SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549


                                   FORM 10-K


             Annual Report pursuant to Section 13 or 15(d) of the
   Securities Exchange Act of 1934 for the fiscal year ended March 31, 1998.


                         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 Identification No.)
    incorporation or organization)


   72 DEVON ROAD, UNIT #18, BRAMPTON, ONTARIO, CANADA          L6T 5B4
        (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         BOSTON STOCK EXCHANGE
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
registrants' common stock on the Nasdaq SmallCap Market as of March 31, 1998
and June 22, 1998, respectively, was approximately $4,431,959 and $4,483,596.

The number of shares outstanding of registrant's common stock as of March 31,
1998 and June 22, 1998 was 5,909,278 and 5,978,128 shares respectively.

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


                                     PART I

BUSINESS

THE COMPANY

The Company was incorporated in Ontario, Canada in June 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 a 36" wide format scanner, a 36" wide format copier and a 36" wide
format plotter/printer. The Company also markets a Modular Digital
Multi-Function Unit which incorporates a scanner module, a 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 limited product
sales.

The Company designed its document management 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, woodworking 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 firmly
believes that the world-wide market for wide format document systems is
emerging as a result of increasing demand for systems which can more
efficiently scan, copy, print, transmit, receive and archive wide format
documents. The Company's products will provide attractive alternatives to
traditional methods used to permit multiple consumers in different locations to
view wide format documents. The company believes its products are more time and
cost-efficient than outmoded methods such as overnight couriers delivering
copies of a document or microfiche reproduction.

On October 2nd, 1996, the Company formed a research and development consortium
known as 3294340 Canada Inc., operating as Technologies NovImage ("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

Widecom SLC836-C Color Scanner

The SLC836-C is a wide format scanner capable of scanning documents up to 36"
wide. The Company's new 24 bit scanners are available in color and monochrome
models and offer SCSI interfacing with personal computers to enable the user to
scan images into the personal computer for display, editing and archiving.
First generation scanners were able to process monochromatic images only. The
second-generation SLC436-C, introduced in May 1996, represented Widecom's first
low-cost wide format color scanner capable of scanning 36" by 48" documents at
a resolution of 400 dpi in under thirty seconds for monochrome images, and
under eight minutes for full color images.

The new SLC836-C and SLC836+ monochrome scanner were introduced in late March
1998 and possess interpolated resolution capabilities of up to 800 dpi. This
generation of 836 series scanners also provide the industry standard SCSI
interface which overcomes certain compatability problems with the proprietary
interface of the SLC 436 series scanners that were associated with Intel's
Pentium II processors.

These products offer high speed, high quality scanning capacity to GIS, EDMS,
Reprographic and graphic arts applications with high fidelity to complex
originals. Their introduction occurred in March 1998, and was too late in the
fiscal year to have a material effect on the Company's revenues for the last
fiscal year.

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 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 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. SLC836-C reads an image in increments up to 400
dots per inch ("dpi"), whereas standard format scanners 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 SLC836-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 SLC836-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 that are only capable
of scanning documents up to 12" wide. 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
at the center 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 vastly improved clarity and
accuracy.

Widecom Plotter/Printer (WC 436P)

In March 1998, the Company also commenced shipments of a plain paper plotter
which is designed to print an image at a speed of 2 inches per second. The WC
436P incorporates the Company's new print heads that enable the plotter to
print in increments of 400 dpi. This plotter is 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 traditional thermal plotter.

The WC 436P is a wide format plotter capable of printing a document up to 36"
wide x 325' in length. Widecom's Plotter/Printer interfaces with a personal
computer to enable the user to print images directly from the personal
computer. The Plotter/Printer prints wide format documents on various media
including mylar, matte film and bond paper.


WIDECOM Modular Digital Multi-Functional Unit (WC 436 C/P)

The Widecom WC 436 C/P consists of a scanner module and a plotter/printer
module which are integrated into one unit. Together, these modules perform
scanning, printing and copying functions. The user of a WIDEcom scanner or a
WIDEcom Plotter/Printer can upgrade either machine to the unit by purchasing
and connecting the other module.

The unit features high speed, high quality printing, copying and scanning at
over two inches per second and with resolution at 400 dots per inch. Indirect
thermal printing using thermal transfer ribbons saves time and money with
increased uptime and productivity.

This new unit facilitates practical entry into the digital copier environment
for users with lower volume requirements and is extremely compact in comparison
to similar function products from other manufacturers. This Widecom
Copier/Printer incorporates original and copy catch trays into its stand alone
set up and uses a single media roll. This product has Windows and AutoCad
compatible applications enabling digital scanning and storage of color and
mono-chrome images and production of multiple copies, collated sets and image
size control including reduction and enlargement capabilities.

Software and Accessories

The Company sells several software drivers for its products which may include
third party software libraries. The Company also sells accessories for use in
connection with its complete product line, including various types of paper and
film for the plotter/printers and the copiers. Sales of accessories have not
been material to date and are not expected to be material in the near 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 industry, utilities and government agencies
and applications in the 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, 1998, the
Company had arrangements with approximately 112 distributors, dealers and sales
agents (collectively, "distributors"), of which roughly 70% 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 within a specified territory during the term of
the Agreement, provided that the distributor satisfies minimum purchase
requirements. It must be noted that several of the Company's distributors have
been unable to satisfy the applicable minimum purchase requirements,
occasionally due to the inability of the Company to fulfill all purchase
orders.

The Company sells products to distributors at discounts when compared to end
user price of the products. These discounts never exceed 40 percent (%) of list
price and rarely approach 30 percent(%). For the years ended March 31, 1996,
1997 and 1998, the Company's five largest distributors accounted for
approximately 32.8%, 49.9% and 41.3%, respectively, of the Company's product
sales.

The Imtec Group Ltd. of England (European territory) represents 23.7% of the
Company's sales for year ended March 31, 1998. During the years ended March 31,
1996, 1997 and 1998, sales by distributors accounted for approximately 83.1%,
96.4% and 93.9% of the Company's product sales.

The Company supports its U.S. and international distribution channels through
four regional sales managers all located in the U.S. A substantial portion of
the Company's sales have been made to foreign markets, primarily to Europe, 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:

REGIONAL SALES BREAKDOWN

<TABLE>
<CAPTION>
                                         YEAR ENDED MARCH 31,
                    ---------------------------------------------------------------
                           1996                  1997                  1998
                    ------------------    ------------------    -------------------
    REGION            AMOUNT       %        AMOUNT       %        AMOUNT        %
--------------      ----------   -----    ----------   -----    ----------    -----

<S>                 <C>          <C>      <C>          <C>      <C>           <C>
United States       $  730,055    43.8    $  467,766    27.9    $1,246,270     43.0
Middle East            335,682    20.1       346,595    20.6       312,042     11.0
Asia                    80,576     4.8       266,345    15.9       322,685     11.0
Europe                 464,000    27.9       475,552    28.3       686,478     24.0
Canada                  56,032     3.4       122,675     7.3       322,968     11.0
                    ---------------------------------------------------------------
Total               $1,666,345   100.0    $1,678,933   100.0    $2,890,443    100.0
                    ===============================================================
</TABLE>

The Company has started to aggressively market and advertise its products since
the introduction of the SLC836-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.

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 of products sold by the Company, 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
and 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 in a
free trade zone in India where the Company's assembly operations are conducted.
Quality control and adjustments are also conducted at the Company's facility in
India.

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 will succeed on
commercially reasonable terms in a timely manner or at all.


COMPETITION

The markets for document systems are characterized by intense competition. The
Company believes it products compete on the basis of resolution, quality,
speed, price and the quality of its 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., Oce and Anatech
Corporation in the market for wide format scanners; Calcomp Corporation,
Hewlett Packard Company, Oce and Mutoh Corporation in the market for wide
format plotters and Xerox, Katsuragawa Company and Oce in the market for wide
format printers and copiers.

The Company also expects that companies that manufacture and sell standard
copiers, scanners and plotters could develop, without significant 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. In addition, these
companies also 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

In October 1996 the Company formed a research and development consortium with
an economic development agency of the Province of Quebec. The Company is now
conducting all of its research and development activities through that
consortium named NovImage (see "Certain Transactions), which activities are
expected to qualify for partial funding from governmental agencies. The
research and development activities conducted by NovImage on behalf of the
Company are primarily focused on plotter, scanner and copier technologies.

The plotter research at Novimage is concentrated in two areas: i)developing a
high speed, high quality wide format color plotter/printer and ii)improving
printer resolution and developing thermal transfer mechanisms for incorporation
into the plain paper plotter, including color printing capabilities. Scanner
research is presently focused on the development of color scanning capabilities
and the enhancement of scanner image quality.

NovImage is developing a color-scan chip intended, by the end of the next
fiscal year, to be incorporated into a 36" contact scanner to provide color
scanning capabilities at speeds of under one minute compared to approximately
eight minutes with the present generation scanners. This new chip is being
designed to combine four image sensor chips to read the primary colors
(magenta, cyan and 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 this scanner will be introduced in the near
future, hopefully before the end of the calendar year.


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 presently holds one patent and has
filed several other patent applications relating to certain aspects of its
technology.

There can be no assurance, however, that any further 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
presently aware of any infringement on the proprietary rights of others in its
products, however, the Company has not conducted any formal investigation as to
any possible infringement. The Company cautions that there can be no assurance
that third parties will not assert infringement claims against the Company in
connection with its products, nor that any such assertion of infringement will
not result in litigation.

The Company is also unable to speculate as to its chances for success in the
event of any such litigation or its potential ability 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 for the
violation of proprietary rights.

The Company has licensed its patents, both pending and approved, trademarks,
copyright material and all of its technology relating to its scanner and
plotter manufacturing technology and software (collectively, the "Intellectual
Property") to NovImage for research and development purposes. Novimage is
attempting to develop improvements, modifications, additions or alterations to
that Intellectual Property and to develop new products. In exchange for this
license and the payment of a 0.5% royalty fee on net revenue, licensing revenue
and net sales to sub-licensees, NovImage granted the Company an exclusive
perpetual worldwide license (with the exception of the Province of Quebec,
Canada) to the Company. This license permits the Company 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 NovImage. NovImage retained such rights with respect to the
Province of Quebec, Canada. The Company has no restrictions on its sales and
marketing activities in Quebec. Please refer to "Certain Transactions".

The Company has not yet formally filed for copyright protection of its software
and may not pursue such activities in the future. The Company also holds a
registered trademark with the United State Patent and Trademark Office.


EMPLOYEES

As of March 31, 1998, the continental operation of the Company had 29 full time
employees, including several research and development engineers and numerous
sales staff and administrative personnel. The Company employs 178 people at a
manufacturing facility in India and work with the Company's wholly owned Indian
subsidiary. Neither the Company nor its subsidiary is a party to any labor
agreements and none of their employees are represented by a labor union. At
present, the Company believes its employee relations to be satisfactory.


PROPERTIES

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 $500,000. Clean-room
facilities and other special infrastructure within the building is estimated to
cost an additional $200,000 by its completion. The Company expects that the
project should be completed in the next fiscal year.

The Company leases 3,000 square feet at 72 Devon Road, Unit #18, Brampton,
Ontario, Canada, pursuant to a two (2)-year lease entered into in 1998, 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 $23,357.64 and $15,200,
respectively. Upon completion of construction of the Company's new
manufacturing facility the Company will transfer the majority of its
manufacturing operations to the new facility.

In addition, the Company currently leases a sales office on a month-to-month
basis at $650.00 monthly in Santa Rosa, California. The Company also has a
lease for facilities in Pittsburgh, Pennsylvania, at $2,740.00 monthly. The
current annual rental rates of these facilities are approximately $7,800.00 and
$32,880 respectively and $40,680.00 in the aggregate.

During the course of the fiscal year the Company also operated a sales office
in Atlanta. The monthly rental rate for those premises was $865.28. At present
that office is vacant and new tenants are being sought.

The Company believes that its present facilities are adequate for the Company's
current level of operations, however, the Company will likely 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 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.

The two individuals, John Keenan and Vincent DiGiulio ("K&D") have 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 reverse stock 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 these two individuals, is also subject to two
additional lawsuits filed by third parties to whom the above-noted individuals
had attempted to transfer shares. These claims have been consolidated with the
original action, and the Company is also attempting to consolidate the actions
of any subsequent claimants. The Company believes that a number of additional
third parties could also prosecute in this regard. 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 an action on
behalf of himself and the class against the Company, Raja S. Tuli and Suneet S.
Tuli. The action has settled and the terms of that settlement are currently
being overseen by a judge of the United States District Court for the Southern
District of New York. The Complaint was 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. As noted above these three actions (collectively, the "New York Class
Actions") were consolidated for all purposes.

On or about May 1st, 1997 the court approved the settlement of the New York
Class Actions. The settlement obligated the Company to reduce the warrant
redemption to one-half of the number of publicly held warrants, and reduce the
exercise price to $3.00 from $4.00. Along with payment of the Complainant'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, both of which have been done. 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. The warrants needed for this arrangement total 387,708 and
will be issued upon effectiveness of the Company's registration statement
covering these warrants.

In another shareholder's action commenced on or about March 10, 1997, in the
Superior Court of the State of California or the county of Los Angeles. The
action was subsequently removed to the United States District Court for the
Central district of California. The plaintiffs were alleged to be holders of
WideCom shares and/or warrants. The complaint in this action, like the action
commenced in the State of New York, 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 also included causes of action for alleged fraud in the nature of
alleged misrepresentation generally and specifically alleged negligent
misrepresentation, alleged breach of contract, alleged breach of fiduciary
duty, and alleged violations of the California Corporations Code. That action,
as in the others, sought 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.
Settlement negotiations were concluded with a transfer of 150,000 shares to the
complainants as ratified by the board of directors in November, 1997 and to be
completed with the issuance and registration of 75,000 additional shares in the
Company's next registration statement.

A Statement of Claim has been filed against the Company in 1998 for breach of 
sales and royalty agreement and breach of trademark and copyright issues in the
amount of approximately $15.85 million. The Company believes the claim is
without merit.

With respect to other outstanding legal matters, the Company is still engaged
in litigation in Ontario with the financial printing firm of Packard Press
(Boston). At present, Mr. Don Brown, Q.C. of Turk, Brown & Company is acting on
behalf of Widecom before the appeals courts in Ontario.

The company also has a variety of smaller-scale supplier related litigation
that is ongoing and is handled by the company's in-house counsel. None of
theses matters are significant nor are they material.


SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

No matters were submitted to a vote of security holders of the Company during
the spring quarter of the Company's fiscal year ended March 31, 1998.


                                    PART II


MARKET FOR 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 March 31, 1998 and June 22, 1998. 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 approximate number of registered holders of
record of the Company's common stock and warrants at March 31, 1998 was 60 and
9. The company's advisers believe that the actual number of beneficial holders
of each class of common stock and warrants is in excess of 500.

<TABLE>
<CAPTION>
                                        COMMON STOCK             WARRANTS
                                     ------------------    --------------------
                                       High       Low        High        Low
                                     --------   -------    ---------   --------

<S>                                  <C>        <C>        <C>         <C>    
1995
Fourth Quarter (as of 12-18-95)      $  6 1/2   $ 5        $ 3 1/2     $ 1 1/2


1996
First Quarter (Jan.1-Mar.31/96)        12 3/8     4 7/8      9           2 1/2

Second Quarter (Apr.1-Jun.30/96)       13 1/4     7 5/8      9           4 1/2

Third Quarter (July 1-Sept.30/96)      11 3/8     8 1/8      7           3 7/8

Fourth Quarter (Oct.1-Dec.31/96)       10         6 1/2      6 1/4       3 3/8


1997
First Quarter (Jan.1-Mar.31/97)        11 3/8     3 1/4      7             1/4

Second Quarter (Apr.1-Jun.30/97)        4 5/8     1 3/4      1 3/4         5/8

Third Quarter (Jul.1-Sept.30/97)        3 7/8     1 3/4      1             7/16

Fourth Quarter(Oct.1-Dec.31/97)         2 1/2       7/8        15/16       3/8


1998
First Quarter (Jan.1-Mar.31/98)         1 3/4       5/8        3/8         1/8

Second Quarter (Apr.1-Jun.30/98)        1 1/8       5/8        1/8         1/8
</TABLE>


SELECTED FINANCIAL DATA

STATEMENT OF EARNINGS DATA:

<TABLE>
<CAPTION>
                                                                               YEAR ENDED MARCH 31,
                                                          --------------------------------------------------------------
                                                             1994         1995         1996         1997         1998
                                                          ----------   ----------   ----------   ----------   ----------

<S>                                                       <C>          <C>          <C>          <C>          <C>
Total Revenue                                             $1,858,414   $2,016,227   $2,007,801   $1,820,713   $3,053,804
Product Sales                                              1,228,294    1,625,241    1,666,345    1,678,933    2,890,443
R & D Grants                                                 630,120      390,986      262,322         ----       24,567
Total Expenses                                             1,445,560    1,715,233    3,116,119    5,673,672    5,487,826
Earnings (loss) before extraordinary item                    474 295       64,447   (1,025,631)  (4,487,824)  (3,335,865)
Net Earnings (loss)                                          526,182       64,447     (839,301)  (4,487,824)  (3,335,865)
Net Earnings (loss) per share before extraordinary item         0.19         0.02        (0.33)       (0.99)       (0.59)
Net Earnings (loss) per share                                   0.21         0.02        (0.27)       (0.99)       (0.59)
Weighted average shares outstanding                        2,507,375    2,712,660    3,078,428    4,533,583    5,664,188
</TABLE>

BALANCE SHEET DATA:

<TABLE>
<CAPTION>
                                                               MARCH 31,
                                  -------------------------------------------------------------------
                                     1994          1995          1996          1997          1998
                                  -----------   -----------   -----------   -----------   -----------

<S>                               <C>           <C>           <C>           <C>           <C>
Working Capital                   $   581,388   $   170,968   $ 6,814,289   $ 1,818,883   $ 1,429,046
Total Assets                        2,134,514     2,547,681     9,217,514     6,925,187     5,651,190
Total Liabilities                   1,060,888     1,419,740       588,908     1,681,884     1,414,246
Retained earnings (deficit)           (49,440)       15,007      (824,294)   (5,312,118)   (8,647,983)
Shareholders' equity                1,073,626     1,127,941     8,628,606     5,243,303     4,236,944
</TABLE>


MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND RESULTS 
OF OPERATIONS


OVERVIEW

Since inception, the Company has generated limited revenues from operations and
has not yet achieved significant profitability. The Company's revenues are
primarily derived from product sales. The Company recognizes revenues from
product sales when products are shipped.

Commercialization of the Company's WC436 copier systems in March 1998 occurred
too late in the fiscal year to have a material impact on the Company's revenues
for the year. During the year sales of printers and scanners were $31,072 and
$2,673,118 respectively.

The Company's Selling, General and Administration infrastructure was set up to
service its full product line of monochrome and color scanners, monochrome and
color printers and monochrome and color copiers. Neither the color printer nor
the color copier has yet been commercialized and the latest monochrome printers
and copiers were introduced in March 1998 in the last quarter of the fiscal
year to have a material impact on revenues.

Although the Company anticipates a return to profitability upon the
introduction of its full product line, there is no assurance that the Company
will be able to successfully develop and commercialize these products or
achieve profitability.

The Company is aware of the potential year 2000 problem. It has reviewed its
computer software and hardware, which are critical to the Company's operation
and preparation of its financial statements, and has made plans for action, as
required, prior to the year 2000, to avoid significant errors in the Company's
accounting records to avoid adverse effects on business operations. The Company
does not anticipate incurring significant costs regarding the compliance with 
the year 2000.


GOVERNMENT SPONSORED PROGRAMS

During 1997 a change in Canadian Tax legislation substantially reduced the
amount of subsidy available on Research and Development performed by publicly
traded companies. Subsidies of this nature have represented a substantial
portion of the Company's revenue in the past. The Company together with a
branch of the government of the Province of Quebec (Innovatech) became equal
shareholders in a wholly owned research and development company (NovImage). The
nature of 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 NovImage enables the Company to obtain a substantial increase
in the amount of research that can be performed.


IMPACT OF CURRENCY EXCHANGE RATES

The Company conducts a substantial portion of its business in foreign currency,
primarily the Indian Rupee and, to a lesser extent, the Canadian dollar. Prior
to the year ended March 31, 1998 fluctuations in these currencies were minimal
and, consequently had no impact on the Company's results of operations. In the
year ended March 31, 1998, these fluctuations were more severe and resulted in
a foreign exchange translation loss of $36,119. Fluctuations in the exchange
rates between these currencies could have a larger adverse effect on the 
Company's operating results in the future. This loss would, however, be offset
by the Company's practice of satisfying the debt of the subsidiary to the 
parent by the sale of finished product by the subsidiary to the parent, in US 
dollar. There can be no assurance however, that fluctuations in currency 
exchange rates will not have a significant impact on the Company's future 
operating results.


RESULTS OF OPERATIONS

Certain statements contained herein constitute "forward-looking statements"
within the meaning of the Private Securities Litigation Reform Act of 1995 (the
"1995 Reform Act"). The Company desires to avail itself of certain "safe
harbor" provisions of the 1995 Reform Act and is therefore including this
special note to enable the Company to do so. Forward-looking statements
included in this Report on Form 10-K involve known and unknown risks,
uncertainties, and other factors which could cause the Company's actual
results, performance (financial or operating) or achievements to differ from
the future results, performance (financial or operating) achievements expressed
or implied by such forward looking statements. Such future results are based
upon management's best estimates based upon current conditions and the most
recent results of operations. These risks include, but are not limited to,
risks associated with the Company's recent losses, the ability of the Company
to develop and market its product line, the establishment of commercial
acceptance of its products, need for additional capital, effects of competition
and technological changes and dependence upon key personnel.

Recent Issued Accounting Standards

In June 1997, the Financial Accounting Standards Board issued Statement of 
Financial Accounting Standards No. 130, Reporting Comprehensive Income 
(SFAS 130), which establishes standards for reporting and display of 
comprehensive income, its components and accumulate balances. 
Comprehensive income is defined to include all changes in equity except 
those resulting from investments by owners and distributions to owners. 
Among other disclosures, SFAS 130 requires that all items that are 
required to be recognized under current accounting standards are 
components of comprehensive income be reported in a financial statement 
that is displayed with the same prominence as other financial statements.

SFAS 130 is effective for financial statements for periods beginning after 
December 15, 1997 and requires comparative information for earlier years 
to be initiated. Because of the recent issuance of this standard 
management has been unable to fully evaluate the impact, if any the 
standard may have on future financial statements disclosures. Results of 
operations and financial position, however, will be unaffected by 
implementation of this standard.

In June 1997, the Financial Accounting Standards Board issued SFAS No. 
131, Disclosures about segments of an Enterprise and Related Information 
(SFAS 131) which supersedes SFAS No. 14, Financial Reporting for Segments 
of a Business Enterprise. SFAS 131 establishes standards for the way that 
public companies report information about operating segments in annual 
financial statements and requires reporting of selected information about 
reporting segments in interim financial statements issued to the public. It 
also establishes standards for disclosures regarding products and services, 
geographic areas an major customers. SFAS 131 defines operating segments as 
components of a company about which separate financial information is 
available that is evaluated regularly by the chief operating decision maker 
in deciding how to allocate resources and in assessing performance.

SFAS 131 is effective for financial statements for periods beginning after 
December 15, 1997 and requires comparative information for earlier years 
to be restated. Because of the recent issuance of this standard, 
management has been unable to fully evaluate the impact, if any, it may 
have on future financial statement disclosures. Results of operations and 
financial position, however, will be unaffected by implementation of this 
standard.


RESULTS OF OPERATIONS

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

Revenues for the year ended March 31, 1998 were $3,053,804, an increase of
$1,233,091, or 67.7%, as compared to $1,820,713.for the year ended March 31,
1997. This increase was attributable to an increase in product sales of
$1,211,510 and additional research and development grants of $24,567, which
were partially offset by a decrease in interest income of $2,986.

The introduction of the SCSI based SLC836 scanner in late March 1998 overcame
compatibility problems that had been experienced from January to March, 1998
with its previously proprietary computer interface and with Intel Pentium II
processors. This compatibility problem with the SLC 436 series scanners delayed
sales in the last quarter of the Company's fiscal year. Operating expenses for
the year ended March 31, 1998 were $5,487,826, a decrease of $185,846, or 3.3%,
as compared to $5,673,672 for the year ended March 31, 1997. Operating expenses
also decreased as a percentage of revenues from 311.6% for the year ended March
31, 1997 to 179.7% for the year ended March 31, 1998. The decrease in operating
expenses, both in absolute dollars and as a percentage of revenues, is
primarily attributable to decreases in research and development expenditures
and selling, general and administrative ("SG&A") costs.

The decrease in research and development expenses was due to the formation of
the research and development consortium with the province of Quebec. The
decrease in SG&A cost was primarily due to a leveling off of expenditures and
economies undertaken to effect savings as the Company completed the
establishment of it's distribution channel in the USA.

The Shareholders' lawsuit resolution costs of $309,375 were costs that
continued from the previous year related to the settlement of suits arising
from the Company's warrant redemption in February 1997. The increase in the
equity loss in the joint venture of $470,497 is offset by the decrease in 
research and development costs of $515,397.

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 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 is primarily attributable to a few main factors. These factors
include increased selling, general and administrative ("SG&A") costs,
amortization, the write-off of test equipment and an increase in management
fees of $2,981,764, $90,322, $115,721 and $113,552 respectively, during the
year ended March 31, 1997. 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 SG&A costs was primarily due to expenses associated with
increased marketing activities. 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 management
fees. Selling general and administrative costs include an amount of
approximately $681,353 in legal and other costs incurred in raising an
additional $1,298,090 as at March 31, 1997 of share capital through the calling
of the Company's warrants. These costs include legal fees necessary to
successfully defend against court challenges made to the warrant call and
additional public relations costs necessary to disseminate the facts of the
warrant call.

The Company decided to write off its carrying value of the goodwill associated
with the acquisition of 49% interest in the affiliated company because,
although the affiliate remains a viable enterprise, the Company does not expect
to gain substantial benefits from the investment in the immediate future. This
write off amounted to $576,000.

Certain test jigs, although still valuable and being used, will continue to
become less useful with the introduction of the color scanners and plain paper
plotters. The decrease of $117,794 in research and development costs were
offset by the Company's $121,971 share of the loss incurred by NovImage.


LIQUIDITY AND CAPITAL RESOURCES

The Company's primary cash requirements have been to fund the acquisition of
inventories and to meet operating 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 principally through
the issuance of debt and equity securities, government sponsored research and
development grants and reimbursement and cash flow from operations. At March
31, 1998, the Company had working capital of $1,429,046, as compared to
$1,818,883 at March 31, 1997. However, the Company had only approximately
$300,000 in unrestricted cash available. Accordingly, the Company has
experienced short term capital deficiencies during the last fiscal year and has
entered into a letter of intent with an investment banking firm to arrange
$2,000,000 in debt and equity financing during the first quarter of fiscal
1999. There can be no assurance, however, that the financing will be
consummated. In addition, the Company is currently in default in payment of
$150,000 of convertible debentures that were due May 18, 1998. The Company is
attempting to arrange for a purchase and extension of these notes or, in the
alternative, will repay the notes out of the proceeds from the financing.

The Company's cash requirements in connection with the manufacture and
marketing of its products will be significant. 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 or assumptions change, or prove to be incorrect, or if the
projected cash flows 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. There
can be no assurance that this additional financing will be available to the
Company when needed on commercially reasonable terms, or at all.

Financial statements and supplementary data annexed hereto.


PART III

DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

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

<TABLE>
<CAPTION>
NAME                            AGE    POSITION
----------------------------    ---    ------------------------------------------------

<S>                             <C>    <C>
Raja S. Tuli................    32     President, Chief Executive Officer and Director

Willem J. Botha.............    62     Chief Financial Officer and Treasurer

Suneet S. Tuli..............    30     Executive Vice President, Secretary and Director

Mark Maltese................    46     Vice President of Sales & Marketing

Stan Seitz..................    48     Chief Operating Officer

Lt. Colonel K.C. Sharma.....    57     Director

Dr. Ajit Singh..............    57     Director

Bruce D. Vallillee..........    77     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
Information Systems, a manufacturer of data communications equipment, most
recently as its Director of Accounting Services. From 1982 to 1985, Mr. Botha
was an 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, is a Chartered
Accountant and a resident Canadian national.

Suneet S. Tuli has been Executive Vice President of Sales and Marketing,
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.

Stan Seitz was appointed as Chief Operating Officer in early 1998. Prior to
that time, Mr. Seitz worked as operations manager and acted as a director for
Opkor Inc.,a presicion polymer optic design firm for throughout 1997. From 1994
until 1996, Mr. Seitz acted as Senior Vice-President-Operations for PSC Inc., a
major automated data collection design and manufacturing concern. Prior to that
Mr. Seitz worked as senior Director of Operations at Compudyne, U.S.A. in
Dallas Texas for over two years. From 1989 to 1992, Mr. Seitz was president of
PC Brand Inc. Prior to that Mr. Seitz worked as Vice-President-Operations for
Dell Computers in Austin, Texas from 1986 to 1989. Mr. Seitz has a Masters in
Business Administration from the University of Chicago with a focus in
productions and operations management and industrial relations.

Lt. Colonel Kailash Chander Sharma is an independent director of the Company.
Lieutenant Colonel Sharma possesses a Masters Degree in Political Science from
Delhi University. Lt.Col. Sharma has a lengthy military background occupying
several senior posts with significant levels of responsibility including
strategic planning and public relations. Lt. Col. Sharma is proficient in
government organizational and regulatory matters and since 1992 has operated
his own consulting company.

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.

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 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 is only one currently standing
committee of the Board of Directors, that being the Audit Committee chaired by
the Company's chief financial officer. Officers are elected annually by the
Board of Directors and serve at the discretion of the Board.

No director of the Company received any compensation for such services as a
director during the Company's year ended March 31, 1998. 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 those persons earning over $100,000.00 USD and serving as an officer
of the company for the year ended March 31, 1998:

                        1998 SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
Name                       Salary & Commission     Consulting Fees       Total

<S>                        <C>                     <C>                 <C>
Raja S. Tuli               $56,850                 $69,874 (1)         $ 126,724
(President & C.E.O.)

Suneet S. Tuli             $52,584                 $59,892 (1)         $ 112,477
(Secretary, V.P.--Sales & Marketing)

Mark Maltese               $139,548                nil                 $ 139,548
(Sales Manager)

<FN>
<F1>  Such amounts were paid by the Company to a consulting company owned by
      the respective officers of the company for the year ended March 31, 1998.
</FN>
</TABLE>


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.

The Plan is designed to attract, retain and motivate persons to provide
services to the Company, and to increase the alignment of their interests with
the interests of the Company's Stockholders.

The Plan allows the Board, at its discretion, to grant options to purchase
shares of Common Stock of the Company at the fair market value of such shares
on the date the option was granted. Options may be granted to any "Eligible
Person," including directors, officers, employees of the Company or an
affiliate of the Company, or any consultant or insider (as defined in the Plan)
of the Company or any affiliate of the Company. The Board also has the
authority under the Plan to determine the number of shares subject to each
option, the expiration date of each option and the extent to which each option
is exercisable from time to time during its term.

The options will expire ten years after the date they are granted, or at such
other date as may be provided for in the Plan. Individual option agreements may
allow an optionee who retires or terminates service with the consent of the
Board of Directors to exercise his or her option within six months of such
retirement or termination. If the optionee is terminated for cause, the
optionee may not exercise the option following such termination. The present
exercise price of those options is $2.125 USD.

An aggregate of 500,000 shares of Common stock (subject to adjustment as
provided in the Plan) were available under the Plan and such shares subject to
options which terminate unexercised will be available for future option grants.
At present, all of the employee stock options available under the plan are
fully allocated.


SECURITY OWNERSHIP OF MANAGEMENT AND CERTAIN BENEFICIAL OWNERS

The following table sets forth, as of March 31, 1998, 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>
                                             Amount and Nature     Percentage of
                                               of Beneficial       Outstanding
Name and Address of Beneficial Owner (1)       Ownership (2)       Shares Owned
----------------------------------------    -------------------    -------------

<S>                                         <C>                        <C>
Raja S. Tuli............................    1,057,332 (3)              17.9%
Lakhbir S. Tuli.........................      585,082                   9.9
Suneet S. Tuli..........................      511,480 (4)               8.7
Dr. Ajit Singh..........................          ---                   ---
Bruce Vallillee.........................          ---                   ---
Willem J. Botha.........................          ---                   ---
Mark Maltese............................       13,334                   0.2
Stan Seitz..............................          ---                   ---
Lt. Col. K.C. Sharma....................          ---                   ---

All executive officers and directors
 as a group (six persons)...............    2,167,228 (2)(3)(4)        36.7%

<FN>
-------------------
<F1>  Unless otherwise indicated, the business address of each beneficial owner
      is 72 Devon Road, Unit #18, Brampton, Ontario, Canada, L6T 5B4.

<F2>  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.

<F3>  Includes (i) 175,000 Common Shares issuable upon exercise of currently
      exercisable options at a price of $2.125 per share and 50,000 shares
      issuable upon exercise of currently exercisable warrant at a price of
      $2.125 per share, and (ii) 32,500 shares owned by Diversified Investors
      Capital Services of North America, Inc., a New York corporation, 30,500
      shares owned by Pyrotech Limited, a Cayman Islands corporation, and 4,000
      shares owned by Donald J. Schattle, respectively, as to which Mr. Tuli
      has voting rights pursuant to a stock exchange agreement.

<F4>  Includes 75,000 Common Shares issuable upon exercise of currently
      exercisable options at a price of $2.125 per share and 50,000 Common
      Shares issuable upon exercise of currently exercisable warrants at a
      price of $2.125 per share.
</FN>
</TABLE>


CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

In November 1995, the Company entered into an indemnification agreement with
Raja Tuli, Suneet Tuli, Lakhbir Tuli and the Whale Securities Co., L.P., the
underwriter of the Company's initial public offering ("Whale") pursuant to
which: (i) the Company, Raja Tuli, Suneet Tuli and Lakhbir Tuli, jointly and
severally, agreed to indemnify and hold Whale harmless for any and all losses,
claims, damages, expenses or liabilities it may suffer (including reasonable
legal fees and expenses) as a result of any claim (a "Claim") by Mr. Debs
arising out of or based upon or related to a claim asserted by Mr. Debs (see,
"Legal Proceedings"), (ii) Raja Tuli, Suneet Tuli and Lakhbir Tuli, jointly and
severally, agreed to indemnify the Company for any losses, claims, damages,
expenses or liabilities it may suffer (including legal fees and expenses) as a
result of a Claim, which indemnity may be made in cash or Common Shares, and
(iii) in the event the Company issues any Common Shares or other equity
securities to Mr. Debs or any person or entity claiming through, or designated
by, Mr. Debs, Raja Tuli, Suneet Tuli and Lakhbir Tuli agreed to deliver to the
Company, for cancellation, an equivalent number of Common Shares, each in
proportion to his respective current beneficial ownership interest in the
Company. In February 1996, the Company settled the Debs litigation for
$185,000. In connection therewith Raja Tuli, Suneet Tuli and Lakhbir Tuli each
contributed 7,368, 3,760 and 4,959 shares to the Company to be held by the
Company as treasury stock.

As of January 30, 1997, the Registrant announced that it has finalized a joint
venture agreement with Societe Innovatech du Grand Montreal, an instrumentality
of the Province of Quebec, Canada ("Innovatech"). Each of the Registrant and
Innovatech purchased 450 shares of the Class A Common Stock of NovImage Inc., a
Quebec corporation ("NovImage") for a purchase price of approximately US
$1,875,000 each. The consideration paid by the Registrant for the stock of
NovImage was in cash and was derived from the Registrant'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
partially-owned by Raja S.Tuli, President and Chief Executive Officer of the
Registrant, each acquired 50 shares of the Class A Common Stock of NovImage in
exchange for the transfer to NovImage of certain patents, patent applications
and other technology and intellectual property rights of those companies.

In connection with the transaction, the Registrant licensed all of its patents,
software and technology relating to its scanner and plotter manufacturing to
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 license and the payment of a 0.5% royalty fee on net
revenue, licensing revenue and net sales to sub-licensees, NovImage granted the
Registrant 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 NovImage.
NovImage retained such rights with respect to the Province of Quebec, Canada.

In connection with the transaction, the Registrant also entered into a Stock
Exchange Agreement with Innovatech pursuant to which Innovatech would be
permitted, under certain circumstances, to exchange its shares of NovImage for
up to 253,000 shares of common stock of the Registrant 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.



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 Certified Public Accountants
      Consolidated Balance Sheets as of March 31, 1998, 1997, 1996
      Consolidated Statements of Operations for the years ended
       March 31, 1998, 1997, 1996
      Consolidated Statements of Shareholders' Equity for the years
       ended March 31, 1998, 1997, 1996
      Consolidated Statements of Cash Flows for the years ended
       March 31, 1998, 1997, 1996
      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 May 1, 1997, in connection with the Company's
announcement that the Warrant Redemption referred to in the Company's 8-K dated
February 10, 1997, was complete, that more than half of the Warrants had been
exercised, and that no warrants would be redeemed.


(c)   EXHIBITS

      See Exhibit Index.

(d)   Not Applicable.


                                   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:                                   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 to be signed below 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      June 22,1998
------------------------     Director (Principal Executive Officer)
Raja S. Tuli


/s/ WILLEM J. BOTHA          Treasurer and Chief Financial Officer       June 22, 1998
------------------------     Principal Financial and Accounting 
Willem J. Botha              Officer)


/s/ SUNEET S. TULI           Executive Vice President of Sales and       June 22, 1998
------------------------     Marketing, Secretary and Director
Suneet S. Tuli


/s/ BRUCE D. VALLILLEE       Director                                    June 22, 1998
------------------------
Bruce D. Vallillee


/s/ AJIT SINGH               Director                                    June 22, 1998
------------------------
Ajit Singh


/s/ COLONEL K.C. SHARMA      Director                                    June 22, 1998
------------------------
Col. K.C. Sharma
</TABLE>


                    The WideCom Group Inc.

                    Consolidated Financial Statements
                    For the years ended March 31, 1996, 1997 and 1998
                    (in United States dollars)

<PAGE>

                              The WideCom Group Inc.
                              Consolidated Financial Statements
                              For the years ended March 31, 1996, 1997 and 1998
                              (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                                             11

<PAGE>

===============================================================================

                                                               Auditors' Report

-------------------------------------------------------------------------------


To the Shareholders of
The WideCom Group Inc.

We have audited the consolidated balance sheets of The WideCom Group Inc. as at
March 31, 1996 1997 and 1998 and the consolidated statements of operations,
shareholders' equity and cash flows for each of the three years in the period
ended March 31, 1998. 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. 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.

In our opinion, these consolidated financial statements present fairly, in all
material respects, the financial position of the Company as at March 31, 1996,
1997 and 1998 and the results of its operations and the changes in its cash
flow for each of the three years in the period ended March 31, 1998 in
accordance with generally accepted accounting principles in the United States.


Chartered Accountants
(Internationally BDO International B.V.)

By: /s/ Internationally BDO International B.V.

Toronto, Ontario
 June 26, 1998

                                       2

<PAGE>

===============================================================================

                                                         The WideCom Group Inc.
                                                    Consolidated Balance Sheets
                                                     (in United States dollars)

<TABLE>
<CAPTION>

March 31                                                        1996           1997           1998
-------------------------------------------------------------------------------------------------------

<S>                                                          <C>           <C>            <C>
Assets

Current assets
  Cash and cash equivalents (Note 6)                         $ 5,643,491   $    631,486   $    692,833
  Accounts receivable (Notes 1 and 3)                            436,747        650,949        579,060
  Receivable from exercise of warrants                                 -        105,142              -
  Research and development grants receivable                     709,424        696,347              -
  Inventory (Note 2)                                             456,128      1,199,386      1,301,522
  Prepaid expenses                                                70,692        100,308         88,947
  Advances to related parties (Note 3)                            86,715        117,149        180,930
                                                             -----------------------------------------

Total current assets                                           7,403,197      3,500,767      2,843,292
Capital assets (Note 4)                                        1,238,317      1,738,485      1,749,312
Investment in affiliates (Note 5)                                576,000      1,685,935      1,058,586
                                                             -----------------------------------------
Total assets                                                 $ 9,217,514   $  6,925,187   $  5,651,190
                                                             =========================================

Liabilities and Shareholders' Equity

Current liabilities
  Bank indebtedness (Note 6)                                 $   132,246   $    329,810   $    201,114
  Accounts payable and accrued liabilities (Note 7)              393,462      1,352,074      1,013,132
  Convertible debentures (Note 8)                                      -              -        200,000
  Deferred income taxes (Note 11)                                 63,200              -              -
                                                             -----------------------------------------
Total current liabilities                                        588,908      1,681,884      1,414,246
                                                             -----------------------------------------

Shareholders' equity (Note 10)
  Common shares
    20,000,000  shares authorized of no par value
     4,434,073  shares issued and outstanding on
                March 31, 1996
     4,848,418  shares issued and outstanding on
                March 31, 1997
     5,909,278  shares issued and outstanding on
                March 31, 1998                                 9,300,794     10,598,884     12,982,715

  Contributed surplus                                            159,825        159,825        159,825
  Deficit                                                       (824,294)    (5,312,118)    (8,647,983)
  Cumulative translation adjustment                               (7,719)      (203,288)      (257,613)
                                                             -----------------------------------------
                                                               8,628,606      5,243,303      4,236,944
                                                             -----------------------------------------
Total liabilities and shareholders' equity                   $ 9,217,514   $  6,925,187   $  5,651,190
                                                             =========================================
</TABLE>


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

                                       3

<PAGE>

===============================================================================

                                                         The WideCom Group Inc.
                                          Consolidated Statements of Operations
                                                     (in United States dollars)

<TABLE>
<CAPTION>

For the years ended March 31                                     1996          1997          1998
-----------------------------------------------------------------------------------------------------

<S>                                                           <C>           <C>           <C>
Revenue
  Product sales                                               $ 1,666,345   $ 1,678,933   $ 2,890,443
  Research and development grants                                 262,322             -        24,567
  Interest income                                                  79,134       141,780       138,794
                                                              ---------------------------------------

Total revenue                                                   2,007,801     1,820,713     3,053,804
                                                              ---------------------------------------

Expenses
  Cost of product sales                                           470,407       459,026       809,935
  Research and development                                        732,457       614,663        99,266
  Selling, general and administrative                             751,252     3,733,016     3,604,538
  Interest and bank charges                                        67,301        42,399        49,431
  Management fees and salaries                                    207,657       321,209       398,804
  Compensation benefit on stock transaction (Note 10(c))          166,974             -             -
  Amortization                                                    297,316       503,359       489,733
  Debt discount                                                   255,478             -             -
  Finance fees                                                    167,277             -             -
  Foreign exchange loss                                                 -             -        36,119
                                                              ---------------------------------------

Total expenses                                                  3,116,119     5,673,672     5,487,826
                                                              ---------------------------------------

Operating loss                                                 (1,108,318)   (3,852,959)   (2,434,022)

Legal settlement costs (Note 14(d))                                     -             -      (309,375)
Equity in loss of affiliate                                             -      (121,971)     (592,468)
Writedown of goodwill                                                   -      (576,000)            -
                                                              ---------------------------------------

Loss before income taxes and extraordinary item                (1,108,318)   (4,550,930)   (3,335,865)
                                                              ---------------------------------------
Provision for (recovery of) income taxes (Note 11)
  Current                                                               -             -             -
  Deferred                                                        (82,687)      (63,106)            -
                                                              ---------------------------------------
                                                                  (82,687)      (63,106)            -
                                                              ---------------------------------------
Loss before extraordinary item                                 (1,025,631)   (4,487,824)   (3,335,865)

Extraordinary item, net of tax (Note 9)                           186,330             -             -
                                                              ---------------------------------------
Net loss for the year                                         $  (839,301)  $(4,487,824)  $(3,335,865)
                                                              =======================================

Loss per common share before extraordinary item, basic
 and diluted                                                  $     (0.33)  $     (0.99)  $     (0.59)
                                                              =======================================

Loss per common share, basic and diluted (Note 10(f))         $     (0.27)  $     (0.99)  $     (0.59)
                                                              =======================================

Weighted average number of shares outstanding                   3,078,428     4,533,583     5,664,188
                                                              =======================================
</TABLE>


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

                                       4

<PAGE>

===============================================================================

                                                         The WideCom Group Inc.
                                Consolidated Statements of Shareholders' Equity
                                                     (in United States dollars)

For the years ended March 31, 1996, 1997 and 1998
-------------------------------------------------------------------------------

<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, 1995                        $ 183,276   $   839,074    $ 159,825    $    15,007   $ (69,241)     $ 1,127,941

Conversion of preferred shares (116,750)
 (Note 10(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

Exercise of warrants (723,393)                         -     2,170,179            -              -           -        2,170,179
Warrant exercise costs                                 -      (120,470)           -              -           -         (120,470)
Class action settlement (278,500)                      -       355,158            -              -           -          355,158
Conversion of convertible debentures (58,967)          -        50,000            -              -           -           50,000
Share issuance costs                                   -       (71,036)           -              -           -          (71,036)
Net loss for year                                      -             -            -     (3,335,865)          -       (3,335,865)
Foreign currency translation adjustment                -             -            -              -     (54,325)         (54,325)
                                               --------------------------------------------------------------------------------

Balance, March 31, 1998                        $       -   $12,982,715    $ 159,825    $(8,647,983)  $(257,613)     $ 4,236,944
                                               ================================================================================
</TABLE>


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

                                       5

<PAGE>

===============================================================================

                                                         The WideCom Group Inc.
                                          Consolidated Statements of Cash Flows
                                                     (in United States dollars)

<TABLE>
<CAPTION>

For the years ended March 31                                    1996          1997          1998
--------------------------------------------------------------------------------------------------------

<S>                                                             <C>           <C>           <C>
Cash provided by (used in)

Operating activities
  Loss for the year before extraordinary item                   $(1,025,631)  $(4,487,824)  $(3,335,865)
  Add (deduct) items not requiring a cash outlay
    Amortization                                                    297,316       503,359       489,733
    Compensation benefit on stock transaction                       166,974             -             -
    Foreign exchange loss                                                 -             -        36,119
    Deferred income taxes                                           (82,687)      (63,106)            -
    Shares issued to settle lawsuits                                      -             -       355,158
    Writedown of goodwill                                                 -       576,000             -
    Equity in loss of affiliate                                           -       121,971       592,468
    Accrued interest on IOC loan payable                             56,643             -             -
  Net changes in non-cash working capital balances related
   to operations
    Decrease (increase) in accounts receivable                      (66,333)     (333,048)      160,122
    Decrease (increase) in research and development grants
     receivable                                                    (186,971)            -       687,307
    Decrease (increase) in inventory                                149,578      (764,646)     (133,663)
    Increase (decrease) in accounts payable and accrued 
     liabilities                                                   (188,861)      982,544      (308,983)
    Increase (decrease) in prepaid expenses                         (54,837)      (31,453)        8,969
                                                                ---------------------------------------
                                                                   (934,809)   (3,496,203)   (1,448,635)
                                                                ---------------------------------------

Investing activities
  Decrease in term deposits                                          98,331             -             -
  Purchase of capital assets                                     (1,029,416)   (1,108,068)     (540,022)
  Advances to related parties                                       (64,859)      (32,033)      (67,523)
  Purchase of equity in joint venture                                     -    (1,805,836)            -
                                                                ---------------------------------------
                                                                   (995,944)   (2,945,937)     (607,545)
                                                                ---------------------------------------

Financing activities
  Increase (decrease) in bank indebtedness                           27,380       203,456      (121,954)
  Shares and warrants issued                                      7,576,470     1,298,090     1,978,673
  Issuance of convertible debentures                                      -             -       250,000
  Shares contributed by shareholders                               (185,000)            -             -
  Repayment of shareholders loans                                  (266,274)            -             -
  Repayment of Innovation Ontario loan                             (220,110)            -             -
  Deferred issue costs of public offering                           610,909             -             -
                                                                ---------------------------------------
                                                                  7,543,375     1,501,546     2,106,719
                                                                ---------------------------------------

Effect of exchange rate changes on cash                              27,341       (71,411)       10,808
                                                                ---------------------------------------

Net increase (decrease) in cash during the year                   5,639,963    (5,012,005)       61,347

Cash and equivalents, beginning of year                               3,528     5,643,491       631,486
                                                                ---------------------------------------

Cash and equivalents, end of year                               $ 5,643,491   $   631,486   $   692,833
                                                                =======================================
</TABLE>

Note:  See Note 15 for supplementary information


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

                                       6

<PAGE>

===============================================================================

                                                         The WideCom Group Inc.
                                     Summary of Significant Accounting Policies
                                                     (in United States dollars)

March 31, 1996, 1997 and 1998
-------------------------------------------------------------------------------

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 10(b)(ii)).

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


                                       7

<PAGE>

===============================================================================

                                                         The WideCom Group Inc.
                         Summary of Significant Accounting Policies (continued)
                                                     (in United States dollars)

March 31, 1996, 1997 and 1998
-------------------------------------------------------------------------------

Long-Lived Assets                Management reviews long-lived assets and
                                 certain identifiable intangibles 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 is based on
                                 the fair value of the asset.

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:

                                 Machinery, plant and
                                  computer equipment    - 30% declining balance
                                 Furniture and fixtures - 20% declining balance
                                 Prototype and jigs     - 20% declining balance

Earnings or Loss Per Share       The Company adopted Statement of Financial
                                 Accounting Standards No. 128, "Earnings Per
                                 Share" during fiscal 1998. As a result of
                                 this adoption, the Company has restated all
                                 periods presented in these financial
                                 statements to reflect "basic" and "diluted"
                                 earnings (loss) per share. Basic earnings
                                 (loss) per share is computed by dividing net
                                 income (loss) by the weighted average number
                                 of common shares outstanding for the period.
                                 Diluted earnings (loss) per share is computed
                                 by dividing net income (loss) by the weighted
                                 average number of common shares outstanding
                                 plus common stock equivalents (if dilutive)
                                 related to stock options and warrants for
                                 each period.

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 10 (e) for a summary of the pro
                                 forma net loss 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.


                                       8

<PAGE>

===============================================================================

                                                         The WideCom Group Inc.
                         Summary of Significant Accounting Policies (continued)
                                                     (in United States dollars)

March 31, 1996, 1997 and 1998
-------------------------------------------------------------------------------

Recently Issued Accounting
 Standards                       In June 1997, the Financial Accounting
                                 Standards Board issued Statement of Financial
                                 Accounting Standards No. 130, Reporting
                                 Comprehensive Income (SFAS 130), which
                                 establishes standards for reporting and
                                 display of comprehensive income, its
                                 components and accumulated balances.
                                 Comprehensive income is defined to include
                                 all changes in equity except those resulting
                                 from investments by owners and distributions
                                 to owners. Among other disclosures, SFAS 130
                                 requires that all items that are required to
                                 be recognized under current accounting
                                 standards as components of comprehensive
                                 income be reported in a financial statement
                                 that is displayed with the same prominence as
                                 other financial statements.

                                 SFAS 130 is effective for financial
                                 statements for periods beginning after
                                 December 15, 1997 and requires comparative
                                 information for earlier years to be restated.
                                 Because of the recent issuance of this
                                 standard, management has been unable to fully
                                 evaluate the impact, if any, the standard may
                                 have on future financial statement
                                 disclosures. Results of operations and
                                 financial position, however, will be
                                 unaffected by implementation of this
                                 standard.

                                 In June 1997, the Financial Accounting
                                 Standards Board issued SFAS No. 131,
                                 Disclosures about Segments of an Enterprise
                                 and Related Information (SFAS 131) which
                                 supersedes SFAS No. 14, Financial Reporting
                                 for Segments of a Business Enterprise. SFAS
                                 131 establishes standards for the way that
                                 public companies report information about
                                 operating segments in annual financial
                                 statements and requires reporting of selected
                                 information about operating segments in
                                 interim financial statements issued to the
                                 public. It also establishes standards for
                                 disclosures regarding products and services,
                                 geographic areas and major customers. SFAS
                                 131 defines operating segments as components
                                 of a company about which separate financial
                                 information is available that is evaluated
                                 regularly by the chief operating decision
                                 maker in deciding how to allocate resources
                                 and in assessing performance.

                                 SFAS 131 is effective for financial
                                 statements for periods beginning after
                                 December 15, 1997 and requires comparative
                                 information for earlier years to be restated.
                                 Because of the recent issuance of this
                                 standard, management has been unable to fully
                                 evaluate the impact, if any, it may have on
                                 future financial statement disclosures.
                                 Results of operations and financial postion,
                                 however, will be unaffected by implementation
                                 of this standard.


                                       9

<PAGE>

===============================================================================

                                                         The WideCom Group Inc.
                         Summary of Significant Accounting Policies (continued)
                                                     (in United States dollars)

March 31, 1996, 1997 and 1998
-------------------------------------------------------------------------------

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.

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

                                 (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.

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, 1998, due to
                                 the wide variety of customers, markets and
                                 geographic areas to which the Company's
                                 products are sold.

Fair Value of Financial
 Instruments                     The carrying amounts of financial instruments
                                 of the Company, including cash and cash
                                 equivalents, accounts receivable, bank
                                 indebtedness, accounts payable, and
                                 convertible debentures 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.


                                       10

<PAGE>

===============================================================================

                                                         The WideCom Group Inc.
                                     Notes to Consolidated Financial Statements
                                                     (in United States dollars)

March 31, 1996, 1997 and 1998
-------------------------------------------------------------------------------

1.    Accounts Receivable

      Accounts receivable consist of:

                                                 1996        1997        1998
                                               ---------------------------------

      Trade accounts receivable                $ 442,096   $ 657,046   $ 612,946
      Less: Allowance for doubtful accounts        5,349       6,097      33,886
                                               ---------------------------------
                                               $ 436,747   $ 650,949   $ 579,060
                                               =================================

2.    Inventory

      Inventory consists of:

                                     1996         1997          1998
                                   -------------------------------------

      Raw materials                $ 244,524   $ 1,061,422   $   967,723
      Work in progress               168,823        48,225        56,644
      Finished goods                  42,781        89,739       277,155
                                   -------------------------------------
                                   $ 456,128   $ 1,199,386   $ 1,301,522
                                   =====================================

3.    Advances to Related Parties

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

<TABLE>
<CAPTION>
                                                     1996       1997        1998
                                                   --------------------------------

            <S>                                    <C>        <C>         <C>
            WideCom Fax and Plotters Ltd. (i)      $ 86,715   $  85,116   $       -
            3294340 Canada Inc. (ii)                      -           -     149,696
            Shareholders                                  -      32,033      31,234
                                                   --------------------------------
                                                     86,715     117,149     180,930
            Less: Current portion                    86,715     117,149     180,930
                                                   --------------------------------
                                                   $      -   $       -   $       -
                                                   ================================
</TABLE>


                                      11

<PAGE>

===============================================================================

                                                         The WideCom Group Inc.
                                     Notes to Consolidated Financial Statements
                                                     (in United States dollars)

March 31, 1996, 1997 and 1998

-------------------------------------------------------------------------------

3.    Advances to Shareholders and Related Parties (continued)

            (i)   WideCom Fax and Plotters Ltd.

                  Advances 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.

            (ii)  3294340 Canada Inc.

                  Advances were made to a company as referred to in Note 5(ii)
                  to facilitate research and development activities. There is
                  no fixed term of repayment and balance is due on demand.

      (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>
                                                 1996         1997         1998
                                              ------------------------------------

            <S>                               <C>          <C>          <C>
            Sales                             $  37,306    $  13,217    $ 127,043
            Consulting fees                     (45,233)    (135,056)           -
            Capital assets acquired            (323,363)           -            -
            Management fees and salaries       (207,657)    (321,209)    (398,804)
</TABLE>

            The management fees are paid on a month to month basis to
            executives who comprise senior management of the Company (See also
            Note 12(b)).

            Included in accounts receivable is $33,948 (1997 - $13,529) due
            from a company controlled by one of the directors of the Company.

4.    Capital Assets

      Capital assets consist of:

<TABLE>
<CAPTION>
                                                          1996                        1997                        1998
                                                ---------------------------------------------------------------------------------
                                                             Accumulated                 Accumulated                 Accumulated
                                                   Cost      Amortization      Cost      Amortization      Cost      Amortization
                                                ---------------------------------------------------------------------------------

      <S>                                       <C>           <C>           <C>           <C>           <C>           <C>
      Machinery, plant and computer equipment   $  699,335    $  143,256    $1,563,728    $  425,596    $1,941,521    $  842,076
      Furniture and fixtures                        99,832        17,589        95,369        29,946       114,832        44,061
      Prototype and jigs                           444,231        35,430       415,094       223,782       307,500       101,569
      Land                                          67,457             -        61,121             -        59,785             -
      Building under construction                  123,737             -       282,497             -       313,380             -
                                                --------------------------------------------------------------------------------
                                                $1,434,592    $  196,275    $2,417,809    $  679,324    $2,737,018    $  987,706
                                                ================================================================================
      Net book value                                          $1,238,317                  $1,738,485                  $1,749,312
                                                              ==================================================================
</TABLE>

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


                                      12


<PAGE>

===============================================================================

                                                         The WideCom Group Inc.
                                     Notes to Consolidated Financial Statements
                                                     (in United States dollars)

March 31, 1996, 1997 and 1998
-------------------------------------------------------------------------------

5.    Investment in Affiliates

      Investment in affiliates consists of :

                                           1996         1997          1998
                                         -------------------------------------

      DS Corporate Marketing Ltd. (i)    $ 576,000   $         -   $         -
      3294340 Canada Inc. (ii)                   -     1,685,935     1,058,586
                                         -------------------------------------
                                         $ 576,000   $ 1,685,935   $ 1,058,586
                                         =====================================

      (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 3294340 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 government of the Province of
            Quebec, pursuant to which Societe Innocatech du Grand Montreal
            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 12(c)). The other two companies that each own 5% of
            the investee are controlled by a member of the executive, who is
            also a director, of the Company.

            The assets, liabilities, revenue and expenses of 3294340 Canada
            Inc. for the period ended March 31, 1998 and 1997 are as follows:

                                                    1997           1998
                                                 --------------------------

            Current assets                       $ 3,400,046    $ 2,012,857
            Capital assets                           431,048        650,534
                                                 --------------------------
                                                   3,831,094      2,663,391
            Current liabilities                       84,750        310,977
                                                 --------------------------
            Net assets                           $ 3,746,344    $ 2,352,414
                                                 ==========================

            Revenue
              Miscellaneous income               $    92,243    $   139,171
              Research and development grants        265,677        545,613
                                                 --------------------------
                                                     357,920        684,784
            Expenses                                 628,965      2,001,420
                                                 --------------------------
            Net loss for the period              $  (271,045)   $(1,316,636)
                                                 ==========================


                                      13

<PAGE>

===============================================================================
                                                         The WideCom Group Inc.
                                     Notes to Consolidated Financial Statements
                                                     (in United States dollars)

March 31, 1996, 1997 and 1998
-------------------------------------------------------------------------------

6.    Bank Indebtedness

      During 1998 the Company renewed an operating line of credit available for
      approximately $218,000 which bears interest at prime plus 0.75%, is due
      on demand, and is secured by a general security agreement over all
      company assets except real property. At March 31, 1998, approximately
      $112,000 (1997 - $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 1998 and 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.

7.    Accounts Payable and Accrued Liabilities

      Accounts payable and accrued liabilities consist of:

<TABLE>
<CAPTION>
                                                    1996        1997          1998
                                                 -------------------------------------

      <S>                                        <C>         <C>           <C>
      Trade accounts payable                     $ 260,897   $   487,763   $   300,268
      Wages and employee deductions payable          9,125       200,011        73,338
      Accrued liabilities                          123,440       664,300       423,418
      Accrued litigation costs (Note 10(b)(x))           -             -       121,871
      Accrued warrant exercise costs                     -             -        94,237
                                                 -------------------------------------
                                                 $ 393,462   $ 1,352,074   $ 1,013,132
                                                 =====================================
</TABLE>

8.    Convertible Debentures

      On May 19, 1997, the Company completed a private offering of $250,000 of
      convertible debentures maturing on May 19, 1998. The convertible
      debentures bear interest of 8% per annum. In addition, 50,000 warrants
      were also issued in conjunction with these convertible debentures. The
      holder of the debentures has the right to convert at a conversion price
      equal to the lower of $5 or 80% of the average closing bid price of the
      Company's shares over the past 20 trading days. On February 11, 1998,
      $50,000 principal plus accrued interest was converted into 58,967 common
      shares. The warrants are exercisable over 3 years at an exercise price of
      $4 per share. The value attributable to the warrants is not material.
      Included in accounts payable is accrued interest on the debentures of
      $13,861.

      On April 24, 1998, the debenture holder converted another $50,000
      principal plus interest into 68,850 of common shares.

      The Company is currently in default for the repayment of its remaining
      $150,000 convertible debentures that came due on May 18, 1998.

                                      14

<PAGE>

===============================================================================

                                                         The WideCom Group Inc.
                                     Notes to Consolidated Financial Statements
                                                     (in United States dollars)

March 31, 1996, 1997 and 1998
-------------------------------------------------------------------------------

9.    Extraordinary Item

      During fiscal 1996 the Company settled all amounts owing to Innovation
      Ontario Corporation which resulted in an extraordinary gain of $186,330
      (net of $148,266 taxes).

10.   Share Capital

      (a)   Authorized

            20 million common shares
            23,360 preferred shares on March 31, 1995 and no shares on 
            March 31, 1996, 1997, and 1998.

            Of the 5,909,278 shares issued on March 31, 1998, 47,063 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.

            (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 totalling $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.

                                      15

<PAGE>

===============================================================================

                                                         The WideCom Group Inc.
                                     Notes to Consolidated Financial Statements
                                                     (in United States dollars)

March 31, 1996, 1997 and 1998
-------------------------------------------------------------------------------

10.   Share Capital (continued)

            (vii) During 1996, the Company settled a lawsuit for $185,000 which
                  the controlling shareholders had jointly and severally agreed
                  to idemnify 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.

            (ix)  During 1998, 723,923 warrants were exercised in exchange for
                  723,923 common shares. The proceeds of this issue, net of
                  related expenses of $120,470, was $2,049,709. This amount
                  includes warrants exercised under the Company's warrant call.

            (x)   During 1998, 278,500 shares were issued for the full
                  settlement and legal costs of a class action lawsuit filed in
                  the State of New York and a partial settlement of another
                  class action lawsuit filed in the State of California. Both
                  lawsuits were in connection with potential losses that would
                  be suffered on the warrant call. The Company is required to
                  issue an additional 75,000 shares in connection with the
                  State of California suit and accordingly the Company has
                  accrued approximately $122,000 for the cost of these shares
                  representing the fair value of the shares on February 2,
                  1998. The Company has also agreed to issue 387,708 
                  replacement warrants for each warrant held by warrant holders
                  on February 10, 1997 and sold by such holders prior to March
                  5, 1997.

            (xi)  During 1998, $50,000 of convertible debentures (see Note 8)
                  were converted into 58,967 common shares. The debentures were
                  converted based on a conversion price of $0.8479 which
                  represents the average of the closing bid share price of 20
                  days prior to the conversion. The Company also incurred
                  $10,000 of issuance cost relating to the conversion of the
                  debentures.

      (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)   Warrants

            As at March 31, 1998 the Company had 2,074,762 issued and
            outstanding warrants. Warrants are exercisable at an exercise price
            of $2.50 to $8.25 with expiry dates between December 2000 and June
            2002.

                                      16

===============================================================================

                                                         The WideCom Group Inc.
                                     Notes to Consolidated Financial Statements
                                                     (in United States dollars)

March 31, 1996, 1997 and 1998
-------------------------------------------------------------------------------

10.   Share Capital (continued)

      (e)   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, compensation expense is not recognized if
            the exercise price equals or exceeds the market price on the date
            of grant. The exercise price of the Company's employee stock
            options equals the market price of the underlying stock on the date
            of grant, therefore no compensation expense is recognized.

            In July 1996, 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)   In fiscal 1996, options to purchase 200,000 common shares at
                  an exercise price of $5.00 per share were issued to two
                  members of management in exchange for the cancellation of
                  previously issued warrants to purchase 200,000 common shares.
                  These options were exercisable commencing one year from the
                  consummation of a public offering and expire in July 2005.
                  During 1998, the exercise price was changed to $2.125 per
                  share.

            (ii)  Options to purchase 100,000 common shares at an exercise
                  price of $8.50 granted in June 1996 to the President and
                  Vice-President. The options vested immediately as at the date
                  of grant and expire June 2001. The options were changed to
                  warrants in 1998 with a change in exercise price to $2.125.

            (iii) Options to purchase 262,500 common shares at an exercise
                  price of $2.125 were issued to the President, Vice President
                  and various employees of the Company in September 1997.
                  195,767 of the options vest within a year and 66,733 of the
                  options vest within a three year period. These options expire
                  10 years after the grant date.

            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 value of these options was
            estimated at the date of grant using a Black-Scholees option
            pricing model with the following weighted-average assumptions:
            risk-free interest rate of approximately 5.0%; dividend yield of
            0.0%; volatility factors of the expected market price of the
            Company's common stock of approximately 200% (1996 and 1997 - 110%)
            and a weighted-average expected life of the option of 5 years.

            The Company's pro forma information follows:

                                      Year Ended     Year Ended     Year Ended
                                       March 31,      March 31,      March 31,
                                         1996           1997           1998
                                      -----------------------------------------
            Net loss
              As reported             $  (839,301)   $(4,487,824)   $(3,335,865)
              Pro forma                (1,099,301)    (5,177,824)    (3,840,790)

            Net loss per share
              As reported                   (0.27)         (0.99)         (0.59)
              Pro forma                     (0.36)         (1.14)         (0.68)

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

<TABLE>
<CAPTION>
                                            Options Outstanding             Options Exercisable
                                        -----------------------------------------------------------
                                          Weighted                        Weighted
                                        Average Price     Options       Average Price     Options
                                          Per Share     Outstanding       Per Share     Exercisable
                                        -----------------------------------------------------------

            <S>                            <C>           <C>               <C>           <C>
            Balance, March 31, 1996        $ 5.00         200,000          $ 5.00         200,000
            Granted                          8.50         100,000
                                                         --------

            Balance, March 31, 1997          6.16         300,000            6.16         300,000
            Granted                          2.125        462,500
            Cancelled                        8.50        (100,000)
            Cancelled                        5.00        (200,000)
                                                         --------

            Balance, March 31, 1998          2.125        462,500            2.125        395,767
                                                         ========
</TABLE>

            At March 31, 1998, there were 37,500 options available for future
            grants. As at March 31, 1998, the options have a weighted average
            contractual life of 8.5 years.

                                      17

<PAGE>

===============================================================================

                                                         The WideCom Group Inc.
                                     Notes to Consolidated Financial Statements
                                                     (in United States dollars)

March 31, 1996, 1997 and 1998
-------------------------------------------------------------------------------

10.   Share Capital (continued)

      (f)   Earnings (Loss) per Common Share

            The computation of earnings (loss) 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 and
            options. On March 31, 1998 there were 2,437,262 options and
            warrants outstanding that were not considered because they are
            anti-dilutive.

            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>
                                                      1996        1997        1998
                                                    ---------------------------------

            <S>                                     <C>         <C>         <C>
            Shares outstanding at year end          4,434,073   4,848,418   5,909,278
                                                    =================================

            Weighted average shares outstanding     3,078,428   4,533,583   5,664,188
                                                    =================================
</TABLE>

11.   Income Taxes

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

<TABLE>
<CAPTION>
                                                                    1996         1997     1998
                                                                 -----------------------------

            <S>                                                  <C>          <C>         <C>
            Current                                              $       -    $       -   $  -
            Deferred provision                                    (176,000)     (63,106)     -
            Ontario research and development super allowance       (20,000)           -      -
            Change in valuation adjustment                         113,313            -      -
                                                                 -----------------------------
                                                                 $ (82,687)   $ (63,106)  $  -
                                                                 =============================
</TABLE>

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

                                       18

<PAGE>

===============================================================================

                                                         The WideCom Group Inc.
                                     Notes to Consolidated Financial Statements
                                                     (in United States dollars)

March 31, 1996, 1997 and 1998
-------------------------------------------------------------------------------

11.   Income Taxes (continued)

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

<TABLE>
<CAPTION>
                                                                   1996          1997          1998
                                                                 ---------------------------------------

            <S>                                                  <C>         <C>            <C>
            Income taxes recovery at statutory rate              $(495,000)  $(2,030,000)   $(1,488,000)
            Items not subject to income tax                        172,000       210,000        309,000
            Permanent difference resulting from the Ontario
             research and development incentive deduction          (20,000)      (21,000)             -
            Adjustment to valuation adjustment                     260,313     1,777,800      1,179,000
                                                                 ---------------------------------------
                                                                 $ (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
            13).

      (c)   Deferred Tax Liabilities

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

<TABLE>
<CAPTION>
                                                                                1996          1997          1998
                                                                             ---------------------------------------

            <S>                                                              <C>           <C>           <C>
            Liabilities:
              Research and development costs included in inventory,
               deductible as expense for tax purposes                        $   (52,000)  $         -   $         -
              Excess of amortization on capital assets for tax purposes
               over amortization recorded for accounting purposes                (31,000)            -             -
                                                                             ---------------------------------------
                                                                                 (83,000)            -             -
                                                                             ---------------------------------------

            Assets:
              Financing costs                                                     59,000        44,000        28,000
              Balance of pool of Scientific Research & Development
               available to reduce taxable income for future years               339,000       615,000       582,000
              Tax losses available to reduce taxable income of future
               years                                                             209,000     1,364,000     2,440,000
              Share issue costs                                                  633,000       686,000       743,000
              Excess of amortization on capital assets for accounting
               purposes over amortization recorded for tax purposes                    -       197,000       259,000
                                                                             ---------------------------------------

                                                                               1,240,000     2,906,000     4,052,000
                                                                             ---------------------------------------

            Less: Deferred tax asset valuation allowance                      (1,093,800)   (2,906,000)   (4,052,000)
                                                                             ---------------------------------------

            Net tax liability                                                $   (63,200)  $         -   $         -
                                                                             =======================================
</TABLE>

            The Company has net operating loss carryforwards to reduce federal
            taxable income of approximately $6,021,000 which expire in 2004 and
            2005. The Company has net operating loss carryforwards available to
            reduce Ontario taxable income of approximately $7,451,000 which
            expire during the years 1999 through 2005.

            The Company has share issue costs amounting to $2,800,000 which
            gives rise to a tax benefit of $743,000. A portion of these costs
            are included in the net operating losses carryforwards disclosed
            above. When realized the benefit will be recorded as a capital
            transaction.

                                      19

<PAGE>

===============================================================================

                                                         The WideCom Group Inc.
                                     Notes to Consolidated Financial Statements
                                                     (in United States dollars)

March 31, 1996, 1997 and 1998
-------------------------------------------------------------------------------

12.   Commitments

      (a)   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:

            Year ended March 31, 1999              $ 124,000
            Year ended March 31, 2000                 70,000
            Year ended March 31, 2001                 30,000
            Year ended March 31, 2002                 12,000
                                                   ---------
                                                   $ 236,000
                                                   =========

            Approximate rental expense incurred under operating leases is as
            follows:

            Year ended March 31, 1996              $ 128,000
            Year ended March 31, 1997                176,000
            Year ended March 31, 1998                169,000

      (b)   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 1998 were
            approximately $239,000 (1997 - $173,000).

      (c)   The Company is commited to its affiliate, 3294340 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 5).

13.   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, 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

      For the year ended March 31, 1998
      Revenue                                $ 2,913,259    $ 1,556,141   $(1,415,596)   $ 3,053,804
      Operating profit                        (3,321,531)      (244,027)      229,693     (3,335,865)
      Identifiable assets                      6,677,495      2,442,435    (3,468,740)     5,651,190
</TABLE>

                                      20

<PAGE>

===============================================================================

                                                         The WideCom Group Inc.
                                     Notes to Consolidated Financial Statements
                                                     (in United States dollars)

March 31, 1996, 1997 and 1998
-------------------------------------------------------------------------------

13.   Segmented Information (continued)

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

                                  1996         1997         1998
                               ------------------------------------

            Canada             $   56,032   $  122,676   $  322,968
            United States         730,055      467,766    1,246,270
            Middle East           335,682      346,595      312,042
            Asia                   80,576      266,345      322,685
            Europe                464,000      475,551      686,478
                               ------------------------------------
                               $1,666,345   $1,678,933   $2,890,443
                               ====================================

      (c)   For the year ended 1998 and 1997 no end user accounted for more
            than 5% of the Company's product sales. In 1998, approximately 43%
            of the Company's product sales were made through five distributors,
            with the largest representing approximately 23.7%. For the year
            ended March 31, 1997 sales to one major distributor amounted to
            approximately 27.5% of total product sales.

14.   Contingent Liabilities

      (a)   Statement of claims have been filed against the Company in 1997
            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.

      (b)   The Company has a dispute with a legal firm for non-payment of
            invoices for legal services for a total of approximately $77,000.
            The Company has accrued approximately $32,000 for these services.

      (c)   A Statement of Claim has been filed against the Company in 1998 for
            breach of sales and royalty agreement and breach of trademark and
            copyright issues in the amount of approximately $15.85 million. The
            Company believes the claim is without merit.

      (d)   During the year the Company settled previous claims which resulted
            in additional expenses of approximately $378,000 and share issuance
            costs of approximately $32,000.

      Loss, 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.

                                      21

===============================================================================

                                                         The WideCom Group Inc.
                                     Notes to Consolidated Financial Statements
                                                     (in United States dollars)

March 31, 1996, 1997 and 1998
-------------------------------------------------------------------------------

15.   Supplemental Disclosure of Cash Flow Information

      Cash paid during the year:

<TABLE>
<CAPTION>
                                                        1996        1997        1998
                                                      --------------------------------

      <S>                                             <C>        <C>          <C>
      Interest                                        $ 56,289   $   32,442   $ 41,488
                                                      --------------------------------

      Non monetary transaction during the year.

      Shares issued for investment in affiliate       $      -   $  720,000   $      -
      Shares issued in exchange for preferred shares         -      350,250          -
      Shares issued to settle lawsuits                       -            -    355,158
      Shares issued for conversion of debentures             -            -     50,000
                                                      --------------------------------
                                                      $      -   $1,070,250   $405,158
                                                      ================================
</TABLE>

                                      22

<PAGE>


EXHIBIT INDEX

      The exhibit designated with an asterisk (*) is filed herewith. All 
other exhibits have been previously filed with the Commission and, pursuant 
to 17 C.F.R. Secs. 201.24 and 240.12b-32, are incorporated by reference to 
the document referenced in brackets following the descriptions of such 
exhibits.

EXHIBIT NO.      DESCRIPTION
-----------      -----------

   3.1           Articles of Incorporation of Registrant, as amended 
                 (Exhibit 3.1 to Form F-1 Registration Number 33-78004, 
                 filed May 6, 1994)

   3.2           By-Laws of Registrant, as amended (Exhibit 3.2 to Form F-1 
                 Registration Number 33-78004, filed May 6, 1994)

   4.1           Form of Common Stock Certificate (Exhibit 4.1 to Form F-1 
                 Registration Number 33-78004, filed November 21, 1994)

   4.2           Form of Underwriter's Warrants and Warrant Agreement 
                 (Exhibit 4.2 to Form F-1 Registration Number 33-78004, 
                 filed December 12, 1995)

   4.3           Form of Bridge Note (Exhibit 4.3 to Form F-1 Registration 
                 Number 33-78004, filed December 12, 1995)

   4.4           Form of Bridge Warrant (Exhibit 4.4 to Form F-1 
                 Registration Number 33-78004, filed December 12, 1995)

   4.5           Form of Warrant Agreement (Exhibit 4.5 to Form F-1 
                 Registration Number 33-78004, filed December 12, 1995)

   4.6           Form of Warrant Certificate (Exhibit 4.6 to Form F-1 
                 Registration Number 33-78004, filed December 12, 1995)

   4.7           Form of 8% Convertible Debentures purchased by Global 
                 Bermuda Limited Partnership, a Bermuda Limited Partnership 
                 (Exhibit 4.1 to Form F-1 Registration Number 33-78004, 
                 filed August 5, 1994)

   4.8           Representative's Warrant to Purchase Shares of Common Stock 
                 (Exhibit 4.2 to Form F-1 Registration Number 33-78004, 
                 filed August 5, 1994)

  10.1           Financial Consulting Agreement, dated June 2, 1997, by and 
                 between The Widecom Group Inc. and Alex Moore & Co., 
                 (Exhibit 10.1 to Form S-3/A, File Number 333-35547)

  10.2           Settlement Agreement, dated May 1, 1997, among Brett 
                 Whiton, Richard Benjamin, Anthony Hand, and the Company, 
                 Messrs. Raja and Suneet Tuli (Exhibit 10.2 to Form S-3/A, 
                 File Number 333-35547)

  10.5           License Agreement between WideCom R & D Inc. and the 
                 Company date August 24, 1993 (Exhibit 10.5 to Form F-1 
                 Registration Number 33-78004, filed April 21, 1994)

  10.6           Employment Agreement with Exhibits between Raja Tuli and 
                 the Company dated October 4, 1993 (Exhibit 10.6 to Form F-1 
                 Registration Number 33-78004, filed April 21, 1994)

  10.7           Employment Agreement with Exhibits between Suneet S. Tuli 
                 and the Company dated October 4, 1993 (Exhibit 10.7 to Form 
                 F-1 Registration Number 33-78004, filed April 21, 1994)

  10.8           Indemnity Agreement between Raja S. Tuli and the Company 
                 (Exhibit 10.8 to Form F-1 Registration Number 33-78004, 
                 filed November 21, 1994)

  22.1           Subsidiaries of Registrant (Exhibit 22.1 to Form F-1 
                 Registration Number 33-78004, filed April 21, 1994)

  27*            Financial Data Schedule