<PAGE>   1
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                   FORM 10-K/A
                                 AMENDMENT NO.1

                                                                                
         ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
         EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED MARCH 31, 1997

                         COMMISSION FILE NUMBER 1-13588

                             THE WIDECOM GROUP INC.
             (Exact Name of Registrant as specified in its Charter)

       ONTARIO, CANADA                                         98-0139939
(State or other jurisdiction of                            (I.R.S. Employer
incorporation or organization)                             Identification No.)

  267 MATHESON BOULEVARD EAST, MISSISSAUGA, ONTARIO, CANADA       L4Z 1X8
         (Address of principal executive offices)               (Zip Code)

                                 (905) 712-0505
              (Registrant's telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

                                                        NAME OF EACH EXCHANGE ON
        TITLE OF EACH CLASS                                  WHICH REGISTERED
        -------------------                                  ----------------
COMMON STOCK, PAR VALUE $.01 PER SHARE                   NASDAQ SMALL CAP MARKET
WARRANTS TO PURCHASE COMMON STOCK                        BOSTON STOCK EXCHANGE


Securities registered pursuant to Section 12(g) of the Act:


        TITLE OF EACH CLASS
               NONE

         Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter periods 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.

         The aggregate market value of the voting and non-voting common equity
held by non-affiliates of the registrant based upon the closing sale price of
the registrant's common stock on the Nasdaq SmallCap Market as of July 7, 1997
was approximately $9,948,089.

         The number of shares outstanding of registrant's common stock as of
June 30, 1997 was 5,565,251 shares


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All references to "dollar" or "$" in this Annual Report are to United States
dollars.

                                     PART I

DESCRIPTION OF BUSINESS

THE COMPANY

         The Widecom Group Inc. (the "Company") was incorporated in Ontario,
Canada, June 15, 1990. The Company designs, assembles and recently commenced
limited marketing of high-speed, high-performance document systems which
transmit, receive, print, copy and/or archive wide format documents, such as
blueprints, schematics, newspaper layouts and other mechanical and engineering
drawings. The Company's products include WIDEfax Scan, a 36" wide format
scanner, and WIDEfax Plotter, a 36" wide format plotter (printer). The Company
also markets a WIDEfax Modular Unit which incorporates a WIDEfax Scan module, a
WIDEfax Plotter module, optional internal modems and software to permit the unit
to interface with a personal computer and combine scanning, printing, facsimile
and copying functions in one unit. The Company has only recently commenced
commercialization activities which, to date, have resulted in only limited
product sales.

         The Company designed its WIDEfax document systems in response to
perceived market demand for systems which facilitate the efficient management
and transmission of wide format documents, particularly for architectural,
engineering and construction applications. The Company also markets its products
for use by manufacturers in the garment and graphic arts industries, utilities
and government agencies and for applications in newspaper and advertising
industries. Although the markets for the Company's products are highly
specialized and the Company has not conducted any formal market studies as to
the potential demand for wide format document systems, the Company believes that
the markets for wide format document systems are emerging as a result of the
increasing demand for systems which can more efficiently scan, copy, print,
transmit, receive and archive wide format documents. The Company believes that
its products provide attractive alternatives to traditional methods employed to
permit multiple users to view wide format documents, such as the use of an
overnight courier to deliver copies of a document or microfiche reproduction.

         On October 2nd, 1996, the Company formed a research and development
consortium known as 3994340 Canada Inc., doing business as Technologies
NovImage, with an economic development agency of the Province of Quebec. The
Company is now conducting all of its research and development activities through
NovImage, which activities are expected to qualify for partial funding from
governmental agencies.

PRODUCTS

  WIDEfax Scan and SLC436-C Color Scanner

         The WIDEfax Scan and SLC436-C color scanner are wide format scanners
capable of scanning a document up to 36" wide. The Company's scanners interface
with a personal computer to enable the user to scan images into the personal
computer for display, editing and archiving. The WIDEfax Scan provides the
capacity of scanning monochromatic images only. As the next generation of the
WIDEfax Scan, the SLC436-C was introduced in May of 1996, as a low-cost wide
format color scanner capable of scanning 36" by 48" documents at a resolution of
400 dots per square inch ("dpi") in under thirty seconds for monochrome images,
and under eight minutes for full color images. Deliveries of the SLC436-C color
scanner commenced during the third quarter of 1996.

         The Company's scanners incorporate the Company's single line contact
scanner technology to capture the image of a wide format document. The contact
scanner consists of a 36" fiber optic array, 8mm "image sensor chips" aligned to
create a 36" length


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light sensor, a 36" light emitting diode ("LED") array and software designed to
enhance the scanned image by removing deteriorations from the document being
reproduced and to interface the scanner with a personal computer. The fiber
optic array acts as a lens and focuses the image on the image sensor chips which
read the image. Because the Company's image sensor chips contain pixels larger
than those of chips used in other scanners, the Company's contact scanners
require less light exposure and, therefore, operate faster than other scanners.
SLC436-C reads an image in increments of 400 dpi, whereas standard format
facsimile machines read images in increments of 200 dpi and other wide format
scanners read images in increments ranging from 138 dpi to 417 dpi. Higher dpi
improves the reliability of the scanned image because the scanner recognizes
greater image detail.

         The software incorporated in the SLC436-C improves scanned images by
removing background discoloration and enhancing faded images. This capability
improves the image quality of documents which are stained or which have faded
over time. The Company's enabling software permits SLC436-C to interface with a
personal computer, as well as permit the user to perform a variety of scanning,
editing, viewing and transmission functions.

         Traditional document scanners employ camera based lenses capable of
scanning up to a 12" width document. Traditional wide format scanners employ
multiple camera lenses to capture portions of a document's image and integrate
the images to reproduce a wide format document. The reproduced document can be
distorted by camera based scanners, particularly at the edges, and misaligned as
a result of the use of multiple lenses, thereby limiting the reliability and
usefulness of the reproduced document. The Company believes that its single line
contact scanner technology and software enable its products to scan and
reproduce such documents with improved clarity and accuracy.

  WIDEfax Plotter

         WIDEfax Plotter is a wide format plotter capable of printing a document
up to 36" wide x 200' in length. WIDEfax Plotter interfaces with a personal
computer to enable the user to print images directly from the personal computer.
WIDEfax Plotter is sold with an optional internal modem which enables WIDEfax
Plotter to receive facsimile transmissions of wide format documents. WIDEfax
Plotter prints wide format documents on thermal paper or other thermal medium,
such as mylar and matte film paper.

         WIDEfax Plotter incorporates thermal print heads which consist of an
array of pixels. When energy passes through a pixel, the pixel heats up and
changes the color of the thermal paper in contact with that pixel to reproduce a
document's image. WIDEfax Plotter reproduces the image of a standard size wide
format document in approximately 30 seconds, in increments of 200 dpi.

         The Company is currently developing a thermal transfer plain paper
plotter which is designed to print an image in increments of 400 dpi. The
Company has developed print heads which will enable the proposed plotter to
print in increments of 400 dpi. This plotter is being designed to incorporate a
thermal transfer ribbon coated with a wax-like printing substance which, when
heated by energy passing through the pixels on the print head, melts onto the
paper to reproduce the document's image. The plotter, without the thermal
transfer ribbon, would function as a thermal plotter. The Company has developed
a prototype of the thermal transfer plain paper plotter and started assembling
the first pre-production models during the third quarter of 1996. The Company
expects first deliveries of the production models in the third quarter of 1997.

  WIDEfax Modular Unit

         WIDEfax Modular Unit consists of a WIDEfax Scan module and WIDEfax
Plotter module which are integrated into one unit. Together, these modules
perform scanning, printing and copying functions. When these modules are
combined with optional internal modems and enabling software to interface with a
personal computer, WIDEfax Modular Unit


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performs the functions of each module, as well as those of a wide format copier
and facsimile machine. The user of a WIDEfax Scan or a WIDEfax Plotter can
upgrade either machine to a WIDEfax Modular Unit by purchasing and connecting
the other module. Upon introducing WIDEfax Modular Unit in May 1994, the Company
discontinued marketing of its 36" WIDEfax facsimile machine, which accounted for
approximately 89.1% of the Company's product sales for the year ended March 31,
1994. For the years ended March 31, 1995, 1996 and 1997 sales of the WIDEfax
Modular Unit accounted for approximately 67.0%, 35.2%and 13.9%, respectively, of
the Company's product sales.

         The Company plans to incorporate the thermal transfer plain paper
plotter if it is successfully introduced into its WIDEfax Modular Unit, as well
as market the plotter as a separate product. The Company believes that
incorporating the thermal transfer plain paper plotter into WIDEfax Modular Unit
will facilitate the positioning of this product as an attractive entry in the
wide format copier market. The Company also plans to sell the 400 dpi print
heads as a separate component to other manufacturers upon introduction of this
plotter.

  Software

         The Company has developed and markets two applications software
packages, WIDEView, designed to enhance the user's document imaging
capabilities, and SLC-OVLY, which enables the Company's WIDEfax products to
interface with personal computers operating certain CAD software.

         In May 1996, the Company introduced its Image Database File Management
System ("IDF/MS"), a software package designed to provide for wide format
document distribution across the Internet. The IDF/MS provides architects,
engineers and other users remote access to image databases containing wide
format images which previously could not be readily distributed on the Internet.
The Company believes that IDF/MS will be particularly useful to architects,
engineers, and real estate developers in connection with the bidding on proposed
projects by allowing immediate access to engineering documents and plans without
the cost and delay associated with the copying, packaging and delivery of such
documents and plans.

  Accessories

         The Company sells several accessories for use in connection with its
WIDEfax products, including various types of paper and film. Sales of
accessories have not been material to date and are not expected to be material
in the future.

MARKETING AND SALES

         The Company's primary marketing strategy is to sell its products in
targeted commercial markets in which wide format document systems are believed
to have potential for significant applications, principally architectural,
engineering and construction firms, for which reproduction, archiving and
transmission of wide format documents are essential. The Company also markets
its products for use by manufacturers in the garment, and other industries,
utilities and government agencies and applications in newspapers and advertising
industries. The Company believes that its products are used by consumers in
these markets for a variety of applications, including the transmission of
construction plans, architectural drawings, newspaper and advertising layouts
and clothing patterns.

         The Company has established strategic marketing relationships by
engaging independent distributors and dealers to market its products in various
regions throughout the United States and in foreign markets. As of March 31,
1997, the Company had arrangements with approximately 87 distributors, dealers
and sales agents (collectively, "distributors"), of which 72 arrangements are
pursuant to written agreements. The Company's agreements with its distributors
typically are for a term of two to three years and grant the distributor the
right to market the Company's products


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within a specified territory during the term of the Agreement, provided that the
distributor satisfies minimum purchase requirements. Most of the Company's
distributors have not satisfied the applicable minimum purchase requirements, in
many cases because the Company has been unable to fulfill all purchase orders
from the distributors. The Company sells products to distributors at discounts
ranging from 25% to 40% of the end user price of the products. For the years
ended March 31, 1995, 1996 and 1997, the Company's five largest distributors
accounted for approximately 41.8% , 32.8% and 49.9%, respectively, of the
Company's product sales. The Imtec Group Ltd. of England represents 27.5% of the
Company's sales for the fiscal year ended March 31, 1997. During the years ended
March 31, 1995, 1996 and 1997, sales by distributors accounted for approximately
82.3%, 83.1% and 96.4% of the Company's product sales.

         The Company also markets its products in the United States and Canada
through its in-house marketing staff of seven persons. The Company has one sales
person and one service support engineer at each of its sales offices in Atlanta
Georgia, Cleveland Ohio, Pittsburgh Pennsylvania and Big Bear Lake California;
in addition to its main sales office in Mississauga, Ontario. The staff in each
of these offices is responsible for marketing and servicing the Company's
products in its respective region through dealers and distributors.

         A substantial portion of the Company's sales have been made to foreign
markets, primarily the Middle East and Asia. The following table sets forth, for
the periods indicated, the amount of the Company's sales by geographic region
expressed as a dollar amount and as a percentage of product sales for such
periods:

<TABLE>
<CAPTION>
                                                  YEAR ENDED MARCH 31,
                                1995                        1996                        1997
                                ----                        ----                        ----
REGION                 AMOUNT          %           AMOUNT           %           AMOUNT           %
                       ------         ---          ------          ---          ------          ---
<S>                 <C>              <C>         <C>              <C>         <C>             <C> 
United States       $  723,064        44.5       $  730,055        43.8         467,766        27.9
Middle East            394,399        24.3          335,682        20.1         346,595        20.6
Asia                   312,233        19.2           80,576         4.8         266,345        15.9
Europe                  78,879         4.8          464,000        27.9         475,551        28.3
Canada                 116,666         7.2           56,032         3.4         122,676         7.3
                    ----------       -----       ----------       -----       ---------       -----
Total               $1,625,241       100.0       $1,666,345       100.0       1,678,933       100.0
                    ==========       =====       ==========       =====       =========       =====
</TABLE>

         The Company has started to aggressively market and advertise its
products since the introduction of the SLC436-C color scanner. Within the last
year, along with recruitment of additional sales and service staff, the Company
has placed advertisements in trade publications and participated in major trade
shows. The Company believes that the increased costs of these efforts increase
brand awareness, provide credibility with dealers and distributors and are
necessary steps towards the commercialization of its products.

         The Company entered into three distribution relationships during the
year for its scanners. The first two are with the Imtec Group Ltd. ("Imtec") of
England, dated November 15, 1996 and Scan Group ("SGI") Ltd. of Israel, dated
September 8, 1996. Imtec has agreed to an initial purchase order of 500 units of
the Company's product to be used in Imtec's products for distribution throughout
the World. SGI has agreed to a principal purchase order of 200 Units to be
distributed in the European Market. These relationships allow Imtec and SGI to
sell products based on WideCom's technology under their own brand names on terms
similar to those with other distributors. The third agreement is with
CADigitizing, a Florida Corporation, dated February 13, 1997, for the Chinese
market, which gives Cadigitizing the exclusive right to distribute the Company's
products into the Peoples Republic of China. Cadigitizing has placed an initial
purchase order for the Company's products in the amount of $900,000.


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WARRANTY, SERVICE AND MAINTENANCE

         The Company offers a 90-day limited warranty, which can be extended for
a term of up to one-year, covering the workmanship and parts of its products.
During the term of the warranty, the Company will make repairs and replace parts
which become defective due to normal use. During the term of the warranty of
products sold by distributors, the Company will replace parts which become
defective due to normal use and the distributor is responsible for the labor
component of servicing the product. The Company provides a warranty to
distributors for a period expiring on the earlier of twelve months following the
distributor's purchase of the product or three months following the
distributor's sale of the product. The Company trains its in-house service
engineers and certain distributors to enable them to service and maintain the
Company's products.

         The Company operates a toll free telephone line during normal business
hours to respond to distributors and user inquiries about the operation, service
and maintenance of the Company's products. The Company also has an "E-mail box"
which distributors and users can access to receive such assistance from the
Company.

MANUFACTURING

         The Company subcontracts certain manufacturing operations, such as the
production of Company designed printed circuit boards or machine enclosures, to
outside suppliers. Off-the-shelf items, such as integrated circuits, modems,
rollers, gears and LCD displays, are acquired directly from vendors. The Company
believes that alternative sources of supply for all of its components and custom
parts are readily available on commercially reasonable terms. The Company does
not maintain supply agreements with any of its suppliers or subcontractors and
purchases components and custom parts pursuant to purchase orders in the
ordinary course of business. Most of such components are acquired in the United
States and shipped to the Company's manufacturing facility, Indo-Widecom
International Ltd., a wholly owned subsidiary of Widecom ("Indo-Widecom") in a
free trade zone in India where the Company's manufacturing operations are
conducted. Quality control and adjustments are also conducted at Indo-Widecom.

         While the Company conducts its product assembly in-house, the Company
will need to increase its manufacturing capabilities in the event of any
increased demand for its products. There can be no assurance that the Company
can increase its manufacturing capabilities on commercially reasonable terms, in
a timely manner or at all.

         The Company entered into an agreement on August 24, 1993, with WideCom
R&D (the "Agreement"). Widecom R&D is wholly owned by Lakhbir S. Tuli, a
principal stockholder of the Company and the father of Raja S. Tuli and Suneet
S. Tuli who are both officers and directors of the Company. "See Directors and
Executive officers of the Company." Under the Agreement, WideCom R&D will
identify and recruit on a non-exclusive basis, licensing, sub-contract
manufacture and marketing ventures for the Company and its line of products in
India. A Licensee or marketing venture will purchase equipment from the Company
and manufacture the Company's products in India. Pursuant to the agreement, the
Company will sell component parts to licensees and receive a royalty payment of
5% on the licensee's sales of finished products. The Company is allowed to
purchase completed units assembled by licensees up to a maximum of 50% of the
licensee's production, at a price not exceeding the licensees direct cost and
5% for overhead and profit. The licensee will restrict all resales of the
product in India. The Company will monitor the quality of products initially by
supervising and training the licensee in the manufacturing process. To date, no
agreements have been entered into with such licensees.
                                                                               
COMPETITION

         The markets for document systems are characterized by intense
competition. Although the Company is not aware of any other manufacturer of 36"
facsimile machines,


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the Company is aware of one manufacturer of 24" facsimile machines and various
manufacturers of wide format copiers, scanners and plotters. The Company
believes it products compete on the basis of resolution, quality, speed, price
and distribution channels. The Company competes with numerous well-established
foreign and domestic companies that market or are developing wide format
document systems. Competitors include Contex Corporation, Vidar Systems, Inc.,
and Anatech Corporation in the market for wide format scanners; Calcomp
Corporation, Hewlett Packard Company and Mutoh Corporation in the market for
wide format plotters; Silver Reed Corporation in the market for wide format
facsimile machines; and Xerox, Katsuragawa Company and Oce in the market for
wide format copiers. In addition, the Company also expects that companies that
manufacture and sell standard facsimile machines, copiers, scanners and plotters
could develop, without substantial delay, wide format document systems directly
competitive with the Company's products. Many of these companies possess
substantially greater financial, technical, marketing, personnel and other
resources than the Company and have established reputations for success in the
development and marketing of facsimile machines, plotters, scanners and copiers
and have sufficient budgets to permit them to implement extensive advertising
and promotional campaigns in response to competitors and to enter new markets.

         In addition, the markets for the Company's products are characterized
by rapidly changing technology and evolving industry standards, often resulting
in product obsolescence or shortened product lifecycles. As a result, the
Company's ability to compete may be dependent upon its ability to continually
enhance and improve its products, to complete development of and introduce into
the marketplace in a timely manner its proposed products and to successfully
develop and market new products. There can be no assurance that the Company will
be able to compete successfully, that competitors will not develop technologies
or products that render the Company's products obsolete or less marketable or
that the Company will be able to enhance successfully its existing products or
develop new products.

RESEARCH AND DEVELOPMENT

         The Company incurred costs for research and development of $656,876,
$732,457 and $614,663 during the years ended March 31, 1995, 1996 and 1997,
respectively. As of March 31, 1997, the Company employed only 2 full-time
research and development design engineers in North America and 9 research
engineers in India, as it moved the bulk of its research and development efforts
to a consortium. "See Certain Relationships and Related Transactions"

         The Company formed a research and development consortium on October 2,
1996, with an economic development agency of the Province of Quebec, 3994340
Canada Inc., doing business as Technologies NovImage. The Company is now
conducting all of its research and development activities through 3994340 Canada
Inc., doing business as Technologies Novimage (see "Certain Relationships and
Certain Transactions), which activities are expected to qualify for partial
funding from governmental agencies. The research and development activities
conducted by 3994340 Canada Inc., doing business as Technologies Novimage on
behalf of the Company are primarily focused on plotter, scanner and facsimile
technologies.

         The plotter research is concentrated on improving printer resolution
and developing thermal transfer mechanisms for incorporation into the plain
paper plotter, including color printing capabilities. Scanner research is
focused on the development of color scanning capabilities and the enhancement of
scanner image. Facsimile research is focused on the development of a standard
wide format facsimile communication protocol.

         The Company anticipates that upon introduction of the proposed thermal
transfer plain paper plotter, 3994340 Canada Inc., doing business as
Technologies Novimage will commence activities relating to the development of a
color plotter which uses colored thermal transfer ribbons containing a wax-like
printing substance.


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<PAGE>   8
         3994340 Canada Inc., doing business as Technologies Novimage is
completing the development of a color-scan chip intended to be incorporated into
a 36" contact scanner to provide color scanning capabilities. This chip is being
designed to combine four image sensor chips to read the following primary
colors: magenta, cyan, yellow and black. As a result, such a scanner is expected
to be able to function both as a color scanner and as a monochrome scanner. The
Company expects that a prototype of a color scanner will be introduced by the
fourth quarter of 1997.

         The Company is developing a wide format document "fax-on-demand"
system. The Company anticipates that this system would be used for the
distribution of engineering and construction plans by bid depositories and
tendering document distribution services. The Company anticipates that such
services will create a database of documents such as construction plans, and
make such documents available to its subscribers who are generally contractors.
The system is being designed to enable a subscriber to access a document in the
service's database through the subscriber's personal computer and printing the
selected document to a WIDEfax Plotter at the subscriber's location.


INTELLECTUAL PROPERTY

         The Company relies upon proprietary know-how and employs various
methods to protect the ideas, concepts and documentation of its proprietary
technology, which methods include nondisclosure agreements with its employees
and distributors; however, such methods may not afford complete protection and
there can be no assurance that competitors or customers will not independently
develop such know-how or obtain access to the Company's know-how, ideas,
concepts and documentation. The Company does not hold any patents, although it
has filed patent applications relating to certain aspects of its technology.
There can be no assurance, however, that any patents will be issued to the
Company or, if issued, that such patents would afford the Company a competitive
advantage. In any event, there can be no assurance that future patents, if any,
would not be circumvented or invalidated.

         In addition, certain aspects of the technologies embodied in the
Company's products are generally available to other manufacturers. The Company
is not aware of any infringement on the proprietary rights of others and has not
received any notice of claimed infringement; however, the Company has not
conducted any investigation as to possible infringement and there can be no
assurance that third parties will not assert infringement claims against the
Company in connection with its products, that any such assertion of infringement
will not result in litigation, or that the Company would prevail in such
litigation or be able to license any infringed patents of third parties on
commercially reasonable terms. If the Company's technologies were found to
infringe another party's rights, the Company could be required to modify its
products or obtain a license. There can be no assurance that the Company would
be able to do so in a timely manner, upon acceptable terms and conditions, or at
all, or that the Company would have the financial or other resources necessary
to successfully defend a claim of violation of proprietary rights.

         The Company granted an exclusive license to all of its patents and
technology relating to its scanner and plotter manufacturing and its WideView TM
and SLC-OVLY TM proprietary software (collectively, the "Intellectual Property")
to 3994340 Canada Inc., doing business as Technologies Novimage for research and
development purposes in order to develop improvements, modifications, additions
or alterations to the Intellectual Property and to develop new products. In
exchange for this exclusive license and the payment of a 0.5% royalty fee on net
revenue, licensing revenue and net sales to sub-licensees, 3994340 Canada Inc.,
doing business as Technologies Novimage granted the Company an exclusive
perpetual worldwide (with the exception of the Province of Quebec, Canada)
license to use such improved scanner and plotter technology and software to
manufacture, distribute, market and sell the improved scanner, plotter and
software, and any new products developed by 3994340 Canada Inc., doing business
as


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Technologies Novimage. 3994340 Canada Inc., doing business as Technologies
Novimage retained such rights with respect to the Province of Quebec, Canada.
See "Certain Relationships and Certain Transactions".

         The Company has neither filed for copyright protection of its
proprietary software nor registered the name SLC-OVLY and WideView as a
Trademark with the United States Patent and Trademark Office. The Company holds
a registered trademark with the United State Patent and Trademark Office for the
WIDEfax(R) name only. The Company is not aware of any infringement on the
proprietary rights of others and has not received any notice of claimed
trademark infringement; however, the Company has not conducted any investigation
as to possible trademark infringement and there can be no assurance that third
parties will not assert trademark infringement claims against the Company in
connection with its use of any of its marks, that any such assertion of
infringement will not result in litigation, or that the Company would prevail in
such litigation.

EMPLOYEES

         As of March 31, 1997, the Company had 188 full time employees,
including 11 research and development engineers, 108 manufacturing employees, 69
sales staff and administrative personnel. One hundred and forty two of such
employees are located in India and are employees of the Company's wholly owned
Indian subsidiary, Indo-Widecom International, Ltd. Neither the Company nor its
subsidiary is a party to any labor agreements and none of their employees are
represented by a labor union. The Company believes its employee relations to be
satisfactory.

DESCRIPTION OF PROPERTY

         In February 1996, the Company purchased property in the Noida Export
Processing Zone near New Delhi, India (the "Free Trade Zone") for approximately
$67,500 and is building a manufacturing facility of approximately 24,000 square
feet with estimated construction costs of approximately $360,000. Clean-room
facilities and other special infrastructure within the building is estimated to
cost an additional $240,000 by its completion. The Company expects that the
project will be completed shortly.

         The Company leases 9,000 square feet at 267 Matheson Boulevard,
Mississauga, Ontario, Canada, pursuant to a five-year lease entered into in
1993, and 7,000 square feet in the Free Trade Zone, pursuant to a five-year
lease entered into in 1994. The current annual rents are $39,375 and $15,200,
respectively. Upon completion of construction of the Company's new manufacturing
facility the Company will transfer its manufacturing operations to the new
facility.

         In addition, the Company currently leases a sales office on a
month-to-month basis in Big Bear Lake, California, the Company has a one year
lease for sales offices in Pittsburgh, Pennsylvania, and Cleveland, Ohio, and a
two year lease for a sales office in Atlanta, Georgia. The current annual rental
rates of these facilities are approximately $28,164 in the aggregate.

         The Company believes that its present facilities are adequate for the
Company's current level of operations; however, the Company will need to
increase its manufacturing capabilities in the event of any increased demand for
its products.

LEGAL PROCEEDINGS

         From 1992 to July 1993, Raja S. Tuli engaged two individuals, John
Keenan and Vincent DiGiulio ("K&D") to provide services relating to the
Company's marketing and other activities. In exchange for performing such
services, Mr. Tuli transferred 100,000 Common Shares to K&D. Thereafter, K&D
attempted to transfer an aggregate of 172,860 Common Shares to third parties,
which 172,860 common shares is in excess of the 100,000 common shares
transferred by Mr. Tuli. In November 1993, Raja S. Tuli entered into an
indemnification agreement with the Company pursuant to which Mr. Tuli agreed


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that in the event the Company is required to issue in excess of 100,000 Common
Shares to K&D or any purported transferee of such shares, Mr. Tuli would return
to the Company up to 160,000 Common Shares for cancellation to the extent the
Company is required to issue any such additional shares.

         K&D filed a lawsuit on December 20, 1996, in the U.S. District Court
for the District Court of Rhode Island, alleging breach of contract and
demanding specific performance, claiming 300,000 shares and 200,000 warrants.
Giving effect to the 8 for 10 stock reverse split the Company had implemented in
1995, the claim would be for 240,000 shares and 160,000 warrants, of which
100,000 shares have been transferred by Mr. Tuli and the remaining exposure is
for an additional 140,000 shares. The Company has filed an answer to the claim,
and is in the process of filing an interpleader counterclaim. One of the two
above-mentioned individuals has filed for bankruptcy. The Company, along with
K&D are also subject to two additional lawsuits filed by the above-mentioned
third parties to whom K&D attempted to transfer shares. This claim has been
consolidated into the original litigation, and the Company is attempting to also
consolidate the claim by the additional claimant. The Company believes that a
number of additional third parties could also prosecute in this regard. The
Company will continue to attempt the joinder of all such actions arising in the
future in to one Federal Court action. The Department of Business Regulation for
the State of Rhode Island is also continuing an investigation into these
matters.

         On or about February 27, 1997, plaintiff, Brett Whiton, commenced a
class action against the Company, Raja S. Tuli and Suneet S. Tuli. The action is
currently pending before the United States District Court for the Southern
District of New York. The Complaint is based upon alleged improper conduct with
respect to the announcement of the redemption of certain warrants, which
announcement was made on February 10, 1997. On or about March 15, 1997, two
substantially similar class actions were commenced in the Supreme Court of the
State of New York, County of New York; one by Richard Benjamin and the other by
Anthony Hand. These actions have also been removed to, and are currently pending
before, the United States District Court for the Southern District of New York.
The above three actions (collectively, the "New York Class Actions") have been
consolidated for all purposes.

         On or about May 1st, 1997, the court approved the settlement of the New
York Class Action. The settlement obligated the Company to reduce the warrant
redemption to half of the publicly held warrants, and reduce the exercise price
to $3.00 from $4.00. Along with payment of the Plaintiff's legal fees, the
settlement further obligated the Company to appoint an independent director to
its board of directors and recruit an independent Chief Operating Officer. The
Company also agreed to issue one replacement warrant for each warrant held by
warrant holders on February 10th, 1997 and sold by such holders prior to the
close of business on March 5th, 1997. It is not yet possible to quantify the
number of warrants that the Company will be required to issue.

         The Settlement has been preliminarily approved by the Court on a non
opt-out basis and, if finally approved on a non opt-out basis, will resolve all
claims (if any) which may be or have been made by class members. Notice to all
class members has been provided, and a hearing has been scheduled for August 2,
1997, to determine whether the settlement shall be finally approved.

         On or about March 10, 1997, an action was commenced in the Superior
Court of the State of California or the county of Los Angeles. The action was
subsequently removed to, and is currently pending before the United States
District Court for the Central District of California. Plaintiffs, Don Johnson,
Walter J. Lack, Thomas V. Girardi, Glenn McCusker and Gino Aiello are alleged to
be holders of the Company's shares and/or warrants. The complaint in this
action, similar to the New York Class Action, is based upon alleged improper
conduct with respect to the announcement of the redemption of certain warrants,
which announcement was made on February 10, 1997. The complaint includes causes
of action for alleged fraud, in the nature of alleged misrepresentation and in
the nature of alleged negligent misrepresentation, alleged breach of contract,


                                                                              10
<PAGE>   11
alleged breach of fiduciary duty, and alleged violation of California
Corporations Code SS 25400 and 25500. Plaintiffs' seek compensatory and general
damages, punitive damages, and injunctive relief. The complaint also demanded an
award of pre-judgment and post-judgment interest, attorneys' fees, expert
witness fees, and costs. An answer has been filed by the company in the action
in which all material allegations in the complaint are denied and numerous
affirmative defenses are asserted.


                                                                              11
<PAGE>   12
SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

         Certain matters were submitted to a vote of security holders of the
Company during the fourth fiscal quarter of the Company's fiscal year ended
March 31, 1997, at the Company's annual meeting held on January 30, 1997 (the
"Annual Meeting"). At the Annual Meeting the stockholders approved the
following:

         (1)      the election of the Board of Directors at which four directors
                  were elected, each to serve until the next annual meeting of
                  the stockholders;

<TABLE>
<CAPTION>
Name                    Votes For         Votes Against      Age
----                    ---------         -------------      ---
<S>                     <C>               <C>                <C>
RAJA S. TULI            2,245,846             35,211          31
SUNEET S. TULI          2,245,846             35,211          29
DR. AJIT SINGH          2,245,846             35,211          56
BRUCE D. VALLILLEE      2,245,846             35,211          76 and
</TABLE>


         (2)      an amendment to the Company's 1995 Stock Option Plan (the
                  "Plan") to increase the number of shares of the Company's
                  Common Stock authorized for issuance under the Plan. The
                  amendment to the Plan permits the Company to issue options to
                  purchase up to 500,000 shares of the Company's Common Stock.
                  To date, the Company has issued options to purchase up to
                  200,000 shares of the Company's Common Stock.

         The number of votes cast in connection with the Plan were as follows:
(i) 2,147,871 votes approved the Plan; (ii) 50,111 votes were against the Plan;
and (iii) there were 6,300 abstentions and 76,775 broker non-votes.


                                                                              12
<PAGE>   13
                                     PART II

MARKET PRICE OF REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

         The Company's common stock and warrants are quoted on the Nasdaq
SmallCap Market under the symbols "WIDEF" and "WIDWF", respectively, and on the
Boston Stock Exchange under the symbols "WDE" and "WDEW". The table below
represents the quarterly high and low closing prices for the Company's common
stock and warrants as reported through July 7, 1997. The prices listed in this
table reflect quotations without adjustment for retail mark-ups, mark-downs, or
commissions. The Company has not paid any cash dividends since inception, and
intends to retain earnings, if any, in the foreseeable future for use in Company
expansion. The number of holders of record of the Company's common stock and
warrants on June 30, 1997 was 57 and 8, respectively. It is believed that the
actual number of beneficial holders of each class of common stock and warrants
is in excess of 500.

         The following sets forth the high and low sales prices for the
Company's Common Stock and warrants, respectively, as reported on the NASDAQ
Small Cap Market.

<TABLE>
<CAPTION>
                                       COMMON STOCK         WARRANTS
                                       ------------         --------
                                    HIGH           LOW        HIGH      LOW
                                    ----           ---        ----      ---
<S>                                <C>           <C>        <C>       <C>
1995
  Fourth Quarter (commencing
    December 18, 1995)             $ 6 1/2       $    5      $3 1/2   $1 1/2

1996                                                                       
  First Quarter (January 1
    through March 31, 1996)         12 3/8        4 7/8       9         21/2
  Second Quarter (April 1
    through June 30, 1996)          13 1/4        7 5/8       9         41/2
  Third Quarter (July 1
    through September 30, 1996)     11 3/8        8 1/8       7        3 7/8
  Fourth Quarter (October 1,
    through December 31, 1996)          10         61/2       6 1/4    3 3/8

1997                                                
  First Quarter (January 1
    through March 31, 1997)         11 3/8        3 1/4       7          1/4
  Second Quarter (April 1
    through June 30, 1997)           4 5/8            2       1 3/4      5/8
  Third Quarter (July 1
   through July 7, 1997)             2 5/8        2 3/8       3/4        3/4
</TABLE>


                                                                              13
<PAGE>   14
SELECTED FINANCIAL DATA

STATEMENT OF EARNINGS DATA:

<TABLE>
<CAPTION>
                                         YEAR ENDED MARCH 31,
                                         --------------------
                                 1994             1995              1996               1997
                                 ----             ----              ----               ----
<S>                           <C>              <C>              <C>                <C>         
Total Revenue                 $1,858,414       $2,024,289       $ 2,007,801        $ 1,820,713
Product Sales                  1,228,294        1,625,241         1,666,345         1,678,933
Research and
  development grants             630,120          390,986           262,322                --
Total Expenses                 1,445,560        1,723,295         3,116,119         5,673,672
Earnings (loss) before
  extraordinary item             474,295           64,447        (1,025,631)       (4,487,824)
Net Earnings (loss)              526,182           64,447          (839,301)       (4,487,824)
Earnings (loss) per
  share before
  extraordinary item                 .19              .02              (.33)            (0.99)
Net Earnings (loss) per
  share                              .21              .02              (.27)            (0.99)
Weighted average
  shares outstanding           2,507,375        2,712,660         3,078,428         4,533,583
</TABLE>

BALANCE SHEET DATA:

<TABLE>
<CAPTION>
                                               YEAR ENDED MARCH 31,
                                               --------------------
                                     1995              1996               1997
                                     ----              ----               ----
<S>                               <C>              <C>                <C>        
Working Capital                   $  170,968       $ 6,814,289        $ 1,818,883
Total Assets                       2,547,681         9,217,514          6,925,187
Total Liabilities                  1,419,740           588,908          1,681,884
Retained earnings (deficit)           15,007          (824,294)        (5,312,118)
Shareholders' equity               1,127,941         8,628,606          5,243,303
</TABLE>


                                                                              14
<PAGE>   15
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND RESULTS OF
OPERATIONS

OVERVIEW

         In 1992, the Company commenced marketing its first 36" wide format
facsimile machine on a limited basis, primarily for demonstration purposes, and
other wide format document systems in 1994. As a result, the Company has a
limited relevant operating history upon which an evaluation of the Company's
prospects and performance can be made. Since inception, the Company has
generated limited revenues from operations and has not yet achieved
profitability. The Company's revenues are derived from product sales and
research and development grants and reimbursements from the Canadian government.
The Company recognizes revenues from product sales when products are shipped,
and from research and development grants and reimbursements when related
expenses are incurred. The Canadian government audits the Company's requests for
reimbursement for research and development expenses incurred during a calendar
year and makes reimbursement payments typically some months after the Company
has filed the request. The Company's request for reimbursement for approximately
$427,000 attributable to calendar year 1994 (which was filed in September 1995)
has been audited and has been received from the Canadian government in May 1997.
The Company has filed a request for reimbursement for the year ended December
31, 1995, and the three months ended March 31, 1996 for approximately $255,000
and $123,000 respectively. These requests have not been audited or paid by the
Canadian Government. There is no assurance that the requests will be approved in
their entirety or at all. Denial of all or a portion of such reimbursement by
the Canadian government would result in a change to current period income and
denial of a significant portion of such reimbursement would have a material
adverse effect on the Company's results of operations for such periods.

GOVERNMENT SPONSORED PROGRAMS

         To date, a substantial portion of the Company's revenues have been
derived from research and development grants and reimbursement from the Canadian
government. Government sponsored programs are designed to encourage and support
the development and exploitation of new technologies by providing partial
reimbursement to Canadian businesses for expenses incurred in connection with
research and development activities. Prior to 1993, the Company received
reimbursement of a percentage of substantially all of its expenses from the
Canadian government, because the Company was classified as a "sole purpose
research and development company." Since 1993, reimbursement of the Company's
expenses from the Canadian government has been limited to reimbursement of a
specified percentage of its research and development expenses and qualified
related support expenses. Companies seeking reimbursement must submit
applications verifying the amounts and nature of research and development
expenditures incurred for audit by the Canadian government. Although the
Canadian government reimbursed the Company for substantially all amounts
requested in 1991 and 1992, the Company did not receive $43,800 (approximately
9.6%) of its requested reimbursement for the calendar year 1993. As of March 31,
1997, the Company had research and development grants receivable of $696,347
representing amounts for which reimbursement has been requested for calendar
1994, calendar 1995 and, three months, ended March 31, 1996. Of this amount,
$420,000 has subsequently been received.

         Other government sponsored research grants and subsidies have been
provided to the Company to fund specific research programs. The majority of such
grants and subsidies have been provided under the Industrial Research Assistance
Program which is administered by the Canadian National Research Council (the
"NRC"). Grants are made on the condition that research and development
activities are performed in Canada and with the prior approval by the NRC of the
scope, content and objectives of the research to be performed. For the years
ended March 31, 1995 and 1996, the Company received payments under such program
of approximately, $18,000 and $66,000, respectively. No grants were received for
the year ending March 31, 1997; however, the Company together with a branch of
the government of the Province of Quebec (Innovatech) became equal


                                                                              15
<PAGE>   16
shareholders in the Research and Development company, 3994340 Canada Inc., doing
business as Technologies Novimage. The nature of 3994340 Canada Inc., doing
business as Technologies Novimage entitles it to receive grants in excess of 40%
of qualified research expenditures. Products derived from the research are then
licensed back to the Company at a nominal royalty of 0.5% of sales of those
products. The formation of 3994340 Canada Inc., doing business as Technologies
Novimage enables the Company to obtain a substantial increase in the amount of
research that can be performed. See "Certain Relationships and related
Transactions."

         In 1996, a change in Canadian tax legislation substantially reduced the
amount of subsidy available on research and development performed by publicly
traded companies.

IMPACT OF CURRENCY EXCHANGE RATES

         The Company conducts a substantial portion of its business in foreign
currency, primarily the Canadian dollar and, to a lesser extent, the Indian
rupee. To date, fluctuation in foreign currency exchange rates have not had a
significant impact on the Company's results of operations. Fluctuations in the
exchange rates between the United States dollar and the Canadian dollar or
Indian rupee; however, could have an adverse effect on the Company's operating
results in the future. The Company may seek to limit its exposure to the risk of
currency fluctuations by engaging in foreign currency transactions that could
expose the Company to substantial risk of loss. The Company has limited
experience in managing international transactions and has not yet formulated a
strategy to protect the Company against currency fluctuations. There can be no
assurance that fluctuations in foreign currency exchange rates will not have a
significant impact on the Company's future operating results.

RESULTS OF OPERATIONS

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

         Revenues for the year, ended March 31, 1997, were $1,820,713, a
decrease of $187,088, or 9.3%, as compared to $2,007,801 for the year, ended
March 31, 1996. The decrease was attributable to a decrease in research grants
and reimbursement of $262,322, which was partially offset by an increase in
product sales of $12,588 and interest income of $62,646.

         The increase in accounts receivable for the year, ended March 31, 1997
of $650,949, compared to $436,747 for 1996, is attributable to an increase in
sales of the Company's Color Scanner during the end of such period.

         Operating expenses for the year, ended March 31, 1997 were $5,673,672,
an increase of $2,557,553, or 82.1%, as compared to $3,116,119 for the year,
ended March 31, 1996. Operating expenses also increased as a percentage of
revenues from 155.2% for the year, ended March 31, 1996 to 311.6% for the year,
ended March 31, 1997. The increase in operating expenses both in absolute
dollars and as a percentage of revenues of $2,981,764, $90,322, $115,721 and
$113,552, respectively, during the year, ended March 31, 1997, is primarily
attributable to an increase in selling, general and administrative ("SG&A")
costs, amortization, the write-off of test equipment, an increase in salaries to
Raja S. Tuli and Suneet Tuli, and management fees to Lakhbir S. Tuli in
connection with the building of a manufacturing facility of approximately 24,000
square feet in India and the management of Indo-Widecom, Ltd. See "Description
of Property and Certain Relationships and Related Transactions," respectively.
This increase was off set by the decrease in research and development of
$117,794 and non re-occurrence of compensation benefit on stock transaction,
debt discount and finance fees of $166,974, $255,478, and $167,277 respectively,
which had occurred in 1996. The increase in Selling General & Administrative
costs from $751,252 in 1996 to $3,733,016 in 1997 was primarily due to expenses
associated with increased marketing activities and due to increased legal and
public relations fees of approximately $681,353 incurred


                                                                              16
<PAGE>   17
in raising an additional $1,298,090 as of March 31, 1997, of share capital in
connection with the Company's redemption of all of its publicly traded warrants
relating to its initial public offering. The legal fees were also used to
successfully defend against court challenges made regarding the warrant call,
and additional public relations costs deemed necessary to disseminate the facts
of the warrant call. The increase in amortization expenses was due to the
increase in the Company's capital assets. Interest and bank charges for the year
ended March 31, 1997, decreased by $24,902. Warranty costs of $6,613 were
incurred compared to $ nil in the year, ended March 31, 1996. Additions to the
management team together with the implementation of employment contracts at the
time of public offering resulted in the increase in the management fees.

         The Company has written off its carrying value of the goodwill
associated with the acquisition in 1996 of a 49% interest in Corporate
Acquisitions, Ltd. doing business as DS Corporate Marketing, Ltd. This write
off of goodwill amounted to $576,000. 

         The decrease of $117,794 in research and development costs were offset
by the Company's $121,971 share of the loss incurred by 3994340 Canada Inc.,
doing business as Technologies Novimage.

YEAR ENDED MARCH 31, 1996 COMPARED TO YEAR ENDED MARCH 31, 1995.

         Revenues for the year ended March 31, 1996 were $2,007,801, a decrease
of $16,488, or 0.8%, as compared to $2,024,289 for the year, ended March 31,
1995. The decrease was attributable to an decrease in research grants and
reimbursement of $128,664, which was partially offset by an increase in product
sales of $41,104 and interest income of $71,072.

         The increase in accounts receivable for the year ended March 31, 1996
of $436,747 compared to $359,368 for 1995, is attributable to an increase in
sales of WIDEfax(R) Scan during the end of such period.

         Operating expenses for the year ended March 31, 1996, were $3,116,119,
an increase of $1,392,824, or 80.8%, as compared to $1,723,295 for the year
ended March 31, 1995. Operating expenses also increased as a percentage of
revenues from 85.1% for the year ended March 31, 1995, to 155.2% for the year
ended March 31, 1996. The increase in operating expenses both in absolute
dollars and as a percentage of revenues is primarily attributable to an increase
in costs of products sold, research and development expenditures, selling,
general and administrative ("SG&A") costs, management fees, compensation
benefits on stock exchange, amortization and debt discount and finance fees of
$128,703, $75,581, $270,444, $93,465, $166,974, $270,915, $255,478, and
$167,277, respectively, during the year ended March 31, 1996. The increase in
research and development expenses was primarily due to costs associated with the
development of color scanning capabilities. The increase in SG&A costs was
primarily due to expenses associated with the retention of a financial public
relations firm and increased marketing activities. The increase in amortization
expenses was primarily due to the substantial increase in the Company's capital
assets. The increase in debt discount and finance fees was primarily due to
non-recurring expenses associated with the Company's Bridge Financing in October
1995 (see, "Liquidity and Capital Resources") and initial public offering in
December 1995. Interest and bank charges for the year ended March 31, 1996,
decreased by $32,858 and decreased as a percentage of revenues from 4.9% to
3.3%.

LIQUIDITY AND CAPITAL RESOURCES

         The Company's primary cash requirements have been to fund research and
development activities, acquisition of equipment and inventories and marketing
expenses incurred in connection with the commercialization of its products.
Until the Company's initial public offering, the Company had satisfied its
working capital requirements


                                                                              17
<PAGE>   18
principally through the issuance of debt and equity securities, government
sponsored research and development grants and reimbursement and cash flow from
operations. On March 31, 1997, the Company had working capital of $1,818,883, as
compared to $6,814,289 on March 31, 1996.

         On February 10, 1997, the Company announced that it was calling all
1,187,500 of its publicly traded warrants for redemption. See "Legal
Proceedings". On March 6, 1997, the exercise price was reduced to $3.00, and
excluded one half of the warrants and the date for redemption was extended to
April 4, 1997, after which the exercise price reverted to $4.00 per share for
the unredeemed warrants. On March 31, 1997, 244,345 warrants were exercised for
which $627,893 was received. The balance of $105,142 was received after March
31, 1997. The remaining 716,833 warrants were exercised between April 1st and
April 4th of 1997 for which $2,150,499 was received.

         The Company's cash requirements in connection with the manufacture and
marketing of its products at Indo-Widecom,Ltd. will be significant. Other than
in connection with expansion of its manufacturing capacity, the Company does not
have any material commitments for capital expenditures. The Company believes,
based on its currently proposed plans and assumptions relating to its
operations, projected cash flow from operations will be sufficient to satisfy
its contemplated cash requirements for the foreseeable future. In the event that
the Company's plans change, or its assumptions change or prove to be incorrect,
or if the projected cash flow otherwise prove to be insufficient to fund
operations (due to unanticipated expenses, delays, problems or otherwise), the
Company could be required to seek additional financing sooner than currently
anticipated. The Company has no current arrangements with respect to, or sources
of, additional financing and it is not anticipated that existing stockholders
will provide any portion of the Company's future financing requirements. There
can be no assurance that additional financing will be available to the Company
when needed on commercially reasonable terms, or at all.

                                    PART III

DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY

         The directors and executive officers of the Company are as follows:

<TABLE>
<CAPTION>
NAME                              AGE                      POSITION
----                              ---                      --------
<S>                               <C>           <C>
Raja S. Tuli                       31           President, Chief Executive Officer and
                                                Director
Willem J. Botha                    61           Chief Financial Officer and Treasurer
Suneet S. Tuli                     29           Executive Vice President, Secretary and
                                                Director
Mark Maltese                       45           Vice President of Sales & Marketing
Brig General Baldev Singh          54           Vice President of Manufacturing
                                                Operations/India
Dr. Ajit Singh                     56           Director
Bruce D. Vallillee                 76           Director
</TABLE>

         Raja S. Tuli, founder of the Company, has been President, Chief
Executive Officer and a director of the Company since its inception. From the
Company's inception to August 1993, Mr. Tuli was also Treasurer of the Company.
From 1987 to 1990, Mr. Tuli was President of CaCE Ltd. a family-owned
architectural/construction business. Mr. Tuli received a bachelor of Science
degree in Computer Engineering in 1988 from the University of Alberta. Mr. Tuli
is a resident Canadian national. Mr. Tuli is the brother of Suneet S. Tuli.

         Willem J. Botha has been Chief Financial Officer and Treasurer of the
Company since September 1993. From 1989 to September 1993, Mr. Botha was an
independent accounting consultant. From 1985 to 1989, Mr. Botha was employed by
Motorola


                                                                              18
<PAGE>   19
Information Systems, a manufacturer of data communications equipment, most
recently as its Director of Accounting Services. From 1982 to 1985, Mr. Botha 
wasan independent financial consultant. Mr. Botha was the Secretary and
Treasurer and a Director of Alcon Canada Inc., a pharmaceutical company, from
1980 to 1982. From 1976 to 1980, Mr. Botha was the Controller and Chief
Financial Officer for Bell & Howell Limited, a manufacturer of electronic
photographic products, and from 1969 to 1976, Mr. Botha was the Controller for
Wyeth Ltd., a pharmaceuticals company. Mr. Botha received a Certificate in
Theory of Accounting from the University of South Africa. Mr. Botha is a 
Chartered Accountant and a resident Canadian national.                 

         Suneet S. Tuli has been Executive Vice President of Sales and Marketing
and Secretary since September 1993, and a director of the Company since October
1992, and was the Marketing manager of the Company from June 1990 to August
1993. Mr. Tuli received a Bachelor of Science degree in Civil Engineering from
the University of Toronto in April 1990 and is a resident Canadian national. Mr.
Tuli is the brother of Raja S. Tuli.

         Mark Maltese has been Vice President of Sales and Marketing for the
Company since June 1996. Prior to joining the firm, Mr. Maltese was Vice
President of Marketing for SBI, Inc., a start-up company which introduced the
first automatic document feeding system for engineering copiers. From 1986
through 1994, Mr. Maltese was employed by Xerox Corporation, a manufacturer of
printers, scanners, image processing systems, engineering copiers, document
management, and workflow solutions. His last assignment at Xerox was Vice
President and General Manager Systems Business Team within Xerox's Engineering
Systems Division. From 1982 through 1986 Mr. Maltese was a Director of Marketing
for Versatec, a Xerox Company. From 1980 through 1981, Mr. Maltese was a Senior
Product Marketing Manager for Calma, a General Electric Company. Mr. Maltese
received a Bachelor of Science in Information Management Systems from the
University of San Francisco in California. Mr. Maltese is a resident of the
Unites States of America.

         Brigadier General Baldev Singh has been the Company's Vice President of
Manufacturing Operations since November 1993 and is responsible for all of the
Company's manufacturing operations in India. From 1968 through September 1993,
General Singh was a member of the Indian Armed Forces. General Singh received a
Bachelor's degree in Inter Science from Pune University in India, and
subsequently obtained a Master of Sciences degree in Military Sciences from
Allahabad University in India. General Singh is a citizen of India.

         Dr. Ajit Singh has been a director of the Company since October 1992.
Dr. Singh is the Senior Fellow at Queens' College, University of Cambridge in
England, and its Director of Studies in Economics. Since 1987, Dr. Singh has
held the Dr. William M. Scholl Visiting Chair in the Department of Economics at
the University of Notre Dame in the United States. Dr. Singh has been a senior
economic advisor the governments of Mexico and Tanzania, and is the author of,
"Takeovers, Their Relevance to the Stock market and the Theory of the Firm". Dr.
Singh is the uncle of Raja and Suneet S. Tuli. General Singh and Dr. Singh are
not related.

         Bruce D. Vallillee has been a director of the Company since September
1995. Since April 1994, Mr. Vallillee has been President of Vallillee Wide
Format Products, Ltd., a company engaged in wide format document management and
equipment sales. From 1987 to 1994, Mr. Vallillee was the President of Vallillee
Electronics, Ltd., a company engaged in the distribution of electronic products.
From 1976 to 1987, Mr. Vallillee was Vice President - Sales and Marketing for
ITT / Canon Canada, the Canadian joint venture of ITT Corporation and Canon
Electronics Corp. Mr. Vallillee is a resident Canadian national.

         Under Ontario law, a majority of the directors of the Company must be
resident Canadians. A resident Canadian is defined, generally, to be an
individual who is (i) a Canadian citizen ordinarily resident in Canada, (ii) a
Canadian citizen not 


                                                                              19
<PAGE>   20
ordinarily resident in Canada who is a member of a prescribed class of persons,
or (iii) a permanent resident within the meaning of the Immigration Act
(Canada), and ordinarily resident in Canada.

         All directors hold office until the next annual meeting of shareholders
and the election and qualification of their successors. There are currently no
standing committees of the Board of Directors. Officers are elected annually by
the Board of Directors and serve at the discretion of the Board.

         No director of the Company has received any compensation for such
services as a director. Directors who are employees of the Company receive no
compensation for serving on the Board of Directors. Non-employee directors are
reimbursed for their out-of-pocket expenses in attending Board meetings and a
per diem of $1,000.

EXECUTIVE COMPENSATION

         The following table sets forth the cash compensation paid or accrued by
the Company to the Named person serving as chief executive officer during the
years ended March 31, 1995, 1996 and 1997:


<TABLE>
<CAPTION>
                           SUMMARY COMPENSATION TABLE
                                               Annual Compensation                     Long-Term Compensation
                                               -------------------                     ----------------------
                                                                                       Awards           Payouts
                                                                                       ------           -------
                                                                       Other
                                                                      Annual                                        All Other  
                                                                      Compen-                                     Compensatioin
Name And Principal Position         Year      Salary       Bonus      sation(1)  Restrict    Securiti                  ($)     
                                               ($)          ($)         ($)      ed Stock       es                
                                                                                  Awards      Under-      LTIP  
                                                                                    ($)        Lying     Payouts
                                                                                             Options/     ($)   
                                                                                             SARs (#)           
<S>                                 <C>       <C>          <C>        <C>        <C>         <C>         <C>       <C>
Raja S. Tuli, President (2)         1997      19,100        --         79,360       --          --         --          --
Chief Executive Officer
                                    1996        --          --         79,225       --          --         --          --
                                    1995        --          --         31,682       --          --         --          --
                                    1994        --          --         28,000       --          --         --          --
</TABLE>


(1)      Such amounts were paid by the Company to a consulting company owned by
         Raja S. Tuli during the years ended March 31, 1994, 1995, 1996 and
         1997.

(2)      In July 1995, the Company granted to Raja S. Tuli stock options to
         purchase 150,000 shares.

         No other executive officer of the Company received compensation and
bonuses which exceed $100,000 during any such year.





                                                                              20
<PAGE>   21
EMPLOYMENT AGREEMENTS                         

         On July 17, 1995, the Company entered into a five year employment
contract with Raja S. Tuli to serve as President of the Company at an annual
base salary of $98,000 per year. Mr. Tuli's compensation will be subject to
annual cost-of-living increases, and be eligible to receive bonuses (up to 50%
of his then current base salary) provided that the Company achieves certain
performance objectives. The Agreement contains a non-disclosure covenant and
prohibits Mr. Tuli from competing with the Company during the term of employment
agreement and for a period of two years thereafter. In connection with entering
in to the Agreement, the Company granted to Mr. Tuli a stock option to purchase
150,000 shares of the Company's Common Stock at an exercise price of $5.00 per
share.

         On July 17, 1995, the Company entered into a five year employment
contract with Suneet S. Tuli to serve as Executive Vice President of Sales and
Marketing of the Company at an annual base salary of $92,000 per year. Mr.
Tuli's compensation will be subject to annual cost-of-living increases, and be
eligible to receive bonuses (up to 50% of his then current base salary) provided
that the Company achieves certain performance objectives. The Agreement contains
a non-disclosure covenant and prohibits Mr. Tuli from competing with the Company
during the term of employment agreement and for a period of two years
thereafter. In connection with entering in to the Agreement, the Company granted
to Mr. Tuli a stock option to purchase 150,000 shares of the Company's Common
Stock at an exercise price of $5.00 per share. Amounts paid to the Tulis in 1997
were approximately $173,000 (1996 - $100,000).


                                                                              21
<PAGE>   22
OPTION/SAR GRANTS IN LAST FISCAL YEAR

         The following table contains information with respect to the named
executive officers concerning individual grants of stock options held as of the
last fiscal year.

<TABLE>
<CAPTION>
                                                    OPTION/SAR GRANTS IN LAST FISCAL YEAR
                                                    -------------------------------------
                                    Individual Grants                                   Potential Realizable Value   Alternative
                                    -----------------                                   At assumed Annual Rates Of   to (f) And
                                                                                        Stock Price Appreciation     (g): Grant 
                                                                                            For Option Term          Date Value 
                                                                                         

                                       Percent Of
                       Number of         Total
                      Securities      Options/SARs
                      Underlying       Granted To        Exercise Of                                                 Grant Date   
                      Option/SARs     Employees In       Base Price       Expiration                                Present Value 
  Name                Granted (#)     Fiscal Year          ($/sh)            Date           5% ($)        10% ($)        $        
  (a)                     (b)             (c)                (d)             (e)             (f)           (g)          (h)       
<S>                   <C>             <C>                <C>              <C>             <C>           <C>         <C>             
RAJA S. TULI            50,000            50%               8.50           6/12/06        $267,000      $672,500      --
SUNEET S. TULI          50,000            50%               8.50           6/12/06        $267,000      $672,500      --
</TABLE>


         During the fiscal year ended March 31, 1996, the Company adopted a
stock option plan permitting the issuance of options to purchase up to 300,000
shares of the Company's common stock. During that fiscal year, the Company
issued 200,000 options under the plan to the senior officers of the Company at
an exercise price of $5.00 per share. During the fiscal year ended March 31,
1997, the Company amended the plan permitting the issuance of options to
purchase up to 500,000 shares of the Company's stock.


AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND FY-END OPTION/SAR VALUES

         The following table sets forth certain information concerning the
exercise, if any, of stock options made as of the last fiscal year under the
Company's 1995 and 1996 stock option plan to each of the named executive
officers and the fiscal year - end value of unexercised options of the company.


<TABLE>
<CAPTION>
              AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND FY-END OPTION/SAR VALUES
              --------------------------------------------------------------------------------
                                                         Number of Securities            Value of Unexercised In-
                           Shares                       Underlying Unexercised          The-Money Options/SARs At
                          Acquired                      Options/SARs At Fiscal             Fiscal Year-End (1)
                             On           Value              Year-End                   Exercisable/Unexercisable
                          Exercise      Realized      Exercisable/Unexercisable
     Name             
      (a)                    (b)           (c)                   (d)                               (e)
<S>                       <C>           <C>             <C>        <C>                       <C>        <C>            
Raja S. Tuli                  0         $ 0             $ 0          200,000                 $ 0        $ 0
Suneet S. Tuli                0         $ 0             $ 0          200,000                 $ 0        $ 0
</TABLE>
(1) Market value at March 31, 1997 was 3-7/8.

                                                                              22
<PAGE>   23
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

         The following table sets forth, as of July 20, 1997, information as to
(i) the Common Stock beneficially owned by all directors, nominees and named
executive officers, (ii) the Common Stock beneficially owned by any person who
is known by the Company to be the beneficial owner of more than five percent of
the Company's Common Stock.



<TABLE>
<CAPTION>
--------------------------------------------------------------------------------
                        Name                     Amount
                     And Address              And Nature of          Percent
  Title of           of Beneficial              Beneficial           Of Class
   Class                Owner                   Ownership
--------------------------------------------------------------------------------
<S>                  <C>                      <C>                    <C>  
      Common         Raja S. Tuli(5)           1,250,223(3)            21.2%
      Common         Lakhbir S. Tuli(5)          515,041               10.6%
      Common         Suneet S. Tuli(5)           490,240(4)             9.9%
      Common         Dr. Ajit Singh                  ---                ---
      Common         Bruce Vallillee                 ---                ---
      Common         Willem J. Botha                 ---                ---
      Common         Mark Maltese                    ---                ---
                     All executive officers
                     and directors as a group
                     (six persons)             2,075,503(2)(3)(4)      40.3%
</TABLE>

(1)      Unless otherwise indicated, the business address of each beneficial
         owner is 267 Matheson Boulevard East, Mississauga, Ontario, Canada L4Z
         1X8.

(2)      Except as indicated by footnote, the persons named in the table have
         sole voting and investment power with respect to all shares of Common
         Stock shown as beneficially owned by them. Each beneficial owner's
         percentage ownership is determined by assuming that convertible
         securities, options or warrants that are held by such person (but not
         those held by any other person) and which are exercisable within 60
         days of the date hereof have been exercised.

(3)      Includes: (i) 150,000 Common Shares issuable upon exercise of currently
         exercisable options at a price of $5.00 per share, and 50,000 Common
         Shares issuable upon exercise of currently exercisable warrant at a
         price of $8.50 per share, and (ii) 32,500 shares owned by Diversified
         Investors Capital Services of North America, Inc., a New York
         corporation, 67,500 shares owned by Pyrotech Limited, a Cayman Islands
         corporation, and 4,890 shares owned by Donald J. Schattle, and 180,000
         by other stockholders (none of which are affiliated with the Company
         or Mr. Schattle) respectively, as to which Mr. Tuli and the certain
         other stockholders has voting rights pursuant to a stock exchange 
         agreement. See "Certain Relationships and Related Transactions."

(4)      Includes 50,000 Common Shares issuable upon exercise of currently
         exercisable options at a price of $5.00 per share and 50,000 Common
         Shares issuable upon exercise of currently exercisable warrant at a
         price of $8.50 per share.

(5)      Lakhbir S. Tuli is the father of Raja S. and Suneet S. Tuli. The Tulis'
         disclaim ownership for each others shares of Common Stock.


                                                                              23
<PAGE>   24
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS


         In October 1993, the Company entered into an agreement with WideCom R&D
pursuant to which WideCom R&D would seek to identify and recruit distributors
and sub-contract manufacturers for the Company's products in India. The
agreement provides for WideCom R&D to structure its compensation with any
distributor or sub-contractor it engages and WideCom R&D will not receive any
compensation from the Company. To date, WideCom R&D has not recruited any
distributor or sub-contractor. There can be no assurance that conflicts of
interest will not arise as a result of WideCom R&D structuring its compensation
with potential licensees or sub-contractors.

         From 1992 to July 1993, Raja S. Tuli engaged two individuals to provide
services relating to the Company's marketing and other activities. In exchange
for performing such services, Mr. Tuli transferred 100,000 Common Shares to such
individuals. Such individuals have attempted to transfer an aggregate of 172,860
Common Shares to third parties. In November 1993, Raja S. Tuli entered into an
indemnification agreement with the Company pursuant to which Mr. Tuli agreed
that, in the event the Company is required to issue in excess of 100,000 Common
Shares to such individuals or any purported transferee of such shares, Mr. Tuli
would return to the Company up to 160,000 Common Shares for cancellation to the
extent the Company is required to issue any such additional shares. "See Legal
Proceedings"

         The Company has engaged Lakhbir S. Tuli, the father of Suneet and Raja
Tuli as a management consultant, with respect to the Company's operations in
India. As consideration for his services, the Company paid to Mr. Tuli $38,000,
$47,000, $54,000 and $115,000 during the years ended March 31, 1994, 1995, 1996
and 1997 respectively.

         In October 1993, Indo-WideCom International Ltd. ("Indo-Widecom"), a
wholly owned subsidiary of the Company, entered into a sublease with WideCom Fax
(Widecom Fax"). Widecom Fax is 70% owned by Lakhbir Tuli, the father of Suneet
and Raji Tuli. WidecomFax sublease is in connection with the Company's
manufacturing facility in India. Annual lease payments by Indo WideCom to
WideCom Fax have remained the same at 480,000 rupees (approximately $15,200).
See "Properties."

         During the year ended March 31, 1996, the Company purchased
approximately $323,000 of products from WideCom Fax pursuant to purchase orders
on similar terms as purchases made by unaffiliated third parties. As of March
31, 1996, WideCom Fax owed approximately $86,700 to the Company for purchases
from the Company during the year ended March 31, 1995.

         In March 1995, the Company entered into a three year marketing and
consulting agreement with Schattle & Duquette, an executive search and
management consulting firm partially owned by Donald J. Schattle, a former
director of the Company who resigned effective March 7, 1996, which agreement
commenced upon consummation of the Company's initial public offering in December
1995. Pursuant to the agreement, Schattle & Duquette will assist the Company in
identifying potential management personnel, acquisition candidates and sales
opportunities within the engineering and architectural markets for a monthly fee
of $15,000.

         On April 4, 1995, the Company entered into a stock exchange agreement
with the four stockholders of DS Corporate Marketing Ltd. ("DS"). Pursuant to
this agreement, the Company acquired a 49% equity interest in DS in exchange for
the issuance to DS of 240,000 Common Shares and warrants to purchase 100,000
Common Shares at a price of $4.00 per share. Upon distribution by DS to its
stockholders and their designees, Donald J. Schattle, a 25% stockholder of DS,
received 60,000 of the 240,000 Common Shares and 25,000 of the warrants to
purchase Common Shares at a price of $4.00 per share. The remaining 180,000
Common Shares and 75,000 warrants were distributed to


                                                                              24
<PAGE>   25
the other stockholders, none of which are affiliated with the Company or Mr.
Schattle. In connection with the stock exchange agreement, the holders of all of
such 300,000 shares granted Raja Tuli a proxy to vote all of such shares at all
meetings of the Company's stockholders; however, in 1996, 55,110 of Mr. 
Schattle's Common Shares were sold by Mr. Schattle. As a result of the
foregoing, Raja Tuli now has a proxy to vote 184,890 of those shares granted to
Raja Tuli pursuant to the Stock Exchange Agreement. See "Security Ownership of
Certain Beneficial Owners and Management."                    

         As of January 30, 1997, the Company announced that it had finalized a
joint venture agreement with Societe Innovatech du Grand Montreal, an
instrumentality of the Province of Quebec, Canada ("Innovatech").The Company
and Innovatech purchased 450 shares of the Class A Common Stock of 3994340
Canada Inc., doing business as Technologies NovImage, for a purchase price of
approximately US $1,875,000 each. The consideration paid by the Company for
the stock of 3994340 Canada Inc., doing business as Technologies Novimage was in
cash and was derived from the Company's working capital. In addition, two
other corporations, 3294412 Canada Inc., a Quebec corporation and 3294421 Canada
Inc., a Quebec corporation, both of which corporations are wholly-owned by Raja
S. Tuli, President and Chief Executive Officer of the Company, each acquired 50
shares of the Class A Common Stock of 3994340 Canada Inc., doing business as
Technologies Novimage in exchange for the transfer to 3994340 Canada Inc., doing
business as Technologies Novimage of certain patents, patent applications and
other technology and intellectual property rights of those companies. In
connection with the transaction, the Company granted an exclusive license of all
of its patents, if any, and technology relating to its scanner and plotter
manufacturing and its WideView TM and SLC-OVLY TM software (collectively, the
"Intellectual Property") to 3994340 Canada Inc., doing business as Technologies
Novimage for research and development purposes in order to develop improvements,
modifications, additions or alterations to the Intellectual Property and to
develop new products. 

         In exchange for this exclusive license and the payment of a 0.5%
royalty fee on net revenue, licensing revenue and net sales to sub-licensees,
3994340 Canada Inc., doing business as Technologies Novimage granted the Company
an exclusive perpetual worldwide (with the exception of the Province of Quebec,
Canada) license to use such improved scanner and plotter technology and software
to manufacture, distribute, market and sell the improved scanner, plotter and
software, and any new products developed by 3994340 Canada Inc., doing business
as Technologies Novimage. 3994340 Canada Inc., doing business as Technologies
Novimage retained such rights with respect to the Province of Quebec, Canada. In
connection with the transaction, the Company also entered into a Stock Exchange
Agreement with Innovatech pursuant to which Innovatech would be permitted, under
certain circumstances, to exchange its shares of 3994340 Canada Inc., doing
business as Technologies Novimage for up to 253,000 shares of common stock of
the Company for which Innovatech would have demand registration rights.

         Although the Company believes that the foregoing transactions were on
terms no less favorable than would have been available from unaffiliated third
parties in arm's length transaction, there can be no assurance that this is the
case. All future transaction and loans between the Company and its officers,
directors and 5% shareholders will be on terms no less favorable than could be
obtained from independent, third parties and will be approved by a majority of
the independent and disinterested members of the Board of Directors. There can
be no assurance, however, that future transactions or arrangements between the
Company and its affiliates will be advantageous, that conflicts of interest will
not arise with respect thereto or that if conflicts do arise, that they will be
resolved in favor of the Company.


                                                                              25
<PAGE>   26
                                     PART IV

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

(a) (1)   Financial Statements

     The following financial statements of The WideCom Group Inc. are included:

                  Report of Independent Accountants Consolidated Balance Sheets
                  as of March 31, 1997, 1996, 1995. Consolidated Statements of
                  Operations for the years ended March 31, 1997, 1996, 1995.
                  Consolidated Statements of Shareholders' Equity for the years
                  ended March 31, 1997, 1996, 1995. Consolidated Statements of
                  Cash Flows for the years ended March 31, 1997, 1996, 1995.
                  Summary of Significant Accounting Policies Notes to
                  Consolidated Financial Statements.

         (2) Other Schedules

         All other schedules are omitted since the required information is not
present or is not present in an amount sufficient to require submission of
schedules, or because the information required is included in the financial
statements and notes thereto.

         (3) Exhibits

             None.

(b)      Reports on Form 8-K

         Form 8-K, dated February 3, 1997, with respect to the finalization of a
joint venture agreement with Societe Innovatech du Grand Montreal, an
instrumentality of the Province of Quebec, Canada ("Innovatech"). The Company
and Innovatech purchased 450 Shares of the Class A Common Stock of 3994340
Canada Inc., doing business as Technologies Novimage Inc., a Quebec Corporation
for a purchase price of approximately (US) $1,875,000 each.

         Form 8-K, dated February 10, 1997 with respect to the Company's
announcement on February 10, 1997, that it was calling for redemption all of its
publicly traded warrants issued in connection with its initial public offering.
In addition, notice was given to all registered warrant holders of the Company
and to American Stock Transfer and Trust Company that American Stock Transfer
and Trust Company had been removed as warrant agent for purposes of warrants
being called for redemption, and that the First National Bank of Boston had been
appointed to such position.

         Form 8-K, dated April 30, 1997, relating to the Company's announcement
on February 10, 1997, that it was calling for redemption all of its
publicly-traded warrants issued in connection with its initial public offering.
On April 10, 1997, the Company announced that the warrant redemption was
complete, and that more than half of the Warrants had been exercised, and that
no warrants would be redeemed.


                                                                              26
<PAGE>   27
(c)      Exhibits

                  The following exhibits are filed herewith:

<TABLE>
<CAPTION>
EXHIBIT
NO.               DESCRIPTION
---               -----------
<S>               <C>                                                           
10.1              Distributor Agreement between The Widecom Group Inc. and CADigitizing
                  Corporation, dated May 6, 1997.

                  Portions of this exhibit has been omitted
                  pursuant to a request for confidential
                  treatment.

10.2              Distributor Agreement between The Widecom Group Inc. and Scan Group, dated
                  September 8, 1996.

                  Portions of this exhibit has been omitted pursuant to a request for
                  confidential treatment.

10.3              Distributor Agreement between the Widecom Group Inc. and The Imtec Group
                  Limited, dated November 15, 1996.

                  Portions of this exhibit have been omitted pursuant to a request for
                  confidential treatment.

21.               List of subsidiaries.

23.               Consent of BDO Dunwoody, independent accountants.

27.               Financial Data Schedule.


(d)               Not Applicable.
</TABLE>


                                                                              27
<PAGE>   28
                                   SIGNATURES

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.

Date: August 18, 1997                   THE WIDECOM GROUP INC.
            

                                        By: /s/ RAJA S. TULI
                                           ------------------------------------
                                        Raja S. Tuli Chief Executive Officer
                                        and President

Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed by the following persons on behalf of the registrant and in the
capacities and on the date indicated.

<TABLE>
<CAPTION>
     NAME                                 TITLE                                 DATE
     ----                                 -----                                 ----
<S>                         <C>                                            <C>    
/s/ RAJA S. TULI            President, Chief Executive Officer and
Raja S. Tuli                Director (Principal Executive Officer)         August 18, 1997
                                                                                 

/s/ WILLEM J. BOTHA         Treasurer and Chief Financial Officer          August 18, 1997
Willem J. Botha             (Principal Financial and Accounting
                            Officer)

/s/ SUNEET S. TULI          Executive Vice President of Sales and          August 18, 1997
                                                                                  
Suneet S. Tuli              Marketing, Secretary and Director

/s/ BRUCE D. VALLILLEE      Director                                       August 18, 1997
                                                                                 
Bruce D. Vallillee

/s/ AJIT SINGH              Director                                       August 18, 1997
Ajit Singh
</TABLE>


                                                                              28
<PAGE>   29
                             THE WIDECOM GROUP INC.
                        CONSOLIDATED FINANCIAL STATEMENTS
                FOR THE YEARS ENDED MARCH 31, 1995, 1996 AND 1997
                           (IN UNITED STATES DOLLARS)

         CONTENTS
         --------
AUDITORS' REPORT                                                      2

CONSOLIDATED FINANCIAL STATEMENTS

Balance Sheets                                                        3

Statements of Operations                                              4

Statements of Shareholders' Equity                                    5

Statements of Cash Flows                                              6

Summary of Significant Accounting Policies                            7

Notes to Financial Statements                                        10


                                                                              29
<PAGE>   30
                            [BDO DUNWOODY LETTERHEAD]


                                                                AUDITORS' REPORT

TO THE BOARD OF DIRECTORS OF
  THE WIDECOM GROUP INC.

We have audited the consolidated balance sheets of The WideCom Group Inc. as at
March 31, 1995 1996 and 1997 and the consolidated statements of operations,
shareholders' equity and cash flows for the years then ended. These consolidated
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
generally accepted in the United States of America. Those standards require that
we plan and perform an audit to obtain reasonable assurance 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, these consolidated financial statements present fairly, in all
material respects, the financial position of the Company as at March 31, 1995,
1996 and 1997 and the results of its operations and the changes in its cash flow
for the years then ended in conformity with accounting principles generally
accepted in the United States of America.

/s/ BDO Dunwoody


Chartered Accountants
(Internationally BDO Binder)

Toronto, Ontario
July 4, 1997


                                        2


                                                                              30
<PAGE>   31
                               WIDECOM GROUP INC.
                           CONSOLIDATED BALANCE SHEETS
                           (IN UNITED STATES DOLLARS)

<TABLE>
<CAPTION>
                                                                               MARCH 31,
                                                                               ---------
                                                                 1995             1996                 1997
                                                                 ----             ----                 ----
<S>                                                        <C>                <C>                <C>         
ASSETS
CURRENT ASSETS
  Cash and short term investments (Note 7)                 $     3,528        $ 5,643,491        $    631,486
  Term deposits (Note 7)                                        95,731                 --                  --
  Accounts receivable (Note 1)                                 359,368            436,747             650,949
  Receivable from exercise of warrants                              --                 --             105,142
  Research and development grants
    receivable (Note 10(b))                                    506,680            709,424             696,347
  Inventory (Note 2)                                           588,393            456,128           1,199,386
  Prepaid expenses                                              15,251             70,692             100,308
  Advances to related parties (Note 3)                          21,043             86,715             117,149
  Deferred income taxes                                            714                 --                  --
                                                           -----------        -----------        ------------
TOTAL CURRENT ASSETS                                         1,590,708          7,403,197           3,500,767
CAPITAL ASSETS (Note 4)                                        362,217          1,238,317           1,738,485
DEFERRED ISSUE COSTS OF PUBLIC
  OFFERING (Note 5)                                            594,756                 --                  --
INVESTMENT IN AFFILIATES (Note 6)                                   --            576,000           1,685,935
                                                           -----------        -----------        ------------
TOTAL ASSETS                                               $ 2,547,681        $ 9,217,514        $  6,925,187
                                                           ===========        ===========        ============

LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
  Bank indebtedness (Note 7)                               $   101,708        $   132,246        $    329,810
  Accounts payable and accrued
    liabilities (Note 8)                                       565,441            393,462           1,352,074
  IOC loan payable (Note 10)                                   214,290                 --                  --
  Accrued interest on IOC loan payable                         277,953                 --                  --
  Loans from non-management
    shareholders (Note 9)                                      259,247                 --                  --
  Deferred income taxes                                          1,101             63,200                  --
                                                           -----------        -----------        ------------
TOTAL CURRENT LIABILITIES                                    1,419,740            588,908           1,681,884
                                                           -----------        -----------        ------------
SHAREHOLDERS' EQUITY (Note 11)
  Preferred shares
    23,350 shares authorized on
                       March 31, 1995 and no shares
                       authorized on March 31, 1996
                       and 1997
    23,350 shares issued and outstanding
                       on March 31, 1995 and no
                       shares issued and outstanding
                       on March 31, 1996 and 1997              183,276                 --                  --
Common shares
  20,000,000 shares authorized of no par
                         value
   2,111,910 shares issued and
                         outstanding on
                         March 31, 1995
   4,434,073 shares issued and
                         outstanding on
                         March 31, 1996
   4,848,418 shares issued and
                         outstanding on
                         March 31, 1997                        839,074          9,300,794          10,598,884
Contributed surplus                                            159,825            159,825             159,825
Retained earnings (deficit)                                     15,007           (824,294)         (5,312,118)
Cumulative translation adjustment                              (69,241)            (7,719)           (203,288)
                                                           -----------        -----------        ------------
                                                             1,127,941          8,628,606           5,243,303
                                                           -----------        -----------        ------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY                 $ 2,547,681        $ 9,217,514        $  6,925,187
                                                           ===========        ===========        ============
</TABLE>

         See accompanying summary of significant accounting policies and
                      notes to these financial statements.

                                        3


                                                                              31
<PAGE>   32
                               WIDECOM GROUP INC.
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                           (IN UNITED STATES DOLLARS)

<TABLE>
<CAPTION>
                                                           FOR THE YEARS ENDED MARCH 31,
                                                           -----------------------------
                                                    1995               1996              1997
                                                    ----               ----              ----
<S>                                             <C>                <C>                <C>        
REVENUE
  Product sales                                 $ 1,625,241        $ 1,666,345        $ 1,678,933
  Research and development grants
    (Note 10)                                       390,986            262,322                 --
  Interest income                                     8,062             79,134            141,780
                                                -----------        -----------        -----------
TOTAL REVENUE                                     2,024,289          2,007,801          1,820,713
                                                -----------        -----------        -----------
EXPENSES
  Cost of product sales                             341,704            470,407            452,413
  Research and development                          656,876            732,457            614,663
  Selling, general and administrative               480,808            751,252          3,733,016
  Interest and bank charges                         100,159             67,301             42,399
  Management fees                                   114,192            207,657            321,209
  Compensation benefit on stock
    transaction (Note 11(c))                             --            166,974                 --
  Amortization                                       26,401            297,316            503,359
  Debt discount                                          --            255,478                 --
  Finance fees                                           --            167,277                 --
  Warranty costs                                      3,155                 --              6,613
                                                -----------        -----------        -----------
TOTAL EXPENSES                                    1,723,295          3,116,119          5,673,672
                                                -----------        -----------        -----------
OPERATING INCOME (LOSS)                             300,994         (1,108,318)        (3,852,959)
WRITE OFF OF DEFERRED ISSUE COSTS
  (Note 5)                                         (216,547)                --                 --
EQUITY IN EARNINGS (LOSS) OF AFFILIATE                   --                 --           (121,971)
WRITEDOWN OF GOODWILL                                    --                 --           (576,000)
                                                -----------        -----------        -----------
EARNINGS (LOSS) BEFORE INCOME TAXES AND
  EXTRAORDINARY ITEM                                 84,447         (1,108,318)        (4,550,930)
                                                -----------        -----------        -----------
PROVISION FOR (RECOVERY OF) INCOME TAXES
  (Note 12)
  Current                                                --                 --                 --
  Deferred                                           20,000            (82,687)           (63,106)
                                                -----------        -----------        -----------
                                                     20,000            (82,687)           (63,106)
                                                -----------        -----------        -----------
EARNINGS (LOSS) BEFORE EXTRAORDINARY ITEM            64,447         (1,025,631)        (4,487,824)
EXTRAORDINARY ITEM, NET OF TAX (Note 10)                 --            186,330                 --
                                                -----------        -----------        -----------
NET EARNINGS (LOSS) FOR THE YEAR                $    64,447        $  (839,301)       $(4,487,824)
                                                ===========        ===========        ===========
EARNINGS (LOSS) PER COMMON SHARE BEFORE
  EXTRAORDINARY ITEM, PRIMARY AND FULLY
  DILUTED                                       $      0.02        $     (0.33)       $     (0.99)
                                                ===========        ===========        ===========
EARNINGS (LOSS) PER COMMON SHARE,
  PRIMARY AND FULLY DILUTED (Note 11(e))        $      0.02        $     (0.27)       $     (0.99)
                                                ===========        ===========        ===========
WEIGHTED AVERAGE NUMBER OF SHARES
  OUTSTANDING                                     2,712,660          3,078,428          4,533,583
                                                ===========        ===========        ===========
</TABLE>


         See accompanying summary of significant accounting policies and
                      notes to these financial statements.


                                        4


                                                                              32
<PAGE>   33
                               WIDECOM GROUP INC.
                 CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
                           (IN UNITED STATES DOLLARS)

                               FOR THE YEARS ENDED MARCH 31, 1995, 1996 AND 1997

<TABLE>
<CAPTION>
                                                                                        RETAINED     CUMULATIVE         TOTAL
                                          PREFERRED       COMMON        CONTRIBUTED     EARNINGS     TRANSLATION    SHAREHOLDERS'
                                           SHARES         SHARES          SURPLUS       (DEFICIT)    ADJUSTMENT        EQUITY
                                           ------         ------          -------       ---------    ----------        ------
<S>                                       <C>          <C>              <C>           <C>            <C>            <C>        
BALANCE, March 31, 1994                   $ 183,276    $    839,074      $159,825     $   (49,440)    $ (59,109)    $ 1,073,626
NET EARNINGS FOR THE YEAR                        --              --            --          64,447            --          64,447
FOREIGN CURRENCY TRANSLATION
  ADJUSTMENT                                     --              --            --              --       (10,132)        (10,132)
                                          ---------    ------------      --------     -----------     ---------     -----------
BALANCE, March 31, 1995                     183,276         839,074       159,825          15,007       (69,241)      1,127,941
CONVERSION OF PREFERRED SHARES
  (116,750)(Note 11(c))                    (183,276)        350,250            --              --            --         166,974
SHARES ISSUED FOR INVESTMENT IN
  AFFILIATE (240,000)                            --         720,000            --              --            --         720,000
SHARES ISSUED ON INITIAL PUBLIC
  OFFERING (1,650,000)                           --       8,250,000            --              --            --       8,250,000
WARRANTS ISSUED ON INITIAL
  PUBLIC OFFERING (1,650,000)                    --         165,000            --              --            --         165,000
SHARES ISSUED TO UNDERWRITER
  FOR BRIDGE FINANCING (84,000)                  --         252,000            --              --            --         252,000
SHARES ISSUED ON EXERCISE OF
  UNDERWRITER'S OPTION (247,500)                 --       1,237,500            --              --            --       1,237,500
WARRANTS ISSUED ON EXERCISE OF
  UNDERWRITER'S OPTION (247,500)                 --          24,750            --              --            --          24,750
PURCHASE OF WARRANTS BY
  UNDERWRITER (165,000)                          --             165            --              --            --             165
INITIAL PUBLIC OFFERING COSTS                    --      (2,352,945)           --              --            --      (2,352,945)
CONTRIBUTION BY SHAREHOLDERS
  (16,087)                                       --        (185,000)           --              --            --        (185,000)
NET LOSS FOR THE YEAR                            --              --            --        (839,301)           --        (839,301)
FOREIGN CURRENCY TRANSLATION
  ADJUSTMENT                                     --              --            --              --        61,522          61,522
                                          ---------    ------------      --------     -----------     ---------     -----------
BALANCE, March 31, 1996                   $      --    $  9,300,794      $159,825     $  (824,294)    $  (7,719)    $ 8,628,606
EXERCISE OF WARRANTS (414,345)                   --       1,413,035            --              --            --       1,413,035
WARRANT EXERCISE COSTS                           --        (114,945)           --              --            --        (114,945)
NET LOSS FOR YEAR                                --              --            --      (4,487,824)           --      (4,487,824)
FOREIGN CURRENCY TRANSLATION ADJUSTMENT          --              --            --              --      (195,569)       (195,569)
                                          ---------    ------------      --------     -----------     ---------     -----------
BALANCE, March 31, 1997                   $      --    $ 10,598,884      $159,825     $(5,312,118)    $(203,288)    $ 5,243,303
                                          =========    ============      ========     ===========     =========     ===========
</TABLE>



         See accompanying summary of significant accounting policies and
                      notes to these financial statements.


                                        5


                                                                              33
<PAGE>   34
                             THE WIDECOM GROUP INC.
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                           (IN UNITED STATES DOLLARS)

<TABLE>
<CAPTION>
                                                            FOR THE YEARS ENDED MARCH 31,
                                                            -----------------------------
                                                      1995              1996               1997
                                                      ----              ----               ----
<S>                                              <C>                <C>                <C>         
CASH PROVIDED BY (USED IN) OPERATING
  ACTIVITIES
  Earnings (loss) for the year before
    extraordinary item                           $    64,447        $(1,025,631)       $(4,487,824)
  Add (deduct) items not requiring a
    cash outlay
    Amortization                                      26,401            297,316            503,359
    Compensation benefit on stock
      transaction                                         --            166,974                 --
    Deferred revenue                                 (13,536)                --                 --
    Deferred income taxes                             20,000            (82,687)           (63,106)
    Initial public offering costs
      written off                                    216,547                 --                 --
    Writedown of goodwill                                 --                 --            576,000
    Equity in earnings (loss) of
      affiliate                                           --                 --            121,971
    Accrued interest on IOC loan payable              89,493             56,643                 --
  Net changes in non-cash working
    capital balances related to operations
    Increase in accounts receivable                 (208,552)           (66,333)          (333,048)
    Decrease (increase) in research
      and development grants receivable               45,580           (186,971)                --
    Decrease (increase) in inventory                  36,245            149,578           (764,646)
    Increase (decrease) in accounts
      payable and accrued liabilities                268,488           (188,861)           982,544
    Increase in prepaid expenses                     (10,785)           (54,837)           (31,453)
                                                 -----------        -----------        -----------
                                                     534,328           (934,809)        (3,496,203)
                                                 -----------        -----------        -----------
INVESTING ACTIVITIES
  Decrease in term deposits                              763             98,331                 --
  Purchase of capital assets                        (311,549)        (1,029,416)        (1,108,068)
  Advances (repayment) to related
    parties                                          201,947            (64,859)           (32,033)
  Purchase of equity in joint venture                     --                 --         (1,805,836)
                                                 -----------        -----------        -----------
                                                    (108,839)          (995,944)        (2,945,937)
                                                 -----------        -----------        -----------
FINANCING ACTIVITIES
  Increase in bank indebtedness                       16,578             27,380            203,456
  Shares and warrants issued                              --          7,576,470          1,298,090
  Shares contributed by shareholders                      --           (185,000)                --
  Loan (repayment) from shareholders                   9,092           (266,274)                --
  Repayment of Innovation Ontario loan                    --           (220,110)                --
  Deferred issue costs of public offering           (531,741)           610,909                 --
                                                 -----------        -----------        -----------
                                                    (506,071)         7,543,375          1,501,546
                                                 -----------        -----------        -----------
EFFECT OF EXCHANGE RATE CHANGES ON CASH               (5,162)            27,341            (71,411)
                                                 -----------        -----------        -----------
NET INCREASE (DECREASE) IN CASH DURING
  THE YEAR                                           (85,744)         5,639,963         (5,012,005)
CASH AND EQUIVALENTS, beginning of year               89,272              3,528          5,643,491
                                                 -----------        -----------        -----------
CASH AND EQUIVALENTS, end of year                $     3,528        $ 5,643,491        $   631,486
                                                 ===========        ===========        ===========
</TABLE>

NOTE: SEE NOTE 17 FOR SUPPLEMENTARY INFORMATION

         See accompanying summary of significant accounting policies and
                      notes to these financial statements.


                                        6


                                                                              34
<PAGE>   35
                               WIDECOM GROUP INC.
                   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
                           (IN UNITED STATES DOLLARS)

MARCH 31, 1995, 1996 AND 1997

NATURE OF BUSINESS

The WideCom Group Inc. ("the Company") was incorporated under the laws of
Ontario on June 15, 1990 and its first fiscal year ended on March 31, 1991. The
Company designs, assembles and sells high speed, high performance document
systems which transmit, receive, print, copy and/or archive wide format
documents.

BASIS OF FINANCIAL STATEMENTS

The accompanying consolidated financial statements are stated in United States
dollars, "the reporting currency". The transactions of the Company have been
recorded during the year in Canadian dollars, "the functional currency". The
translation of Canadian dollars into United States dollars amounts have been
made at the year end exchange rates for balance sheet items and the average
exchange rate for the year for revenues, expenses, gains and losses. Translation
adjustments to reporting currency are included in equity.

The financial statements reflect retroactively a backsplit occurring during 1996
(see Note 11(b)(ii)).

These financial statements have been prepared by management in accordance with
accounting principles generally accepted in the United States.

PRINCIPLES OF CONSOLIDATION

These consolidated financial statements include the accounts of the Company and
its wholly-owned subsidiary Indo WideCom International Ltd. All significant
intercompany transactions and accounts have been eliminated.

INVESTMENT IN AFFILIATES

The investment in affiliates are accounted for on the equity basis.

ACCOUNTING ESTIMATES

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

INVENTORY

Inventory is valued at the lower of cost, determined on a first-in, first-out
basis, and market value. Market value for raw materials is defined as
replacement and for finished goods as net realizable value.

LONG-LIVED ASSETS

The Company adopted Statement of Financial Accounting Standards (SFAS) No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
be Disposed of" in the fiscal year 1997. SFAS No. 121 requires that long-lived
assets and certain identifiable intangibles be reviewed for impairment whenever
events or changes in circumstances indicate that the carrying amount of an asset
may not be recoverable, and, if deemed impaired, measurement and recording of an
impairment loss be based on the fair value of the asset. The adoption of SFAS
No. 121 had no impact on the Company's financial statements or operations.


                                        7


                                                                              35
<PAGE>   36
CAPITAL ASSETS

Capital assets are recorded at cost. Amortization is provided annually at rates
calculated to amortize the assets over their estimated useful lives as follows:

Plant, machinery and computer equipment         -     30% declining balance
Furniture and fixtures                          -     20% declining balance
Prototype and jigs                              -     20% declining balance

EARNINGS OR LOSS PER SHARE

Earnings or loss per share is based on the weighted average number of shares of
common stock and dilutive common stock equivalents outstanding during each
period. Earnings or loss per share is computed using the treasury stock method,
under which the number of shares outstanding reflects the assumed repurchase of
shares of the Company's common stock with the proceeds from the assumed exercise
of dilutive outstanding stock options. All share and per share data are
retroactively adjusted for stock dividends and stock splits.

The Financial Accounting Standards Board issued SFAS No. 128, "Earnings Per
Share", effective for financial statements for both interim and annual periods
ending after December 15, 1997. The Company will adopt this statement in the
third quarter of the fiscal year 1998. The adoption of SFAS No. 128 is not
expected to have a material impact on earnings per share.

STOCK BASED COMPENSATION

SFAS No. 123, "Accounting for Stock-Based Compensation", encourages, but does
not require, companies to record compensation costs for stock-based employee
compensation plans at fair value. The Company chose to continue to account for
stock-based compensation using the intrinsic value method prescribed in
Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to
Employees", and related interpretations. Accordingly, compensation cost for
stock options is measured as the excess, if any, of the quoted market price of
the Company's stock at the measurement date over the amount an employee must pay
to acquire the stock. See Note 11 (d) for a summary of the pro forma net income
and earnings per share determined as if the Company had applied SFAS No. 123.

CASH AND EQUIVALENTS

Cash and cash equivalents include all highly liquid investments with original
maturities of three months or less.

REVENUE RECOGNITION

(i)      Product sales are recognized as revenue upon shipment of the product.
         Advance sales revenue is deferred until shipment of the product.

(ii)     Research and development grants are recognized as revenue as the
         related expenditures are incurred.

WARRANTY COSTS

The provision for warranty costs ranges from .25% to 1% of product sales based
on the period of time that the products are under warranty.

FOREIGN CURRENCY TRANSLATION

Balances of the Company denominated in foreign currencies and the accounts of
its foreign subsidiary are translated into the functional currency as follows:

(i)      monetary assets and liabilities at year end rates;

(ii)     all other assets and liabilities at historical rates;

(iii)    revenue and expense transactions at the average rate of exchange
         prevailing during the year; and


                                        8


                                                                              36
<PAGE>   37
(iv)     changes in cash flow at the average rate of exchange prevailing during
         the year.

Exchange gains or losses arising on these translations are reflected in income
in the year except for translation gains and losses which arise in connection
with the translation of the results of the foreign subsidiary's operations which
are included in equity.

RESEARCH AND DEVELOPMENT COSTS

Research and development costs are charged against income in the year of
expenditure.

INCOME TAXES

The Company accounts for income taxes under the asset and liability method as
required by SFAS No. 109, Accounting for Income Taxes. Under the asset and
liability method, deferred income taxes are recognized for the tax consequences
of temporary differences by applying enacted tax rates applicable to future
years to differences between the financial statements carrying amounts and the
tax bases of existing assets and liabilities. When tax credits are available,
they are recognized as reductions of current year's tax expense.

CONCENTRATIONS OF CREDIT RISK AND BUSINESS CONCENTRATION

The Company's receivables are unsecured and are generally due in 30 days.
Currently the Company's customers are primarily local, national and
international users of wide fax document systems. The Company's receivables do
not represent significant concentrations of credit risk as at March 31, 1997,
due to the wide variety of customers, markets and geographic areas to which the
Company's products are sold.

VALUE OF FINANCIAL INSTRUMENTS

The carrying amounts of financial instruments of the Company, including cash,
accounts receivable, bank indebtedness and accounts payable, approximate fair
value because of their short maturity. The fair value of advances to related
parties can not be readily determined because of the nature of their terms.


                                        9


                                                                              37
<PAGE>   38
                             THE WIDECOM GROUP INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           (IN UNITED STATES DOLLARS)

MARCH 31, 1995, 1996 AND 1997

1.       ACCOUNTS RECEIVABLE

Accounts receivable consist of:

<TABLE>
<CAPTION>
                                              1995           1996           1997
                                              ----           ----           ----
<S>                                         <C>            <C>            <C>     
Trade accounts receivable                   $364,559       $442,096       $657,046
Less: Allowance for doubtful accounts          5,191          5,349          6,097
                                            --------       --------       --------
                                            $359,368       $436,747       $650,949
                                            ========       ========       ========
</TABLE>

2.       INVENTORY

<TABLE>
<CAPTION>
                         1995            1996             1997
                         ----            ----             ----
<S>                    <C>            <C>              <C>       
Raw materials          $218,789       $  244,524       $1,061,422
Work in progress        298,720          168,823           48,225
Finished goods           70,884           42,781           89,739
                       --------       ----------       ----------
                       $588,393       $  456,128       $1,199,386
                       ========       ==========       ==========
</TABLE>

3.       ADVANCES TO SHAREHOLDERS AND RELATED PARTIES

(a)      Advances to related parties are non-interest bearing except as noted
         and will be repaid follows:

<TABLE>
<CAPTION>
                                         1995          1996            1997
                                         ----          ----            ----

<S>                                    <C>           <C>            <C>     
WideCom Fax and Plotters Ltd.(i)       $21,043       $ 86,715       $ 85,116
Shareholders                                --             --         32,033
                                       -------       --------       --------
                                        21,043         86,715        117,149
Less: Current portion                   21,043         86,715        117,149
                                       -------       --------       --------
                                       $    --       $     --       $     --
                                       =======       ========       ========
</TABLE>

         (i) WideCom Fax and Plotters Ltd.

         Loans were made to a company controlled by a principal stockholder to
         purchase production equipment necessary in the manufacture of the
         Company's product in India.

(b)      Transactions with companies controlled by, and fees paid to, executive
         officers, the principal shareholders and directors during the year were
         as follows:

<TABLE>
<CAPTION>
                                                   1995             1996             1997
                                                   ----             ----             ----
<S>                                             <C>              <C>              <C>      
Sales                                           $  23,109        $  37,306        $  13,217
Consulting fees (Note 13(a))                           --          (45,233)        (135,056)
Capital assets acquired                          (224,707)        (323,363)              --
Purchases                                        (115,891)              --               --
Management fees, salaries and commissions        (114,192)        (207,657)        (378,015)
</TABLE>

         The management fees are paid on a month to month basis to executives
         who comprise senior management of the Company (See also Note 13(c)).


                                       10


                                                                              38
<PAGE>   39
4.       CAPITAL ASSETS

Capital assets consist of:

<TABLE>
<CAPTION>
                                                   1995                           1996                          1997
                                                   ----                           ----                          ----
                                                ACCUMULATED                    ACCUMULATED                   ACCUMULATED
                                             Cost        Amortization       Cost        Amortization      Cost        Amortization
                                             ----        ------------       ----        ------------      ----        ------------
<S>                                        <C>            <C>           <C>              <C>           <C>            <C>       
Machinery, plant and computer equipment    $284,840       $   29,045    $  699,335       $  143,256    $1,563,728     $  425,596
Furniture and fixtures                      114,935            8,513        99,832           17,589        95,369         29,946
Prototype and jigs                               --               --       444,231           35,430       415,094        223,782
Land                                             --               --        67,457               --        61,121             --
Building under construction                      --               --       123,737               --       282,497             --
                                           --------       ----------    ----------       ----------    ----------       --------
                                           $399,775       $   37,558    $1,434,592       $  196,275    $2,417,809     $  679,324
                                           ========       ==========    ==========       ==========    ==========     ==========
Net book value                                            $  362,217                     $1,238,317                   $1,738,485
                                                          ==========                     ==========                   ==========
</TABLE>

During 1997, prototypes and jigs were written down by approximately $115,000.

5.       DEFERRED ISSUE COSTS OF PUBLIC OFFERING

         These costs include legal, accounting, advances of the underwriter's
         expense allowance and other related costs of the public offering.
         Certain costs related to previous offerings were written off during
         1995 and the remaining costs were deducted from the equity raised in
         the offering during 1996.

6.       INVESTMENT IN AFFILIATES

         Investment in affiliates consists of:

<TABLE>
<CAPTION>
                                        1995            1996            1997
                                        ----            ----            ----

<S>                                   <C>            <C>              <C>       
DS Corporate Marketing Ltd. (i)       $     --       $  576,000       $       --
3994340 Canada Inc. (ii)                    --               --       $1,685,935
                                      --------       ----------       ----------
                                      $     --       $  576,000       $1,685,935
                                      ========       ==========       ==========
</TABLE>

(i)      During 1996 the Company acquired a 49% interest in DS Corporate
         Marketing Ltd. and the original excess of $720,000 over the purchase
         price of the underlying value of the assets was attributed to goodwill.
         Management periodically assesses the carrying value of the goodwill
         based on the expected benefits from this investee and, accordingly,
         during 1997 this investment was written down to $ nil. The Company's
         49% share of assets, liabilities and operating income is not
         significant.

(ii)     In October 1996, the Company entered into a joint venture agreement
         which resulted in the purchase of a 45% stake in 3994340 Canada Inc., a
         Quebec based company for approximately $1,875,000. The investee carries
         on research and development activities in order to develop
         improvements, modifications, additions or alterations to the
         intellectual property and to develop new products. In connection with
         the transaction, the Company also entered into a Stock Exchange
         Agreement with Societe Innovatech du Grand Montreal, an economic
         development agency of the Province of Quebec pursuant to which they
         would be permitted, under certain circumstances, to exchange its 45%
         interest for up to 253,000 common shares of the Company. The Company
         has a commitment to pay a royalty fee based on net revenue (See also
         Note 13(d)). The other two companies that each own 5% of the investee
         are controlled by a member of the executive of the Company.


                                                                              39
<PAGE>   40
The assets, liabilities, revenue and expenses of 3994340 Canada Inc. for the
period ended March 31, 1997 are as follows:

<TABLE>
<S>                                   <C>        
Current assets                        $ 3,400,046
Capital assets                            431,048
                                        3,831,094
Current liabilities                        84,750
Net assets                            $ 3,746,344
Revenue
Other Income                          $    92,243
Research and development grants           265,677
                                      -----------
                                          357,920
Expenses                                  628,965
                                      -----------
Net loss for the period               $  (271,045)
                                      ===========
</TABLE>

7.       BANK INDEBTEDNESS

         In 1995 the Company had a line of credit of approximately $125,000 plus
         accrued interest income on specified term deposits. This line bore
         interest at bank prime plus one and one half percent, collateralized by
         specified term deposits and is payable on demand. At March 31, 1995
         approximately $101,708 was utilized. During 1996 this indebtedness was
         repaid in full and the Company canceled the line. During 1997 the
         Company obtained an operating line of credit which bears interest at
         prime + 0.75%, is due on demand, and is secured by inventory, accounts
         receivable, and equipment for up to five years as well as a general
         security agreement over all company assets. At March 31, 1997,
         approximately $110,000 was utilized.

         The Company's 1996 bank indebtedness is the result of a bank overdraft
         in the Company's subsidiary. The Company's 1997 bank indebtedness is
         the result of a bank overdraft in the Company's subsidiary as well as a
         revolving operating loan in the Company. The indebtedness of the
         subsidiary is secured by a pledge of fixed deposits with the local
         bank.

8.       ACCOUNTS PAYABLE AND ACCRUED LIABILITIES

         Accounts payable and accrued liabilities consist of:

<TABLE>
<CAPTION>
                                              1995            1996            1997
                                              ----            ----            ----
<S>                                         <C>            <C>              <C>       
Trade accounts payable                      $137,276       $  260,897       $  487,763
Wages and employee deductions payable         93,533            9,125          200,011
Accrued liabilities                           10,719          123,440          664,300
Costs of public offering                     265,123               --               --
Interest payable (see Note 9)                 58,790               --               --
                                            --------       ----------       ----------
                                            $565,441       $  393,462       $1,352,074
                                            ========       ==========       ==========
</TABLE>

9.       LOANS FROM NON-MANAGEMENT SHAREHOLDERS

<TABLE>
<CAPTION>
                                                    1995            1996            1997
                                                    ----            ----            ----
<S>                                                <C>            <C>            <C>    
Promissory notes payable, interest
  at 8% and 12% per annum, repaid from
  the proceed of the initial public offering
  (see Note 11 (b))                                $259,247       $       --     $       --
                                                   ========       ==========     ==========
</TABLE>

Included in accounts payable at March 31, 1995 was interest of $58,790 (see Note
8).


                                                                              40
<PAGE>   41
10.      GOVERNMENT ASSISTANCE

(a)      On December 19, 1991, the Company entered into an agreement with
         Innovation Ontario Corporation ("IOC") whereby IOC granted Cdn.$300,000
         (U.S. $223,590) to the Company for purposes of funding research and
         development. This amount was recorded as a loan payable.

         Under the IOC agreement, the Company had agreed to pay an amount equal
         to 10% of gross revenues, as defined, commencing May 1, 1992. The
         Company could not advance amounts to affiliates or shareholders, repay
         amounts owing to shareholders, declare dividends or redeem shares
         without the consent of IOC.

         The agreement had been collateralized by a security interest covering
         all the assets of the Company. The Company had the option to terminate
         the agreement at any time by making a payment calculated in accordance
         with an agreed upon formula.

         In October, 1995 the Company settled all amounts outstanding including
         accrued interest of $334,596 for the repayment of principal of
         Cdn.$300,000. Upon such payment all obligations to IOC and IOC's
         security interest in the Company's assets were terminated. The
         settlement resulted in a gain, which has been recorded as an
         extraordinary item, of $186,330 ($334,596 net of tax of $148,266)
         during 1996.

<TABLE>
<CAPTION>
                                     1995           1996         1997
                                     ----           ----         ----

(b)      Grants

<S>                                <C>            <C>            <C>  
Research and development (1)       $360,140       $186,971       $  --
National Research Council            18,088         66,033          --
Other government agencies            12,758          9,318          --
                                   --------       --------       -----
                                   $390,986       $262,322       $  --
                                   ========       ========       =====
</TABLE>

(1)      Research and development grants are cash payments and credits against
         taxes payable received or receivable from the Federal government as an
         incentive to conduct research and development in Canada. As at March
         31, 1997, research and development grants receivable amounted to
         $696,347. This amount represents management's best estimate of grants
         based on its interpretation of current legislation. However, Revenue
         Canada has not yet assessed all claims and therefore the amount
         ultimately received could be materially different than the amount
         recorded.

11.      SHARE CAPITAL

(a)      Authorized

         20 million common shares

         23,350 preferred shares on March 31, 1995 and no shares on March 31,
         1996 and 1997.

         Of the 4,848,418 shares issued on March 31, 1997, 51,063 of these
         shares have not been registered by the Company's stock transfer agent.

(b)      Changes to Issued Share Capital

         (i)      In April 1995, the Company acquired a minority interest in a
                  U.S. based marketing company in exchange for 240,000 shares of
                  the Company's common stock and 100,000 warrants to purchase
                  common shares at $4.00. For the purposes of this acquisition
                  the Company's shares were valued at $3.00 per share.

         (ii)     On September 18, 1995, the outstanding common shares of the
                  Company were backsplit 8 for 10. The number of authorized
                  common shares were changed from unlimited to 20 million. These
                  changes have been treated retroactive to all prior period
                  share information and earnings per share calculations.


                                                                              41
<PAGE>   42
         (iii)    On October 13, 1995 the Company consummated a bridge financing
                  for which it issued an aggregate of 84,000 common shares and
                  warrants to purchase 840,000 common shares exercisable during
                  the four year period commencing one year from the date of the
                  initial public offering at a purchase price of $4.00 per
                  share.

         (iv)     On December 15, 1995 the Company completed an initial public
                  offering whereby 1,650,000 common shares were sold for $5 per
                  share and 1,650,000 redeemable warrants for $0.10 per warrant
                  exercisable. The proceeds of this issue, net of underwriting
                  and other issue expenses totaling $2,352,945, was $6,062,055.

         (v)      In January 1996 the underwriter exercised the option granted
                  to them in the terms of the initial public offering to
                  purchase an additional 247,500 common shares and 247,500
                  warrants at $5.00 and $0.10 each respectively for the purposes
                  of covering over allotments.

         (vi)     During 1996, the underwriter purchased 165,000 warrants at a
                  price of $.001 each for an aggregate of $165, which entitles
                  the underwriter to purchase 165,000 common shares at a
                  purchase price of $8.25 per share and also entitles the
                  underwriter to purchase an additional 165,000 of warrants at a
                  purchase price of $0.165 per warrant. The warrants purchased
                  during 1996 are exercisable during the four year period
                  commencing December 15, 1996.

         (vii)    During 1996, the Company settled a lawsuit for $185,000 which
                  the controlling shareholders had jointly and severally agreed
                  to indemnify and hold harmless the Company. The controlling
                  shareholders surrendered to the Company, 16,087 common shares
                  of the Company with a fair market value equal to the amount of
                  the settlement.

         (viii)   During 1997, 414,345 warrants were exercised in exchange for
                  414,345 common shares. The proceeds of this issue, net of
                  related expenses of $114,945, was $1,298,090. This amount
                  includes warrants exercised under the Company's warrant call
                  (see Note 16 (b) and (c)).

(c)      Preferred Shares

         The preferred shares provided for one-vote per share with increases in
         the votes per share should certain performance criteria be met. In June
         1995, these shares were converted to 116,750 common shares. For the
         purposes of this exchange, the Company's shares were valued at $3.00
         which resulted in a compensation expense of $166,974. On November 14,
         1995, the shareholders approved the cancellation of the authorized
         preferred shares.

(d)      Employee Stock Option Plan

         The Company has elected to follow Accounting Principles Board (APB)
         Opinion No. 25, "Accounting for Stock Issued to Employees", and related
         interpretations in accounting for its employee stock options. Under APB
         25, because the exercise price of the Company's employee stock options
         equals the market price of the underlying stock on the date of grant,
         no compensation expense is recognized.

         In July 1995, the board of directors approved an employee stock option
         plan covering options to purchase 300,000 common shares , increased in
         January 1997 to 500,000, which have been issued as follows:

         (i)      Options to purchase 200,000 common shares at an exercise price
                  of $5.00 per share have been issued to two members of
                  management in exchange for the cancellation of previously
                  issued warrants to purchase 200,000 common shares. These
                  options are exercisable commencing one year from the
                  consummation of a public offering and expire in July 2005.

         (ii)     Options to purchase 100,000 common shares at an exercise price
                  of $8.50 were issued to the President and Vice-President in
                  June 1996.

         Pro forma information regarding net income and earnings per share is
         required by SFAS No. 123, and has been determined as if the Company had
         accounted for its employee stock options under the fair value method of
         that statement. The fair


                                                                              42
<PAGE>   43
         value of these options was estimated at the date of grant using a
         Black-Scholees option pricing model with the following weighted-average
         assumptions for March 31, 1997 and 1996, respectively: risk-free
         interest rate of approximately 6.0%; dividend yield of 0.0%; volatility
         factors of the expected market price of the Company's common stock of
         approximately 11.0 % and a weighted-average expected life of the option
         of 5 years.

         The Company's pro forma information follows:

<TABLE>
<CAPTION>
                                      YEAR ENDED       YEAR ENDED          YEAR ENDED
                                        MARCH 31,         MARCH 31,          MARCH 31,
                                          1995             1996                1997
                                          ----             ----                ----
         <S>                       <C>              <C>                  <C>           
         Net earnings (loss)
           As reported             $      64,447    $    (839,301)       $  (4,487,824)
           Pro forma                      64,447       (1,099,301)          (5,177,824)
         Net loss per share
           As reported                      0.02            (0.27)               (0.99)
           Pro forma                        0.02            (0.36)               (1.14)
</TABLE>

The activity of the Company's stock option plan is as follows:

<TABLE>
<CAPTION>
                                     AVERAGE PRICE
                                        PER SHARE       OPTIONS
                                        ---------       -------
<S>                                  <C>                <C>                      
Balance, April 1, 1995                $        --            --
Granted to management                        5.00       200,000
                                      -----------       -------
Balance, March 31, 1996
  (outstanding and exercisable)                         200,000
Granted to management                        8.50       100,000
                                      -----------       -------
Balance, March 31, 1997                                 300,000
                                                        =======
</TABLE>

(e)      Earnings (Loss) per Common Share

         The computation of earnings per common share and common equivalent
         share is based on the weighted average number of common shares
         outstanding during the year except as noted below plus (in years which
         they have a dilutive effect) the effect of common shares contingently
         issuable pursuant to outstanding warrants. Pursuant to SEC
         requirements, shares issued within a one year period prior to the
         filing of a registration statement relative to an initial public
         offering ("IPO") at a price below the IPO price should be treated as
         outstanding for all reported years.


                                                                              43
<PAGE>   44
         The weighted average number of common shares used in calculating
         earnings per common share after retroactive application of the
         backsplit is as follows:

<TABLE>
<CAPTION>
                                            1995            1996            1997
                                            ----            ----            ----
<S>                                       <C>             <C>             <C>      
Shares outstanding at year end            2,111,910       4,434,073       4,848,418
Weighted average shares outstanding       2,712,660       3,078,428       4,533,583
</TABLE>

12.      INCOME TAXES

(a)      The components of the provision for income taxes on earnings before
         income taxes are as follows:

<TABLE>
<CAPTION>
                                                1995            1996            1997
                                                ----            ----            ----
<S>                                          <C>             <C>              <C>     
Current                                      $     --        $      --        $     --
Deferred provision                             25,000         (176,000)        (63,200)
Ontario research and development super
  allowance                                    (5,000)         (20,000)             --
Change in valuation adjustment                     --          113,313              --
                                             --------        ---------        --------
                                             $ 20,000        $ (82,687)       $(63,200)
                                             ========        =========        ========
</TABLE>

         The extraordinary item during 1996 is net of taxes of $148,266.

(b)      The reconciliation of income taxes calculated at the statutory rate of
         44.6% to the total tax provision is as follows:

<TABLE>
<CAPTION>
                                               1995            1996              1997
                                               ----            ----              ----
<S>                                          <C>             <C>              <C> 
Income taxes (recovery) at statutory
  rate                                       $ 38,000        $(495,000)       $(2,030,000)
Small business deduction                      (13,000)              --                 --
Items not subject to income tax                    --          172,000            210,000
Permanent difference resulting from
  the Ontario research and development
  incentive deduction                          (5,000)         (20,000)           (21,000)
Adjustment to valuation adjustment                 --          260,313          1,777,800
                                             --------        ---------        -----------
                                             $ 20,000        $ (82,687)       $    63,200
                                             ========        =========        ===========
</TABLE>

         Income tax provision and recovery is related solely to domestic
         operations. Foreign operations are not subject to taxes (see Note 14).


                                                                              44
<PAGE>   45
(c)      Deferred tax liabilities (assets)

         Deferred tax liabilities (assets) have been recorded at current rates
         as follows:

<TABLE>
<CAPTION>
                                                   1995              1996               1997
                                                   ----              ----               ----
<S>                                            <C>                <C>                <C>        
LIABILITIES:
Research and development costs included
  in inventory, deductible as expense
  for tax purposes                             $   (43,387)       $   (52,000)       $        --
Deferred financing costs, deductible
  as expense for tax purposes                      (19,000)                --                 --
Deferred development costs, deductible
  as expense for tax purposes                      (17,000)                --                 --
Excess of amortization on capital
  assets for tax purposes over
  amortization recorded for accounting
  purposes                                         (74,000)           (31,000)                --
                                               -----------        -----------        -----------
                                                  (153,387)           (83,000)                --
                                               -----------        -----------        -----------
ASSETS:
Financing costs                                         --             59,000             44,000
Balance of pool of Scientific Research
  & Development available to reduce
  taxable income for future years                       --            339,000            615,000
IOC loan interest, not deductible for
  tax purposes                                     153,000                 --                 --
Tax losses available to reduce taxable
  income of future years                           258,000            209,000          1,364,000
Share issue costs                                       --            633,000            686,000
Excess of amortization on capital
  assets for accounting purposes over
  amortization recorded for tax purposes                --                 --            197,000
                                               -----------        -----------        -----------
                                                   411,000          1,240,000          2,906,000
                                               -----------        -----------        -----------
Less: Deferred tax asset valuation
  allowance                                       (258,000)        (1,093,800)        (2,906,000)
                                               -----------        -----------        -----------
Net tax asset (liability)                      $      (387)       $   (63,200)       $        --
                                               ===========        ===========        ===========
</TABLE>

         The Company has net operating loss carry forwards to reduce federal
         taxable income of approximately $3,268,000 which expire 2004. The
         Company has net operating loss carry forwards available to reduce
         Ontario taxable income of approximately $4,735,000 which expire during
         the years 1999 through 2004.

         The Company has share issue costs amounting to $2,600,000 which gives
         rise to a tax benefit of $686,000. A portion of these costs are
         included in the net operating losses carry forwards disclosed above.
         When realized the benefit will be recorded as a capital transaction.

13.      COMMITMENTS

(a)      The Company has entered into a 3 year management and consulting
         agreement for management, marketing, planning and related services with
         a related company controlled by one of the directors to December 1998.
         The Company will pay $180,000 per year, for three consecutive years,
         for a total of $540,000.

(b)      The Company leases premises, office equipment and motor vehicles under
         operating leases expiring in 2001. The approximate annual rental
         commitments during the lease terms are as follows:


                                                                              45
<PAGE>   46
<TABLE>
<S>                                                             <C>     
          Year ended March 31, 1998                             $ 63,000
          Year ended March 31, 1999                               49,000
          Year ended March 31, 2000                               27,000
          Year ended March 31, 2001                                6,000
                                                                --------
                                                                $145,000
</TABLE>

         Approximate rental expense incurred under operating leases is as
         follows:

<TABLE>
<S>                                                             <C>     
         Year ended March 31, 1995                              $135,000
         Year ended March 31, 1996                               128,000
         Year ended March 31, 1997                                68,000
</TABLE>

(c)      The Company has entered into employment contracts with two members of
         management for a total of up to $190,000 in base salary per annum plus
         up to a 50% bonus of base salary provided certain performance
         objectives are met. Amounts paid in 1997 were approximately $173,000
         (1996 - $100,000).

(d)      The Company is committed to its affiliate, 3994340 Canada Inc., to pay
         a 0.5% royalty fee on net revenue, licensing revenue and net sales to
         sub-licensees on scanner and plotter technology created by affiliate on
         behalf of the Company (See also Note 6).

14.      SEGMENTED INFORMATION

(a)      The Company operates in Canada and India in one industry segment. The
         Company's operations and identifiable assets by geographic region are
         as follows:

<TABLE>
<CAPTION>
                             CANADA             INDIA           INTERCOMPANY          TOTAL
                             ------             -----           ------------          -----
<S>                       <C>                <C>                <C>                <C>        
For the year ended
  March 31, 1995
Revenue                   $ 1,920,849        $   103,440        $        --        $ 2,024,289
Operating profit               64,027                420                 --             64,447
Identifiable assets         2,412,511            593,527           (458,357)         2,547,681
For the year ended
  March 31, 1996
Revenue                   $ 1,430,918        $   576,883        $        --        $ 2,007,801
Operating profit             (849,219)             9,918                 --           (839,301)
Identifiable assets         8,933,132          1,627,339         (1,342,957)         9,217,514
For the year ended
  March 31, 1997
Revenue                     1,329,446          1,357,171           (865,904)         1,820,713
Operating profit           (4,364,854)          (628,877)           505,907         (4,487,824)
Identifiable assets         6,719,782          2,872,586         (2,667,181)         6,925,187
</TABLE>

(b)      The breakdown of sales by geographic area is as follows:

<TABLE>
<CAPTION>
                        1995            1996             1997
                        ----            ----             ----
<S>                 <C>              <C>              <C>       
Canada              $  116,666       $   56,032       $  122,676
United States          723,064          730,055          467,766
Middle East            394,399          335,682          346,595
Asia                   312,233           80,576          266,345
Europe                  78,879          464,000          475,551
                    ----------       ----------       ----------
                    $1,625,241       $1,666,345       $1,678,933
                    ==========       ==========       ==========
</TABLE>

(c)      For the year ended 1997 and 1996 no end user accounted for more than 5%
         of the Company's product sales. In 1997, approximately 49.9% of the
         Company's product sales were made through five distributors, with the
         largest representing approximately 27.5%. For the year ended March 31,
         1996 sales to one major distributor amounted to approximately 9% of
         total product sales.

15.      CONTINGENT LIABILITIES

(a)      A statement of claim has been filed against the Company with respect to
         claims for non-payment of invoices in the amount of $110,000 for
         accounting services provided by an accounting firm. The Company has
         accrued $ 35,000 for this claim.


                                                                              46
<PAGE>   47
(b)      Statement of claims have been filed against the Company alleging breach
         of contract and demanding specific performance, claiming 240,000 shares
         and 160,000 warrants (after the stock back-split). The President had
         transferred 100,000 common shares issued to individuals who provided
         marketing and related services in 1992 and 1993. The individuals had
         attempted to transfer 172,860 common shares to third parties. The
         Company's President has entered into an indemnification agreement with
         the Company whereby he would return up to 160,000 common shares for
         cancellation to the extent the Company is required to issue any such
         additional shares.

(c)      In February 1997 the Company was served with a class action lawsuit in
         the State of New York by shareholders in connection with potential
         losses that would be suffered on a warrant call (see also Note 16(c)).
         In addition the Company was subsequently served with a lawsuit by 5
         shareholders in the State of California for similar reasons.

         Settlement, if any, on the claims in paragraph (b) and (c) will be
         recorded when settlement is probable and the amount of the settlement
         is estimable.

16.      SUBSEQUENT EVENTS

(a)      On May 1, 1997, the courts gave preliminary approval to a March 7, 1997
         informal agreement to settle, subject to approval of the class, the
         class action lawsuit. The settlement required that the Company change
         certain terms of the warrant redemption, undertake to appoint an
         independent addition to the Board of Directors, hire an independent
         Chief Operating Officer and cover legal costs of the complainant.

(b)      In April 1997, warrants to purchase 716,833 common shares were
         exercised at an exercise price of $ 3 per share.

(c)      In June 1997, the Company received $130,000 which is held in escrow in
         connection with a proposed financing in the amount of $250,000.

17.      SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION

Cash paid during the year:

<TABLE>
<CAPTION>
                                                  1995             1996           1997
                                                  ----             ----           ----
<S>                                            <C>              <C>              <C>    
Interest                                       $    7,126       $   56,289       $32,442
Non monetary transaction during the year
Shares issued for investment in
  affiliate                                    $       --       $  720,000       $    --
Shares issued in exchange for
  preferred shares                                     --          350,250            --
                                               ----------       ----------       -------
                                               $       --       $1,070,250       $    --
                                               ==========       ==========       =======
</TABLE>


                                                                              47
<PAGE>   48
                                EXHIBIT INDEX
                                -------------
<TABLE>
<CAPTION>
EXHIBIT
NO.               DESCRIPTION
---               -----------
<S>               <C>                                                           
10.1              Distributor Agreement between The Widecom Group Inc. and CADigitizing
                  Corporation, dated May 6, 1997.

                  Portions of this exhibit has been omitted
                  pursuant to a request for confidential
                  treatment.

10.2              Distributor Agreement between The Widecom Group Inc. and Scan Group, dated
                  September 8, 1996.

                  Portions of this exhibit has been omitted pursuant to a request for
                  confidential treatment.

10.3              Distributor Agreement between the Widecom Group Inc. and The Imtec Group
                  Limited, dated November 15, 1996.

                  Portions of this exhibit have been omitted pursuant to a request for
                  confidential treatment.

21.               List of subsidiaries.

23.               Consent of BDO Dunwoody, independent accountants.

27.               Financial Data Schedule.

</TABLE>