<PAGE>


                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                   ----------

                                    FORM 20-F

(Mark One)

[_]  REGISTRATION STATEMENT PURSUANT TO SECTION 12(B) OR 12(G) OF THE
     SECURTITIES EXCHANGE ACT OF 1934

                                       or

[X]  ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
     ACT OF 1934

     For the fiscal year ended January 31, 2003.

                                       or

[_]  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
     EXCHANGE ACT OF 1934

     For the transition period from _______ to _______.

                             Commission File Number:
                                     0-22270

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

                           Frisco Bay Industries Ltd.
             (Exact name of Registrant as specified in its charter)

                                     Canada
                 (Jurisdiction of incorporation or organization)

                                  160 Graveline
                               St. Laurent, Quebec
                                 Canada H4T 1R7
                     (Address of principal executive office)

     Securities registered or to be registered pursuant to Section 12(b) of
                                 the Act: None.

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

                           Common Stock, No Par Value
                                (Title of class)

        Securities for which there is a reporting obligations pursuant to
                         Section 15(d) of the Act: None.

As of January 31, 2003, the Registrant had 1,688,438 shares of Common Stock and
799,967 shares of Class A Common Stock, no par value, outstanding.

Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports) and (2) has been subject to such filing
requirements for the past 90 days.

                           Yes [X]            No [_]

Indicate by check mark which financial statement item the Registrant has elected
to follow:

                         Item 17 [_]         Item 18 [X]



<PAGE>


                             MESSAGE TO SHAREHOLDERS

I am pleased to report that our company has reached an important milestone in
the last fiscal year: total revenues surpassed the $50 million mark! More
importantly, thanks to the efforts of all of our dedicated employees, the
continued growth in revenue allowed us to generate in excess of $3 million in
net earnings.

In integrated security, key growth factors were the continued enhancement and
expansion of our security solutions to our existing customer base. We helped a
major Canadian financial institution standardize their digital video
surveillance technology in all their branches, maximize their picture and video
quality, and reduce their fraud investigation cycle. We introduced innovative
remote diagnostic services designed to help customers increase uptime and reduce
service costs. So far major Canadian customers like Bell Canada and Domtar have
signed on to this new proposal. We expect that these new service offerings will
give us an opportunity to grow our recurring revenue base in Fiscal 2004 and
beyond.

As part of our mission statement of being a provider of customer-driven
solutions, we launched a new WEB site earlier this year. We also invested
$650,000 in the last 2 years to migrate our management information system to a
new state-of-the-art integrated ERP solution that will help us better respond to
customer needs for information.

Our Intivid division launched VIP 9, its latest digital video solution, at the
ISC West in Las Vegas. Customer response is very positive and major clients have
embraced the new features. Our network of dealers in the U.S. grew by 50% and we
have now established sales and support offices in Texas, Georgia and California.

In February 2003, we effectively acquired the remaining 50% of Frisco/ATMS
Limited Partnership. This transaction is expected to generate an additional $3
million in annual revenues. With this acquisition, our network is now comprised
of more than 1300 White-label ATMs across Canada.

In June 2003, we completed a US$2.2 million private placement in Canada that
will be used to repay some of the debt we took on as part of the Frisco/ATMS
acquisition. We now intend to list our shares on the Toronto Stock Exchange,
which should give us the flexibility and access to capital in both the U.S. and
Canada to pursue and accelerate our expansion program.

We would like to thank our employees for their ongoing dedication and hard work
this past year. We would also like to thank our shareholders, customers and
suppliers for their continued support.

Sincerely,


/s/ Barry E. Katsof

Barry E. Katsof
Chairman of the Board



<PAGE>


                                TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                                            Page
                                                                                            ----
<S>                                                                                          <C>
Item 1.    Identity of Directors, Senior Management and Advisors..............................2
Item 2.    Offer Statistics and Expected Timetable............................................2
Item 3.    Key Information....................................................................2
Item 4.    Information on the Company.........................................................6
Item 5.    Operating and Financial Review and Prospects......................................16
Item 6.    Directors, Senior Management and Employees........................................25
Item 7.    Major Shareholders and Related Party Transactions.................................34
Item 8.    Financial Information.............................................................35
Item 9.    The Offer and Listing.............................................................36
Item 10.   Additional Information............................................................37
Item 11.   Quantitative and Qualitative Disclosures About Market Risk........................46
Item 12.   Description of Securities Other Than Equity Securities............................47
Item 13.   Defaults, Dividend Arrearages and Delinquencies...................................48
Item 14.   Material Modifications to the Rights of Security Holders and Use of Proceeds......48
Item 15.   Controls and Procedures...........................................................48
Item 16.   [Reserved]........................................................................48
Item 17.   Financial Statements..............................................................49
Item 18.   Financial Statements..............................................................49
Item 19.   Exhibits..........................................................................50
</TABLE>


                                      -i-



<PAGE>



SAFE HARBOR FORWARD-LOOKING STATEMENTS UNDER
THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995

          This Annual Report contains forward-looking statements within the
meaning of the Private Securities Litigation Reform Act of 1995. These
statements involve known and unknown risks and uncertainties that may cause the
Company's actual results or outcomes to be materially different from those
anticipated and discussed herein. These factors include, among others, those
listed under the caption "Item 3.(D) Risk Factors" or described elsewhere in
this Annual Report and in the risk factors described in the Company's previous
filings with the Securities and Exchange Commission. In assessing
forward-looking statements contained herein, readers are urged to read carefully
all cautionary statements contained in this Annual Report and in those other
filings with the Securities and Exchange Commission. Although we believe that
the expectations reflected in our forward-looking statements are reasonable, we
cannot guarantee future results, levels of activity, performance or achievements
or other future events. We are under no duty to update any of our
forward-looking statements after the date of this annual report, other than as
required by law.

                                   ----------

          Unless the context indicates otherwise, the terms "Frisco Bay
Industries Ltd.," the "Company" and "Frisco Bay" are used interchangeably in
this Annual Report and include Frisco Bay Industries Ltd.'s wholly-owned
subsidiaries Frisco Bay Industries, Ltd. ("Frisco Bay U.S.") and Intivid
Solutions, Inc. (both Maryland corporations) through which the Company
coordinates its operations outside of Canada, Intivid Solutions Inc., CDP
Protection Inc. ("CDP"), the operations of which were sold on May 29, 1998, and
ATMS/Frisco Bay and Company, Limited Partnership ("Frisco/ATMS"), in which the
Company had a 50% interest until February 2003 at which time the Company
effectively acquired the remaining 50%, and all other subsidiaries of the
Company and the Company's predecessor businesses.

          The financial information presented in this Annual Report is expressed
in Canadian dollars ("CDN $"), unless stated in United States dollars ("US $"),
and except as otherwise noted, financial data in this Annual Report is presented
in accordance with accounting principles generally accepted in Canada ("Can.
GAAP"). Such financial data conforms in all material respects with accounting
principles generally accepted in the United States ("U.S. GAAP"), except as
disclosed in Note 21 of the Notes to Consolidated Financial Statements contained
herein. The exchange rate of Canadian dollars for United States dollars, based
upon the noon buying rate in New York City for cable transfers in foreign
currencies as certified for customs purposes by the Federal Reserve Bank of New
York, on June 13, 2003, was CDN $1.00 = U.S. $0.7484.





<PAGE>


                                     PART I

          Item 1. Identity of Directors, Senior Management and Advisors

          Not applicable.

          Item 2. Offer Statistics and Expected Timetable

          Not applicable.

          Item 3. Key Information

          (A)  Selected Financial Data

          The selected consolidated financial data presented below for the years
ended January 31, 1999, 2000, 2001, 2002 and 2003 has been derived from the
Company's Consolidated Financial Statements. These Consolidated Financial
Statements have been prepared in accordance with generally accepted accounting
principles in Canada, which conform to accounting principles in the U.S., except
as described in Note 21 of Notes to Consolidated Financial Statements. The data
below should be read in conjunction with information contained under the caption
"Item 5. Operating and Financial Review and Prospects" below, the Consolidated
Financial Statements and Notes thereto and other financial information appearing
elsewhere in this Annual Report.

<TABLE>
<CAPTION>
                                                                Fiscal Year Ended January 31,
                                               --------------------------------------------------------------
Canadian GAAP Data                                1999         2000         2001         2002          2003
------------------                             ----------   ----------   ----------   ----------   ----------
                                                       (In thousands of CDN $, except per share data)
<S>                                            <C>          <C>          <C>          <C>          <C>
Statement of Operations Data:

Revenue from continuing operations .........   $   32,687   $   37,136   $   35,847   $   43,092   $   51,277

Earnings (loss) from continuing
   operations ..............................   $      940   $      498   $     (202)  $    1,768   $    3,140

Net earnings (loss) ........................   $    2,092   $      498   $     (202)  $    1,768   $    3,140

Per Share Data:

Earnings (loss) from continuing
   operations ..............................   $     0.42   $     0.22   $    (0.09)  $     0.76   $     1.32

Net earnings (loss) ........................   $     0.93   $     0.22   $    (0.09)  $     0.76   $     1.32

Weighted average number of Class A Stock
   and Common Stock outstanding ............    2,238,048    2,265,630    2,298,153    2,330,753    2,384,525

Balance Sheet Data:

Working capital ............................   $    7,044   $    7,177   $    6,491   $    7,012   $   10,448

Total assets ...............................   $   17,217   $   19,187   $   20,810   $   26,340   $   27,567

Obligations under capital leases, less
   current portion .........................           --   $      235   $      573   $      924   $      632

Shareholders' equity .......................   $    8,120   $    8,744   $    8,617   $   10,435   $   14,434
</TABLE>


                                      -2-



<PAGE>


          The amounts set forth in the table above are consistent with those
that would be reported under U.S. GAAP for the fiscal years ended January 31,
1999, 2000, 2001, 2002 and 2003, except those listed in the following table.

<TABLE>
<CAPTION>
                                                                  Fiscal Year Ended January 31,
                                                 --------------------------------------------------------------
U.S. GAAP Data                                      1999         2000         2001         2002         2003
--------------                                   ----------   ----------   ----------   ----------   ----------
                                                         (In thousands of CDN $, except per share data)
<S>                                              <C>          <C>          <C>          <C>          <C>
Statement of Operations Data:

Earnings (loss) from continuing operations ...   $      891   $      380   $     (324)  $    1,834   $    3,201

Net Earnings (loss) ..........................   $    2,043   $      380   $     (324)  $    1,834   $    3,201

Per Share Data:

Earnings (loss) from continuing operations ...   $     0.40   $     0.17   $    (0.14)  $     0.79   $     1.34

Net Earnings (loss) ..........................   $     0.91   $     0.17   $    (0.14)  $     0.79   $     1.34

Weighted average number of Class A Stock
   and Common Stock outstanding ..............    2,238,048    2,265,630    2,298,153    2,330,753    2,384,525

Balance Sheet Data:

Total assets .................................   $   17,217   $   19,120   $   20,682   $   26,279   $   27,567

Shareholders' equity .........................   $    8,112   $    8,669   $    8,418   $   10,808   $   14,789
</TABLE>

Exchange Rates

          The following tables sets forth, for the periods indicated, certain
exchange rates based on the high and low noon buying rates in New York City for
cable transfers in foreign currencies as certified for customs purposes by the
Federal Reserve Bank of New York. Such rates are quoted as U.S. dollars per
Canadian dollar and are the inverse of rates quoted by the Federal Reserve Bank
of New York for Canadian dollars per U.S. $1.00.

<TABLE>
<CAPTION>
                                           Twelve Month Period Ended January 31,
                                           -------------------------------------
                                           1999    2000    2001    2002    2003
                                           -----   -----   -----   -----   -----
<S>                                        <C>     <C>     <C>     <C>     <C>
High ...................................   .7106   .6969   .6936   .6630   .6619
Low ....................................   .6327   .6550   .6410   .6190   .6207
Average* ...............................   .6703   .6766   .6711   .6416   .6390
Period End .............................   .6619   .6888   .6669   .6289   .6542
</TABLE>

----------
*    The average rate means the average of the exchange rates on the last day of
     each month during the applicable period.


                                      -3-



<PAGE>


     As of June 13, 2003, the exchange rate was CDN $1.00 = U.S. $0.7484. The
high and low exchange rates for the previous six months are as follows:

<TABLE>
<CAPTION>
Month                                   High                Low
-----                                   -----              -----
<S>                                     <C>                <C>
December 2002                           .6461              .6329
January 2003                            .6570              .6349
February 2003                           .6720              .6530
March 2003                              .6815              .6709
April 2003                              .6916              .6737
May 2003                                .7437              .7032
</TABLE>

          (B)  Capitalization and Indebtedness

          Not applicable.

          (C)  Reasons for the Offer and Use of Proceeds

          Not applicable.

          (D)  Risk Factors

          Dependence on Suppliers. The Company relies on outside sources to
manufacture and supply most of the components included in the Company's systems
and products, none of which sources are contractually obligated to meet the
long-term requirements of the Company. Furthermore, in those situations in which
the Company is the sole distributor for certain of its suppliers, those
arrangements are typically restricted geographically to Canada only. There can
be no assurance that current or alternative sources will be able to supply all
of the Company's demands on a timely basis. The Company currently relies upon a
single, separate supplier for each of its cash dispensing units, rolled coin
dispensers, currency sorters and automatic deposit systems. Although the Company
believes that alternative sources are available for those components, any
interruption in its supply from any supplier that currently serves as the
Company's sole source could delay product and system shipments and adversely
affect the Company's business, financial condition, operating results and
prospects.

          Dependence on Significant Customers. The Company's sales to its five
largest customers accounted, in the aggregate, for approximately 25%, 34% and
28% of the Company's total sales during the fiscal years ended January 31, 2001,
2002 and 2003, respectively, and sales to the Company's two largest customers
for each of those periods accounted for approximately 8%, 13% and 11%, and 5%,
7% and 7%, respectively, of total sales during those periods. There can be no
assurance that any of the Company's principal customers will maintain its volume
of business with the Company or that a similar volume of business would be
forthcoming from new or existing customers to replace lost business, if any. The
loss of one or more of the Company's existing significant customers without
replacement by a customer or customers of similar volume would have a material
adverse effect on the Company's business, financial condition, operating results
and prospects.

          Competition. The Company's competitors include numerous financial
equipment manufacturers and distributors and computer companies, many of which
have greater research, development, financial and personnel resources or name
recognition than the Company. There can be no assurance that the Company will be
able to maintain its market share in Canada, or that it will be able to compete
successfully in the United States or other markets.


                                      -4-



<PAGE>


          Control of Company by Management and Affiliates. As of May 31, 2003,
the executive officers and Directors of the Company beneficially owned or
controlled approximately 35.47% of the outstanding combined shares of Common
Stock and Class A Stock, representing approximately 66.96% of the combined
voting power of these classes. As a result of the magnitude of their holdings
and their contractual arrangements, the Company's current principal shareholders
could hinder or preclude an unsolicited acquisition of the Company and that fact
could have an adverse effect on the market price of the Common Stock. Further,
the current principal shareholders have the ability to elect all the Company's
Directors and to control the outcome of all other issues submitted to the
Company's shareholders for the foreseeable future.

          Dependence on Key Individuals and Qualified Personnel. Barry E.
Katsof, Chairman of the Board of Directors and Chief Executive Officer of the
Company, and Ronald G. Waxman, Vice-Chairman of the Board of Directors, have
been primarily responsible for the development and expansion of the Company's
business, and the loss of the services of either of or both those individuals
could have a material adverse effect on the Company. The Company currently has
three-year employment agreements with each of Messrs. Katsof and Waxman,
expiring on April 30, 2006. In addition, the Company has purchased and is the
beneficiary of $1 million key-man insurance policies on the lives of each of
Messrs. Katsof and Waxman. Because of the specialized technical nature of the
Company's business, the Company is dependent upon its ability to continue to
attract and retain qualified management, marketing, engineering and technical
personnel. There is intense competition for qualified personnel in the Company's
business and in related businesses and there can be no assurance that the
Company will be able to continue to attract and retain the qualified personnel
necessary for the development of its business.

          Absence of Dividends. The Company has not paid any cash dividends and
does not anticipate paying any dividends on its Common Stock or Class A Stock in
the foreseeable future. The Company anticipates that earnings, if any, will be
retained to finance future growth.

          Anti-Takeover Provisions. In addition to the voting control held by
officers, Directors and principal shareholders, the Company is subject to
agreements and provisions that could hinder or preclude an unsolicited
acquisition of the Company. The Company's Articles of Amalgamation authorize the
Board of Directors to issue, without shareholder authorization, shares of
preferred stock, in one or more designated series or classes. The Articles of
Amalgamation also provide for the Board of Directors to be divided into three
classes which serve for staggered three-year terms and include a "fair price
provision" which requires that 85% of the voting power of the Company approve
any merger, or similar extraordinary transaction, with an acquirer who owns 10%
or more of the voting power of the Company where the merger has not previously
been approved by independent Directors of the Company. Any of these agreements
or provisions could discourage, hinder or preclude an unsolicited acquisition of
the Company and could make it less likely that shareholders receive a premium
for their shares as a result of any unsolicited acquisition attempt. These
provisions may also have a depressive effect on the market price of the Common
Stock.

          Exchange Rate Risk. The Company records its transactions and prepares
its financial statements in Canadian dollars. During the Company's 2003 fiscal
year, a material percentage of the Company's business, including approximately
6% of its sales and approximately 50% of the Company's purchases of equipment,
parts and supplies, was transacted in currencies other than the Canadian dollar.
Any change in the value of, for example, the United States dollar against the
Canadian dollar would affect United States revenues and


                                      -5-



<PAGE>


earnings of the Company when translated into Canadian dollars. The same result
might be recognized if sales were made by the Company in countries other than
Canada at material levels.

          However, as the Company monitors exchange rate fluctuations on a
regular basis, makes corresponding changes as necessary to the price of its
products and services, and partially hedges its exchange rate risk through the
purchase of currency options contracts, the Company does not anticipate that
exchange rate fluctuations would have a material effect on future Company
earnings. However, there can be no assurance that the Company will be able to
hedge successfully against all exchange rate risk in the future.

          Service of Legal Process and Enforcement of Judgments. It may be
difficult for investors to effect service of process and to enforce judgments
against the Company or those of its officers and Directors who are not resident
in or citizens of the United States. The Company is a Canadian federal
corporation. All of its Directors and officers, except two Directors, are
residents of Canada and all or a substantial portion of the assets of each of
those persons and a substantial portion of the assets of the Company are located
outside the United States. Consequently, it may be difficult for United States
investors to effect service within the United States upon the Company or upon
Directors or officers of the Company, or to satisfy judgments of courts of the
United States predicated upon civil liabilities under United States federal
securities laws.

          Item 4. Information on the Company

          (A)  History and Development of the Company

          The Company and its predecessors have been in business continuously
since 1972. In August, 1993, the Company changed its legal and commercial name
from "Frisco Bay Industries of Canada Ltd." to "Frisco Bay Industries Ltd." in
order to more appropriately reflect its current business strategy. The Company
was constituted in 1989 as the successor corporation to its merged predecessors
under the Canada Business Corporations Act. Its principal executive offices are
located in the Montreal metropolitan area at 160 Graveline Street, St. Laurent,
Quebec, Canada H4T 1R7 (telephone number: 514-738-7300; fax number:
514-735-7039). The Company has appointed its United States subsidiary, Frisco
Bay Industries, Ltd., a Maryland corporation, as the Company's agent to receive
service of process in any action against the Company brought in any federal or
state court sitting in New York County, State of New York, which arise solely
out of or in connection with United States federal securities laws. The address
of Frisco Bay Industries, Ltd. is 1055 Parsippany Blvd., Parsippany, New Jersey
07054. The Company can be reached over the Internet through www.friscobay.com.

Capital Expenditures

          Our principal capital expenditures for each of fiscal 2001, 2002 and
2003 were for automated teller machines, equipment and furniture, computer
equipment and leasehold improvements. We have largely financed capital
expenditures through working capital except for automated teller machines and
the Enterprise Resource Planning (ERP) System which are financed partially
through capital leases.

          In fiscal 2001, we spent approximately $742,156, $20,406, $49,005 and
$15,560, respectively for automated teller machines, equipment and furniture,
computer equipment and leasehold improvements. In fiscal 2002, we spent
approximately $1,480,301, $19,238, $150,429


                                      -6-



<PAGE>


and $16,500, respectively for automated teller machines, equipment and
furniture, computer equipment and leasehold improvements. In fiscal 2003 we
spent approximately $1,330,341, $444,080, $249,010, and $105,324 respectively
for automated teller machines, the ERP System, computer equipment and
interchange contract rights.

          During fiscal 2004, we expect to continue to make capital expenditures
to expand our business in Canada, the United States and targeted European
markets. In fiscal 2003 and 2004 combined the Company will also spend
approximately $650,000 in changing its Enterprise Resource Planning (ERP)
System. We anticipate financing these expenditures through working capital
except for automated teller machines and the ERP System which will be financed
through capital leases.

          (B)  Business Overview

          Frisco Bay designs, develops, markets and installs integrated systems
and products predominantly for financial institutions, government agencies and
major industrial corporations. The Company also provides service and support for
its products and systems. The Company's systems include self-service and
financial transaction processing and integrated security systems. Frisco Bay
believes that its customers are shifting towards a "self-service" environment
and are embracing technology to improve efficiency and reduce costs. The
Company's products, systems and services are designed to help its clients
improve their competitiveness and the cost effectiveness of their operations.

          The Company has been engaged in business in Canada for over three
decades and its customers include Canada's seven largest banks (based on
published aggregate asset values), as well as many large corporations and
government agencies. In addition, the Company has sold certain financial
transaction processing and security systems in the United States, Mexico and
targeted European countries. Frisco Bay's customers outside of Canada primarily
include dealers, banks and large institutions.

          Management operates and evaluates the Company's business in two major
segments, one dealing with product sales and the other dealing with product
support and service fees. Product revenues include the sale and installation of
equipment and integrated systems. Service revenues include maintenance agreement
revenues and ATM service fees. The expenses that can be identified within each
of these segments are disclosed in the Consolidated Statements of Earnings and
Deficit. The assets are common to both segments and cannot be allocated.

          The Company's principal products, systems and services include:

          Integrated Security Systems that are offered primarily in Canada and
feature surveillance cameras and computer-based access systems controlled by
identification cards. The Company's surveillance systems are enhanced by
in-house processing and storage of image media, and the Company's ability, in
certain cases, to provide photographic evidence to, and cooperate with, its
customers and law enforcement agencies. The Company believes that the demand for
quality low cost video photographs is increasing. To respond to this demand, the
Company developed and is currently marketing its computer-based video
surveillance recording and retrieval system. The Video Image Processing System
("VIP") offers a state-of-the-art method of digitizing video images and
recording this information on a PC hard drive. The files can then be retrieved
on-site or off-site, using VIP retrieval software. The system is currently


                                      -7-



<PAGE>


marketed throughout Canada, the U.S. and in certain European countries, under
the brand name of Intivid Solutions, a division of Frisco Bay.

          Self-Service and Financial Transaction Processing Systems that are
engineered and designed to bring increased efficiency and cost savings through
the automation of customer transactions. These systems are typically stand-alone
units, and include automated teller machines, deposit and receipt systems, coin
sorting, counting, wrapping and dispensing systems, cash sorting systems, and
secure cash dispensing systems.

          Overall, the Company develops and markets a wide range of products and
systems, and offers a broad array of support and other services to its
customers. Prices charged by the Company to its customers range widely, from
several dollars for small components to several hundreds of thousands of dollars
for large integrated systems. In addition, the Company's prices tend to vary
from application to application because in many instances the Company designs
customized systems for its customers. Sales of the Company's products and
systems are effected primarily through standard purchase orders, and are not
pursuant to customized, negotiated contracts. Information concerning the terms
of the Company's service agreements is set forth in the "Service, Support and
Training" section below.

          Although certain of the Company's customers, including, particularly,
banking institutions, insurance institutions and gaming casinos, are in
industries that are subject to various forms of governmental regulation,
historically the Company's business has not been adversely affected by
regulations applicable to those industries. Further, although the Company is not
aware of any new or contemplated regulations that could materially affect its
customers' businesses, and, hence, the Company's business, there can be no
assurance that such regulations will not be adopted in the future. The Company's
business could be materially affected by the adoption of new regulations or
changes in existing regulations which could affect the business of all, or
material groups of similar types of businesses, of its customers. Further,
because of the Company's intent to expand its business outside of Canada, its
customer base could be subject to different regulations. A diversity of
regulations could affect the Company's ability to offer uniform products and
services and could, therefore, adversely affect its business.

Business Strategy

          The Company's business strategy is to capitalize on its existing
customer base and Canadian experience to expand its markets in the United
States, Europe, New Zealand and Australia, with its proprietary products. The
Company intends to distribute its products to these markets through strategic
partnerships. The Company also intends to continue to modify the systems,
products and services offered to its existing Canadian customers, as well as to
expand its Canadian customer base through organic growth and targeted accretive
acquisitions in the security and ATM industries. The Company will also continue
to focus its sales effort on product lines that provide an opportunity for
ongoing revenue after the initial sale in the form of supplies, service revenue
and ATM transaction fee revenue. Frisco Bay believes that its competitive
advantage is its ability to customize products and related applications software
to produce systems that meet customer needs and are aligned to changes in the
marketplace.

          The Company's strategy includes the following principal components:

          Targeted accretive acquisitions in the integrated security and
white-label ATM businesses. The Company intends to expand its integrated
security business by realizing a


                                      -8-



<PAGE>


number of small "tuck-under" acquisitions to gain market share in selected
regions. In addition, the Company will seek to take advantage of acquisition
opportunities in the white-label ATM business. The white-label industry is
highly fragmented with over 50% of machines owned by operators with less than
100 machines. As a result of tightened regulatory requirements, smaller players
will not have the infrastructure required to comply and management expects that
there will be consolidation in the industry.

          Penetration of the VIP Market in the United States, Europe, New
Zealand and Australia. The Company is continuing its penetration into the U.S.
market for its VIP product through a strategic agreement it signed with Diebold,
Inc., a global provider of security solutions, and through a network of
approximately 50 dealers and original equipment manufacturers. It also has
dealer agreements with strategic partners in Europe, New Zealand and Australia.
Additionally, global marketing efforts are underway with potential dealers.

          Expansion of Canadian Customer Base For Self-Service and Financial
Transaction Processing and Integrated Security Systems. The Company intends to
expand its Canadian operations by building on its current base of established
clients and through the introduction of new products and enhancements to
existing products and systems. In the late 1990s, the Company expanded its
product offering to include White Label (non-financial institution owned) ATMs,
and entered into a limited partnership agreement with G.M. Automated Teller
Machine Services Inc. (ATMS Canada) to service the Eastern Canadian market. In
February 2003 the Company effectively acquired the remaining 50% of Frisco/ATMS.
The Company markets the machines as Frisco/ATMS. The Company believes it has
developed a reputation in Canada for designing, customizing and assembling
quality, automated systems and products under the Frisco Bay'TM' label for the
unique applications and requirements of its customers, as well as for providing
a high level of customer service and support.

          Modification and Adaptation of Products and Systems to Provide
Customized Products and Services to Customers. The Company intends to work
closely with its customers and prospective customers to determine their
requirements and thereby to seek to be in a position to deliver products that
will better meet their needs. The Company also intends to continuously seek to
modify and adapt its existing systems and products to meet new applications in
existing and potential new markets. Frisco Bay intends to further develop and
improve its "application engineering" capabilities, which the Company believes
provide it with the technological flexibility and ability to provide customers
with customized products and services.

Automated Systems and Products

          The Company believes that in response to growing competition and
increased costs in the financial services marketplace, banks and other financial
institutions are turning to automation to improve the quality and efficiency of,
and to reduce the costs associated with, the services they provide to their
retail and commercial customers. The self-service and financial transaction
processing systems that Frisco Bay has developed and is marketing under the
Frisco Bay'TM' label are designed to enhance an institution's product offerings
and to improve that institution's productivity, efficiency and accuracy. In
addition, Frisco Bay's self-service and financial transaction processing systems
are designed to improve the security of money handling activities in financial
institutions, casinos and industrial customers.


                                      -9-



<PAGE>


          Integrated Security Systems are typically customized security systems
and, except for the Company's VIP system, are presently sold by the Company in
Canada only. The Company's integrated security systems can include sophisticated
surveillance cameras and related security equipment, and/or computer-based
access and alarm monitoring systems usually controlled by identification cards.
Access and alarm monitoring can be as simple as a card recognition system for an
automated banking machine vestibule, or as complex as a computerized network
that could control entrances to hundreds of facilities at various places
throughout the world.

          The camera based security systems include a comprehensive laboratory
service at which the Company processes and stores image media that may document
frauds and holdups and may assist law enforcement agencies by providing them
necessary courtroom evidence. The Company maintains laboratories for this
purpose in most of its regional sales and service offices in Canada. Frisco
Bay's systems may include a wide variety of customized and specialized
accessories.

          The Company's proprietary VIP System incorporates advanced digital
image capturing, compression, retrieval and reproduction technology. The Company
believes the system is competitively priced so as to replace the existing video
recording systems which presently deliver a lesser grade of image quality. A
target marketplace for VIP are institutions utilizing ATMs where the system
records transactions at ATMs for use in fraud investigations. In this
environment it is combined with a proprietary device that transfers transaction
information onto the image captured at the time of the event. As a result,
retrieval of the image is immediate and image to transaction correlation is
assured. VIP can also be used to monitor the lobby or other branch areas.
Additionally, VIP is being marketed to other organizations whose businesses
include high-cost, high-risk transactions and which commonly attract fraud.

          Self-Service and Financial Transaction Processing Systems are
typically stand-alone units engineered and designed to bring increased
efficiency and cost savings through the automation of customer transactions and
the processing of those transactions. The products that Frisco Bay markets
within this product group can be generally categorized as follows:

          Self-Service Banking Systems which are automated machines that
supplement and complement automated teller machines ("ATMs") by performing
functions normally performed by tellers. Frisco Bay's products and systems in
this category include the following:

          o Deposit Machines that, unlike traditional night depositories, accept
both personal and commercial deposits and give the customer a receipt for each
transaction. The Company's deposit machines improve overall quality of service
by eliminating the need for customers to wait in teller lines when a receipt is
required and by providing 24-hour access for both personal and commercial
deposits.

          o Rolled Coin and Note Dispensers that dispense up to six different
coin denominations or a combination of rolled coin and ATM quality notes. The
rolled coin and note dispensers eliminate the need for customers who operate
retail establishments to enter a branch to obtain change, and provide access to
services after normal banking hours. The machines also provide patrons of gaming
casinos with access to change or casino chips without waiting in cashier lines.


                                      -10-



<PAGE>


          o Commercial Kiosk, which incorporates the latest technology in
self-service banking. This is a multi-function, stand-alone self-service center
that allows commercial clients to obtain rolls of coin and ATM quality notes,
and to make daily deposits and obtain a receipt without having to enter a
branch. The service is available 24 hours a day, 7 days a week and these centers
can be located in environments where bank branches do not exist.

          o ATMs, that due to a change in banking regulations in Canada in the
fall of 1997, can now be owned by any person or business. This non-bank
environment for ATMs is called the "White Label" market. Frisco Bay not only
receives revenues from the sale, installation and servicing of the ATM units,
but also generates a recurring revenue stream from transaction fees charged to
users of the machine.

          Teller Operated Banking Systems are computer-linked cash dispensing
systems designed to increase teller efficiency and productivity, reduce errors
in transactions and provide increased security through the use of safe-type
encasings. The Company also markets other teller-operated systems and products
that simplify labor-intensive tasks such as sorting, counting and wrapping
coins. The following is an example of a teller operated banking system:

          o Cash Dispensers automatically dispense the correct amount of cash
and enable banks to improve customer service by making transfer transactions
more efficient and faster. Utilizing the Company's proprietary software, the
systems can be linked to the bank's computer system and can download transaction
data directly into its database for storage. Accuracy is maintained by a
microprocessor-controlled system that eliminates the need for a teller to count
bills manually. In addition, cash dispensers dispense currency denominations at
very high speeds, thereby reducing transaction time, enabling tellers to
accurately handle more business, while facilitating end-of-the-day
reconciliation procedures.

          Administrative Support Systems automate the processing of transactions
in the "back office" of banks or other financial institutions, as well as in
gaming casinos. These products simplify and expedite labor-intensive tasks such
as sorting, processing and recording customer transactions, and prepare the
currency and coins required for the institution's teller operations and ATM-type
machines. Administrative support systems include the following:

          o Bank Note and Coin Sorting, Counting, Authenticating and Wrapping
machines make up a full line of products that have been designed to assist
personnel in the performance of certain labor-intensive tasks with greater
speed, efficiency and accuracy to meet the requirements of a bank's teller
operations, as well as the supply requirements of ATMs and similar machines.

Service, Support and Training

          Frisco Bay believes that customer service, technical support and
training are important to the success of its business. The Company currently has
a customer service, installation and support staff of approximately ninety-five
persons operating from the Company's nine regional sales and/or service
facilities in Canada and three in the United States. Additionally, the Company
engages dealers and/or subcontractors who are trained to provide these services
in certain remote areas or to supplement staff. Service and technical support
offered by the Company to its customers include system planning and support,
coordination and evaluation of product performance data, evaluation of existing
equipment and systems


                                      -11-



<PAGE>


specifications, site preparation, installation and user training. Frisco Bay's
service and support staff are available to its customers 7 days per week, 24
hours per day.

          The Company typically offers service and support contracts to its
customers providing for maintenance and support after installation or sale. As
part of the Company's technical and operation support program, the Company
provides in-house training courses for its clients to ensure that individuals
operating a system not only understand how it functions, but how it is
integrated into the work environment.

          The Company generally offers warranties on its products ranging from
three months to one year. Through January 31, 2003, warranty expense to the
Company historically has been minimal.

Product Assembly and Sources of Supply

          The Company's assembly operations consist of designing and developing
its products and systems, assembling various equipment, related hardware and
software components and finished products, most of which are purchased from
outside sources, and conducting quality control and final testing. The Company
staffs a quality assurance team that participates in the design, assembly and
testing of the Company's products and systems, including the inspection of
components, subassemblies and final tests. All assembly operations are currently
performed at the Company's facility in Montreal or through contracted suppliers.

          Most of the equipment, hardware, components and other supplies used by
the Company in its product and system assembly processes are available from
multiple suppliers, and it is the Company's policy to secure, whenever possible,
second and third sources of the supplies and materials it needs. Although Frisco
Bay generally relies upon separate, single suppliers for each of its cash
dispensing units, rolled coin dispensers, currency sorters and automatic deposit
systems, alternative sources are available, and the Company believes it is not
materially dependent upon any single source for any of its supply needs. Any
interruption in the supply of components from any supplier that serves currently
as a sole source, however, could delay product or system shipments and adversely
affect the Company's business unless and until new sources are developed and on
line or the interruption was otherwise resolved. The Company believes it
maintains a sufficient inventory of its supplies to meet current needs.

          A significant portion of the systems Frisco Bay sells to its customers
are comprised of products it acquires from outside sources pursuant to
distribution agreements that customarily grant to the Company, for terms
typically ranging from one to five years, rights to distribute products and to
provide warranty support. Certain of the Company's distribution agreements may
be terminated by either party without cause. While the Company does not consider
any single distribution agreement to be material to its business, the Company
generally relies upon distribution agreements with separate, individual sources
for its supply of certain products.

Sales, Distribution and Marketing

          Frisco Bay's sales force currently includes approximately 25 Company
employed representatives who operate on a regional basis from the Company's
sales and/or service facilities in Canada and in the United States. In Canada,
the Company maintains sales and/or service facilities in Quebec City, Montreal,
Ottawa, Toronto, Winnipeg, Calgary, Edmonton,


                                      -12-



<PAGE>


Regina and Vancouver. In the United States, Frisco Bay maintains sales and/or
service facilities in Parsippany, New Jersey, which is located in the New York
City metropolitan area, in Keller, Texas and in Tucker, Georgia. Most of the
Company's sales force is compensated by a combination of base salary and
incentive payments that are based on achieving or exceeding sales quotas. The
Company markets its products and systems principally through the direct efforts
of its in-house sales personnel. The Company is also marketing ATMs to the White
Label market in Canada through Frisco/ATMS. Frisco Bay supplements these sales
efforts by attendance at major trade shows and advertising through print media
in a variety of trade magazines. In addition, the Company markets and sells its
financial transaction processing and VIP products through dealers in certain
geographic areas that do not require the Company's physical presence.

          The Company's integrated security systems are marketed to financial
institutions and banks, commercial real estate developers, industrial facility
occupants, government facilities, airports, and large companies that utilize the
systems in a variety of applications, including manufacturing facilities,
distribution facilities and front office applications.

          The Company markets its self-service and financial transaction
processing systems to banks, financial institutions, shopping malls and other
retail institutions, such as department stores, supermarkets, fast food
establishments and other merchandisers whose businesses involve a large number
of frequent financial transactions with customers. The Company also markets some
of these products to gaming casinos in order to enhance productivity in the
counting and wrapping of coin, the counting of paper currency, and the
dispensing of cash.

          The Company's systems and products are assembled at, and distributed
from, its 30,000 square foot facility in Montreal, Quebec, Canada. Frisco Bay
believes that its facilities are adequate for its current assembly and
distribution needs.

          The Company maintains insurance, including product liability and
business interruption insurance, in a scope and amount management considers to
be adequate and customary under the circumstances, but there is no assurance
that the Company will not incur losses beyond the limits of, or outside the
coverage of, its existing insurance. In addition, the Company seeks to protect
itself against claims for product liability by offering express limited product
warranties that warrant the replacement or repair of the particular product or
system, and not against consequential damages resulting from the malfunction or
failure to perform. Historically, the Company has not experienced material
claims or been subject to material litigation regarding product liability claims
from its customers.

Significant Customers and Order Backlog

          The Company's sales to its five largest customers accounted, in the
aggregate, for approximately 25%, 34% and 28% of the Company's total sales
during the fiscal years ended January 31, 2001, 2002 and 2003, respectively, and
sales to the Company's two largest customers for each of those periods accounted
for approximately 8%, 13% and 11%, and 5%, 7% and 7%, respectively, of total
sales during those periods. There can be no assurance that any of the Company's
principal customers will maintain their volume of business with the Company or
that a similar volume of business would be forthcoming from new or existing
customers to replace lost business, if any. The loss of one or more of the
Company's existing significant customers without replacement by a customer or
customers of similar volume would have a


                                      -13-



<PAGE>


material adverse effect on the Company's business, financial condition,
operating results and prospects.

          Frisco Bay's backlog of firm orders at May 31, 2003, was approximately
CDN $7.6 million, compared to CDN $7.9 million at May 31, 2002. Management
expects to ship all the orders included in the May 31, 2003, backlog by January
31, 2004. Additional information is contained under the caption "Item 5.
Operating and Financial Review and Prospects" below.

Competition

          Frisco Bay believes that the principal factors affecting competition
in its markets are (i) the ability to customize products and application
software to meet customer needs and solve problems, (ii) product functionality,
price and ease of use, and (iii) customer service and support. Several
companies, including Banking Automation and Diebold, Inc. in the United States,
and NCR Corporation of Canada, presently compete in the market of self-service
and financial transaction processing systems. The Company believes that national
financial institutions desire standardization of their systems, service and
support and, therefore, are most likely to purchase systems from larger,
national companies who can provide the desired quality and scope of sales and
service. However, many smaller companies do compete with the Company in
non-financial markets on a regional basis.

          For similar reasons, the Company faces national competition in Canada
in its integrated security systems market from a few large competitors,
including Chubb Security Systems, ADT Security Systems, Siemens Building
Technologies, Inc. and Johnson Controls and from many small to midsized
competitors on a regional basis.

          Many of the Company's competitors and potential competitors have
greater research, development, financial and personnel resources or name
recognition than Frisco Bay. There can be no assurance that the Company will be
able to maintain its market share in Canada, or that it will be able to compete
successfully in the United States or elsewhere.

Patents and Trademarks

          As a result of its ongoing development efforts, the Company has
developed proprietary technology. Frisco Bay currently holds one patent in
Canada. This patent expires in 2006. It is the Company's policy to defend its
patents, although there can be no assurance that it will have the resources to
defend, or that it will be successful in defending, any such patents. Except as
described above, management believes that none of Frisco Bay's current systems
or products is materially dependent upon a single patent or license or group of
related patents or licenses, and that timely introduction of products that
incorporate new technologies and that are particularly suited to meet the needs
of a specific market or customer group is the more important factor in
influencing the Company's results of operations. There can be no assurance that
the Company's present or future competitors will not develop technologies that
are substantially equivalent or superior to the Company's technology, or that
the Company's issued patent will be upheld if challenged.

          The Company regards its trademark "Frisco Bay" as valuable to its
business. The Company has registered that trademark in Canada and in the United
States, and has not granted any rights to use its name to any unaffiliated third
party. Registration of the trademarks "VIP"


                                      -14-



<PAGE>


and "Commercial Kiosk" have been granted in Canada and in the United States.
Copyright protection for the base software related to VIP has been granted in
Canada and is pending in the United States.

          (C)  Organizational Structure

          The Company's wholly-owned subsidiary Frisco Bay Industries, Ltd. (a
Maryland corporation) coordinates the Company's operations outside Canada.

          (D)  Property, Plants and Equipment

          The Company believes that its facilities, including its machinery and
equipment, are generally in good condition and well maintained. The Company
believes that its product assembly and sales and service facilities have
adequate capacity to accommodate the Company's present needs and foreseeable
business growth. The Company's principal properties are described in the
following table.

<TABLE>
<CAPTION>
                                                                    Approximate
                                                                  Square Footage
         Location                       Type of Property           of Facility
---------------------------      ------------------------------   --------------
<S>                              <C>                                 <C>
Montreal, Quebec                 Executive Offices, Product          30,000(1)
                                 Assembly, Sales and Service,
                                 Laboratory

Toronto, Ontario                 Sales and Service, Laboratory,      14,034(2)
                                 Research and Development

Vancouver, British Columbia      Sales and Service, Laboratory        5,100(2)

Calgary, Alberta                 Sales and Service, Laboratory        4,037(2)

Winnipeg, Manitoba               Sales and Service, Laboratory        2,120(2)

Edmonton, Alberta                Sales and Service                      700(2)

Ottawa, Ontario                  Sales and Service                    1,210(2)

Parsippany, New Jersey           Sales                                  200(2)
</TABLE>

----------
(1)  Leased from an affiliate of the Company for a term expiring in 2016, with
     an option to renew for an additional ten-year period on substantially the
     same terms. Additional information is contained under the caption "Item 7.
     Major Shareholders and Related Party Transactions" below and in Note 14 of
     Notes to Consolidated Financial Statements.

(2)  Leased under leases with landlords that expire at various times through
     2008. See Note 14 of Notes to Consolidated Financial Statements for
     additional information.


                                      -15-



<PAGE>


          Item 5. Operating and Financial Review and Prospects

          The following discussion and analysis should be read together with the
Consolidated Financial Statements of the Company including the Notes thereto.
The Company prepares its Consolidated Financial Statements in accordance with
accounting principles generally accepted in Canada. For a reconciliation of
differences to accounting principles generally accepted in the United States,
see Note 21 of Notes to Consolidated Financial Statements. All dollar amounts
discussed in this section are in Canadian dollars.

          Management operates and evaluates the Company's business in two major
segments, product sales and product support and service fees. Product revenues
include the sale and installation of equipment and integrated systems. Service
revenues include maintenance contract revenues and ATM machine service fees. The
expenses which can be identified within each of these segments are disclosed in
the Consolidated Statements of Earnings and Deficit. The assets are common to
both segments and cannot be allocated.

          The following table sets forth, for the three most recent fiscal
years, the percentage relationship to total revenues of principal items in the
Company's Statement of Continuing Operations:

<TABLE>
<CAPTION>
                                                         Year Ended January 31,
                                                         ----------------------
                                                           2001   2002   2003
                                                           ----   ----   ----
<S>                                                        <C>    <C>    <C>
Revenues
   Products                                                 67%    68%    66%
   Services:
      Maintenance Agreements                                21%    11%    14%
      ATM Service Fees                                      12%    21%    20%
                                                           ---    ---    ---
   Total Services                                           33%    32%    34%
                                                           ===    ===    ===
                                                           100%   100%   100%

Costs and Expenses
   Costs of products                                        52%    45%    45%
   Costs of services                                        22%    22%    21%
   Selling, general and administrative                      25%    26%    24%
   Amortization                                              2%     2%     3%
   Interest and bank charges                                 1%     1%     1%
   Income taxes                                             (1)%    0%     2%

Net Earnings (Loss) From Continuing Operations              (1)%    4%     6%
                                                           ===    ===    ===
                                                           100%   100%   100%
</TABLE>


                                      -16-



<PAGE>


          The following table sets forth, for the three most recent fiscal
years, a breakdown by category of the Company's revenues, in thousands of
dollars, and the percentage increase (decrease) over the previous year:

<TABLE>
<CAPTION>
                                Year Ended January 31,     % Increase (Decrease)
                             ---------------------------   ---------------------
                               2001      2002      2003    2002 over   2003 over
                             -------   -------   -------   ---------   ---------
                                                             2001        2002
                                                             ----        ----
<S>                          <C>       <C>       <C>         <C>          <C>
Products                     $23,963   $29,349   $33,918      22%         16%

Services:

   Maintenance Contracts     $ 7,554   $ 4,815   $ 6,989     (36%)        45%
   ATM Service Fees          $ 4,330   $ 8,928   $10,370     106%         16%
                             -------   -------   -------
Total Services               $11,884   $13,743   $17,359      16%         26%
                             =======   =======   =======
Total Revenues               $35,847   $43,092   $51,277      20%         19%
</TABLE>

          The following table provides a breakdown of the Company's revenues by
geographic areas in thousands of dollars for the periods indicated:

<TABLE>
<CAPTION>
                                       CANADA                    UNITED STATES
                                Year Ended January 31,      Year Ended January 31,
                             ---------------------------   ------------------------
                               2001      2002      2003     2001     2002     2003
                               ----      ----      ----     ----     ----     -----
<S>                          <C>       <C>       <C>       <C>      <C>      <C>
Products                     $21,584   $27,160   $31,064   $2,379   $2,189   $2,854

Services:

   Maintenance Contracts     $ 7,337   $ 4,598   $ 6,799   $  217   $  217   $  190
   ATM Service Fees          $ 4,330   $ 8,928   $10,370       --       --       --
                             -------   -------   -------   ------   ------   ------
Total Services               $11,667   $13,526   $17,169   $  217   $  217   $  190
                             =======   =======   =======   ======   ======   ======
Total                        $33,251   $40,686   $48,233   $2,596   $2,406   $3,044

% of Total Revenues by
   Geographic Area                93%       94%       94%       7%       6%       6%
</TABLE>

          (A)  Operating Results

Fiscal year ended January 31, 2003 compared to fiscal year ended January 31,
2002

          Revenues. Consolidated revenues for the year ended January 31, 2003
("Fiscal 2003") amounted to $51,277,209 compared to $43,091,872 for the year
ended January 31, 2002 ("Fiscal 2002"), representing an increase of 19%.

          Product revenues. Product revenues, which include sales of new
equipment and installation revenues, increased by 16% from $29,349,186 in Fiscal
2002 to $33,918,443 in Fiscal 2003. Sales of integrated security systems were
24% higher than last year due to the increased penetration of the digital video
image processing (VIP) product line in the Canadian


                                      -17-



<PAGE>


and U.S. markets, as well as the completion of major integrated systems for
government agencies and large industrial customers.

          In order to support the rapid growth of the integrated security
systems product line, the Company increased its workforce both in Canada and the
United States. Intivid Solutions, Frisco Bay's division in charge of the
development and marketing of its proprietary VIP digital video system, expanded
its global dealer network to more than 50 dealers in the United States, certain
European countries, New Zealand and Australia. Management expects to continue to
build its dealer network in areas in which it is not currently present.

          As a percentage of total product revenues, integrated security
amounted to 65% in Fiscal 2003, compared to 61% in Fiscal 2002.

          Sales of financial transaction products in Fiscal 2003 were 2% higher
than the previous year primarily due to an increase in sales of cash dispensing
equipment to financial institutions.

          As a percentage of total product revenues, financial transactions
amounted to 35% in Fiscal 2003, compared to 39% in Fiscal 2002.

          Service Revenues: In Fiscal 2003, service revenues, which includes
recurring revenue from short and long-term service and processing agreements,
increased by 26% from $13,742,686 to $17,358,766. Revenues from service
contracts increased by 45% to $6,988,887 from $4,814,949 in Fiscal 2002 due to a
change in accounting estimates in Fiscal 2002 explained in the next paragraph,
as well as an increase in service contract revenue in both the integrated
security and financial transaction product lines.

          As a result of changes in the Company's business operations and
practices, costs incurred on its service contracts are now spread out more
evenly over the term of the contract. Therefore, the Company is now recognizing
the corresponding revenue evenly over the term of the contract. As a result, in
addition to an adjustment of approximately $400,000 processed in the second
quarter of Fiscal 2002 on some of the Company's main contracts, this change in
estimate had the one-time effect of decreasing earnings before income taxes in
Fiscal 2002 by approximately $1,200,000.

          ATM service fees reached $10,369,879, a 16% increase over the levels
achieved in the preceding year. ATM service fees increased due to additional
revenue generated by a higher number of owned machines than the prior year,
including the impact of the new contract with Gateway Casinos.

          As a percentage of total revenue, service revenues increased from 32%
in Fiscal 2002 to 34% in Fiscal 2003. This increase is in line with the
Company's ongoing focus on recurring revenue. As at January 31, 2003, Frisco Bay
had a recurring revenue backlog from long-term agreements of approximately $46
million to be recognized over the next 3 to 5 years. This compares to a
recurring revenue backlog of approximately $40 million as at January 31, 2002.

          Geographic Distribution of Revenues: Revenues generated in Canada in
Fiscal 2003 at $48,233,054 were 19% higher than the previous year. Revenues
generated in the United


                                      -18-



<PAGE>


States in Fiscal 2003 at $3,044,155 were 27% higher than the previous year. In
Fiscal 2003, non-Canadian revenues represented 6% of total revenues, the same
level as in Fiscal 2002.

          Costs and Expenses: Gross profits for the Company in Fiscal 2003 were
$17,700,997, or 35% of revenues, compared to $14,404,499, or 33% of revenues, in
Fiscal 2002.

          Gross profit as a percentage of product sales decreased to 32% in
Fiscal 2003 from 35% in Fiscal 2002 mainly as a result of product mix.

          Gross margin on service revenues increased to 39% in Fiscal 2003 from
31% in Fiscal 2002. The increase is mainly attributable to the non-recurrence in
Fiscal 2003 of the one-time charge incurred in Fiscal 2002 related to the change
in estimate on the recognition of service contract revenue explained above.

          Selling, General and Administrative (SG&A) costs increased by 6% to
$12,066,278 in Fiscal 2003 from $11,363,290 in Fiscal 2002 primarily due to
increased selling expenses. As a percentage of sales, SG&A decreased from 26% in
Fiscal 2002 to 24% in Fiscal 2003. The percentage decrease was due to general
and administrative costs remaining flat in spite of the sales growth.

          Financial Costs: Interest expense and bank charges in Fiscal 2003
amounted to $327,808, a 27% decrease over the level of the previous year. The
decrease was due to the lower level of average short-term borrowings during the
year compared to the previous year, and increased interest income partially
offset by higher interest expense on obligations under capital leases.

          Income Taxes: An income tax expense of $871,000 was recorded in Fiscal
2003 compared to $36,000 in Fiscal 2002. The current tax expense of $333,000 in
Fiscal 2003 was higher than the $262,000 recorded in Fiscal 2002 due to the
increased level of earnings before taxes. A future income tax expense of
$538,000 was recorded in Fiscal 2003 compared to a future income tax recovery of
$226,000 in Fiscal 2002. In Fiscal 2003, the future tax expense represents the
utilization of tax loss carry forwards and capital cost allowance claims in
excess of book depreciation, while the future income tax recovery recorded in
Fiscal 2002 was based on management's estimates of the future tax benefits
available from capital cost allowance claims in excess of net book value of
capital assets, investment tax credits and losses carried forward.

          Net Earnings: In Fiscal 2003, the Company generated net earnings of
$3,140,081, or $1.32 per share, a 78% improvement over earnings of $1,767,618,
or $0.76 per share, in Fiscal 2002.

Fiscal year ended January 31, 2002 compared to fiscal year ended January 31,
2001

          Revenues. Consolidated revenues for the year ended January 31, 2002
("Fiscal 2002") amounted to $43,091,872 compared to $35,847,437 for the year
ended January 31, 2001 ("Fiscal 2001"), representing an increase of 20%.

          Product revenues. Product revenues increased by 22% from $23,963,480
in Fiscal 2001 to $29,349,186 in Fiscal 2002. Sales of integrated security
systems were 22% higher


                                      -19-



<PAGE>


than last year primarily due to the increased penetration of the digital video
image processing (VIP) product line in the Canadian and U.S. markets.

          The Company has continued to allocate additional financial and human
resources to the integrated security segment of its business. The Company has
also continued to expand its product offering to provide a comprehensive range
to its customers. For example, the VIP equipment division was spun off into its
own operating unit, Intivid Solutions Inc. This structure gives Intivid the
necessary focus and resources to continue improving the VIP product line to
ensure it maintains its technological edge.

          As a percentage of total product revenues, integrated security
amounted to 61% in Fiscal 2002, compared to 60% in Fiscal 2001.

          Sales of financial transaction products in Fiscal 2002 were 21% higher
than the previous year primarily due to an increase in sales of cash dispensing
equipment to financial institutions, including a large order from a major
chartered bank, and the casino industry.

          As a percentage of total product revenues, financial transactions
amounted to 39% in Fiscal 2002, compared to 40% in Fiscal 2001.

          Service Revenues: In Fiscal 2002, service revenues increased by 16%
from $11,883,957 to $13,742,686. Revenues from service contracts decreased by
36% to $4,814,949 from $7,553,674 in Fiscal 2001. As a result of changes in the
Company's business operations and practices, costs incurred on its service
contracts are now spread out more evenly over the term of the contract.
Therefore, starting in fiscal 2002 the Company is now recognizing the
corresponding revenue evenly over the term of the contract. This change in
estimate had the effect of decreasing earnings before income taxes in fiscal
2002 by approximately $1,200,000.

          ATM service fees reached $8,927,737, more than double the levels
achieved in the preceding year. ATM service fees increased due to additional
revenue generated by a higher number of owned machines than the prior year.

          As a percentage of total revenue, service revenues decreased from 33%
in Fiscal 2001 to 32% in Fiscal 2002.

          Geographic Distribution of Revenues: Revenues generated in Canada in
Fiscal 2002 at $40,686,168 were 22% higher than the previous year. Revenues
generated in the United States in Fiscal 2002 at $2,405,704 were 7% lower than
the previous year. In Fiscal 2002, non-Canadian revenues represented 6% of total
revenues compared to 7% reported in Fiscal 2001.

          Costs and Expenses: Gross profits for the Company in Fiscal 2002 were
$14,404,499, or 33% of revenues, compared to $9,167,646, or 26% of revenues, in
Fiscal 2001.

          Gross profit as a percentage of product sales improved to 35% in
Fiscal 2002 from 22% in Fiscal 2001 as a result of improved product mix and the
implementation of margin-driven incentives for managers throughout the
organization.

          Gross margin on service revenues decreased to 31% in Fiscal 2002 from
34% in Fiscal 2001. The decrease is mainly attributable to the change in
estimate on the recognition of service contract revenue explained above.


                                      -20-



<PAGE>


          Selling, General and Administrative (SG&A) costs increased by 27% to
$11,363,290 in Fiscal 2002 from $8,957,828 in Fiscal 2001. As a percentage of
sales, SG&A increased from 25% in Fiscal 2001 to 26% in Fiscal 2002. The
increase was due to increased provisions for bad debt and inventory obsolescence
as well as increased commissions resulting from the sales growth. The Company
continues to review its overhead structure to ensure that it remains in line
with the level of business activity.

          Financial Costs: Interest expense and bank charges in Fiscal 2002
amounted to $449,531, a 57% increase over the level of the previous year. The
increase was due to the higher level of average short-term borrowings during the
year compared to the previous year and increased interest on obligations under
capital leases.

          Income Taxes: An income tax expense of $36,000 was recorded in Fiscal
2002 compared to a recovery of $474,000 in Fiscal 2001. In Fiscal 2002, a
current tax expense of $262,000 was partially offset by a future income tax
recovery of $226,000. In Fiscal 2001, the recovery of $474,000 was recorded
entirely against future income taxes. The future income tax recovery recorded in
both years is based on management's estimates of the future tax benefits
available from capital cost allowance claims in excess of net book value of
capital assets, investment tax credits and losses carried forward.

          Net Earnings: The Company generated net earnings of $1,767,618, or
$0.76 per share, a $1,969,674 improvement over last year's loss of $202,056, or
$0.09 per share.

Subsequent Events

          On February 27, 2003, the Company effectively acquired, through a
series of transactions, the remaining 50% in ATMS/Frisco Bay and company Limited
Partnership ("ATMS"). As consideration for the aggregate purchase price of
approximately $6,300,000, the Company paid $3,600,000 in cash, assumed
$1,000,000 of liabilities and owes a balance of purchase price of $1,700,000 to
be paid out of internally generated cash flows over the next two years. The
results of the remaining 50% interest in ATMS will be included commencing
February 1, 2003. This acquisition will be accounted for using the purchase
method. The allocation of the purchase price to the fair value of the
identifiable assets and liabilities has not yet been completed.

Exchange Rate Risk

          The Company records its transactions and prepares its financial
statements in Canadian dollars. During Fiscal 2003, approximately 6% of sales
and 50% of purchases of equipment, parts and supplies were transacted in
currencies other than the Canadian dollar. During Fiscal 2003, most foreign
currencies with which the Company deals appreciated in comparison to the
Canadian dollar. The appreciation of the U.S. dollar relative to the Canadian
dollar is tabled under the caption "Item 3. Key Information-Exchange Rates"
above.

          As of May 31, 2003, the Company had entered into foreign exchange
contracts to purchase US $200,000 (CDN $285,860) in the month of June and US
$200,000 (CDN $286,340) in the month of July. The contracts can be exercised at
any time during the respective months.


                                      -21-



<PAGE>


          (B)  Liquidity and Capital Resources

          The Company's cash requirements are for capital expenditures and
working capital. The Company believes that cash flow from operating activities,
cash on hand (including the $4 million invested in short-term deposits, bankers'
acceptances, provincial bonds and cash), and periodic short-term borrowings will
be adequate to meet its operating cash requirements for the next 12 months.

          The Company has negotiated a revolving operating facility of $5
million at rates ranging from bank prime to bank prime plus 1/2%. At January 31,
2003, the Company was not utilizing its operating line. At January 31, 2002, the
Company had utilized its operating line to the extent of $2,700,000, including
the issuance of Letters of Credit to suppliers.

          ATMS has negotiated an operating demand line of credit of $5.75
million at a rate of bank prime plus 1/2%. This line is used to finance cash
loaded into the ATMs. The cash is presented as part of cash in circulation in
automated teller machines in the current assets section of the balance sheet. At
January 31, 2003, ATMS had utilized its operating line to the extent of
$2,280,451, as compared to $1,173,071 at January 31, 2002.

          Working capital as at January 31, 2003 and 2002 was $10,447,875 and
$7,012,266 respectively.

Subsequent Events

          On February 19, 2003, the Company obtained a $3,500,000 term loan, in
part, to finance the ATMS acquisition. The loan bears an annual interest at the
bank's prime rate plus 0.875%, and is repayable over three years. The Company
also has the right to prepay the term loan at any time. As security for the term
loan and for the Company's current credit facility (note 10), the Company has
pledged a $12,500,000 moveable hypothec on accounts receivable, inventories and
other moveable property. The Company has also provided an assignment of fire
insurance on the Company's assets and life insurance on the Company's
executives. The terms of the banking agreement require the company to comply
with certain financial ratios.

          On February 24, 2003, the Company obtained a $1,500,000 credit
facility to provide vault cash for automated teller machines. The demand loan
bears an annual interest at the bank's prime rate plus 0.25% and is secured by a
letter of credit from the Company's principal bank. The terms of the credit
facility require the Company to comply with certain financial ratios.

          On June 16, 2003, the Company agreed to a US$2,187,900 private
placement financing consisting of 243,100 common shares at US$9.00 per common
share. The net proceeds of the financing will be used to reduce debt taken on in
its recent acquisition of the remaining 50% of Frisco/ATMS Limited partnership
and to support the Company's acquisition strategy.

          (C)  Research and Development, Patents and Licenses, etc.

          The Company has invested continuously in research and development to
produce new and improved products to satisfy customer needs and requirements.
The Company continues to develop the software that forms part of various systems
acquired from foreign


                                      -22-



<PAGE>


suppliers used in a new generation of self-service processing systems. These
modifications are being made to tailor the software to the specific needs and
requirements of individual customers.

          The Company's research and development expenditures for the fiscal
years ended January 31, 2001, 2002 and 2003, were $294,999, $311,439 and
$356,435, respectively.

          Under accounting principles generally accepted in Canada, development
costs may be capitalized upon meeting certain specific criteria, including the
establishment of technological feasibility. The Company had capitalized
development expenditures of $127,818 during fiscal 2001. The Company had no
capitalized development expenditures in its 2002 and 2003 fiscal years. The
Company intends to continue to expense its development costs as incurred.
Amortization of these capitalized costs is presented separately on the statement
of earnings. Development costs include the salaries and benefits of certain
employees who work full time on new product development, as well as costs of
materials and labor related to new prototypes. These costs also include
miscellaneous travel and other expenses related to specific development
activities. Once a product is commercialized, the capitalized development costs
related to that product are amortized over a two-year period.

          The Company evaluates the viability of products on an annualized basis
and deferred costs relating to products that are no longer expected to attain
commercial success are written off immediately. As at January 31, 2003, the
Company had no unamortized deferred development costs. Under United States
generally accepted accounting principles, development costs are expensed as
incurred. See Note 21 of Notes to Consolidated Financial Statements for
additional information.

          The Company is continuing its policy of investing in development
programs and has budgeted $350,000 for development for its fiscal year ending
January 31, 2004. There can be no assurance, however, that such expenditures
will result in any short-term or long- term benefits to the Company.

          (D)  Trend Information

          The market for security systems integration is one of the fastest
growing sectors of the security industry. Industry analysts expect this segment
to grow at a rapid pace over the next 3 to 5 years. However, recent global
economic and political uncertainties have resulted in reduced capital spending
in the short term. As a result, market growth in this sector has slowed down in
the first half of 2003. The outlook for Frisco Bay in this market segment is to
complement organic growth with targeted acquisitions to improve our market
position in selected geographical areas and to continue expanding our global VIP
dealer network. Also, we are looking to broaden our product and service offering
in this space by providing our customer base additional outsourcing services.

          In the self-service and financial transaction processing business, we
are continuing to follow our successful strategy of maintaining sales of new and
current product to grow the recurring maintenance contract revenue base. We are
also introducing new self-service products to the gaming casino industry to
support their transition to cashless operations.

          The White-Label ATM industry is highly fragmented as more than 50% of
companies operate networks of less than 100 machines. Regulators have also
recently tightened


                                      -23-



<PAGE>


operational requirements and this is having a significant impact on the smaller
companies. With its network of 1300 machines, Frisco Bay is one of the leaders
in Canada and already has all of the controls in place to meet the new
regulatory environment. As a result, the Company is well positioned to take
advantage of consolidation in this industry.

          Because of the consolidation within the financial industry in the
United States and Canada, both in terms of industry concentration and internal
reorganization, Frisco Bay has, in recent years, focused on increasing sales of
its integrated security systems and its financial processing products outside of
the financial industry.

          The Company has been successful at increasing its level of business to
other industries including global retail chains, auto manufacturers and
information technology organizations as well as gaming casinos. Consequently,
although still extremely important to the Company, orders from financial
institutions represent approximately 25% of total revenues down from more than
50% in the 1990's. These institutions typically place orders for a major portion
of their capital budgets in the latter part of the calendar year.


                                      -24-



<PAGE>


          Item 6. Directors, Senior Management and Employees

          (A)  Directors and Senior Management

          The following table sets forth, as of May 31, 2003, the Directors and
executive officers of the Company:

<TABLE>
<CAPTION>
                                                                      Date First Became an
                                                                            Executive
          Name                             Position                    Officer or  Director
          ----                             --------                   --------------------
<S>                         <C>                                       <C>
Barry E. Katsof (1)(2)      Chief Executive Officer and Chairman of
                            the Board of Directors                    February, 1987

Ronald G. Waxman(3)         Vice Chairman and
                            Director                                  December, 1988

Robert Gagnon               Vice President, Finance and Information
                            Technology and Assistant Secretary        April 2001

Heather Halickman(4)        Vice President, Human Resources
                            and Secretary                             April, 1992

Dominique Mimeault          Vice President,
                            Special Projects                          September, 1997

Abraham Nozetz(2)(5)(6)     Director                                  June, 1993

Brahm M. Gelfand(1)(2)(6)   Director                                  June, 1993

Jan Westlund(5)             Director                                  July, 1995

James G. Spencer(1)         Director                                  July, 1999
</TABLE>

----------
(1)  Class III Director, current term of office expires at the Annual Meeting of
     Shareholders in 2005.

(2)  Member of the audit committee.

(3)  Class II Director, current term of office expires at the Annual Meeting of
     Shareholders in 2004.

(4)  Ms. Halickman stepped down as Vice President, Human Resources and Secretary
     on June 13, 2003.

(5)  Class I Director, current term of office expires at the Annual Meeting of
     Shareholders in 2003.

(6)  Member of the compensation committee.


                                      -25-



<PAGE>


          Set forth below is information regarding the relevant business
experience of our Directors and executive officers.

          Barry E. Katsof

          Age: 55. Co-founded the Company in 1972 and Chief Executive Officer
and Chairman of the Board of Directors since February 1987. Mr. Katsof has been
a director of Quebec Blue Cross since 1992, and was previously a director of
Promatek Industries Ltd., an electronic copy control manufacturer. Mr. Katsof
received a Bachelor of Commerce degree (the equivalent in the United States of
an under-graduate business degree) from Sir George Williams University, a
predecessor of Concordia University, in 1970.

          Ronald G. Waxman

          Age: 53. A co-founder of Camtron Electronics International Ltd. in
1977, a company which prior to its amalgamation with Frisco Bay, was a
subsidiary of the Company. Previously, the President of the Company and
currently Vice Chairman and Chief Operating Officer since August 1995 and a
Director since December 1988. Mr. Waxman received a Bachelor of Commerce degree
from Sir George Williams University in 1971.

          Robert Gagnon

          Age: 44. Vice President Finance and Information Technology and
Assistant Secretary since April 2001. Mr. Gagnon was employed by Saturn
(Solutions) Inc. as Vice President from 1999 to 2001 and Corporate Controller
from 1997 to 2001. From 1995 to 1997, he was Director of Finance of the vaccine
subsidiary of BioChem Pharma Inc. From 1989 to 1994, he was employed by Domtar
Inc. where he held various positions including Director - Financial Planning and
Management Reporting. Mr. Gagnon received his Bachelor in Accounting and
Business Administration from the University of Montreal (H.E.C.) in 1991. He
qualified as a Certified General Accountant in Canada in 1984.

          Heather Halickman

          Age: 55. Ms. Halickman was Vice President, Human Resources from 1992
and Secretary of the Company from 1993 until she stepped down on June 13, 2003.
Ms. Halickman joined the Company in April 1978 and previously served as
Personnel Manager from 1985 to 1989 and as Marketing Manager from 1989 until
1992. Ms. Halickman received a teaching diploma from MacDonald College in 1966,
at that time the education faculty of McGill University in Montreal, and was an
elementary school teacher until 1975.

          Dominique Mimeault

          Age: 51. Vice President, Special Projects since August 2000,
previously Vice President, Service and Product Delivery since November 1997. Mr.
Mimeault joined the Company in 1986 and served as account manager from 1986 to
1989, and as Vice President and General Manager for the Eastern Region from 1989
until 1997. Prior to joining Frisco Bay Mr. Mimeault spent 14 years with the
Royal Bank of Canada where he held various management positions.


                                      -26-



<PAGE>


          Abraham Nozetz

          Age: 70. A Director of the Company since June 1993. Prior to his
retirement Mr. Nozetz was a partner in the firm of Fuller Landau, independent
chartered accountants, and its predecessors.

          Brahm M. Gelfand

          Age: 66. A Director of the Company since June 1993 and previously
served as Secretary from January 1992 to September 1993. Mr. Gelfand has been a
partner in the law firm of Lapointe Rosenstein, the Company's Canadian legal
counsel, for over twenty-five years. Mr. Gelfand is currently a member of the
Board of Governors of Dynamic Mutual Funds and serves as a trustee for Dynamic
QSSP Fund . He also serves as a director of Innovium Capital Corp. and SureFire
Commerce Inc. Amongst his community endeavors, Mr. Gelfand is a Director of a
number of non-profit corporations, namely the Roasters' Foundation, the Sir
Mortimer B. Davis-Jewish General Hospital, the Hospital's Foundation and Summit
School. He earned a Bachelor of Arts degree in 1957 and a Bachelor-Civil Law
degree in 1960 from McGill University in Montreal. He is a member of the Bar of
the Province of Quebec, the Canadian Bar Association and the American Bar
Association. Additional information regarding Mr. Gelfand's relationship with
the Company is contained under the caption "Item 7.(B) Related Party
Transactions" below.

          Jan Westlund

          Age: 61. A Director of the Company since July 1995, Mr. Westlund is an
international business consultant and is founder and Chairman of Business
Support Systems, a consulting firm located in Sweden. Mr. Westlund was
previously Managing Director of Inter-Innovation, the world's largest
manufacturer of cash dispensing machines, that was subsequently sold to De La
Rue Systems of England.

          James G. Spencer

          Age: 60. A Director of the Company since July 1999, Mr. Spencer is
semi-retired but serves as President of The Tartan Group Inc., a
business-consulting firm located in Boca Raton, Florida. Mr. Spencer was
previously Vice President and part owner of Casi Rusco, Inc., currently a
division of Interlogix. He has also held multiple sales and marketing management
positions with IBM. Mr. Spencer is a graduate of Pace University in New York,
where he earned BBA and MBA degrees.

          (B)  Compensation

          For the fiscal year ended January 31, 2003, all Directors and
executive officers of the Company as a group (9 persons) received total
compensation of approximately $1,390,127.

          Directors who are not officers of the Company receive an annual fee of
$4,000 and a participation fee of $500 for each meeting of the Board of
Directors attended, except for Brahm M. Gelfand, a partner of Lapointe
Rosenstein, the Company's Canadian legal counsel that receives a fee for the
services Mr. Gelfand renders as a Director of the Company, and Jan Westlund, who
upon his appointment to the Board of Directors in July 1995 received options to
purchase 7,515 shares of Common Stock of the Company at a price of US $4.00 per
share which vested immediately and which are exercisable at any time before July
28, 2005.


                                      -27-



<PAGE>


Additional information regarding Mr. Gelfand's relationship with the Company is
contained under the caption "Item 7.(B) Related Party Transactions" below. The
Company also reimburses Directors for their actual out-of-pocket expenses.

          Information regarding options held by Directors and executive officers
who served during the fiscal year, is contained under the caption "Item 6.(E)
Share Ownership" below.

          (C)  Board Practices

          The Board of Directors is divided into three classes. Members of each
class are elected to hold office for three-year staggered terms. Additional
information is contained under the caption "Item 6.(A) Directors and Senior
Management" above.

          Our Directors do not have service contracts with us providing for
benefits upon the cessation of their service. Each outside Director is entitled
to receive an annual retainer of $4,000 plus meeting fees for their service on
our board except for Brahm M. Gelfand, a partner of Lapointe Rosenstein, the
Company's Canadian legal counsel that receives a fee for the services Mr.
Gelfand renders as a Director of the Company. Additional information regarding
Mr. Gelfand's relationship with the Company is contained under the caption "Item
7.(B) Related Party Transactions" below. Directors are also eligible to receive
grants of options under the Company's Stock Incentive Plan.

Employment Agreements

          Executive officers serve at the discretion of the Board of Directors,
subject to the terms of any agreement between an officer and the Company.
Additional information is contained under the caption "Item 3.(D) Risk Factors"
above.

Audit Committee

          The members of the audit committee consist of Barry E. Katsof, Brahm
M. Gelfand and Abraham Nozetz. The audit committee is charged with overseeing
the Company's accounting and financial reporting policies, practices and
internal controls. The committee reviews significant financial and accounting
issues and the services performed by and the reports of our independent auditors
and makes recommendations to our Board of Directors with respect to these and
related matters.

Compensation Committee

          The Company's compensation committee is responsible for making
determinations regarding salaries, bonuses, option grants and other remuneration
for the Company's officers and key employees. The members of the compensation
committee consist of Brahm M. Gelfand and Abraham Nozetz.

          (D)  Employees

          As of January 31, 2003, Frisco Bay had approximately one hundred
eighty full-time employees. Functionally, approximately thirteen employees are
engaged in product assembly, shipping and warehousing operations, one hundred
twenty-six in marketing, sales, service and support, two in research and
development and thirty-nine in general and


                                      -28-



<PAGE>


administrative activities. Three of the Company's full-time employees are
employed in operations outside of Canada.

          (E)  Share Ownership

          The following information with respect to the outstanding shares of
Class A Common Stock and Common Stock beneficially owned by each Director of the
Company, each nominee for Director of the Company, each executive officer named
under the caption "6.(A) Directors and Senior Management" above, each former
executive officer who served for all or part of the fiscal year and all
Directors and executive officers of the Company as a group, is furnished as of
May 31, 2003. Except as otherwise noted, each person listed in the table owns
all shares directly and has sole voting and investment power.


                                      -29-



<PAGE>


<TABLE>
<CAPTION>
                                                        NUMBER OF
                          NUMBER OF                     SHARES OF
                          SHARES OF      NUMBER OF     COMMON STOCK
                           CLASS A       SHARES OF     THAT MAY BE      PERCENT
                           COMMON         COMMON         ACQUIRED      OF CLASS   PERCENT
                           STOCK          STOCK       WITHIN 60 DAYS      A         OF
                        BENEFICIALLY   BENEFICIALLY      BY OPTION      COMMON     COMMON
        NAME               OWNED         OWNED(1)        EXERCISE        STOCK     STOCK
---------------------   ------------   ------------   --------------   --------   -------
<S>                        <C>            <C>             <C>           <C>        <C>
Barry E. Katsof(2)         546,793            --              --        68.35%       --

Ronald G. Waxman(3)        252,707            --              --        31.59%       --

Robert Gagnon                   --         2,667           2,667           --          *

Heather Halickman(4)           200         2,000           2,000             *         *

Dominique Mimeault             200         2,150              --             *         *

Abraham Nozetz                  --        22,500          22,500           --      1.31%

Brahm M. Gelfand                --        22,500          22,500           --      1.31%

Jan Westlund                    --        30,015          30,015           --      1.75%

James G. Spencer(5)             --        11,000          10,000           --          *

All Directors and
executive officers
as a group

(9 persons)...............  799,900        92,832          89,682        99.99%     5.29%
</TABLE>

----------
* Indicates less than one percent.

(1)  Amounts include the shares shown in the next column, which are not
     currently outstanding but are deemed beneficially owned because of the
     right to acquire them pursuant to options exercisable within 60 days (on or
     before July 31, 2003).

(2)  Held by 92324 Canada Ltd., a company controlled by Mr. Katsof.

(3)  Held by 126909 Canada, Inc. ("Waxco"), a company controlled by Mr. Waxman.
     Pursuant to an agreement entered into among Waxco, 92324 Canada Ltd.
     ("Katsco"), Ronald G. Waxman, Barry E. Katsof and Brahm M. Gelfand (an
     escrow agent), Mr. Katsof, through Katsco, is currently entitled to
     exercise the voting rights attached to the Class A Common Shares held by
     Waxco.

(4)  Ms. Halickman stepped down as Vice President, Human Resources and Secretary
     on June 13, 2003.

(5)  Mr. Spencer shares voting and investment power with his spouse.


                                      -30-



<PAGE>


Aggregate Options to Purchase Securities

          As of May 31, 2003, each Director of the Company, each nominee for
Director of the Company, each executive officer named under the caption "6.(A)
Directors and Senior Management" above and each former executive officer who
served for all or part of the fiscal year held the following options to purchase
Common Stock of the Company.

<TABLE>
<CAPTION>
                                           EXERCISE PRICE PER
       NAME            NUMBER OF OPTIONS         SHARE          EXPIRATION DATE
--------------------   -----------------   ------------------   ---------------
<S>                          <C>                 <C>             <C>
Robert Gagnon                 6,000              $3.250          April 9, 2011

Heather Halickman(1)          7,000              $2.500          March 1, 2011

Abraham Nozetz                7,500              $2.630           May 1, 2007

                              5,000              $2.938           May 20, 2009

                             10,000              $5.300           May 8, 2012

Brahm M. Gelfand              7,500              $2.630           May 1, 2007

                              5,000              $2.938           May 20, 2009

                             10,000              $5.300           May 8, 2012

Jan Westlund                  7,515              $4.000          July 28, 2005

                              7,500              $2.630           May 1, 2007

                              5,000              $2.938           May 20, 2009

                             10,000              $5.300           May 8, 2012

Jim Spencer                  10,000              $5.300           May 8, 2012
</TABLE>

(1)  Ms. Halickman stepped down as Vice President, Human Resources and Secretary
     on June 13, 2003.

Stock Incentive Plan

          In 1993, the Company amended and restated its Stock Incentive Plan.
The Company has since further amended the Stock Incentive Plan in 1995 and 2002,
in order to increase the number of shares of Common Stock available for issuance
pursuant to the exercise of awards granted under the Stock Incentive Plan. The
purpose of the Stock Incentive Plan is to promote the interests of the Company,
its affiliates and its shareholders by providing the Company's officers,
Directors, consultants and key employees an opportunity to acquire a proprietary
interest in the Company. Under the Stock Incentive Plan, the Company has
reserved for issuance 900,000 shares of Common Stock. No award may be granted
under the Stock Incentive Plan after June 22, 2004.

          The Stock Incentive Plan is administered by the Board of Directors or
any appropriate committee thereof. Subject to the terms of the Stock Incentive
Plan, the Committee determines the persons to whom awards are granted, the
number of shares covered by an award, the type of option awarded, whether the
exercise of a stock appreciation right awarded is in tandem or in lieu of the
exercise of an option, the vesting of an award, the type of consideration


                                      -31-



<PAGE>


to be paid to the Company upon exercise, the term of any award (which generally
cannot exceed ten years) and other terms.

          Under the Stock Incentive Plan, the Company may grant both incentive
stock options ("ISOs") intended to qualify under Section 422 of the United
States Internal Revenue Code of 1986, as amended (the "Code"), and options that
are not qualified as incentive stock options. ISOs may not be granted under the
Stock Incentive Plan at an exercise price of less than the fair market value of
the Common Stock on the date of grant.

          ISOs under the amended Stock Incentive Plan may not be granted to
non-employees. The exercise price of ISOs granted to any holder of more than 10%
of the voting power of all classes of stock of the Company or a parent or
subsidiary must be at least 110% of the fair market value of the Common Stock on
the date of grant, and the term of those ISOs cannot exceed five years.

          Unless the Board of Directors of the Company decides otherwise,
options granted pursuant to the Stock Incentive Plan may not be exercised more
than three months after the option holder ceases to be an officer, Director,
consultant or employee of the Company, except that in the event of the death or
permanent and total disability of the option holder, the option may be exercised
by the holder (or his estate, as the case may be), for a period of up to one
year after the date of death or permanent or total disability or retirement. The
exercise price may be paid in cash, in shares of Common Stock (valued at fair
market value at the date of exercise), in installments, or by a combination of
such means of payment, as may be determined by the Compensation Committee.
Options granted under the Stock Incentive Plan may include the right to purchase
shares of Common Stock equal to the shares tendered upon the exercise of the
option or withheld by the Company for withholding taxes.

          The Stock Incentive Plan also provides for the grant of stock
appreciation rights ("SARs"). SARs permit the participant to receive a payment
representing the excess of the fair market value of one share of Common Stock on
the date of exercise over the share's fair market value as of the date of grant.
Amounts payable upon exercise of SARs may, at the discretion of the Compensation
Committee, be made in cash, shares of Common Stock, or a combination thereof.
SARs granted in tandem with an option expire upon the exercise of the option.

          The Stock Incentive Plan also provides for the award of restricted
Common Stock outright for no consideration. Such stock awards may contain
restrictions regarding voting rights, dividend rights and transferability.

          Unless otherwise specified in the award agreement, an award will vest
over a period of five years. The Stock Incentive Plan also provides that all
outstanding awards shall vest immediately upon the acquisition of 40% or more of
the Company's outstanding stock without prior Board approval or upon the
election or appointment within a 12-month period of new Board members
constituting a majority of the Board who were not approved by a majority of the
Board members at the beginning of the period.

          Awards of options and SARs and awards of restricted stock, to the
extent the restriction period has not expired, are not transferable other than
by will or the laws of descent and distribution in the event of the awardee's
death. Shares of Common Stock subject to awards that were granted, but that
later terminate or expire, may again be made subject to awards.


                                      -32-



<PAGE>


          The Board of Directors may from time to time amend or terminate the
Stock Incentive Plan, except that it may not take any action that would
adversely affect the rights and obligations with respect to outstanding awards
without the consent of the awardee. The Board may not, without approval of the
Company's shareholders, materially increase the benefits accruing to
participants under the Stock Incentive Plan, materially increase the maximum
number of shares of Common Stock that may be made subject to awards under the
Stock Incentive Plan or materially modify the requirements as to eligibility for
participation in the Stock Incentive Plan.

          At May 31, 2003, options to purchase an aggregate of 140,915 shares of
Common Stock, at prices ranging from U.S. $2.188 to U.S. $11.20 per share, were
currently outstanding under the Stock Incentive Plan. In addition, an aggregate
of 1,100 SARs, not in tandem with options with a value of U.S. $1.00 per SAR,
were outstanding at that date.

          Included in the foregoing are options for an aggregate of 98,015
shares of Common Stock at prices ranging from U.S. $2.50 to U.S. $5.30 per
share, held by all Directors and officers as a group (9 persons).

          During Fiscal 2003, certain of the Company's management were granted
an aggregate of 2,427 shares of Common Stock for no consideration based on the
achievement of specific financial and other objectives.


                                      -33-



<PAGE>


          Item 7. Major Shareholders and Related Party Transactions

          (A)  Major Shareholders

          The following table sets forth as of May 31, 2003, all persons known
to the Company to be the owner of more than five percent of the Company's Common
Stock or Class A Common Stock. Except as disclosed in the footnotes below, the
Company, to the best of its knowledge, is not directly or indirectly owned or
controlled by another corporation, any foreign government or by any other
natural or legal person.

<TABLE>
<CAPTION>
                                                              AGGREGATE VOTING
                                                              POWER OF COMBINED
  TITLE           IDENTITY OF           AMOUNT    PERCENT   CLASS A COMMON STOCK
OF CLASS        PERSON OR GROUP         OWNED    OF CLASS     AND COMMON STOCK
--------   -------------------------   -------   --------   --------------------
<S>        <C>                         <C>        <C>               <C>
Class A
Common
Stock      Barry E. Katsof(1)(2)       546,793    68.35%            44.48%

Class A
Common
Stock      Ronald G. Waxman(3)(4)      252,707    31.59%            20.56%

Common     Sprott Asset Management
Stock         Inc.                     405,600    23.62%             8.25%

Common
Stock      Summit Capital Management   142,850     8.32%             2.91%
</TABLE>

----------
(1)  Held by 92324 Canada Ltd. ("Katsco"), a company controlled by Mr. Katsof.

(2)  In addition, pursuant to an agreement entered into among Katsco, 126909
     Canada Inc. ("Waxco"), Ronald G. Waxman, Barry E. Katsof and Brahm M.
     Gelfand (as escrow agent), Mr. Katsof, through Katsco, is currently
     entitled to exercise the voting rights attached to the 252,707 shares of
     Class A Common Stock held by Waxco.

(3)  Held by Waxco, a company controlled by Mr. Waxman.

(4)  The voting rights attached to these shares of Class A Common Stock may
     currently be exercised by Mr. Katsof through Katsco, pursuant to the
     agreement described in Note 2 to this table.

          Shares of Common Stock are entitled to one vote per share and shares
of Class A Common Stock are entitled to four votes per share. Shares of Class A
Common Stock convert automatically into shares of Common Stock upon transfer of
ownership on a one-for-one basis, except for sales to certain permitted
transferees. The Common Stock and Class A Common Stock rank pari passu in all
other respects.

          At May 31, 2003, the Company had 1,717,173 shares of Common Stock
outstanding, which, to the best of the Company's knowledge, were held by 687
record holders, 601 of which, holding an aggregate of approximately 1,317,000
shares of Common Stock, were in the United States. Based on the number of proxy
statements distributed in connection with the Company's 2002 Annual Meeting of
Shareholders, the Company believes it has more than


                                      -34-



<PAGE>


800 beneficial holders. In addition, as of May 31, 2003, the Company had 799,967
shares of Class A Common Stock, no par value, outstanding.

          There are no arrangements, known to the Company, the operation of
which may at a subsequent date result in a change in control of the Company.

          (B)  Related Party Transactions

          The Company leases its executive headquarters in Montreal, Quebec, for
an annual rent of $165,000 pursuant to two lease agreements with 151185 Canada
Inc., a corporation controlled by Barry E. Katsof and Ronald G. Waxman, two of
the Company's officers and Directors, and a third individual who previously was
an officer and Director of the Company. The Company believes that the terms of
these leases are at least as favorable as those it could have obtained for
comparable property from an unaffiliated landlord.

          The Company has provided a guarantee of $225,000 to secure a second
mortgage taken by 151185 Canada Inc., from which office space is leased. The
second mortgage is repayable over four years and is also secured by a second
mortgage on the building where the Company's head office is located.

          From February 1987 to February 1995, the Company made annual advances
to 92324 Canada Inc. and 126909 Canada Inc., corporations currently controlled
by Messrs. Katsof and Waxman, to fund those corporations' shareholder buy-out
arrangements. As of May 31, 2003, the remaining balance of such advances
aggregated approximately $73,000. The loans are unsecured, non-interest bearing
and due not earlier than February 1, 2004.

          Brahm M. Gelfand, a Director of the Company, may be deemed to benefit
indirectly from the fact that the Company engages the law firm of which he is a
partner for advice and legal services in the ordinary course of business.

          (C)  Interests of Experts and Counsel

          Not applicable.

          Item 8. Financial Information

          (A)  Consolidated Statements and Other Financial Information

          Information regarding our financial statements is contained under the
caption "Item 18. Financial Statements" below.

          Dividend Policy

          The Company has not paid any dividends on its Common Stock or Class A
Common Stock during the previous five-year period and does not currently intend
to declare and pay dividends on its Common Stock or Class A Common Stock in the
foreseeable future.

          Legal Proceedings

          Various claims and legal proceedings have been instituted against the
Company in the normal course of its business operations. In Management's
opinion, these claims and proceedings are unfounded. Management believes that
the Company does not have an exposure


                                      -35-



<PAGE>


in excess of amounts recorded in its Consolidated Financial Statements and that
any payments resulting from their outcome are not likely to have a material
impact on its financial position.

          The Company is contingently liable for Frisco/ATMS's share of the
obligations of the joint venture. In the event that the Company had to meet any
of these contingencies, it would have a claim on the assets of the joint
venture.

          (B)  Significant Changes

          There have been no significant changes since the date of the financial
statements included in this annual report.

          Item 9. The Offer and Listing

          (A)  Offer and Listing Details

          The following table sets forth (in U.S. dollars) the high and low
closing prices as reported by Nasdaq for the Company's Common Stock for each of
the indicated periods:

             Annual high-low price history for previous five fiscal years

<TABLE>
<CAPTION>
          Fiscal Year Ended       High       Low
          -----------------      -----      -----
          <S>                    <C>        <C>
          January 31, 1999       3.375       1.25
          January 31, 2000       3.688      1.719
          January 31, 2001        7.50      1.375
          January 31, 2002       7.370      1.625
          January 31, 2003       12.05       4.45
</TABLE>

Quarterly high-low price history for previous two fiscal years and the most
recent full financial quarter

<TABLE>
<CAPTION>
          Quarter Ended           High       Low
          -----------------      ------     -----
          <S>                    <C>        <C>
          April 30, 2001           4.00     1.688
          July 31, 2001           4.490     2.530
          October 31, 2001        4.550     2.060
          January 31, 2002        7.370     3.910
          April 30, 2002          6.500     3.950
          July 31, 2002          12.050     5.110
          October 31, 2002       11.170     7.800
          January 31, 2003       11.440     8.500
          April 30, 2003         11.200     8.820
</TABLE>

             Monthly high-low price history for previous six months

<TABLE>
<CAPTION>
              Month               High       Low
          -------------          ------     ------
          <S>                    <C>        <C>
          December 2002          11.240     10.290
          January 2003           11.440      9.500
          February 2003          10.010      9.450
          March 2003             10.050      8.820
          April 2003             11.200      8.900
          May 2003                9.850      8.800
</TABLE>


                                      -36-



<PAGE>


          (B)  Plan of Distribution

          Not applicable.

          (C)  Markets

          The Company's Common Stock had been listed on the National Market of
The Nasdaq Stock Market, Inc. ("Nasdaq") since October 13, 1993. Effective
November 16, 1998, as a result of changes in Nasdaq listing requirements, the
Company's Common Stock commenced trading on Nasdaq's SmallCap Market. The symbol
for the Company's Common Stock is "FBAY".

          (D)  Selling Shareholders

          Not applicable.

          (E)  Dilution

          Not applicable.

          (F)  Expenses of the Issue

          Not applicable.

          Item 10. Additional Information

          (A)  Share Capital

          Not applicable.

          (B)  Memorandum and Articles of Association

Articles of Amalgamation

          The Company is governed by its Articles of Amalgamation (the
"Articles") under the Canada Business Corporations Act ("CBCA") and by its
by-laws (the "By-laws"). The Articles are filed with Industry Canada under
Corporation Number 243613-2. The Articles do not include stated objects or
purposes and do not place any restrictions on the business that the Company may
carry on.

Directors

          The minimum number of Directors of the Company is three (3) and the
maximum number is fifteen (15). In accordance with the By-laws, a majority of
the Directors must be residents of Canada. There is no requirement for the
Directors to hold stock of the Company or to retire pursuant to an age limit.

          Pursuant to the provisions of the CBCA, a Director who is party to a
material contract or transaction with the Company or who has a material interest
in any person who is party to a material contract or transaction with the
Company must disclose to the Company the nature and extent of such interest in
writing or request to have such interest noted in the minutes of meetings of the
Directors. Furthermore, a Director who has a material interest in a proposal or


                                      -37-



<PAGE>


contract may not vote on any resolution to approve the proposal or contract
unless the proposal or contract (i) relates primarily to the Director's
remuneration as a Director, officer, employee or agent of the Company or an
affiliate, (ii) is for indemnity or insurance for the Director against liability
incurred by the Director acting in his or her capacity as Director, or (iii) is
with an affiliate. Absent an appropriate quorum, Directors are precluded from
voting on any matters concerning remuneration.

          The Board of Directors may (i) borrow money on the Company's credit,
(ii) issue, re-issue, sell or pledge debt obligations of the Company, (iii) give
a guarantee on behalf of the Company to secure performance of any present or
future indebtedness, liability or obligation of any person and, (iv) charge,
mortgage, hypothecate, pledge or otherwise create a security interest in all or
any currently owned or subsequently acquired real or personal, movable or
immovable, property of the Company to secure any present or future indebtedness,
liabilities or other obligations of the Company. The CBCA directs that the Board
of Directors may vary these borrowing powers by passing a resolution to that
effect and subsequently submitting the amendment to the shareholders of the
Company at the next meeting of shareholders.

Common Stock and Class A Common Stock

          Shares of Common Stock are entitled to one vote per share and shares
of Class A Common Stock are entitled to four votes per share. Shares of Class A
Common Stock convert automatically into shares of Common Stock upon transfer of
ownership on a one-for-one basis, except for sales to certain permitted
transferees. The Common Stock and Class A Common Stock rank pari passu in all
other respects.

Preferred Stock

          Our Board of Directors is authorized, without further action by the
shareholders, to issue Preferred Shares in one or more series and to set the
number of shares constituting any such series and the designation, rights,
privileges, restrictions and conditions attaching to the shares of such series
including dividend rights and rates, redemption provisions (including sinking
fund provisions), rights of conversion or exchange, liquidation preferences and
voting rights, if any. The Preferred Shares as a class are entitled to priority
over the Common Stock and Class A Common Stock if our Board of Directors decides
to pay any dividends, and, if we are dissolved, liquidated or wound up, the
Preferred Shares are entitled as a class to priority in respect of return of
capital. Except as required by law or the provisions of any designated series of
Preferred Shares, the holders of Preferred Shares as a class are not entitled to
receive notice of, attend or vote at any meeting of our shareholders. As of May
31, 2003, no Preferred Shares have been issued by the Company.

Changes to Rights of Shareholders

          In order to change the rights of our shareholders, the Company would
need to amend its Articles to effect the change. Such an amendment would require
the approval of not less than two-thirds of the votes attached to the shares of
Common Stock and Class A Common Stock voting together as one class at a duly
called special meeting. However, any changes to the manner by which members of
the Board of Directors are elected or hold office would require the approval of
not less than 85% of the outstanding shares of the capital stock of the Company
having the right to vote on such matters.


                                      -38-



<PAGE>


Meetings of Shareholders

          An annual meeting of shareholders is held each year for the purpose of
considering the financial statements and reports, electing Directors, appointing
auditors and for the transaction of other business as may be brought before the
meeting. The Board of Directors has the power to call a special meeting of
shareholders at any time.

          Notice of the time and place of each meeting of shareholders must be
given not less than 21 days, nor more than 50 days, before the date of each
meeting to each Director, to the auditor and to each shareholder who at the
close of business on the record date for notice is entered in the securities
register as the holder of one or more shares carrying the right to vote at the
meeting. Notice of meeting of shareholders called for any other purpose other
than consideration of the minutes of an earlier meeting, financial statements
and auditor's report, election of Directors and reappointment of the incumbent
auditor, must state the nature of the business in sufficient detail to permit
the shareholder to form a reasoned judgement on and must state the text of any
special resolution or by-law to be submitted to the meeting.

          The only persons entitled to be present at a meeting of shareholders
are those entitled to vote, the Directors of the Company and the auditors of the
Company. Any other person may be admitted only on the invitation of the chairman
of the meeting or with the consent of the meeting. In circumstances where a
court orders a meeting of shareholders, the court may direct how the meeting may
be held, including who may attend the meeting.

Limitations on Share Ownership

          Our By-laws do provide for any limitations on the rights to own
securities.

Shareholder Ownership Disclosure

          Our By-laws do not contain any provision governing the ownership
threshold above which shareholder ownership must be disclosed.

          (C)  Material Contracts

          Except for contracts entered into in the ordinary course of business,
the Company has not entered into any material contracts in the preceding two
years.

          (D)  Exchange Controls

          There is no law, governmental decree or regulation in Canada that
restricts the export or import of capital, or that affects the remittance of
dividends, interest or other payment to non-resident holders of Common Stock,
other than withholding tax requirements. Additional information is contained
under the caption "Item 10.(E) Taxation" below.

          There is no limitation imposed by Canadian law or by the Articles of
Amalgamation or other constituent documents of the Company on the right of a
non-resident to hold or vote Common Stock, other than as provided by the
Investment Canada Act (Canada), as amended, including as amended by the
Canada-United States Free Trade Agreement Implementation Act (Canada) and the
World Trade Organization Agreement Implementation Act (Canada). The following
summarizes the principal features of the Investment Canada Act for non-residents
who propose to acquire Common Stock.


                                      -39-



<PAGE>


          The Investment Canada Act (the "Act"), enacted on June 20, 1985, as
amended up to January 18, 2003, including as amended by the North American Free
Trade Agreement Implementation Act (Canada) and the World Trade Organization
Agreement Implementation Act (Canada), requires the prior notification and, in
certain cases, advance review and approval by the Government of Canada of the
acquisition by a "non-Canadian" of "control" of a "Canadian business," all as
defined in the Act. For purposes of the Act, "control" can be acquired through
the acquisition of all or substantially all of the assets used in the Canadian
business, or the direct or indirect acquisition of voting interests or shares in
an entity that carries on a Canadian business or which controls the entity which
carries on the Canadian business whether or not that controlling entity is
Canadian. Under the Act, control of a corporation is deemed to be acquired
through the acquisition of a majority of the voting shares of a corporation, and
is presumed to be acquired where at least one-third, but less than a majority,
of the voting shares of a corporation or of an equivalent undivided ownership
interest in the voting shares of a corporation are acquired, unless it can be
established that the corporation is not controlled in fact through the ownership
of voting shares. Other rules apply with respect to the acquisition of
non-corporate entities.

          Investments requiring review and approval include (i) a direct
acquisition of control of a Canadian business with assets with a value of CDN
$5,000,000 or more, (ii) an indirect acquisition of control of a Canadian
business where the value of the assets of the Canadian business and of all other
Canadian entities the control of which is acquired directly or indirectly is CDN
$50,000,000 or more; and (iii) an indirect acquisition of control of a Canadian
business where the value of the assets of the Canadian business and of all other
Canadian entities the control of which is acquired directly or indirectly is CDN
$5,000,000 or more and represents greater than 50% of the total value of the
assets of all of the entities, control of which is being acquired. Subject to
certain exceptions, where an investment is made by a "WTO investor" or the
Canadian business is controlled by a WTO investor (as defined in the Act), the
monetary thresholds discussed above are higher. In these circumstances the
monetary threshold with regard to the acquisitions discussed in (i) and (iii)
above for 2003 is CDN $223,000,000 multiplied by the quotient obtained by
dividing the current nominal gross domestic product of Canada ("GDP") by the
previous year's GDP, as determined in accordance with the Act. Other indirect
acquisitions of Canadian businesses by or from WTO investors are not subject to
review. A "WTO investor", as defined under the Act, includes an individual who
is a national of a member of the World Trade Organization or who has the right
of permanent residence in relation to such member, and an entity that is
controlled by a WTO investor in accordance with the Act. Certain other
corporations, limited partnerships and trusts may also qualify as WTO investors.
Special rules apply with respect to investments by non-Canadians to acquire
control of Canadian businesses that engage in certain specified activities,
including financial services, transportation services and activities relating to
Canada's cultural heritage or national identity.

          If an investment is reviewable, an application for review in the form
prescribed by regulation is normally required to be filed with the Director of
Investments, established by the Act, prior to the investment taking place and
the investment may not normally be consummated until the review has been
completed and ministerial approval obtained.

          The Director of Investments will submit the application for review to
the Minister, together with any other information or written undertakings given
by the acquirer and any representation submitted to the Director of Investments
by a province that is likely to be significantly affected by the investment. The
Minister will then determine whether the


                                      -40-



<PAGE>


investment is likely to be of "net benefit to Canada", taking into account the
information provided and having regard to certain factors of assessment
prescribed under the Act. Among the factors to be considered are: (i) the effect
of the investment on the level and nature of economic activity in Canada,
including the effect on employment, on resource processing, on the utilization
of parts, components and services produced in Canada, and on exports from
Canada; (ii) the degree and significance of participation by Canadians in the
Canadian business and in any industry in Canada of which it forms a part; (iii)
the effect of the investment on productivity, industrial efficiency,
technological development, product innovation and product variety in Canada;
(iv) the effect of the investment on competition within any industry or
industries in Canada; (v) the compatibility of the investment with national,
industrial, economic and cultural objectives enunciated by the government or
legislature of any province likely to be significantly affected by the
investment; and (vi) the contribution of the investment to Canada's ability to
compete in world markets.

          Within 45 days after a completed application for review has been
received, the Minister must notify the investor that (a) he is satisfied that
the investment is likely to be of "net benefit to Canada," or (b) he is unable
to complete his review in which case he shall have 30 additional days to
complete his review (unless the investor agrees to a longer period) or (c) he is
not satisfied that the investment is likely to be of "net benefit to Canada."

          If the Minister is unable to complete his review and no decision has
been taken within the prescribed or agreed upon time, the Minister is deemed to
be satisfied that the investment is likely to be of "net benefit to Canada."

          Where the Minister has advised the investor that he is not satisfied
that the investment is likely to be of "net benefit to Canada," the acquirer has
the right to make representations and submit undertakings within 30 days of the
date of the notice (or any further period that is agreed upon between the
investor and the Minister). On the expiration of the 30-day period (or an agreed
extension), the Minister must notify the investor whether or not he is satisfied
that the investment is likely to be of "net benefit to Canada." In the latter
case, the investor may not proceed with the investment or, if the investment has
already been consummated, must divest itself of control of the Canadian
business.

          (E)  Taxation

          The following summary describes the principal U.S. federal income and
Canadian tax consequences of the beneficial ownership and disposition of Common
Stock. This summary does not purport to be a comprehensive description of all
the tax considerations that may be relevant. This summary is not intended as tax
advice and is limited to U.S. Holders and Non-U.S. Holders (as defined below)
who hold the Common Stock as a capital asset, whose functional currency is the
U.S. dollar and who do not own Common Stock in carrying on a business through a
permanent establishment, or in connection with a fixed base, in Canada. This
summary does not address the tax treatment of U.S. Holders that may be subject
to special U.S. federal income tax rules, such as regulated investment
companies, real estate investment trusts, banks, tax-exempt entities, insurance
companies, U.S. Holders subject to the alternative minimum tax, brokers or
dealers in securities or currencies, and persons holding the Common Stock as
part of a "hedging," "straddle," "conversion transaction," "synthetic security"
or "integrated investment" for federal income tax purposes or other
risk-reduction transaction, or U.S. Holders who own (directly, indirectly or
constructively by attribution) 10% or more of the total combined voting power of
all classes of the Company's stock entitled to vote.


                                      -41-



<PAGE>


          For purposes of this summary, the term "U.S. Holder" means a
beneficial owner of Common Stock that is, for U.S. federal income tax purposes,
(i) a citizen or resident of the U.S., (ii) a corporation or other entity
created or organized under the laws of the U.S. or any political subdivision
thereof, (iii) an estate the income of which is subject to U.S. federal income
tax regardless of its source, or (iv) a trust if a U.S. court can exercise
primary supervision over the administration of such trust and one or more U.S.
persons has the authority to control all substantial decisions of the trust. A
"Non-U.S. Holder" is such a beneficial owner that is not a U.S. Holder.

          The summary of U.S. tax considerations is based on the Internal
Revenue Code of 1986, as amended (the "Code"), Treasury regulations, rulings and
judicial decisions in effect as of the date of hereof, all of which are subject
to change, with possible retroactive effect. No ruling from the Internal Revenue
Service (the "IRS") will be sought with respect to the Common Stock, and the IRS
could take a contrary view with respect to the matters described below. Holders
should consult their tax advisors as to the U.S. federal, state, local, and
other tax consequences to them of the purchase, ownership and disposition of
Common Stock.

          The discussion of Canadian Tax considerations is based upon the
provisions of the Income Tax Act (Canada) (the "Tax Act"), all proposed
amendments to the Act and the regulations thereto as of the date hereof, the
Canada-United States Tax Convention (the "Convention") and counsel's
understanding of published administrative practices of the Canada Customs and
Revenue Agency and judicial decisions, all of which are subject to change. The
discussion does not take into account the tax laws of the various provinces or
territories of Canada or the tax laws of the various state and local
jurisdictions in the United States.

          THIS DISCUSSION IS GENERAL IN NATURE AND IS NOT INTENDED TO BE NOR
SHOULD IT BE CONSTRUED AS LEGAL OR TAX ADVICE TO ANY PARTICULAR SECURITYHOLDER.
THEREFORE, SECURITYHOLDERS SHOULD CONSULT THEIR OWN TAX ADVISORS WITH RESPECT TO
THE TAX CONSEQUENCES OF THEIR INVESTMENT IN THE COMMON STOCK.

          Dividends paid or credited on the Common Stock to Unconnected U.S.
Shareholders will be subject to a Canadian withholding tax. Under the
Convention, the rate of withholding tax generally applicable to dividends paid
to Unconnected U.S. Shareholders that beneficially own Common Stock is 15%. In
the case of Unconnected U.S. Shareholders that are U.S. corporations that
beneficially own 10% or more of the voting shares of the Company, the applicable
withholding tax rate is 5%.

          Gains recognized by Unconnected U.S. Shareholders on the disposition
of Common Stock generally will not be subject to tax in Canada. If the holder,
persons with whom the holder did not deal at arm's length, or the holder
together with all such persons, owned at any time during the five-year period
immediately preceding the disposition, 25% or more of the issued shares of any
class of the capital stock of the Company, certain Canadian reporting
requirements must be complied with. Furthermore, gain recognized on the
disposition of a share of the capital stock of a company that is a resident of
Canada, the value of whose shares is derived principally from real property
situated in Canada will be subject to tax in Canada. The Company believes that
the value of its shares does not derive principally from real property situated
in Canada.


                                      -42-



<PAGE>


United States Tax Considerations

U.S. HOLDERS

     Tax Consequences in Respect of Common Stock

          Taxation of Dividends on Common Stock. The gross amount of a
distribution with respect to Common Stock (other than a distribution in
redemption or liquidation) will be treated as a taxable dividend to the extent
of the Company's current and accumulated earnings and profits, computed in
accordance with U.S. federal income tax principles. For these purposes,
distributions to U.S. Holders in Canadian dollars must be translated into U.S.
dollars at the spot rate on the date the distribution is received. U.S. Holders
should consult their tax advisor regarding potential recognition of foreign
currency gain or loss for U.S. federal income tax purposes upon the conversion
Canadian dollars received into U.S. dollars. Distributions in excess of the
Company's current and accumulated earnings and profits will be applied against
and will reduce the U.S. Holder's tax basis in the Common Stock. To the extent a
distribution exceeds the U.S. Holder's tax basis, the excess will be treated as
gain from a sale or exchange of such Common Stock. For special rules regarding
certain distributions from "passive foreign investment companies", see "Passive
Foreign Investment Company" below.

          Subject to the limitations set forth in Section 904 of the Code (which
limits the extent to which a U.S. taxpayer may credit against its U.S. federal
income tax liability, any taxes paid by it to a foreign country), the Canadian
tax withheld or paid with respect to distributions on the Common Stock generally
may be credited against the U.S. federal income tax liability of a U.S. Holder
if such U.S. Holder makes an appropriate election for the taxable year in which
such taxes are paid or accrued; alternatively, a U.S. Holder who does not elect
to credit any foreign taxes paid during the taxable year may deduct such taxes
in such taxable year. In addition, a U.S. Holder that owns 10% of more of the
Common Stock who receives a dividend is deemed to have received (and to have
paid as a foreign tax eligible for the foreign tax credit, subject to the
limitations of Section 904 of the Code) a portion of the foreign taxes paid by
the Company. Because the foreign tax credit provisions of the Code are very
complex (particularly the provisions relating to the deemed paid foreign tax
credit and the limitations on the claiming of the credit), U.S. Holders should
consult their own tax advisors with respect to the claiming of foreign tax
credits.

          Corporate U.S. Holders will not be entitled to claim a dividends
received deduction in respect of dividends distributed on the Common Stock.

          Taxation on Sale or Exchange of Common Stock. A U.S. Holder will
generally recognize gain or loss on the sale, exchange or other disposition of
Common Stock in an amount equal to the difference between the amount realized on
the sale or exchange and the U.S. Holder's adjusted tax basis in such Common
Stock. Gain or loss upon the sale of the Common Stock will be capital gain or
loss if the Common Stock is a capital asset in the hands of the U.S. Holder and
will be long-term capital gain or loss if at the time of sale or exchange the
Common Stock has been held for more than one year. Under current law, long-term
capital gain of individuals are generally taxed at lower rates than items of
ordinary income. Capital losses recognized on a sale or exchange of Common Stock
are subject to certain deductibility limitations. For special rules regarding
the sale or exchange of stock in a "passive foreign investment company" see
"Passive Foreign Investment Company" below.


                                      -43-



<PAGE>


     Passive Foreign Investment Company

          The Code contains special rules for the taxation of U.S. persons who
own shares in a "passive foreign investment company" (a "PFIC"). A PFIC is a
non-U.S. corporation that meets an income test and/or an asset test. The income
test is met if 75% or more of the corporation's gross income is "passive income"
(generally, dividends, interest, rents, royalties, and gains from the
disposition of assets producing passive income, such as shares of stock, subject
to certain exceptions). The asset test is met if at least 50% of the average
value of the corporation's assets produce, or are held for the production of,
passive income. U.S. persons are denied capital gain treatment upon a sale or
exchange of stock in a PFIC and are subject to other special tax rules upon an
"excess distribution" in respect of stock in a PFIC, unless a "qualified
electing fund" election pursuant to Section 1295 of the Code, is made in the
first year that the foreign corporation constitutes a PFIC with respect to a
U.S. Holder. Based on its income, assets and activities, the Company believes
that it has not been a PFIC in the past and that it will not be treated as a
PFIC for the current taxable year. Although the Company intends to conduct its
business and investment activities in a manner that avoids classification as a
PFIC, no assurance can be given that the Company will not become a PFIC for the
current taxable year or any subsequent taxable year. U.S. Holders should consult
with their tax advisors regarding the U.S. federal income tax consequences under
the PFIC rules and carefully consider whether to make a qualified electing fund
election with respect to the Common Stock if the Company becomes a PFIC.

     Controlled Foreign Corporation and Foreign Personal Holding Company

          U.S. persons owning (directly, indirectly or by attribution) shares
representing 10% or more of the voting power of the shares of a "controlled
foreign corporation" ("CFC") are required to include as ordinary income their
pro rata share of the "Subpart F Income" derived by the CFC (as well as certain
income of its subsidiaries). Among other items, and subject to certain
exceptions, "Subpart F Income" includes dividends, interest, annuities, gains
from the sale or shares and securities, certain gains from commodities
transactions, certain types of insurance income and income from certain
transactions with related parties. A foreign corporation is a CFC if more than
50% of its stock (by vote or value) is owned (directly, indirectly, or by
attribution) by U.S. persons who each own (directly, indirectly or by
attribution) 10% or more of the total combined voting power of its shares. The
Company has not been and does not expect to be a CFC for the current year.
However, future changes of ownership of the Company's stock could cause the
Company to become a CFC in the future. U.S. Holders should consult their tax
advisors regarding the U.S. federal income tax consequences of owning Common
Stock in a CFC.

          Similarly, U.S. persons who own shares (directly or indirectly) of a
foreign corporation that is a "foreign personal holding company" ("FPHC") on the
last day of the foreign corporation's taxable year must include in their gross
income, for the shareholder's taxable year in which or with which the taxable
year of the FPHC ends, a pro rata share of the FPHC's undistributed "foreign
personal holding company income" (or "FPHCI"). A foreign corporation will
constitute an FPHC if more than 50% of its stock (by vote or value) is owned
(directly, indirectly or by attribution) by five or fewer individuals who are
U.S. citizens or residents and at least 60% (50% in certain years following the
year in which the corporation becomes an FPHC) of its gross income consists of
FPHCI. FPHCI generally consists of passive income such as interest, dividends,
royalties, certain rents, and gain from the sale of stock or securities, from
whatever geographic source derived. The Company does not expect to meet the FPHC
stock


                                      -44-



<PAGE>


ownership test and, therefore, the Company does not expect to be an FPHC.
However, future changes in ownership could cause the Company to become an FPHC
if the FPHC gross income test is then also met. U.S. Holders should consult
their tax advisors regarding the U.S. federal tax income consequences of owning
Common Stock in an FPHC.

NON-U.S. HOLDERS

          A Non-U.S. Holder should not be subject to U.S. federal income or
withholding taxes with respect to the sale, disposition or any distribution in
respect of the Common Stock, unless (i) such income is effectively connected
with trade or business conducted by such Non-U.S. holder within the United
States, or (ii) in the case of an individual, such Non-U.S. Holder is a
nonresident alien who holds the Common Stock as a capital asset and is present
in the United States for 183 days or more during a taxable year and certain
other conditions are satisfied.

     United States Information Reporting and Backup Withholding

          For each calendar year in which the Common Stock is outstanding, the
Company, its agents or paying agents or a broker may be required to provide the
IRS with certain information, including the Holder's name, address and taxpayer
identification number, information concerning distributions on the Common Stock
during the calendar year and the amount of tax withheld, if any. This obligation
however, does not apply with respect to certain Holders, including corporations,
tax-exempt organizations, qualified pension and profit sharing trusts and
individual retirement accounts. A backup withholding tax will apply to payments
if a U.S. Holder fails to provide a taxpayer identification number. Backup
withholding is applied at a rate not to exceed 28%.

          Backup withholding and information reporting generally will not apply
to distributions made to a Non-U.S. Holder that provides an IRS Form W-8BEN to
the relevant withholding agent, paying agent or broker, together with all
appropriate attachments, signed under penalties of perjury, identifying the
Non-U.S. Holder and stating that the Non-U.S. Holder is not a U.S. person or
otherwise qualifies for an exemption.

          The payment of the proceeds on the disposition of Common Stock by a
Holder to or through the U.S. office of a broker generally will be subject to
information reporting and backup withholding unless the Holder either certifies
its status as a Non-U.S. Holder as described above or otherwise establishes an
exemption. The payment of the proceeds on the disposition of Common Stock by a
Non-U.S. Holder to or through a non-U.S. office of a non-U.S. broker will not be
subject to backup withholding or information reporting unless the non-U.S.
broker is a "U.S. related person" (as defined below). The payment of proceeds on
the disposition of Common Stock by a Non-U.S. Holder to or through a Non-U.S.
office of a U.S. broker or a U.S. related person generally will be subject to
information reporting (but not backup withholding) unless the Holder establishes
an exemption as described above or the broker has certain documentary evidence
in its files as to a Non-U.S. Holder's foreign status and the broker has no
actual knowledge to the contrary.

          For purposes of the preceding paragraph, a "U.S. related person" is
(i) a CFC, (ii) a foreign person 50% or more of whose gross income from all
sources for the three-year period ending with the close of its taxable year
preceding the payment (or for such part of the period that the broker has been
in existence) is derived from activities that are effectively


                                      -45-



<PAGE>


connected with the conduct of a U.S. trade or business, or (iii) for payments
made on or after January 1, 2001, a foreign partnership if at any time during
its tax year one or more of its partners are U.S. persons who, in the aggregate,
hold more than 50 percent of the income or capital interest of the partnership
or if, at any time during its taxable year, the partnership is engaged in the
conduct of a U.S. trade or business.

          Backup withholding is not an additional tax and may be refunded (or
credited against the Holder's U.S. federal income tax liability, if any),
provided the required information is furnished to the IRS. The information
reporting requirements may apply regardless of whether withholding is required.
Copies of information returns and withholding information also may be made
available to the tax authorities in the country in which a Non-U.S. Holder is a
resident under the provisions of an applicable income tax treaty or agreement.

          THE FOREGOING SUMMARY DOES NOT DISCUSS ALL ASPECTS OF CANADIAN OR U.S.
FEDERAL INCOME TAXATION THAT MAY BE RELEVANT TO A PARTICULAR HOLDER OF COMMON
STOCK IN LIGHT OF SUCH HOLDER'S PARTICULAR CIRCUMSTANCES AND INCOME TAX
SITUATION. HOLDERS SHOULD CONSULT THEIR OWN TAX ADVISORS AS TO THE SPECIFIC TAX
CONSEQUENCES THAT WOULD RESULT FROM THEIR OWNERSHIP AND DISPOSITION OF COMMON
STOCK OF THE COMPANY, INCLUDING THE APPLICATION AND EFFECT OF STATE, LOCAL,
FOREIGN AND OTHER TAX LAWS AND THE POSSIBLE EFFECTS OF CHANGES IN FEDERAL OR
OTHER TAX LAWS.

          (F)  Dividends and Paying Agents

          Not applicable.

          (G)  Statement by Experts

          Not applicable.

          (H)  Documents on Display

          The documents concerning the Company referred to in this Annual Report
may be inspected at the Company's office at 160 Graveline Street, St. Laurent,
Quebec H4T 1R7 Canada. The Company may be reached at (514) 738-7300. Documents
filed with the Securities and Exchange Commission ("SEC") may also be read and
copied at the SEC's public reference rooms located at 450 Fifth Street, N.W.,
Washington, D.C. 20549. Please call the SEC at 1-800-SEC-0330 for further
information on the public reference rooms.

          (I)  Subsidiary Information

          Not applicable.

          Item 11. Quantitative and Qualitative Disclosures About Market Risk

          The Company records its transactions and prepares its financial
statements in Canadian dollars. During the Company's 2003 fiscal year, a
material percentage of the Company's business, including approximately 6% of its
sales and approximately 50% of the Company's purchases of equipment, parts and
supplies, was transacted in currencies other than


                                      -46-



<PAGE>


the Canadian dollar. Any change in the value of, for example, the United States
dollar against the Canadian dollar would affect United States revenues and
earnings of the Company when translated into Canadian dollars. The same result
might be recognized if sales were made by the Company in countries other than
Canada at material levels.

          However, as the Company monitors exchange rate fluctuations on a
regular basis, makes corresponding changes as necessary to the price of its
products and services, and partially hedges its exchange rate risk through the
purchase of currency options contracts, the Company does not anticipate that
exchange rate fluctuations would have a material effect on future Company
earnings. However, there can be no assurance that the Company will be able to
hedge successfully against all exchange rate risk in the future.

          Item 12. Description of Securities Other Than Equity Securities.

          Not applicable.


                                      -47-



<PAGE>


                                     PART II

          Item 13. Defaults, Dividend Arrearages and Delinquencies

          None.

          Item 14. Material Modifications to the Rights of Security Holders and
                   Use of Proceeds

          None.

          Item 15. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

          As of a date within the 90-day period prior to the filing of this
report, an evaluation of the effectiveness of the Company's "disclosure controls
and procedures" (as such term is defined in Rules 13a-14(c) and 15d-14(c) of the
United States Securities Exchange Act of 1934 (the "Exchange Act")) was carried
out by the Company's Chief Executive Officer ("CEO") and Chief Financial Officer
("CFO"). Based on that evaluation, the CEO and CFO have concluded that as of
such date the Company's disclosure controls and procedures are effective to
ensure that information required to be disclosed by the Company in reports that
it files or submits under the Exchange Act is recorded, processed, summarized
and reported within the time periods specified in United States Securities and
Exchange Commission rules and forms.

Changes in Internal Controls

          Subsequent to the completion of their evaluation, there have been no
significant changes in the Company's internal controls or in other factors that
could significantly affect the internal controls, including any corrective
actions with regard to significant deficiencies and material weaknesses.

          Item 16. [Reserved]


                                      -48-



<PAGE>


                                    PART III

          Item 17. Financial Statements

          Information regarding our financial statements is contained under the
caption "Item 18. Financial Statements" below.

          Item 18. Financial Statements

          The following documents are filed as part of this Annual Report on
Form 20-F beginning on page F-1.

<TABLE>
<CAPTION>
Document Title:                                                             Page
--------------                                                              ----
<S>                                                                          <C>
Report of Richter, Usher & Vineberg, General Partnership                     F-1

Report of Ernst & Young, LLP                                                 F-2

Consolidated Balance Sheets as at January 31, 2003 and 2002                  F-3

Consolidated Statement of Earnings and Deficit
for the years ended January 31, 2001, 2002 and 2003                          F-5

Consolidated Statement of Cash Flows
for the years ended January 31, 2001, 2002 and 2003                          F-6

Notes to Consolidated Financial Statements                                   F-7
</TABLE>


                                      -49-



<PAGE>


          Item 19. Exhibits

<TABLE>
<CAPTION>
Exhibit Number   Description of Document
--------------   -----------------------
<S>              <C>

1.1              Articles of Amalgamation of the Company dated February 1, 1989
                 as amended by Articles of Amendment dated October 4, 1993.(1)

1.2              By-laws of the Company.(1)

4.1              Frisco Bay Industries Ltd. Stock Incentive Plan.(2)

4.2              Employment Agreement, dated October 23, 1993, between the
                 Company and Barry Katsof.(1)

4.3              Amendment, dated June 25, 1996, to Employment Agreement between
                 the Company and Barry Katsof.(3)

4.4              Employment Agreement, dated October 23, 1993, between the
                 Company and Ronald G. Waxman.(1)

4.5              Amendment, dated June 25, 1996, to Employment Agreement between
                 the Company and Ronald G. Waxman.(3)

4.6              Employment Agreement, effective April 9, 2001, between the
                 Company and Robert Gagnon.(3)

4.7              Employment Agreement, effective February 1, 1998, as amended
                 March 8, 2001, between the Company and Heather Halickman.(3)

4.8              Employment Agreement, effective February 1, 1998, as amended
                 April 2, 2001, between the Company and Dominique Mimeault.(3)

10.1             Consent of Richter, Usher & Vineberg, General Partnership

10.2             Consent of Ernst & Young, LLP

99.1             Certification of Principal Executive Officer pursuant to
                 Section 906 of the Sarbanes-Oxley Act of 2002

99.2             Certification of Principal Financial Officer pursuant to
                 Section 906 of the Sarbanes-Oxley Act of 2002
</TABLE>

----------------
(1)  Incorporated by reference to the Registrant's Registration Statement on
     Form F-1 (file no. 33-66616) and any amendments thereto.

(2)  Incorporated by reference to the Registrant's Registration Statement on
     Form S-8 (file no. 333-01002) and any amendments thereto, and as amended on
     February 10, 1997 (file no. 333-6430) and on January 9, 2003 (file no.
     333-102435).

(3)  Incorporated by reference to the Registrant's Annual Report on Form 20-F
     for the fiscal year ended January 31, 2001.


                                      -50-



<PAGE>


Auditors' Report

To the Shareholders of
Frisco Bay Industries Ltd.

We have audited the consolidated balance sheets of Frisco Bay Industries Ltd. as
at January 31, 2003 and 2002 and the consolidated statements of earnings and
deficit and cash flows for each of the years then ended. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.

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

In our opinion, these consolidated financial statements present fairly, in all
material respects, the financial position of the Company as at January 31, 2003
and 2002 and the results of its operations and its cash flows for each of the
years then ended in accordance with Canadian generally accepted accounting
principles.

Canadian generally accepted accounting principles vary in certain significant
respects from accounting principles generally accepted in the United States.
Application of accounting principles generally accepted in the United States
would have affected results of operations for the years ended January 31, 2003
and 2002 to the extent summarized in note 21 to the consolidated financial
statements.


/s/ Richter, Usher & Vineberg
-------------------------------------
Chartered Accountants
General Partnership

Montreal, Quebec
April 17, 2003


                                      F-1



<PAGE>


AUDITORS' REPORT

To the Shareholders of
FRISCO BAY INDUSTRIES LTD.

We have audited the consolidated balance sheets of FRISCO BAY INDUSTRIES LTD. as
at January 31, 2001, and the consolidated statements of earnings (loss) and
deficit and cash flows for the year then ended. Our audit also included the
information as at and for the year ended January 31, 2001, included in the
financial statement schedule listed under the caption "Item 18 Financial
Statements" of the 2001 Form 20-F Annual Report. These consolidated financial
statements and schedule are the responsibility of the company's management. Our
responsibility is to express an opinion on these consolidated financial
statements and schedule based on our audit.

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

In our opinion, these consolidated financial statements present fairly, in all
material respects, the financial position of the company as at January 31, 2001,
and the results of its operations and its cash flows for the year then ended, in
accordance with Canadian generally accepted accounting principles. Also in our
opinion, the information as at and for the year ended January 31, 2001, included
in the financial statement schedule referred to above, when considered in
relation to the basic 2001 financial statements taken as a whole, is presented
fairly in all material respects.


                                                     /s/ ERNST & YOUNG LLP
                                                     ---------------------------
Montreal, Canada,
May 11, 2001.                                        Chartered Accountants


                                      F-2



<PAGE>


Frisco Bay Industries Ltd.

Consolidated Balance Sheets
As At January 31
(Expressed in Canadian Funds)

<TABLE>
<CAPTION>
                                                            2003          2002
---------------------------------------------------------------------------------
<S>                                                     <C>           <C>
Assets

Current

   Cash - operations                                    $   813,644   $   738,722
   Cash - in circulation in automated teller machines     2,176,445     1,226,240
   Marketable securities, at cost
      which approximates quoted values (note 5)           3,274,104     2,815,762
   Accounts receivable and other
      assets (note 6)                                    10,485,470    11,202,050
   Inventories (note 7)                                   5,265,412     5,475,345
   Costs and estimated earnings in excess of billings
      on uncompleted contracts                              339,151       106,072
   Future income taxes                                      162,000       288,000
---------------------------------------------------------------------------------
                                                         22,516,226    21,852,191

Loans Receivable, Controlling Shareholders (note 8)          73,020        93,020

Capital Assets (note 9)                                   4,768,743     3,884,188

Future Income Taxes                                              --       412,000

Development Costs, unamortized balance                           --        61,362

Deferred Charges, unamortized balance                       171,573            --

Goodwill                                                     37,642        37,642
---------------------------------------------------------------------------------

                                                        $27,567,204   $26,340,403
=================================================================================
</TABLE>

See accompanying notes

Approved on Behalf of the Board:

/s/ Barry E. Katsof                       Director
-----------------------------------------

/s/ Ronald G. Waxman                      Director
-----------------------------------------


                                      F-3



<PAGE>


<TABLE>
<CAPTION>
                                                              2003          2002
-----------------------------------------------------------------------------------
<S>                                                       <C>           <C>
Liabilities

Current

   Bank indebtedness - operations (note 10)               $   105,366   $ 2,700,000
   Bank indebtedness - cash in circulation
      in automated teller machines (note 10)                2,175,085     1,173,071
   Accounts payable and accrued liabilities (note 11)       6,294,825     7,445,978
   Income taxes payable                                        32,607        67,000
   Current maturity of obligations under capital leases       953,846       969,264
   Term bank loan (note 12)                                   395,833            --
   Deferred revenue                                         2,110,789     2,484,612
-----------------------------------------------------------------------------------
                                                           12,068,351    14,839,925
-----------------------------------------------------------------------------------

Obligations Under Capital Leases (note 13)                    631,666       924,241
-----------------------------------------------------------------------------------

Deferred Revenue                                              433,678       141,013
-----------------------------------------------------------------------------------
Commitments and Contingencies (note 14)

Shareholders' Equity

Capital Stock (note 15)                                    15,966,588    15,115,644

Contributed Surplus (note 15)                                 104,865        97,605

Deficit                                                    (1,637,944)   (4,778,025)
-----------------------------------------------------------------------------------
                                                           14,433,509    10,435,224
-----------------------------------------------------------------------------------

                                                          $27,567,204   $26,340,403
===================================================================================
</TABLE>

See accompanying notes


                                      F-4



<PAGE>


Frisco Bay Industries Ltd.

Consolidated Statements of Earnings and Deficit
For the Years Ended January 31
(Expressed in Canadian Funds)

<TABLE>
<CAPTION>
                                                      2003         2002          2001
                                                                               (note 23)
-----------------------------------------------------------------------------------------
<S>                                               <C>           <C>           <C>
Revenues

   Products                                       $33,918,443   $29,349,186   $23,963,480
   Services
      Maintenance contracts                         6,988,887     4,814,949     7,553,674
      Automated teller machine fees                10,369,879     8,927,737     4,330,283
-----------------------------------------------------------------------------------------
                                                   51,277,209    43,091,872    35,847,437
-----------------------------------------------------------------------------------------
Costs and Expenses

   Costs of products                               22,924,482    19,212,675    18,788,066
   Costs of services                               10,651,730     9,474,698     7,891,725
   Selling, general and administration             12,066,278    11,363,290     8,957,828
   Amortization of capital assets                   1,234,468       702,784       508,312
   Amortization of development costs                   61,362        66,456        66,449
   Amortization of goodwill                                --        18,820        24,452
   Interest on obligations under capital leases
      and term bank loan                              151,458       123,018        79,810
   Other interest                                     257,794       396,599       266,492
   Interest income                                    (81,444)      (70,086)      (59,641)
-----------------------------------------------------------------------------------------
                                                   47,266,128    41,288,254    36,523,493
-----------------------------------------------------------------------------------------

Earnings (Loss) Before Income Taxes                 4,011,081     1,803,618      (676,056)
-----------------------------------------------------------------------------------------

Income taxes (note 16)
   Current                                            333,000       262,000            --
   Future                                             538,000      (226,000)     (474,000)
-----------------------------------------------------------------------------------------
                                                      871,000        36,000      (474,000)
-----------------------------------------------------------------------------------------

Net Earnings (Loss)                                 3,140,081     1,767,618      (202,056)

Deficit - Beginning of Year                        (4,778,025)   (6,545,643)   (6,343,587)
-----------------------------------------------------------------------------------------

Deficit - End of Year                             $(1,637,944)  $(4,778,025)  $(6,545,643)
=========================================================================================

Earnings (Loss) Per Share (note 18)               $      1.32   $      0.76   $     (0.09)
=========================================================================================

Diluted Earnings (Loss) Per Share (note 18)       $      1.27   $      0.74   $     (0.09)
=========================================================================================
</TABLE>

See accompanying notes


                                      F-5



<PAGE>


Frisco Bay Industries Ltd.

Consolidated Statements of Cash Flows
For the Years Ended January 31
(Expressed in Canadian Funds)

<TABLE>
<CAPTION>
                                                             2003           2002         2001
                                                                                       (note 23)
------------------------------------------------------------------------------------------------
<S>                                                       <C>           <C>           <C>
Funds Provided (Used) -

   Operating Activities

      Net earnings (loss)                                 $ 3,140,081   $ 1,767,618   $ (202,056)
      Future income taxes                                     538,000      (226,000)    (474,000)
      Common shares awarded                                    28,856        26,267       30,664
      Stock appreciation rights                                12,029            --           --
      Amortization of capital assets                        1,234,468       702,784      508,312
      Amortization of development costs                        61,362        66,456       66,449
      Amortization of goodwill                                     --        18,820       24,452
      Amortization of deferred charges                         28,427            --           --
------------------------------------------------------------------------------------------------
                                                            5,043,223     2,355,945      (46,179)
      Changes in non-cash operating elements
         of working capital (note 20)                        (573,270)    2,191,571     (832,751)
------------------------------------------------------------------------------------------------
                                                            4,469,953     4,547,516     (878,930)
------------------------------------------------------------------------------------------------

   Financing Activities

         Bank indebtedness                                 (1,592,620)   (1,478,328)   1,413,609
         Repayments of obligations under capital leases    (1,061,022)     (682,247)    (309,699)
         Increase in obligations under capital leases         753,029     1,513,148      149,060
         Issue of common shares                               817,319        24,240       44,433
         Decrease in loans receivable,
            controlling shareholders                           20,000            --           --
         Increase in term bank loan                           500,000            --           --
         Repayments of term bank loan                        (104,167)           --           --
------------------------------------------------------------------------------------------------
                                                             (667,461)     (623,187)   1,297,403
------------------------------------------------------------------------------------------------

   Investing Activities

         Marketable securities                               (458,342)      494,634     (185,872)
         Additions to capital assets                       (2,119,023)   (2,771,105)     (82,115)
         Proceeds on disposal of capital assets                    --       127,587       91,226
         Goodwill on acquisition of business                       --            --      (14,119)
         Additions to deferred charges                       (200,000)           --     (127,818)
------------------------------------------------------------------------------------------------
                                                           (2,777,365)   (2,148,884)    (318,698)
------------------------------------------------------------------------------------------------

Increase in Cash                                            1,025,127     1,775,445       99,775

Cash - Beginning of Year                                    1,964,962       189,517       89,742
------------------------------------------------------------------------------------------------

Cash - End of Year (note 20)                              $ 2,990,089   $ 1,964,962   $  189,517
================================================================================================
</TABLE>

See accompanying notes


                                      F-6



<PAGE>


Frisco Bay Industries Ltd.

Notes to Consolidated Financial Statements
January 31, 2003
(Expressed in Canadian Funds)

1.   Nature of Business

The Company was incorporated under the Canada Business Corporations Act. The
Company designs, develops, assembles, markets and installs integrated systems
and products primarily for financial institutions, government agencies and major
corporations in both Canada and the United States. These systems include
self-service and financial transaction processing systems, time management
systems and integrated security systems which are included as product revenues.
The Company also provides service and maintenance for their systems and products
as well as automated teller machine ("ATM") services. These services are
included in service revenues.

2.   Changes in Accounting Policies and Estimates

     Goodwill

Goodwill represents the excess of the purchase price over the fair value of net
assets acquired.

The Canadian Institute of Chartered Accountants (CICA) recently issued Handbook
Sections 1581, "Business Combinations" and 3062, "Goodwill and Other Intangible
Assets". Effective February 1, 2002, the Company adopted the new recommendations
and accordingly is no longer amortizing goodwill. Goodwill is tested for
impairment on an annual basis at the reporting unit level and written down to
fair value if required. Fair value is determined using discounted cash flows.

The following is a reconciliation of net earnings to reflect the impact of no
longer amortizing goodwill had the new standard been applied retroactively for
fiscal 2002 and 2001.

<TABLE>
<CAPTION>
                                                    For the years ended January 31,
                                                 -----------------------------------
                                                                             2001
                                                    2003         2002      (note 23)
------------------------------------------------------------------------------------
<S>                                              <C>          <C>          <C>
   Reported net earnings (loss)                  $3,140,081   $1,767,618   $(202,056)
   Addback:  Goodwill amortization                       --       18,820      24,452
------------------------------------------------------------------------------------

   Adjusted net earnings (loss)                  $3,140,081   $1,786,438   $(177,604)
====================================================================================

Basic Earnings Per Share

      Reported basic earnings (loss) per share   $     1.32   $     0.76   $   (0.09)
      Goodwill amortization                              --         0.01        0.01
------------------------------------------------------------------------------------

   Adjusted basic earnings (loss) per share            1.32   $     0.77   $   (0.08)
====================================================================================

Diluted Earnings Per Share

   Reported diluted earnings (loss) per share    $     1.27   $     0.74   $   (0.09)
   Goodwill amortization                                 --         0.01        0.01
------------------------------------------------------------------------------------

Adjusted diluted earnings (loss) per share       $     1.27   $     0.75   $   (0.08)
====================================================================================
</TABLE>


                                      F-7



<PAGE>


Frisco Bay Industries Ltd.

Notes to Consolidated Financial Statements
January 31, 2003
(Expressed in Canadian Funds)

2.   Changes in Accounting Policies and Estimates (Cont'd)

     Foreign Currency Translation

In 2003, the Company adopted the new recommendations of the CICA with respect to
the accounting for foreign currency translation. Under the new recommendations,
exchange gains and losses on foreign currency denominated monetary items that
have a fixed or ascertainable life extending beyond the end of the fiscal year
following the current reporting period are reported in the results of operations
in the current year and are not deferred and amortized. Notwithstanding the
adoption of the new recommendations, no adjustment was made to the consolidated
financial statements for 2003.

Stock-Based Compensation

Effective February 1, 2002, the Company adopted the new recommendations of the
CICA with respect to stock-based compensation and other stock-based payments.
The new standard requires the use of a fair value-based method to account for
certain stock-based compensation arrangements which include all stock-based
awards to non-employees, direct awards of stock and stock appreciation rights to
employees and awards to employees calling for settlement in cash or other
assets. Options granted by the Company to employees are not required under the
new standard to be accounted for using a fair value-based method. When an
enterprise does not use the fair value-based method for accounting, it must
disclose pro forma net earnings and pro forma earnings per share as if the fair
value-based accounting method had been used to account for stock-based
compensation cost.

The Company will continue to use the settlement method to account for the
employees stock options granted under the stock-based compensation plan
described in note 15. As a result, no compensation expense is recognized when
stock options are issued to employees. Any consideration paid by employees upon
exercise of stock options is credited to share capital.

The new standard also requires a compensation expense to be recognized for stock
appreciation rights to be settled in equity (SAR). The Company has selected to
measure this expense based on the current market value of common stock over the
vesting period, the same method selected under US GAAP (note 21).

The adoption of the new standard has no material effect on the prior periods and
therefore no adjustment was made to opening retained earnings for the change in
accounting policy. Expense resulting from changes in the appreciation values of
the SAR, has been recognized and included in selling, general and administration
expenses prospectively beginning in 2003 with a corresponding increase to
contributed surplus. Upon the issuance of Common Shares resulting from the
exercise of a SAR, an amount representing the accrued appreciation in value will
be transferred from contributed surplus to capital stock.

Grants to non-employees in payment of services rendered will be accounted for on
a prospective basis, in accordance with the new standard, based on the fair
value of the consideration received or the fair value of the equity instruments
issued, whichever is more reliably measured.

Common share awards to employees are recorded as compensation expense based on
the quoted common share price at closing the day of the grant and will continue
to be so under the new section.


                                      F-8



<PAGE>


Frisco Bay Industries Ltd.

Notes to Consolidated Financial Statements
January 31, 2003
(Expressed in Canadian Funds)

2.   Changes in Accounting Policies and Estimates (Cont'd)

     Earnings Per Share

In 2002, the Company adopted the new recommendations of the CICA with respect to
earnings per share. Under the new recommendations, diluted earnings per share
are calculated based on the weighted average number of common shares outstanding
during the year plus the effects of dilutive common share equivalents such as
options. This method requires that diluted earnings per share be calculated
using the treasury stock method which calculation is made on the basis as if all
common share equivalents had been exercised at the beginning of the reporting
period or at the date of issue as the case may be, and that the funds obtained
thereby were used to purchase common shares of the Company at the average
trading price of the common shares during the period.

     Change in Accounting Estimates

As a result of changes in the Company's business operations and practices in
2002, costs on service contracts were incurred more evenly over the term of the
contract. Accordingly, in 2002 the Company began recognizing the corresponding
revenue on a straight-line basis over the term of the contract. This change in
estimate had the effect of decreasing earnings before income taxes for 2002 by
approximately $1,200,000.

3.   Summary of Significant Accounting Policies

These consolidated financial statements have been prepared by management in
accordance with Canadian generally accepted accounting principles and conform,
in all material respects, with generally accepted accounting principles in the
United States, except as disclosed in note 21.

     Principles of Consolidation

The consolidated financial statements include the accounts of Frisco Bay
Industries Ltd., its subsidiary companies, Frisco Bay Industries, Ltd., First
Frisco Financial Corp., Intivid Solutions Inc., and its proportionate share of
the assets and liabilities, revenues and expenses of its investment in ATMS /
Frisco Bay and Company, Limited Partnership, a joint venture. On consolidation,
all material intercompany balances and transactions have been eliminated.

     Use of Estimates

In preparing the Company's consolidated financial statements, management is
required to make estimates and assumptions that affect the reported amounts of
assets and liabilities, the disclosure of contingent assets and liabilities at
the date of the financial statements and reported amounts of revenues and
expenses during the period. Actual results could differ from these estimates.

     Inventory Valuation

Inventories are valued at the lower of cost and net realizable value for
finished goods and lower of cost and replacement cost for spare parts, supplies
and raw materials. Cost is determined using the first-in, first-out method.


                                      F-9



<PAGE>


Frisco Bay Industries Ltd.

Notes to Consolidated Financial Statements
January 31, 2003
(Expressed in Canadian Funds)

3.   Summary of Significant Accounting Policies (Cont'd)

Amortization of Capital Assets

<TABLE>
<CAPTION>
<S>                                                                    <C>
On the declining balance method -

    Automated teller machines                                                30%
    Equipment and furniture                                            20% - 30%
    Computer equipment                                                       30%

  On the straight-line method -

       Leasehold improvements                                over the lease term
</TABLE>

Capital assets include amounts paid with respect to the purchase of rights to
fees generated from automated teller machines under interchange contracts. These
assets are amortized on a straight-line basis over the term of the underlying
interchange contract.

     Development Costs

Research costs are expensed as incurred. Development costs incurred for product
development for which the Company has an identified market and are considered
technically and financially feasible are deferred and amortized. Amortization is
charged to operations on a straight-line basis over two years commencing with
the product's commercialization. Development costs for products that are no
longer expected to attain commercial success are written off.

     Revenue Recognition

The Company recognizes operating revenues when earned, specifically when the
services are provided, products are delivered to customers, persuasive evidence
of an arrangement exists, amounts are fixed and determinable and collectibility
is reasonably assured.

Revenue from the sale of products is recognized at the time goods are shipped to
customers and accepted. Revenue from the sale of integrated security systems,
including installation services, is recognized on a percentage of completion
basis. Any losses on contracts are recognized in the period that such losses
become known. Revenue from service contracts is recognized on a straight-line
basis over the term of the contract. Billings in advance of services are
included in deferred revenue.

     Deferred Charges

The deferred charges representing commissions and are being amortized on a
straight-line basis between three and five years. Amortization for the year
amounted to $28,427 and is included in selling, general and administration
expenses.

                                      F-10



<PAGE>


Frisco Bay Industries Ltd.

Notes to Consolidated Financial Statements
January 31, 2003
(Expressed in Canadian Funds)

3.   Summary of Significant Accounting Policies (Cont'd)

     Future Income Taxes

Future tax assets and liabilities are determined based on differences between
the carrying amount and the tax basis of assets and liabilities and are measured
using the enacted tax rates that will be in effect when these differences are
expected to reverse. Future income tax assets, if any, are recognized only to
the extent that, in the opinion of management, it is more likely than not that
these assets will be realized.

     Investment Tax Credits

Investment tax credits related to expenditures for development costs are
recorded as a reduction of these costs. Investment tax credits related to
research and development costs are recorded as a reduction of the related costs.

     Fair Value

Cash, accounts receivable and other assets, bank indebtedness and accounts
payable and accrued liabilities are all short-term in nature and as such, their
carrying values approximate fair values.

A reasonable estimate of fair value cannot be made for the loans receivable,
controlling shareholders as there is no comparable market data.

The estimated fair value of marketable securities is based upon quoted value and
the fair value of obligations under capital leases and term bank loan are based
upon discounted future cash flows, using current market rates for similar debt.
The fair values of these financial instruments approximate their carrying
values.

     Foreign Currency Translation

Accounts in foreign currency, covered by foreign exchange contracts, have been
translated as follows:

Assets, liabilities, revenues and expenses, at rates prevailing in such
contracts.

Unrealized gains and losses on outstanding forward exchange contracts, used to
hedge future revenues and purchases, are not recorded in the financial
statements but are included in the measurement of the related hedged transaction
when realized.

Integrated foreign operations and other foreign currency accounts not covered by
foreign exchange contracts have been translated as follows:

     Monetary items - at exchange rates in effect at the balance sheet date;

     Non-monetary items - at exchange rates in effect on the dates of the
transactions;


                                      F-11



<PAGE>


Frisco Bay Industries Ltd.

Notes to Consolidated Financial Statements
January 31, 2003
(Expressed in Canadian Funds)

3.   Summary of Significant Accounting Policies (Cont'd)

          Revenue and expenses - at average exchange rates prevailing during the
          year, except for inventories and amortization which are translated at
          rates prevailing when the assets were acquired.

Gains and losses arising from foreign currency translation are included in
income.

4.   Joint Venture

On May 1, 1999, the Company entered into a joint venture agreement to form ATMS
/ Frisco Bay and Company, Limited Partnership ("ATMS"). The Company owns 50% of
ATMS and has proportionally consolidated the following:

<TABLE>
<CAPTION>
                                                           2003         2002
--------------------------------------------------------------------------------
<S>                                                     <C>          <C>
Current assets                                          $2,930,529   $1,650,023
Capital assets                                           1,245,118      934,688
Deferred charges                                            49,859           --
Current liabilities                                      3,323,267    1,775,796
Long-term portion of capital lease obligations              34,370      151,007
Deferred revenue                                             5,335           --
Revenues                                                 3,195,648    2,757,106
Expenses                                                 2,641,020    2,088,402
Net earnings                                               554,628      668,704
Cash flows provided by operating activities                553,933    1,061,177
Cash flows provided by financing activities              1,212,617      567,189
Cash flows used in investing activities                   (818,436)    (481,155)
</TABLE>

The Company's share of commitments of ATMS is disclosed in note 14.

On February 27, 2003, the Company acquired the remaining 50% interest in ATMS
(note 22).

5.   Marketable Securities

Marketable securities consist of bankers' acceptances, commercial paper and
corporate and government bonds. As at January 31, 2003, these securities had
maturity dates ranging from February 6, 2003 to September 4, 2003 with an
approximate weighted average yield of 3.0% per annum.


                                      F-12



<PAGE>


Frisco Bay Industries Ltd.

Notes to Consolidated Financial Statements
January 31, 2003
(Expressed in Canadian Funds)

6.   Accounts Receivable and Other Assets

The components of accounts receivable and other assets are as follows:

<TABLE>
<CAPTION>
                                                          2003          2002
--------------------------------------------------------------------------------
<S>                                                   <C>           <C>
Accounts receivable                                   $10,479,861   $11,151,181
Prepaid and other assets                                  402,220       231,967
Allowance for doubtful accounts                          (396,611)     (181,098)
--------------------------------------------------------------------------------

                                                      $10,485,470   $11,202,050
================================================================================
</TABLE>

In 2002, revenues included transactions with a major customer which represented
13% of revenues and 20% of accounts receivable at year end. In 2003 and 2001, no
customer represented more than 10% of revenues and accounts receivable at year
end.

Included in accounts receivable is approximately $869,000 (2002 - $492,000)
receivable in U.S. currency (U.S.$571,000; 2002 - U.S.$309,000).

7.   Inventories

<TABLE>
<CAPTION>
                                                            2003         2002
--------------------------------------------------------------------------------
<S>                                                      <C>          <C>
Spare parts and supplies                                 $  867,443   $  965,242
Raw materials                                               371,790      437,062
Finished goods                                            4,026,179    4,073,041
--------------------------------------------------------------------------------
                                                         $5,265,412   $5,475,345
================================================================================
</TABLE>

8.   Loans Receivable, Controlling Shareholders

The loans are unsecured, non-interest bearing and are due not earlier than
February 1, 2004.

9.   Capital Assets

     2003

<TABLE>
<CAPTION>
                                                       Accumulated   Net Carrying
                                           Cost       Amortization      Amount
----------------------------------------------------------------------------------
<S>                                      <C>           <C>            <C>
Automated teller machines                $5,173,025    $1,952,149     $3,220,876
Equipment and furniture                   1,617,595     1,267,094        350,501
Computer equipment                        2,519,794     1,536,693        983,101
Leasehold improvements                      608,338       546,376         61,962
Interchange contract rights                 226,566        74,263        152,303
--------------------------------------------------------------------------------
                                        $10,145,318    $5,376,575     $4,768,743
================================================================================
</TABLE>


                                      F-13



<PAGE>


Frisco Bay Industries Ltd.

Notes to Consolidated Financial Statements
January 31, 2003
(Expressed in Canadian Funds)

9.   Capital Assets (Cont'd)

     2002

<TABLE>
<CAPTION>
                                                        Accumulated   Net Carrying
                                             Cost      Amortization      Amount
----------------------------------------------------------------------------------
<S>                                       <C>           <C>            <C>
Automated teller machines                 $3,842,684    $  983,624     $2,859,060
Equipment and furniture                    1,632,403     1,191,021        441,382
Computer equipment                         1,826,704     1,403,184        423,520
Leasehold improvements                       606,888       529,163         77,725
Interchange contract rights                  121,242        38,741         82,501
--------------------------------------------------------------------------------
                                          $8,029,921    $4,145,733     $3,884,188
================================================================================
</TABLE>

Included in automated teller machines and computer equipment are assets under
capital leases having original costs of $3,258,436 (2002 - $2,788,436) and
$341,429 (2002 - $58,379) respectively, and accumulated amortization of
$1,376,980 (2002 - $750,108) and $57,242 (2002 - $56,839) respectively.

10.  Bank Indebtedness

The Company's $5,000,000 credit facility is subject to review annually and
consists of an operating demand line of credit and letters of credit facility.
Borrowings under the operating demand line of credit bear an annual interest at
rates ranging from prime to prime plus 0.5% on Canadian borrowings and from U.S.
base rate to U.S. base rate plus 0.5% on U.S. borrowings. As security for the
credit facility, the Company has pledged a $7,500,000 moveable hypothec on
accounts receivable, inventories and other moveable property. The Company has
also provided a $1,000,000 moveable hypothec on marketable securities (note 5),
an assignment of fire insurance on the Company's assets and life insurance on
the Company's executives. The terms of the banking agreement require the Company
to comply with certain financial ratios.

ATMS has an operating demand line of credit of $5,750,000 in aggregate.
Borrowings under the demand line of credit bear an annual interest at prime rate
plus 0.50%. As security for the credit facility and term bank loan (note 12),
ATMS has provided a $6,900,000 moveable hypothec on all of its assets. The terms
of the banking agreement require ATMS to comply with certain covenants.

The Company has provided a guarantee of $225,000 to secure a second mortgage of
a company controlled by the controlling shareholders of the Company, from which
office space is leased. The second mortgage is repayable over four years and is
also secured by a second mortgage on the building where the Company's head
office is located.


                                      F-14



<PAGE>


Frisco Bay Industries Ltd.

Notes to Consolidated Financial Statements
January 31, 2003
(Expressed in Canadian Funds)

11.  Accounts Payable and Accrued Liabilities

The components of accounts payable and accrued liabilities are as follows:

<TABLE>
<CAPTION>
                                                            2003        2002
--------------------------------------------------------------------------------
<S>                                                      <C>          <C>
Trade payables                                           $2,307,223   $4,298,969
Accrued compensation                                      2,354,596    1,719,111
Other accrued liabilities                                 1,633,006    1,427,898
--------------------------------------------------------------------------------
                                                         $6,294,825   $7,445,978
================================================================================
</TABLE>

Included in accounts payable and accrued liabilities is approximately $789,000
(2002 - $1,529,000) payable in U.S. currency (U.S.$518,000; 2002 - U.S.$960,000)
and $151,000 (2002 - $87,000) payable in Japanese Yen currency (11,400,000 JPY;
2002 - 6,500,000 JPY).

12.  Term Bank Loan

ATMS has a term bank loan, bearing an annual interest at 1% above bank prime
rate, maturing on August 17, 2004, payable in monthly principal instalments of
$20,834 plus interest. The loan of $395,833 is repayable on demand. As security,
ATMS has pledged a moveable hypothec (note 10).

Principal repayments are due as follows:

<TABLE>
<S>                                                              <C>
2004                                                             $250,008
2005                                                              145,825
</TABLE>

13.  Obligations Under Capital Leases

The following is a schedule of future minimum capital lease payments for leases
expiring in 2006:

<TABLE>
---------------------------------------------------------------------------
<S>                                                              <C>
2004                                                             $1,037,283
2005                                                                482,756
2006                                                                181,684
---------------------------------------------------------------------------
                                                                  1,701,723
Amount representing interest (weighted average of 7.68%
   per annum)                                                       116,211
---------------------------------------------------------------------------
                                                                  1,585,512
Less current maturity                                               953,846
---------------------------------------------------------------------------
                                                                 $  631,666
===========================================================================
</TABLE>


                                      F-15



<PAGE>


Frisco Bay Industries Ltd.

Notes to Consolidated Financial Statements
January 31, 2003
(Expressed in Canadian Funds)

14.  Commitments and Contingencies

     Commitments

The aggregate minimum rentals (exclusive of other occupancy charges) for leases
in effect as at January 31, 2003 are approximately as follows:

<TABLE>
<S>    <C>
2004   $536,000
2005    501,000
2006    383,000
2007    209,000
2008     13,000
</TABLE>

Office space is leased from a company controlled by the controlling shareholders
of the Company. The lease, which expires in 2007, provides for annual rent of
$165,000. This amount has been included in the above operating lease amounts.
This transaction has been recorded at the exchange amount which is the amount of
the consideration established and agreed to by the related parties.

As at January 31, 2003, the Company had foreign currency exchange contracts to
buy U.S.$400,000 for approximately $621,000 Canadian. Based on the rates as at
January 31, 2003, the cost to the Company to exercise these commitments would be
approximately $609,000 Canadian.

Total letters of credit outstanding as at January 31, 2003 were approximately
$187,000 of which $144,000 is included in accounts payable and accrued
liabilities.

     Contingencies

Various claims and legal proceedings have been instituted against the Company in
the normal course of its business operations. In management's opinion, these
claims and proceedings are unfounded. Management believes that the Company does
not have an exposure in excess of amounts recorded in the consolidated financial
statements and that any payments resulting from their outcome are not likely to
have a material impact on its financial position.

The Company is contingently liable for the co-venturer's share of the
obligations of ATMS. In the event that the Company had to meet any of these
contingencies, it would have a claim on the assets of ATMS (note 22).


                                      F-16



<PAGE>


Frisco Bay Industries Ltd.

Notes to Consolidated Financial Statements
January 31, 2003
(Expressed in Canadian Funds)

15.  Capital Stock

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

Authorized without par value -

     Unlimited Preferred Shares, issuable in one or more series
     Unlimited Common Stock, entitled to one vote per share and ranking pari
        passu with Class A Common Shares
     1,220,610 Class A Common Shares entitled to four votes per share,
       convertible automatically into Common Stock upon transfer of ownership
       on a one-for-one basis, except for sales to certain permitted
       transferees and ranking pari passu with Common Stock

     Issued -

<TABLE>
<CAPTION>
                                                                              Class A
                                               Common Shares           Common Shares        Total
                                           ----------------------   -------------------   ----------
                                               #           $           #          $           $
     -----------------------------------------------------------------------------------------------
<S>                                        <C>         <C>          <C>       <C>         <C>
     Balance, January 31, 2001             1,520,470   11,369,949   799,967   3,695,188   15,065,137

     Common Shares awarded                     6,910       26,267        --          --       26,267
     Stock options exercised                   8,000       24,240        --          --       24,240
     Common Shares issued on exercise of
        stock appreciation rights              5,048           --        --          --           --
     -----------------------------------------------------------------------------------------------

     Balance, January 31, 2002             1,540,428   11,420,456   799,967   3,695,188   15,115,644

     Common Shares awarded                     2,427       28,856        --          --       28,856
     Stock options exercised                 144,616      817,319        --          --      817,319
     Common Shares issued on exercise of
        stock appreciation rights                967        4,769        --          --        4,769
     -----------------------------------------------------------------------------------------------

     Balance, January 31, 2003             1,688,438   12,271,400   799,967   3,695,188   15,966,588
     ===============================================================================================
</TABLE>

Stock-Based Compensation

The Company utilizes common share awards as stock-based compensation in addition
to stock options and stock appreciation rights which are covered by its stock
incentive plan ("Stock Incentive Plan").

     Common Share Awards

     Management, at its discretion, may award common shares to key employees.
     During the year, the Company awarded and issued 2,427 Common Shares (2002 -
     6,910) as compensation to key employees. Capital stock was increased by
     $28,856 (2002 - $26,267) and an equivalent amount of compensation expense
     was recorded.


                                      F-17



<PAGE>


Frisco Bay Industries Ltd.

Notes to Consolidated Financial Statements
January 31, 2003
(Expressed in Canadian Funds)

15.  Capital Stock (Cont'd)

     Stock Options

     The Company has a Stock Incentive Plan with provides for the issue of stock
     options and stock appreciation rights to the Company's officers, directors,
     employees and consultants. The maximum number of Common Shares issuable
     under the Stock Incentive Plan is 900,000.

     Stock options granted under this plan have a maximum exercise period of ten
     years and have vesting periods which range from immediate to vesting in
     equal increments, commencing one year from the grant date, over a period
     not exceeding five years. Stock options have an exercise price not less
     than the market value of the common shares at the closing on the date of
     grant.

     Stock option transactions during the two year period ending January 31,
     2003 were as follows:

<TABLE>
<CAPTION>
                                                                     Weighted
                                                                     Average
                                                                  Exercice Price
                                                       Options       (U.S. $)
--------------------------------------------------------------------------------
<S>                                                    <C>             <C>
Outstanding at January 31, 2001                         159,362        $2.86

Granted                                                  65,000         2.73
Exercised                                                (8,000)        1.94
Forfeited                                               (17,814)        3.16
--------------------------------------------------------------------------------
Outstanding at January 31, 2002                         198,548         2.82

Granted                                                 127,000         5.27
Exercised                                              (144,616)        3.56
Forfeited                                               (10,500)        3.43
--------------------------------------------------------------------------------

Outstanding at January 31, 2003                         170,432         3.98
================================================================================
</TABLE>

     The following table summarizes information about stock options outstanding
     as at January 31, 2003:

<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------
                                Options Outstanding                     Options Exercisable
------------------------------------------------------------------------------------------------
                                   Weighted-
                                    Average          Weighted-                       Weighted-
   Range of                        Remaining          Average                        Average
Exercise Prices      Number     Contractual Life   Exercise Price     Number      Exercise Price
    (U.S.$)       Outstanding      (in years)          (U.S.$)      Exercisable      (U.S.$)
------------------------------------------------------------------------------------------------
<S>                 <C>                <C>              <C>           <C>              <C>
$2.19 - $ 4.50      116,215            6.7              $2.97          65,748          $3.22
$5.30 - $ 6.50       42,217            8.9               5.36          42,217           5.36

$8.20 - $11.20       12,000            9.7               8.86           1,000           9.32
------------------------------------------------------------------------------------------------
                    170,432            7.5               3.98         108,965           4.11
================================================================================================
</TABLE>


                                      F-18



<PAGE>


Frisco Bay Industries Ltd.

Notes to Consolidated Financial Statements
January 31, 2003
(Expressed in Canadian Funds)

15. Capital Stock (Cont'd)

     As at January 31, 2002 and 2001, approximately 118,148 and 127,562
     outstanding options respectively were exercisable. The weighted average
     exercise price for options exercisable at January 31, 2002 and 2001 was
     U.S.$2.89 and U.S.$2.75 respectively.

     No compensation expense has been recorded in the consolidated financial
     statements for stock options in accordance with note 2, changes in
     accounting policies and estimates.

     The following outlines the impact on the basis that the compensation for
     the Company's stock options is determined under the fair value-based method
     of accounting, for awards granted after February 1, 2002:

<TABLE>
<CAPTION>
     --------------------------------------------------------------------------
<S>                                                                  <C>
     Net earnings, as reported                                       $3,140,081
     Pro forma impact                                                  (558,703)
     --------------------------------------------------------------------------

     Pro forma net earnings                                          $2,581,378
     --------------------------------------------------------------------------

     Pro forma basic earnings per share                              $     1.08
     --------------------------------------------------------------------------

     Pro forma diluted earnings per share                            $     1.05
     --------------------------------------------------------------------------
</TABLE>

     The fair value of options used to compute pro forma net earnings and net
     earnings per share is the estimated fair value at grant date, using the
     Black-Scholes option-pricing model, with the following weighted average
     assumptions:

<TABLE>
<S>                                                                        <C>
     Expected dividend yield                                                  0%
     Expected volatility                                                     84%
     Risk-free interest rate                                               3.94
     Expected option life in years                                         4.21
</TABLE>

     The weighted average fair value of options granted during the year was
     CDN$5.34 per option after conversion effect.

     The Black-Scholes option valuation model was developed for use in
     estimating the fair value of traded options which have no vesting
     restrictions and are fully transferable. In addition, option valuation
     models require the input of highly subjective assumptions including the
     expected stock price volatility. Because the Company's options and rights
     have characteristics significantly different from those of traded options,
     and because changes in the subjective input assumptions can materially
     affect the fair value estimate, in management's opinion, the existing
     models do not necessarily provide a reliable single measure of the fair
     value of its employees' stock options.


                                      F-19



<PAGE>


Frisco Bay Industries Ltd.

Notes to Consolidated Financial Statements
January 31, 2003
(Expressed in Canadian Funds)

15. Capital Stock (Cont'd)

     Stock Appreciation Rights (SAR)

     The Company awards stock appreciation rights to its employees under the
     Stock Incentive Plan which entitles recipients to rewards representing the
     excess of the fair market value of one share of Common Shares on the date
     of exercise over the share's fair market value as of the date of the grant.
     Amounts may be paid in cash, Common Shares or a combination thereof, at the
     option of the Company. The Company has granted stock appreciation rights on
     one occasion in February 1995. The SARs were awarded at the fair value of
     the Company's Common Shares which was U.S.$1.00 per share and vested at 20%
     per year over the five year period commencing one year after the date of
     grant.

     Stock appreciation rights transactions during the two year period ending
     January 31, 2003 were as follows:

<TABLE>
<CAPTION>
     --------------------------------------------------------------------------
<S>                                                                      <C>
     Outstanding at January 31, 2001                                      9,625
     Exercised                                                           (6,450)
     Forfeited                                                             (225)
     --------------------------------------------------------------------------

     Outstanding at January 31, 2002                                      2,950
     Exercised                                                           (1,125)
     Forfeited                                                             (500)
     --------------------------------------------------------------------------

     Outstanding at January 31, 2003                                      1,325
     --------------------------------------------------------------------------
</TABLE>

     The outstanding SARs are entirely vested and exercisable and expire on
     February 6, 2005. During the year, the Company issued 967 (2002 - 5,048)
     Common Shares upon the exercise of 1,125 (2002 - 6,450) of the stock
     appreciation rights. In 2003, an expense of $12,029 resulting from changes
     in the appreciation values of the SAR, has been recognized and included in
     selling, general and administration expenses with a corresponding increase
     to capital stock and contributed surplus of $4,769 and $7,260 respectively.


                                      F-20



<PAGE>


Frisco Bay Industries Ltd.

Notes to Consolidated Financial Statements
January 31, 2003
(Expressed in Canadian Funds)

16. Income Taxes

Significant components of future income tax assets are as follows:

<TABLE>
<CAPTION>
                                                             2003        2002
--------------------------------------------------------------------------------
<S>                                                        <C>        <C>
Current future income tax asset                            $162,000   $  288,000
Long-term future income tax asset                                --      412,000
--------------------------------------------------------------------------------

Total future income tax assets                             $162,000   $  700,000
================================================================================

Tax loss carryforwards                                      117,000      488,000
Tax value of assets in excess of their carrying value        93,000      700,000
--------------------------------------------------------------------------------
Total future income tax assets                              210,000    1,188,000
Valuation allowance for future income tax assets             48,000      488,000
--------------------------------------------------------------------------------

Total future income tax assets                             $162,000   $  700,000
================================================================================
</TABLE>

Income tax expense reported differs from the amount computed by applying the
statutory income tax rates to earnings (loss) before income taxes. The reasons
are the following:

<TABLE>
<CAPTION>
                                                                                    2001
                                                           2003        2002      (note 23)
------------------------------------------------------------------------------------------
<S>                                                     <C>          <C>          <C>
Statutory income tax rates                                   37.90%      40.51%      39.26%

Income taxes at the statutory rates                     $1,520,200   $ 730,611   $(249,716)
Recognized benefits of tax losses                         (668,910)   (277,000)   (474,000)
Tax value of assets in excess of their carrying value           --    (412,000)         --
Non-deductible expenses and other                           19,710      (5,611)    249,716
------------------------------------------------------------------------------------------

Effective Income Taxes                                  $  871,000   $  36,000   $(474,000)
------------------------------------------------------------------------------------------
</TABLE>

As at January 31, 2003, there were U.S. income tax losses of approximately
$292,000 (U.S.$191,000).


                                      F-21



<PAGE>


Frisco Bay Industries Ltd.

Notes to Consolidated Financial Statements
January 31, 2003
(Expressed in Canadian Funds)

16.  Income Taxes (Cont'd)

The loss carryforwards may be applied against earnings of future years, not
later than as follows:

<TABLE>
<CAPTION>
                                                                   United States
--------------------------------------------------------------------------------
<S>                                                                   <C>
2020                                                                  $ 88,000
2021                                                                    54,000
2022                                                                   150,000
--------------------------------------------------------------------------------
                                                                      $292,000
================================================================================
</TABLE>

17.  Research and Development Costs

Research and development costs consist of the following:

<TABLE>
<CAPTION>
                                                     2003     2002        2001
                                                                        (note 23)
--------------------------------------------------------------------------------
<S>                                                <C>       <C>       <C>
Total costs incurred                               $    --   $16,453   $ 294,999
Less: Development costs capitalized                     --        --    (127,818)
Plus: Amortization of development costs             61,362    66,456      66,449
--------------------------------------------------------------------------------
                                                   $61,362   $82,909   $ 233,630
================================================================================
</TABLE>


                                      F-22



<PAGE>


Frisco Bay Industries Ltd.

Notes to Consolidated Financial Statements
January 31, 2003
(Expressed in Canadian Funds)

18.  Earnings Per Share

The calculation of basic earnings per share and diluted earnings per share is as
follows:

<TABLE>
<CAPTION>
                                               2003         2002         2001
                                                                       (note 23)
--------------------------------------------------------------------------------
<S>                                         <C>          <C>          <C>
Basic Earnings (Loss) Available to
    Common Shareholders                     $3,140,081   $1,767,618   $ (202,056)
================================================================================
Weighted Average Number of Common
    Shares Outstanding                       2,384,525    2,330,753    2,298,153
================================================================================
Basic Earnings (Loss) Per Share             $     1.32   $     0.76   $    (0.09)
================================================================================
Weighted average number of Common
    Shares outstanding                       2,384,525    2,330,753    2,298,153
Effects of dilutive securities:
    Stock options                               82,375       57,250        9,075
    Stock appreciation rights                    1,186        1,770        5,347
--------------------------------------------------------------------------------

Weighted Average Number of
    Common Shares and Common Share
    Equivalents Outstanding                  2,468,086    2,389,773    2,312,575
================================================================================
Diluted Earnings (Loss) Per Share           $     1.27   $     0.74   $    (0.09)
================================================================================
</TABLE>

19.  Segmented Information

Management operates and evaluates the Company's business in two major segments,
product sales and product support and services fees. Product revenues include
the sale and installation of equipment and integrated systems. Service revenues
include maintenance contract revenues and ATM service fees. The expenses which
can be identified within each of these segments are disclosed in the statement
of earnings and deficit. The assets are common to both segments and cannot be
allocated.


                                      F-23



<PAGE>


Frisco Bay Industries Ltd.

Notes to Consolidated Financial Statements
January 31, 2003
(Expressed in Canadian Funds)

19.  Segmented Information (Cont'd)

The Company currently operates in Canada and the United States and revenues are
allocated geographically based on customer location.

<TABLE>
<CAPTION>
                                             2003          2002         2001
                                                                      (note 23)
--------------------------------------------------------------------------------
<S>                                      <C>          <C>            <C>
Revenues
Canada                                   $48,233,054   $40,686,168   $33,251,103
U.S.                                       3,044,155     2,405,704     2,596,334
--------------------------------------------------------------------------------
Total                                    $51,277,209   $43,091,872   $35,847,437
================================================================================

Capital Assets
Canada                                     4,768,743     3,884,188     1,948,163
U.S.                                              --            --            --
--------------------------------------------------------------------------------
Total                                    $ 4,768,743   $ 3,884,188   $ 1,948,163
================================================================================

Intangible Assets
Canada                                        37,642        99,004       184,280
U.S.                                              --            --            --
--------------------------------------------------------------------------------
Total                                    $    37,642   $    99,004   $   184,280
================================================================================
</TABLE>

Segmented revenue is presented net of intersegment eliminations in the amount of
approximately $696,000 in 2003 (2002 - $549,000 and 2001 - $379,000) all of
which are exports from Canada.

20.  Additional Cash Flow Information

Cash is represented by:

<TABLE>
<CAPTION>
                                                 2003         2002        2001
                                                                        (note 23)
--------------------------------------------------------------------------------
<S>                                           <C>          <C>          <C>
Cash - operations                             $  813,644   $  738,722   $183,029
Cash - in circulation in automated
   teller machines                             2,176,445    1,226,240      6,488
--------------------------------------------------------------------------------
                                              $2,990,089   $1,964,962   $189,517
================================================================================
</TABLE>


                                      F-24



<PAGE>


Frisco Bay Industries Ltd.

Notes to Consolidated Financial Statements
January 31, 2003
(Expressed in Canadian Funds)

20.  Additional Cash Flow Information (Cont'd)

     Changes in Non-Cash Operating Elements of Working Capital

<TABLE>
<CAPTION>
                                                                                         2001
                                                               2003         2002       (note 23)
     -------------------------------------------------------------------------------------------
<S>                                                        <C>           <C>           <C>
     Accounts receivable and other assets                  $   716,580   $(1,800,532)  $  47,241
     Inventories, including costs and estimated earnings
        in excess of billings on uncompleted contracts         (23,146)     (372,654)   (397,768)
     Accounts payable and accrued liabilities               (1,151,153)    2,822,500    (246,903)
     Other                                                    (115,551)    1,542,257    (235,321)
     -------------------------------------------------------------------------------------------
                                                           $  (573,270)  $ 2,191,571   $(832,751)
     ===========================================================================================
</TABLE>

     Additional Cash Flow Information

<TABLE>
<CAPTION>
                                                                                   2001
                                                             2003       2002     (note 23)
     -------------------------------------------------------------------------------------
<S>                                                        <C>        <C>        <C>
     Interest paid                                         $409,252   $519,617   $346,302
     Income taxes paid                                      519,040     97,649     35,236
</TABLE>

     Non-Cash Financing and Investing Activities

The following non-cash items have been excluded from the statement of cash
flows:

     a)   the Company awarded and issued $28,856 (2002 - $26,267; 2001 -
          $30,644) of Common Shares as compensation to the employees; and

     b)   the Company issued 967 (2002 - 5,048; 2001 - 26,120) common shares
          from the exercise of stock appreciation rights.

     c)   in 2001, the Company acquired assets under capital lease in the amount
          of $1,010,000;

21.  Reconciliation of Accounting Principles Generally Accepted in Canada and in
     the United States

The Company prepares the consolidated financial statements in accordance with
Canadian generally accepted accounting principles (Canadian GAAP), which conform
in all material respects to those in the United States (U.S. GAAP), except as
follows:

     a)   Under U.S. GAAP, development costs are written-off to earnings as
          incurred as opposed to being deferred as is the case under certain
          conditions under Canadian GAAP.

                                      F-25



<PAGE>


Frisco Bay Industries Ltd.

Notes to Consolidated Financial Statements
January 31, 2003
(Expressed in Canadian Funds)

21.  Reconciliation of Accounting Principles Generally Accepted in Canada and in
     the United States (Cont'd)

     b)   Under U.S. GAAP, the Company intends to continue to account for its
          employee stock options applying Accounting Principles Board Opinion
          No. 25 "Accounting for Stock Issued to Employees" and related
          interpretations in accounting for its employee stock options. The
          exercise price of the Company's employee stock options equals or is
          greater than the market price of the underlying stock on the date the
          options were granted; accordingly, no compensation expense has been
          included in the Company's reconciliation of net income under U.S.
          GAAP. In addition, the Company measures compensation expense for its
          stock appreciation rights based on the current market value of common
          stock over the vesting period as permitted under Statement of
          Accounting Standards (SFAS) No. 123 "Accounting for Stock-Based
          Compensation". Since the method of accounting is the same for
          Canadian and U.S. GAAP as of February 1, 2002, there will be no
          difference in expense in 2003 and onwards.

     c)   Effective February 1, 2001, the Company adopted SFAS 133, which
          establishes accounting and reporting standards for derivative
          instruments, including certain derivative instruments embedded in
          other contracts and for hedging activities. All derivatives, whether
          designated in hedging relationships or not, are required to be
          recorded on the balance sheet at fair value. The cumulative effect of
          adopting SFAS 133 as of January 31, 2002 is not material to the
          Company's consolidated financial statements.

     d)   The Company's interest in a jointly controlled entity has been
          proportionately consolidated in the Company's consolidated financial
          statements. For purposes of U.S. GAAP, this interest would be
          accounted for by the equity method. Net earnings, earnings per share
          and shareholders' equity under U.S. GAAP are not impacted by
          proportionate consolidation of this interest in the jointly controlled
          entity. Differences on classification or display that result from
          using proportionate consolidation have been omitted.

     e)   U.S. GAAP establishes standards for reporting and display of
          comprehensive income (loss) and its components. Comprehensive income
          is defined as the change in equity of a business enterprise during a
          period from transactions and other events and circumstances from
          non-owner sources. It includes all changes in equity during a period
          except those resulting from investments by owners and distributions to
          owners. Under U.S. GAAP, all components of comprehensive income must
          be reported in the financial statements in the period in which they
          are recognized. A total amount for comprehensive income shall be
          displayed in the financial statements where the components of other
          comprehensive income are reported. There are no significant items to
          be included in other comprehensive income.

     f)   Marketable securities are classified as "available for sale
          securities" in accordance with SFAS 115. The impact on the
          consolidated financial statements is not significant.

                                      F-26



<PAGE>


Frisco Bay Industries Ltd.

Notes to Consolidated Financial Statements
January 31, 2003
(Expressed in Canadian Funds)

21.  Reconciliation of Accounting Principles Generally Accepted in Canada and in
     the United States (Cont'd)

New Accounting Pronouncements

     1)   In April 2002, the Financial Accounting Standards Board ("FASB")
          issued Statement No. 145, "Rescission of FASB Statement No. 4, 44 and
          64, Amendment of FASB Statement No. 13, and Technical Corrections"
          ("SFAS 145"). SFAS 145 rescinds FASB Statement No. 4, "Reporting Gains
          and Losses from Extinguishment of Debt" and amends other existing
          authoritative pronouncements. As a result of SFAS 145, gains and
          losses from extinguishment of debt should be classified as
          extraordinary items only if they meet the criteria in Accounting
          Principles Board Opinion No. 30, "Reporting the Effects of Disposal of
          a Segment of a Business, and Extraordinary, Unusual and Infrequently
          Occurring Events and Transactions" ("APB 30"). Applying the provisions
          of APB 30 will distinguish transactions that are part of an entity's
          recurring operations from those that are unusual or infrequent or that
          meet the criteria for classification as an extraordinary item. SFAS
          145 is effective for fiscal years beginning after May 15, 2002. We
          believe that adoption of SFAS 145 will not have a material effect on
          the consolidated financial statements.

     2)   In June 2002, the FASB issued Statement No. 146, "Accounting for Costs
          Associated with Exit or Disposal Activities" ("SFAS 146"). SFAS 146
          replaces EITF Issue No. 94-3 "Liability Recognition for Certain
          Employee Termination Benefits and Other Costs to Exit an Activity
          (including Certain Costs Incurred in a Restructuring)". SFAS 146
          requires companies to recognize costs associated with exit or disposal
          activities when they are incurred rather than at the date of a
          commitment to an exit or disposal plan. SFAS 146 is to be applied
          prospectively to exit or disposal activities initiated after December
          31, 2002. We believe that adoption of SFAS 146 will not have a
          material effect on the consolidated financial statements.

     3)   In November 2002, the FASB issued FASB Interpretation No. 45 ("FIN
          45"), "Guarantor's Accounting and Disclosure Requirements for
          Guarantees, Including Indirect Guarantees of Indebtedness of Others".
          This interpretation requires companies to recognize an initial
          liability for the fair value of an obligation assumed when issuing a
          guarantee. The provision for initial recognition and measurement of
          the liability will be applied on a prospective basis to guarantees
          issued or modified after December 31, 2002 The adoption of FIN 45 is
          not expected to materially affect the consolidated financial
          statements.

     4)   In December 2002, the FASB issued Statement 148 "Accounting for
          Stock-Based Compensation - Transition and Disclosure" ("SFAS 148")
          which is effective for years ending after December 15, 2002. SFAS 148
          provides alternative methods of transitioning to the fair-value method
          of accounting for stock-based employee compensation. SFAS 148 also
          amends previously issued disclosure requirements by requiring
          disclosure in the summary of significant accounting policies of the
          effect of the entity's accounting policy with respect to stock-based
          employee compensation on reported net income and earnings per share in
          annual and within the current interim financial statements. Since the
          Company's financial statements are in accordance with Canadian GAAP,
          the U.S. GAAP disclosure requirements will continue to be presented
          under this note. The adoption of SFAS 148 has no significant effect on
          the consolidated financial statements.

                                      F-27



<PAGE>


Frisco Bay Industries Ltd.

Notes to Consolidated Financial Statements
January 31, 2003
(Expressed in Canadian Funds)

21.  Reconciliation of Accounting Principles Generally Accepted in Canada and in
     the United States (Cont'd)

The effect of the above differences on the consolidated statement of earnings
would be:

                                                                    2001
                                           2003         2002      (note 23)
---------------------------------------------------------------------------
Net earnings (loss), Canadian GAAP      $3,140,081   $1,767,618   $(202,056)
Development costs (a)                       61,362       66,456     (61,369)
Stock appreciation rights (b)                   --           --     (60,090)
Related income tax effect                   (4,000)      (4,000)     71,000
Future income taxes, at current rates        4,000        4,000     (71,000)
---------------------------------------------------------------------------
Net earnings (loss), U.S. GAAP          $3,201,443   $1,834,074   $(323,515)
===========================================================================

The following table sets forth the computation of basic and diluted earnings
(loss) per share:

<TABLE>
<CAPTION>
                                                                                  2001
                                                         2003         2002      (note 23)
------------------------------------------------------------------------------------------
<S>                                                   <C>          <C>          <C>
Numerator for basic and diluted net earnings (loss)
   per share - earnings (loss) available to common
   stockholders, U.S. GAAP                            $3,201,443   $1,834,074   $ (323,515)
Denominator for basic earnings (loss) per
   share (note 18)                                     2,384,525    2,330,753    2,298,153
Denominator for diluted earnings (loss) per
   share (note 18)                                     2,468,086    2,389,773    2,312,575
------------------------------------------------------------------------------------------
Basic earnings (loss) per share, U.S. GAAP            $     1.34   $     0.79   $    (0.14)
==========================================================================================
Diluted earnings (loss) per share, U.S. GAAP          $     1.30   $     0.77   $    (0.14)
==========================================================================================
</TABLE>

If the above-mentioned adjustments were made, the following balance sheet
amounts would have resulted:

                                                                        2001
                                            2003          2002       (note 23)
-------------------------------------------------------------------------------
Capital stock                           $16,300,012   $15,442,024   $15,353,301
Contributed surplus                          65,622        77,435       115,651
Deficit                                  (1,576,582)   (4,711,569)   (7,050,544)


                                      F-28



<PAGE>


Frisco Bay Industries Ltd.

Notes to Consolidated Financial Statements
January 31, 2003
(Expressed in Canadian Funds)

21.  Reconciliation of Accounting Principles Generally Accepted in Canada and in
     the United States (Cont'd)

     Supplementary Information

     Stock-Based Compensation

Pro forma information regarding net earnings and earnings per share is required
by Statement of Financial Accounting Standards No. 123 ("SFAS 123"), and has
been determined as if the Company had accounted for its employee stock options
under the fair value method of that Statement. The fair value for the options
was estimated at the date of grant using the Black-Scholes option pricing model
with the following weighted average assumptions for each respective year;
risk-free interest rates of 3.94% (2002 - 4.9%; 2001 - 3%); dividend yields of
0%; volatility factors of the expected market price of the Company's common
stock of 84% (2002 - 77.6%, 2001 - 79.1%) and an expected life of the options of
4.21 years (2002 and 2001 - 10).

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

<TABLE>
<CAPTION>
                                                                              2001
                                                     2003          2002     (note 23)
-------------------------------------------------------------------------------------
<S>                                               <C>          <C>          <C>
Net earnings (loss) U.S. GAAP                     $3,201,443   $1,834,074   $(323,515)
Pro forma stock option expense                      (582,575)     (70,557)    (32,107)
-------------------------------------------------------------------------------------
Pro forma net earnings (loss), U.S. GAAP          $2,618,868   $1,763,517   $(355,622)
=====================================================================================
   Pro forma basic earnings (loss) per share,
      U.S. GAAP                                   $     1.10   $     0.76   $   (0.15)
=====================================================================================
   Pro forma diluted earnings (loss) per share,
      U.S. GAAP                                   $     1.06   $     0.74   $   (0.15)
=====================================================================================
</TABLE>


                                      F-29



<PAGE>


Frisco Bay Industries Ltd.

Notes to Consolidated Financial Statements
January 31, 2003
(Expressed in Canadian Funds)

21.  Reconciliation of Accounting Principles Generally Accepted in Canada and in
     the United States (Cont'd)

     Valuation and Qualifying Accounts

<TABLE>
<CAPTION>
                                           Additions
                                    -----------------------
                        Balance -                Charged to                Balance -
                        Beginning   Charged to      Other                     End
                         of Year      Expense     Accounts    Deductions    of Year
------------------------------------------------------------------------------------
<S>                      <C>         <C>            <C>       <C>           <C>
Allowance for
   Doubtful Accounts

Fiscal 2003              $181,098    $215,513       $--       $      --     $396,611
Fiscal 2002                58,592     278,206        --        (155,700)     181,098
Fiscal 2001               120,351      60,000        --        (121,759)      58,592
</TABLE>

<TABLE>
<CAPTION>
                                           Additions
                                    -----------------------
                        Balance -                Charged to                Balance -
                        Beginning   Charged to      Other                     End
                         of Year      Expense     Accounts    Deductions    of Year
------------------------------------------------------------------------------------
<S>                      <C>         <C>            <C>       <C>           <C>
Inventory - Provision
   for Obsolescence

Fiscal 2003              $340,286    $160,000       $--       $ (50,000)    $450,286
Fiscal 2002               435,542     177,616        --        (272,872)     340,286
Fiscal 2001               363,564      71,978        --              --      435,542
</TABLE>

22.  Subsequent Events

     a)   On February 27, 2003, the Company effectively acquired, through a
          series of transactions, the remaining 50% interest in ATMS/Frisco Bay
          and Company, Limited Partnership ("ATMS"). As consideration for the
          aggregate purchase price of approximately $6,300,000, the Company paid
          $3,600,000 in cash, assumed $1,000,000 of liabilities and owes a
          balance of purchase price of $1,700,000 to be paid out of internally
          generated cash flows over the next two years. The results of the
          remaining 50% interest in ATMS will be included commencing February 1,
          2003. This acquisition will be accounted for using the purchase
          method. The allocation of the purchase price to the fair value of the
          identifiable assets and liabilities has not yet been completed.


                                      F-30



<PAGE>


Frisco Bay Industries Ltd.

Notes to Consolidated Financial Statements
January 31, 2003
(Expressed in Canadian Funds)

22.  Subsequent Events (Cont'd)

     b)   On February 19, 2003, the Company obtained a $3,500,000 term loan, in
          part, to finance the acquisition referred to in a) above. The loan
          bears an annual interest at the bank's prime rate plus 0.875% , and is
          repayable over three years. The Company also has the right to prepay
          the term loan at any time. As security for the term loan and for the
          Company's current credit facility (note 10), the Company has pledged a
          $12,500,000 moveable hypothec on accounts receivable, inventories and
          other moveable property. The Company has also provided an assignment
          of fire insurance on the Company's assets and life insurance on the
          Company's executives. Ther terms of the banking agreement require the
          Company to comply with certain financial ratios.

     c)   On February 24, 2003, the Company obtained a $1,500,000 credit
          facility to provide vault cash for automated teller machines. The
          demand loan bears an annual interest at the bank's prime rate plus
          0.25% and is secured by a letter of credit from the Company's
          principal bank. The terms of the credit facility require the Company
          to comply with certain financial ratios.

23.  Comparative Figures

The audited financial statements for 2001, which are presented for comparative
purposes only, were audited by other chartered accountants.

Certain reclassifications of 2002 and 2001 amounts have been made to facilitate
comparison with the current year.


                                      F-31



<PAGE>


                                   SIGNATURES

          The registrant hereby certifies that it meets all of the requirements
for filing on Form 20-F and that it has duly caused and authorized the
undersigned to sign this annual report on its behalf.

                                       FRISCO BAY INDUSTRIES LTD.


                                       By: /s/ Robert Gagnon
                                          --------------------------------------
                                          Name:  Robert Gagnon
                                          Title: Vice President, Finance and
                                                 Information Technology
                                                 and Assistant Secretary

Date: June 25, 2003



<PAGE>


                                 CERTIFICATIONS

I, Barry E. Katsof, certify that:

1. I have reviewed this annual report on Form 20-F of Frisco Bay Industries
Ltd.;

2. Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this annual
report;

3. Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this annual report;

4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

a) designed such disclosure controls and procedures to ensure that material
information relating to the registrant, including its consolidated subsidiaries,
is made known to us by others within those entities, particularly during the
period in which this annual report is being prepared;

b) evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this annual
report (the "Evaluation Date"); and

c) presented in this annual report our conclusions about the effectiveness of
the disclosure controls and procedures based on our evaluation as of the
Evaluation Date;

5. The registrant's other certifying officers and I have disclosed, based on our
most recent evaluation, to the registrant's auditors and the audit committee of
registrant's board of directors (or persons performing the equivalent function):

a) all significant deficiencies in the design or operation of internal controls
which could adversely affect the registrant's ability to record, process,
summarize and report financial data and have identified for the registrant's
auditors any material weaknesses in internal controls; and

b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal controls; and



<PAGE>


6. The registrant's other certifying officers and I have indicated in this
annual report whether or not there were significant changes in internal controls
or in other factors that could significantly affect internal controls subsequent
to the date of our most recent evaluation, including any corrective actions with
regard to significant deficiencies and material weaknesses.

Date: June 25, 2003


                                              /s/ Barry E. Katsof
                                              ----------------------------------
                                              Barry E. Katsof
                                              Chief Executive Officer (Principal
                                              Executive Officer)



<PAGE>


                                 CERTIFICATIONS

I, Robert Gagnon, certify that:

1. I have reviewed this annual report on Form 20-F of Frisco Bay Industries
Ltd.;

2. Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this annual
report;

3. Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this annual report;

4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

a) designed such disclosure controls and procedures to ensure that material
information relating to the registrant, including its consolidated subsidiaries,
is made known to us by others within those entities, particularly during the
period in which this annual report is being prepared;

b) evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this annual
report (the "Evaluation Date"); and

c) presented in this annual report our conclusions about the effectiveness of
the disclosure controls and procedures based on our evaluation as of the
Evaluation Date;

5. The registrant's other certifying officers and I have disclosed, based on our
most recent evaluation, to the registrant's auditors and the audit committee of
registrant's board of directors (or persons performing the equivalent function):

a) all significant deficiencies in the design or operation of internal controls
which could adversely affect the registrant's ability to record, process,
summarize and report financial data and have identified for the registrant's
auditors any material weaknesses in internal controls; and

b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal controls; and



<PAGE>


6. The registrant's other certifying officers and I have indicated in this
annual report whether or not there were significant changes in internal controls
or in other factors that could significantly affect internal controls subsequent
to the date of our most recent evaluation, including any corrective actions with
regard to significant deficiencies and material weaknesses.

Date: June 25, 2003


                                                   /s/ Robert Gagnon
                                                   -----------------------------
                                                   Robert Gagnon
                                                   Vice-President, Finance and
                                                      Information Technology
                                                   (Principal Financial Officer)



<PAGE>


                                INDEX OF EXHIBITS

<TABLE>
<CAPTION>
Exhibit
Number                        Description of Document                 Page
-------   ---------------------------------------------------------   ----
<S>       <C>                                                         <C>
10.1      Consent of Richter, Usher & Vineberg, General Partnership

10.2      Consent of Ernst & Young, LLP

99.1      Certification of Principal Executive Officer pursuant to
          Section 906 of the Sarbanes-Oxley Act of 2002

99.2      Certification of Principal Financial Officer pursuant to
          Section 906 of the Sarbanes-Oxley Act of 2002
</TABLE>



                         STATEMENT OF DIFFERENCES
                         ------------------------
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