UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-KSB

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

For The Fiscal Year EndedDecember 31, 2002

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

or the transition period from  to

Date of Report (Date of Earliest Event Reported) March 28, 2003

BRAINTECH, INC.

(Exact name of Registrant as specified in its charter)



|Nevada                                   | 98-0168932                       
|---------------------------------------- | ---------------------------------
|(State or jurisdiction of incorporation) | (IRS Employer 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: $460,093

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 24, 2003: $4,565,818.

State the number of shares outstanding of each of the issuer's classes of common equity, as of the latest practicable date: 15,219,394 common shares, par value $0.001, as at March 24, 2003.

Index to Exhibits on Page 39

Braintech, Inc.

Form 10-KSB

TABLE OF CONTENTS

Page

PART I

Risk Factors 	1

Item 1.	Description of Business 	4

Item 2.	Description of Property 	20

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	22

Item 7.	Financial Statements	28

Item 8.	Changes in and Disagreements with Accountants	28

PART III

Item 9.	Directors, Executive Officers, Promoters, and

Control Persons	28

Item 10.	Executive Compensation	30

Item 11.	Security Ownership of Certain Beneficial Owners and Management

And Related Stockholder Matters	32

Item 12.	Certain Relationships and Related Transactions	 35

Item 13.	Exhibits and Reports on Form 8-K	39

Item 14.	Controls and Procedures	41

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 $706,994 from inception to December 31, 2002, 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, 2003. 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, 2002 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, 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 25 vision guided robotic systems to date. We intend to develop our relationship with ABB to try to 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 guidance systems for specific customer needs, we may not be able to create a repeat customer base.

Most vision guidance 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 guidance systems, or that any customers we secure will become repeat customers.

Because our work force is small, with only 21 people employed either as officers, employees or contractors, we are vulnerable to the loss of key people or to rapid expansion.

We employ only 21 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.

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 and on May 24, 2002 we filed an identical application in the United States Patent Office. On January 31, 2003 we filed an International Application according to the Patent Cooperation Treaty. The Patent Cooperation Treaty provides a procedure enabling applicants to obtain patents in many countries. 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 vision guidance 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, 2002 the market price of our common stock has varied between $0.11 and $1.05. 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 $706,994 from inception to December 31, 2002, and our business has not been profitable with accumulated losses of $11,540,766 from inception to December 31, 2002, 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, 2001 and 2002. 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.
- 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 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 a significant percentage of our issued shares has recently become free trading, and because of the size of anticipated share offerings, there is a risk of downward pressure on our stock price.

During 2001 and early 2002, we issued approximately 2.3 million shares in private placements and other transactions. Those shares are now eligible for re-sale under Rule 144 to the Securities Act of 1933. In addition, during the remainder of 2002, we raised further funds in private placements for which we issued 3,760,716 shares and 1,880,358 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.

Because the National Association of Dealers has announced that the OTC Bulletin Board will cease operations in 2003, the market for trading of our securities may be adversely affected.

The National Association of Securities Dealers, Inc., has announced that it intends to make certain changes to its system for trading shares electronically other than through NASDAQ, including establishing a new electronic trading system known as the Bulletin Board Exchange ("BBX") which will eventually supersede the OTC Bulletin Board. We are unable to determine the effect of any such change on the Company and the trading market for our securities, or whether our common stock will be eligible for listing on the BBX. The inability of our common stock to be listed on the BBX could have a material adverse impact on the market price for our common stock.

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$0.64, being the average exchange rate during the year ended December 31, 2002.

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.

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 that 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.

-"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 from the development of technology and products used in creating machine vision systems, to the development of vision guidance systems for robots used in the automotive assembly 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 used 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:

-	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.

In March 2000, we entered into a strategic alliance agreement with ABB Inc. (ABB). ABB is a leading international 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. Since entering into our alliance with ABB, we have focused on the development and integration of vision guidance systems for robots used in the automobile manufacturing industry. Under the ABB alliance, we have completed and installed 20 vision systems that provide guidance to ABB's industrial robots in the automotive manufacturing industry.

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.

In 2000, we commenced the development of eVisionFactory ("eVF"), a software development environment whose main components are: e - Real-Time Internet Support, V - Vision Science & Engineering, and F - Application Development & Operation. eVF combines vision technology, systems engineering, and a wireless Internet based service and support system and thereby reduces the solution building life cycle from development to deployment to support. The Internet-based service and support system is designed to provide technical support through the Internet to purchasers of our vision guidance systems. The Internet-based support system could also be used to provide technical support to companies operating other types of industrial machinery and manufacturing systems.

Early in 2002 we completed a commercial version of eVisionFactory that does not include our Internet based service and support system. We included eVisionFactory software with the systems we delivered in 2002.

In the 2nd quarter of 2001, at the request of Ford Motors, we completed the development of a 3D single camera vision guidance system for robots used in automotive manufacturing systems ("SC3D"). The SC3D system uses a single conventional CCD (Charge Coupled Device) camera. Software algorithms use images from the camera mounted on the robot arm to determine the position and orientation of an object. That information is used to guide the robot operating on or manipulating the object. Applications for the SC3D system include automated assembly, material handling, spot welding, machining operations, adhesive and sealant application, spray painting, and part identification and inspection. As a result of our completion of the development of SC3D, we received from ABB an order for 19 vision guidance systems for installation into two engine assembly plants of Ford Motors.

To date, we have delivered 15 of the 19 SC3D vision systems ordered by ABB. All of these systems include the commercialized version of eVF, SC3D and AutoCal-3D. These systems are integrated with ABB robots and are currently operating in Ford's automotive power train assembly lines. The remaining 4 systems are to be installed during 2003, although the actual installation dates have not been determined.



In July 2001, we entered into a Memorandum of Understanding with Marubeni Corporation, pursuant to which the two companies agreed to cooperate in developing and marketing of the Braintech technology for industrial applications including vision guided robots in Japanese and Asian markets. Marubeni is a Japanese trading company with offices and subsidiaries throughout the world. Marubeni is ranked 25th on the 2002 Fortune Global 500 ranking of the world's largest corporations, based on 2001 revenues.

During the 1st half of 2002, we continued the development of our relationship with Marubeni Corporation and that culminated in the signing of a Marketing and Development Agreement. The agreement, which covers Southeast Asia and Australia, provides for mutual exclusivity, whereby Marubeni is granted an exclusive license to manufacture and distribute Braintech's vision guided robotic systems and Marubeni agrees that it will not deal with any competitive technology or products during the three-year term. Marubeni placed an order for two eVF development systems and these systems were delivered upon completion of the Marketing and Development Agreement. We have completed the integration work for utilization of eVF with Kawasaki robots. We have also set up the demonstration/training models of eVF in the Marubeni Vision Techno Centre in Nagoya, Japan and have provided onsite training to Marubeni engineers. In addition, Mr. Babak Habibi, our President, gave a presentation to senior level executives of Marubeni at the Techno Centre. We have also hired a Vice-President Marketing and Business Relations - Asian Region to oversee and manage our relationship with Marubeni.

During 2002 we continued to add functionality to eVF by developing additional components as follows:

AutoCal-3D; AutoCal-3D is a fully automated process for 3D calibration of a stationary or robot-mounted camera.

Xi2D (Single/Multi-Camera 2D); Xi2D consists of a single or multi-camera arrangement that views various features of interest.

DD3D (Direct Depth 3D); DD3D uses stereo vision for direct measurement and consists of a binocular camera arrangement to view a part or feature.

SR3D (Surround Vision 3D); SR3D is similar to SC3D but involves multiple cameras configured to view different areas of the same part.

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.

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, grasp and remove the part from the bin. The complete process takes less than one second. 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 the 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.

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 ("The Machine Vision Market: 2001 Results and Forecasts to 2006"). These statistics are provided to illustrate how significantly the manufacturing industry has embraced vision technology. Statistics published by the AIA include the following:

- The study concluded that the 2001 total world market for machine vision is approximately $5.5 billion and 130,548 units. Revenues were down 11.1% and units down by 10.5% from 2000.

- The North American demand represents approximately 32%, or $1.76 billion in revenue and 41,800 units of the world market. Japan represents approximately 33%, or $1.81 billion in revenue and 44,386 units of the world market demand.

-	The semiconductor and electronic industries accounted for more than 55% of all revenues and 38% of all units sold in 2001. The automotive industry accounted for approximately 10% of all units sold in North America in 2001.

-	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.

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

Our attempts to sell customized vision systems were unsuccessful until the final quarter of 1999. Since then, we have sold and installed 23 vision systems, we have upgraded 2 existing vision systems to eVF, we have sold 2 developer's licenses, and we have sold 2 runtime licenses.

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.

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 systems are for installation in two of Ford Canada's engine plants. These vision systems utilize our 3D single camera vision systems. Installation of the systems commenced in the second quarter of 2002 and to date 15 of the systems had been installed. We estimate that the remaining 4 systems will be installed during the second and third quarter of 2003. However, the installation dates are dependent on customer requirements and these dates have constantly shifted. In April 2002 we received a 10% advance payment for all 19 systems and to date we have received payment for 14 of the 15 systems installed.

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 recognized 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. We completed and installed the system in March 2002 and invoiced Axium on March 28, 2002. In accordance with the software revenue recognition rules, we are recognizing the revenue from this installation over the 12-month period commencing April 1, 2002.

In July 2001, we 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. During the 1st half of 2002, we continued the development of our relationship with Marubeni Corporation and that culminated in the signing of a Marketing and Development Agreement. In March 2002, Marubeni placed an order for two eVF development systems and these systems were delivered upon completion of the Marketing and Development Agreement. In December 2002, Marubeni placed an order for demonstration run-time licenses and those licenses were delivered in March 2003.

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 include a version of eVF without the internet based service and support system in all of the vision guidance systems that we deliver. The Internet based support system is 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 guidance systems. eVisionFactory stores and manipulates libraries of routines to perform the various functions that can be included within a vision guidance system. eVisionFactory includes standardized interfaces to which all of the routines are adapted, so that 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 vision guidance system. After installation, the vision guidance 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 will also include maintenance and support features which monitor the performance of a vision guidance 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 2003.

The software by which eVisionFactory links the various routines within its libraries is proprietary to us. 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.

-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 vision guidance systems. However, our Internet based service and support system can be adapted for use with a variety of industrial manufacturing 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 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.

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

According to data published by the Automated Imaging Association, of 205 companies operating in the North American merchant machine vision during 2001 (note: the AIA did not publish these statistics for 2000):

-	125 companies, versus 155 in 1999, operated with revenues of less than $5 million;

-	32 companies, versus 30 in 1999, operated with revenues in the range of $5-10 million;

-	20 companies, versus 21 in 1999, operated with revenues in the range of $10-20 million;

-	15 companies, versus. 9 in 1999, operated with revenues in the range of $20-30 million;

-	4 companies, versus 4 in 1999, operated with revenues in the range of $30-40 million; and

-	6 companies, versus 6 in 1999, 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, 2001, we incurred research and development expense of $404,482, and during the year ended December 31, 2002, we incurred research and development expense of $477,392. Substantially all of our research and development expenses consisted of internal personnel costs allocated to research and development. For 2003, our own employees will do substantially all of our research and development work.

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 in developing the components of eVisionFactory including AutoCal-3D, Xi2D (Single/Multi-Camera 2D), DD3D (Direct Depth 3D), and SR3D (Surround Vision 3D);

- 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 we have written from time to time in developing machine vision systems;

- software we have written in developing the Wizmaster program; and

- software we have written and incorporated in the Odysee Development Studio.

We have registered the trademarks "Braintech" and "BrainTron" with the United States Patent and Trademark office. We have also applied for registration of the trademarks SC3D, eVisionFactory and eVF with the United States Patent and Trademark Office. In the Canadian Trade-marks Office we have applied for registration of the trademarks Pathfinder VGR, SC3D,eVF, and eVisionFactory.

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 and on May 24, 2002 we filed an identical application in the United States Patent Office. On January 31, 2003 we filed an International Application according to the Patent Cooperation Treaty. The Patent Cooperation Treaty provides a procedure enabling applicants to obtain patents in many countries. 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 Agreement. In addition, we have made it publicly known for over seven 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 or in eVF.

Our ability to compete successfully will depend in part on our ability to protect our proprietary technology and information. Except for the patent applications regarding our Method And Apparatus For Single Camera 3D Vision Guided Robotics described above, and apart from the above trademarks and trade mark applications, 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 that 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 surrender 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 $112,000 per year, inclusive of operating costs. 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 lease, we could also be legally responsible for rent relating to the portion of the premises which has been surrendered to a third party, if Sideware Systems Inc. and the third party both fail to pay that rent. The additional rent for which we could be liable totals approximately $6,950 per month. The legal responsibility under the co-covenantor provisions terminates on August 31, 2003

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.

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 "BRHI".

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

|Quarter        |  | High | Low  | Close
|-------------- |  | ---- | ---- | -----
|               |  | ($)  | ($)  | ($)  
|               |  |      |      |      
|2002           |  |      |      |      
|Fourth quarter |  | 0.45 | 0.11 | 0.11 
|Third quarter  |  | 0.85 | 0.25 | 0.31 
|Second quarter |  | 0.95 | 0.55 | 0.70 
|First quarter  |  | 1.05 | 0.65 | 0.80 
|               |  |      |      |      
|2001           |  |      |      |      
|Fourth quarter |  | 1.40 | 0.65 | 0.65 
|Third quarter  |  | 1.80 | 0.65 | 0.75 
|Second quarter |  | 1.65 | 0.45 | 1.55 
|First quarter  |  | 2.20 | 0.55 | 0.65 
|               |  |      |      |      

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.

Holders

As at March 21, 2003, we have 15,219,394 shares issued and outstanding. We have approximately 320 registered shareholders. Approximately 7.8 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

On January 4, 2002, we issued 20,000 common shares at a deemed value of $0.80 per share on account of services rendered by Ogilvie Rothchild Inc. The shares 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 March 6, 2002, we issued 60,000 common shares at a deemed value of $0.80 per share on account of services rendered by Ogilvie Rothchild Inc. The shares 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 March 12, 2002, we issued 20,000 common shares at a deemed value of $0.80 per share on account of services rendered by Farid Rohani. The shares 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 April 17, 2002, we issued 1,128,638 common shares at a price of $0.75 per share pursuant to a private placement. Owen Jones, our C.E.O. and director purchased 833,334 of the shares and Grant Sutherland, a former director, purchased 295,304 of the shares. 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 $1.00 per share. The shares and warrants were issued pursuant to exemptions from registration as set out in Rule 506 of Regulation D under the Securities Act.

On October 29, 2002, we issued 855,594 common shares at a price of $0.60 per share pursuant to a private placement agreed to on August 28, 2002. Owen Jones, our C.E.O. and director purchased 751,544 of the shares and Grant Sutherland, a former director, purchased 104,050 of the shares. 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 $0.85 per share. The shares and warrants were issued pursuant to exemptions from registration as set out in Rule 506 of Regulation D under the Securities Act.

On October 29, 2002, we issued 267,106 common shares at a price of $0.31 per share pursuant to a private placement agreed to on September 30, 2002. Owen Jones, our C.E.O. and director purchased the shares. 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 $0.36 per share. The shares and warrants were issued pursuant to exemptions from registration as set out in Rule 506 of Regulation D under the Securities Act.

On December 18, 2002, we issued 297,334 common shares at a price of $0.27 per share, 227,480 common shares at a price of $0.21 per share, 407,640 common shares at a price of $0.15 per share, and 576,924 common shares at a price of $0.20 per share pursuant to private placements agreed to on October 24, 2002, November 7, 2002, November 26, 2002 and December 2, 2002 respectively. Owen Jones, our C.E.O. and director purchased the shares. In addition, for every two shares purchased, the purchaser received one share purchase warrant as follows: 148,667 warrants with an exercise price of $0.32, 113,740 warrants with an exercise price of $0.26, 203,820 warrants with an exercise price of $0.20, and 288,462 warrants with an exercise price of $0.25. The shares and warrants were issued pursuant to exemptions from registration as set out in Rule 506 of Regulation D under the Securities Act.

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

Overview

We generate the majority of our revenues from the sale of computer software that we have developed and that we believe constitutes intellectual property belonging to us. Our software sales have principally involved computerized vision systems used for the guidance of industrial robots performing automated assembly, material handling, and part identification and inspection functions. We have generated total revenues, from inception on January 3, 1994 to December 31, 2002, in the amount of $706,994.

We have incurred aggregate net losses of approximately $11.5 million during the period from our inception on January 3, 1994, to December 31, 2002. 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.

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, 2002 compared with year ended December 31, 2001

For the year ended December 31, 2002 we recorded revenue of $460,093, an increase of more than 800% over $49,342 for the year ended December 31, 2001. The 2002 amount included:

(a)	Approximately $21,250 for the sale of eVF development licenses;

(b)	Approximately $362,000 for vision guidance systems delivered to ABB for installation at Ford engine assembly plants;

(c)	Approximately $59,000 for vision guidance systems used in the manufacture of plastic fuel tanks;

(d)	Approximately $16,500 for upgrades of previously delivered vision guidance systems used in the manufacture of plastic fuel tanks.

In accordance with the software revenue recognition rules outlined in the American Institute of Certified Public Accountant's Statement of Position (SOP) 97-2, $80,468 of the sales invoiced during 2002 is recorded as deferred revenue on the balance sheet and will be recognized as revenue throughout fiscal 2003.

Cost of sales for the year ended December 31, 2002 was $36,449 representing approximately 8% of revenue. This amount consisted of:

(a)	$970 of cost associated with the sale of eVF development licenses;

(b)	$15,900 for equipment and installation costs relating to the Ford engine assembly plant project;

(c)	$12,355 for equipment and installation costs relating to the fuel tank project; and

(d)	$7,150 for equipment and installation cost relating to the upgrade project.

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.

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;

1. $6,355 for equipment and installation costs relating to the air conditioner project; and

Research and development expenses increased from $404,482 for the year ended December 31, 2001 to $477,392 for the year ended December 31, 2002. The increase resulted principally from an increase from $372,177 in 2001 to $431,630 in 2002 in salaries allocated to research and development.

Selling, general, and administrative expenses increased from $1,462,937 for the year ended December 31, 2001 to $1,525,646 for the year ended December 31, 2002. Several factors contributed to the increase. The principal factors were as follows:

(a)	General and administrative salaries increased from approximately $650,000 to approximately $710,000, due to an increase of 2 additional general and administrative employees, and the stock based compensation paid to the CEO during the year ended December 31, 2002;

(b)	Amortization expenses decreased from $113,327 to $78,579, principally as a result of diminishing net book value of the capital assets. Only $9,515 was expended on the purchase of capital assets during the year ended December 31, 2002 compared to the expenditure of $154,447 during the year ended December 31, 2001;

(c)	Legal expenses decreased from $171,864 to $106,488, principally due to the cost incurred during the year ended December 31, 2001 for filing a registration statement under the Securities Act of 1933. No such filing occurred in the year ended December 31, 2002;

(d)	During the year ended December 31, 2001 we incurred a foreign exchange loss of $6,860. The comparative figure for 2002 was $1,623. 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;

(e)	During the year ended December 31, 2002, we paid $98,773 for investor relations services compared to $34,922 paid during 2001;

(f)	Travel and trade show expenses increased from $66,951 to $111,512, principally as a result of attending the two trade shows in 2002 compared to one in 2001;

(g)	Premises costs increased from $93,708 to $140,698, principally as a result of the July 2001 relocation of our office premises to Unit 102 - 930 West 1st Street, North Vancouver, B.C.

Liquidity and Capital Resources

As of December 31, 2002, our trade accounts receivable balance was $196,160. Subsequent to December 31, this balance was received in full. In addition, we have received $20,000 from the sale of two demonstration run-time licenses and we have also received $28,477 relating to the Ford engine assembly plant installations.

In January 2003, Owen Jones, our CEO advanced $54,487 and in March 2003 he advanced $101,352 in return for unsecured demand promissory notes with an annual interest rate of 8%.

As of March 26, 2003, inclusive of the private placement proceeds described above, our cash balance is approximately $130,000. 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 $155,000 per month. We base this estimate on the following data:

-	As at March 26, 2003, we have 21 employees. Our salary costs are approximately $80,000 per month;

-	For the year ended December 31, 2002 our average monthly general, overhead and administrative costs, exclusive of salary costs, were approximately $72,000 per month. We expect that our general overhead and administrative costs, exclusive of salary costs, will continue to be approximately $72,000 per month for the first half of 2003;

-	We do not expect to incur contractor research and development expenses in 2003;

-	During the year ended December 31, 2002 we incurred capital expenditures of approximately $9,500, principally for computer equipment. Between December 31, 2002 and March 26, 2003, we did not incurred any capital expenditures and do not expect to incur significant capital expenditures during the remainder of 2003 unless they result from an increase in our level of operation.

Based on the foregoing, we estimate that our total cash expenditures for the period March 26, 2003 to June 30, 2003 will be approximately $500,000. Based on our current financial position, we believe that our present and anticipated cash resources from operations and equity and/or debt financings will be sufficient to pay ongoing cash operating expenses for the remainder of the fiscal year. However, there can be no assurance that we can or will obtain sufficient funds from operations or additional financings on terms acceptable to us. Our current cash balances, together with the anticipate cash generated from our sales to ABB should be sufficient to pay our anticipated cash expenditures to approximately April 30, 2003. To continue as a going concern, we will either have to raise additional capital or begin to 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 and Changes to Existing 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 judgments, 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 are required to follow the software revenue recognition rules outlined in the American Institute of Certified Public Accountant's Statement of Position (SOP) 97-2. 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. Changes in contractual arrangements or customer relationships in the future could impact the extent or timing of revenue recognition.

Income Taxes. Our financial statements reflect a full valuation allowance against the net future income tax assets based on our assessment that we are not more likely than not to be able to utilize certain deductions before their expiry. Our assessment is based on a judgment of estimated loss before such deductions. Changes in the timing of the recognition and amount of revenues and expenses in the future may impact our ability to utilize these deductions.

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, and thus our profit or loss. During the year ended December 31, 2002 we incurred a foreign exchange loss of $1,623. 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, 2002 and December 31, 2001 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, 2002 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, 2002 approximate their carrying values.

To December 31, 2002, 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.

Plan of Operation

At the beginning of fiscal 2002, we set strategic operating priorities for the ensuing year. These priorities were as follows:

Our first priority for fiscal 2002 was the completion of the order of SC3D vision guidance systems ordered by ABB for installation at Ford Canada engine assembly plants. To date we have delivered fifteen of the nineteen systems and most are currently being used in automotive power train assembly lines. The remaining four systems are scheduled for installation during the second and third quarters fo 2003. However, the installation dates are dependent on customer requirements and these dates have constantly shifted.

Our second priority for fiscal 2002 was to continue to build upon our relationship with ABB and become the principle supplier of vision guidance systems to ABB and their customers. We took the following steps to develop our relationship with ABB and to secure additional contracts from them.

-We hired a sales engineer in the Province of Ontario, Canada, where the Canadian automotive manufacturing industry is concentrated. Our Ontario sales engineer provides support to ABB sales representatives in Ontario, through presentations to potential customers of industrial vision guided robotic systems.

-We installed a single camera 3D demonstration unit in the ABB plant in Brampton, Ontario for purposes of displaying our vision system technology to ABB's customers.

-We provided proposals to ABB for the vision system components for robotic systems being sold to ABB customers. As of March 28, 2003 we have several proposals outstanding, some of which involve multiple systems.

-We began negotiations with ABB's US subsidiary to establish an alliance similar to the one we have with ABB's Canadian subsidiary.

-We contracted a sales consultant based in the northeastern United States to provide sales support to ABB - USA and to be responsible for direct sales to US automakers and their Tier I and Tier II suppliers.

Our third priority for fiscal 2002 was to continue the development of eVisionFactory, including our Internet based service and support system. We completed a commercial version of eVisionFactory and all vision guidance systems delivered to ABB for installation at Ford Canada engine assembly plants include a version of eVisionFactory. We have demonstrated a Beta version of our Internet based service and support system and it is currently undergoing field-testing. In addition, we continued to add functionality to eVF by developing additional components as follows:

-AutoCal-3D; AutoCal-3D is a fully automated process for 3D calibration of a stationary or robot-mounted camera.

-Xi2D (Single/Multi-Camera 2D); Xi2D consists of a single or multi-camera arrangement that views various features of interest.

-DD3D (Direct Depth 3D); DD3D uses stereo vision for direct measurement and consists of a binocular camera arrangement to view a part or feature.

-SR3D (Surround Vision 3D); SR3D is similar to SC3D but involves multiple cameras configured to view different areas of the same part.

Our fourth priority for fiscal 2002 was to develop our relationship with Marubeni Corporation. In June of 2002, we entered into a mutually exclusive Marketing and Development Agreement with Marubeni that provides for the marketing of our products throughout south east Asia. To facilitate our marketing plans with Marubeni, we hired a Vice President Marketing and Business Relations - Asian Region to oversee and manage our relationship with Marubeni.

Our strategic operating priorities for fiscal 2003 include the following:

A major priority is to leverage the success of the installations in the Ford Motor Company's engine assembly plants by informing the automotive industry of how the intelligent processing of vision guided robotics allows for greater creativity and flexibility in vehicle design and assembly. In March 2003, we attended the Society of Automotive Engineers World Congress trade show in Detroit Michigan. We exhibited the vision guidance technology currently being used in Ford's new engine plants. We have generated substantial interest in our technology and this is reflected in the number of requests for proposal we have received. We have issued approximately 12 quotations representing approximately 21 vision systems. We have established a formal procedure for the management of sales and marketing process.

To continue the development of our relationship with ABB, we intend to expand our presence in the automotive assembly concentrations of Southern Ontario and Detroit Michigan.

To continue the development of our relationship with Marubeni, we intend to assist in their sale process by providing engineering solution assistance. In this regard, Marubeni arranged for the loan of a Kawasaki robot so that we could integrate the Kawasaki robot controller into the eVF platform. We have shipped the first run-time licenses to Marubeni and expect that more orders for run-time licenses will occur throughout fiscal 2003.

We intend to continue to add functionality to eVF by developing additional components. We expect that during fiscal 2003 our Internet based service and support system will have completed field testing and be available for commercial installation.

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, 2002 and 2001;

-	Consolidated Statements of Operations for each of the years in the three year period ended December 31, 2002 and for the period from inception on January 3, 1994 to December 31, 2002;

-Consolidated Statements of Stockholders' Equity (Deficit) for the period from January 3, 1994 to December 31, 2002;

-Consolidated Statements of Cash Flows for each of the years in the three year period ended December 31, 2002 and for the period from inception on January 3, 1994 to December 31, 2002; 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 13 to our audited consolidated financial statements.



|Consolidated Financial Statements
(Expressed in United States dollars)
BRAINTECH, INC.
(A Development Stage Enterprise)
Years ended December 31, 2002, 2001 and 2000
Period from inception on January 3, 1994 to December 31, 2002
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|AUDITORS' REPORT TO THE STOCKHOLDERS
We have audited the accompanying consolidated balance sheets of Braintech, Inc. (a development stage enterprise) as at December 31, 2002 and 2001 and the related consolidated statements of operations, stockholders' equity (deficit) and cash flows for each of the years in the three year period ended December 31, 2002 and for the period from inception on January 3, 1994 to December 31, 2002 and stockholders' equity (deficit) for the period from inception on January 3, 1994 to December 31, 2002. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated 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, 2002 and 2001 and the results of its operations and its cash flows for each of the years in the three year period ended December 31, 2002 and for the period from inception on January 3, 1994 to December 31, 2002, in conformity with accounting principles generally accepted in the United States of America.
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in note 1 to the financial statements, the Company has incurred 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 1. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
KPMG LLP (signed)
Chartered Accountants
Vancouver, Canada
February 12, 2003
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|BRAINTECH, INC.                     
|------------------------------------
|(A Development Stage Enterprise)    
|                                    
|Consolidated Balance Sheets         
|(Expressed in United States dollars)
|                                    
|December 31, 2002 and 2001          
|                                    
|                                    
|                                    
|Assets                              
|                                    
|Current assets:                     
|                                    
|                                    
|                                    
|                                    
|                                    
|                                    
|                                    
|Fixed assets (note 4)               
|                                    
|                                    
|                                    
|Liabilities and Stockholders' Equity
|                                    
|Current liabilities:                
|                                    
|                                    
|                                    
|Stockholders' equity:               
|                                    
|                                    
|                                    
|                                    
|                                    
|                                    
|                                    
|                                    
|                                    
|                                    
|                                    

Future operations (note 1)

Contingencies (note 3(a)(i))

Commitments (note 8)

Subsequent event (note 14)

See accompanying notes to consolidated financial statements.



|BRAINTECH, INC.                                             
|------------------------------------------------------------
|(A Development Stage Enterprise)                            
|                                                            
|Consolidated Statements of Operations                       
|(Expressed in United States dollars)                        
|                                                            
|                                                            
|                                                            
|                                                            
|                                                            
|                                                            
|                                                            
|Sales                                                       
|Cost of sales                                               
|                                                            
|Gross margin                                                
|                                                            
|Operating expenses:                                         
|                                                            
|                                                            
|                                                            
|                                                            
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|                                                            
|Operating loss                                              
|                                                            
|Non-operating:                                              
|                                                            
|                                                            
|                                                            
|                                                            
|                                                            
|                                                            
|                                                            
|                                                            
|Loss for the period                                         
|                                                            
|Loss per share information:                                 
|                                                            
|                                                            
|                                                            
|Weighted average number of common                           
|                                                            
|                                                            
|                                                            
|See accompanying notes to consolidated financial statements.
|                                                            



|BRAINTECH, INC.                                          
|---------------------------------------------------------
|(A Development Stage Enterprise)                         
|                                                         
|Consolidated Statements of Stockholders' Equity (Deficit)
|(Expressed in United States dollars)                     
|                                                         
|                                                         
|                                                         
|                                                         
|                                                         
|                                                         
|                                                         
|Balance, January 3, 1994                                 
|                                                         
|Loss for the period                                      
|Balance, December 31, 1994                               
|                                                         
|Loss for the period                                      
|Balance, December 31, 1995                               
|                                                         
|Common stock transactions                                
|                                                         
|                                                         
|                                                         
|                                                         
|Loss for the period                                      
|Balance, December 31, 1996                               
|                                                         
|Common stock transactions                                
|                                                         
|                                                         
|                                                         
|                                                         
|Compensatory benefit of                                  
|                                                         
|Loss for the period                                      
|Balance, December 31, 1997                               
|                                                         
|Common stock transactions                                
|                                                         
|                                                         
|Compensatory benefit of                                  
|                                                         
|Loss for the period                                      
|Balance, December 31, 1998                               
|                                                         
|Common stock transactions                                
|                                                         
|                                                         
|Common stock subscriptions                               
|Subscriptions receivable                                 
|Compensatory benefit of                                  
|                                                         
|Loss for the period                                      
|Balance, December 31, 1999                               
|                                                         
|Common stock transactions                                
|                                                         
|                                                         
|                                                         
|                                                         
|                                                         
|                                                         
|Common stock subscriptions                               
|Common stock to be issued in                             
|                                                         
|Settlement of litigation                                 
|Loss for the year                                        
|Balance December 31, 2000,                               
|                                                         



|BRAINTECH, INC.                                                      
|---------------------------------------------------------------------
|(A Development Stage Enterprise)                                     
|                                                                     
|Consolidated Statements of Stockholders' Equity (Deficit) (Continued)
|(Expressed in United States dollars)                                 
|                                                                     
|                                                                     
|                                                                     
|                                                                     
|                                                                     
|                                                                     
|                                                                     
|Balance, December 31, 2000,                                          
|                                                                     
|                                                                     
|Common stock transactions                                            
|                                                                     
|                                                                     
|                                                                     
|                                                                     
|                                                                     
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|Common stock subscriptions                                           
|Common stock to be issued for                                        
|                                                                     
|Deferred stock-based                                                 
|                                                                     
|Amortization of deferred                                             
|                                                                     
|Loss for the period                                                  
|Balance, December 31, 2001                                           
|                                                                     
|Common stock transactions                                            
|                                                                     
|                                                                     
|                                                                     
|                                                                     
|                                                                     
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|                                                                     
|Stock based compensation                                             
|Deferred stock-based                                                 
|                                                                     
|Loss for the year                                                    
|                                                                     
|December 31, 2002                                                    

See accompanying to consolidated financial statements.

|BRAINTECH, INC.                                 
|------------------------------------------------
|(A Development Stage Enterprise)                
|                                                
|Consolidated Statements of Cash Flows           
|(Expressed in United States dollars)            
|                                                
|                                                
|                                                
|                                                
|                                                
|                                                
|                                                
|                                                
|Cash flows from operations:                     
|                                                
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|                                                
|Increase (decrease) in cash and cash equivalents
|                                                
|Cash and cash equivalents, beginning of period  
|                                                
|Cash and cash equivalents, end of period        
|                                                
|Supplemental information:                       
|                                                
|                                                
|Non-cash financing activities:                  
|                                                
|                                                
|                                                
|                                                

See accompanying notes to consolidated financial statements.



|BRAINTECH, INC.                                              
|-------------------------------------------------------------
|(A Development Stage Enterprise)                             
|                                                             
|Notes to Consolidated Financial Statements                   
|(Expressed in United States dollars)                         
|                                                             
|Years ended December 31, 2002, 2001 and 2000                 
|Period from inception on January 3, 1994 to December 31, 2002
|                                                             
|                                                             
|1.                                                           
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|                                                             
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|2.                                                           
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|                                                             



|BRAINTECH, INC.                                              
|-------------------------------------------------------------
|(A Development Stage Enterprise)                             
|                                                             
|Notes to Consolidated Financial Statements                   
|(Expressed in United States dollars)                         
|                                                             
|Years ended December 31, 2002, 2001 and 2000                 
|Period from inception on January 3, 1994 to December 31, 2002
|                                                             
|                                                             
|2.                                                           
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|BRAINTECH, INC.                                              
|-------------------------------------------------------------
|(A Development Stage Enterprise)                             
|                                                             
|Notes to Consolidated Financial Statements                   
|(Expressed in United States dollars)                         
|                                                             
|Years ended December 31, 2002, 2001 and 2000                 
|Period from inception on January 3, 1994 to December 31, 2002
|                                                             
|                                                             
|2.                                                           
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|                                                             

|BRAINTECH, INC.                                              
|-------------------------------------------------------------
|(A Development Stage Enterprise)                             
|                                                             
|Notes to Consolidated Financial Statements                   
|(Expressed in United States dollars)                         
|                                                             
|Years ended December 31, 2002, 2001 and 2000                 
|Period from inception on January 3, 1994 to December 31, 2002
|                                                             
|                                                             
|2.                                                           
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|BRAINTECH, INC.                                              
|-------------------------------------------------------------
|(A Development Stage Enterprise)                             
|                                                             
|Notes to Consolidated Financial Statements                   
|(Expressed in United States dollars)                         
|                                                             
|Years ended December 31, 2002, 2001 and 2000                 
|Period from inception on January 3, 1994 to December 31, 2002
|                                                             
|                                                             
|2.                                                           
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|                                                             



|BRAINTECH, INC.                                              
|-------------------------------------------------------------
|(A Development Stage Enterprise)                             
|                                                             
|Notes to Consolidated Financial Statements                   
|(Expressed in United States dollars)                         
|                                                             
|Years ended December 31, 2002, 2001 and 2000                 
|Period from inception on January 3, 1994 to December 31, 2002
|                                                             
|                                                             
|2.                                                           
|                                                             
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|                                                             
|                                                             
|3.                                                           
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|BRAINTECH, INC.                                              
|-------------------------------------------------------------
|(A Development Stage Enterprise)                             
|                                                             
|Notes to Consolidated Financial Statements                   
|(Expressed in United States dollars)                         
|                                                             
|Years ended December 31, 2002, 2001 and 2000                 
|Period from inception on January 3, 1994 to December 31, 2002
|                                                             
|                                                             
|3.                                                           
|                                                             
|                                                             
|                                                             
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|                                                             
|                                                             
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|                                                             



|BRAINTECH, INC.                                              
|-------------------------------------------------------------
|(A Development Stage Enterprise)                             
|                                                             
|Notes to Consolidated Financial Statements                   
|(Expressed in United States dollars)                         
|                                                             
|Years ended December 31, 2002, 2001 and 2000                 
|Period from inception on January 3, 1994 to December 31, 2002
|                                                             
|4.                                                           
|                                                             
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|BRAINTECH, INC.                                              
|-------------------------------------------------------------
|(A Development Stage Enterprise)                             
|                                                             
|Notes to Consolidated Financial Statements                   
|(Expressed in United States dollars)                         
|                                                             
|Years ended December 31, 2002, 2001 and 2000                 
|Period from inception on January 3, 1994 to December 31, 2002
|                                                             
|5.                                                           
|                                                             
|                                                             
|                                                             
|                                                             
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|                                                             
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|                                                             



|BRAINTECH, INC.                                              
|-------------------------------------------------------------
|(A Development Stage Enterprise)                             
|                                                             
|Notes to Consolidated Financial Statements                   
|(Expressed in United States dollars)                         
|                                                             
|Years ended December 31, 2002, 2001 and 2000                 
|Period from inception on January 3, 1994 to December 31, 2002
|                                                             
|5.                                                           
|                                                             
|                                                             
|                                                             
|                                                             

|BRAINTECH, INC.                                              
|-------------------------------------------------------------
|(A Development Stage Enterprise)                             
|                                                             
|Notes to Consolidated Financial Statements                   
|(Expressed in United States dollars)                         
|                                                             
|Years ended December 31, 2002, 2001 and 2000                 
|Period from inception on January 3, 1994 to December 31, 2002
|                                                             
|5.                                                           
|                                                             
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|                                                             





|BRAINTECH, INC.                                              
|-------------------------------------------------------------
|(A Development Stage Enterprise)                             
|                                                             
|Notes to Consolidated Financial Statements                   
|(Expressed in United States dollars)                         
|                                                             
|Years ended December 31, 2002, 2001 and 2000                 
|Period from inception on January 3, 1994 to December 31, 2002
|                                                             
|                                                             
|6.                                                           
|                                                             
|                                                             
|                                                             



|BRAINTECH, INC.                                              
|-------------------------------------------------------------
|(A Development Stage Enterprise)                             
|Notes to Consolidated Financial Statements                   
|(Expressed in United States dollars)                         
|Years ended December 31, 2002, 2001 and 2000                 
|Period from inception on January 3, 1994 to December 31, 2002
|                                                             
|6.                                                           
|                                                             
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|BRAINTECH, INC.                                              
|-------------------------------------------------------------
|(A Development Stage Enterprise)                             
|                                                             
|Notes to Consolidated Financial Statements                   
|(Expressed in United States dollars)                         
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|Years ended December 31, 2002, 2001 and 2000                 
|Period from inception on January 3, 1994 to December 31, 2002
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|BRAINTECH, INC.                                              
|-------------------------------------------------------------
|(A Development Stage Enterprise)                             
|                                                             
|Notes to Consolidated Financial Statements                   
|(Expressed in United States dollars)                         
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|Years ended December 31, 2002, 2001 and 2000                 
|Period from inception on January 3, 1994 to December 31, 2002
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|BRAINTECH, INC.                                              
|-------------------------------------------------------------
|(A Development Stage Enterprise)                             
|                                                             
|Notes to Consolidated Financial Statements                   
|(Expressed in United States dollars)                         
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|Years ended December 31, 2002, 2001 and 2000                 
|Period from inception on January 3, 1994 to December 31, 2002
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|11.                                                          
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|12.                                                          
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|BRAINTECH, INC.                                              
|-------------------------------------------------------------
|(A Development Stage Enterprise)                             
|                                                             
|Notes to Consolidated Financial Statements                   
|(Expressed in United States dollars)                         
|                                                             
|Years ended December 31, 2002, 2001 and 2000                 
|Period from inception on January 3, 1994 to December 31, 2002
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|13.                                                          
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|BRAINTECH, INC.                                              
|-------------------------------------------------------------
|(A Development Stage Enterprise)                             
|                                                             
|Notes to Consolidated Financial Statements                   
|(Expressed in United States dollars)                         
|                                                             
|Years ended December 31, 2002, 2001 and 2000                 
|Period from inception on January 3, 1994 to December 31, 2002
|                                                             
|15.                                                          
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|                                                             

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 28, 2003, with respect to our directors, executive officers and key employees.

|Name             | Age | Position                                                   
|---------------- | --- | -----------------------------------------------------------
|Owen L.J. Jones  | 51  | Director, and Chief Executive Officer                      
|Babak Habibi     | 31  | Director, President, and Chief Operating Officer           
|Edward A. White  | 58  | Director, Chief Financial Officer, Treasurer, and Secretary
|Lionel Dodd*     | 63  | Director                                                   
|James L. Speros* | 44  | Director                                                   

* Denotes member of the audit committee.

The board of directors has determined that Lionel Dodd is a financial expert in accordance with the SEC definition of that term and that he is independent as that term is used under the Exchange Act.

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.

Lionel Dodd was appointed a Director on August 1, 2002. During the period from 1996 to 2000 Mr. Dodd was the President and Chief Executive Officer of Versacold Corporation (TSX:ICE). Since that time he has sat on the boards of many public and private companies. Currently, Mr. Dodd sits as an independent director on the boards of Pope and Talbot, Inc. (NYSE:POP), Napier International Technologies Inc. (TSX:NIC), and International Absorbents Inc. (AMEX:IAX).

James L. Speros was appointed a Director 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 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 and he was appointed as our Secretary on August 28, 2002. 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. Mr. White is not a director of any other public companies.

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 Degree in Applied Science from the University of Waterloo. Mr. Habibi is not a director of any other public companies.

Owen Jones was a director 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 Securities Exchange Act of 1934, as amended, requires our executive officers and directors and persons who own more than 10% of a registered class of our equity securities to file with the Securities and Exchange Commission initial statements of beneficial ownership, reports of changes in ownership and annual reports concerning their ownership of our common stock and other equity securities, on Forms 3, 4 and 5 respectively. Executive officers, directors and greater than 10% shareholders are required by the Securities and Exchange Commission regulations to furnish our company with copies of all Section 16(a) reports they file.

To the best of our knowledge, all executive officers, directors and greater than 10% shareholders filed the required reports in a timely manner, with the exception of the following:

|Name             | Number of
Late Reports | Number of Transactions Not Reported on a Timely Basis | Failure to File
Requested Forms
|---------------- | ---------------------- | ----------------------------------------------------- | -------------------------------
|Grant Sutherland | 1(1)                   | 2(1)                                                  | Nil                            
|Babak Habibi     | 1(2)                   | 11(2)                                                 | Nil                            
|Owen Jones       | 1(1)                   | 1(1)                                                  | Nil                            
|Ted White        | 1(1)                   | 1(1)                                                  | Nil                            
|James Speros     | 1(3)                   | 5(3)                                                  | Nil                            

(1)	The named officer, director or greater than 10% shareholder, as applicable, filed a late Form 5 - Annual Statement of Changes in Beneficial Ownership

(2)	The named officer, director or greater than 10% shareholder, as applicable, filed a late Form 3 - Initial Statement of Beneficial Ownership.

(3)	The named, officer, director or greater than 10% shareholder, as applicable, filed a late Form 4 - Statement of Changes in Beneficial Ownership.

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.

Summary Compensation Table

|Name and Principal Position           | Year                               | Annual Compensation | Long Term Compensation | All Other Compensation
|------------------------------------- | ---------------------------------- | ------------------- | ---------------------- | ----------------------
|Salary                                | Bonus                              | Other               | Awards                 | Payouts               
|Restricted Stock Awards               | Securities Underlying Options/SARs |                    
|Owen JonesPresident, CEO and Director | 2002
2001
2000                     | Nil
Nil
$30,000     | Nil
Nil
Nil            | Nil
Nil
Nil           

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

Option / SAR Grants in Last Fiscal Year



|Name       | Number of securities underlying Options/SARs granted | Percent of total options/SARs granted to employees in fiscal year | Exercise or base price | Expiration
Date  | Grant date present value(1)
|---------- | ---------------------------------------------------- | ----------------------------------------------------------------- | ---------------------- | ---------------- | ---------------------------
|Owen Jones | 200,000                                              | 16.4%                                                             | $0.20                  | December 1, 2004 | $0                         

(1)

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

Aggregated Option / SAR Exercises in Last Fiscal Year and FY-End Option / SAR Values

|Name                      | Shares acquired on exercise | Value realized | Number of securities underlying unexercised options/SARs at end of fiscal year | Value of unexercised in-the-money options/SARs at end of fiscal year
|------------------------- | --------------------------- | -------------- | ------------------------------------------------------------------------------ | --------------------------------------------------------------------
|Exercisable/Unexercisable | Exercisable/Unexercisable  
|Owen Jones                | Nil                         | Nil            | 65,500(1)/ 180,000                                                             | Nil(2)/ Nil                                                         

(1)

(2)

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. On October 17, 2002, we issued 500,000 common share purchase warrants to Mr. Jones in settlement of salary owed for the period from January 1, 2002 to September 30, 2002. Each share purchase warrant entitles him to purchase one common share for two years at $0.31 per share, which was the fair market value of the common shares on September 30, 2002. The fair value of the warrants as calculated by the Black-Scholes option pricing model of $39,409 has been recorded as an expense and additional paid-in capital in the year ended December 31, 2002. Mr. Jones 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 as listed in the table below. 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 as listed in the table below. Mr. White receives no other compensation from us or any of our subsidiaries.

James L. Speros. Mr. Speros holds stock options as listed in the table below. Mr. Speros receives no other compensation from us or any of our subsidiaries.

Lionel Dodd. Mr. Dodd holds stock options as listed in the table below. Mr. Dodd 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 $155,000 during the fiscal year ended December 31, 2002. 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, 2002.



|Name            | Options Granted       | Number
Exercised | Number Outstanding    | Exercise Price    | Market Value of Underlying Shares at Date of Grant | Expiry Date
(m/d/y)       
|--------------- | --------------------- | ---------------- | --------------------- | ----------------- | -------------------------------------------------- | --------------------------
|Owen Jones      | 200,000
40,000
5,500  | Nil
Nil
Nil      | 200,000
40,000
5,500  | $0.20
$1.25
$1.00 | $0.20
$1.00
$0.95                                  | 12/01/07
11/30/05
04/19/04
|Babak Habibi    | 150,000
80,000
20,000 | Nil
Nil
7,000    | 150,000
80,000
13,000 | $0.20
$1.25
$1.00 | $0.15
$1.00
$0.95                                  | 12/16/07
11/30/05
04/19/04
|James Speros    | 50,000
60,000         | Nil
Nil          | 50,000
60,000         | $0.20
$1.00       | $0.20
$0.95                                        | 12/01/07
04/19/04         
|Edward A. White | 150,000
100,000       | Nil
Nil          | 150,000
100,000       | $0.20
$1.25       | $0.15
$1.00                                        | 12/16/07
11/30/05         
|Lionel Dodd     | 100,000               | Nil              | 100,000               | $0.75             | $0.60                                              | 07/31/07                  

Mr. Habibi exercised options to acquire 7,000 shares at $1.00 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 BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

Equity Compensation Plan Information

|Plan category                                                | Number of securities to be issued upon exercise of outstanding options, warrants and rights | Weighted-average exercise price of outstanding options, warrants and rights | Number of securities remaining available for future issuance
|------------------------------------------------------------ | ------------------------------------------------------------------------------------------- | --------------------------------------------------------------------------- | ------------------------------------------------------------
|                                                             | (a)                                                                                         | (b)                                                                         | (c)                                                         
|Equity compensation plans approved by shareholders           | 1,815,500                                                                                   |                                                                             | $0.59                                                       
|Equity compensation plans not approved by security holders * | 500,000                                                                                     |                                                                             | $0.31                                                       
|Total                                                        | 2,315,500                                                                                   |                                                                             | $0.53                                                       

* On October 17, 2002, we authorized the issuance of 500,000 common share purchase warrants to the Company's Chief Executive Officer pursuant to an agreement dated September 30, 2002, whereby the officer agreed to accept the warrants in settlement of salary owed for the period from January 1, 2002 to September 30, 2002. Each share purchase warrant entitles the holder to purchase one common share for two years at $0.31 per share, which was the fair market value of the common shares on September 30, 2002, therefore the intrinsic market value of the warrants is nil. The fair value of the warrants as calculated by the Black-Scholes option pricing model of $39,409 has been recorded as an expense and additional paid-in capital in the year ended December 31, 2002.

The following table shows certain information regarding beneficial ownership of common stock, as of March 21, 2003 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:

|NAME AND ADDRESS
OF BENEFICIAL OWNER                                                | NUMBER OF SHARES
BENEFICIALLY OWNED(1) | PERCENTAGE OF SHARES
BENEFICIALLY OWNED(1)
|----------------------------------------------------------------------------------- | -------------------------------------- | ------------------------------------------
|Owen L.J. Jones*(2)
102 - 930 West. 1st Street
North Vancouver, B.C.
Canada V7P 3N4 | 6,557,544                              | 37.19%                                    
|Babak Habibi*(3)
102 - 930 West 1st Street
North Vancouver, B.C.
Canada V7P 3N4     | 308,001                                | 2.00%                                     
|James L. Speros*(4)
6420 Grovesdale Drive
Alexandria, Virginia
USA 22310            | 65,000                                 | 0.43%                                     
|Edward A. White*(5)
416-5 K de K Court
New Westminster, B.C.
Canada V3M 6B6         | 315,001                                | 2.05%                                     
|Lionel Dodd*(6)
3508 Mathers Avenue
West Vancouver, B.C.
Canada V7V 2K9             | 25,000                                 | 0.16%                                     
|W. Grant Sutherland*(6)
1600 - 777 Dunsmuir St.
Vancouver, B.C.
Canada V7Y 1K4      | 1,381,532                              | 8.84%                                     
|All executive officers and directors as a group (5 Persons)(7)                      | 8,652,078                              | 46.79%                                    

* Denotes Director of the Company

_________

(1)

(2)

(3)

(4)

(5)

(6)

(7)

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 through the OTC-Bulletin Board. One of our five directors, James Speros is a director and shareholder of Sideware. Edward White and Owen Jones were both previously directors of Sideware. Edward White resigned Sideware as a director 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 and some personnel with Sideware. In June 2001, Sideware vacated the premises, and entered into an agreement to surrender a portion of the premises to a third party. Effective July 15, 2001, we returned to the original office premises previously shared with Sideware. We currently occupy the remainder of the premises. The annual rent for our 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, we could also be legally responsible for rent relating to the portion of the premises which has been surrendered to a third party, if Sideware and the third party both fail to pay that rent. The additional rent for which we could be liable is $6,950 per month, inclusive of operating costs. The legal responsibility under the co-covenantor provisions terminates on August 31, 2003.

2.	Purchase of computer equipment.

During the three year period ended December 31, 2002, we purchased computer equipment from Sideware that cost us approximately nil, $21,000 and $19,400 respectively.

3.	Sale of leasehold improvements

On September 30, 2000, we 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.

4.	Sale of product

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

Other Transactions involving Directors

Other transactions within the last three years 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 director, 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, a former director, is a partner. For the year ended December 31, 2002, Sutherland Johnston performed $54,885 (2001 - $136,157; 2000 - 65,389) worth of legal services for us.

During our last three fiscal years and to March 28, 2003 Grant Sutherland, a former director, has directly or indirectly acquired the following shares in private placements:

-333,334 shares at a price of $0.75 per share in a private placement conducted in the last quarter of 2000 and the 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 $1.00 per share. We have voluntarily and without receipt of any further consideration agreed to extend the share purchase warrants until February 28, 2004 and to reduce the exercise price to $0.75 per share;

-295,304 shares at a price of $0.75 per share in a private placement conducted in the last quarter of 2001 and first quarter of 2002. For each two shares purchased, Beau J Holdings Ltd. received one share purchase warrant, which entitles the company to purchase one additional share for one year at $1.00 per share. We have voluntarily and without receipt of any further consideration agreed to extend the share purchase warrants until February 28, 2004;

-104,050 shares at a price of $0.60 per share in a private placement conducted in last quarter of 2002. For each two shares purchased, Beau J Holdings Ltd. received one share purchase warrant, which entitles the company to purchase one additional share for one year at $0.85 per share;

During our last three fiscal years and to March 28, 2003 Owen Jones has directly acquired the following shares in private placements:

-333,334 shares at a price of $0.75 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 $1.00 per share. We have voluntarily and without receipt of any further consideration agreed to extend the share purchase warrants until February 28, 2004 and to reduce the exercise price to $0.75 per share;

-833,334 shares at a price of $0.75 per share in a private placement conducted in the last quarter of 2001 and first quarter of 2002. For each two shares purchased, Mr. Jones received one share purchase warrant, which entitles him to purchase one additional share for one year at $1.00 per share. We have voluntarily and without receipt of any further consideration agreed to extend the share purchase warrants until February 28, 2004;

-751,544 shares at a price of $0.60 per share in a private placement conducted in the last quarter of 2002. For each two shares purchased, Mr. Jones received one share purchase warrant, which entitles him to purchase one additional share for one year at $0.85 per share

-267,106 shares at a price of $0.31 per share in a private placement conducted in the last quarter of 2002. For each two shares purchased, Mr. Jones received one share purchase warrant, which entitles him to purchase one additional share for one year at $0.36 per share

-297,334 shares at a price of $0.27 per share in a private placement conducted in the last quarter of 2002. For each two shares purchased, Mr. Jones received one share purchase warrant, which entitles him to purchase one additional share for one year at $0.32 per share

-227,480 shares at a price of $0.21 per share in a private placement conducted in the last quarter of 2002. For each two shares purchased, Mr. Jones received one share purchase warrant, which entitles him to purchase one additional share for one year at $0.26 per share

-407,640 shares at a price of $0.15 per share in a private placement conducted in the last quarter of 2002. 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

-576,924 shares at a price of $0.20 per share in a private placement conducted in the last quarter of 2002. For each two shares purchased, Mr. Jones received one share purchase warrant, which entitles him to purchase one additional share for one year at $0.25 per share

In addition, in January 2003, Owen Jones advanced $54,487 and in March 2003 he advanced $101,352, in return for unsecured demand promissory notes with an annual interest rate of 8%.

In June 2001, Judy Jones, wife of Owen Jones, acquired 333,334 shares at a price of $0.75 per share in a private placement. For each two shares purchased, Mrs. Jones received one share purchase warrant, which entitles her to purchase one additional share for one year at $1.00 per share. We have voluntarily and without receipt of any further consideration agreed to extend the share purchase warrants until February 28, 2004 and to reduce the exercise price to $0.75 per share;

In March 2001, Edward White acquired 133,334 shares at a price of $0.75 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 $1.00 per share. We have voluntarily and without receipt of any further consideration agreed to extend the share purchase warrants until February 28, 2004 and to reduce the exercise price to $0.75 per share. 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 133,334 shares at a price of $0.75 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 $1.00 per share. We have voluntarily and without receipt of any further consideration agreed to extend the share purchase warrants until February 28, 2004 and to reduce the exercise price to $0.75 per share. 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

|Number    | Exhibit                                                                                                                                                                      
|--------- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|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(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.                                                                                           
|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(9)  | Letter for Resumption of Premises at 102-105 930 W. 1st Street, North Vancouver, June 14, 2001                                                                               
|10.17(9)  | Partial Surrender of Lease for 100-101 A & B 930 W. 1st Street, North Vancouver, June 25, 2001                                                                               
|10.18(9)  | Memorandum of Understanding with Marubeni Corporation                                                                                                                        
|10.19(10) | License Agreement with Marubeni Corporation                                                                                                                                  
|10.20(11) | Certificate of Reverse Stock Split                                                                                                                                           
|10.21     | Corporate Governance Committee Charter                                                                                                                                       
|10.22     | Audit Committee Charter                                                                                                                                                      
|10.23     | Compensation Committee Charter                                                                                                                                               
|10.24     | Code of Business Conduct and Ethics for Directors, Officers and Employees                                                                                                    
|10.25     | Corporate Governance Guidelines                                                                                                                                              
|11.1      | Computation of net loss per share                                                                                                                                            
|          |                                                                                                                                                                              

(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, 2000.

(8) Exhibit already on file - exhibit to our Form S-1/A registration statement filed July 3, 2001.

(9) Exhibit already on file - exhibit to our Form 10-KSB for the year ended December 31, 2001

(10) Exhibit already on file - exhibit to our Form 8-K filed July 5, 2002.

(11) Exhibit already on file - exhibit to our Form 8-K filed September 9, 2002.

REPORTS ON FORM 8-K

On November 13, 2002, we filed a report on Form 8-K containing certifications by the Chief Financial Officer and Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. 1350)

ITEM 14. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

Within the 90 days prior to the date of this report, the Company's Chief Executive officer and Chief Financial Officer carried out an evaluation of the effectiveness of the design and operation of the Company's disclosure controls and procedures. The Company's disclosure controls and procedures are designed to ensure that information required to be disclosed by the Company in its periodic Securities and Exchange Commission ("SEC") filings is recorded, processed and reported within the time periods specified in the SEC's rules and forms. Based on that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the Company's disclosure controls and procedures are effective in timely alerting them to material information relating to the Company (including its consolidated subsidiaries) required to be included in the Company's periodic SEC filings.

Changes in Internal Controls

There were no significant changes in the Company's internal controls or in other factors that could significantly affect these controls subsequent to the date of their evaluation.

The Company maintains a system of internal accounting controls designed to provide reasonable assurance that transactions are properly recorded and summarized so that reliable financial records and reports can be prepared and assets safeguarded. There are inherent limitations in the effectiveness of any system of internal control, including the possibility of human error and the circumvention or overriding of controls. Additionally, the cost of a particular accounting control should not exceed the benefit expected to be derived.

Signatures

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

Registrant				Braintech, Inc.

Signature	Title	Date

/s/ Owen L.J. Jones		Chief Executive Officer,	March 31, 2003

Owen L.J. Jones

In accordance with the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

Signature	Title	Date

/s/ Owen L.J. Jones		Chief Executive Officer,	March 31, 2003

Owen L.J. Jones	Director

(Principal Executive Officer)



/s/ Babak Habibi		President, Director, 	March 31, 2003

Babak Habibi



/s/ Edward A. White		Chief Financial Officer,	March 31, 2003

Edward A. White	Director

(Principal Financial and Accounting

Officer)

CERTIFICATIONS

I, Edward A. White, certify that:

1. I have reviewed this annual report on Form 10-KSB of Braintech, Inc.;

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

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

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

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

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

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

5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors:

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

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

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

/s/ Edward A. White	Edward A. White
Principal Financial Officer

Dated: March 31, 2003

CERTIFICATIONS

I, Owen Jones, certify that:

1. I have reviewed this annual report on Form 10-KSB of Braintech, Inc.;

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

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

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

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

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

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

5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors:

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

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

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

/s/ Owen Jones	Owen Jones
Principal Executive Officer

Dated: March 31, 2003