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

                                 FORM 10-KSB

/x/  ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
     EXCHANGE ACT OF 1934

               For The Fiscal Year Ended December 31, 2001

/ /  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
     EXCHANGE ACT OF 1934

               For the transition period from ----- to -----

  Date of Report (Date of Earliest Event Reported)   March 28, 2002

                             BRAINTECH, INC.
                   ------------------------------------
          (Exact name of Registrant as specified in its charter)

                    Nevada                        98-0168932
             --------------------           ----------------------
            (State or jurisdiction             (IRS Employer
               of incorporation)             Identification No.)

    Unit 102-930 West 1st Street, North Vancouver, B.C., Canada, V7P 3N4
------------------------------------------------------------------------
                     (Address of Principal Executive offices)

                    Issuer's Telephone Number: (604) 988-6440

       Securities registered pursuant to section 12(b) of the Act:
------------------------------------------------------------------------
                                  None

       Securities registered pursuant to section 12(g) of the Act:
------------------------------------------------------------------------
                     Common Stock, $0.001 par value
                             (Title of Class)

Check 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 past 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject
to such filing requirements for the past 90 days.

     Yes    x            No
          -----            -----

Check if there is no disclosure of delinquent filers in response to Item
405 of Regulation S-B contained in this form, and no disclosure will be
contained, to the best of the registrant's knowledge, in definitive
proxy or information statements incorporated by reference in Part III of
this Form 10-KSB or any amendment to this Form 10-KSB.
                                                       -----

State issuer's revenues for the most recent fiscal year:  $49,342

<PAGE>

State the aggregate market value of the voting and non-voting common
equity held by non-affiliates, computed by reference to the closing
price for trading of the issuer's stock on the OTC-Bulletin Board as at
March 20, 2002:  $8,083,996.

State the number of shares outstanding of each of the issuer's classes
of common equity, as of the latest practicable date:  57,293,311 common
shares, par value $0.001, as at March 20, 2002.


Index to Exhibits on Page 38

<PAGE>

                              BRAINTECH, INC.
                                FORM 10-KSB
                             TABLE OF CONTENTS
<TABLE>
<CAPTION>

                                                                    Page
<S>                                                                 <C>
PART I

Risk Factors                                                          1

Item 1.  Description of Business                                      4

Item 2.  Description of Property                                     19

Item 3.  Legal Proceedings                                           20

Item 4.  Submission of Matters to a Vote of Security Holders         20


PART II

Item 5.  Market for Common Equity and Related Stockholder Matters    20

Item 6.  Management's Discussion and Analysis or Plan of Operation   23

Item 7.  Financial Statements                                        28

Item 8.  Changes in and Disagreements with Accountants               29


PART III

Item 9.  Directors, Executive Officers, Promoters, and
         Control Persons                                             29

Item 10. Executive Compensation                                      30

Item 11. Security Ownership of Certain Beneficial Owners
         and Management                                              33

Item 12. Certain Relationships and Related Transactions              35

Item 13. Exhibits and Reports on Form 8-K                            38

</TABLE>
                                         1

<PAGE>

         CAUTIONARY NOTICE REGARDING FORWARD LOOKING STATEMENTS

This report contains forward-looking statements within the meaning of
Section 27A of the Securities Act and Section 21E of the Securities
Exchange Act.  Forward-looking statements deal with our current plans,
intentions, beliefs and expectations and are statements of future
economic performance.  Statements containing terms like "believes,"
"does not believe," "plans," "expects," "intends," "estimates,"
"anticipates," and other phrases of similar meaning are considered to
imply uncertainty and are forward-looking statements.

Forward-looking statements involve known and unknown risks and
uncertainties that may cause our actual results in future periods to
differ materially from what is currently anticipated.  We make
cautionary statements throughout this report and the documents we have
incorporated by reference, including those stated under the heading
"Risk Factors".  You should read these cautionary statements as being
applicable to all related forward- looking statements wherever they
appear in this report, the materials referred to in this report, and
the materials incorporated by reference into this report.

We cannot guarantee our future results, levels of activity,
performance or achievements. Neither we nor any other person assumes
responsibility for the accuracy and completeness of these statements.
We are under no duty to update any of the forward-looking statements
after the date of this report.


                           RISK FACTORS

INVESTMENT IN OUR COMMON STOCK INVOLVES A HIGH DEGREE OF RISK.
PROSPECTIVE INVESTORS SHOULD CAREFULLY CONSIDER THE FOLLOWING RISK
FACTORS IN ADDITION TO OTHER INFORMATION IN THIS ANNUAL REPORT BEFORE
PURCHASING OUR COMMON STOCK.

BECAUSE WE HAVE EARNED INSIGNIFICANT REVENUE OF ONLY $246,901 FROM
INCEPTION TO DECEMBER 31, 2001, WE FACE A RISK OF INSOLVENCY.

We have never earned substantial operating revenue.  We have been
dependent on equity financing to pay operating costs and to cover
operating losses.

We have sufficient cash to pay ongoing operating expenses, at their
current level, to approximately April 30, 2002.  To continue operation
beyond that we will have to raise additional capital.  If we are
unable to do so, we face a risk of insolvency.

The auditors' report on our December 31, 2001 consolidated financial
statements includes an additional paragraph that identifies conditions
which raise substantial doubt about our ability to continue as a
going concern.  The financial statements do not include any
adjustments that might result from the outcome of this uncertainty.

BECAUSE WE HAVE NO SIGNIFICANT SALES HISTORY AND ARE SUBSTANTIALLY
DEPENDENT ON OUR ALLIANCE WITH ABB TO GENERATE FUTURE SALES, OUR
FUTURE IS UNCERTAIN IF OUR ALLIANCE WITH ABB FAILS.

We plan to market our machine vision systems and also our Internet
based support and service system through our alliance with ABB Inc.
("ABB").  We believe our alliance with ABB is our best prospect for
generating sales revenue.  We have no other established distribution
channels or marketing arrangements,

                                         2
<PAGE>

and if we are unable to generate sales through ABB, our prospects
for generating revenue are highly speculative.

BECAUSE OUR ALLIANCE WITH ABB IS NEW, WE HAVE NO ASSURANCE THAT IT
WILL LEAD TO ADDITIONAL SALES.

We made our alliance agreement with ABB in March 2000 and together we
have been awarded contracts for more than 20 vision guided robotic
systems to date.  We intend to develop our relationship with ABB to
try and make additional sales through that relationship.  However, our
relationship with ABB is new and our prospects for generating sales
under the ABB alliance are uncertain.  Furthermore, additional sales
through ABB will be dependent upon our products and services meeting
customer demands.

BECAUSE OUR INTERNET BASED SERVICE AND SUPPORT SYSTEM IS IN THE
DEVELOPMENT STAGE, WE HAVE NO ASSURANCE THAT WE WILL COMPLETE
DEVELOPMENT SUCCESSFULLY.

We commenced development of our Internet based service and support
system during the fall of 2000.  That system is still in the
development stage.  We have no assurance that we will be able to
complete development of the system, or that any market will exist for
the system when it is completed.

BECAUSE OF OUR LIMITED OPERATING AND SALES HISTORY, WE CANNOT MAKE
RELIABLE PROJECTIONS OF OUR FUTURE OPERATING COSTS.

If we are able to generate sales, we may have to hire additional
personnel to service our customers and to continue development of our
technology.  We may also have to incur additional marketing and
overhead expenses.  As a result of our lack of historical sales, we
cannot make reliable projections of the number of additional personnel
we will require, the cost of employing those personnel, or the level
of marketing and overhead expenses we will incur.  We thus have no
assurance that any revenue we earn will be sufficient to cover the
cost of earning that revenue, or to generate operating profits.

BECAUSE WE DEVELOP AND INSTALL CUSTOMIZED VISION SYSTEMS FOR SPECIFIC
CUSTOMER NEEDS, WE MAY NOT BE ABLE TO CREATE A REPEAT CUSTOMER BASE.

Most vision systems are designed for the specific needs of a particular
customer, and represent isolated purchases by the customers in question.
As a result, we have no assurance that we will be able to obtain
additional contracts to supply our custom vision systems, or that any
customers we secure will become repeat customers.

BECAUSE OUR WORK FORCE IS SMALL, WITH ONLY 23 PEOPLE EMPLOYED EITHER
AS OFFICERS, EMPLOYEES OR CONTRACTORS, WE ARE VULNERABLE TO THE LOSS
OF KEY PEOPLE OR TO RAPID EXPANSION.

We employ only 23 people either as officers, employees or contractors.
We try to employ people with skill sets that match the specific fields
important to our business.  As a result, the departure of a single
person or a small number of people could materially adversely affect
our business.  We do not have key man insurance on any of the people
we employ.

Qualified technical personnel are in great demand in all high
technology industries.  Accordingly, it may be difficult for us to
replace people who depart, or to hire additional people we may require
if we are able to generate substantial sales.

                                         3
<PAGE>

BECAUSE WE DO NOT HAVE PATENT PROTECTION FOR ANY OF OUR PRODUCTS, OUR
INTELLECTUAL PROPERTY MAY BE COPIED OR MISAPPROPRIATED.

We do not hold any patents on any of our products.  Accordingly, we
have no legal means to prevent other companies from developing
products that perform similar functions in a similar way. On January
31, 2002, we filed an application in the Canadian Patent Office
regarding the Method And Apparatus For Single Camera 3D Vision Guided
Robotics.  This is the only instance in which we have applied for
patent protection of our intellectual property.

We believe that the software code that we have written for
eVisionFactory, the BrainTron processor, the Odysee Development
Studio, and each of our custom machine vision systems is protected by
copyright law.  However, copyright law does not prevent other
companies from developing their own software to perform the same
functions as our products.

BECAUSE THE MARKET PRICE OF OUR COMMON STOCK HAS BEEN PARTICULARLY
VOLATILE, PURCHASERS OF OUR COMMON STOCK FACE A HIGH DEGREE OF MARKET
RISK.

The market price of our common stock has experienced extreme
fluctuations.  Since January 1, 2000 the market price of our common
stock has varied between $0.10 and $6.12.  As we have not announced
any material changes to our earnings, we believe that the fluctuations
in our stock price have resulted primarily from market perceptions of
the speculative value of our business opportunities.  The
susceptibility of our stock price to fluctuation exposes purchasers of
our stock to a high degree of risk.

BECAUSE WE HAVE GENERATED REVENUE OF ONLY $246,901 FROM INCEPTION TO
DECEMBER 31, 2001, AND OUR BUSINESS HAS NOT BEEN PROFITABLE WITH
ACCUMULATED LOSSES OF $9,962,176 FROM INCEPTION TO DECEMBER 31, 2001,
WE MAY NOT BE ABLE TO RAISE THE ADDITIONAL CAPITAL WE NEED.

We will require additional capital to continue the development of our
products, to pay the costs of marketing those products, or to cover
operating losses until we are able to become profitable.  As we have
never generated operating profits or significant sales revenue, we may
not be able to raise the amount of capital we require.

Several other factors may also hinder our efforts to raise capital.
They include the following:

-  Our share price has been highly volatile during 2000 and 2001.  The
   volatility of our share price may deter potential investors.
-  Subsequent to the first quarter of 2000, many technology companies
   have experienced financial difficulties and rapidly declining share
   prices.  As a result, potential investors may be less willing to
   invest in technology companies generally.
-  Subsequent to the first quarter of 2000, capital markets have
   become tighter generally, with less financing available for
   technology companies generally.
-  Capital markets have become tighter due to international tensions
   beginning on September 11, 2001.

BECAUSE WE WILL HAVE TO RAISE ADDITIONAL CAPITAL, THE INTERESTS OF
SHAREHOLDERS MAY BE DILUTED.

To raise additional capital we may have to issue additional shares,
which may dilute the interests of existing shareholders substantially.
Alternatively, we may have to borrow large sums, and assume

                                         4
<PAGE>

obligations to make substantial interest and capital payments.  We may
also have to sell significant interests in some or all of our
products.  If we are able to raise additional capital, we cannot
assure that it will be on terms that enhance the value of our common
shares.

BECAUSE APPROXIMATELY 14% OF OUR ISSUED SHARES THAT HAVE RECENTLY
BECOME FREE TRADING, AND THE SIZE OF ANTICIPATED SHARE OFFERINGS,
THERE IS A RISK OF DOWNWARD PRESSURE ON OUR STOCK PRICE.

During the first 3 months of 2001, we issued approximately 8.1 million
shares in private placements.  Those shares have recently become
eligible for re-sale under Rule 144 to the Securities Act of 1933.  In
addition, we raised further funds late in 2001 and early 2002 in
private placements and other transactions for which we have or are in
the process of issuing 5,376,520 shares and 2,488,260 share purchase
warrants for one share each.  We may register these shares and share
purchase warrants for resale.  The market price of our stock could
drop significantly if the owners of these shares sell all or a large
portion of the shares, or are perceived as intending to sell them.

BECAUSE OUR STOCK MAY BE SUBJECT TO "LOW PRICE STOCK" RULES, THE
MARKET FOR OUR STOCK MAY BE LIMITED.

The Securities and Exchange Commission has adopted regulations which
generally define a "penny stock" to be any equity security that has a
market price less than $5.00.  Our stock is presently covered by those
rules, and may continue to be so.  The penny stock rules require
broker-dealers to make a special suitability determination before
selling our stock to investors who are not either regular customers or
accredited investors.  As a result, the potential market for our stock
may be limited.

PART I.

ITEM 1.  DESCRIPTION OF BUSINESS

Our financial statements are presented in United States dollars, and
dollar figures stated in this annual report refer to United States
dollars (except where specified otherwise).  As our head office is in
Canada, many of our transactions (including payment of salaries to our
employees) are completed in Canadian dollars ("Cdn$").  For purposes
of this annual report, other than amounts extracted from our financial
statements, Canadian dollar amounts have been converted to United
States dollars at an exchange rate of Cdn$1.00 = US$0.65, being the
average exchange rate during the year ended December 31, 2001.

THE COMPANY

Our company was incorporated in Nevada on March 4, 1987 under the name
Tome Capital Inc.  We changed our name to Nevada Manhattan Mining Inc.
on August 15, 1988, then back to Tome Capital Inc. on July 5, 1990, to
Offshore Reliance Ltd. on February 19, 1993, to Cozy Financial
Corporation on April 20, 1993 and to Braintech, Inc. on January 3,
1994.

We were registered as an extra-provincial company under the British
Columbia Company Act on January 17, 1996.  Our principal executive
offices are located at Unit 102-930 West 1st Street, North Vancouver,
British Columbia, Canada V7P 3N4.  Our telephone number is (604) 988-
6440 and our Internet address is www.braintech.com.

                                         5
<PAGE>

     OUR SUBSIDIARIES

We have two wholly owned subsidiaries.  The first, Braintech Canada,
Inc., was incorporated in British Columbia, Canada on March 3, 1994
under the name Brainware Systems Inc.  Brainware Systems Inc. changed
its name to Braintech Canada, Inc. on September 19, 2001.  Braintech
Canada, Inc. carries out our research and development activities,
employs our technical and managerial personnel, and carries on our
sales activities.

The description of our business in this annual report includes the
activities of both Braintech, Inc. and Braintech Canada, Inc.

Our other subsidiary was incorporated on September 15, 1999, as 9141
Investments Ltd.  On September 19, 2001, 9141 Investments Ltd. changed
its name to Brainware Systems Inc.  This subsidiary currently has no
active operations.  Its function is to hold the Brainware Systems
name.

TECHNICAL TERMS

Our business is technical, and as a result, we use technical terms in
describing it.  We have included the following glossary to assist in
understanding our description.

-  "algorithm" refers to the underlying logical method or sequence of
    steps by which a given calculation or manipulation of data is
    performed.

-  "fuzzy mathematics" is a branch of mathematical logic in which
   propositions are not classified as absolutely true or absolutely
   untrue, but rather as true to a degree, or untrue to a degree.
   Fuzzy mathematics has been used in a number of our engineering and
   control applications.

-  "fuzzy set" means a range of values used in calculations done
   through fuzzy mathematics.  If the object of a fuzzy mathematics
   operation is to determine whether a measured quantity equals a certain
   specified value, the two quantities will be considered equal if the
   measured quantity falls within the fuzzy set constructed around the
   specified value.

-  "interface" means a convention by which two software systems or
   programs communicate.

-  "machine vision" refers to technology that collects and analyses
   visual images in a digital electronic format, and which uses such data
   to draw conclusions with little or no operator intervention.

-  "module" refers to a part of a computer system or program that
   performs functions which are conveniently designed or performed as a
   group.  Designing computer systems in separate modules, which are then
   linked together, can reduce development costs and make subsequent
   modifications easier.

-  "physical signature" means a vector of numbers representing an
   image, which a vision system has identified as an object or visual
   pattern of interest, or a potential object or visual pattern of
   interest.

                                         6
<PAGE>

-  "protocol" means a set of formal rules describing how to transmit
   data, especially across a network.  Low level protocols define the
   electrical and physical standards to be observed, bit- and byte-
   ordering and the transmission and error detection and correction of
   the bit stream.

-  "routine" means a computer program, or a portion of a computer
   program, that performs a specific task.

-  "signature" means vector of numbers representing a specific object
   or visual pattern that a vision system is attempting to identify or
   recognize.  Part of the function of a machine vision system is to
   compare a physical signature to a signature, to determine how well
   they match.

-  "TCP/IP" or "transmission control protocol over internet protocol"
   is the communications protocol used to transmit data over the
   Internet.

-  "vector" refers to a set of numbers, with each number relating to a
   specific physical quantity or measurement.

-  "vision guided robotics" is the field encompassing the application
   of science and technology from multiple disciplines including computer
   vision, robotics, 3D geometry and artificial intelligence to the task
   of guiding robots to interact adaptively and interactively with their
   surroundings.

HISTORICAL DEVELOPMENT

We entered the technology field in the first quarter of 1994.  Since
then, the majority of our efforts have been devoted to developing
products to be used in creating machine vision systems or
"computerized vision", and in developing machine vision systems.
Machine vision refers to the technology base that employs any number
of electro-optical or non-contact techniques to acquire image data,
process that data and analyze it to draw conclusions with little or no
operator intervention.  Basically, machine vision is the application
of electronic imaging, image processing, and image analysis techniques
to applications in the manufacturing industries for the purpose of
control (process control, quality control, machine control, and robot
control. (Automated Imaging Association, 2001 Market Report).

Our focus has progressively narrowed developing technology and
products to be used in creating machine vision systems to the
development of vision systems for robots used in the automotive
industry.

In June 1995, we completed development of the first generation
BrainTron Processor, which employs the Olson Reticular Brainstem
algorithm to carry out functions relating to the identification,
classification and matching of visual images.  Further information on
the Olson algorithm is given below, under the headings "BrainTron
Processor" and "Intellectual Property".

During 1998, we made our first attempts at securing contracts to
develop custom machine vision systems to perform quality control
functions.  We prepared feasibility studies or prototype systems in
the following fields:  print quality inspection, frost damage
inspection for fruit, and quality inspection for surgical stents, used
to reinforce weak blood vessels following angioplasty surgery.  The
companies for whom we prepared these studies decided not to proceed
with the automated inspection systems we had proposed.  As a result,
we were not able to secure contracts to sell or install any of these
systems.

During 1998, we also commenced development of:

                                         7
<PAGE>

-  the Odysee Development Studio, a program designed to streamline the
   design of custom vision systems;
-  the second generation BrainTron processor, which employs more
   advanced mathematical algorithms for identifying and classifying
   digital images; and
-  the IMPAC accelerator board, which can compare and match
   mathematical vectors at high speed.

During 1999, we obtained our first substantial contract for the
development and installation of a custom machine vision system, to
inspect and sort brake shoes for Satisfied Brake Products Inc. of
Cornwall, Ontario.  We completed development of the Odysee Development
Studio, and working prototypes for the IMPAC accelerator board and the
second-generation BrainTron processor.  We also developed "Wizmaster",
a program designed for incorporation into the Dr. Bean Internet
product formerly developed and marketed by Sideware Systems Inc.
Details of our contracts with Satisfied Brake Products and Sideware
Systems Inc. are at pages 23 and 36 of this report, respectively.

In March 2000, we entered into an alliance agreement with ABB Inc.
ABB is a leading supplier of industrial robotics systems and services
to several industries including the automotive and metal fabrication
industries.  We have agreed with ABB to cooperate in identifying and
pursuing sales opportunities that combine the expertise of the two
companies.  Under the ABB alliance, we have completed and installed 5
vision systems that provide guidance to ABB's industrial robots used
in the automotive manufacturing industry.  We have also been awarded a
contract for an additional 19 vision systems that we expect to install
in 2002.

In 2001, we also received orders for two systems from Axium Automation
Inc., a systems integrator.  These vision systems are also for guiding
ABB robots used in the automotive manufacturing industry.

During the fall of 2000, we also commenced development of an Internet
based service and support system for industrial systems.  This system
is intended for companies operating industrial machinery and
manufacturing systems, and allows them to provide technical support
for their customers through the Internet.

During the first half of 2001, we commenced development of the
eVisionFactory a comprehensive software environment for the design
development, operation and support of vision systems, which includes:

-  functions similar to the Odysee Development Studio, permitting
   users to link the different software components of a vision system
   together;
-  software for the integration of vision systems with robots;
-  software which can be used to monitor the operation of an installed
   vision system, and to modify or upgrade the system; and
-  our Internet based service and support system that allows companies
   operating our vision systems or other industrial machinery and
   manufacturing systems to obtain technical support services over the
   internet.

Early in 2002, we completed a commercial version of eVisionFactory that
does not include our Internet based service and support system.  We
plan to start including eVisionFactory software with the systems we
deliver in 2002.

During 2001, we also developed what we believe is a unique 3D vision
system for robots used in

                                         8
<PAGE>

automotive manufacturing systems.  Our new 3D system uses only a single
conventional CCD (Charge Coupled Device) camera.  Software algorithms
use information from the camera to determine the position and
orientation of the parts being manipulated or assembled.  That
information is used in turn to control industrial robots operating
on the parts.  Applications for the system include material handling,
spot welding, machining operations, adhesive and sealant application,
spray painting, automated assembly, and part identification and
inspection.

In July 2001, we also entered into a Memorandum of Understanding with
Marubeni Corporation pursuant to which the two companies agreed to
cooperate in developing and marketing vision guided robotic systems.
Marubeni is a Japanese trading company with a network of 167 Marubeni
Group offices and 598 associated subsidiary companies in Japan and
other countries.  Marubeni Corporation's total sales in 2000 were
about $78 billion and gross profit on sales was about $3.460 billion.

In February 2002, Marubeni placed an order for two eVisionFactory
developer systems.  We have completed development of these systems and
are currently negotiating with Marubeni the terms on which the systems
will be supplied.

Our priority for 2002 is to complete delivery and installation of the
19 systems purchased by ABB in 2001, and to continue to build on our
relationship with ABB.  Our objective is to secure with ABB additional
multi-order contracts for the design and installation of vision guided
robotic systems. We also plan to continue the development of
eVisionFactory including further development of proprietary guidance
and calibration algorithms, integration of new robotic systems,
algorithms and methodologies into eVisionFactory, and further development
and integration of our Internet based support system into eVisionFactory.

We have not at any time been able to generate sufficient revenue from
sales of our services or products to sustain ongoing operations, and
we do not have an established record of sales or established
distribution channels for our services or products.  In order to
continue as a going concern, we will have to begin generating
significant sales revenue.

SERVICES AND PRODUCTS

     MACHINE VISION SYSTEMS

Our business consists of the development and supply of custom machine
vision systems.  Systems like the ones we developed are known as
application specific machine vision systems.  Application specific
machine vision systems are generally custom designed to perform a
specific function.  We have also developed specialized software
products for use in the development, maintenance and support of
machine vision systems.

The principal industrial applications of machine vision systems are
inspection, location analysis, and pattern recognition.  Examples of
inspection, location analysis and pattern recognition applications
include inspection of products for quality control purposes, location
analysis for control of industrial machines or robots, or control of
fitting and assembly of products, and optical character recognition.

Currently, we are focusing on the development, supply and support of
machine vision systems for robots used in the automotive manufacturing
industry.  The field of vision guided robotics requires our vision
systems to incorporate advanced robotic engineering and programming
know-how and programming for optimal integration with robotic systems.

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<PAGE>

Our products and services are suitable for both product inspection and
location analysis applications, and the projects we have completed
with ABB have involved both applications. The machine vision systems
we have sold to date are used in the manufacture of automotive parts,
but we believe that we are capable of developing systems that can be
applied in a large number of industrial sectors.  We have not to date
completed any projects or proposals in the two industries which make
the greatest use of machine vision systems, the semiconductor and
electronics industries.

We develop machine vision systems based on our customers' particular
needs.  Solutions that we have delivered range from single and multi-
camera 2D systems to single camera 3D systems.  A 3D system determines
the position of an object in 3 dimensional space, i.e. the x,y,z
coordinates and roll, pitch and yaw angles.

Our vision systems are used in the following types of applications:

-  mold number recognition for aluminum die-cast components (single
   camera 2D system);
-  automotive brake shoe identification and sorting (multi-camera 2D
   system);
-  robotic guidance and location of features for plastic blow molded
   gas tanks (multi-camera 2D system);
-  robotic guidance and positioning of automotive engine/radiator-
   racks (multi-camera 2D system);
-  robotic guidance and grasping of automotive engine heads and intake
   manifolds (single camera 3D system).

     SINGLE CAMERA 3D VISION SYSTEMS

We developed our 3D Single CCD (Coupled Charged Devise) Camera vision
system (SC3D) in response to a major automaker's request for a robust
3D robot guidance system for automotive part handling applications.

The SC3D is integrated into the robot gripper.  The robot moves to
position the SC3D over the bin containing the part to be handled by
the robot.  The SC3D captures a single image of the part and
performs its analysis.  The SC3D system determines the position of the
part in 3D space, ie. its position on the on x, y, z axis and its
orientation (roll, pitch, and yaw angles).  These values are
transmitted to the robot controller via Ethernet.  The robot uses this
information to adjust the position of its gripper to match the 3D
coordinates of the part and proceeds to intercept and grasp the part
out of the bin.  The whole process takes under one second with the
SC3D system we developed for ABB robots used for grasping and handling
automotive powertrain parts.  In extreme cases, where the part is
heavily tilted to one side, the vision guidance system can perform two
measurements (coarse and then fine) to achieve higher accuracy and
reliability.  The vision guidance system makes this decision
automatically.

The SC3D vision system can keep track of multiple part models and
multiple part features so that the user can re-configure the vision
system for use with different parts.

Applications for SC3D include robot-handling applications involving
precisely manufactured parts such as engine heads and manifolds.  The
system provides necessary accuracy for robots transferring parts to
conveyors or placing parts precisely in a fixture.  The system is not
suitable for flexible parts where dimensions vary significantly such
as plastic blow-moulded products.

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<PAGE>

We believe that the major advantages of our SC3D systems are its
compactness for installation on the end of the robotic arm, low-cost
conventional sensor and computing platform, ease of calibration and
short cycle times.

Our sales efforts were historically directed at generating direct
sales to end users, consistent with the majority of the vision systems
market.  As a result of our alliance with ABB, we expect that most our
future sales efforts will be through, or in conjunction with, ABB.  We
are also developing our relationship with Marubeni Corporation in
order to make sales in Japan and other Asian countries.

     MACHINE VISION SYSTEMS - INDUSTRY BACKGROUND

The growth of the machine vision industry is dictated, on the one
hand, by the technical difficulty of achieving accurate "computerized
vision", and on the other hand, by the vast theoretical scope of the
potential applications.  The principal technical difficulties include
the problems of compensating for background noise that masks or
distorts objects, separating objects from their backgrounds,
determining how much "similarity" must exist before two visual
patterns are considered to represent the same object, and comparing
physical objects which are only approximately "similar" in the first
place.

As the technical difficulties are solved, the potential benefits and
applications of computerized vision are large.  In industrial quality
control, computerized vision can replace and perform inspections more
accurately than human inspectors.  In industrial automation,
computerized vision can be used to control industrial machines or
robots.  In security systems, computerized vision can be used to
detect human visitors or intruders in video camera images.  In
military applications, computerized vision can be used in automated
targeting systems.  In medical applications, it can be used to improve
diagnostic reliability.

The Automated Imaging Association has published extensive statistics
on the market for machine vision systems.  These statistics are
provided to illustrate how significantly the manufacturing industry
has embraced vision technology.  Statistics published by the AIA
include the following:

-  In 2000, the North American market for machine vision systems was
   approximately $1.57 billion in revenue, or approximately 50,500 units.
   These figures represented an increase of 26.4% in units, and an
   increase of 25.8% in revenue, compared to corresponding figures for
   1999.
-  The study concluded that the total world market for machine vision
   is approximately $5.83 billion.  Of these sales, North American
   companies captured $3.39 billion or approximately 58.1%.  With respect
   to the geographic distribution of sales by the North American machine
   vision industry, 44.2% of the revenues came from sales outside of
   North America.
-  The semiconductor and electronic industries accounted for more than
   60% of all revenues and 55% of all units sold in 2000.  The
   transportation industry accounted for approximately 6% of the units
   sold in North America in 2000.
-  In the automotives industry, machine vision is being employed in
   the production of every automobile.  Most applications in the
   automotive industry require a good deal of customisation.

     TECHNICAL DESCRIPTION - COMPUTERIZED VISION

Computerized vision involves analysing visual images in a digital
electronic form.  To do so, a computerized vision system must first
express a visual image in digital form.  The system must then analyse
the digital data to recognize patterns or specific objects.

                                         11
<PAGE>

We separate the development of a vision system into the following
modules, which correspond to the logical steps that must be followed
in analysing an electronic visual image.

ACQUISITION AND DIGITIZATION MODULE.  The acquisition and digitization
module receives input such as the signal from a video monitor, and
creates a digitized version of that input.

PRE-PROCESSING MODULE.  The pre-processing module receives digitized
output from the acquisition and digitization module and performs
certain operations and modifications on the digital data to facilitate
pattern recognition.  The pre-processing module performs the following
principal functions:

-  It filters out noise and other apparent anomalies in the digital
   data.
-  It segments the data by identifying subsets of the digital data
   which represent candidates for physical objects that the vision system
   is intended to recognize.
-  It transforms data by deriving selected numerical characteristics
   of the data subsets identified as potential objects.  The numerical
   characteristics may include such quantities as the length or width of
   the object, or a series of numbers describing its colour or texture.
   The numerical quantities thus derived are stored as a vector, referred
   to as the "physical signature" of the potential object.

TRAINING AND MATCHING MODULE.  The training and matching module
performs two essential functions.

-  It receives the physical signatures of potential objects and
   attempts to match them to the signatures of specified objects already
   stored in memory (the objects the system is trying to locate or
   recognize).  The training and matching module "classifies" physical
   signatures by calculating how well they match the signatures stored in
   memory.  Since physical objects are unlikely to be perfectly
   identical, or to be described perfectly by a digitized version of
   visual input, classification necessarily involves the comparison of
   approximate quantities.  The classification of physical signatures
   thus requires a mathematical algorithm for deciding how closely a
   physical signature and a signature match.  A variety of mathematical
   models, including fuzzy mathematics and standard probability error
   functions, can be used to fulfil this requirement.  While the
   technical details of the mathematical models differ, they have the
   common object of producing a numerical measure of how closely two
   mathematical data vectors match.
-  It refines the stored signatures to which future physical
   signatures can be matched, that is it "trains" the system for more
   accurate object recognition in the future.  Depending on the
   mathematical algorithm used to identify matching signatures, the
   training and matching module can adjust the appropriate memory
   signatures, or the mathematical parameters or functions used in
   matching physical signatures to the signatures stored in memory.

CONTROL AND FEEDBACK MODULES.  The control and feedback module
controls input to, and output from, the system.  The control and
feedback module determines the extent to which the system is being
trained and also permits direct operator participation in certain
steps of the process, such as the identification of candidate objects
or new objects.  When a physical signature does not match any of the
signatures stored in memory, the control and feedback module can also
initiate procedures to create a "new" signature in memory, to be used
in identify the "new" object in the future.

     CUSTOMER PROJECTS - MACHINE VISION SYSTEMS

                                         12
<PAGE>

Our attempts to sell customized vision systems were unsuccessful until
the final quarter of 1999.  Since then, we have sold and installed 7
vision systems, and have received purchase orders for 20 additional
vision systems.

In September 1999, we entered into a contract to develop a system for
inspecting and sorting brake shoes for Satisfied Brake Products Inc.
We agreed to develop the machine vision components of the system.  A
company named Mercator Robotec Inc. agreed to provide system
integration services, to link our machine vision components with the
mechanical control systems of the customer's production line.  The
machine vision components of the system were required to identify and
separate approximately 200 different types of brake shoes, and to
inspect the brake shoes visually for defects.

The price for the system was approximately US$68,000 and, of this
amount, we paid approximately $26,000 to Mercator Robotec Inc.  The
system was completed in January 2000, and is currently in operation.
Our contract with Satisfied Brake Products Inc. represented our first
major contract for the sale of a custom vision system.

In March 2000, we entered into an alliance agreement with ABB.  ABB is
a technology group based in Europe, employing over 165,000 people in
more than 100 countries.

Under the alliance agreement we have agreed to cooperate with ABB in
identifying, developing, and pursuing business opportunities that
combine the expertise and technology of the two companies. Either
company, upon becoming aware of such an opportunity, will notify the
other, and the companies will cooperate in preparing proposals,
specifications, and contracts.  The companies have agreed to work with
each other exclusively to the greatest extent reasonably practicable.
However, the exclusivity provisions do not apply if either company has a
bona fide business reason, such as preference of a customer, for
contracting with a different company.  Either party may terminate the
alliance agreement on 120 days notice.

We received an initial purchase order from ABB to develop a vision
system to identify and sort automobile transmission casing parts.  The
price for the vision system was approximately $18,000.  We completed
and installed the system in May 2000, and we have received payment.

In July 2000, we received a purchase order to develop two further
vision systems for ABB, to locate specified features on plastic blow-
moulded automotive fuel tanks, and to transmit that information to
industrial robots operating on the fuel tanks.  The price for each
system was approximately $20,000.  We completed and installed the
systems in September 2000 and we have received payment.

In February 2001, we received a purchase order from ABB, for a third
vision system to control industrial robots used in manufacturing fuel
tanks.  The price for the system was approximately $24,000.  We
completed and installed the system in March, 2001, and we have
received payment.

In August 2001, we received a further purchase order from ABB for a
vision system to guide industrial robots used in inspecting automotive
air conditioning systems.  The price of the system was approximately
$23,000.  We completed and installed the system in September 2001 and
we have received payment.

                                         13
<PAGE>

In late September and early October, 2001 we received purchase orders
from ABB to supply 19 vision systems to guide robots used in engine
parts handling.  These vision systems will utilize our 3D single camera
vision systems.  The systems will be installed at one of North
America's major automaker's engine assembly plants.  The installation
dates for these systems are dependent on the requirements of the
customer and these dates have constantly shifted.  We estimate that
two systems will be installed in April 2002, nine systems will be
installed in the second quarter of 2002 and the remaining eight systems
will be installed in the third quarter of 2002.

In September 2001, we received a purchase order from integrator Axium
Automation Inc. to supply a vision system to guide robots used in the
manufacture of plastic blow-moulded automotive fuel tanks.  The price
of the system was $32,500.  We completed and installed the system in
December 2001 and invoiced Axium on December 21, 2001.  However, in
accordance with the software revenue recognition rules outlined in the
American Institute of Certified Public Accountant's Statement of
Position (SOP) 97-2, we will recognize the revenue from this
installation throughout fiscal 2002.

In November 2001, we received a purchase order from Axium Automation
Inc. to supply an additional vision system to guide robots used in the
manufacture of plastic blow-moulded automotive fuel tanks.  The price
of the system is $32,500.  The expected installation date for this
system is March 2002.

In July 2001, we also entered into a Memorandum of Understanding with
Marubeni Corporation, pursuant to which the two companies have agreed
to cooperate in developing and marketing vision systems for industrial
applications including vision guided robots in Japanese and Asian
markets.  In conjunction with this agreement, in February 2002, we
received a purchase order for two eVF development systems.  To allow
integration of our eVisionFactory developed vision systems into
Kawasaki robots, Marubeni provided us with a Kawasaki robot.  We have
now completed the two eVisionFactory development systems and are
finalizing the license terms with Marubeni..

We caution investors that most machine vision systems are designed for
the specific needs of a particular customer, and represent isolated
purchases by the customers in question.  Accordingly, we have no
assurance that any customers we secure will become repeat customers.

     EVISIONFACTORY

eVisionFactory (eVF) is intended to provide a comprehensive software
environment for the design, development, operation, and support of
machine vision systems.  eVF consists of two principle elements, a
development environment and an Internet based service and support
system.

We use eVF to develop custom machine vision systems.  We are planning
to include a version of eVF without the internet based service and
support system or the error detection feature with the 19 vision
systems purchased by ABB.  The error detection feature and the
Internet based support system  are still in the development stage and
will be released separately.

     EVISIONFACTORY - DEVELOPMENT ENVIRONMENT

The development software included in eVisionFactory performs functions
similar to the Odysee Development Studio, which we completed in 1999.
That software is designed to facilitate the expeditious and
economical development of custom vision systems.  eVisionFactory
stores and manipulates libraries of routines to perform the various
functions that can be included within a vision system.  eVisionFactory
includes standardized interfaces to which all of the routines are
adapted, so that

                                         14
<PAGE>

the routines can be combined easily and efficiently
into an integrated system.  eVisionFactory permits the operator to
"drag and drop" individual routines from particular libraries to a
window opened for the system under development.  Once added to the
system window, the routines are automatically linked together
through the standardized eVisionFactory interface.  eVisionFactory
thus eliminates the need to write specialized computer code to link
individual routines.

eVisionFactory is installed on a user's computer system as part of a
completed machine vision system.  After installation, the vision
system can be modified or upgraded, by altering or adding to the
software components of the system, or by augmenting the data used by
the system.  eVisionFactory will permit users to make minor
modifications directly.  We will supply major modifications or
upgrades at an extra charge.

eVisionFactory also includes maintenance and support features which
monitor the performance of a vision system to detect errors, and to
notify the operator when an error has been detected.  We expect to
release the maintenance and support features separately, in 2002.

The software by which eVisionFactory links the various routines within
its libraries is proprietary. However, we do not have proprietary
ownership of the majority of the individual routines that can be used
with eVisionFactory, some of which are available in the public domain.

     EVISIONFACTORY-INTERNET BASED SERVICE AND SUPPORT SYSTEM

In the fall of 2000, we commenced development of a system for Internet
based service and support of industrial systems.  During the first half
of 2001, we began to incorporate this system as part of eVisionFactory.
The principal components of the system include the following:

-  communication devices, to transmit messages between on-site personnel
   and a server operating at the industrial site;
-  a server which controls communication within the industrial site, and
   which also connects to internet sites offering web based technical
   support; and
-  web based technical support applications, queuing mechanisms, channel
   managers, and synchronization mechanisms designed to respond to
   technical inquiries over the Internet.

Initially, our Internet based service and support system will use
networked computers to carry out its communication functions.  We also
plan to incorporate wireless communication features for use by on-site
personnel.  We plan to implement the wireless components of the system
through universally accepted standards for short-range wireless
communications, such as Bluetooth communications protocols or the
802.11b standard protocol.  Both sets of protocols are used in
implementing wireless networks, and are compatible with TCP/IP protocols
used in transmitting data over the Internet.  We do not yet have a
timetable for completion of the wireless components.

To gain access to technology required for our Internet based service and
support system, we have entered into the following agreements:

-  Under an Early Adopters Agreement dated December 15, 2000 with IBM,
   we receive information on methods for implementing Bluetooth
   communications protocols.
-  Under a Support and Equipment Lease Agreement dated December 19, 2000
   with Tactel AB, we have access to equipment incorporating Bluetooth
   communications protocols for testing and development purposes.

                                         15
<PAGE>

-  Under an agreement dated January 29, 2001 with Axis Communications
   Inc. we have been provided with a prototype unit of the AXIS 9010 Ltd.
   Bluetooth Access Point for testing and development purposes.

To complete development of the system we will have to develop
interfaces between the wireless components and software applications
that will be used to support Internet based communications.

We are developing software which will permit companies operating the
Internet based service and support system to obtain the following types
of support services in a secure manner:

-  Fault Information Wizards.  The wizards will ask the system operator
   a few simple questions aimed at identifying the nature of the problem
   and its location.  The system then transmits the support request to the
   remote support facility.  The technical support staff will acknowledge
   the receipt of the support request and respond by invoking one of three
   support mechanisms provided  by the system;
-  Two-way text chat capability.  If the problem description is unclear
   from the request, the technical support person can initiate a chat
   session and ask specific questions to ascertain the true nature of the
   problem.  The chat capability will be available from the eVF interface
   installed in the PC on the factory floor.
-  Trouble-shooting Wizards.  The system is capable of storing
   troubleshooting wizards for typical problems that can be transmitted to
   the system operator.  The wizards are designed to guide the operator in
   a step-by-step fashion with the aid of clear schematics to resolve the
   fault;
-  Remote Diagnostics.  The system has been designed to enable the
   support person to take remote control of the vision system when offline
   and when permitted by the operator, to identify and resolve a problem.

We originally planned to use the Wizmaster program which we developed
for Sideware systems to provide an automated "self-service" feature in
our Internet based support system.  We no longer plan to use this
program with the eVF Internet based service and support system.

We plan initially to market our Internet based service and support
system to users of our machine vision systems.  However, our Internet
based service and support system can be adapted for use with a variety
of industrial manufacturing systems including industrial robotic
systems.  Accordingly, we also we plan to market the system through our
alliance with ABB, to users of industrial robotic systems developed by
ABB.

Investors are cautioned that our Internet based service and support
system is in the development stage, and that we have no assurance that
we will be able to complete technical development of the system, or to
market the system successfully if it is completed.

     BRAINTRON PROCESSOR

In 1995, we developed the first generation of the BrainTron processor,
which performs the functions of a training and matching module, as
described above.  The first generation BrainTron processor exists in
hardware and software versions, both of which operate under the
Windows NT operating system.  Both versions can be used in final
applications, although the software version was intended principally
for

                                         16
<PAGE>

initial testing.  The hardware version is a plug-in computer card
with five chips performing the following functions:  communication
with a host computer, control of data movement within the processor,
generation of addresses to move data in memory, arithmetic operations,
and random access memory (RAM).

The first generation BrainTron processor uses the principles of fuzzy
mathematics to match physical signatures to signatures stored in
memory.  Training functions carried out by the BrainTron processor use
the ORB algorithm, which includes a set of rules for making fuzzy sets
either larger or smaller to reflect new data.  Using the ORB
algorithm, the first generation BrainTron processor expands or
contracts the fuzzy sets being used to compare signatures and physical
signatures. This process "trains" the system to require a close match
in circumstances where a close match can be expected, and to accept a
more approximate match where historical data shows that a close match
will not likely be found.

During 1998, we commenced development of the second-generation
BrainTron processor.  The second generation BrainTron processor uses
revised mathematical algorithms to perform the classification and
training functions.  In performing its classification function, the
second generation BrainTron processor uses a different mathematical
formula for measuring how well two vectors (representing a signature
and a physical signature) match.  In performing its training function,
the second generation BrainTron processor adapts a system to new
pieces of information in a way that is independent of the order in
which the new pieces of information are received.  We believe that the
enhancements to the second-generation BrainTron processor allow it to
carry out its classification and training functions more accurately
and quickly.

The software version of the second generation BrainTron processor has
been completed.  We expect that the second-generation BrainTron
processor will be available for use in robotic vision systems that we
install in the future, if its features are required for those systems.
We have not yet commenced development of a hardware version of the
second generation BrainTron processor, and do not have definite plans
as to when, or whether, a hardware version will be built.

     ODYSEE DEVELOPMENT STUDIO

During 1999, we completed development of the Odysee Development Studio
("Odysee").

Odysee is designed to facilitate the expeditious and economical
development of custom machine vision systems.  Odysee stores and
manipulates libraries of routines to perform the various functions
that can be included within a vision system.  Odysee includes a
standardized interface to which all of the routines are adapted, so
that the routines can be combined easily and efficiently into an
integrated system.  Odysee permits the operator to "drag and drop"
individual routines from particular libraries to a window opened for
the system under development.  Once added to the system window, the
routines are automatically linked together through the standardized
Odysee interface.  Odysee thus eliminates the need to write
specialized computer code to link individual routines.

We initially developed Odysee for internal use, as an internal
development tool.  We tried briefly to market Odysee, through a
limited marketing program, as a development tool for use by other
software companies and system integrators.  To achieve this, we
modified Odysee to include additional routines and functions, beyond
those useful principally for machine vision systems.  The additional
routines included numerical calculation and statistical routines, to
perform a variety of mathematical operations, and routines which
manipulated large databases.  Our attempts to market Odysee were not
successful.

                                         17
<PAGE>

Development of Odysee has been funded in part by a grant from the
National Research Council of Canada in the amount of $51,400.

The software by which Odysee links the various routines within its
libraries is proprietary.  However, we do not have proprietary
ownership of the majority of the individual routines that can be used
with Odysee, some of which are available in the public domain.

     COMPETITIVE POSITION-MACHINE VISION SYSTEMS

The Automated Imaging Association has identified various categories
for companies operating in the vision systems industry.  We believe
that for purposes of analysing our competitive position, we would be
classified as a merchant machine vision vendor.

According to data published by the AIA, of 257 companies operating in
the machine vision systems market during 1999 (note: the AIA did not
publish these statistics for 2000):

-  155 companies, versus 139 in 1998, operated with revenues of less
   than $5 million;
-  50 companies, versus 35 in 1998. operated with revenues in the
   range of $5-10 million;
-  21 companies, versus 18 in 1998, operated with revenues in the
   range of $10-20 million;
-  19 companies, versus. 11 in 1998, operated with revenues in the
   range of $20-30 million;
-  6 companies, versus 4 in 1998, operated with revenues in the range
   of $30-40 million; and
-  6 companies, versus 5 in 1998, operated with revenues in excess of
   $40 million.

Accordingly, many of our potential competitors are substantially
larger than we are and earn substantially greater revenue.

We do not know of a reliable way to evaluate our future competitive
position within the industry. We believe that a substantial number of
companies operating in the vision systems market have the capability
of developing the kind of machine vision systems we develop.  However,
we also believe that:

-  eVisionFactory will enable us to develop machine vision systems
   quickly and efficiently; and
-  through our alliance with ABB, we have demonstrated an ability to
   complete projects for major industrial clients.

We, however, do not have an established track record of sales or
profits to provide any reliable indication of our ability to attract
significant market share or to operate profitably.

RESEARCH AND DEVELOPMENT

During the year ended December 31, 1999 we incurred research and
development expenses of $579,441, which included $204,800 paid to
North Shore Circuit Design for work on the IMPAC board.  During the
year ended December 31, 2000, we incurred research and development
expenses of $435,071, which included $87,751 paid to North Shore
Circuit Design.  During the year ended December 31, 2001, we incurred
research and development expense of $404,482, none of which was paid
to North Shore Circuit Design.  Other than payments to North Shore
Circuit Design, substantially all of our research and development
expenses consisted of internal personnel costs allocated to research
and development.  For 2002, our own employees will do substantially
all of our research and development work.

                                         18
<PAGE>

INTELLECTUAL PROPERTY

We believe that software and related technical data which we have
developed constitute intellectual property belonging to us.  The
software and technical data over which we assert intellectual property
rights include principally the following:

-  software we have written in developing our single camera 3D robot
   guidance system;
-  software we have written and incorporated in eVisionFactory,
   including the software by which eVisionFactory links the various
   subroutines within its libraries;
-  software we have written and incorporated in the Internet based
   service and support system included in eVisionFactory;
-  software and design specifications incorporated in the second
   generation BrainTron processor;
-  software routines which we develop from time to time in developing
   machine vision systems;
-  software written in developing the Wizmaster program; and
-  software we have written and incorporated in the Odysee Development
   Studio.

We have also registered the trademarks "Braintech" and "BrainTron"
with the United States Patent and Trademark office.

On January 31, 2002, we filed an application in the Canadian Patent
Office regarding the METHOD AND APPARATUS FOR SINGLE CAMERA 3D VISION
GUIDED ROBOTICS.  This is the only instance in which we have applied
for patent protection of our intellectual property.

Under our Product Development Agreement with UTMC dated July 6, 1998,
we and UTMC own jointly all intellectual property created in the
development of the IMPAC accelerator board.  The stipulations as to
joint ownership do not apply to pre-existing intellectual property
owned by either us or UTMC, or to improvements or modifications to
such pre-existing intellectual property.

Pursuant to a License Agreement dated January 13, 1995 with Willard W.
Olson, we hold a non-exclusive license to use the Olson Reticular
Brainstem algorithm ("ORB").  The term of the license is for 10 years,
expiring in January, 2005.

ORB is a method of pattern classification which includes the following
features:

-  ORB measures the similarity of two visual patterns by developing a
   mathematical measurement for the degree of similarity in various
   features in the patterns.
-  ORB uses fuzzy mathematics to measure the similarity in individual
   features.
-  ORB is adaptive, in the sense that the mathematical criteria which
   it uses in comparing features can be modified to take account of new
   data, as new patterns are observed.  In this way, a system using ORB
   can be "trained" over time to recognize and distinguish visual
   patterns more accurately.

We understand that Olson holds a license from Motorola Corp., pursuant
to which he was given the authority and legal power to grant the
license given to us under the License Agreement.  We do not have a
complete copy of the license agreement between Motorola Corp. and
Olson, which has been withheld on grounds of confidentiality.  We are
thus not able to confirm directly the authority and legal power of
Olson to grant the license contained in the License Agreement.
However, attorneys for Olson have provided us with copies of certain
provisions contained in the license agreement between Motorola Corp.
and Olson, which provisions appear to us to authorize the license
granted to us pursuant to the License

                                         19
<PAGE>

Agreement.  In addition, we have made it publicly known for over
four years that we have used the ORB algorithm in the development
of the first generation BrainTron processor, and have received no
notice of any objection from Motorola Corp.  We have no reason to
believe that our use of the ORB algorithm is not properly authorized
under the License Agreement.

ORB is the subject matter of U.S. Patent #5,390,261 (expiry date
February 14, 2012) and Taiwan Patent No. 62531, currently owned by
Motorola Corp.  To the best of our knowledge, neither patent has been
challenged in any form of court proceedings, with the result that
there exists no judicial confirmation of the validity or
enforceability of the patents.  We can not assure that any of the
patents referred to herein are valid or enforceable.

The first generation BrainTron processor was designed incorporating
ORB.  ORB is not utilized in the second generation BrainTron
processor.

Our ability to compete successfully will depend in part on our ability
to protect our proprietary technology and information.  Except for the
patent application regarding our METHOD AND APPARATUS FOR SINGLE
CAMERA 3D VISION GUIDED ROBOTICS described above, and apart from the
Braintech and BrainTron trademarks, we have not applied for
registration of intellectual property rights in respect of any of our
software (although certain forms of legal protection, such as
copyright ownership, are available without registration).  Although we
attempt to prevent improper disclosure of our proprietary technology,
we cannot assure that the measures we take will be adequate, or that
competitors will not be able to develop similar technology
independently. Further, we can not assure that claims allowed on any
patent we obtain will be broad enough to protect our technology, that
any patent applications will ultimately be successful, or that foreign
intellectual property laws will protect our intellectual property.  We
may have to resort to litigation to enforce or determine the validity
and scope of our proprietary rights.  Litigation of this nature would
likely be expensive, and its outcome uncertain.

We have no pending claims against us for infringement of any patents
or other intellectual property rights of others.  We have no reason to
believe that we infringe any intellectual property rights of others,
although we do not conduct systematic patent searches to determine
whether any of our products infringe existing patent rights.  Whether
or not we are actually infringing the rights of third parties, claims
of infringement may be advanced against us, forcing us either to
defend costly litigation or to purchase license rights from third
parties.  If we are forced to purchase license rights from third
parties, we can not assure that we will be able to do so on
commercially reasonable terms, or at all.

ITEM 2. DESCRIPTION OF PROPERTY

Effective July 15, 2001 we returned to office premises which we
occupied previously at Unit 102, 930 West 1st Street, North Vancouver,
B.C.  From May 1995 to March 2001, we shared those premises with
Sideware Systems Inc.  In June 2001, Sideware vacated the premises,
and entered into an agreement to sub-let a portion of the premises to
a third party.  We currently occupy the remainder of the premises,
consisting of approximately 9,800 square feet.  The annual rent for
our portion of the premises is approximately $85,000 per year.  In
addition, we are responsible for costs relating to property taxes and
common area maintenance, totalling approximately $27,000 per year.
The term of the lease expires August 31, 2003.

The lease for the premises at Unit 102-930 West 1st Street is in the
name of TechWest Management Inc. The lease was made at a time when we
shared the premises with Sideware Systems Inc., and we signed the
lease as a co-covenantor, along with TechWest and Sideware.  As co-
covenantor on the original

                                         20
<PAGE>

lease, we could also be legally responsible for rent relating to the
portion of the premises which has been let to a third party, if
Sideware Systems Inc. and the sub-tenant both fail to pay that rent.
The additional rent for which we could be liable totals approximately
$82,000 per year, inclusive of operating costs.

Our current premises at Unit 102-930 West 1st Street are suitable and
adequate for our current and future anticipated research and
development and production operations.  Additional facilities at other
locations will be occupied as dictated by our needs and growth.

We have vacated our previous office premises at Unit 113-980 West 1st
Street, North Vancouver, B.C., and have no continuing financial
obligations in respect of those premises.

ITEM 3.  LEGAL PROCEEDINGS

As at the date of this annual report, we are not involved in any legal
proceedings.

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

Not Applicable.


PART II

ITEM 5.  MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

Our common shares are currently trading through the OTC Bulletin Board
under the symbol "BNTI".

The following table shows the high and low sale prices for our common
shares for the quarters indicated.

<TABLE>
<CAPTION>
QUARTER                          HIGH               LOW              CLOSE
                                  ($)               ($)               ($)
                               --------          ---------         ---------

<S>                            <C>               <C>               <C>
2001
 Fourth quarter                  0.28               0.13              0.13
 Third quarter                   0.36               0.13              0.15
 Second quarter                  0.33               0.10              0.31
 First quarter                   0.43               0.11              0.13

2000
 Fourth quarter                  0.37               0.14              0.15
 Third quarter                   0.59               0.26              0.27
 Second quarter                  2.0                0.53              0.53
 First quarter                   6.13               1.07              1.94
</TABLE>

The source of this information is the OTC-Bulletin Board.  The
quotations reflect inter-dealer prices, without retail mark-up,
mark-down or commission and may not represent actual transactions.

                                         21
<PAGE>

HOLDERS

As at March 20, 2002, we have 57,293,311 shares issued and outstanding.
We have approximately 282 registered shareholders.  Approximately 38.5
million shares are registered in the name of CEDE & Co., a depository.
Based on research into the indirect holdings registered in the names of
depositories and financial institutions, we estimate that we have over
9,500 beneficial shareholders.

DIVIDEND POLICY

We have never paid cash dividends on our capital stock.  We currently
intend to retain any profits we earn to finance the growth and
development of our business.  We do not anticipate paying any cash
dividends in the foreseeable future.

RECENT SALES OF UNREGISTERED SECURITIES

During the first quarter of 2001, we completed a private placement of
7,600,000 shares at a price of $0.15 per share.  In addition, for
every two shares purchased, each purchaser received one share purchase
warrant.  Each share purchase warrant entitles the holder to purchase
one additional share for one year at $0.20 per share.  We have
voluntarily and without receipt of any further consideration agreed to
extend the 3,800,000 share purchase warrants for 6 months.  The shares
and warrants were issued to accredited investors pursuant to
exemptions from registration as set out in Rule 506 of Regulation D
under the Securities Act.

Of the 7,600,000 shares issued pursuant to this private placement,
3,300,000 shares were issued February 26, 2001 at a price of $0.15
(equivalent to proceeds of $495,000) and 4,300,000 shares were issued
March 15, 2001 at a price of $0.15 (equivalent to proceeds of
$645,000).  We received $730,000 of the proceeds from this private
placement prior to December 31, 2000, and included this amount as
"Additional paid-in capital" in our financial statements as at
December 31, 2000.  We received the balance of the proceeds during the
first quarter of 2001.  Purchasers in this private placement included
the following directors and officers:

-  Owen Jones, one of our directors, purchased 1,666,667 shares and
   833,334 share purchase warrants;
-  Edward White, one of our directors, purchased 666,667 shares and
   333,334 share purchase warrants;
-  Beau J Holdings Ltd., a private holding company of Grant
   Sutherland, one of our directors, purchased 1,666,666 shares and
   833,333 share purchase warrants.

Edward White issued a promissory note in the amount of $100,000 to us
in payment of his shares and share purchase warrants.  In accordance
with an Agreement for Escrow of Share Certificate dated February 27,
2001, the share certificate and warrant certificate issued to Mr.
White will remain in escrow until we receive full payment of the
$100,000 from Mr. White.

On March 15, 2001, pursuant to a Mutual Release and Settlement
Agreement dated February 1, 2001, we issued 400,000 shares to JMF
Management Inc. in settlement of legal proceedings.  The shares were
issued pursuant to the exemption from registration set out in section
4(2) of the Securities Act.

On March 15, 2001, we issued 100,000 common shares Peter MacLean, a
former employee.  Mr. MacLean was entitled to the shares as a term of
his employment agreement.  The shares were issued

                                         22
<PAGE>

pursuant to the exemption from registration set out in section 4(2) of
the Securities Act.

On June 29, 2001, we issued 2,773,523 common shares at a price of
$0.15 per share to Judy Jones, James Meyers and Babak Habibi pursuant
to a private placement.  In addition, for every two shares purchased,
the purchasers received one share purchase warrant.  Each share
purchase warrant entitles the holder to purchase one additional share
for one year at $0.20 per share.  We have voluntarily and without
receipt of any further consideration agreed to extend the share
purchase warrants for 6 months.  The shares and warrants were issued
to accredited investors pursuant to exemptions from registration as
set out in Rule 506 of Regulation D under the Securities Act.  Ms.
Jones is the wife of Owen Jones, our Chief Executive Officer and one
of our directors.

Mr. Habibi is our President and one of our directors.  Mr. Habibi
provided us with a demand promissory note in the amount of $100,000
without interest to pay for the shares and share purchase warrants.
He has signed an agreement to hold the share certificate and warrant
certificate in escrow. According to the agreement, the shares and
warrants issued to him will remain in escrow until he submits full
payment to us.  If Mr. Habibi fails to pay the demand promissory note,
we will cancel the share certificate and warrant certificate issued to
him.

As at the date of this annual report, none of the 5,186,766 share
purchase warrants we issued in the first half of 2001 have been
exercised.

On August 30, 2001, we issued 295,455 common shares at a price of
$0.22 per share to a single arm's length investor pursuant to a
private placement.  In addition, for every two shares purchased, the
purchaser received one share purchase warrant.  Each share purchase
warrant entitles the holder to purchase one additional share for one
year at $0.27 per share.  We have voluntarily and without receipt of
any further consideration agreed to extend the share purchase warrants
for 6 months.  A finder's fee of $4,640 was paid to facilitate the
transaction.  The shares and warrants were issued to an accredited
investor pursuant to exemptions from registration as set out in Rule
506 of Regulation D under the Securities Act.

On September 6, 2001, we issued 25,000 common shares at a deemed value
of $0.20 per share on account of consulting services rendered by Farid
Rohani.  Mr. Rohani is an accredited investor and the shares were
issued pursuant to exemptions from registration as set out in Rule 506
of Regulation D under the Securities Act.

On October 31, 2001, we received from Owen Jones, our C.E.O. and
director, the sum of $250,000 and on December 20, 2001 we received
from Grant Sutherland, our Chairman and director, the sum of $64,516.
These amounts have been recorded in additional paid-in capital as
common stock subscriptions received.  To the date of this annual
report, no shares have been issued with regard to these subscriptions.

On January 4, 2002, we issued 100,000 common shares at a deemed value
of $0.16 per share for public relations services rendered by Ogilvie
Rothchild Inc.  As the services had been rendered prior to December
31, 2001, we have recorded the amount as additional paid-in capital as
at December 31, 2001.  Ogilvie Rothchild Inc. is an accredited
investor and the shares were issued pursuant to exemptions from
registration as set out in Rule 506 of Regulation D under the
Securities Act.

                                         23
<PAGE>

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

OVERVIEW

We have incurred aggregate net losses of approximately $10.0 million
during the period from our inception on January 3, 1994, to December
31, 2001.  We will likely continue to incur significant additional
operating losses as our product development, research and development,
and marketing efforts continue.  Operating losses may fluctuate from
quarter to quarter as a result of differences in the timing of
expenses incurred and revenue recognized.

We have generated total revenues, from inception on January 3, 1994 to
December 31, 2001, in the amount of $246,901.

RESULTS OF OPERATIONS

We believe that our limited history of revenue generation and recent
business developments make the prediction of future results of
operations difficult, and, accordingly, our operating results should
not be relied upon as an indication of future performance.

YEAR ENDED DECEMBER 31, 2001 COMPARED WITH YEAR ENDED DECEMBER 31,
2000

For the year ended December 31, 2001 we recorded revenue of $49,342.
This amount included:

(a)  $26,392 for a vision system used in the manufacture of plastic
     fuel tanks;
(b)  $22,950 for a vision system used to locate and inspect automotive
     air conditioning systems.

     Both of these systems were sold through our alliance with ABB Flexible
     Automation.

Revenue for the year ended December 31, 2001, did not include $32,500
for an additional vision system used in the manufacture of plastic
fuel tanks that was delivered in December 2001.  In accordance with
the software revenue recognition rules outlined in the American
Institute of Certified Public Accountant's Statement of Position (SOP)
97-2, we will recognize the revenue from this installation throughout
fiscal 2002.

Cost of sales for the year ended December 31, 2001 were $13,830.  This
amount consisted of:

(a)  $7,475 for equipment and installation costs relating to the fuel
     tank project;
(b)  $6,355 for equipment and installation costs relating to the air
     conditioner project; and

Revenue from operations for the year ended December 31, 2000 was
$140,049.  This amount included:

(a)  $65,786 for a brake shoe sorting and inspection system developed
     for Satisfied Brake Products Inc.;
(b)  $11,387 for the Wizmaster program developed for Sideware Systems
     Inc.;
(c)  Approximately $44,000 from ABB for two vision systems used in the
     manufacture of plastic fuel tanks; and
(d)  Approximately $18,000 from ABB for a vision system to identify and
     sort automotive transmission casing parts.

                                         24
<PAGE>

Cost of sales for the year ended December 31, 2000 were $53,581.  This
amount consisted of:

(a)  $26,105 paid to a systems integrator working on the Satisfied
     Brake Products Inc. project; and
(b)  Approximately $27,500 for equipment and expenses related to the
     projects that generated revenue from operations.

Research and development expenses decreased from $435,071 for the year
ended December 31, 2000 to $404,482 for the year ended December 31,
2001.  The decrease resulted principally from the following factors:

(a)  During the year ended December 3, 2000 we paid approximately
     $88,000 to North Shore Circuit Design for work on the IMPAC
     accelerator board.  During 2001 we ceased work on the IMPAC
     accelerator board, in order to concentrate our efforts on developing
     our relationship with ABB.  As a result, payments to North Shore
     Circuit design have ceased;
(b)  Salaries and contract labour allocated to research and development
     increased from $327,275 to $372,177 for the year ended December 31,
     2001.

Selling, general, and administrative expenses increased from $691,993
for the year ended December 31, 2000 to $1,462,937 for the year ended
December 31, 2001.  Several factors contributed to the increase.  The
principal factors were as follows:

(a)  General and administrative salaries increased from approximately
     $189,000 to approximately $650,000, due to the hiring of approximately
     10 additional general and administrative employees during the year
     ended December 31, 2001;
(b)  Amortization expenses increased from $52,114 to $113,327,
     principally as a result of amortization charges in respect of
     approximately $155,000 in additional capital assets purchased during
     the year ended December 31, 2001.  The capital assets purchased
     related mainly to the increase in our staff and the increase in the
     size of our office premises;
(c)  Legal expenses increased from $72,965 to $171,864, principally due
     to the cost of filing a registration statement under the Securities
     Act of 1933;
(d)  Filing and transfer fees decreased from $32,465 to $4,870.  During
     the year ended December 31, 2000 we incurred filing fees of
     approximately $30,000 for the filing of a registration statement under
     the Securities Act of 1933 that was completed in 2001;
(e)  During the year ended December 31, 2000 we incurred a foreign
     exchange loss of $19,431.  The comparative figure for 2001 was $6,860.
     Our foreign exchange losses result principally from adjusting entries
     made in respect of transactions recorded in United States dollars, but
     actually carried out in Canadian dollars;
(f)  During the year ended December 31, 2001, we paid $18,922 for
     investor relations services.  There were no similar payments during
     2000;
(g)  Travel and trade show expenses increased from $6,329 to $66,951,
     principally as a result of attending the International Robots & Vision
     Show in Chicago in June 2001;
(h)  Premises costs increased from $55,033 to $93,708, principally as a
     result of the relocation of our office premises to Unit 102 - 930 West
     1st Street, North Vancouver, B.C.

YEAR ENDED DECEMBER 31, 2000 COMPARED WITH YEAR ENDED DECEMBER 31,
1999

During the year ended December 31, 2000, we recorded revenue from
operations of $140,049.  This amount included:

                                         25
<PAGE>

-  Approximately $68,000 for a brake shoe sorting and inspection
   system developed for Satisfied Brake Products Inc.;
-  $11,387 for the Wizmaster program developed for Sideware Systems
   Inc.;
-  Approximately $44,000 from ABB, principally for two vision systems
   used in the manufacture of plastic fuel tanks; and
-  Approximately $18,000 from ABB for a vision system to identify and
   sort automotive transmission casing parts.

We recorded no revenue from operations during the year ended December
31, 1999.

Cost of sales for the year ended December 31, 2000, were $53,581.
This amount consisted of:

-  $26,105 paid to Mercator Robotec Inc., a systems integrator working
   on the Satisfied Brake Products Inc. project; and
-  Approximately $27,200 for equipment and expenses related to the
   projects that generated revenue from operations.

We had no revenue during the year ended December 31, 1999 and,
accordingly, we recorded no cost of sales during that period either.

Research and development expenses for the year ended December 31, 2000
were $435,071 compared with $579,441 for the year ended December 31,
1999.  This change resulted principally from the following factors:

-  Salaries allocated to research and development increased from
   $315,458 to $327,275; and
-  Payments to North Shore Circuit Design for work on the IMPAC board
   decreased from $204,800 to $87,751.  Our work on the IMPAC board
   ceased during 2001, and as a result, payments to North Shore Circuit
   design have ceased.

Selling, general and administrative expenses increased from $650,715
for the year ended December 31, 1999 to $691,993 for the year ended
December 31, 2000. Several factors contributed to the increase. The
principal factors were as follows.

-  Amortization increased from approximately $42,500 to $52,000, as a
   result of a change in the amortization period with respect to computer
   hardware and also as a result in the increased expenditure on
   leasehold improvements;
-  Filing and transfer fees increased from $12,213 to $32,465,
   principally as a result of costs incurred in filing a registration
   statement under the Securities Act of 1933;
-  Accounting and auditing expenses decreased from approximately
   $66,000 to approximately $59,000;
-  Legal expenses decreased from approximately $77,000 to
   approximately $73,000;
-  Investor relations costs increased from $19,528 to $51,430, almost
   all of the $51,430 related to costs incurred in distributing materials
   for our 2000 shareholders' meeting and in proxy tabulation costs;
-  Travel and trade show costs decreased from approximately $41,000 to
   approximately $6,300, principally because we did not participate in
   industry trade shows during 2000;
-  Premises costs increased from $33,353 to $55,033, principally as a
   result of our relocation to our new office premises located at Unit
   113-980 West 1st Street, North Vancouver, B.C.

                                         26
<PAGE>

LIQUIDITY AND CAPITAL RESOURCES

During the first quarter of 2001, we completed a private placement of
7,600,000 shares at a price of $0.15 per share.  In addition, for
every two shares purchased, each purchaser received one share purchase
warrant.  Each share purchase warrant entitles the holder to purchase
one additional share for 18 months at $0.20 per share.  Net proceeds
from the private placement were approximately $1.1 million.

On June 29, 2001 we completed a private placement of 2,773,523 common
shares at a price of $0.15 per share.  In addition, for every two
shares purchased, the purchasers received one share purchase warrant.
Each share purchase warrant entitles the holder to purchase one
additional share for 18 months at $0.20 per share.  Net proceeds from
the private placement were approximately $410,000.

On August 30, 2001 we completed a private placement of 295,455 common
shares at a price of $0.22 per share.  In addition, for every two
shares purchased, the purchasers received one share purchase warrant.
Each share purchase warrant entitles the holder to purchase one
additional share for 18 months at $0.27 per share.  Net proceeds from
the private placement were approximately $60,360.

We commenced a private placement of our securities in October 2001 at
a price of $0.15 per share.  In addition, the purchasers will receive
one share purchase warrant for one year at $0.20 per share for each
two shares purchased.  On October 31, 2001 we received $250,000 and on
December 20, 2001 we received $64,516 on account of this private
placement.  No securities have yet been issued in consideration of
these funds.  Subsequent to December 31, 2001, on January 30, 2002 we
received $131,962, on February 6, 2002 we received $100,000, on
February 26, 2002 we received $100,000, and on March 26, 2002 we
received $100,000.  No securities have yet to be issued in
consideration of these funds.

As of March 26, 2002, inclusive of the private placement proceeds
described above, our cash balance is approximately $140,000.  Apart
from our cash balance and any revenue we receive from operations, we
have no other sources of liquidity or capital resources.

At our current level of operation, we estimate that our cash expenses
are approximately $160,000 per month.  We base this estimate on the
following data:

-  As at March 20, 2002, we have 23 employees.  Our salary costs are
   approximately $85,000 per month;
-  For the year ended December 31, 2001 our average monthly general,
   overhead and administrative costs, exclusive of salary costs, were
   approximately $70,000 per month.  We expect that our general overhead
   and administrative costs, exclusive of salary costs, will continue to
   be approximately $70,000 per month for the first half of 2002;
-  We do not expect to incur contractor research and development
   expenses in 2002;
-  During the year ended December 31, 2001 we incurred capital
   expenditures of approximately $154,000, principally for leasehold
   improvements, furniture and fixtures, and computer equipment.  Between
   December 31, 2001 and March 15, 2002, we incurred capital expenditures
   of approximately $148,000, principally for leasehold improvements,
   furniture and fixtures, computer equipment, and computer software
   related to the expansion of our staff.  We do not expect to incur
   significant capital expenditures during the remainder of 2002
   unless they result from an increase in our level of operation.

                                         27
<PAGE>

Based on the foregoing, we estimate that our total cash expenditures
for the period March 15, 2002 to June 30, 2002 will be approximately
$500,000.  Accordingly, at our current level of operation, our
existing cash balances, together with the revenue generated by our
sales to ABB and Axium, should be sufficient to pay our anticipated
cash expenditures to approximately April 30, 2002.  To continue as a
going concern, we will either have to raise additional capital or
generate substantial sales revenue.  If we cannot do either by April 30,
we face the risk that our business will fail.

We do not plan to increase our operating expenses significantly, or to
incur substantial capital expenditures, unless we begin to generate
sales revenue or unless we raise additional capital.   At present, we
do not have specific plans to raise additional capital.  We believe
that if we identify additional development projects that we consider
worth pursuing, we will likely try to raise additional private
placement financing.

CRITICAL ACCOUNTING POLICIES

On December 12, 2001, the Securities and Exchange Commission
issued cautionary advice regarding the disclosure of critical
accounting policies.  Critical accounting policies are those that
our management believes are both most important to the portrayal
of our financial condition and results, and that require
difficult, subjective, or complex judgements, often as a result
of the need to make estimates about the effects of matters that
involve uncertainty.

We believe the "critical" accounting policies we use in
preparation of our financial statements are as follows:

REVENUE RECOGNITION.  We recognize revenue when there is a
persuasive evidence of a contract, delivery has occurred, the fee
is fixed or determinative, collection is reasonably assured, and
there are no substantive performance obligations remaining.  Any
cash received in advance of meeting these criteria is recorded as
deferred revenue on our balance sheet.

USE OF ESTIMATES.  The preparation of our financial statements in
conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the
reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses
during the reporting period  Actual amounts may differ from these
estimates.

STOCK-BASED COMPENSATION.  We have elected to apply the provision
of Accounting Principles Board Opinion No. 25, "Accounting for
Stock Issued to Employees" ("APB 25"), and related
interpretations in accounting for stock options granted to
employees.  Under APB 25, compensation expense is only recorded
to the extent that the exercise price is less than fair value on
the measurement date.  We have adopted the disclosure-only
provisions of Statement of Financial Accounting Standards 123,
"Accounting for Stock-Based Compensation" ("SFAS 123").  Non-
employee options are recognized at the fair value of the options
as determined by an option pricing model as the services are
performed and the options earned.

EFFECTS OF FOREIGN CURRENCY EXCHANGE RATES AND INFLATION

While we record our financial statements in United States dollars,
many of our expenses are incurred in Canadian dollars.  As a result,
fluctuations in the Canadian dollar exchange rate can affect our
expenses,

                                         28
<PAGE>

and thus our profit or loss.  During the year ended December 31,
2001 we incurred a foreign exchange loss of $6,860.  The foreign
exchange loss resulted principally from adjusting entries made in
respect of transactions recorded in United States dollars, but
actually carried out in Canadian dollars.  As at the date of this
annual report, we have not engaged in exchange rate-hedging
activities.  To the extent we implement such hedging activities in the
future, we cannot assure that we will be successful.

In the years ended December 31, 2001 and December 31, 2000 inflation
has had a limited impact on our operations.  However, there can be no
assurance that inflation will not have a material adverse effect on
our results of operations in the future.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

As at December 31, 2001 we have not entered into or acquired financial
instruments that have a material market risk.  We have no financial
instruments for trading or other purposes or derivative or other
financial instruments with off balance sheet risk.  All financial
assets and liabilities are due within the next twelve months and are
classified as current assets or liabilities in the consolidated
balance sheet provided with this annual report.  The fair value of all
financial instruments at December 31, 2001 approximate their carrying
values.

To December 31, 2001, the majority of our cash costs have been
realized or incurred in Canadian dollars.  To date we have not entered
into foreign currency contracts to hedge against foreign currency
risks between the Canadian dollar or other foreign currencies and our
reporting currency, the United States dollar.  Generally, however, we
attempt to manage our risk of exchange rate fluctuations by
maintaining sufficient net assets in Canadian dollars to retire our
liabilities as they come due.

ITEM 7.  FINANCIAL STATEMENTS

Each of the following items is contained in our consolidated financial
statements, which are attached as an exhibit to our annual report.

-  Report of KPMG LLP Independent Auditors;
-  Consolidated Balance sheets as of December 31, 2001 and 2000;
-  Consolidated Statements of Operations for each of the years in the
   three year period ended December 31, 2001 and for the period from
   inception on January 3, 1994 to December 31, 2001;
-  Consolidated Statements of Stockholders' Equity (Deficit) for the
   period from January 3, 1994 to December 31, 2001;
-  Consolidated Statements of Cash Flows for each of the years in the
   three year period ended December 31, 2001 and for the period from
   inception on January 3, 1994 to December 31, 2001; and
-  Notes to Consolidated Financial Statements.

Supplementary financial data showing unaudited quarterly financial
information such as revenues, gross margin, net earnings (loss) for
the period and net loss per share during our two most recent fiscal
years is contained in note 14 to our audited consolidated financial
statements.

                                         29
<PAGE>

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

Not Applicable.


PART III

ITEM 9.  DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
         COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT

DIRECTORS, EXECUTIVE OFFICERS AND KEY EMPLOYEES

The following table sets forth certain information, as of March 20,
2002, with respect to our directors, executive officers and key
employees.

<TABLE>
<CAPTION>

     Name                   Age             Position
<S>                         <C>       <C>

Owen L.J. Jones             50        Director, and Chief Executive Officer
Babak Habibi                30        Director, President, and Chief Operating Officer
W. Grant Sutherland         55        Director, Chairman of the Board of Directors and Secretary
James L. Speros             43        Director and Vice President
Edward A. White             57        Director, Chief Financial Officer, and Treasurer
</TABLE>

OWEN L.J. JONES has been our President, Chief Executive Officer and a
Director since December 1993. Prior to joining our Board of Directors,
Mr. Jones was the V.P. Sales, Marketing and Technology of Evergreen
International Technology Inc. which is now Sideware Systems Inc.  Mr.
Jones resigned from his position with Evergreen International
Technology Inc. in December 1993.  In May 1995 Mr. Jones was elected
as a director of Evergreen International Technology Inc., and shortly
thereafter assumed the responsibilities of President and Chief
Executive Officer of that company.  Between May 1995 and November 30,
2000, Mr. Jones divided his time and effort between our affairs and
the affairs of Sideware Systems Inc.  Mr. Jones resigned as the
President of Sideware Systems Inc. on October 16, 2000, and as a
director of Sideware Systems Inc. on November 30, 2000.  Mr. Jones now
works full time for Braintech, Inc.  Mr. Jones is not a director of
any other public companies.

W. GRANT SUTHERLAND was appointed one of our Directors, and Chairman
of our Board of Directors, in November 1995.  Mr. Sutherland is a
licensed lawyer in the Province of British Columbia, and has been
engaged in the private practice of law for 27 years, currently as a
partner in the Vancouver law firm Sutherland Johnston.  Mr. Sutherland
was also a Director of Sideware Systems Inc. from May 1993 to March
20, 2002.  Since November 1995, Mr. Sutherland has devoted the
majority of his time and effort to our affairs and those of Sideware
Systems Inc.  Mr. Sutherland is not a director of any other public
companies.

JAMES L. SPEROS was appointed a Director, and our Vice President, on
September 15, 1998.  Mr. Speros is also a Director, President and
Chief Executive Officer of Sideware Systems Inc. and of Sideware
Corp., a wholly owned subsidiary of Sideware Systems Inc.  From June
1993 to January 1997 Mr. Speros was the President and owner of two
professional sports franchises, the Baltimore Stallions and Montreal
Alouettes of the Canadian Football League.  From January 1997 to
February 1999 Mr. Speros was President of Exploration Mirandor, a
mining exploration company.  Mr. Speros was also a director of


                                         30
<PAGE>

Consolidated Maymac Petroleum Corp. from September 9, 1999 to March 5,
2001.  Consolidated Maymac Petroleum Corp. is a public company trading
on the Canadian Venture Exchange.

EDWARD A. WHITE was appointed as a Director and our Chief Financial
Officer and Treasurer effective November 1, 2000.  Mr. White has been
a member of the British Columbia Institute of Chartered Accountants
for 28 years and, for 23 of those years, Mr. White practiced as a
self-employed chartered accountant serving clients in both the public
and private sectors.  Mr. White was a director of Sideware Systems Inc.
from October 1995 to March 20, 2002, a director and officer of Bravo
Resource Partners Ltd. since February 1987 and a director and officer
of West African Venture Exchange Corp. since March 1993.  Bravo
Resource Partners Ltd. and West African Venture Exchange Corp. each
trade on the Canadian Venture Exchange.

BABAK HABIBI was appointed as a Director and as our president
effective June 19, 2001.  Prior to his appointment as President, Mr
Habibi was our Vice President of Engineering.  Mr. Habibi supervises
the design, development, and deployment of our machine vision systems,
and has also been involved in the development of eVisionFactory.  Mr.
Habibi holds Bachelor's and Master's Degrees in Applied Science from
the University of Waterloo.

Owen Jones and Grant Sutherland were directors of Sideware Systems
Inc. at the time when two bankruptcy petitions under the Bankruptcy
and Insolvency Act (Canada) were brought in the Supreme Court of
British Columbia against that company by former directors of that
company or private corporations controlled by them.  Both bankruptcy
petitions were dismissed in January 1998.

Our directors will hold office until they resign, or until our next
shareholders' meeting.

Section 16(a) of the Exchange Act requires Braintech's Directors,
executive officers and persons who own more than 10% of its common
stock (collectively "Reporting Persons") to file reports of ownership
and changes in ownership of its common stock.  SEC regulations require
Reporting Persons to give Braintech copies of all section 16(a)
reports they file.  Based solely on Braintech's review of copies of
those reports or written representations from Reporting Persons,
Braintech believes that during the last fiscal year ended December 31,
2001, all Reporting Persons complied with all applicable filing
requirements except as follows:

-  Grant Sutherland filed a Form 5 relating to transactions during
   2001 on February 22, 2002, which was 8 days late.  The Form 5 reported
   2 transactions.
-  Babak Habibi filed a Form 3, reporting his initial security
   holdings on October 25, 2001,  118 days late.
-  Owen Jones filed a Form 5 relating to transactions during 2001 on
   March 29, 2002, 42 days late.  The Form 5 reported one transaction, a
   purchase of shares and warrants in a private placement.
-  Ted White filed a Form 5 relating to transactions during 2001 on
   March 29, 2002, 42 days late.  The Form 5 reported one transaction, a
   purchase of shares and warrants in a private placement.

ITEM 10.  EXECUTIVE COMPENSATION

During our last completed fiscal year our only named executive officer
was our Chief Executive Officer. The following table shows compensation
paid to our Chief Executive Officer during our last three fiscal years.

                                        31
<PAGE>

<TABLE>
<CAPTION>

                                               SUMMARY COMPENSATION TABLE



                            Annual Compensation                Long Term Compensation
                            -----------------------    -------------------------------------
                                                                Awards               Payouts
                                                       -------------------------    ---------
                                                       Restricted     Securities
                                                         Stock        Underlying                   All Other
Name and Principal   Year   Salary    Bonus   Other     Awards       Options/SARs                Compensation
-------------------------------------------------------------------------------------------------------------
<S>                  <C>    <C>       <C>     <C>      <C>           <C>            <C>          <C>
Owen Jones           2001   Nil        Nil     Nil        Nil             Nil           Nil          Nil
President, CEO and   2000   $30,000    Nil     Nil        Nil           200,000         Nil          Nil
Director             1999   $16,320    Nil     Nil        Nil            27,500         Nil          Nil

</TABLE>

The following table sets forth information on grants of stock options
to our Chief Executive Officer during our last fiscal year:

<TABLE>
<CAPTION>

                                         OPTION / SAR GRANTS IN LAST FISCAL YEAR

                                 Number of        Percent of total
                                securities          Options/SARs
                                underlying           granted to
                               Options/SARs      employees in fiscal   Exercise or base   Expiration   Grant date present
Name                             granted                year                price            Date          value(1)
-------------------------------------------------------------------------------------------------------------------------
<S>                            <C>               <C>                   <C>                <C>          <C>
Owen Jones                         Nil                   N/A                 N/A              N/A              N/A
</TABLE>

(1)  Grant date present value was calculated by multiplying the number
of option shares by the difference between the exercise price and the
closing trading price on the date of grant.

The following table sets out the options exercised by Mr. Jones during
the last fiscal year.

<TABLE>
<CAPTION>

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

                                                                    Number of securities
                                                                   underlying unexercised      Value of unexercised in-
                                                                   options/SARs at end of     the-money options/SARs at
                                                                         fiscal year              end of fiscal year
                        Shares acquired                           -------------------------   -------------------------
Name                      on exercise        Value realized       Exercisable/Unexercisable   Exercisable/Unexercisable
-----------------------------------------------------------------------------------------------------------------------
<S>                     <C>                  <C>                  <C>                         <C>
Owen Jones                    Nil                 Nil                 1,727,500(1) / Nil              Nil(2)/ Nil
</TABLE>

(1)  The total of 1,727,500 options granted to Mr. Jones represents
1,500,000 options granted to Mr. Jones pursuant to a directors'
resolution dated December 17, 1997, 27,500 options granted to Mr.
Jones during the fiscal year ended December 31, 1999 and 200,000
options granted to Mr. Jones during the fiscal year ended December 31,
2000.

(2)  The closing price for our shares on the OTC-Bulletin Board as of
December 31, 2001 was $0.13.

                                        32
<PAGE>

COMPENSATION TO OUR DIRECTORS

We currently provide the following compensation to our other
directors:

OWEN JONES.  Since October 16, 2000 Mr. Jones has worked full time for
us.  Prior to October 16, 2000 Mr. Jones divided his time between
Sideware Systems Inc and us.  Since January 1, 2001, Mr. Jones has
worked for us without salary.  Between January 1, 2000 and December
31, 2000, we paid Mr. Jones a salary of $2,500 per month.  Between
June 1, 1998, and December 31, 1999, Mr. Jones received payments
totaling $6,800 per month from Techwest Management Inc.  We shared
responsibility for those payments with Sideware, paying 50% during
1998 and 20% during 1999.  Prior to June 1, 1998, Mr. Jones' monthly
payments, then shared equally with Sideware, were $3,400 per month.
Mr. Jones also holds stock options as listed in the table below.  Mr.
Jones receives no other compensation from us or any of our
subsidiaries.

GRANT SUTHERLAND.  Since January 1, 2001 Mr. Sutherland has worked for
us without salary.  From January 1, 2000 to December 31, 2000 we paid
Mr. Sutherland a salary of $2,500 per month.  Between May 1, 1998 and
December 31,1999 Mr. Sutherland received payments totaling $6,800 per
month.  We shared responsibility for those payments with Sideware,
paying 50% during 1998 and 20% during 1999. Mr. Sutherland also holds
stock options as listed in the table below.  Mr. Sutherland receives
no other compensation from us or any of our subsidiaries.

BABAK HABIBI.  Mr. Habibi receives a salary of $6,400 per month from
us.  Mr. Habibi also holds stock options to purchase 65,000 shares at
a price of $0.20 and options to purchase 400,000 shares at a price of
$0.25.  Mr. Habibi receives no other compensation from us or any of
our subsidiaries.

EDWARD A. WHITE.  Mr. White receives a salary of $6,400 per month from
us.  Mr. White also holds stock options to purchase 500,000 shares at
a price of $0.25 per share.  Mr. White receives no other compensation
from us or any of our subsidiaries.

JAMES L. SPEROS.  Mr. Speros holds options to acquire 300,000 shares
at $0.20 per share, but does not receive a salary from us. Mr. Speros
receives no other compensation from us or any of our subsidiaries.

The aggregate amount of cash remuneration which we paid to our
directors as a group, was approximately $120,000 during the fiscal
year ended December 31, 2001.  None of our directors receive any
pension plan or similar benefits.

STOCK OPTIONS GRANTED TO OUR DIRECTORS

The following table shows the stock options held by our directors and
officers as at December 31, 2001.

                                        33
<PAGE>

<TABLE>
<CAPTION>

                                                                       Market
                                                                      Value of
                                                                     Underlying
                                                                      Shares at     Expiry
                    Options     Number       Number     Exercise       Date of       Date
Name                Granted   Exercised   Outstanding     Price         Grant       (m/d/y)
-------------------------------------------------------------------------------------------
<S>               <C>         <C>         <C>           <C>          <C>            <C>
Owen Jones          200,000       Nil        200,000      $0.25          $0.20      11/30/05
                  1,500,000       Nil      1,500,000      $0.20          $0.23      12/16/02
                     27,500       Nil         27,500      $0.20          $0.19      04/19/04

Grant Sutherland    200,000       Nil        200,000      $0.25          $0.20      11/30/05
                  1,500,000   1,420,000(1)    80,000      $0.20          $0.23      12/16/02
                     27,500       Nil         27,500      $0.20          $0.19      04/19/04

Babak Habibi        400,000       Nil        400,000      $0.25          $0.20      11/30/05
                    100,000      35,000       65,000      $0.20          $0.19      04/19/04

James Speros        300,000       Nil        300,000      $0.20          $0.20      04/19/04

Edward A. White     500,000       Nil        500,000      $0.25          $0.20      11/30/05
</TABLE>

(1)  Mr. Sutherland exercised options to acquire 300,000 shares at
$0.20 per share in August 1998 and 1,120,000 shares at $0.20 per share
in January 2000.

Mr. Habibi exercised options to acquire 35,000 shares at $0.20 per
share in January 2000.

We do not have a long-term incentive plan, and have not granted any
stock appreciation rights.

ITEM 11.  SECURITY OWNERSHIP OF CERTAIN RELATED BENEFICIAL OWNERS AND
MANAGEMENT

The following table shows certain information regarding beneficial
ownership of common stock, as of March 15, 2002 by (i) each
shareholder whom we know to be the beneficial owner of more than 5% of
outstanding shares, (ii) each of our Directors and executive officers,
and (iii) all Directors and executive officers as a group:

                                        34
<PAGE>

<TABLE>
<CAPTION>
                                                                PERCENTAGE OF SHARES
NAME AND ADDRESS                   NUMBER OF SHARES                    SHARES
OF BENEFICIAL OWNER              BENEFICIALLY OWNED(1)          BENEFICIALLY OWNED(1)
-------------------------------------------------------------------------------------
<S>                              <C>                            <C>
Owen L.J. Jones*(2)                    6,427,501                       10.75%
102 - 930 West. 1st Street
North Vancouver B.C.
Canada V7P 3N4

W. Grant Sutherland*(3)                3,942,499                        6.75%
1600 - 777 Dunsmuir St.
Vancouver B.C.
Canada V7Y 1K4

Babak Habibi*(4)                       1,325,001                        2.29%
102 - 930 West 1st Street
North Vancouver B.C.
Canada V7P 3N4

James L. Speros*(5)                      300,000                        0.52%
1111 Grand Hamptons Dr.
Herndon, Virginia
USA  20170

Edward A. White*(6)                    1,375,001                        2.37%
416-5 K de K Court
New Westminster B.C.
Canada V3M 6B6

All executive officers and            13,370,002                       21.36%
directors as a group (5
Persons)(7)

</TABLE>

* Denotes Director of the Company
_________

(1)  Beneficial ownership is determined in accordance with the rules
of the Securities and Exchange Commission and generally includes
voting or investment power with respect to securities. Shares of
common stock subject to options or warrants currently exercisable or
convertible, or exercisable or convertible within 60 days of March 15,
2002 are deemed outstanding for computing the percentage of the person
holding such option or warrant but are not deemed outstanding for
computing the percentage of any other person. Except as indicated in
the footnotes to this table and pursuant to applicable community
property laws, the persons named in the table have sole voting and
investment power with respect to all shares of common stock
beneficially owned.

(2)  Includes 1,677,500 shares issuable pursuant to stock options and
833,334 shares issuable pursuant to share purchase warrants, all being
exercisable within 60 days.  Figures stated for Mr. Jones exclude
1,666,667 shares and 833,334 share purchase warrants owned by Judy
Jones, of which Mr. Jones disclaims beneficial ownership.

                                        35
<PAGE>

(3)  Includes 257,500 shares issuable pursuant to stock options and
833,333 shares issuable pursuant to share purchase warrants, all being
exercisable within 60 days.

(4)  Includes 365,000 shares issuable pursuant to stock options and
333,334 shares issuable pursuant to share purchase warrants, all being
exercisable within 60 days.

(5)  Includes 300,000 shares issuable pursuant to stock options
exercisable within 60 days.

(6)  Includes 375,000 shares issuable pursuant to stock options and
333,334 shares issuable pursuant to share purchase warrants, all being
exercisable within 60 days.

(7)  Includes 2,975,000 shares issuable pursuant to stock options and
2,333,335 shares issuable pursuant to share purchase warrants, all
being exercisable within 60 days.

We are unaware of any arrangements, the operation of which may at a
subsequent date result in a change of corporate control.

ITEM 12.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

We have had several transactions with Sideware Systems Inc.  Sideware
is a software development company whose shares trade on the TSE and
through the OTC-Bulletin Board.  One of our five directors, James
Speros  is a director and shareholder of Sideware.  Grant Sutherland,
Edward White and Owen Jones were all previously directors of Sideware.
Grant Sutherland and Edward White resigned as Sideware directors on
March 20, 2002.  Owen Jones resigned as Sideware's President effective
October 16, 2000 and as a director effective November 30, 2000.

While we have common directors and principal shareholders with
Sideware, the companies' businesses are separate.  The companies raise
their financing separately, and do not share the proceeds from their
separate issuances of securities.  The companies also own separate
technology, and do not share their intellectual property except under
express license agreements, such as the Wizmaster agreement, explained
below.

TRANSACTIONS WITH SIDEWARE

Our transactions with Sideware during our last two fiscal years have
been as follows:

     1.     COST SHARING AGREEMENT

We previously shared all of our office premises in North Vancouver and
Vancouver, and some of our personnel, with Sideware.  Accordingly, we
shared the cost of those premises and personnel. The personnel
involved included our accounting personnel and other part time
employees.

Prior to 1999, we shared the common costs equally with Sideware, under
a cost sharing agreement made in October 1996.

In October 1999, we entered into a cost sharing and allocation
agreement with Sideware.  Under that agreement we agreed with Sideware
Systems Inc. to re-allocate the common costs 20% to us and 80% to
Sideware, effective from January 1, 1999.  The reason for the
reallocation of costs was the substantially

                                         36
<PAGE>

greater level of business conducted by Sideware, and its corresponding
greater use of the common premises and personnel.

Techwest Management Inc., a private management company in which Owen
Jones and Grant Sutherland each hold a 50% interest, administered the
shared costs between Sideware and us.  Techwest Management Inc. passed
on the shared costs through to us and to Sideware at its cost, without
any markup.

From time to time, either our payments or those of Sideware Systems
Inc. exceeded the proportionate share required under the cost sharing
arrangement, giving rise to indebtedness between us, Sideware Systems
Inc. and Techwest Management Inc.  Through much of 1998 and 1999, we
were indebted to Sideware Systems Inc., as we did not have sufficient
cash available to pay our proportionate share of the common operating
costs.  As of March 15, 2002, there is no further inter-corporate
indebtedness between Sideware and us.

During the second quarter of 2000, we moved our operations to premises
located at Unit 113-980 West 1st Street, North Vancouver, V7P 3N4.  We
entered into a letter agreement with Sideware dated November 1, 2000
that allowed us to retain office space for four of our employees, and
to utilize the services of some Sideware personnel during a
transitional period which ended in March 2001.  This arrangement
terminated when Sideware vacated the premises on May 31, 2001.

     2.    PURCHASE OF COMPUTER EQUIPMENT

During the last three years, we have purchased computer equipment from
Sideware that cost us approximately $21,000 in 1999, $19,400 in 2000
and $39,200 in 2001.

We previously purchased most of our computer equipment through
Sideware Systems Inc. owing to favorable pricing on IBM equipment
available to Sideware Systems Inc.  Sideware Systems Inc. charged a
markup on the initial purchases, but in most of the transactions
passed the equipment on to us at cost.

     3.     WIZMASTER

We entered into a software development and license agreement dated
September 20, 1999 with Sideware. Under that agreement, we developed a
program named the "Wizmaster", for incorporation into Sideware's "Dr.
Bean" program, now part of Sideware's Enterprise Interaction Suite.
The Enterprise Interaction Suite is electronic customer relations
management software that supports live chat over the Internet between
companies and their customers.  The purpose of the software is to
permit companies to create customized knowledge trees.  The knowledge
trees specify nodes and links, corresponding to questions and possible
responses which ultimately direct a customer to a response to his or
her query or to a customer service representative.

Sideware agreed to pay for developing Wizmaster on a cost plus 10%
basis.  The total amount paid by Sideware was approximately $11,200,
exclusive of taxes.  Sideware acquired, at no further charge, a
perpetual worldwide license to use Wizmaster in its products.  We were
prohibited from licensing Wizmaster to any other software developer
but not to systems integrators, for a period of one year from December
1999.  December 1999 was the date Wizmaster became generally available
to purchasers of Sideware products.  We are no longer prohibited from
licensing Wizmaster to any other software developer.

                                        37
<PAGE>

OTHER TRANSACTIONS INVOLVING DIRECTORS

Other transactions within the last year of which our directors have an
interest are as follows:

Effective July 1, 1999, along with Sideware Systems Inc., we acquired
an interest in the leasehold premises at 1600 - 777 Dunsmuir Street,
Vancouver, B.C., by assignment from SJM Management Ltd.  SJM
Management Ltd. is a private company in which Grant Sutherland, our
Chairman, holds a one third interest.  Effective January 1, 2001 we
relinquished our interest in those premises to Sideware, as Sideware
makes substantially greater use of the premises than we do.

We have acquired legal services from the law firm Sutherland Johnston,
of which Grant Sutherland is a partner.  For the year ended December
31, 2000, Sutherland Johnston performed approximately, $38,000 worth
of legal services for us.  For the year ended December 31, 2001,
Sutherland Johnston performed approximately, $136,000 worth of legal
services for us.

During our last three fiscal years and first quarter of 2002 Grant
Sutherland has directly or indirectly acquired the following shares in
private placements:

-  1,000,000 shares at a price of $0.15 per share in a private
   placement conducted in March 1999;
-  1,000,000 shares at a price of $0.15 per share in a private
   placement conducted in September 1999;
-  135,000 shares at a price of $0.15 per share in a private placement
   conducted in October 1999;
-  150,000 shares at a price of $0.60 per share in a private placement
   conducted in December 1999; and;
-  1,666,666 shares at a price of $0.15 per share in a private
   placement conducted in last quarter of 2000 and first quarter of 2001.
   For each two shares purchased, Beau J Holdings Ltd., a private company
   owned by Mr. Sutherland, received one share purchase warrant, which
   entitles the company to purchase one additional share for one year at
   $0.20 per share.  We have voluntarily and without receipt of any
   further consideration agreed to extend the share purchase warrants for
   6 months.

In addition, in December 2001, Grant Sutherland advanced $64,516 and
in January 2002 he advanced $56,962 as share subscriptions received
for a future private placement.  To date no shares have been issued.

During our last three fiscal years and first quarter of 2002 Owen
Jones has directly acquired the following shares in private
placements:

-  1,000,000 shares at a price of $0.15 per share in a private
   placement conducted in March 1999; and
-  1,666,667 shares at a price of $0.15 per share in a private
   placement conducted in last quarter of 2000 and first quarter of 2001.
   For each two shares purchased, Mr. Jones received one share purchase
   warrant, which entitles him to purchase one additional share for one
   year at $0.20 per share. We have voluntarily and without receipt of
   any further consideration agreed to extend the share purchase warrants
   for 6 months.

In addition, in October 2001, Owen Jones advanced $250,000, in January
2002 he advanced $75,000, in February 2002 he advanced $200,000, and
in March 2002, he advanced $100,000 as share subscriptions received
for a future private placement.  To date no shares have been issued.

                                        38
<PAGE>

In addition, in June 2001 Judy Jones, wife of Owen Jones, acquired
1,666,667 shares at a price of $0.15 per share.  For each two shares
purchased, Mrs. Jones received one share purchase warrant, which
entitles her to purchase one additional share for one year at $0.20
per share. We have voluntarily and without receipt of any further
consideration agreed to extend the share purchase warrants for 6
months.

During the first quarter of 2001, Edward White acquired 666,667 shares
in a private placement.  Mr. White provided us with a demand
promissory note in the amount of $100,000 without interest to pay for
the shares and has signed an agreement to hold the share certificate
and warrant certificate in escrow. The date of the agreement is
February 27, 2001.  According to the agreement, the shares and
warrants issued to him will remain in escrow until he submits full
payment to us.  For each two shares purchased, Mr. White received one
share purchase warrant, which entitles him to purchase one additional
share for one year at $0.20 per share.  We have voluntarily and
without receipt of any further consideration agreed to extend the
share purchase warrants for 6 months.  If Mr. White fails to pay the
demand promissory note, we will cancel the share certificate and
warrant certificate issued to him.

In June 2001, Babak Habibi acquired 666,667 shares in a private
placement.  Mr. Habibi provided us with a demand promissory note in
the amount of $100,000 without interest to pay for the shares and has
signed an agreement to hold the share certificate and warrant
certificate in escrow. The date of the agreement is June 26, 2001.
According to the agreement, the shares and warrants issued to him will
remain in escrow until he submits full payment to us.  For each two
shares purchased, Mr. Habibi received one share purchase warrant,
which entitles him to purchase one additional share for one year at
$0.20 per share. We have voluntarily and without receipt of any
further consideration agreed to extend the share purchase warrants for
6 months.  If Mr. Habibi fails to pay the demand promissory note, we
will cancel the share certificate and warrant certificate issued to
him.

We do not have established policies about entering into future
transactions with affiliates.  Management addresses individual
transactions on their individual merits.

ITEM 13.   INDEX TO EXHIBITS AND REPORTS ON FORM 8-K

<TABLE>
<CAPTION>

Number	    Exhibit
--------    ----------
<S>         <C>

3.1(1)      Articles of Incorporation, dated February 27, 1987
3.2(1)      Articles of Amendment, dated July 14, 1998
3.3(1)      Articles of Amendment, dated June 28, 1990
3.4(1)      Articles Of Amendment of the Company, dated February 8, 1993
3.5(1)      Articles of Amendment of the Company, dated April 6, 1993
3.6(1)      Articles of Amendment of the Company, dated December 6, 1993
3.7(8)      Restated Articles of Incorporation of the Company dated
            June 1, 2000
3.8(1)      By-Laws of the Company
3.9         Amendment to By-Laws of the Company
4.1(1)      Specimen Stock Certificate
4.2(2)      1997 Stock Option Plan
4.3(2)      2000 Stock Option Plan
4.4(7)      Amended 2000 Stock Option Plan dated November 1, 2000
10.1(1)     License Agreement between the Company and Willard W. Olson,
            dated January 5, 1995.

                                        39
<PAGE>

10.2(4)     Cost Sharing and Allocation Agreement between the Company
            and Sideware Systems Inc.
10.3(1)     Assignment of Lease and Modification of Lease Agreement
            dated August 17, 1998 between HOOPP Realty Inc., Techwest
            Management Inc., Sideware Systems Inc., and Braintech, Inc.
10.4(4)     Software Development and License Agreement dated September
            20, 1999 between the Company and Sideware Systems Inc.
10.5(4)     Lease effective as of July 1, 1999 between the Company,
            Techwest Management Inc., Sideware Systems Inc. and Pacific
            Centre Leaseholds Ltd.
10.6(4)     Assignment Agreement effective as of July 1, 1999 between
            the Company, Techwest Management Inc., Sideware Systems
            Inc., and SJM Management Ltd.
10.7(5)     Alliance Agreement dated March 26, 2000 between the Company
            and ABB Flexible Automation Group Inc.
10.8(6)     Letter agreement with Sideware Systems Inc. dated
            November 1, 2000
10.9(7)     Bluetooth Specification Early Adopters Agreement between IBM
            and the Company dated December 15, 2000
10.10(7)    Support and Equipment Lease Agreement between Tactel AB and
            the Company dated December 19, 2000
10.11(7)    Assignment Agreement between Pacific Centre Leaseholds Ltd.,
            Techwest Management Inc., Sideware Systems Inc. and the
            Company dated January 1, 2001
10.12(7)    Mutual Release and Settlement Agreement between Manfred
            Kurschner, JMF Management Inc, Techwest Management Inc. and
            the Company dated February 1, 2001
10.13(7)    Agreement between Axis Communications Inc. and the Company
            dated January 29, 2001
10.14(7)    Agreement for Escrow of Share Certificate & Promissory Note
            between Edward White and the Company dated February 27, 2001
10.15(8)    Agreement for Escrow of Share Certificate and Promissory
            Note between Babak Habibi and the Company dated June 21, 2001
10.16       Letter for Resumption of Premises at 102-105 930 W. 1st Street,
            North Vancouver, June 14, 2001
10.17       Partial Surrender of Lease for 100-101 A & B 930 W. 1st Street,
            North Vancouver, June 25, 2001
10.18       Memorandum of Understanding with Marubeni Corporation
11.1        Computation of net loss per share
21.1        Subsidiaries of the Registrant
</TABLE>

(1)  Exhibit already on file - exhibit to our Form 10-SB registration
statement filed September 25, 1998.
(2)  Exhibit already on file - exhibit to our Schedule 14A proxy
information filed March 1, 2000.
(3)  Exhibit already on file - exhibit to our Form S-1 registration
statement filed February 11, 2000.
(4)  Exhibit already on file - exhibit to our Form 10-QSB covering the
quarter ended September 30, 1999 filed November 15, 1999.
(5)  Exhibit already on file - exhibit to our Form 10-QSB covering the
quarter ended March 31, 2000 filed May 15, 2000.
(6)  Exhibit already on file - exhibit to our Form 10-QSB covering the
quarter ended September 30, 2000 dated November 9, 2000.
(7)  Exhibit already on file - exhibit to our Form 10-KSB for the year
ended December 31, 2001.
(8)  Exhibit already on file - exhibit to our Form S-1/A registration
statement filed July 3, 2001.

                                        40
<PAGE>

We filed one report on Form 8-K during the third quarter of the period
covered by this annual report.  We filed a Form 8-K as of July 11, 2001,
to advise of the appointment of Babak Habibi as director, Chief
Operating Officer, and President of the Company. The appointments took
effect as of June 19, 2001.


                               SIGNATURES


In accordance with Section 13 of the Securities Exchange Act of 1934,
the registrant caused this annual report to be signed on its behalf by
the undersigned, thereunto duly authorized.


Dated: March 28, 2002              Braintech, Inc.


                                   "Grant Sutherland"
                                   ------------------------------
                                   by:
                                   W. Grant Sutherland
                                   Chairman of the Board of Directors


                            POWER OF ATTORNEY

KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints Grant Sutherland as such
person's true and lawful attorney-in-fact and agent, with full power
of substitution and resubstitution, for such person and in such
person's name, place and stead, in any and all capacities, to sign any
and all amendments (including post-effective amendments) to this
annual report, and to file same, with all exhibits thereto, and other
documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorney-in-fact and agent full power
and authority to do and perform each and every act and thing requisite
and necessary to be done in connection therewith, as fully to all
intents and purposes as such person might or could do in person,
hereby ratifying and confirming all that said attorney's-in-fact ad
agent, or his substitutes, may lawfully do or cause to be done by
virtue thereof.

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


Signature                   Title                           Date

"Owen Jones"             Chief Executive Officer,          March 28, 2002
------------------       Director
Owen L.J. Jones          (Principal Executive Officer)


"Grant Sutherland"       Chairman of the Board,            March 28, 2002
-------------------      Director
W. Grant Sutherland

                                       41
<PAGE>


"Edward White"           Chief Financial Officer,          March 28, 2002
-------------------      Director
Edward A. White          (Principal Financial and
                         Accounting Officer)
















                    Consolidated Financial Statements
                    (Expressed in U.S. dollars)

                    BRAINTECH, INC.
                    (A Development Stage Enterprise)

                    Years ended December 31, 2001, 2000 and 1999
                    Period from inception on January 3, 1994 to December 31,
                    2001








<PAGE>

KPMG LLC
CHARTERED ACCOUNTANTS
Box 10426 777 Dunsmuir Street
Vancouver BC V7Y 1K3
Canada

AUDITORS' REPORT TO THE STOCKHOLDERS

We have audited the accompanying consolidated balance sheets of
Braintech, Inc. (a development stage enterprise) as at December 31,
2001 and 2000 and the related consolidated statements of operations
and cash flows for each of the years in the three year period ended
December 31, 2001 and for the period from inception on January 3, 1994
to December 31, 2001 and stockholders' equity (deficit) for the period
from inception on January 3, 1994 to December 31, 2001.  These consolidated
financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements
based on our audits.

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

In our opinion, the consolidated financial statements referred to
above present fairly, in all material respects, the financial
position of Braintech, Inc. as at December 31, 2001 and 2000 and the
results of their operations and their cash flows for each of the
years in the three year period ended December 31, 2001 and for the
period from inception on January 3, 1994 to December 31, 2001, in
conformity with generally accepted accounting principles in the
United States of America.

The accompanying financial statements have been prepared assuming
that the Company will continue as a going concern.  As discussed in
note 2 to the financial statements, the Company has incyrred recurring
losses from operations and used cash in operating activities that raise
substantial doubt about its ability to continue as a going concern.
Management's plans in regard to these matters are also described in note
2.  The financial statements do not include any adjustments that might
result from the outcome of this uncertainty.


"KPMG LLP"

Chartered Accountants

Vancouver, Canada

February 7, 2002, except for note 13
which is as of March 26, 2002

                                                                1
<PAGE>

BRAINTECH, INC.
(A Development Stage Enterprise)

Consolidated Balance Sheets
(Expressed in U.S. dollars)

December 31, 2001 and 2000

<TABLE>
<CAPTION>

=======================================================================================
                                                              2001                 2000
---------------------------------------------------------------------------------------
<S>                                                 <C>                   <C>

Assets

Current assets:
  Cash and cash equivalents                         $      101,880         $    899,573
  Short-term investments                                         -                6,929
  Accounts receivable                                       72,215                6,878
  Inventory                                                 35,467                3,369
  Due from related companies (note 4(a))                         -               28,010
  Prepaid expenses                                          28,247               10,121
  Deferred costs                                             7,765                    -
  -------------------------------------------------------------------------------------
                                                           245,574              954,880

Deposit on lease                                                 -                2,297

Fixed assets (note 5)                                      175,047              176,895
---------------------------------------------------------------------------------------
                                                    $      420,621       $    1,134,072
=======================================================================================

Liabilities and Stockholders' Equity

Current liabilities:
  Accounts payable and accrued liabilities          $     127,664        $       50,686
  Deferred revenue                                         32,500                     -
  -------------------------------------------------------------------------------------
                                                          160,164                50,686
Stockholders' equity:
  Common stock (note 6):
    Authorized:  200,000,000 shares,
    with $0.001 par value
    Issued:  56,793,311 shares (2000 - 45,599,333)
    To be issued (note 6(f) and 8(a)):  100,000 shares
      (2000 - 400,000)                                     56,793                45,599
  Additional paid-in capital (note 6(d))               10,234,640             9,202,233
  Deferred stock-based compensation                       (10,000)                    -
Deficit accumulated prior to the development stage        (58,800)              (58,800)
Deficit accumulated during the development stage       (9,962,176)           (8,105,646)
  -------------------------------------------------------------------------------------
                                                          260,457             1,083,386
  -------------------------------------------------------------------------------------
                                                    $     420,621        $    1,134,072
=======================================================================================

</TABLE>

Future operations (note 2)
Contingencies (notes 4(a)(i) and 8)
Commitments (note 9)
Subsequent events (notes 6(f) and (g) and 13)

See accompanying notes to consolidated financial statements.

Approved on behalf of the Board:

                                                                    Chief
"Babak Habibi"                              "Edward A. White"       Financial
----------------------- President          ------------------------ Officer

                                                                2
<PAGE>

BRAINTECH, INC.
(A Development Stage Enterprise)

Consolidated Statements of Operations
(Expressed in U.S. dollars)


<TABLE>
<CAPTION>

==========================================================================================
                                   Period from
                                  inception on
                               January 3, 1994
                               to December 31,               Years ended December 31,
                                          2001           2001          2000           1999
------------------------------------------------------------------------------------------
                                  <C>            <C>            <C>           <C>

Sales                             $    246,901   $     49,342   $   140,049   $          -
Cost of sales                           97,416         13,830        53,581              -
------------------------------------------------------------------------------------------
Gross margin                           149,485         35,512        86,468              -

Operating expenses:
  Consulting and contractors           736,561              -             -              -
  Research and development
  (note 10)                          2,997,254        404,482       435,071        579,441
Selling, general and
    administrative (note 11)         6,119,142      1,462,937       691,993        650,715
  ----------------------------------------------------------------------------------------
                                     9,852,957      1,867,419     1,127,064      1,230,156
------------------------------------------------------------------------------------------
Operating loss                      (9,703,472)    (1,831,907)   (1,040,596)    (1,230,156)

Non-operating:
  Interest income                       44,938         18,345        26,593              -
  Loss on settlement of
    litigation (note 8(a))            (100,000)             -      (100,000)             -
  Loss on disposal of fixed
    assets                             (69,022)       (42,968)            -         (5,918)
  Write-down of investments           (100,000)             -             -              -
  Write-down of intangible assets      (17,189)             -             -              -
  Write-down of organization costs     (17,431)             -             -              -
  ----------------------------------------------------------------------------------------
                                      (258,704)       (24,623)      (73,407)        (5,918)
------------------------------------------------------------------------------------------
Loss for the period               $ (9,962,176)  $ (1,856,530)  $(1,114,003)  $ (1,236,074)
==========================================================================================
Loss per share information:
  Basic and diluted               $      (0.34)  $      (0.04)  $     (0.03)  $      (0.03)

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

Weighted average number of
  common shares outstanding         28,993,593     52,246,904    43,737,333     36,076,379
==========================================================================================

</TABLE>

See accompanying notes to consolidated financial statements.

                                                                3
<PAGE>

BRAINTECH, INC.
(A Development Stage Enterprise)

Condensed Consolidated Statements of Stockholders' Equity (Deficit)
(Expressed in U.S. dollars)

<TABLE>
<CAPTION>
===========================================================================================================================
                                                                                     Deficit         Deficit
                                                                                 accumulated     accumulated         Total
                                    Common Stock    Additional    Deferred      prior to the      during the  stockholders'
                                  ---------------    paid-in     stock-based     development     development        equity
                               Number of             capital     Compensation          stage           stage     (deficit)
                               Shares     Amount
---------------------------------------------------------------------------------------------------------------------------
<S>                            <C>        <C>       <C>          <C>            <C>               <C>          <C>
Balance, January 3, 1994       17,400,000 $ 17,400  $ 1,039,271  $         -    $   (58,800)      $         -  $   997,871

Loss for the period                     -        -            -	           -              -        (1,006,716)  (1,006,716)
---------------------------------------------------------------------------------------------------------------------------
Balance, December 31, 1994     17,400,000   17,400    1,039,271            -        (58,800)       (1,006,716)      (8,845)

Loss for the year                       -        -            -            -              -          (748,310)    (748,310)
---------------------------------------------------------------------------------------------------------------------------
Balance, December 31, 1995     17,400,000   17,400    1,039,271            -        (58,800)       (1,755,026)    (757,155)

Common stock transactions
  (net of issue costs):
  Issued for cash at $0.1895
    per share                     950,000      950      173,440            -              -                 -      174,390
  Issued for cash at $0.25
    per share                     733,333      733      183,167            -              -                 -      183,900
  Issued for cash at $0.20
    per share                   3,000,000    3,000      592,500            -              -                 -      595,500
  Shares issued for services
    rendered                    1,200,000    1,200      238,800            -              -                 -      240,000
Loss for the year                       -        -	      -            -              -          (959,945)    (959,945)
---------------------------------------------------------------------------------------------------------------------------
Balance, December 31, 1996     23,283,333   23,283    2,227,178            -        (58,800)       (2,714,971)    (523,310)

Common stock transactions (net
  of issue costs):
  Issued for cash at $0.20
    per share                   2,000,000    2,000      396,991            -              -                 -      398,991
  Issued for cash at $0.15
    per share                   1,000,000    1,000      148,279            -              -                 -      149,279
  Shares issued for services
    rendered                      300,000      300       59,700            -              -                 -       60,000
  Compensatory benefit of
    employee stock options              -        -	200,000            -              -                 -      200,000
Loss for the year                       -        -            -            -              -          (930,042)    (930,042)
---------------------------------------------------------------------------------------------------------------------------
Balance, December 31, 1997     26,583,333   26,583    3,032,148            -        (58,800)       (3,645,013)    (645,082)

Common stock transactions (net
  of issue costs):
  Issued for cash at $0.25
    per share                   1,600,000    1,600      398,400            -              -                 -      400,000
  Issued for cash at $0.20
    per share                   2,188,000    2,188      435,412            -              -                 -      437,600
  Compensatory benefit of
    employee stock options              -        -      927,800            -              -                 -      927,800
Loss for the year                       -        -            -            -              -        (2,110,556)  (2,110,556)
---------------------------------------------------------------------------------------------------------------------------
Balance, December 31, 1998     30,371,333   30,371    4,793,760            -        (58,800)       (5,755,569)    (990,238)

Common stock transactions (net of
  issue costs):
  Issued for cash at $0.15
    per share                   9,800,000    9,800    1,433,950            -              -                 -    1,443,750
  Issued for cash at $0.20
    per share                     157,000      157       31,243            -              -                 -       31,400
  Issued for cash at $0.60
    per share                   1,010,000    1,010      604,990            -              -                 -      606,000
  Common stock subscriptions            -        -      110,270            -              -                 -      110,270
  Subscriptions receivable              -     (110)     (65,890)           -              -                 -      (66,000)
  Compensatory benefit of
    employee stock options              -        -        2,000            -              -                 -        2,000
Loss for the year                       -        -            -            -              -        (1,236,074)  (1,236,074)
---------------------------------------------------------------------------------------------------------------------------
Balance, December 31, 1999,
  carried forward              41,338,333   41,228    6,910,323            -        (58,800)       (6,991,643)     (98,892)

</TABLE>

                                                                4
<PAGE>

BRAINTECH, INC.
(A Development Stage Enterprise)

Condensed Consolidated Statements of Stockholders' Equity (Deficit) (Continued)
(Expressed in U.S. dollars)

<TABLE>
<CAPTION>
===========================================================================================================================
                                                                                     Deficit         Deficit
                                                                                 accumulated     accumulated         Total
                                    Common Stock    Additional    Deferred      prior to the      during the  stockholders'
                                  ---------------    paid-in     stock-based     development     development        equity
                               Number of             capital     Compensation          stage           stage     (deficit)
                               Shares     Amount
---------------------------------------------------------------------------------------------------------------------------
<S>                            <C>        <C>       <C>          <C>            <C>               <C>          <C>

Balance, December 31, 1999,
  carried forward              41,338,333 $ 41,228  $ 6,910,323  $         -    $   (58,800)      $(6,991,643) $   (98,892)

Common stock issued for cash
  at $0.20 per share (net of
  share issue costs)            3,976,000    3,976      790,305            -              -                 -      794,281
Subscriptions received in cash          -      110       65,890            -              -                 -       66,000
Settlement of litigation                -        -      606,000            -              -                 -      606,000
Common stock issued for cash
  on subscriptions	          285,000      285         (285)           -              -                 -            -
Common stock subscriptions
  received in cash                      -        -      730,000            -              -                 -      730,000
Common stock to be issued in
  settlement of legal claim             -        -      100,000            -              -                 -      100,000
Loss for the year                       -        -            -            -              -        (1,114,003)  (1,114,003)
---------------------------------------------------------------------------------------------------------------------------
Balance, December 31, 2000     45,599,333 $ 45,599  $ 9,202,233   $        -    $   (58,800)      $(8,105,646) $ 1,083,386

Common stock issued for
  promissory notes (note 6(e))  1,333,334    1,334      198,666            -              -                 -      200,000
Less: Promissory notes
  receivable for subscription
  of common shares (note 6(e))          -        -     (200,000)           -              -                 -     (200,000)
Common stock issued for
  settlement of legal claim
  (note 8(a))                     400,000      400         (400)           -              -                 -            -
Common stock issued for cash
  at $0.15 per share (net of
  share issue costs and share
  subscriptions received in
  2000)                         9,040,189     9,040     607,685            -              -                 -      616,725
Common stock issued for cash
  at $0.22 per share (net of
  share issue costs)              295,455       295      60,065            -              -                 -       60,360
Shares issued for services
  rendered                        125,000       125      23,875            -              -                 -       24,000
Common stock subscriptions
  received in cash (note 13)            -         -     314,516            -              -                 -      314,516
Common stock to be issued for
  services rendered (note
  (6(f))                                -         -      16,000                                                     16,000
Deferred stock-based
  compensation                          -         -      12,000      (12,000)             -                 -            -
Amortization of deferred
  stock-based compensation              -         -           -        2,000              -                 -        2,000
Loss for the year                       -         -           -            -              -        (1,856,530)  (1,856,530)
---------------------------------------------------------------------------------------------------------------------------
Balance, December 31, 2001     56,793,311 $ 56,793  $l0,234,640   $  (10,000)   $   (58,800)      $(9,962,176) $   260,457

</TABLE>

                                                                5
<PAGE>

BRAINTECH, INC.
(A Development Stage Enterprise)

Consolidated Statements of Cash Flows
(Expressed in U.S. dollars)

<TABLE>
<CAPTION>


=============================================================================================================
                                                Period from
                                               inception on
                                            January 3, 1994
                                            to December 31,                  Years ended December 31,
                                                       2001            2001             2000            1999
-------------------------------------------------------------------------------------------------------------
                                            <C>               <C>             <C>             <C>

Cash flows from operating activities:
  Net loss                                     $ (9,962,176)   $ (1,856,530)   $  (1,114,003)  $  (1,236,074)
  Items not involving cash:
   Amortization                                     245,399         113,327           52,114          42,503
   Bad debt                                          75,108               -                -               -
   Loss on disposal of fixed assets                  69,022          42,968                -           5,918
   Write-down of investments                        100,000               -                -               -
   Write-down of intangible assets                   17,189               -                -               -
   Write-down of organization costs                  17,431               -                -               -
   Shares issued for services rendered              324,000          24,000                -               -
   Shares to be issued for services rendered         16,000          16,000                -               -
   Shares issued for satisfaction of legal
     claim                                          100,000               -          100,000               -
   Compensatory benefit of employee
     stock options                                1,131,800           2,000                -           2,000
Changes in non-cash operating working capital:
   Inventory                                        (35,467)        (32,098)	           -          (3,369)
   Accounts receivable                              (72,215)        (65,337)           9,311           6,244
   Prepaid expenses                                 (28,247)        (18,126)          (2,729)          4,952
   Deferred cost of sales                            (7,765)         (7,765)               -               -
   Accounts payable and accrued liabilities         114,132          76,978          (37,024)          3,709
   Deferred revenue                                  32,500          32,500          (21,506)         21,506
-------------------------------------------------------------------------------------------------------------
Net cash used in operating activities            (7,863,289)     (1,672,083)      (1,013,837)     (1,152,611)

Cash flows from investing activities:
   Deposit on lease                                       -           2,297           (2,297)              -
   Purchase of marketable securities               (100,000)              -                -               -
   Purchase of short-term investments                     -           6,929                -          (6,929)
   Purchase of fixed assets                        (529,915)       (154,447)        (136,305)       (107,394)
   Proceeds from notes receivable                  (130,181)              -                -               -
   Proceeds from disposal of real estate            306,752               -                -               -
   Proceeds from disposal of fixed assets            41,506               -           41,506               -
-------------------------------------------------------------------------------------------------------------
Net cash used in investing activities              (411,838)       (145,221)         (97,096)       (114,323)

Cash flows from financing activities:
   Notes receivable                                  55,073               -                -               -
   Borrowings from directors and officers             7,304               -           10,130               -
   Due (to) from related companies                  (11,626)         28,010          (14,366)       (456,504)
   Mortgages payable                               (207,739)              -                -               -
   Share subscriptions received                     314,516         314,516          730,000         110,270
   Subscriptions receivable                               -               -           66,000         (66,000)
   Common shares issued, net of issue costs       7,975,367         677,085          794,281       2,081,150
  -----------------------------------------------------------------------------------------------------------
   Net cash provided by financing activities      8,132,895       1,019,611        1,586,045       1,668,916
-------------------------------------------------------------------------------------------------------------
Increase (decrease) in cash and cash
   equivalents                                     (142,232)       (797,693)         475,112         401,982

Cash and cash equivalents, beginning of
   period                                           244,112         899,573          424,461          22,479
-------------------------------------------------------------------------------------------------------------
Cash and cash equivalents, end of period        $   101,880    $    101,880   $      899,573   $     424,461
=============================================================================================================

Supplemental information:
  Cash paid for interest                        $      3,797   $          -    $           -   $         895
  Cash paid for taxes                           $          -   $          -    $           -   $           -
Non-cash financing activities:
  Shares issued for services rendered           $    316,000   $     16,000    $           -   $           -
  Shares issued for satisfaction of legal claim $    500,000   $    400,000    $     100,000   $           -
  Shares issued for promissory notes            $    200,000   $    200,000    $           -   $           -
=============================================================================================================

</TABLE>

See accompanying notes to consolidated financial statements.

                                                                6
<PAGE>

BRAINTECH, INC.
(A Development Stage Enterprise)

Notes to Consolidated Financial Statements
(Expressed in U.S. dollars)

Years ended December 31, 2001, 2000 and 1999
Period from inception on January 3, 1994 to December 31, 2001

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

1.  Organization:

    Braintech, Inc. (the "Company") was incorporated on March 4,
    1987 under the laws of the State of Nevada as Tome Capital, Inc.
    The Company initially was in the business of real estate
    development.  On January 3, 1994, the Company changed its name to
    Braintech Inc. and began operations as a high tech development
    company, developing advanced video recognition software.  All
    sales of its products and services are made in this industry
    segment.

2.  Future operations:

    During the year ended December 31, 2001, the Company incurred an
    operating loss of $1,856,530 and used cash in operating
    activities of $1,672,083.  From inception of the business on
    January 3, 1994, the Company has incurred cumulative operating
    losses of $9,962,176 and used cash for operating activities of
    $7,863,289.

    These consolidated financial statements have been prepared on the
    going concern basis under which an entity is considered to be
    able to realize its assets and satisfy its liabilities in the
    ordinary course of business.  The Company has not generated
    significant revenues and is continuing to develop its business.
    Operations to date have been primarily financed by equity
    transactions.  The Company's future operations and its
    continuation as a going concern are dependent upon its ability to
    raise additional capital, increase sales of its products by
    maintaining its strategic sales alliance with a major supplier of
    robotic systems, generating positive cash flows from operations
    and ultimately attaining profitability.  It is the Company's
    intention to focus on developing this alliance and on becoming
    their principal supplier of vision systems, raising financing and
    achieving profitable operations.

    Depending on the Company's ability to develop sales through this
    alliance, the Company may need to raise additional capital
    through public or private financings which may not be available
    on reasonable terms.  Subsequent to year-end, and to March 26, 2002,
    the Company has received $431,962 for a future private placement
    at the date of this audit report (note 13).  The consolidated
    financial statements do not include any adjustments relating to
    the recoverability of assets and classification of assets and
    liabilities that might be necessary should the Company be unable
    to continue as a going concern.

3.  Significant accounting policies:

    (a)  Basis of presentation:

         These consolidated financial statements are prepared in
         accordance with generally accepted accounting principles in
         the United States of America and present the financial
         position, results of operations and cash flows of the Company
         and its wholly-owned subsidiary, Braintech Canada, Inc.,
         incorporated as Brainware Systems Inc., under the Company Act
         (British Columbia) on March 30, 1994.  All material
         intercompany balances and transactions have been eliminated.

                                                                7
<PAGE>


BRAINTECH, INC.
(A Development Stage Enterprise)

Notes to Consolidated Financial Statements
(Expressed in U.S. dollars)

Years ended December 31, 2001, 2000 and 1999
Period from inception on January 3, 1994 to December 31, 2001

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

3.  Significant accounting policies (continued):

    (a)  Basis of presentation (continued):

         To December 31, 2001, for United States of America accounting
         and reporting purposes, the Company is considered to be in a
         development stage as it was devoting substantial efforts to
         developing its business operations.  Commencement of the
         development stage is considered to have occurred on January 3,
         1994 when the Company began operations as a high-technology
         development company.

    (b)  Cash and cash equivalents:

         Cash and cash equivalents include highly liquid investments,
         such as term deposits, having terms to maturity of three
         months or less at the date of acquisition and that are readily
         convertible to contracted amounts of cash.

    (c)  Short-term investments:

         Short-term investments include term deposits having terms to
         maturity greater than three months at the date of acquisition.

    (d)  Research and development costs:

         Research and development costs are expensed as incurred.

    (e)  Advertising costs:

         Advertising costs are expensed as incurred and totaled
         $16,811, nil, $1,950 and $10,786, during the period from
         inception on January 3, 1994 to December 31, 2001 and the
         years ended December 31, 2001, 2000 and 1999, respectively.

    (f)  Inventory:

         Inventory is valued at the lower of cost and net realizable
         value with cost being determined on a first-in-first-out
         basis.  Cost includes laid-down cost which is the cost of
         materials and other applicable direct costs.

    (g)  Revenue recognition:

         The Company recognizes revenue when there is persuasive
         evidence of an arrangement, delivery has occurred, the fee is
         fixed or determinable, collectibility is reasonably assured,
         and there are no substantive performance obligations
         remaining.  The Company's revenue recognition policies are in
         conformity with the AICPA's Statement of Position No. 97-2
         ("SOP 97-2"), "Software Revenue Recognition".

                                                                8
<PAGE>

BRAINTECH, INC.
(A Development Stage Enterprise)

Notes to Consolidated Financial Statements
(Expressed in U.S. dollars)

Years ended December 31, 2001, 2000 and 1999
Period from inception on January 3, 1994 to December 31, 2001

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

3.  Significant accounting policies (continued):

    (g)  Revenue recognition (continued):

         Cash received in advance of meeting the revenue recognition
         criteria is recorded as deferred revenue.  During the last
         quarter of 2001, the Company made a sale of $32,500 which has
         been deferred, together with related costs, as it did not meet
         all of the revenue recognition criteria under SOP 97-2.

    (h)  Warranty costs:

         The Company accrues warranty costs based on managements' best
         estimate and they are amortized over one year from the date of
         sale.

    (i)  Fixed assets:

         Fixed assets are carried at cost less accumulated
         amortization.  Amortization is calculated annually as follows:


         ====================================================================
         Asset                                  Basis           Rate
         --------------------------------------------------------------------

         Furniture and fixtures     declining-balance            20%
         Computer equipment             straight-line        33 1/3%
         Trade show assets              straight-line        33 1/3%
         Computer software              straight-line            50%
         Leasehold improvements         straight-line     lease term

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


    (j)  Use of estimates:

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

    (k)  Foreign currency:

         The Company's functional currency is the United States dollar.
         Assets and liabilities denominated in a foreign currency have
         been translated into the functional currency at rates of
         exchange in effect at the balance sheet date.  Revenue and
         expense items are translated at average exchange rates during
         the year.  Exchange gains and losses are included in
         operations.

                                                                9
<PAGE>

BRAINTECH, INC.
(A Development Stage Enterprise)

Notes to Consolidated Financial Statements
(Expressed in U.S. dollars)

Years ended December 31, 2001, 2000 and 1999
Period from inception on January 3, 1994 to December 31, 2001

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

3.  Significant accounting policies (continued):

    (l)  Stock-based compensation:

         The Company has elected to apply the provision of Accounting
         Principles Board Opinion No. 25, "Accounting for Stock Issued
         to Employees" ("APB 25"), and related interpretations in
         accounting for its stock options granted to employees.  Under
         APB 25, compensation expense is only recorded to the extent
         that the exercise price is less than fair value on the
         measurement date.  The Company has adopted the disclosure-only
         provisions of Statement of Financial Accounting Standards 123,
         "Accounting for Stock-Based Compensation" ("SFAS 123").
         Non-employee options are recognized at the fair value of the
         options as determined by an option pricing model as the
         services are performed and the options earned.

    (m)  Income taxes:

         The Company follows the asset and liability method of
         accounting for income taxes.  Deferred tax assets and
         liabilities are recognized based on the estimated future tax
         consequences attributable to differences between the financial
         statement carrying amounts of existing assets and liabilities
         and their respective tax basis.  Deferred tax assets and
         liabilities are measured using enacted tax rates in effect for
         the year in which those temporary differences are expected to
         be recovered or settled.  The effect on deferred tax assets
         and liabilities of a change in tax rates is recognized in
         income in the period that includes the enactment date.  When
         the likelihood of realization of a deferred tax asset is not
         considered to be more likely than not, a valuation allowance
         is provided.

    (n)  Loss per share:

         Loss per share is calculated based on the weighted average
         number of shares outstanding.

         As the effect of outstanding options is anti-dilutive, diluted
         loss per share does not differ from basic loss per share.

    (o)  Comprehensive income:

         Net income for the Company is the same as comprehensive
         income.

    (p)  Comparative figures:

         The Company has reclassified certain of the figures presented
         for comparative purposes to conform to the financial statement
         presentation adopted in the current year.

                                                                10
<PAGE>

BRAINTECH, INC.
(A Development Stage Enterprise)

Notes to Consolidated Financial Statements
(Expressed in U.S. dollars)

Years ended December 31, 2001, 2000 and 1999
Period from inception on January 3, 1994 to December 31, 2001

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

4.  Related party balances and transactions:

    (a)  Due (to) from related companies:

         During the periods presented, the Company has had several
         transactions with Sideware Systems Inc. ("Sideware").
         Sideware is under the direction of common directors and
         principal shareholders.  However, the companies' businesses
         are separate.  The companies raise their financing separately
         and do not share the proceeds from their separate issuances of
         securities.  The companies also are developing and own
         separate technology and generate sales from different
         customers.

         Transactions with Sideware during the last three fiscal years
         have been as follows:

         (i)  Cost sharing agreement:

              The Company previously shared all of its office premises and
              some personnel with Sideware.  Prior to 1999, costs were
              shared equally with Sideware.  In October 1999, a new
              agreement was made to reallocate common costs 80% to
              Sideware and 20% to the Company retroactive to January 1,
              1999.

              TechWest Management Inc. ("TechWest"), which is under the
              control of common directors, administered the shared costs
              between Sideware and the Company.  Techwest passed on the
              shared cost through to the Company and Sideware at its cost,
              without any markup.

              This cost sharing agreement was replaced on November 1, 2000
              with an agreement providing for the use by the Company of a
              portion of the formerly shared premises and for the use of
              the services of Sideware personnel.  Payments under the
              agreement were approximately $5,200 per month.  This
              agreement terminated in March 2001.

              In June 2001, Sideware vacated the premises, and entered
              into an agreement to sub-let a portion of the premises to a
              third party.  Effective July 15, 2001, the Company returned
              to the original office premises previously shared with
              Sideware.  The Company currently occupies the remainder of
              the premises.  The annual rent for the Company's portion of
              the premises is approximately $112,000 per year.  The term
              of the lease expires August 31, 2003.

              As co-covenantor on the original lease, the Company could
              also be legally responsible for rent relating to the portion
              of the premises which has been let to a third party, if
              Sideware and the sub-tenant both fail to pay that rent.  The
              additional rent for which the Company could be liable totals
              approximately $82,000 per year, inclusive of operating
              costs.

              Amounts due to (from) related companies result from the
              intercompany expense allocations, cash advances, monthly
              charges for office and personnel use, and the sale of
              leasehold improvements (note 4(a)(iii)).


                                                                11
<PAGE>

BRAINTECH, INC.
(A Development Stage Enterprise)

Notes to Consolidated Financial Statements
(Expressed in U.S. dollars)

Years ended December 31, 2001, 2000 and 1999
Period from inception on January 3, 1994 to December 31, 2001

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

4.  Related party balances and transactions (continued):

    (a)  Due (to) from related companies (continued):

         (ii)  Purchase of computer equipment:

               During the three year period ended December 31, 2001, the
               Company purchased computer equipment from Sideware at a cost
               of approximately $21,000, $19,400, and $39,200 respectively.

         (iii) Sale of leasehold improvements:

               On September 30, 2000, the Company entered into an agreement
               with Sideware for the sale of leasehold improvements at
               their net book value of $41,506 which management estimates
               is also the fair market value.

         (iv)  Sale of product:

               During the year ended December 31, 2000, a product sale of
               $11,387 (1999 - nil) was made to Sideware.

    (b)  Transactions with directors and officers:

         During the year, the Company was charged $136,157 (2000 -
         $65,389; 1999 - $68,375) for management and consulting
         services provided by directors and officers.  These charges
         are included in selling, general and administrative expenses.

    (c)  Due from related party:

         Included in accounts payable and accrued liabilities is
         $98,901 (2000 - $2,850) due to a company owned by a director.

5.  Fixed assets:

    ================================================================
                                           Accumulated      Net book
    December 31, 2001            Cost     amortization         value
    ----------------------------------------------------------------

    Furniture and fixtures  $  75,568      $    21,496    $   54,072
    Computer equipment        165,660           83,165        82,495
    Computer software          32,483            9,988        22,495
    Leasehold improvements     20,538            4,553        15,985
    ----------------------------------------------------------------
                            $ 294,249      $   119,202    $  175,047
    ================================================================


                                                                12
<PAGE>

BRAINTECH, INC.
(A Development Stage Enterprise)

Notes to Consolidated Financial Statements
(Expressed in U.S. dollars)

Years ended December 31, 2001, 2000 and 1999
Period from inception on January 3, 1994 to December 31, 2001

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

5.  Fixed assets (continued):

    ================================================================
                                           Accumulated      Net book
    December 31, 2000            Cost     amortization         value
    ----------------------------------------------------------------

    Furniture and fixtures  $  62,466      $    12,805    $   49,661
    Computer equipment        112,891           48,002        64,889
    Trade show assets          17,306            6,982        10,324
    Computer software          56,880           45,418        11,462
    Leasehold improvements     44,622            4,063        40,559
    ----------------------------------------------------------------
                            $ 294,165      $   117,270    $  176,895
    ================================================================

    During the year ended December 31, 2001, the Company wrote down
    fixed assets by $42,968 (2000 and 1999 - nil) to reflect the
    lower of cost and fair market value.

6.  Common stock:

    (a)  At the annual general meeting of the Company on May 17,
         2000, the stockholders approved an increase in the authorized
         share capital of the company from 50,000,000 common shares to
         200,000,000 common shares having a par value of $0.001 each.

    (b)  Of the common stock issued at December 31, 2001,
         1,820,455 shares (2000 - 1,875,000; 1999 - 12,595,000) are
         subject to trading restrictions of up to one year following
         issue unless a registration statement is filed qualifying the
         shares for distribution.  These include the 1,500,000 shares
         retained by the Company, as described in note 6(c).

    (c)  5,500,000 common stock were issued for technology in 1993
         and recorded at a par value of $5,500.  1,500,000 of these
         shares have been retained by the Company because the
         development of the technology has not been completed.

    (d)  Additional paid-in capital arises on the issuance of
         common shares at a price in excess of par value.

    (e)  During the year ended December 31, 2001, the Company
         issued 1,333,334 common stock as part of two private placement
         financings for promissory notes of $200,000.  The notes are
         receivable from officers of the Company.  These promissory
         notes are unsecured, without interest and payable on demand.

    (f)  During the year ended December 31, 2001, the Company
         entered into an agreement with a consulting company to obtain
         services in exchange for common stock of the Company.  As at
         December 31, 2001, 100,000 common stock was owed at a value of
         $16,000.  The common stock was issued subsequent to year-end.


                                                                13
<PAGE>

BRAINTECH, INC.
(A Development Stage Enterprise)

Notes to Consolidated Financial Statements
(Expressed in U.S. dollars)

Years ended December 31, 2001, 2000 and 1999
Period from inception on January 3, 1994 to December 31, 2001

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

6.  Common stock (continued):

    (g)  Stock options:

         The Company has reserved 7,500,000 common shares pursuant to
         the 1997 stock option plan and an additional 7,500,000 common
         shares pursuant to the 2000 stock option plan.  The Company's
         Board of Directors have discretion to set the price, term,
         vesting schedules, and other terms and conditions for options
         granted under the plan, subject to the requirements of any
         stock exchange on which the Company's shares are listed.

         Subsequent to year-end, effective January 2, 2002 and January
         11, 2002, the Company granted a total of 95,000 stock options
         having an exercise price of $0.25 per share.  The options vest
         periodically over a two year period; 25,000 expire on January
         1, 2007 and the remaining 70,000 expire on January 10, 2007.

         (i)  A summary of the Company's stock option activity is as
              follows:

      ==============================================================
                                                            Weighted
                                        Number               average
                                     of shares        exercise price
      --------------------------------------------------------------

      Balance, December 31, 1998     5,432,000               $ 0.20
      Options granted                1,165,000                 0.20
      Options exercised               (157,000)                0.20
      Options cancelled/expired        (35,000)                0.20

      Balance, December 31, 1999     6,405,000                 0.20
      Options granted                2,425,000                 0.25
      Options exercised             (3,976,000)                0.20
      Options cancelled/expired       (100,000)                0.20

      Balance, December 31, 2000     4,754,000                 0.23
      Options granted                1,040,000                 0.25
      Options exercised                      -                    -
      Options cancelled/expired       (491,500)                0.24
      --------------------------------------------------------------
      Balance, December 31, 2001     5,302,500               $ 0.23
      ==============================================================

                                                                14
<PAGE>

BRAINTECH, INC.
(A Development Stage Enterprise)

Notes to Consolidated Financial Statements
(Expressed in U.S. dollars)

Years ended December 31, 2001, 2000 and 1999
Period from inception on January 3, 1994 to December 31, 2001

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

6.  Common stock (continued):

    (g)  Stock options (continued):

         (ii)  Additional information regarding options outstanding as at
               December 31, 2001 is as follows:

<TABLE>
<CAPTION>

               =====================================================================================
                                                    Outstanding                     Exercisable
                                 ---------------------------------------     -----------------------
                                                      Weighted
                                                       average   Weighted                   Weighted
                                                     remaining    average                    average
                                      Number       contractual   exercise           Number  exercise
               Exercise prices     of shares      life (years)      price        of shares     price
               -------------------------------------------------------------------------------------
               <S>                 <C>            <C>            <C>         <C>            <C>

               $ 0.20              2,237,500              1.35     $ 0.20        2,237,500    $ 0.20
               $ 0.25              3,065,000              4.03       0.25        1,351,250      0.25
               -------------------------------------------------------------------------------------
                                   5,302,500              2.90     $ 0.23        3,588,750    $ 0.22
               =====================================================================================
</TABLE>

         (iii) Stock-based compensation:

               With respect to the stock options granted from inception
               through December 31, 2001, the Company recorded stock-based
               compensation of $1,131,800.

               As indicated in note 3(l), the Company has adopted the
               disclosure provisions of Statement of Financial Accounting
               Standards No. 123, "Accounting for Stock-based
               Compensation" ("FAS 123").  Had compensation cost been
               determined based on the fair value of employee stock options
               at their grant date, the Company's net loss and net loss per
               share would have been as indicated below:

<TABLE>
<CAPTION>

               ============================================================================================
                                                Period from
                                               inception on
                                            January 3, 1994
                                            to December 31,                Years ended December 31,
                                                       2001          ---------------------------------
                                                                     2001           2000          1999
              ---------------------------------------------------------------------------------------------
              <S>                            <C>                <C>            <C>            <C>
               Net loss:
                 As reported                  $   (9,962,176)   $  (1,856,530) $  (1,114,003) $ (1,236,074)
                 Proforma                        (11,357,008)      (1,900,918)    (1,219,195)   (1,423,903)

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

               Basic and diluted net loss per
               share:
                 As reported                         $ (0.34)         $ (0.04)       $ (0.03)      $ (0.03)
                 Proforma                              (0.39)           (0.04)         (0.03)        (0.04)

               ============================================================================================
</TABLE>

                                                                15
<PAGE>

BRAINTECH, INC.
(A Development Stage Enterprise)

Notes to Consolidated Financial Statements
(Expressed in U.S. dollars)


Years ended December 31, 2001, 2000 and 1999
Period from inception on January 3, 1994 to December 31, 2001

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

6.  Common stock (continued):

    (g)  Stock options (continued):

         (iii) Stock-based compensation (continued):

               The fair value for the options was estimated using the
               Black-Scholes option pricing model assuming no expected
               dividends and the following weighted average assumptions:


<TABLE>
<CAPTION>

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

                                                       Options
                                                 ------------------
                                               Interest
                                                   Rate     Term   Volatility
              ----------------------------------------------------------------
             <S>                              <C>         <C>     <C>

              Years ended:
                 December 31, 2001                4.07%    2 yrs          80%
                 December 31, 2000                6.05%    2 yrs          70%
                 December 31, 1999                5.88%    5 yrs         120%
              ===============================================================
</TABLE>


<TABLE>

          ====================================================================
                                          Weighted average        Weighted average
                                           exercise price	       fair value
                                             December 31,            December 31,
                                     ----------------------     ----------------------
                                     2001     2000     1999     2001     2000     1999
          ----------------------------------------------------------------------------

         <S>                       <C>      <C>      <C>       <C>     <C>      <C>
           Exercise price is
            less than fair value
            on grant date           $   -    $   -   $ 0.20    $   -	$   -   $ 0.18
           Exercise price
            exceeds fair value
            on grant date            0.25     0.25     0.20     0.04     0.04     0.16
          ----------------------------------------------------------------------------
           Total options            $0.25    $0.25    $0.20    $0.04    $0.04    $0.16
          ----------------------------------------------------------------------------

</TABLE>

    (h)  Share purchase warrants:

         During the year ended December 31, 2001, the Company completed
         private placements of 10,373,523 common shares at a price of
         $0.15 per share and 295,455 common shares at a price of $0.22
         per share.  In conjunction with the private placements, the
         Company issued 5,334,494 common share purchase warrants (each
         purchaser received one common share purchase warrant for each
         two common shares purchased).

                                                                16
<PAGE>

BRAINTECH, INC.
(A Development Stage Enterprise)

Notes to Consolidated Financial Statements
(Expressed in U.S. dollars)

Years ended December 31, 2001, 2000 and 1999
Period from inception on January 3, 1994 to December 31, 2001

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

6.  Common stock (continued):

<TABLE>
<CAPTION>

    (h)  Share purchase warrants (continued):

         ================================================================================
                                                  Number           Expiry        Exercise
                                                 of shares          date           price
         --------------------------------------------------------------------------------
         <S>                                    <C>           <C>                <C>

         Balance December 31, 1999 and 2000              -                    -         -
         Issued                                  1,650,002    February 25, 2002     $0.20
         Issued                                  2,150,001       March 14, 2002     $0.20
         Issued                                  1,386,763        June 29, 2002     $0.20
         Issued                                    147,728       August 29,2002     $0.27
         --------------------------------------------------------------------------------
                                                 5,334,494                          $0.20
         ================================================================================

</TABLE>

         The Company's intention is to extend the expiry date on all of
         the share purchase warrants for an additional six months.

7.  Income taxes:

    Deferred income taxes reflect the tax effects of temporary
    differences between the carrying amount of assets and liabilities
    for financial reporting purposes and the amounts used for income
    tax purposes, as well as net operating loss and tax credit
    carryforwards.

    The Company's deferred income tax assets are comprised of the
    following at December 31:

<TABLE>

    ===================================================================
                                                   2001            2000
    -------------------------------------------------------------------

   <S>                                       <C>           <C>

    Net deferred tax assets and liabilities:
      Net operating loss carryforwards
      and other timing differences           $  3,001,935   $ 2,720,070
    -------------------------------------------------------------------
    Total deferred tax assets                   3,001,935   $ 2,720,070
    Valuation allowances                       (3,001,935)   (2,720,070)
    -------------------------------------------------------------------
    Net deferred tax assets                  $          -   $         -
    ===================================================================

</TABLE>

    As at December 31, 2001, management believes that sufficient
    uncertainty exists as to whether or not the deferred tax assets
    will be realized, and accordingly, a valuation allowance is required.

    As of December 31, 2001, the Company had net operating losses of
    $5,100,000 available to offset taxable income earned in Canada to
    2008 and $3,300,000 available to offset taxable income earned in
    the United States to 2021.

                                                                17
<PAGE>

BRAINTECH, INC.
(A Development Stage Enterprise)

Notes to Consolidated Financial Statements
(Expressed in U.S. dollars)

Years ended December 31, 2001, 2000 and 1999
Period from inception on January 3, 1994 to December 31, 2001

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

8.  Contingencies:

    (a)  On February 1, 1999, a former employee of the Company
         commenced legal proceedings against the Company claiming
         damages for an alleged breach of a stock option agreement and
         an amount owing pursuant to a consulting agreement.  The
         Company and the former employee entered into a Mutual Release
         and Settlement Agreement dated February 1, 2001 whereby the
         Company issued 400,000 common shares to the former employee's
         company.  The cost of the settlement of these proceedings has
         been included in shareholders' equity and the statement of
         operations as at December 31, 2000.

    (b)  On March 16, 1999, three corporations commenced legal
         proceedings against the Company and certain of its present and
         former directors claiming damages in the amount of $606,000
         for breach of contract and conversion of stock certificates.
         In a Supreme Court of British Columbia Order, effective
         January 25, 2001, the action was dismissed without cost to the
         Company or its present and former directors.  The previously
         accrued provision for estimated cost of settlement has been
         credited to additional paid-in capital in the December 31,
         2000 consolidated financial statements.

9.  Commitments:

    The Company has obligations under operating lease arrangements
    which require the following minimum annual payments:

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

    2002                                                $  120,900
    2003                                                    77,850
    --------------------------------------------------------------
                                                        $  198,750
    ==============================================================

10. Research and development expenditures:

    Included in cumulative research and development expenditures is
    $438,700 of compensatory benefit of employee stock options from
    the period of inception on January 31, 1994 to December 31, 2001.
    No benefit was recorded during the year ended December 31, 2001
    (2000 - nil; 1999 - nil).

                                                                18
<PAGE>

BRAINTECH, INC.
(A Development Stage Enterprise)

Notes to Consolidated Financial Statements
(Expressed in U.S. dollars)

Years ended December 31, 2001, 2000 and 1999
Period from inception on January 3, 1994 to December 31, 2001

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

11. Selling, general and administrative expenses:
    Selling, general and administrative expenses are comprised of the
    following:

<TABLE>
<CAPTION>
    ============================================================================================
                                      Period from
                                     inception on
                                  January 3, 1994
                                  to December 31,                      Years ended December 31,
                                                                       ------------------------
                                             2001              2001           2000          1999
    --------------------------------------------------------------------------------------------
    <S>                           <C>                <C>                <C>          <C>
    Compensatory benefit of
      employee stock options      $      693,100     $        2,000     $        -   $     2,000
    Salaries and benefits              1,705,030            649,870        189,159       143,865
    Marketing                          1,125,773            173,407        126,640       163,768
    Legal and audit                    1,026,622            245,450        132,237       142,781
    Rent and facilities                  400,974             93,708         55,033        33,353
    Other                              1,167,643            298,502        188,924       164,948
    --------------------------------------------------------------------------------------------
                                  $    6,119,142     $    1,462,937     $  691,993   $   650,715
    ============================================================================================

</TABLE>

12. Financial instruments:

    (a)  Fair values of financial instruments:

         The Company's short-term financial instruments consist of cash
         and cash equivalents, accounts receivable, due from related
         companies, accounts payable and accrued liabilities. The fair
         value of these financial instruments approximate their
         carrying values due to their short-term maturity.

    (b)  Foreign currency risk:

         Foreign currency risk reflects the risk that the Company's net
         assets or operations will be negatively impacted due to
         fluctuations in exchange rates.  Revenues and expenses of the
         Company denominated in foreign currencies come due in the
         short-term and accordingly, management of the Company believes
         there is no significant exposure to foreign currency
         fluctuations.  The Company does not have foreign currency
         derivative instruments in place.

    (c)  Credit risk:

         Financial instruments subjecting the Company to concentrations
         of credit risk consist primarily of cash and cash equivalents
         and short-term investments. The Company maintains cash and
         cash equivalents with high quality financial institutions.

         The Company's customers are currently concentrated in Canada.
         The Company performs ongoing credit evaluations, generally
         does not require collateral and establishes an allowance for
         doubtful accounts based upon factors surrounding the credit
         risk of customers, historical trends and other information.


                                                                19
<PAGE>

BRAINTECH, INC.
(A Development Stage Enterprise)

Notes to Consolidated Financial Statements
(Expressed in U.S. dollars)

Years ended December 31, 2001, 2000 and 1999
Period from inception on January 3, 1994 to December 31, 2001

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

13.  Subsequent event:

     As at December 31, 2001, $314,516 had been received with respect
     to a future private placement that has not yet been finalized,
     and is included in additional paid-in capital.  An additional
     $431,962 has been received subsequent to year-end.

14.  Unaudited interim financial information:

     The following table sets forth selected unaudited quarterly
     information for the Company's last eight fiscal quarters (in
     thousands):

<TABLE>
<CAPTION>

    ========================================================================
                                         Fiscal 2001 Quarter End
                             ------------------------------------------
                         December 31  September 30     June 30      March 31
    ------------------------------------------------------------------------
     <S>                 <C>          <C>              <C>          <C>

     Revenues                      1            23          25             -
     Gross margin                 (6)           17          17             -
     Net loss for the period    (486)         (443)       (535)         (400)
     Net loss per share        (0.01)        (0.01)      (0.01)        (0.01)
    ========================================================================
</TABLE>

<TABLE>
<CAPTION>

    ========================================================================
                                         Fiscal 2000 Quarter End
                             ------------------------------------------
                         December 31  September 30     June 30      March 31
    ------------------------------------------------------------------------
     <S>                 <C>          <C>              <C>          <C>

     Revenues                     19            44           7            70
     Gross margin                 12            31           4            39
     Net loss for the period    (339)         (120)       (327)         (328)
     Net loss per share        (0.01)        (0.00)      (0.01)        (0.01)
    ========================================================================
</TABLE>