred tax liabilities are as follows:
<TABLE>
<CAPTION>
                                                                                           1997           1996
                                                                                       -------------  ------------
<S>                                                                                    <C>            <C>
DEFERRED TAX ASSETS
Net operating losses, before carryback...............................................  $   3,162,000  $    --
Inventory, principally due to additional cost inventoried for tax purposes and
  financial statement allowances.....................................................        475,000        59,000
Goodwill and intangible assets, principally due to amortization differences..........        349,000       380,000
Accruals for financial reporting purposes............................................         71,000        21,000
Alternative minimum tax credit carryforwards.........................................         70,000       104,000
Accounts receivable, due to allowance for doubtful accounts..........................         58,000        50,000
Cash surrender value of life insurance...............................................         35,000       --
Other differences, net...............................................................         12,000         4,000
Income tax benefit related to exercise of stock options and warrants.................       --             758,000
                                                                                       -------------  ------------
  Net deferred tax assets............................................................      4,232,000     1,376,000
DEFERRED TAX LIABILITIES
Plant and equipment, principally due to depreciation differences.....................        458,000       214,000
                                                                                       -------------  ------------
        Net deferred tax assets before valuation allowance...........................      3,774,000     1,162,000
Valuation allowance..................................................................     (3,774,000)      --
        Net deferred tax assets......................................................  $    --        $  1,162,000
 
At March 31, 1997 and 1996, the Company's net deferred tax assets are presented as
  follows:
 
<CAPTION>
                                                                                           1997           1996
                                                                                       -------------  ------------
<S>                                                                                    <C>            <C>
Current deferred tax assets..........................................................  $    --        $    970,000
Long-term deferred tax assets........................................................       --             192,000
                                                                                       $    --        $  1,162,000
                                                                                       -------------  ------------
                                                                                       -------------  ------------
</TABLE>
 
    Based on the Company's current operating income and expectations for the
future, management determined that future operating and taxable income may not
be sufficient to fully recognize all deferred tax assets existing at March 31,
1997. As a result, the carrying value of the net deferred tax asset was
 
                                      F-13
<PAGE>
NOTE 7--FEDERAL INCOME TAXES (CONTINUED)
decreased by $3,774,000 at March 31, 1997. This decrease was recognized as an
income tax provision during the year ended March 31, 1997.
 
    At March 31, 1997, the Company has alternative minimum tax credit
carryforwards of approximately $70,000 which are available to reduce future
regular federal income taxes over an indefinite period. Net operating loss
carryforwards approximating $6,800,000 are available to offset future taxable
income through 2012. In addition, net operating losses on foreign operations of
approximately $1,000,000 are available to the Company subject to foreign tax
rules.
 
NOTE 8--STOCKHOLDERS' EQUITY
 
    STOCK OPTION AND INCENTIVE PLANS--  As of March 31, 1997, the Company had
reserved 1,000,000 shares of common stock for issuance to key employees,
officers and directors pursuant to the 1996 Stock Option Plan. Options granted
under the Plan qualify as incentive stock options and will generally not be
taxable to the holder until the share subject to the option is ultimately sold
by the holder of the option. There were no shares granted pursuant to this plan
as of March 31, 1997. Options to purchase the Company's common stock are granted
at a price equal to or greater than the market price of the stock at the date of
grant, and are exercisable upon issuance and regulatory approval. All options
expire no more than ten years after the date of grant. Prior to the formation of
the 1996 Stock Option Plan, the Company granted nonqualified stock options on a
case by case basis as deemed appropriate by the Board of Directors.
 
    Pro forma information regarding net income and earnings per share is
required by Statement of Financial Accounting Standards No. 123 ACCOUNTING FOR
STOCK-BASED COMPENSATION. The pro forma information recognizes, as compensation,
the value of stock options granted using an option valuation model. Pro forma
earnings per share amounts also reflect an adjustment for an assumed purchase of
stock from proceeds deemed obtained from the issuance of stock options. The fair
value for options issued in 1996 is estimated at $181,000, net of tax. There
were no options granted in 1997 and therefore no presentation is required for
1997.
 
    The following assumptions were used to estimate the fair value of the
options:
 
<TABLE>
<CAPTION>
                                                                                        1996
                                                                                      ---------
<S>                                                                                   <C>
Risk-free interest rate.............................................................    6.26   %
Dividend yield rate.................................................................     --    %
Price volatility....................................................................     .6787
Weighted average expected life of options...........................................     1.60 yr.
</TABLE>
 
    Management believes that the assumptions used in the option pricing model
are highly subjective and represent only one estimate of possible value, as
there is no active market for the options granted. The fair value of the options
granted in 1996 are recognized in the period issued because they are immediately
exercisable.
 
                                      F-14
<PAGE>
NOTE 8--STOCKHOLDERS' EQUITY (CONTINUED)
 
    Pro forma disclosures:
 
<TABLE>
<CAPTION>
                                                                                      1996
                                                                                  ------------
<S>                                                                               <C>
Net income as reported..........................................................  $  1,232,024
Additional compensation for fair value of stock options.........................  $    181,000
Pro forma net income............................................................  $  1,051,024
Pro forma earnings per share
    Primary.....................................................................  $        .15
    Assuming full dilution......................................................  $        .15
</TABLE>
 
<TABLE>
<CAPTION>
                                                                  NONQUALIFIED
                                                                  COMMON STOCK   OPTION PRICE
                                                                    OPTIONS      PER SHARE ($)
                                                                 --------------  -------------
<S>                                                              <C>             <C>
BALANCE, March 31, 1994........................................       451,000
           Granted.............................................       129,000      .84 to 1.03
           Exercised...........................................      (128,000)     .92 to 1.03
                                                                 --------------
BALANCE, March 31, 1995........................................       452,000
           Granted.............................................       496,000     1.47 to 3.57
           Exercised...........................................      (628,000)     .73 to 2.56
                                                                 --------------
BALANCE, March 31, 1996........................................       320,000
           Granted.............................................        --
           Exercised...........................................      (144,000)     .73 to 2.56
           Expired.............................................        (2,500)            3.04
                                                                 --------------
BALANCE, March 31, 1997........................................       173,500
                                                                 --------------
                                                                 --------------
</TABLE>
 
<TABLE>
<CAPTION>
                                                  OPTIONS OUTSTANDING
                                     ---------------------------------------------        OPTIONS EXERCISABLE
                                                       WEIGHTED                     --------------------------------
                                                        AVERAGE         WEIGHTED                      WEIGHTED
RANGE OF                                               REMAINING         AVERAGE                       AVERAGE
EXERCISE                               NUMBER         CONTRACTUAL       EXERCISE      NUMBER          EXERCISE
PRICES                               OUTSTANDING         LIFE             PRICE     EXERCISABLE         PRICE
-----------------------------------  -----------  -------------------  -----------  -----------  -------------------
<S>                                  <C>          <C>                  <C>          <C>          <C>
$ Up to 2..........................      86,000         3.07 years      $    1.51       86,000        $    1.51
  2 to 4...........................      87,500         3.54 years           3.04       87,500             3.04
</TABLE>
 
    In addition, warrants to purchase 1,342,293 and 24,000 shares of common
stock at prices ranging from $.77 to $6.50, and $.75 to $4.77, were outstanding
as of March 31, 1997 and 1996, respectively. These warrants are exercisable upon
issuance and expire from April 15, 1998 to December 1, 2001. The exercise price
of the warrants was equal to the market price of the stock at the date the
warrants were issued.
 
    During the current year the Company's shareholders and its Board of
Directors approved a resolution to increase the Company's authorized shares from
ten million to one hundred million. Subsequent to year end, the Company
commenced preparation of Articles of Amendment amending the Articles of
Incorporation in accordance with this resolution. The Company anticipates filing
the Articles of Amendment during fiscal year ended 1998.
 
NOTE 9--RELATED PARTY TRANSACTIONS
 
    On September 15, 1995, officers and directors converted debentures in an
aggregate face amount of $200,000 into 219,178 common shares. The debentures
were convertible at the holder's option into
 
                                      F-15
<PAGE>
NOTE 9--RELATED PARTY TRANSACTIONS (CONTINUED)
common shares of the Company at Cdn. $1.25 per share, to a maximum of 219,178
common shares. There is no remaining balance of debentures outstanding at March
31, 1997.
 
    The Company issued $996,000 of convertible debentures payable to certain
officers and directors of the Company on September 26, 1995. The debentures were
convertible at the holder's option into common shares of the Company at Cdn.
$4.45 per share, to a maximum 274,233 common shares. On December 22, 1995, these
debentures were converted into 274,233 common shares, and are no longer
outstanding.
 
    At March 31, 1996, certain officers and directors had advanced the Company
$1,264,711 in the form of uncollateralized notes payable. The notes are payable
on demand and are classified as current liabilities. Interest on these notes are
payable monthly at the rate of prime plus 1%. As of March 31, 1997, the balance
remaining on these notes payable to a certain officer totaled $850,000. The
outstanding balance at March 31, 1997 was paid in full subsequent to year end.
 
    Total interest costs associated with these notes and debentures was
approximately $92,000 for the year ended March 31, 1997 and $60,000 during each
of the years ended March 31, 1996 and 1995.
 
    On January 23, 1996, the Company completed a private placement of 500,000
common shares to officers and directors of the Company at a price of Cdn. $5.75.
Total cash received, net of issuance costs, totaled $1,906,100.
 
    Effective April 1, 1996, the Company transferred to Geographics Marketing
Canada, Inc., a wholly-owned subsidiary, the exclusive rights to market and
distribute the Company's products in Canada. These marketing and distribution
rights were previously maintained by Martin Distribution, Inc. ("Martin"), a
company related through common directorship. As such, the financial results of
Geographics Marketing Canada, Inc. have been included in the consolidated
results of Geographics, Inc. for fiscal year ended March 31, 1997, with all
material intercompany transactions eliminated.
 
    Sales to Martin amounted to $2,854,935 and $1,056,250 during the years ended
March 31, 1996 and 1995, respectively. Trade receivables due from Martin
amounted to $899,422 at March 31, 1996. No sales to Martin were made during the
year ended March 31, 1997, and no amounts were due from Martin as of that date.
 
    International Geographics of Ontario recorded purchases from Martin in the
aggregate amount of $118,659 and $261,765 during the years ended March 31, 1996
and 1995, respectively. No purchases were made from Martin during the year ended
March 31, 1997.
 
    The Company has approximately $210,000 due to Guildmark, Inc., a company
related through common ownership, included in accounts payable at March 31,
1997.
 
NOTE 10--EMPLOYEE BENEFIT PLANS
 
    On April 1, 1995, the Board of Directors approved a retirement savings plan,
which permits eligible employees to make contributions to the plan on a pretax
salary reduction basis in accordance with the provisions of Section 401(k) of
the Internal Revenue Code. The Company makes a matching stock contribution of
10% of the employee's pretax contribution. Eligible employees may contribute up
to 18% of their pretax compensation. Total expense related to this plan was
$36,296 and $20,619 during the year ended March 31, 1997 and 1996, respectively.
 
NOTE 11--COMMITMENTS AND CONTINGENCIES
 
    LEASES--The Company conducts certain operations in leased facilities, under
leases that are classified as operating leases for financial statement purposes.
The leases provide for the Company to pay real estate
 
                                      F-16
<PAGE>
NOTE 11--COMMITMENTS AND CONTINGENCIES (CONTINUED)
taxes, common area maintenance, and certain other expenses. Lease terms,
excluding renewal option periods exercisable by the Company at escalated rents,
expire between August 1996 and February 2006. In addition to the base lease
term, the Company has various renewal option periods. In addition, certain
equipment used in the Company's operations is also leased under operating
leases. A schedule of noncancelable operating lease commitments are as follows:
 
<TABLE>
<CAPTION>
<S>                                                             <C>
1998..........................................................  $  365,103
1999..........................................................     152,253
2000..........................................................      67,403
2001..........................................................      46,164
                                                                ----------
                                                                $  630,923
                                                                ----------
                                                                ----------
</TABLE>
 
    EQUIPMENT DEPOSITS--On January 17, 1997, the Company placed an order for a
printing press and has a deposit of $219,000 which is included in other assets
at March 31, 1997. The cost of the press is approximately $2,190,000. Upon
taking delivery of the press during the first quarter of fiscal year 1998, the
Company obtained capital lease financing for this equipment.
 
    LITIGATION--In July 1997, three related class action suits were filed in the
United States District Court for the Western District of Washington against the
Company, its President, Chief Executive Officer and Chairman of its Board of
Directors, and the Company's former Vice President of Finance and Chief
Financial Officer (the "Defendants"). The suits allege that the Defendants
inflated the price of the Company's stock by intentionally or recklessly making
misrepresentations or omissions which deceived the public about the Company's
financial condition and prospects, thus misleading shareholders who purchased
shares between August 6, 1996 and June 12, 1997. The complaints seek damages in
unstated amounts.
 
    Management intends to vigorously defend these complaints, however the
ultimate outcome of these actions cannot be predicted with certainty. The
Company owns insurance policies with aggregate limits of $5 million, applicable
to certain losses including costs of defense. These insurance policies have an
aggregate self-insurance retention of $150,000. If the Company is determined to
be liable for, or otherwise agrees to settle or compromise, any claim, there is
no assurance that any or all of such liability, compromise or settlement would
be covered by the Company's insurance. If the amount of insurance is
insufficient, or if the policies are determined to be inapplicable, the Company
could be required to make a payment in the form of cash, indebtedness or equity
securities. A payment of this nature could have a negative material impact on
the Company's capital resources and issuance of additional equity securities
could have a negative material impact on the Company's existing shareholders.
The defense of this or any pending or future litigation, investigations or
disputes could result in substantial legal and professional costs to the
Company.
 
    There are various additional claims, lawsuits, and pending actions against
the Company incident to the operations of its business. It is the opinion of
management that the ultimate resolution of these matters and any future
unidentified claims will not have a material effect on the Company's financial
position, results of operations or liquidity.
 
    CONTINGENCY FOR YEAR 2000 ISSUES--The Company has not yet made an assessment
of the impact of the year 2000 on their computer software, hardware and other
systems, including those of vendors, customers and other third parties. The
potential expense to ensure that all of the computer and other systems are year
2000 compliant cannot be determined until such an assessment is made.
 
                                      F-17
<PAGE>
NOTE 11--COMMITMENTS AND CONTINGENCIES (CONTINUED)
    EMPLOYMENT CONTRACTS--Subsequent to year end, the Company entered into
employment contracts with certain employees for a period of up to three years.
The contracts provide for severance payments in the event these employees
terminate employment for certain specified reasons during the contract period.
 
NOTE 12--INFORMATION ABOUT CREDIT RISK AND BUSINESS CONCENTRATIONS
 
    Assets for which the Company has credit risk include trade accounts
receivable, which amounted to $6,654,500 and $5,873,578 at March 31, 1997 and
1996, respectively. The Company's trade customers are concentrated in the retail
office products industry and mass market retail stores. Sales to four major
customers approximated 74%, 80% and 65% of total sales for the years ended March
31, 1997, 1996 and 1995, respectively. Amounts due from three customers
approximated 89% and 75% of the total accounts receivable at March 31, 1997 and
1996, respectively.
 
    The Company expects that sales to relatively few customers will continue to
account for a high percentage of its net sales in the foreseeable future and
believes that its financial results depend in significant part upon the success
of these few customers. Although the composition of the group comprising the
Company's largest customers may vary from period to period, the loss of a
significant customer or any reduction in orders by any significant customers,
including reductions due to market, economic or competitive conditions in the
designer stationary or specialty papers industry, may have a material adverse
effect on the Company's business, financial condition and results of operations.
 
    The following table represents approximate sales and trade accounts
receivable related to the geographic regions in which the Company operates.
<TABLE>
<CAPTION>
                                                                     1997
                                                    TOTAL   UNITED STATES   CANADA   OTHER
                                                    -----   -------------   ------   -----
<S>                                                 <C>     <C>             <C>      <C>
Sales.............................................   100%        78%         16%      6%
                                                    -----        ---        ------   -----
                                                    -----        ---        ------   -----
Accounts receivable...............................   100%        86%          9%      5%
                                                    -----        ---        ------   -----
                                                    -----        ---        ------   -----
 
<CAPTION>
 
                                                                     1996
                                                    TOTAL   UNITED STATES   CANADA   OTHER
                                                    -----   -------------   ------   -----
<S>                                                 <C>     <C>             <C>      <C>
Sales.............................................   100%        86%         13%      1%
                                                    -----        ---        ------   -----
Accounts receivable...............................   100%        83%         15%      2%
                                                    -----        ---        ------   -----
                                                    -----        ---        ------   -----
<CAPTION>
 
                                                                     1995
                                                    TOTAL   UNITED STATES   CANADA   OTHER
                                                    -----   -------------   ------   -----
<S>                                                 <C>     <C>             <C>      <C>
Sales.............................................   100%        89%         10%      1%
                                                    -----        ---        ------   -----
                                                    -----        ---        ------   -----
Accounts receivable...............................   100%        85%         12%      3%
                                                    -----        ---        ------   -----
                                                    -----        ---        ------   -----
</TABLE>
 
    The Company purchases goods from approximately 700 vendors. One vendor
accounted for a significant portion of the Company's total merchandise purchases
during the years ended March 31, 1997, 1996 and 1995. The Company purchases
commodity paper and other related products from this broker/ vendor that could
be supplied by other sources. There can be no assurances that the relationship
between the Company and this vendor will continue and the loss of the purchasing
power the Company has established with this company would likely have a material
adverse effect on the Company. The Company does not consider itself dependent on
any single source for materials to manufacture its products.
 
                                      F-18
<PAGE>
NOTE 13--SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
 
<TABLE>
<CAPTION>
                                                              1997        1996        1995
                                                           ----------  ----------  ----------
<S>                                                        <C>         <C>         <C>
Cash paid during the year for interest...................  $  995,691  $  812,416  $  465,377
                                                           ----------  ----------  ----------
                                                           ----------  ----------  ----------
Net cash paid (received) during the year for income
  taxes..................................................  $  304,303  $  173,034  $  (50,000)
                                                           ----------  ----------  ----------
                                                           ----------  ----------  ----------
</TABLE>
 
NOTE 14--QUARTERLY INFORMATION
 
    During the fourth quarter, the Company determined that inventories were
overstated by approximately $5.6 million and that a material adjustment was
therefore required. Approximately $4.6 million of the adjustment was required to
reflect the results of the year end physical counts of inventories on hand. The
remaining $1 million was recorded to reflect the Company's estimate of reserves
required for obsolete and slow-moving items. Although the Company believes that
the overstatements occurred over the course of fiscal 1997, it has determined
that, given the complexity of the issues involved, it is not possible to
allocate accurately the adjustment to any interim periods. Accordingly, the
quarterly information for fiscal 1997 has not been restated to reflect an
allocation of the adjustment.
 
    In light of the losses incurred during fiscal 1997, the Company decided to
provide a valuation allowance on all of its deferred tax assets. This valuation
allowance was recorded in the fourth quarter and increased the net loss by
approximately $3,774,000.
 
NOTE 15--LIQUIDITY AND OPERATIONS
 
    As shown in the accompanying financial statements, the Company incurred a
net loss of $7,950,301 for the year ended March 31, 1997. As a result of this
loss, a decline in gross profit margins, the Company's failure to comply with
certain covenants under its line of credit and other factors, the report of the
Company's auditors states that there is substantial doubt about the Company's
ability to continue as a going concern. The accompanying financial statements
have been prepared assuming the Company will continue as a going concern and do
not include any adjustments to reflect the possible future effects on the
recoverability and classification of assets and liabilities that may result from
this uncertainty.
 
    The amount and timing of the working capital requirements of the Company and
the Company's ability to continue as a going concern will be determined by
numerous factors, including the level of gross margin on future sales, the
outcome of outstanding contingencies and disputes including pending lawsuits,
payment terms achieved by the Company and the timing of capital expenditures.
There can be no assurance that borrowings under the Company's revolving credit
agreement will remain available or that borrowings available under the Company's
revolving credit agreement together with the Company's other anticipated sources
of working capital will be sufficient to meet the Company's other working
capital requirements.
 
    The Company has retained investment banking counsel to advise and assist it
in evaluating methods of generating capital including the possible issuance of
additional equity securities and the possible sale of one or more business
segments. If the Company is unable to obtain sufficient funds to satisfy its
cash requirements, it could be forced to curtail operations, dispose of assets
or seek extended payment terms from its vendors. There can be no assurance that
the Company would be able to reduce expenses or successfully complete other
steps necessary to continue as a going concern.
 
                                      F-19
<PAGE>
NOTE 16--STOCK EXCHANGE LISTING REQUIREMENTS
 
    The Nasdaq Stock Market, Inc. and the Toronto Stock Exchange have notified
the Company of possible action to remove the Company's listing from their
respective stock exchanges. The Ontario Securities Commission has also issued a
cease trading order. Such actions could restrict marketability of the Company's
common stock.
 
                                      F-20
<PAGE>
                          INDEPENDENT AUDITOR'S REPORT
 
To the Stockholders
Geographics, Inc.
 
We have audited the consolidated financial statements of Geographics, Inc. as of
March 31, 1997 and 1996 and for each of the three years in the period ended
March 31, 1997, and have issued our report thereon dated August 26, 1997; such
financial statements and report are included elsewhere in this Form 10-K. Our
audits also included the financial statement schedules of Geographics, listed in
Item 14. These financial statements schedules are the responsibility of the
Company's management. Our responsibility is to express an opinion based on our
audits. In our opinion, such financial statement schedules, when considered in
relation to the basic financial statements taken as a whole, present fairly in
all material respects the information set forth therein.
 
/s/ Moss Adams LLP
Bellingham, Washington
August 26, 1997
 
                                      S-1
<PAGE>
                                                                     SCHEDULE II
 
                               GEOGRAPHICS, INC.
                       VALUATION AND QUALIFYING ACCOUNTS
 
<TABLE>
<CAPTION>
                                                                               DEDUCTIONS             BALANCE AT
                                             BALANCE AT              ------------------------------  MARCH 31 ALL
YEAR ENDED MARCH 31                           APRIL 1    ADDITIONS      COLLECTIONS     WRITE-OFFS     CURRENT
-------------------------------------------  ----------  ----------  -----------------  -----------  ------------
<S>                                          <C>         <C>         <C>                <C>          <C>
Allowance for Doubtful Accounts, Sales
  Returns and Cash Discounts
 
1997.......................................  $  146,926     772,221                        104,306   $    814,841
 
1996.......................................  Amounts not material for reporting purposes
 
1995.......................................  Amounts not material for reporting purposes
 
Allowance for Obsolete Inventory
 
1997.......................................  $  100,000   1,190,000                                  $  1,290,000
 
1996.......................................  Amounts not material for reporting purposes
 
1995.......................................  Amounts not material for reporting purposes
</TABLE>
 
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