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

                                   FORM 10-KSB

(Mark One)

[X]      ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECUIRITES AND EXCHANGE
         ACT OF 1934

                     For the fiscal year ended June 30, 2001

[ ]      TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES AND
         EXCHNAGE ACT OF 1934

          For the transition period from ___________ to _______________


                         Commission file number 0-30711

                           SECURITY BIOMETRICS, INC.

                 (Name of small business issuer in its charter)

                 NEVADA                               98-0209119

      (State or other jurisdiction                 (I.R.S. Employer
           of incorporation                        Identification No.)
           or organization)

     1410-1030 West Georgia Street
          Vancouver BC Canada                             V6E 2Y3

 (Address of principal executive offices)                (Zip Code)

                                 (604) 609-7749

                           (Issuer's telephone number)

Securities registered under Section 12(b) of the Exchange Act:

          Title of each class                 Name of each exchange on which
          to be so registered                 each class is to be registered

                 None                                     None

Securities to be registered under Section 12(g) of the Exchange Act:

                          Common Stock, $.001 par value

                                (Title of Class)
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Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.       [X] Yes   [ ] No

Check if disclosure of delinquent filers pursuant to Item 405 of Regulation S-B
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-KSB or any amendment to this Form 10-KSB.
[X]

Issuer's revenues for its most recent fiscal year were $0.

The aggregate market value of the voting and non-voting common equity held by
non-affiliates computed by reference to the closing price of the common stock on
October 8, 2001 was $56,880,787.50.

                    APPLICABLE ONLY TO CORPORATE REGISTRANTS

As of October 8, 2001, the issuer had 70,832,315 shares of common stock, $.001
par value, outstanding.

                       DOCUMENTS INCORPORATED BY REFERENCE

            None.



Transitional Small Business Disclosure Format (Check One):    Yes [ ]     No [X]
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                                     PART I

ITEM 1.           DESCRIPTION OF BUSINESS

Our Business

         We are a development stage company whose objective is to develop,
market under license and distribute dynamic biometric technologies, including:

         -        dynamic gesture recognition technology;

         -        dynamic signature verification; and

         -        voice recognition.

    Dynamic Biometric Technology

         Dynamic biometric solutions measure operative human characteristics
such as:

         -        voice recognition;

         -        signature recognition;

         -        keystroke recognition; and

         -        gesture recognition.

Dynamic biometric technology identifies individuals based on how they do
something. For example, the way someone speaks or writes or types on a keyboard
are considered "dynamic" biometrics.

    Signature Recognition

         Signature biometrics can either be dynamic or static. Static signature
verification like that exercised for decades in banks only considers the
geometry of written letters. Dynamic signature verification traces the speed,
velocity and pressure exerted during the physical movement of the pen rather
than the resulting static signature. Aspects of the writing or signature remain
relatively constant allowing dynamic signature verification systems to adopt
over time. Tablet based systems often operate using off the shelf digitizers
allowing signature biometrics to be a cost effective solution for a number of
applications such as computer system access and for dispensing pharmaceuticals.

    Voice Recognition

         Voice biometrics measure how a speaker says a word rather than what is
said. The voice input received by these devices is determined by the size and
shape of vocal tracts, mouth, nasal cavities and lips. Some voice systems
identify a specific phrase while higher end systems evaluate speech regardless
of the words spoken.

Options to Acquire Licenses For Gesture Recognition Technology Developed by DSI
Datotech Systems, Inc.

         Through our wholly owned subsidiaries, we have the right to acquire
exclusive worldwide royalty-free licenses to exploit gesture recognition
technology developed by DSI Datotech Systems, Inc. ("DSI") for banking and
financial transactions and for video games and Internet television.

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         On August 22, 2000, Biometrics Security, Inc. ("Biometrics Security"),
a Nevada corporation and our wholly-owned subsidiary, entered into a definitive
option agreement with DSI which grants Biometrics Security an option to acquire
an exclusive worldwide license to exploit DSI's proprietary gesture recognition
technology for banking and financial transactions. The exercise price of the
option is $8,000,000. We have paid DSI $320,000 under the option agreement,
and we are required to pay DSI an additional $3,000,000, which will be used by
DSI to develop a prototype. DSI extended the due date for the payment of the
$3,000,000 from July 22, 2001 to August 22, 2001 and is continuing to work with
us pending payment. However, DSI has the right to terminate the option for our
failure to make the payment. Amounts paid under the option agreement will be
credited against the $8,000,000 exercise price of the option. We must exercise
this option within three months after DSI makes available a prototype
reasonably acceptable to us. DSI has agreed to use its best efforts to make a
prototype available to us within 12 months after we make the $3,000,000
payment. In addition, upon exercise of the option by Biometrics Security, DSI
is entitled to receive 20% of the then outstanding common stock of Biometrics
Security. We do not have the right to recover monies paid under the option
agreement if DSI fails to make a prototype available to us.

         On June 28, 2000, NetFace, LLC ("NetFace"), a Connecticut limited
liability company and our wholly-owned subsidiary, entered into an option
agreement with DSI which grants NetFace the option to acquire a license to use
DSI's gesture recognition technology for video games and Internet television.
The exercise price of the option is $5,000,000, of which $200,000 has been paid,
plus a 20% equity interest in NetFace. The remaining $4,800,000 balance of the
exercise price is payable by December 4, 2002, the date upon which the option
expires. We do not have the right to recover monies paid under the option
agreement if DSI fails to make a prototype available to us.

         DSI may terminate either option agreement if:

         -        The optionee becomes bankrupt or insolvent;

         -        The optionee does not make any payments to DSI when due; or

         -        The optionee does not exercise the option.

         We do not own, and we are not an applicant for, any patents, and we do
not own any other intellectual property rights, nor do we have a license to use
anyone else's patents or other intellectual property rights. If we exercise the
option to acquire the license for DSI's gesture recognition technology, we will
have the right to use and sublicense to others the intellectual property rights,
including patents, relating to that technology for banking and financial
transactions or video games and Internet television as the case may be. We do
not have any products nor do we plan to sell any products in the foreseeable
future. We have not realized any revenues and we do not expect to generate any
revenues within the next twelve months.

         We were incorporated in the State of Nevada on March 12, 1999 as Great
Bear Resources, Inc. On May 25, 1999, we changed our name to Great Bear
Investments Inc. On August 11, 2000, we changed our name to Security Biometrics,
Inc. On August 25, 2000, we acquired all of the outstanding capital stock of
Biometrics Security in a share exchange with its shareholders. Gesture
Recognition Technologies International Limited received 37,500,000 shares of our
common stock in exchange for the 500,000 shares of Biometrics Security's
preferred stock, and the holders of the common stock of Biometrics Security
received 757,675 shares of our common stock in the share exchange. Upon
completion of the share exchange, Biometrics Security became our wholly-owned
subsidiary. On June 29, 2001, we acquired all of the outstanding membership
interests of NetFace in exchange for an aggregate of 20,000,000 shares of our
common stock All share information in this report gives effect to a four-for-one
forward stock split to shareholders of record on August 28, 2000.

         Our principal executive offices are located at 1410-1030 West Georgia
Street, Vancouver BC, Canada V6E 2Y3 and our telephone number is (604) 609-7749.

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DSI's Gesture Recognition Technology

          DSI is a research and development company which has been engaged in
the development of a proprietary input system for computers and electronic
devices based on gesture recognition technology since 1996. This innovative new
technology interprets hand gestures performed on an intelligent touchpad. DSI
is a publicly-held Canadian company located in Vancouver, British Columbia,
whose securities are publicly traded in Canada. As of June 30, 2001, Edward C.
Pardiak, Chairman of the Board of DSI, beneficially owned approximately 10% of
DSI's outstanding common stock, and all officers and directors of DSI as a
group beneficially owned approximately 12% of DSI's outstanding capital stock.
As of that date, no other person owned more than 10% of DSI's outstanding
capital stock.

         DSI's proprietary technology facilitates and simplifies user
interaction with computers. Communication is intuitive, using simple natural
gestures and enhances the use of a regular keyboard and mouse. The eyes-free
operation means that there is no need to look at what your hand is doing. This
is a great benefit for many applications, including graphic design and video
games. The products can be programmed to replace repetitive and complex code and
manipulations with simple hand gestures, e.g., rotate an object on the screen by
a circular movement of the hand. Instead of striking buttons the sliding gesture
reduces physical effort and strain. In addition, while speech is language and
culture sensitive, gestures are universal.

         DSI's gesture recognition technology is a dynamic system that can be
developed to interpret the biometric characteristics of hand gestures and
signatures using sophisticated software algorithms and performed on multi-sensor
touchpads, which we believe are superior to existing input and pointing
technologies. Gesture recognition technology provides an alternative, or
complementary, input system to keyboards, pointing devices, joysticks, game
pads, touch pads and touch screens.

         DSI's gesture recognition technology evolved from previous gesture
recognition technology for specific application to gaming, stenography and
speech impaired applications. This previous technology utilized a three-finger
touch system, protected by several patents. The core components of DSI's gesture
recognition technology are currently the subject of patent applications. The
gesture recognition technology permits a comfortable, natural form of
interaction that is completely eyes-free.

         We expect that DSI's gesture recognition technology will enable us to
design a human/machine interface that is either alternative to or complementary
with input systems such as:

         -        keyboards;

         -        pointing devices;

         -        joysticks;

         -        game pads;

         -        touch pads; and

         -        touch screens.

         The gesture recognition technology can be applied in various ways.
Depending upon the application that has been integrated with the gesture
recognition technology, gestures can command word processing formats to print a
file or be developed to include biometric sampling for security applications,
including home security applications to activate home security systems or the
secure processing of financial transactions.

         The core components of DSI's gesture recognition technology are:

         -        an intelligent multi-touch sensor;


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         -        gesture recognition software systems applications; and

         -        interface modules.

In all cases, the application of the gesture recognition technology may be by
way of a hardware device (such as a cellular telephone) or through a general
purpose computer running an application (such as a spreadsheet).

         The Multi-Touch Sensor

         The Multi-Touch Sensor unit contains a sensor structure of
approximately 440x170x7mm in size, combined with mixed signal measurement
circuits and a digital signal microprocessor to perform measurement, image
processing and communications to the host. Sensor structure, measurement
circuitry and processing multi-touch algorithm to determine the location and
other parameters of simultaneous finger contacts referred to as "pointers", are
proprietary and are the subject of DSI's patent applications. The data format
for pointers will remain available to original equipment manufacturers, and
defines the interface between the sensor and the gesture recognition components
of the system.

         Demonstration units will communicate pointer information through
universal service bus to the driver and the gesture recognition engine on the
host, and require external power. Devices will incorporate remote communications
links, battery power and gesture recognition embedded in the sensor unit,
communicating gesture codes to the host.

         DSI owns the following United States Patents for its multi-touch
sensor:

         -        United States Method Patent No. 5,203,704, expiring December
                  21, 2010

         -        United States Design Patent No. D354,735, expiring January 24,
                  2009

         -        United States Core Patent No. 5,808,567, expiring September
                  15, 2015

         DSI also has filed a patent application which relates to the signature
verification hardware for its touch pad. These patents and patent application
are included in the licenses to use DSI's gesture recognition technology that we
may acquire upon exercise of the options granted to our subsidiaries by DSI. DSI
also has an international core patent filing in process.

         Gesture Recognition Software Module

         The gesture recognition software module is a proprietary software
module that reads pointer information from a sensor and produces gesture codes.
The module operates independent of any particular sensor, provided the sensor
produces pointer information in the required format. The module is portable and
independent of any particular operating system, support libraries or hardware
platform. It is suitable for embedding in a custom microchip. The data format
for gesture codes will be made available to original equipment manufacturers and
defines the interface between the gesture recognition and mapping components of
the system. In general, the module performs casual processing on the pointer
time series, marks the series into segments, and then classifies each segment by
calculating various features. The sequence of classified segments is assembled
using syntactic analysis into recognized gestures in realtime. The methods of
segmenting, classifying and combining are proprietary, and the subject of DSI's
future patent applications.

         DSI does not have any patents or copyrights covering its gesture
recognition software module. DSI's proprietary rights in the software module are
derived from its methods and know-how. DSI relies on a combination of trade
secret laws and non-disclosure agreements to protect its rights in the software
module.

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         Systems and Application Interface Module

         The systems and application interface module converts gesture events
into events for the user's application. This can be implemented in several ways,
depending upon the context, as follows:

         a)       A hardware device that plugs into a keyboard, mouse or game
                  port and converts gesture events into simulated electrical
                  signals for the devices. An example is a game controller.

         b)       An operating system level device driver that continuously
                  converts gesture events into simulated keyboard and mouse
                  events. An example is the intelligent touch pad for personal
                  computer power users.

         c)       An existing software application runs in conjunction with a
                  plug-in. The plug-in includes a multi-touch pad device driver
                  and converts gesture events into application input events. An
                  example will be the intelligent touch pad for existing
                  high-level professional applications.

         d)       Software applications that integrate the multi-touch pad
                  device driver. The application performs functions based on
                  gesture events read from special device drivers. An example is
                  custom applications on a personal computer.

         e)       A gesture mapping module as well as application code, all
                  integrated and embedded in a multi-touch pad microprocessor to
                  create a specialized device. An example would consist of a
                  custom portable electronic e-appliance.

         DSI does not have any patents or copyrights covering its systems and
application interface module. DSI's proprietary rights in this interface module
are derived from its methods and know-how. DSI relies on a combination of trade
secret laws and non-disclosure agreements to protect its rights in the systems
and application interface module.

Market for Biometric Products

Banking and Financial Transactions

         If Biometrics Security exercises its option to acquire a license to use
DSI's gesture recognition technology for banking and financial transactions, we
intend to initially market DSI's gesture recognition technology to large banking
and financial institutions in the United States and Canada, as well as other
countries. In the United States, most of the Federal Bureau of Investigations'
financial institution fraud caseload during the late 1980's and early 1990's
related to insiders. Since the middle 1990's there has been a resurgence in
external fraud in the form of check fraud, counterfeit negotiable instruments,
and identity fraud. Of the 2,505 convictions executed by the FBI in 1998, 1,123
were of bank employees and bank officers. Inside fraud frequently includes
multiple transactions by loan brokers, appraisers, accountants and real estate
attorneys who sometimes layer fraudulent transactions with genuine transactions.
Currently, the FBI is fully supportive of ink less fingerprinting to curb check
fraud and counterfeit negotiable instruments.

         Large financial institutions tend to attract more fraud across all
categories than smaller institutions. Criminals target larger financial
institutions because they have a wider set of products, and more retail
locations, which can be struck simultaneously. Smaller financial institutions
are not immune but tend to have a more intuitive grasp of normal transactions at
the teller level for each of its customers.

         Identity fraud in the United States is a big driver for security
countermeasures. In 1998 it is estimated that the $6 billion being lost annually
could be attributed to:

         -        fraudulent welfare disbursements ($1 billion);

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         -        credit card transactions ($1 billion);

         -        cell phone crime ($1 billion); and

         -        ATM transactions ($3 billion).

Financial Transactions:

         ATM

         The automated teller or "ATM" in the United States and the automated
banker or "ABM" in Canada has eclipsed bank tellers as the workhorse for retail
financial transactions in Canada and the United States. There are over 15,000
bank-operated ABMs in Canada and Canadians have access to over 23,506 other ABMs
through the Interac network. The average Canadian logs over 50 ABM transactions
per year. The penetration of ATM machines in the United States has been similar
with over 240,000 units executing transactions worth over 900 million dollars
per month.

         Check Payment

         In the United States, checks are still the dominant form of non-cash
consumer transaction. However, alternative non-cash forms are growing more
quickly. Americans use checks for three-quarters of all non-cash transactions
according to the Check Payment Systems Association, but the volume of
check-based transactions is increasing annually by only 2-3%.

         Checks are a tenured transaction medium, which are popular in part
because they have been around for such a long time. Internationally there are
over 65 billion checks written each year.

         Bank procedure aimed at minimizing check fraud is always tempered by
the need to avoid arbitrary or time-consuming procedures, which may alienate
customers. For example, banks have tried locating Magnetic Ink Character
Recognition, the machine-readable numbers at the bottom of modern-day checks,
readers at each teller stand. While unit costs have dropped to the point where
this is now economic, the processing time required to confirm numbers is too
slow. Banks are reluctant to inconvenience customers for the marginal savings in
reduced fraud. The clear message from a systems standpoint for biometric vendors
is the need for speedy authentication in order to avoid inconveniencing bank
customers.

         Several software programs in use today compare financial account
activity against existing profiles for individual accounts and flag abnormal
activity. Variables this type of software monitors include flagging transactions
where the same identification is used to cash multiple checks during a limited
time period, duplicate check numbers, check numbers out of a range, unusual
deposit sizes, and low or no magnetic ink. However, even these kinds of software
profiles can be circumvented. Aspects of these software programs can be beaten.
For example, if persons committing the fraud have several runners executing
fraudulent checks simultaneously at the same branch computer systems do not
have the reaction time necessary to flag an abnormal profile.

         Credit Cards

         The convenience of credit cards has positioned them as the backbone of
emerging consumer transactions on the Internet.

         Like checks, credit cards have several printing features, which curb
more obvious counterfeiting and criminal misuse. Like checks, credit cards rely
on static signature verification. Among the existing security measures on credit
cards are signature panels that sometimes include the credit card number. Other
key credit card security features include Bank Identification Numbers and
holograms.

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         The Bank Identification Number repeats the first four raised digits on
the credit card. The last 4 raised credit card digits of modern credit cards now
generally run through a hologram, which is difficult to counterfeit. At the
point of sale, merchants can tilt the card to verify the appearance of the
hologram.

         Despite these measures, crime rings are capable of counterfeiting
credit cards. Recent criminal investigations in San Francisco have revealed the
use of blank plastic stock for fake identification and credit cards along with
magnetic stripe readers.

         The ability to execute a credit card transaction verbally over a
telephone is an often exploited, weak spot for this medium of exchange. All
thieves need to know is a number and a date and a fraudulent transaction can be
executed. Some reactive security measures have evolved to remedy the most
blatant abuse of telephone-based transactions. Recognition systems like those
developed by HNC Software Inc., monitor ongoing transactions against a profile
of common card usage. These are similar to the profiling software packages used
to monitor check account activity.

         A form of credit card fraud involves the swapping of stolen credit card
numbers in Internet chat rooms. Participants in this trade buy and sell stolen
credit cards numbers and often exchange anonymous computer and postal addresses.
Participants in the trade range from small time crooks to professional hackers
who may steal thousands of credit card numbers at a time from poorly secured
eCommerce sites. Online theft of credit card numbers takes several forms, which
include packet sniffing. Some criminals establish phony websites that extend
amazing bargains which attempt to trick unwary shoppers into giving away credit
information.

         Current American law curbs the ability of law enforcement to monitor
chat rooms without some third party pointing out a specific illegal incident.
Although the players in this form of fraud are mainly adolescents, remedying
this form of fraud has highlighted American financial security shortcomings.
Specifically, as of February 2000, United States credit card companies and card
issuing banks had not yet determined a method for reporting this kind of
activity.

         Debit/Point of Sale

         In the United States there are an estimated 200 million debit cards in
circulation. Many factors have driven the popularity of debit cards including
the ability of non-financial institutions to brand themselves using what was
formerly a bank card.

         A debit card or ATM transaction is generally a three-step process that
occurs over dedicated telephone lines. At the point of sale, a processor ensures
that a personal identification number in encrypted and sends an electronic
message to the network service provider's processor. The network service
provider queries the financial institution's processor to ensure that the
personal identification number is correct and that there are sufficient funds
for the transfer. The network service provider relays this information to the
point of sale where the physical transaction takes place. The entire point of
sale transaction generally takes five to ten seconds to authorize. Later in the
day, the network service provider will provide a summary settlement to the
financial institution and the merchant at the point of sale.

         Small banks on average experience a couple of thousand dollars of
losses per year while larger banks generally experience about a hundred thousand
dollars worth of losses.

         eCommerce

         ECommerce is a transaction medium that is rapidly gaining mainstream
acceptance in North America. To a great extent, actual transactions use network
backbones established by credit card companies who are keen to capitalize on
their use as a default medium with new Internet specific media. The increasing
pervasiveness of transactions over personal computers and the promise of
transactions over mobile platforms have inspired security measures both at the
log on stage and at the network level.

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         Currently, credit cards are the backbone payment system for e-tailers.
Web companies pay a premium to conduct credit card based transactions with
consumers, and the fraud that does occur appears to be a manageable cost of
doing business. In a June 2000 survey conducted by ActivMedia Research, of 736
web businesses surveyed only 3% indicated that fraud was a regular and
substantial problem. This finding is at odds with an August 2000 survey by
Gartner Group which determined that 1.15% of all online transactions are
fraudulent while only 0.6-0.9% of all off line transactions are fraudulent. Many
variables may account for the different findings, but a likely reason is that
e-tailers are less experienced than traditional retailers and may consider a
given level of fraud the cost of doing business using an emerging medium.

         Network service providers recognize that these pioneering retailers are
prepared to pay a premium to use their systems. In Gartner's survey of 160
companies, it was determined that on average credit card companies, which are
the current backbone of Internet transactions, offer e-tailers discount rates of
2.5% plus 30 cents per transaction versus an average of 1.5% plus 30 cents to
traditional retailers. Additional costs faced by e-tailers include the cost to
enter Internet payment gateways which can add as much as $0.50 per transaction.

         The Gartner survey also found that e-tailers pay more than traditional
retailers when it comes to handling charge-backs. According to the survey,
e-tailers spend four times as much as traditional retailers when it comes to
resolving this customer service function. The reason for this is that in
traditional transactions there is a signed sales slip, which verifies the
transaction and takes the onus off the retailer. Online transactions have no
such documentation.

         Besides the correlation between increased anonymity and increased
propensity for fraud, it may be that traditional retailers simply have more
experience and expertise at handling various customer service issues. In the
ActivMedia survey, Lands End was quoted as saying that since it had launched its
online catalogue it had experienced no increase in fraudulent activity.

         Public Key is a very likely companion to emerging biometrics servicing
secured online transactions. Existing American and Canadian legislation
recognizing the validity of digital signatures is an important consideration. As
of May of 1999, the Canadian Payments Association announced its intention of
becoming the root Certification Authority for a Pubic Key system in Canada so
that individuals and businesses would be able to make secure transactions over
the Internet. The root Certification Authority qualifies certification
authorities with the power to issue digital certificates to clients wishing to
conduct transactions over the Internet. By March of 2000 the Canadian Payments
Association had completed technical specifications for a Canadian Public Key
system and was awaiting requests for proposal from its members.

         Fraud schemes on the Internet have been with us for several years now.
Security, confidentiality, and privacy questions undermine the credibility of
the Internet as a medium for financial exchange. Measures like Public Key and
biometric safeguards may be either the key to cleaning up this medium or the
forerunners of safeguards on a private (more secure) parallel version of the
Internet. For the record, initial fraud schemes on the Internet, which relate to
consumers merit mention. Going back to 1997, the American Institute of Certified
Public Accountants determined that the following 10 fraud schemes were most
common at that time:

          - On-line services                      - Work at home schemes
          - Merchandise sale                      - Prizes and sweepstakes
          - Auctions                              - Credit card offers
          - Pyramid schemes                       - Books
          - Internet business opportunities       - Magazine subscriptions

Banking and Electronic Transaction Software

         Banks are spending heavily on security and Internet services because
new services mean a whole new set of service charges. Killen & Associates has
projected that banks expect that expanded Web-based cash management services
should increase bank revenues by $80 billion by 2004.

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         Virtual Private Networks are enabling e-banking to expand by offering
secure networks for employees, customers, suppliers, and business partners.
Virtual Private Networks encrypt transmitted information using complex
algorithms to hide sensitive data from outsiders.

         When Virtual Private Networks first came out, they were adopted slowly
by the banking community. Demand for Virtual Private Networks picked up in 1998,
when a set of international standards was confirmed. Just as Web-based
procurement has saved manufacturers money over older EDI systems, Virtual
Private Networks is proving to be cheaper for banks than existing communications
platforms, which work around leased lines and telephone equipment. Infonetics
Research estimates that setting up and maintaining 350 users with an average of
31 hours of monthly Internet time apiece will save a bank $500,000.

         Online banking is swiftly charging from its position as an extravagant
application used by a select few to a mainstream application utilized by the
growing number of Internet users. To attest to this, in the United States alone,
there were 6.6 million households banking online in 1998. By 2003, that number
will increase substantially to more than 32 million.

         According to a report published by International Data Corp., a
combination of factors is driving the explosive growth in online banking. To
begin with, there has been a proliferation of low-cost personal computers and
other networking devices in the home market, which is causing a surge in the
number of Internet users. Because many of the security concerns have been
alleviated, these Internet users are becoming more and more comfortable using
the Internet as a transaction-based medium.

         Secondly, the increasing number of banks offering Web-based banking
services is also triggering the market's growth. It is estimated that the number
of banks offering online banking services will increase from 1,150 (base year
1998) to 15,845 by 2003, primarily via the Web. It is important to note that
these numbers represent 6% and an incredible 86%, respectively, of all United
States commercial banks and credit unions.

         According to IDC, online banking is evolving through three phases. The
first phase offers functionality similar to what is available through telephone
banking systems - access to account balances and transaction data. The access is
provided through a dial-up or browser-based service. The second phase emphasizes
interactive technologies such as online bill payment and personalized reminder
services. The third phase involves direct marketing of credit and lending
services, personalized financial management features, and services such as
securities trading and insurance offerings.

         A strong link exists between banking, bill payments, and the Internet.
The banking sector is quickly realizing that online banking may be the critical
service driver that enables them to maintain a dominant market position, and
offer customers wider and more effective, and cost efficient access to financial
services.

Banking and Financial Transaction Fraud

         In terms of need, initial implementations will probably flow from the
highest value/highest risk transactions down to progressively lower value/lower
risk transactions. Using this rationale, corporate cash management should be the
first candidate. Ben Miller, the publisher of the Personal Identification
Newsletter, has commented if you're sending a message to swap a $100 million
derivative you want to be sure someone with the necessary authority said it.
After corporate cash management, credit cards are the next most likely step for
implementation.

Identity Theft

         Identity theft occurs when a person uses someone else's personal
identification to obtain credit, loans, services, rentals or mortgages.
America's over reliance on social security numbers contributes to this problem
since dishonest clerks at accountancies, legal firms, financial institutions,
hospitals, courts and schools are able to obtain access to this information.

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The identity theft organization (www.identitytheft.org) claims that 500,000
Americans are targeted by this type of crime each year, and that 25% of credit
card fraud now involves some form of identity theft.

         Identity theft is an emerging form of credit fraud where thieves
working from an identification like a drivers license create a paper person who
registers several sets of credit cards. Once the fake person is created, the
thieves misuse the newly minted credit cards with no intention of repaying the
sponsoring financial institutions. With this crime, the original person whose
identification has been stolen loses his good credit rating and the sponsoring
financial institution is defrauded. As of October 1999, 15 states in the United
States recognized identity theft as a felony with more states planning similar
legislation.

Banking and Financial Transaction Security Measures

         Financial institutions are reticent to report incidents of internal
theft for public relations purposes. Atalla Inc, a hardware security division at
Tandem, claims that 70% of banking fraud is conducted with an insider. Therefore
internal security represents a large opportunity. Some limited reporting has
occurred on the types of internal crimes these institutions generally
experience. In banks, these problems generally involve junior employees that
either steal customer checks or enter into arrangements with criminals.
Sometimes professional criminals find work in the accounts payable (or even the
mail room) of corporations. When corporations have sloppy internal controls,
these kinds of theft can occur for several months.

Banking and Financial Biometric Initiatives

         Some estimates going back to 1998 suggest that banks need checking
account deposits of $200 per account as a hedge against all forms of fraud. The
primary reason transaction fraud is so significant is the proliferation of
access points (ATMs, telephone banking, Internet) available to conduct financial
transactions. As the volume of individuals and transactions continue to increase
through these access points, so to will the technology needed to secure these
transactions.

         Several major financial services institutions are currently piloting a
variety of biometric technologies. In addition to the obvious applications, such
as account access or internal network security, a variety of other novel
solutions are being deployed and investigated. These solutions are being
deployed at the ATM and teller level, in web-based applications, and in
securities transactions. As more customers and clients decide to transact
business remotely, industry observers believe there will be an increasing need
to authenticate users on both ends. And while certificate-based infrastructures
can determine that a certain personal computer or organization is on the other
end, and a Private Key infrastructure can determine that a message has not been
modified or read into a transaction, only biometrics can determine that a given
individual authorized or initiated a transaction.

         As with electronic bill presentment, the need to find consensus between
businesses, financial institutions and consumers has a delaying effect. The
International Biometrics Group has noted some major developments in the
financial services world listed below. Some of these initiatives have been
actively pursued and some may never proceed beyond pilot projects.

         -        ING Direct is providing finger-scan biometric authentication
                  for online banking customers.

         -        BACOB Bank in Belgium is piloting voice verification for
                  customer account access.

         -        Chase Bank is piloting finger scan technology.

         -        Bank United has integrated iris recognition into a number of
                  its ATM's.

         -        Wells Fargo owns a 40% stake in InnoVentry, which provides
                  biometric face verification at its check-cashing ATM's.

         -        Charles Schwab is piloting biometric technologies for account
                  access.

                                       10
<PAGE>   13
         -        A Mexican institution is distributing payroll and executing
                  automated purchases with smart cards and biometrics.

         -        The FSTC (Financial Services Technology Consortium) is
                  participating in IBG's major round of IT Security and
                  e-commerce testing this summer.

         The roll out of Mr. Payroll machines since 1997-8 has been successful
for several reasons, including management commitment to the concept and public
acceptance of an unobtrusive biometric identifier. Moreover, Mr. Payroll did not
start with the massive investment in legacy systems, which are issues for major
banks and credit card companies. Mr. Payroll has a clearly defined target
market, which is working class households that do not have checking accounts.
According to information provided by the company and attributed to the Federal
Reserve Bank, 41% of American working class households do not have checking
accounts. These people need to cash paychecks and this is where Mr. Payroll
becomes involved. Mr. Payroll uses a touch pad as an on switch and facial
recognition in place of a PIN number.

         Since the success of the initial roll out, InnoVentry Corp. the
technical supplier to Mr. Payroll, has installed 500 Mr. Payroll and RPM
machines in retail locations including Kroger, Circle K, HEB Pantry Foods,
Wal-Mart, K-Mart, Texaco and RaceTrac. RPM machines. InnoVentry has been backed
by Wells Fargo & Co and as of September 2000 claims 760,000 customer and over 2
million checks cashed over the last two years.

         Bank of America, Bank One, J.P. Morgan Chase, Citibank, Wachovia,
Wells Fargo and the Federal Reserve System are piloting a static signature
verification scheme that would work in conjunction with online verification.
The initiative is called Automated Imaged Signature Comparison. Check imaging
at the point of sale is the primary thrust of the initiative. First and
foremost, check imaging safeguards banks and merchants against losses due to
insufficient funds and closed accounts, which are the largest sources of loss.
This safeguard is expected to increase the general acceptability of checks at
the point of sale. An ancillary benefit of check imaging is the reduction
handling which reduces the transaction costs of processing checks.

         Static image verification which increases the security of the imaged
check. In the past, manual signature verification was applied in an ad hoc
manner if the teller or merchant at the point of sale found the customer's
behavior or appearance questionable. Automated verification of the signature
takes this manual procedure and applies it to each and every transaction. While
the principal motivation is safeguarding against insufficient funds and closed
accounts, the cost of signature verification has dropped to the point where it
can be added on as an ancillary safeguard.

         With software and hardware at acceptable cost levels what remains is
the development of consensus around a smaller set of solutions and commitment to
a network platform. During this hiatus, the impetus seems to be to get involved
in as many new pilot programs as possible. Activity and engagement through such
initiatives as voluntary trials opens the door to wider consumer understanding
and imaginative administrative thought when it comes to linking new biometric
technologies with legacy systems.

         However, at some point, a combination of low unit costs and potential
cost savings reach a point where major players commit to a new way of doing
business. In this instance, electronic bill presentment is an excellent model
for the adoption of biometric technology for mainstream financial transactions.

Video Games and Internet Television

         The interactive gaming market comprises a multi-billion dollar
worldwide home entertainment industry. Interactive video games are played on
either PC platforms (Windows and MAC) or proprietary platforms that operate
with television sets. These games emulate everything from sporting events to
fighter aircraft. The game experience continues to evolve as graphics simulate
reality and processing power multiplies. Many games have a cult following who
continue to drive the developers to new heights, which contribute to growth in
the industry.

                                       11
<PAGE>   14
         The players in the gaming market consist of platform suppliers, gaming
software content suppliers and peripheral input device suppliers. The main
suppliers of proprietary platforms for interactive gaming include, but are not
limited to:

         -        Sony Playstation 1 and Playstation 2

         -        Sega Dreamcast

         -        Nintendo Gameboy and Game Cube

         -        Microsoft X-Box (target launch Q4 '01)

These consoles are proprietary hardware platforms that play video games on
consumer television screens. Interactive entertainment on the Internet is also
gaining popularity, but access speeds in the local loop of the network limit the
capabilities of many games.

         In terms of content, the platform suppliers listed above are developing
much of their own core gaming software. However, software content is not limited
to the platform suppliers as there are a range of partner companies ( e.g.
Electronic Arts ) developing games for both the platform suppliers and the PC
market.

         Another set of players within the gaming market are the peripheral
input device suppliers, producing input devices such as joysticks, gamepads,
wheels and pedals. Their devices add value to the core products developed by
the platform suppliers.

Marketing

         Banking and Financial Transactions

         If Biometrics Security exercises its option to acquire a license to use
DSI's gesture recognition technology for banking and financial transactions, our
market penetration strategy will focus on the security and efficient interface
aspects of the banking and financial transactions market segments. We intend to
derive multiple revenue streams from:

         -        transaction loss reduction profit sharing (Automatic Teller
                  Machines, debit and credit cards, and e-commerce);

         -        interaction cost management within the banking and financial
                  transaction vertical market (double initial control system,
                  information management, back office, etc.); and

         -        sublicensing to financial institutions.

         DSI's gesture recognition technology forms the core delivery platform
for the execution of our business model, around which we will build our
intellectual property management portfolio. Gesture recognition technology
brings full reverse compatibility and improved performance to gesture
recognition technology enabled multi-touch pads that can be utilized for dynamic
signature verification. Within the area of interface efficiency, these are
deemed advanced generation touch pads or mice replacements, and we believe they
greatly enhance keyboard functionality when executing upon the function of
financial transactions.

         A key element of our market penetration strategy is incorporating
intelligent gesture recognition technology enabled input devices that will
provide a transparent and ubiquitous delivery platform for minimizing
interaction and transaction costs within the vertical banking and financial
transactions markets. We will initially focus on the three market segments,
where we intend to be first to market. This includes initially developing under
license and marketing:

                                       12
<PAGE>   15
         -        Standalone multi-touch DatoPad for power users of gesture
                  recognition technology enabled professional financial services
                  software, and subsequently for the on-line banking aftermarket
                  general user;

         -        Gesture recognition technology enabled security biometric
                  interaction and transaction systems for the banking and
                  financial services markets; and

         -        Gesture recognition technology enabled security biometric
                  hardware and software solutions for the point of sale markets,
                  integrated with public and home access transaction systems.

         Video Games and Internet Television

         If NetFace exercises its option to acquire a license to use DSI's
gesture recognition technology for video games and Internet television, we will
seek to establish supplier, partnership and license agreements with the platform
suppliers and other content providers in order to build more intuitive solutions
that dovetail with our product roadmaps. Once on-board with a key platform, we
will be in a better position to integrate our technology into input devices
produced by the peripheral input device suppliers. We will also be able to
better influence the gaming software content suppliers to build their games
using gesture recognition technology.

         At the outset, our technology will likely complement conventional
button controllers, joysticks and gamepads rather than displace them.
However, as gesture recognition technology is embraced by users, our penetration
should increase dramatically.

         Over the short term, we do not intend to sell solutions directly to the
consumer market, instead we intend to look to leverage third party
relationships.

         Though industry experts have been touting the theme of "convergence"
for the better part of a decade, proprietary console games and PC based computer
games are still fairly discrete markets. Some important indicators affecting our
product potential:

         -        In 1999, 215 million PC-based and console games were sold
                  in the United States.

         -        Combined hardware sales reached $1.3 billion.

         -        Software sales of TV Console games reached $4.2 billion.

         -        PC software sales reached $1.9 billion. Each console is
                  bundled with two controllers.

In 2000, only 8 million proprietary gaming consoles were sold worldwide. This is
because new platform launches are cyclical -roughly every 2-4 years the leading
OEMs come out with a new gaming console. For example, Sony released Playstation
2 in 2000 and is expected to release the next generation console in 2004.

         Competition

         If Biometrics Security or NetFace exercises its option to acquire a
license to use DSI's gesture recognition technology for banking and financial
transactions or video games and Internet television, respectively, we will
compete with many well-established United States and foreign manufacturers in
the biometrics market. Key manufacturers competing in the dynamic signature
verification market include Checkmate Electronics Inc., PenOP Inc., SOFTPRO,
Xenetek, and Ink Tools. These manufacturers exemplify the fact that the
development of strong alliance partners is a key success factor in this field.
Checkmate has a strategic marketing agreement with IBM. PenOP has a series of
agreements with Microsoft, Netscape, Adobe and Eastman Systems. SOFTPRO has
multiple international distribution agreements with UNISYS. Ink Tools has a
strategic alliance with Palm Corporation. In any new technology (especially
where consistent industry profitability is several years away), the ability to
make


                                       13
<PAGE>   16
agreements with tenured high tech companies is a key concern. The ability to
partner is further leveraged when successful pilot programs are promoted
effectively.

         Leading manufacturers of voice recognition systems include
InterVoice-Brite, Inc., Orga, Veritel, VeriVoice, and ITT Industries.
Increasingly, companies in this field are becoming adept at several input
technologies. As the prices of input devices fall, the value proposition shifts
to software attributes like the logic of comparing input data to the digital
template, file storage, and verification times. For retail banking transactions,
authentication time against a large data base is a critical consideration.
Several of the technology segments surveyed now offer acceptably low input
device prices and sufficiently fast authentication times.

         All of these companies have developed products and are authorized to
sell products. All of our principal competitors are significantly larger, well
established and are better capitalized than us, all of which could adversely
affect our ability to compete.

Employees

         As of October 1, 2001, we had five (5) full-time employees and three
(3) part-time employees, none of whom is represented by any labor union.

ITEM 2.           DESCRIPTION OF PROPERTY.

         We occupy approximately 2,500 square feet of space at 1410-1030 West
Georgia Street, Vancouver, British Columbia, Canada for our executive offices.
The lease is for a term expiring March 31, 2004, at a base rent of
approximately $2,200 per month through March 2003 and approximately $2,400 per
month thereafter.

ITEM 3.           LEGAL PROCEEDINGS

         We nor any of our subsidiaries is a party to any material legal
proceeding, nor, to our knowledge, is any litigation threatened against us or
our subsidiaries.

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

         Not Applicable.



                                     PART II

ITEM 5.           MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.

Market Information.


         Our common stock is traded in the over-the-counter market and has been
quoted on the OTC Bulletin Board under the symbol "SBTI" since June 12, 2001.
From September 1, 2000 to June 11, 2001, our common stock was quoted in the
Pink Sheets. The following table presents the range of the high and low bid
quotations for our common stock as reported for each quarter beginning July 27,
2000 when the stock was first quoted. Such quotations reflect inter-dealer
prices without adjustments for retail mark-up, markdown or commissions, and do
not necessarily represent actual transactions.

                                       14
<PAGE>   17
<TABLE>
<CAPTION>
                                                               BID QUOTATIONS

PERIOD                                            LOW                             HIGH
------                                            ---                             ----
<S>                                               <C>                           <C>
July 27, 2000 - September 29, 2000                $4.00                         $ 14.00
October 1, 2000 - December 30, 2000               $5.00                         $  6.25
January 1, 2001 -  March 30,  2001                $2.50                         $  6.625
April 1, 2001 - June 30, 2001                     $2.25                         $  4.95
</TABLE>


Holders

         As of September 21, 2001, our common stock was owned by 248 record
holders and there were approximately 400 beneficial owners.

Dividends

         We have never declared or paid any cash dividends. It is our present
policy to retain earnings to finance the growth and development of the business
and, therefore, we do does not anticipate paying dividends on its common stock
in the foreseeable future.

Recent Sales of Unregistered Securities

         The following sets forth certain information regarding sales of, and
other transactions with respect to, our securities issued during the quarter
ended June 30, 2001, which sales and other transactions were not registered
pursuant to the Securities Act of 1933. Unless otherwise indicated, no
underwriters were involved in such transactions.

         During the quarter ended March 31, 2001, we granted options to purchase
a total of 115,000 shares of common stock under our 2000 Stock Option Plan to
two consultants. The exercise price of the options is $1.00 per share. The
options become exercisable as follows: (i) 25% of the shares underlying options
granted within 180 days after the date of grant; (ii) 25% of the shares
underlying options granted within 360 days after the date of grant; and (iii)
25% of the shares underlying options granted within 540 days after the date of
grant. The grants to the consultants were exempt from the registration
requirements of the Securities Act under Section 4(2).

             During the quarter ended June 30, 2001, we granted options to
purchase a total of 808,500 shares of common stock under our 2000 Stock Option
Plan. The exercise price of the options is $1.00 per share. Options to purchase
250,000 shares become exercisable as follows: (i) 25% of the shares underlying
options are immediately exercisable after the date of grant; (ii) 50% of the
shares underlying options granted within 180 days after the date of grant; (iii)
75% of the shares underlying options granted within 360 days after the date of
grant; and (iv) 100% of the shares underlying options granted within 540 days
after the date of grant. Options to purchase 558,500 shares become exercisable
as follows: (i) 25% of the shares underlying options granted within 180 days
after the date of grant; (ii) 50% of the shares underlying options granted
within 360 days after the date of grant; (iii) 75% of the shares underlying
options granted within 540 days after the date of grant; and (iv) 100% of the
shares underlying options granted within 720 days after the date of grant.
Options to purchase a total of 600,000 shares were granted to two our officers
and two of our directors. Options to purchase a total of 208,500 shares were
granted to five consultants. The grants to our officers and directors were
exempt from the registration requirements of the Securities Act under Section
4(2) and Rule 506 of Regulation D. The grants to the consultants were exempt
from the registration requirements of the Securities Act under Section 4(2).

         On June 29, 2001, we issued 20,000,000 shares of common stock to the
former members of NetFace, all of whom represented to us that they were
accredited investors, in exchange for each of their membership interests in


                                       15
<PAGE>   18
NetFace. The issuance of those shares were exempt from the registration
requirements of the Securities Act under Section 4(2) and Rule 506 of Regulation
D.

          With respect to the sales made in reliance on the exemption afforded
by Section 4(2) of the Securities Act, (i) no advertising or general
solicitation was employed in offering the securities, (ii) the securities were
offered to a limited number of individuals and the transfer thereof was
appropriately restricted by us, (iii) all purchasers were sophisticated
investors who were capable of evaluating the merits and risks of the investment
and had access to the type of information that would be included in a
registration statement with respect to the securities and (iv) each purchaser
represented that the securities were acquired for investment and not with a view
to re-sale in contravention of the registration provisions of the Securities Act
of 1933.

                           FORWARD-LOOKING STATEMENTS

         Many statements made in this registration statement under the captions
"Business", "Risk Factors" and "Management's Discussion and Analysis or Plan of
Operations" are forward-looking statements within the meaning of Section 21E of
the Securities Exchange Act of 1934 that are not based on historical facts.
These forward-looking statements can generally be identified as such because the
context of the statement will include words such as we "believe," "anticipate,"
"estimate," "expect," "will" or words of similar import as they relate to us or
our management, or describe our future plans, objectives or goals. Because
forward-looking statements involve risks and uncertainties, there are important
factors that could cause actual results to differ materially from those
expressed or implied by these forward-looking statements. The forward-looking
statements made in this registration statement relate only to events as of the
date on which the statements are made.

         The financial projections and or estimates which accompany this filing
have been prepared by us and are based on certain assumptions regarding future
operations. The projections are an estimate only, based on certain assumptions,
which may prove to be inaccurate, and which are subject to future conditions
over which we may have no control. There is absolutely no assurance that we will
experience the operating results depicted in the estimates.

         The financial projections were prepared by our management and have not
been examined or compiled by independent certified public accountants or legal
counsel. Our accountants and legal counsel have not participated in the
preparation or review of the financial projection or estimates. Accordingly, our
accountants and legal counsel cannot provide any level of assurance of them.

ITEM 6.           MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.

         When used in this Form 10-KSB, the words "anticipated", "estimate",
"expect", and similar expressions are intended to identify forward-looking
statements. Such statements are subject to certain risks, uncertainties and
assumptions including the possibility that we will fail to generate projected
revenues. Should one or more of these risks or uncertainties materialize, or
should underlying assumptions prove incorrect, actual results may vary
materially from those anticipated, estimated or projected.

         The following discussion and analysis of financial conditions, results
of operation and plan of operation should be read in conjunction with our
consolidated financial statements and notes thereto included elsewhere in this
Form 10-KSB.

         Security Biometrics, Inc. was incorporated as Great Bear Resources,
Inc. in the State of Nevada on March 12, 1999 and we changed our name to Great
Bear Investments, Inc. on May 25, 1999. On August 11, 2000, we changed our name
to Security Biometrics, Inc. We are a development stage company whose objective
is to develop, market under license and distribute dynamic biometric
technologies specific to the security applications of banking and financial
transactions, including dynamic gesture recognition technology, dynamic
signature verification and voice recognition. Our wholly owned subsidiary,
Biometrics Security, Inc., a Nevada corporation incorporated on June 25, 2000,
has an option for an exclusive worldwide license to DSI Datotech Systems, Inc.'s
("DSI") gesture


                                       16
<PAGE>   19
recognition technology for banking and financial transactions, which will form
the core of our business. Our plan is to develop this technology into revenue
and profit operations.

         Biometric Security paid DSI $320,000 under the option agreement and was
required to pay DSI an additional $3,000,000 by July 22, 2001, which payment has
not been made. We have elected to expense the $320,000 deposit paid to DSI.
Biometrics Security has three months from the date DSI's gesture recognition
technology is fully developed to exercise the option to license DSI's gesture
recognition technology for $8,000,000, less the amounts previously paid by
Biometrics Security to DSI. DSI also will get 20% of the common stock of
Biometrics Security upon exercise of the option.

         On June 29, 2001, we acquired all of the outstanding membership
interests of NetFace, LLC, a Connecticut limited liability company, in exchange
for 20,000,000 share of our common stock. NetFace holds an option to acquire an
exclusive worldwide, perpetual, royalty-free license to exploit the Gesture
Recognition Technology developed by DSI for video games and Internet/television.
The exercise price of the option is $5,000,000 plus a 20% Class B Membership of
NetFace.

         We are a development stage company and have not, to date, generated
any revenues nor does our business plan contemplate such revenues during the
next twelve months. Since inception, we have funded our operations and capital
expenditures primarily through private placements of our securities. We
received a total of $757,685 from the sale of common stock in private offerings
in 2000, which was used for working capital. We are required to seek additional
financing on an ongoing basis to execute our business plan. Additional
financing may not be available on terms acceptable to use or at all. Our
business is in the early stages of development. Other facts which will affect
our ultimate commercial success include the competitive environment, the impact
of technological change, dependence on key personnel and reliance on third
party relationships.

         Our ability to generate revenues and positive cash flow will depend on
several factors, including the nature and speed of the development process,
advancement of site testing and public and commercial approval of gesture
recognition technology.

Results of Operations

         For the year ended June 30, 2001, we had no revenues and incurred
expenses of $814,855 for a net loss of ($814,855). Our expenses for the year
ended June 30, 2001 consisted primarily of general and administrative expenses
of approximately $495,000 and the Gesture Recognition Technology Option expense
of $320,000. Our net loss per share for the period ended June 30, 2001 was
$(.02).

         At June 30, 2001, shareholder equity totaled $109,399.

Liquidity and Capital Resources

         At June 30, 2001, we had negative working capital of approximately
$114,000 which consisted of current assets of approximately $36,000 and current
liabilities of approximately $150,000. Our current assets at June 30, 2001 were
approximately $36,000, which consisted of cash and cash equivalents of
approximately $26,000, G.S.T. refund of approximately $9,000 and prepaid
expenses of approximately $900. At June 30, 2001, we had current liabilities of
approximately $150,000 composed primarily of accounts payable to non-related
entities of approximately $111,000, accounts payable to related entities of
$10,000, accrued liabilities of approximately $25,000 and the current portion of
a capital lease payable of approximately $3,600.

         At June 30, 2001, we had total assets of approximately $269,000 and
total liabilities of approximately $160,000.

         We believe that our existing capital will not be sufficient to meet our
cash needs, including those of our subsidiaries and the costs of compliance with
the continuing reporting requirements of the Securities Exchange Act of 1934.
Over the next twelve months, we will seek to fund our operations through the
raising of additional capital


                                       17
<PAGE>   20
and loans, if available to us on terms and conditions acceptable to us. We have
no present plans to increase our staff or operations beyond its present staff
and operations over the next twelve months. We will continue to work toward
developing, marketing and distributing dynamic biometric technologies.

         No commitments to provide additional funds have been made by management
or other stockholders. Accordingly, there can be no assurance that any funds
will be available to us to allow us to cover our expenses.

         We may seek to compensate providers of services by issuances of stock
in lieu of cash.

Our balance sheet as of June 30, 2001 reflects limited assets and limited
liabilities. Further, there exists no agreements or understandings with regard
to loan agreements by or with the officers, directors, principals, affiliates or
shareholders of our company.

Effect of Inflation

         Inflation did not have any significant effect on our operations during
the year ended June 30, 2001. Further, inflation is not expected to have any
significant effect on our future operations.

ITEM 7.           FINANCIAL STATEMENTS.

            The information required under this Item appears in a separate
section following Item 13 of this report.

ITEM 8.           CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE.

         See our report filed on Form 8-K dated June 26, 2001.

                                    PART III

ITEM 9.           DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS
<TABLE>
<CAPTION>
Name                                Age         Position
----                                ---         --------
<S>                                 <C>         <C>
Kenneth Barr                        53          Chief Executive Officer, President and a
                                                Director

Wayne Taylor                        49          Chief Financial Officer

Stephen J. Henry                    62          Corporate Secretary

W. David Angus                      53          Director

Robert Egery                        48          Director

Allan Gibbins                       53          Director

George Gould                        62          Director

Gerard Munera                       65          Director
</TABLE>

                                       18
<PAGE>   21
         Each director is elected to hold office until the next annual meeting
of stockholders and until his successor is elected and qualified. All officers
serve at the discretion of the Board of Directors.

         Kenneth Barr has been a Director since September 29, 2000 and our Chief
Executive Officer and President since July 15, 2001. In October 2000, Mr. Barr
was appointed President and Chief Executive Officer of Combined Telecom Inc.
(CTI). CTI is a Canadian facilities-based, national competitive local exchange
carrier offering local network access, Internet and data networking, enhanced
messaging, wireless services and fully managed scalable telecom solutions. CTI
is a wholly owned subsidiary of Tricaster Capital Corporation, a North American
merchant bank specializing in telecommunications and e-business opportunities.
From March 2000 to September 2000, Mr. Barr was Chief Operating officer of
Cygnal Technologies. Mr. Barr served as President - Business Communications
Systems for Lucent Technologies, Canada from March 1993 until October 1999.
During this same period, he was Executive Vice President and Chief Operating
Officer of the Canadian holding company, Lucent Technologies (Canada). He also
is a member of DSI's Advisory Board.

         Wayne Taylor, a promoter of our company, has been our Chief Financial
Officer since April 12, 2001. Mr. Taylor has been president of FGH Insurance
Agencies Ltd. since May 1995. From December 1990 to April 1995, he was a partner
of JWL Sales Inc. From October 1988 to November 1990, he was a partner of, and
Secretary and Treasurer of, Credit Resources Inc. From July 1986 to September
1988, he was Manager-Credit of Richmond Savings and Credit Union. From April
1977 to June 1986, he was Manager-Credit of Bank of British Columbia. From 1973
to March 1977, he was Branch Manager of Associate Finance. Mr. Taylor is a
member of DSI's Advisory Board.

         Stephen J. Henry has been our Corporate Secretary since November 22,
2000. Mr. Henry has served as President and Director of SJ Henry Holdings, Ltd.,
a real estate development company, since March 1994.

         The Honourable W. David Angus has been a Director since November 6,
2000. He has practiced law with the law firm of Stikeman Elliott since February
1963. He was appointed Queens Counsel in December 1984. He is a senior partner
and head of the Shipping and Insurance Department in the Montreal office.
Senator Angus was summoned to the Senate of Canada in 1993. Senator Angus is a
member of the Standing Senate Committee on "Banking, Trade and Commerce" and a
member of the Standing Senate Committee on "Transport and Communications."
Senator Angus is a Member of the Montreal, Quebec and Canadian Bar Associations.
He is Honourary Life Member of the Canadian Maritime Law Association, of which
he was the President from 1989 to 1992. Senator Angus also serves as a Governor
of the International Maritime Law Institute, Malta. He is an Associate Member
and Past Chairman of the Association of Average Adjusters of Canada. He is also
an Associate Member of the U.K., and U.S. Associations of Average Adjusters and
of the Canadian Board of Marine Underwriters. Senator Angus serves on the Board
of Directors of Air Canada, AON Reed Stenhouse Inc, Eastern Canada Towing
Limited, Eastern Canadian Tug Owners Association, Madeg Holdings Inc, Nymox
Pharmaceutical Corporation (non-executive Chairman) Systech Retail Systems Inc,
AutoSkill International Inc. and 3DVisit.com Inc. (non-executive Chairman).

         Robert Egery has been a Director since November 6, 2000. Mr. Egery has
served as President and Chief Executive Officer of DSI since December 2000. From
August 1998 to December 2000, Mr. Egery was Director of Flight Training of
Bombardier Aerospace. Prior to that, he was Vice President of Business
Development for Lockheed Martin from August 1994 to August 1998 and Vice
President of Marketing and Contracts for Honeywell/Allied Signal. He also has
been a Director of DSI since December 2000.

         Allan Gibbins has been a Director since November 6, 2000. Mr. Gibbins
was interim Vice President, General Manager beginning in June 1992 and was
appointed President and Chief Executive Officer of Hubbell Canada Inc., a
subsidiary of Hubbell Incorporated, in September 1993. He is the Chairman of the
Electrical, Electronic Manufacturers Association of Canada (EEMAC). From
September 1988 to May 1992, Mr. Gibbins was Vice President and General Manager
of Nutone Electrical Inc. Prior to that he held senior management positions with
duPont Canada Inc. for 16 years. He also has been a Director of DSI since
December 2000.


                                       19
<PAGE>   22
         George Gould has been a director since August 1, 2000. Mr. Gould was
also our President from September 8, 2000 to July 15, 2001. Mr. Gould began his
career in the Financial Services Industry in 1961. In March 1973 he entered the
banking business with HSBC Bank Canada, formerly known as Hong Kong Bank of
Canada where he held several senior management positions until July 2000. Mr.
Gould has been the President of GT Financing and Insurance Specialists Ltd.
since August 2000.

         Gerard E. Munera has been a Director since June 26, 2001. Mr. Munera
has been Chairman, CEO and controlling shareholder of Synergex Group
Partnership, a Connecticut general partnership, with majority participations
since 1996 in Arcadia, a manufacturer of low-rise curtain walls, store-fronts
and office partitions, and in Estancia El Olmo, a large cattle ranch. From
1994-1996, Mr. Munera was Chairman and CEO of Latin American Gold Inc., a junior
gold exploration and mining company with activities in Ecuador and Venezuela..
From 1991-1994, Mr. Munera was president and CEO of Minorco (USA), a diversified
$1.5 billion natural resources group with interests in base and precious metals,
industrial minerals, oil and gas, chemicals and fertilizers, in both the U.S.
and Canada.

Compliance with Section 16(a) of the Exchange Act

         Section 16(a) of the Securities Exchange Act of 1934, as amended,
requires our directors and executive officers, and persons who beneficially own
more than ten percent of a registered class of our equity securities, to file
reports of ownership and changes in ownership with the Securities and Exchange
Commission. Based solely on our review of the copies of such forms received by
us, or written representations from certain reporting persons that no other
reports were required for those persons, we believe that, during the period from
July 1, 2000 through June 30, 2001, all filing requirements applicable to its
officers, directors, and greater than ten percent beneficial owners were
complied with, except that (i) an initial ownership report on Form 3 was filed
late for each of Wayne Taylor and Gesture Recognition Technologies International
Limited; (ii) a Form 5 reporting the grant of a stock option to Kenneth Barr was
filed late; and (iii) an initial ownership report on Form 3 by Gerard Munera has
not yet been filed.

ITEM 10.          EXECUTIVE COMPENSATION

         Summary Compensation Table

         The following table sets forth, for the fiscal year ended June 30,
2001, compensation awarded to, earned by, or paid to our former president,
George Gould. No compensation in excess of $100,000 for the fiscal year ended
June 30, 2001 was awarded to, earned by, or paid to any of our executive
officers.
<TABLE>
<CAPTION>
                             Annual Compensation                                 Long-Term Compensation
                 ------------------------------------------      ----------------------------------------------
                                                                  Awards             Awards            Payouts
                                                                  ------             ------            -------
Name and                                       Other Annual      Restricted        Securities                          All other
Principal        Fiscal  Salary     Bonus     Compensation       Stock             underlying          LTIP            compensation
Position         Year     ($)        ($)          ($)            Awards            options/SARs        Payouts             ($)
------------------------------------------------------------------------------------------------------------------------------------
<S>              <C>     <C>        <C>       <C>                <C>               <C>                 <C>             <C>
George Gould,     2001      0          0            0               0                 250,000              0                 0
 former President
</TABLE>


                                       20
<PAGE>   23
                      OPTION/SAR GRANTS IN LAST FISCAL YEAR
                               [INDIVIDUAL GRANTS]

The following table below contains certain information concerning stock
options/SARs granted to our former president, George Gould, during the fiscal
year ended June 30, 2001:
<TABLE>
<CAPTION>
                             Number of        Percent of total
                             securities         options/SARs                                     Market
                             underlying          granted to         Exercise or                  Price on
                             options/SARs       employees in        base price   Expiration      Date of
      Name                     granted           fiscal year         ($/Share)        Date         Grant
<S>                          <C>              <C>                   <C>          <C>             <C>
George Gould                      250,000            7.5%              $1.00        08/20/05       $2.75
</TABLE>


   AGGREGATED OPTION/SAR EXERCISES DURING THE FISCAL YEAR-ENDED JUNE 30, 2001
                      AND FISCAL YEAR-END OPTION/SAR VALUES

         The following table sets forth certain information concerning the
number and value of securities underlying exercisable and unexercisable stock
options/SARs as of the fiscal year ended June 30, 2001 by our former president,
George Gould.
<TABLE>
<CAPTION>

                                                        NUMBER OF SECURITIES UNDERLYING            VALUE OF UNEXERCISED
                                 SHARES ACQUIRED       UNEXERCISED OPTIONS/SARS AT FISCAL      IN-THE-MONEY OPTIONS/SARS AT
                                  ON EXERCISE                     YEAR-END (#)                   FISCAL YEAR-END ($) (2)

                                            VALUED
NAME                          NUMBER       REALIZED      EXERCISABLE      UNEXERCISABLE       EXERCISABLE     UNEXERCISABLE
----                          ------       --------      -----------      -------------       -----------     -------------
<S>                           <C>          <C>           <C>              <C>                 <C>             <C>             <C>
George Gould (1)                0              0             187,500            62,500        $731,250        $243,750
</TABLE>


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

(1) George Gould was granted an option to purchase 250,000 shares of our common
stock which became or become exercisable as follows: (i) 62,500 on 8/21/2000;
(ii) 62,500 on 2/19/01; (iii) 62,500 on 8/21/01; and (iv) 62,500 on 2/19/02.

(2) The closing price for our common stock on June 29, 2001 was $4.90 per share.

Compensation of Directors; Employment Contracts

         Our directors receive (CDN)$1,000 for their attendance at each board
meeting and (CDN) $500 for each telephonic board meeting.

         We have no employment contracts with any of our executive officers.

                                       21
<PAGE>   24
ITEM 11.         SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.

         The following table sets forth as of October 8, 2001 the beneficial
ownership of our common stock, our only class of voting securities, by (i) each
person who is known to be the beneficial owner of more than 5% of our common
stock, (ii) each of our directors, (iii) executive officers listed in the
Compensation Table and (iv) all our officers and directors as a group. As of
October 8, 2001, we had outstanding 70,832,315 shares of common stock.
<TABLE>
<CAPTION>
                                                                   Amount and Nature of
Name and Address of  Beneficial Owner                            Beneficial Ownership (1)          Percent of Class
--------------------------------------                           ------------------------          ----------------
<S>                                                              <C>                               <C>
Kenneth Barr                                                           312,500 (2)                         *
1668 Valley Ridge Crescent
Pickering, ON Canada

W. David Angus                                                         187,500 (3)                         *
1155 Rene-Levesque Boulevard
Montreal, PQ Canada

Robert Egery                                                           187,500 (4)                         *
480 Elizabeth
Beaconsfield, PQ Canada

Allan Gibbins                                                          187,500 (3)                         *
212 Westridge Drive
Kleinburg, ON Canada

George Gould                                                           187,500 (5)                         *
2970 Venables Street
Vancouver, BC Canada

Gerard E. Munera                                                    10,580,000 (6)                       14.9%
16 Old Mill Road
Greenwich, CT

Gesture Recognition Technologies                                    37,500,000 (7)                       52.9%
International Limited
c/o CIBC Trust and Merchant
Bank (Barbados) Limited
Bank Warrens Street
Michaels Bar
Barbados
</TABLE>


                                       22
<PAGE>   25
<TABLE>
<CAPTION>
<S>                                                                 <C>                                <C>
Michel Berty
PO Box 466 Sayres Avenue                                             3,540,000                           5.0%
Wainscott, NY

LAG SA
Edificio El Farallon Apt. 101                                        3,540,000                           5.0%
Calle 30 Punta del Este
Uruguay

All officers and directors
  as a group (8 persons)                                            11,830,000 (8)                      16.41%
</TABLE>

----------------
* Indicates less than 1%

(1) Except as otherwise noted in the footnotes to this table, the named person
owns directly and exercises sole voting and investment power over the shares
listed as beneficially owned by such persons. Includes any securities that such
person has the right to acquire within 60 days pursuant to options, warrants,
conversion privileges or other rights.

(2) Represents 312,500 shares that he may acquire upon exercise of stock options
prior to December 8, 2001. Does not include (i) 62,500 shares that he may
acquire upon the  exercise of stock options commencing 2/19/02, (ii) 62,500
shares that he may acquire upon the exercise of stock options commencing 4/16/02
and (iii) 62,500 shares that he may acquire upon the exercise of stock options
commencing 10/15/02.

(3) Represents 187,500 shares that he may acquire upon exercise of stock options
prior to December 8, 2001. Does not include 62,500 shares that he may acquire
upon the exercise of stock options commencing 5/01/02.

(4) Represents 187,500 shares that he may acquire upon exercise of stock options
prior to December 8, 2001. Does not include 62,500 shares that he may acquire
upon the exercise of stock options commencing 4/15/02.

(5) Represents 187,500 shares that he may acquire upon exercise of stock options
prior to December 8, 2001. Does not include 62,500 shares issuable upon the
exercise of stock options commencing 2/19/02.

(6) Includes 6,040,000 shares owned by an investment partnership of which Mr.
Munera is managing general partner. Mr. Munera has sole dispositive power with
respect to 724,800 shares owned by the investment partnership and shares
dispositive power with respect to the remaining 5,315,200 shares. Does not
include (i) 62,500 shares that he may acquire upon the exercise of stock options
commencing 12/25/01, (ii) 62,500 shares that he may acquire  upon the exercise
of stock options commencing 6/26/02, (iii) 62,500 shares that he may acquire
upon the exercise of stock options commencing 12/25/02 and (iv) 62,500 shares
that he may acquire upon the exercise of stock options commencing 6/26/03.

(7) Gotham Trust is the sole shareholder of Gesture Recognition Technologies
International Limited. Jason Taylor and Candice Taylor, the adult children of
Wayne Taylor, are the beneficiaries of Gotham Trust. Wayne Taylor disclaims
beneficial ownership of those shares.

(8) Includes 1,250,000 shares that may be acquired upon exercise of stock
options prior to December 8, 2001.

                                       23
<PAGE>   26
ITEM 12.          CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

         Wayne Taylor, our Chief Financial Officer and a promoter of our
company, serves as a consultant to DSI under a Financial Consulting Agreement
dated February 28, 2000. Under the terms of that agreement, Mr. Taylor is
entitled to a commission of 10% of the amount of any financing arranged by Mr.
Taylor and 1.5% of the amount of other financings for DSI, which commissions.
Mr. Taylor also is entitled to commissions of 10% of the amount of any licensing
fee arranged through Mr. Taylor, excluding royalty payments. As of October 1,
2000, Mr. Taylor has received $64,120, plus 50,000 shares of DSI for services
provided under the agreement. The agreement also granted Mr. Taylor a
transferable option to acquire an exclusive worldwide license to exploit DSI's
proprietary gesture recognition technology for banking and financial
transactions. The exercise price of the option is $8,000,000, plus 20% of the
undiluted equity of the partnership or corporation receiving the license for the
technology. There was no formal option or form of license agreement containing
any other terms of the option or license at that time. Mr. Taylor is not
entitled to any commission for the grant of the option and exclusive license for
the banking and financial transactions market.

         On July 28, 2000, Mr. Taylor assigned the option to Gesture Recognition
Technologies International Limited for nominal consideration. Gesture
Recognition Technologies International Limited is owned by Gotham Trust, the
beneficiaries of which are Jason Taylor and Candice Taylor, the adult children
of Mr. Taylor. Mr. Taylor disclaims beneficial ownership of these shares. On
August 1, 2000, Gesture Recognition Technologies International Limited assigned
the option to Biometrics Security in consideration for 500,000 shares of the
preferred stock of Biometrics Security.

         On August 25, 2000, we acquired all of the outstanding capital stock of
Biometrics Security in a share exchange with its shareholders. Gesture
Recognition Technologies International Limited received 37,500,000 shares of our
common stock in exchange for the 500,000 shares of Biometrics Security's
preferred stock in the share exchange. Upon completion of the share exchange,
Biometrics Security became our wholly-owned subsidiary. The number of shares
issued to Gesture Recognition Technologies International Limited as part of the
share exchange with Biometrics Security was arbitrarily determined by Wayne
Taylor, who together with Stephen J. Henry, our Corporate Secretary and
President of Biometrics Security, structured the terms of our acquisition of
Biometrics Security and the consideration for the assignment of the option to
Biometrics Security. Since Wayne Taylor initiated the organization of our
business, under the rules of the Securities and Exchange Commission, he is a
promoter of our company.

         On August 22, 2000, DSI entered into a definitive option agreement
with Biometrics Security, which sets forth the terms and conditions of the
option and license. The option agreement grants Biometrics Security an option
to acquire an exclusive worldwide license to exploit DSI's proprietary gesture
recognition technology for banking and financial transactions. The option may
be exercised during the three month period commencing on the date DSI makes
available a prototype reasonably acceptable to us. The exercise price of the
option is $8,000,000. We have paid DSI $320,000 or 4% of the total $8,000,000
exercise price under the option agreement and we are required to pay DSI an
additional $3,000,000, which will be used by DSI to develop a prototype. DSI
extended the due date for the payment of the $3,000,000 from July 22, 2001 to
August 22, 2001 and is continuing to work with us pending payment. However, DSI
has the right to terminate the option for our failure to make the payment.
Amounts paid under the option agreement will be credited against the $8,000,000
exercise price of the option. DSI has agreed to use its best efforts to make a
prototype available to us within 12 months after we make the $3,000,000
payment. In addition, upon exercise of the option by Biometrics Security, DSI
is entitled to receive 20% of the then outstanding common stock of Biometrics
Security. We do not have the right to recover monies paid under the option
agreement if DSI fails to make a prototype available to us.

         The basic economic terms of the original option granted to Wayne Taylor
by DSI and the terms of the option and license agreements between Biometrics
Security and DSI were negotiated by Wayne Taylor and Edward C. Pardiak, Chairman
of the Board of DSI. The terms of the option were based on the option agreement
dated June 28, 2000, under which DSI granted NetFace an option to acquire an
exclusive license to use its gesture recognition technology in interfaces for
personal computer and console games and Internet television. The exercise price
of the NetFace option was $5,000,000, of which $100,000, representing 4% of the
total exercise price, was paid upon


                                       24
<PAGE>   27
signing of the option agreements. DSI also is entitled to receive 20% of the
outstanding equity of NetFace upon exercise of the option under the NetFace
option agreement. The terms of the Biometrics Security option, but not the
original option granted to Taylor, require DSI to develop a prototype. The
prototype is intended to interpret gestures using more advanced gesture
recognition algorithms to be developed by DSI. DSI estimates that the cost of
developing the prototype is $3,000,000. DSI required that Biometrics Security
pay $3,000,000 of the exercise price to cover these development costs. As a
result, the exercise price for the Biometrics Security option is $3,000,000
higher than the exercise price of the option granted for use in interfaces for
personal computers, console games and Internet television.

         On June 29, 2001, we acquired all of the outstanding membership
interests of NetFace in exchange for an aggregate of 20,000,000 shares of our
common stock. NetFace holds an option to acquire an exclusive worldwide
perpetual, royalty-free license to exploit the gesture recognition technology
developed by DSI for video games and Internet television. The exercise price of
the option is $5,000,000, plus a 20% Class B Membership Interest in NetFace.
NetFace has paid DSI $200,000 of the exercise price, with the balance payable by
December 4, 2002, the date upon which the option expires.

         Robert Egery, a director of our company, has been President and Chief
Operating Officer of DSI since December 2000. Two of our other directors, Allan
Gibbins and Robert Egery, became directors of DSI in December 2000. Mr. Gibbins
is the brother-in-law of Edward C. Pardiak, Chairman of the Board of Directors
of DSI. In addition, Kenneth Barr, our Chief Executive Officer and a director,
and Wayne Taylor have been members of the Advisory Board of DSI since December
13, 1999. Except for W. David Angus, all of our directors and officers own
shares of DSI common stock, as follows:
<TABLE>
<CAPTION>
           <S>                                         <C>
           Kenneth Barr............................... 167,000 shares, plus options to
                                                       purchase an additional
                                                       100,000 shares at CDN $0.40
                                                       per share

           Wayne Taylor............................... 50,000 shares, plus options to
                                                       purchase a total of 165,000
                                                       shares -- 150,000 at an exercise
                                                       price of CDN $1.00 per share and
                                                       15,000 at an exercise price
                                                       of CDN $0.40 per share.

           Stephen J. Henry........................... 100,000 shares

           Allan Gibbins.............................. 137,500 shares

           George Gould ..............................  10,000 shares

           Robert Egery............................... 650,000 shares
</TABLE>

ITEM 13.   Exhibits and Reports of Form 8-K.

(a)  Exhibits
<TABLE>
<CAPTION>
EXHIBIT NO.                         DESCRIPTION OF EXHIBITS
-----------                         -----------------------
<S>               <C>
3.1*              Certificate of Amendment to Articles of Incorporation of Registrant
                  changing the name of the Registrant to Great Bear Investments, Inc.
</TABLE>

                                       25
<PAGE>   28
<TABLE>
<CAPTION>
<S>               <C>
3.2*              Articles of Incorporation of Registrant.

3.3**             Certificate of Amendment to the Articles of Incorporation of
                  Registrant changing the name of the Registrant to Security
                  Biometrics Inc.

3.4*              By-Laws of the Registrant.

10.1***           Financial Consulting Agreement between DSI Datotech Systems, Inc.
                  and Wayne Alan Taylor, dated February 28, 2000.

10.2**            Assignment from Wayne Alan Taylor to Gesture Recognition
                  Technologies International Limited dated July 28, 2000.

10.3***           Assignment from GRT International Limited to Biometrics Security
                  Inc. dated August 1, 2000.

10.4***           Stock Exchange Agreement among the Registrant, Biometrics Security
                  Inc. and the shareholders of Biometrics Security Inc.

10.5***           Option Agreement between Biometrics Security Inc. and DSI Datotech
                  Systems, Inc. dated August 22, 2000.

10.6***           Consulting contract between the Registrant and Curtis L. Mearns.

10.7***           Consulting Agreement between the Registrant and LK&Z Advisory
                  International, Inc.

10.8****          Exchange Agreement among the Registrant, NetFace LLC and the members
                  of NetFace LLC dated June 29, 2001.

10.9              Option Agreement by and between DSI Datotech Systems, Inc. and
                  NetFace, LLC dated June 28, 2000.

21.1              Subsidiaries
</TABLE>

--------

*        Incorporated by reference to Registrant's Registration Statement on
         Form 10-SB, filed on May 26, 2000.

**       Incorporated by reference to Registrant's Registration Statement on
         Form 10-SB/A (No. 2), filed on December 28, 2000.

***      Incorporated by reference to Registrant's Registration Statement on
         Form 10-SB/A (No. 3), filed on March 7, 2001.

****     Incorporated by reference to Registrant's report on Form 8-K filed on
         July 13, 2001.

(b)  Reports of Form 8-K.

         A report on Form 8-K was filed on June 26, 2001, reporting under Item
4.



                                       26
<PAGE>   29
                                   SIGNATURES

In accordance with Section 13 or 15(d) of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.

                                         By:  /s/ Kenneth Barr
                                              ----------------------------------
                                              Name: Kenneth Barr
                                              Title:   Chief Executive Officer

Date:  October 11, 2001


In accordance with the Exchange Act, this report has been signed below by the
following persons on behalf of the Registrant and in the capacities and on the
dates indicated.
<TABLE>
<CAPTION>
<S>                                              <C>                                              <C>
/s/  Kenneth Barr                                  Chief Executive Officer, President and
---------------------------------------------                     Director                        October 11, 2001
                 Kenneth Barr                            (principal executive officer)



/s/  Wayne Taylor                                          Chief Financial Officer
---------------------------------------------    (principal financial and accounting officer)     October 11, 2001
                 Wayne Taylor


/s/  W. David Angus                                                Director                       October 11, 2001
---------------------------------------------
                W. David Angus


/s/ Robert Egery                                                   Director                       October 11, 2001
---------------------------------------------
                 Robert Egery


/s/  Allan Gibbins                                                 Director                       October 11, 2001
---------------------------------------------
                 Allan Gibbins


/s/  George Gould                                                  Director                       October 11, 2001
---------------------------------------------
                 George Gould


/s/  Gerard E. Munera                                              Director
---------------------------------------------
                       Gerard E. Munera                                                           October 11, 2001
</TABLE>



                                       27


<PAGE>   30
                   SECURITY BIOMETRICS, INC. AND SUBSIDIARIES
                          FORMERLY KNOWN AS GREAT BEAR
                                INVESTMENTS, INC.
                          (DEVELOPMENT STAGE COMPANIES)

                        CONSOLIDATED FINANCIAL STATEMENTS

                                  JUNE 30, 2001
<PAGE>   31
                                TABLE OF CONTENTS



<TABLE>
<CAPTION>
                                                                        PAGE NO.
                                                                        --------
<S>                                                                     <C>
INDEPENDENT AUDITORS' REPORT.........................................       1

FINANCIAL STATEMENTS

   Consolidated Balance Sheet........................................       2

   Consolidated Statement of Operations..............................       3

   Consolidated Statement of Stockholders' Equity....................       4

   Consolidated Statement of Cash Flows..............................     5 - 6

   Notes to Consolidated Financial Statements........................    7 - 15
</TABLE>
<PAGE>   32
                          INDEPENDENT AUDITORS' REPORT


To The Stockholders and Board of Directors
Security Biometrics, Inc. and Subsidiaries
Formerly known as Great Bear Investments, Inc.
(Development Stage Companies)


We have audited the accompanying consolidated balance sheet of Security
Biometrics, Inc. and Subsidiaries, formerly known as Great Bear Investments,
Inc. (Development Stage Companies) as of June 30, 2001 and the related
statements of operations, stockholders' equity and cash flows for the period
from August 25, 2000 (date of inception) to June 30, 2001. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.

We conducted our audit in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.

In our opinion the June 30, 2001 consolidated financial statements referred to
above present fairly, in all material respects, the financial position of
Security Biometrics, Inc. and Subsidiaries as of June 30, 2001, and the results
of its operations and its cash flows for the period from August 25, 2000 (date
of inception) to June 30, 2001 in conformity with accounting principles
generally accepted in the United States of America.

The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 13 to the
financial statements, the Company has a working capital deficit, no revenues and
needs additional capital to continue the development processes. These conditions
raise substantial doubt about its ability to continue as a going concern.
Management's plans regarding these matters also are described in Note 13. The
financial statements do not include any adjustments that might result from the
outcome of these uncertainties.




MOFFITT & COMPANY, P.C.
SCOTTSDALE, ARIZONA


September 14, 2001
<PAGE>   33
                   SECURITY BIOMETRICS, INC. AND SUBSIDIARIES
                          (DEVELOPMENT STAGE COMPANIES)
                           CONSOLIDATED BALANCE SHEET
                                  JUNE 30, 2001



                                     ASSETS


<TABLE>
<S>                                                       <C>          <C>
CURRENT ASSETS
   Cash and cash equivalents                              $  26,146
   G.S.T. refund                                              9,195
   Prepaid expenses                                             907
                                                          ---------

      TOTAL CURRENT ASSETS                                             $  36,248



PROPERTY AND EQUIPMENT, NET OF
 ACCUMULATED DEPRECIATION                                                 19,311


OTHER ASSETS
   Gesture Recognition Technology Option                    200,000
   Trademark                                                  6,113
   Prepaid expenses                                           2,268
   Deposits                                                   4,763
                                                          ---------

      TOTAL OTHER ASSETS                                                 213,144
                                                                       ---------



      TOTAL ASSETS                                                     $ 268,703
                                                                       =========
</TABLE>
<PAGE>   34
                      LIABILITIES AND STOCKHOLDERS' EQUITY


<TABLE>
<S>                                                       <C>          <C>
CURRENT LIABILITIES
   Accounts payable
    Non-related entities                                  $ 110,896
    Related entities                                         10,000
   Accrued liabilities                                       25,405
   Current portion of capital lease payable                   3,648
                                                          ---------

      TOTAL CURRENT LIABILITIES                                        $ 149,949

LONG - TERM LIABILITIES
   Capital lease payable, net of current portion                           9,355

STOCKHOLDERS' EQUITY
   Common stock
    Authorized - 100,000,000 shares, par
     value $.001 per share
    Issued and outstanding - 70,757,675 shares               70,758
   Paid in capital in excess of par value of stock          853,496
   Deficit accumulated during the development stage        (814,855)
                                                          ---------

      TOTAL STOCKHOLDERS' EQUITY                                         109,399
                                                                       ---------

      TOTAL LIABILITIES AND
       STOCKHOLDERS' EQUITY                                            $ 268,703
                                                                       =========
</TABLE>


            See Accompanying Notes and Independent Auditors' Report.

                                        2
<PAGE>   35
                   SECURITY BIOMETRICS, INC. AND SUBSIDIARIES
                          (DEVELOPMENT STAGE COMPANIES)
                      CONSOLIDATED STATEMENT OF OPERATIONS
             FOR THE PERIOD FROM AUGUST 25, 2000 (DATE OF INCEPTION)
                                TO JUNE 30, 2001




<TABLE>
<S>                                                   <C>           <C>
REVENUES                                                            $         0


EXPENSES
   Gesture Recognition Technology Option              $   320,000
   General and Administrative                             494,855
                                                      -----------

      TOTAL EXPENSES                                                    814,855
                                                                    -----------

NET (LOSS)                                                          $  (814,855)
                                                                    ===========



NET (LOSS) PER COMMON SHARE

   Basic and diluted                                                $      (.02)
                                                                    ===========

WEIGHTED AVERAGE NUMBER OF
 COMMON SHARES OUTSTANDING

   Basic and diluted                                                 38,257,675
                                                                    ===========
</TABLE>



             See Accompanying Notes and Independent Auditors' Report

                                        3
<PAGE>   36
                   SECURITY BIOMETRICS, INC. AND SUBSIDIARIES
                          (DEVELOPMENT STAGE COMPANIES)
                 CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
             FOR THE PERIOD FROM AUGUST 25, 2000 (DATE OF INCEPTION)
                                TO JUNE 30, 2001


<TABLE>
<CAPTION>
                                            COMMON STOCK                    PREFERRED STOCK
                                    ----------------------------      ----------------------------
                                       SHARES           AMOUNT           SHARES           AMOUNT
                                    -----------      -----------      -----------      -----------
<S>                                 <C>              <C>              <C>              <C>
INCEPTION, AUGUST 25, 2000                    0      $         0                0      $         0

SHARES OF BIOMETRICS
SECURITY, INC
 SHARES ISSUED FOR CASH
 PRIOR TO REVERSE
 ACQUISITION                            757,675          757,675          500,000               10

REMOVAL OF BIOMETRICS                  (757,675)
 SECURITY, INC.  AND RE-
 STATEMENT AS EQUIVALENT
 SECURITY BIOMETRICS, INC
 SHARE RECEIVED IN REVERSE
 ACQUISITION                         38,257,675
                                    -----------      -----------      -----------      -----------

AS RESTATED                          38,257,675          757,675          500,000               10

EFFECT OF REVERSE ACQUISITION
 WITH SECURITY BIOMETRICS,
 INC., THE LEGAL ACQUIRER, ON
 AUGUST 25, 2000                     12,500,000         (706,917)        (500,000)             (10)
                                    -----------      -----------      -----------      -----------

BALANCE, AUGUST 25, 2000, AFTER
 REVERSE ACQUISITION WITH
 SECURITY BIOMETRICS, INC            50,757,675           50,758                0                0

ACQUISITION OF NETFACE LLC           20,000,000           20,000                0                0

NET (LOSS) FOR THE PERIOD
 ENDED JUNE 30, 2001                          0                0                0                0
                                    -----------      -----------      -----------      -----------

BALANCE, JUNE 30, 2001               70,757,675      $    70,758                0      $         0
                                    ===========      ===========      ===========      ===========
</TABLE>
<PAGE>   37
<TABLE>
<CAPTION>
                      PAID IN        DEFICIT
                     CAPITAL IN    ACCUMULATED
                     EXCESS OF     DURING THE
                     PAR VALUE     DEVELOPMENT
                     OF STOCK        STAGE           TOTAL
                     ----------    -----------     ---------
<S>                  <C>            <C>            <C>
                     $       0      $       0      $       0




                             0              0        757,685





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

                             0              0        757,685




                       662,133              0        (44,794)
                     ---------      ---------      ---------



                       662,133              0        712,891

                       191,363              0        211,363


                             0       (814,855)      (814,855)
                     ---------      ---------      ---------

                     $ 853,496      $(814,855)     $ 109,399
                     =========      =========      =========
</TABLE>



            See Accompanying Notes and Independent Auditors' Report.

                                        4
<PAGE>   38
                   SECURITY BIOMETRICS, INC. AND SUBSIDIARIES
                          (DEVELOPMENT STAGE COMPANIES)
                      CONSOLIDATED STATEMENT OF CASH FLOWS
             FOR THE PERIOD FROM AUGUST 25, 2000 (DATE OF INCEPTION)
                                TO JUNE 30, 2001



<TABLE>
<S>                                                  <C>            <C>
CASH FLOWS FROM OPERATING
 ACTIVITIES:
   Net (loss)                                        $  (814,855)
   Adjustments to reconcile net (loss) to
    net cash (used) by operating activities:
     Depreciation                                          1,012
   Changes in operating assets and liabilities:
     G.S.T. refund                                        (9,195)
     Deposits                                             (4,763)
     Accounts payable                                    120,896
     Accrued liabilities                                  25,405
                                                     -----------

      NET CASH (USED) BY
       OPERATING ACTIVITIES                                         $  (681,500)

CASH FLOWS FROM INVESTING
 ACTIVITIES:
   Purchases of:
    Property and equipment                                (9,347)
    Trademark                                             (6,113)
   Acquisition of subsidiaries, net of cash
    received                                             (32,977)
                                                     -----------

       NET CASH (USED) BY
        INVESTING ACTIVITIES                                            (48,437)

CASH FLOWS FROM FINANCING
 ACTIVITIES:
   Proceeds from issuance of common stock                757,685
   Payments on capital lease payable                      (1,602)
                                                     -----------

       NET CASH PROVIDED BY
        FINANCING ACTIVITIES                                            756,083
                                                                    -----------

NET INCREASE IN CASH AND CASH
 EQUIVALENTS                                                             26,146
</TABLE>

            See Accompanying Notes and Independent Auditors' Report.

                                        5
<PAGE>   39
                   SECURITY BIOMETRICS, INC. AND SUBSIDIARIES
                          (DEVELOPMENT STAGE COMPANIES)
                CONSOLIDATED STATEMENT OF CASH FLOWS (CONTINUED)
             FOR THE PERIOD FROM AUGUST 25, 2000 (DATE OF INCEPTION)
                                TO JUNE 30, 2001



<TABLE>
<S>                                                                   <C>
CASH AND CASH EQUIVALENTS, AT
 BEGINNING OF PERIOD                                                  $        0
                                                                      ----------

CASH AND CASH EQUIVALENTS, AT
 END OF PERIOD                                                        $   26,146
                                                                      ==========


SUPPLEMENTAL DISCLOSURE OF
 CASH FLOW INFORMATION

   Cash paid during the period for:

    Interest                                                          $    1,184
                                                                      ==========

    Taxes                                                             $        0
                                                                      ==========

NON CASH INVESTING AND
 FINANCING ACTIVITIES

   Purchase of property and equipment by
    capital lease financing                                           $   14,605
                                                                      ==========
</TABLE>


            See Accompanying Notes and Independent Auditors' Report.

                                        6
<PAGE>   40
                   SECURITY BIOMETRICS, INC. AND SUBSIDIARIES
                          (DEVELOPMENT STAGE COMPANIES)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                  JUNE 30, 2001



NOTE 1   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

         ORGANIZATION AND NATURE OF BUSINESS

         Security Biometrics, Inc. (hereinafter referred to as the Company) is a
         Nevada corporation, incorporated on March 12, 1999 as Great Bear
         Resources, Inc.; changed its name to Great Bear Investments, Inc. on
         May 12, 1999, and then subsequently changed its name to Security
         Biometrics, Inc. on August 11, 2000. The Company is based in Vancouver,
         British Columbia, Canada.

         During the year ended June 30, 2000, it was the Company's intent to be
         an internet-based entertainment company that provided a virtual casino
         entertainment complex, known as CasinoInterPlex, as a central meeting
         place for Web Gamblers. This planned complex is an interchange
         environment that allows Web Gamblers to visit other CasinoInterPlex
         sites. It also will provide e-commerce related solutions to collect and
         distribute earnings on behalf of all participants of the
         CasinoInterPlex revenue sharing program. As of June 30, 2001 the
         Company decided to postpone development of this operation.

         On August 25, 2000, the Company acquired all of the issued and
         outstanding stock of Biometrics Security, Inc. (hereinafter referred to
         as BSI) in exchange for 38,257,675 shares (37,500,000 of these shares
         were owned by a trust whose beneficiaries were the children of the
         Chief Financial officer of the Company) of its common stock, par value
         $0.001.

         This transaction has the effect of what is commonly referred to as a
         "reverse acquisition" in that the Company is the legal acquirer;
         however, BSI is the accounting acquirer.

         In connection with the legal form of this transaction, BSI became a
         wholly-owned subsidiary of the Company. For accounting purposes, the
         acquisition is treated as a recapitalization of BSI rather than a
         business combination.

         The statement of operations for the year ended June 30, 2001 includes
         the following:

<TABLE>
<CAPTION>
                                                      ADMINISTRATIVE
                                            REVENUES     EXPENSES     NET(LOSS)
                                            --------     --------     ---------
<S>                                         <C>       <C>             <C>
         Security Biometrics, Inc.
            From August 25, 2000
            (Date of reverse acquisition)
            to June 30, 2001                $      0     $ 29,461     $ (29,461)

         Biometrics Security, Inc.
            From August 25, 2000
            (Date of inception)
            to June 30, 2001                       0      465,394      (465,394)
</TABLE>


            See Accompanying Notes and Independent Auditors' Report.

                                        7
<PAGE>   41
                   SECURITY BIOMETRICS, INC. AND SUBSIDIARIES
                          (DEVELOPMENT STAGE COMPANIES)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                  JUNE 30, 2001



NOTE 1   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

         ORGANIZATION AND NATURE OF BUSINESS (CONTINUED)

         BSI intends to develop, market under license, and distribute dynamic
         biometric technologies specific to the security applications of banking
         and financial transactions. These include but are not limited to
         dynamic gesture recognition technology, and dynamic signature
         verification. It is intended that these systems will use sophisticated
         software algorithms and be performed on proprietary touchpads.

         On June 29, 2001, the Company acquired all of the outstanding
         membership interests of NetFace LLC. NetFace holds an option to acquire
         an exclusive worldwide perpetual, royalty-free license to exploit the
         Gesture Recognition Technology developed by DSI Datotech Systems, Inc.
         (hereinafter referred to as Datotech) for video games and
         internet/television.

         PRINCIPLES OF CONSOLIDATION

         The consolidated financial statements include the accounts of Security
         Biometrics, Inc. and its wholly owned subsidiaries, Biometrics
         Security, Inc. and NetFace LLC.

         All material inter-company accounts and transactions have been
         eliminated.

         CASH AND CASH EQUIVALENTS

         For purposes of the statement of cash flows, the Company considers all
         highly liquid debt instruments purchased with an original maturity of
         three months or less to be cash equivalents.

         ACCOUNTING ESTIMATES

         Management uses estimates and assumptions in preparing financial
         statements in accordance with generally accepted accounting principles.
         Those estimates and assumptions affect the reported amounts of assets
         and liabilities, the disclosure of contingent assets and liabilities,
         and the reported revenues and expenses. Actual results could vary from
         the estimates that were used.

         PROPERTY AND EQUIPMENT

         Property and equipment are stated at cost. Major renewals and
         improvements are charged to the asset accounts while replacements,
         maintenance and repairs, which do not improve or extend the lives of
         the respective assets, are expensed. At the time property and equipment
         are retired or otherwise disposed of, the asset and related accumulated
         depreciation accounts are relieved of the applicable amounts. Gains or
         losses from retirements or sales are credited or charged to income.

         BSI depreciates its property and equipment for financial reporting
         purposes using the straight-line method based upon the following useful
         lives of the assets:

             Office furniture and equipment           10 Years
             Computer equipment                        5 Years


            See Accompanying Notes and Independent Auditors' Report.

                                        8
<PAGE>   42
                   SECURITY BIOMETRICS, INC. AND SUBSIDIARIES
                          (DEVELOPMENT STAGE COMPANIES)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                  JUNE 30, 2001



NOTE 1   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

         INCOME TAXES

         Provisions for income taxes are based on taxes payable or refundable
         for the current year and deferred taxes on temporary differences
         between the amount of taxable income and pretax financial income and
         between the tax basis of assets and liabilities and their reported
         amounts in the financial statements. Deferred tax assets and
         liabilities are included in the financial statements at currently
         enacted income tax rates applicable to the period in which the deferred
         tax assets and liabilities are expected to be realized or settled as
         prescribed in FASB Statement No.109, Accounting for Income Taxes. As
         changes in tax laws or rates are enacted, deferred tax assets and
         liabilities are adjusted through the provision for income taxes.

         NET (LOSS) PER SHARE

         The Company adopted Statement of Financial Accounting Standards No. 128
         that requires the reporting of both basic and diluted (loss) per share.
         Basic (loss) per share is computed by dividing net (loss) available to
         common stockholders by the weighted average number of common shares
         outstanding for the period. Diluted (loss) per share reflects the
         potential dilution that could occur if securities or other contracts to
         issue common stock were exercised or converted into common stock. In
         accordance with FASB 128, any anti-dilutive effects on net (loss) per
         share are excluded.

         LONG-LIVED ASSETS

         Statement of Financial Accounting Standards No. 121, "Accounting for
         the Impairment of Long- Lived Assets and for Long-Lived Assets to be
         Disposed Of," requires that long-lived assets be reviewed for
         impairment whenever events or changes in circumstances indicate that
         the carrying amount of the asset in question may not be recoverable.
         This standard did not have a material effect on the Company's results
         of operations, cash flows or financial position.

         DISCLOSURE ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS

         The Company estimates that the fair value of all financial instruments
         as of June 30, 2001, as defined in FASB 107, does not differ materially
         from the aggregate carrying values of its financial instruments
         recorded in the accompanying balance sheet. The estimated fair value
         amounts have been determined by the Company using available market
         information and appropriate valuation methodologies. Considerable
         judgement is required in interpreting market data to develop the
         estimates of fair value, and accordingly, the estimates are not
         necessarily indicative of the amounts that the Company could realize in
         a current market exchange.


            See Accompanying Notes and Independent Auditors' Report.

                                        9
<PAGE>   43
                   SECURITY BIOMETRICS, INC. AND SUBSIDIARIES
                          (DEVELOPMENT STAGE COMPANIES)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                  JUNE 30, 2001



NOTE 2   DEVELOPMENT STAGE OPERATIONS

         As of June 30, 2001, the Companies were in the development stage of
         operations. According to the Financial Accounting Standards Board of
         the Financial Accounting Foundation, a development stage Company is
         defined as a company that devotes most of its activities to
         establishing a new business activity. In addition, planned principal
         activities have not commenced, or have commenced and have not yet
         produced significant revenue.

NOTE 3   PROPERTY AND EQUIPMENT

         Property and equipment and accumulated depreciation consists of:

<TABLE>
<S>                                                                 <C>
                 Office furniture and equipment                     $    14,015
                 Computer equipment                                       6,308
                                                                    -----------

                                                                         20,323
                 Less accumulated depreciation                            1,012
                                                                    -----------

                 Total property and equipment                       $    19,311
                                                                    ===========
</TABLE>

         Depreciation expense for the year ended June 30, 2001 was $1,012.

NOTE 4   GESTURE RECOGNITION TECHNOLOGY OPTION

         BIOMETRICS SECURITY, INC.

                  On August 22, 2000, BSI acquired an option to license DSI
                  Datotech Systems, Inc. Gesture Recognition Technology, which
                  includes the interface and software for executing banking and
                  financial transactions. The option was acquired for an initial
                  cash consideration of $320,000, which is non-refundable and
                  fully creditable towards $8,000,000 that may be owed to
                  Datotech pursuant to the execution of the license agreement.
                  BSI was obligated to pay Datotech $3,000,000 on July 22, 2001.
                  As of the date of this report, the payment was not made and
                  management elected to expense the deposit of $320,000.

                  The balance of the $8,000,000 license agreement must be paid
                  within three months of delivery of a reasonable acceptable
                  prototype device using Datotech technology. In addition, upon
                  the signing of the licensing agreement, BSI will issue a
                  perpetual non-dilutive twenty percent (20%) Common Share
                  Interest in Security Biometrics, Inc., or the assignee of the
                  Option and License Agreements.

                  The option expires three months from the date when a
                  reasonably acceptable prototype is made available to BSI.


            See Accompanying Notes and Independent Auditors' Report.

                                       10
<PAGE>   44
                   SECURITY BIOMETRICS, INC. AND SUBSIDIARIES
                          (DEVELOPMENT STAGE COMPANIES)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                  JUNE 30, 2001



NOTE 4   GESTURE RECOGNITION TECHNOLOGY OPTION (CONTINUED)

         NETFACE LLC

                  On June 28, 2000, NetFace LLC acquired an option to acquire an
                  exclusive worldwide perpetual, royalty-free license to exploit
                  the Gesture Recognition Technology developed by DSI Datotech
                  Systems, Inc. for video games and internet/television. The
                  exercise price of the option is $5,000,000, plus a 20% Class B
                  membership in NetFace LLC. NetFace has paid Datotech $200,000
                  of the exercise price, with the remaining $4,800,000 balance
                  of the exercise price payable by December 4, 2002. The option
                  expires eighteen months from the date when a prototype
                  reasonably acceptable to NetFace LLC is made available to
                  NetFace LLC.

                  The licensing costs will be amortized over the estimated
                  useful life of the assets once the products are ready for
                  commercial use.

NOTE 5   TRADEMARK

         The trademark costs represent payments made to develop the trademark.
         The costs will be amortized according to FASB 142 as soon as the
         trademark is fully developed and its definitive life period is
         determined.

NOTE 6   CAPITAL LEASE PAYABLE

         BSI acquired an office copier on a capital lease with National Leasing
         Group Inc. The lease requires monthly payments of $310 for 48 months
         including interest at 11%.

         Future minimum payments are as follows:

<TABLE>
<S>                                                                 <C>
            June 30, 2002                                           $     3,715
            June 30, 2003                                                 3,715
            June 30, 2004                                                 3,715
            June 30, 2005                                                 5,033
                                                                    -----------

            Total minimum lease payments                                 16,178
            Less amount representing interest                             3,175
                                                                    -----------
            Present value of minimum lease payments                 $    13,003
                                                                    ===========
</TABLE>

NOTE 7   INTEREST

         Interest expense for the year ended June 30, 2001 was $1,184.

NOTE 8   INCOME TAXES

         Significant components of the Company's deferred tax assets and
         liabilities are as follows:

            See Accompanying Notes and Independent Auditors' Report.

                                       11
<PAGE>   45
                   SECURITY BIOMETRICS, INC. AND SUBSIDIARIES
                          (DEVELOPMENT STAGE COMPANIES)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                  JUNE 30, 2001



NOTE 8   INCOME TAXES (CONTINUED)

         Deferred tax assets

<TABLE>
<S>                                                                   <C>
            Net operating loss carryforward                           $  129,900
            Less valuation allowance                                     129,900
                                                                      ----------

            Net deferred tax assets                                   $        0
                                                                      ==========

            Deferred tax liabilities                                  $        0
                                                                      ==========
</TABLE>

         A reconciliation of the valuation allowance is as follows:

<TABLE>
<S>                                                                   <C>
            Balance at beginning of year                              $   20,900
            Addition for year                                            109,000
                                                                      ----------
            Balance at end of year                                    $  129,900
                                                                      ==========
</TABLE>

NOTE 9   NET OPERATING LOSS CARRYFORWARDS

         The Company has the following net operating loss carryforwards:

<TABLE>
<CAPTION>
                                                           EXPIRATION
                     YEAR                AMOUNT               DATE
                 -------------        ------------         ----------
<S>              <C>                  <C>                  <C>
                 June 30, 1999        $     10,546            2019
                 June 30, 2000              51,016            2020
                 June 30, 2001             804,259            2021
                                      ------------
                                      $    865,821
                                      ============
</TABLE>

NOTE 10  REAL ESTATE LEASE

         On April 1, 2001, BSI leased its office facilities in Vancouver,
         British Columbia under a 36 month lease. The lease requires monthly
         rentals for the first two years of approximately $2,200 and
         approximately $2,400 for the third year of the lease plus sales taxes
         and common area costs.

         The lease provides that BSI has one three year option to renew the
         lease at the prevailing rates at the time the lease is renewed.

         Future minimum lease payments are as follows:

<TABLE>
<S>                                                                 <C>
            June 30, 2002                                           $    26,294
            June 30, 2003                                                26,707
            June 30, 2004                                                20,953
                                                                    -----------
                                                                    $    73,954
                                                                    ===========
</TABLE>

         Rent expense for the year ended June 30, 2001 was $26,917.

            See Accompanying Notes and Independent Auditors' Report.

                                       12
<PAGE>   46
                   SECURITY BIOMETRICS, INC. AND SUBSIDIARIES
                          (DEVELOPMENT STAGE COMPANIES)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                  JUNE 30, 2001



NOTE 11  EMPLOYEE STOCK OPTIONS

         On August 21, 2000, the corporation adopted the Biometrics Security,
         Inc. stock option plan for the purpose of providing an incentive based
         form of compensation to the officers, directors, key employees and
         service providers of the Company.

         The stock subject to the plan and issuable upon exercise of options
         granted under the plan are shares of the corporation's common stock,
         $.001 par value, which may be either unissued or treasury shares.

         The aggregate number of shares of common stock covered by the plan and
         issuable upon exercise of all options granted shall be 5,100,000
         shares, which shares shall be reserved for use upon the exercise of
         options to be granted from time to time.

         The exercise prices range form $1.00 to $5.00 at the date of the grant
         of the options.

         Vesting terms of the options range from immediate to five years.

         The Company has elected to continue to account for stock-based
         compensation under APB Opinion No. 25, under which no compensation
         expense has been recognized for stock options granted to employees at
         fair market value.

         A summary of the option activity for the year ended June 30, 2001
         pursuant to the terms of the plan is as follows:

<TABLE>
<CAPTION>
                                                      SHARES         WEIGHTED
                                                       UNDER         AVERAGE
                                                      OPTION      EXERCISE PRICE
                                                    -----------   --------------
<S>                                                 <C>           <C>
                  Options granted                     1,061,250    $       1.26
                  Exercised                                   0               0
                                                    -----------    ------------

                     Outstanding at June 30, 2001     1,061,250    $       1.26
                                                    ===========    ============
</TABLE>

         1,061,250 shares are exercisable at June 30, 2001.

         Information regarding stock options outstanding as of June 30, 2001 is
         as follows:

<TABLE>
<S>                                                          <C>
                  Price range                                      $1.00 - $5.00
                  Weighted average exercise and grant
                   date prices                                             $1.26
                  Weighted average remaining
                   contractual life                          4 years, 3.2 months
                  Options exercised                                            0
</TABLE>


            See Accompanying Notes and Independent Auditors' Report.

                                       13
<PAGE>   47
                   SECURITY BIOMETRICS, INC. AND SUBSIDIARIES
                          (DEVELOPMENT STAGE COMPANIES)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                  JUNE 30, 2001



NOTE 11  EMPLOYEE STOCK OPTIONS (CONTINUED)

         The weighted average fair value of options granted were estimated as of
         the date of grant using the Black-Scholes stock option pricing model,
         based on the following weighted average assumptions:

<TABLE>
<S>                                                                <C>
                  Dividend yield                                              0%
                  Expected volatility                                        50%
                  Risk free interest rate                          4.85% - 5.86%
                  Expected life                                          5 years
</TABLE>

         For purposes of pro forma disclosures, the estimated fair value of the
         options is amortized to expense over the options' vesting period. The
         Company's pro forma information follows:

<TABLE>
<S>                                                               <C>
         Net (loss)
           As reported                                            $    (494,855)

           Pro forma                                              $  (1,043,412)

         (Loss) per share attributable to
          common stock
           As reported                                            $        (.01)

           Pro forma                                              $        (.03)
</TABLE>


NOTE 12  ACQUISITION OF NETFACE LLC

         On June 29, 2001, the Company issued 20,000,000 of its common stock and
         acquired 100% of the outstanding members' interests of NetFace, LLC.
         The acquisition was accounted for as a purchase and the results of
         NetFace LLC's operations have been included in the consolidated
         financial statements since the date of acquisition.

         NetFace has an option to acquire an exclusive worldwide perpetual,
         royalty-free license to exploit the Gesture Recognition Technology
         developed by Datotech for video games and internet/television. As a
         result of the acquisition, the Company hopes to be a leader in Gesture
         Recognition Technology as it would have licenses, once the options are
         exercised, for medical and entertainment technologies. In addition, the
         Company has a right of first refusal on all other licenses for
         Datotech's technology for future products.

         The Company valued the following assets acquired from NetFace LLC at
         NetFace's book value:

<TABLE>
<S>                                                                 <C>
                  Cash                                              $     11,363
                  Gesture Recognition Technology Option                  200,000
                                                                    ------------

                                                                    $    211,363
                                                                    ============
</TABLE>

         Management believes that the book value of NetFace is the same as fair
         market values.

            See Accompanying Notes and Independent Auditors' Report.

                                       14
<PAGE>   48
                   SECURITY BIOMETRICS, INC. AND SUBSIDIARIES
                          (DEVELOPMENT STAGE COMPANIES)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                  JUNE 30, 2001



NOTE 13  GOING CONCERN

         These financial statements are presented on the basis that the Company
         is a going concern. Going concern contemplates the realization of
         assets and the satisfaction of liabilities in the normal course of
         business over a reasonable length of time. The Company has a working
         capital deficit, no revenues and needs additional financing to proceed
         with the development of its products and to exercise its Datotech
         options. These factors raise substantial doubt as to the Company's
         ability to continue as a going concern.

         Management's plan to eliminate the going concern situation include
         obtaining financing from either public or private sources.

NOTE 14  PREFERRED STOCK

         Biometrics Security Inc. is authorized to issue 500,000 shares of no
         par value preferred stock. BSI has not established any preference
         rights for the preferred stock.







            See Accompanying Notes and Independent Auditors' Report.

                                       15