SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549
                               -------------------
                                    FORM 10-K
(Mark One)

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

                   For the fiscal year ended December 31, 2001

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

                        For the transition period from to

                         Commission file number 0-28572.

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

                             OPTIMAL ROBOTICS CORP.
             (Exact name of registrant as specified in its charter)

                 [Canada]                                  98-0160833
       (State or other jurisdiction                     (I.R.S. Employer
    of incorporation or organization)                Identification Number)

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

               4700 de la Savane, Suite 101,                        H4P 1T7
                 Montreal, Quebec, Canada                        (Postal code)
         (Address of principal executive offices)
    Registrants telephone number, including area code:           (514) 738-8885
Securities registered pursuant to Section 12(g) of the Act:

                   Title of each class:

              Class "A" shares, no par value

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

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

     Indicate  by check mark  whether the  registrant  (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the  Securities  Exchange Act of
1934  during  the  preceding  12 months  (or for such  shorter  period  that the
registrant was required to file such reports),  and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [_]

     Indicate by check mark if disclosure of delinquent  filers pursuant to Item
405 of Regulation S-K is not contained herein and will not be contained,  to the
best of registrant's  knowledge,  in definitive proxy or information  statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K [X].

     Aggregate  market  value  of the  voting  stock of the  registrant  held by
non-affiliates of the registrant at March 15, 2002 (computed by reference to the
last reported sale price of the common shares on the Nasdaq Stock Market on such
date): $236,698,295

     Number of common shares outstanding at March 15, 2002: 15,471,335

     DOCUMENTS INCORPORATED BY REFERENCE: NONE

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

<PAGE>


     In  this  Form  10-K,  except  where  otherwise  indicated,  references  to
"dollars" or "$" are to United States dollars,  and references to "Cdn.$" are to
Canadian dollars.

Item 1. BUSINESS

Company Overview

     We are the leading  provider of  self-checkout  systems to retailers in the
United States.  Our principal product is the U-Scan(R)  automated  self-checkout
system,  which enables  shoppers to scan,  bag and pay for their  purchases with
little or no assistance  from store  personnel.  We estimate that in 2001 U-Scan
systems processed over 350 million customer transactions.  The U-Scan system can
be operated  quickly and easily by shoppers and makes the checkout  process more
convenient  for them.  The  U-Scan  system  also  reduces  the cost of  checkout
transactions  to retailers and addresses  labor  shortage  problems by replacing
manned checkout counters with our automated self-checkout stations.

     As of December 31, 2001,  we had sold 1,937 U-Scan  systems,  consisting of
7,706 checkout stations, across 42 states. Each U-Scan system typically includes
four checkout stations and one manned supervisor terminal.

     The following  chart provides  information  regarding the U-Scan systems we
sold during the last five years:

<TABLE>
<CAPTION>
                                                              1997       1998      1999       2000        2001
                                                              ----       ----      ----       ----        ----
<S>                                                            <C>        <C>     <C>        <C>         <C>
     U-Scan system sales:
           Systems sold during year.....................        22         57       288        583         979
           Systems sold as at year-end..................        30         87       375        958       1,937
     U-Scan checkout stations sold as at year-end.......       120        346     1,498      3,808       7,706
     Customer transactions (millions)(1)................                   12        45        150         350
</TABLE>

---------

(1)  Estimated,  based on reports  provided by our customers.  Prior to 1998, we
     did not track this data.

Our Corporate Information

     Our company was formed in 1984 and is  incorporated  under the federal laws
of Canada.  We commenced our current  business in 1991. Our principal  office is
located at 4700 de la Savane,  Suite 101,  Montreal,  Quebec,  H4P 1T7,  and our
telephone number is (514) 738-8885.  We have two subsidiaries,  Optimal Robotics
Inc., a wholly-owned Delaware corporation and Optimal Robotics (Canada) Corp., a
wholly-owned Canadian corporation.

Our Industry

     We currently target supermarket and supercenter chains in the United States
with  average  annual  sales per store in excess of $12  million.  According  to
industry  sources,  there are over 11,500 of these stores in the United  States.
The U-Scan system,  which can be quickly and easily  operated,  addresses  these
shoppers' needs by providing them with more control over the checkout process.

     We believe that the potential market for self-checkout  solutions  includes
applications beyond  supermarkets and supercenters.  General merchandise stores,
home  improvement  stores and other  big-box  retailers  have begun to  purchase
self-checkout  systems.  Other  types of stores  that we have  identified  where
self-checkout  systems  could be used  include drug  stores,  warehouse  stores,
office superstores and toy stores. Additionally,  we believe that a large market
for self-checkout systems exists in Europe.

     We believe that the demand for self-checkout systems will continue to grow.
In addition to providing stores with a dependable and economical  alternative to
maintaining  cashiers in express  checkout lanes, we believe that  self-checkout
systems allow large retailers to offer shoppers the speed of a small convenience
store while maintaining the greater selection and lower prices of a supermarket.

     We also believe that the acceptance of self-checkout  systems will increase
over time much like the  increase in  acceptance  of automated  teller  machines
(ATMs) and pay-at-the-pump  credit/debit card machines. Banking industry sources
have  estimated that the number of ATMs in the United States grew from 18,500 in
1980 to over


                                       2
<PAGE>

200,000 in 1999,  and that the number of ATMs in use  worldwide was over 700,000
at the end of 1999. According to the National Association of Convenience Stores'
1999 State of the Industry  report,  the percentage of  convenience  stores with
pay-at-the-pump  technology  increased from less than 5% in 1990 to 50% in 1998.
In the same way that many people have  become more  accustomed  to using ATMs to
conduct their banking and to paying at the pump when fueling their cars,  rather
than  interacting  with a bank  teller  or  store  attendant,  we  believe  that
consumers  seeking  convenience and "control" when shopping will choose to use a
self-checkout system instead of paying at a traditional manned checkout counter.

Our Customers

     Our most significant  customers have been  supermarkets  and  supercenters,
including the following retailers:

     o    The Kroger Co.

     o    Ahold NV (which  includes Bi-Lo,  Tops,  Giant Food and Stop & Shop in
          the United States)

     o    Meijer Inc.

     o    The Great Atlantic & Pacific Tea Company, Inc. (A&P)

     o    Harris Teeter

     o    Price Chopper Supermarkets

     o    Loblaw Companies Limited

     These leading  retailers figure  prominently in the establishment of market
standards,  and we believe that our  relationships  with them and the increasing
presence  and use of our  systems in their  stores  contribute  to the  market's
growing  acceptance  of the  U-Scan  system.  We  also  believe  that  shoppers'
increasing  familiarity  with our  systems at these  retailers  will  facilitate
future sales efforts, particularly with retailers who have not yet purchased our
systems.

     We  believe  that  these  customers  have  chosen  to  install  the  U-Scan
self-checkout system because it:

     o    increases convenience for their shoppers,  while accommodating typical
          shopping  patterns and allowing  shoppers to check out as if they were
          at a manned checkout counter,

     o    provides the shopper  with more  control  over the  checkout  process,
          similar to an ATM transaction,

     o    builds loyalty by making shopping easier and more convenient,

     o    addresses  labor  shortages  in certain  markets by  replacing  manned
          checkout counters with automated self-checkout stations, and

     o    provides labor cost savings by allowing one employee to supervise four
          unmanned stations.

     Of the 979  systems  sold in 2001,  a majority  were sold to The Kroger Co.
through its various  divisions and  affiliates.  The loss of this customer could
have a material adverse effect upon our company.

Our Competitive Advantages

     We believe that the following competitive  advantages have helped us become
the leading provider of self-checkout systems to retailers in the United States:

     o    the  largest  installed  base of  self-checkout  systems in the United
          States and well-established relationships with leading retailers,


                                       3
<PAGE>

     o    an established brand name and corporate identity,

     o    eight years'  experience  and  expertise  in  designing  self-checkout
          solutions for retailers,

     o    a  focused  business   strategy   targeting  the  rapidly   developing
          self-checkout market,

     o    a senior management team and experienced sales force familiar with the
          needs of retailers, and

     o    superior  customer  service  through a 24-hours per day,  365-days per
          year  on-line  helpdesk  supported  by a dedicated  network of service
          personnel.

Our Business Strategy

     Our primary  objectives are to sell more U-Scan systems for installation in
additional  supermarkets and  supercenters,  to begin selling U-Scan systems and
other  self-checkout  systems for installation in other kinds of stores,  and to
initiate sales of our systems in Europe.

     Key elements of our business strategy are to:

     Increase Sales in Existing and New Supermarket and Supercenter Accounts. We
plan to further  increase  our  penetration  of existing  customer  accounts and
continue to increase  the size of our direct sales force in order to sell to new
customers  in North  America.  We are  continuing  to develop  opportunities  in
Europe.

     Extend Retail Applications of Our Products and Services. In addition to our
focus on  transactions  for  supermarkets  and  supercenters,  we have  recently
introduced  new lower  profile  ergonomically  advanced  variants  of our U-Scan
system. Each of these new units enables customers to scan, bag and pay for their
purchases  with limited or no  assistance  from store  personnel,  much like the
U-Scan  Express(R)  system,  and we  believe  that these new units will serve to
expand our potential customer base.

     Advance Our Leadership Position Through Innovation.  We plan to continue to
enhance our  self-checkout  product  line  through  offering  the most  advanced
peripherals  and  further  automating  certain  processes  of the  self-checkout
experience.

Products and Systems

     U-Scan System

     A  U-Scan  system,  in  a  typical   configuration  for  a  supermarket  or
supercenter application,  consists of four self-checkout stations and one manned
supervisor terminal.  Each checkout station consists of the following components
linked by a PC platform:

     o    a bar code scanner with a scale,

     o    a bagging station equipped with a scale,

     o    a touchscreen monitor,

     o    an overhead video camera,

     o    a credit/debit  terminal (with available support for signature capture
          devices),

     o    bill and coin acceptors and dispensers, and

     o    a receipt printer.

     The supervisor terminal consists of:


                                       4
<PAGE>

     o    a monitor that allows the  supervisor  to observe the activity at each
          checkout station,

     o    a  hand-held  scanner,  either  wired or  wireless,  that  enables the
          supervisor to assist shoppers with large items,

     o    an easy-to-use  touchscreen that makes it simple for the supervisor to
          interact with the system, and

     o    a receipt printer for credit/debit transactions.

     In a typical configuration, the U-Scan system occupies the same floor space
as would three manned checkout  lanes.  As a result,  shoppers are provided with
one additional checkout station.

Operation

     The U-Scan  system is equipped  with a  convenient,  intuitive  touchscreen
interface  and  provides  automated  voice  instructions  that guide the shopper
through the entire  checkout  process,  from scanning the first item to removing
the receipt after payment.

     To  commence  the  checkout  process,  a  shopper  presses  an  icon on the
touchscreen  of a U-Scan  station.  An  automated  voice  greets the shopper and
instructs him or her to begin  scanning  items using the station's  easy-to-use,
multi-directional  scanner.  As  each  item  is  scanned  by  the  shopper,  the
touchscreen   acknowledges   the   scanned   item  and   displays   its   price.
Simultaneously,  the shopper is instructed  by the automated  voice to place the
scanned item in the shopping bag located on the station's scale. In this manner,
not only are purchased items bagged, but the station also simultaneously  weighs
each item and makes sure that its weight is correct for the item scanned.

     The U-Scan system easily handles  bar-coded  items and has been designed to
accommodate  non bar-coded  items and items  requiring  compliance with specific
procedures.  The U-Scan system has the capacity to learn the weight of bar-coded
items that it has not previously  encountered.  For non-bar-coded  items such as
produce or other items sold by weight, the shopper places the item on a separate
scale that is part of the scanner and presses a specific icon on the touchscreen
that  alerts the system  supervisor.  Each U-Scan  station is  equipped  with an
overhead video camera that transmits an image of the item placed on the scale to
the color video monitor  located at the  supervisor  terminal.  This enables the
supervisor  to identify the item for the system,  which,  in turn,  computes the
correct  price for the item.  At the  request of some  customers,  the system is
configured  to  allow  shoppers  to  identify  the  non-bar-coded   items  being
purchased, thereby eliminating the need for supervisor attention.  Additionally,
alcohol and tobacco product purchases automatically prompt the system supervisor
to verify the purchaser's age. The system supervisor terminal is equipped with a
hand-held scanner that is used to read bar codes on heavy, oversized items. Both
wired and wireless models are available.

     The U-Scan  system is able to handle  variations  on the  normal  bar-coded
purchase.  For example, it can process transactions  involving products that are
sold on a "per unit" basis. The system can identify  multiple-unit items such as
six-packs of canned beverages and partial purchases of multiple-unit items (such
as five cans of a six-pack).  The system also has the  capability  to adjust its
tolerance level for deviations in an item's weight,  such as where the inclusion
of a prize in a cereal  box would  increase  the  weight of that box  beyond the
preset or previously "learned" tolerance level.

     Once a shopper has scanned all the items he or she wishes to purchase,  the
shopper notifies the system by pressing the appropriate icon on the touchscreen.
The U-Scan  system then  prompts the shopper to select the form of payment.  The
U-Scan  system  can  accept  any form of  payment,  either at the  self-checkout
station or at the supervisor's terminal, that is accepted by cashiers, including
cash,  checks,  credit  cards,  debit  cards,  coupons,  food  stamps  and  gift
certificates.  The U-Scan station can make change and dispense  additional  cash
should the shopper choose to withdraw  additional  money using a credit or debit
card. The U-Scan system also identifies and can handle "mix and match" payments,
such as a combination of cash and coupons. Those shoppers who choose to pay with
checks,  food stamps or gift  certificates are directed to the system supervisor
to complete their transactions.


                                       5
<PAGE>

     Once the  shopper  has made  payment  and  received  change from the U-Scan
station's bill and coin  dispenser,  a receipt is printed at the U-Scan station.
At all times, a system supervisor is located nearby to provide prompt assistance
should it be required by the shopper.

Security

     The close  proximity of the system  supervisor to the U-Scan stations helps
to deter theft.  Moreover,  the U-Scan system  provides an  additional  level of
protection with a built-in, three-tier security system designed to guard against
loss due to theft or human  error.  The security  system at each U-Scan  station
consists of:

     o    a bagging station  equipped with a scale that detects any unscanned or
          substituted items,

     o    an  overhead   video   camera   that   discourages   non-scanning   or
          substitution, and

     o    an  integrated  payment  mechanism  that  substantially   reduces  the
          opportunity for cashier fraud or error.

     The U-Scan system weighs each item scanned.  If the weight detected for the
scanned  item is  different  from the item's  weight  contained  in the system's
database,  the  shopper  will be  asked to try  again  and the  cashier  will be
alerted.  Should a shopper  fail to scan an item that is placed on the  weighing
platform,  the system  will  prompt the  shopper to remove the item and scan it.
Should a shopper mistakenly scan an item more than once before placing it on the
weighing platform, the U-Scan station will only charge the shopper once for such
item.  The  U-Scan  system  can  also be  customized  to  support  a  retailer's
electronic anti-theft system.

Customization and Flexible Technology

     The U-Scan system can be customized to meet the individual  requirements of
a  particular  store  by  changing  features  such as the user  graphics  on the
touchscreen  and  automated  voice  prompts.  It can be  programmed  to  include
frequent shopper and other loyalty and marketing  programs and is available with
a multilingual touchscreen.  To ensure compliance with governmental regulations,
the U-Scan  system can be  programmed  to comply with local weights and measures
and federal and local laws regarding proof-of-age  verification for purchases of
alcohol and tobacco products.

     The U-Scan system operates on an industry-standard,  PC-based platform with
the Windows NT  operating  system,  and uses  readily  available,  off-the-shelf
components. Its open architecture enables it to be integrated with most existing
information  systems.  It can be upgraded to take  advantage of new features and
can generate custom  management  reports.  The U-Scan system obtains most of the
information it needs to operate from the store's  information  systems,  just as
cashier-operated  terminals  do. A local area  network  links the four  checkout
stations to the supervisor terminal.

     We have  developed  software  that allows the U-Scan system to form part of
and communicate with a store's  information systems in the same way conventional
cashier-operated  terminals do. In doing so, the system uses the store's network
and communications protocol,  enabling it to interact easily and completely with
the information  systems.  Our technology allows  information to be communicated
between  the U-Scan  system  and a store's  information  systems on a  real-time
basis, including such information as:

     o    product movement data,

     o    inventory management data,

     o    cash balance information, and

     o    transaction summaries.

     The U-Scan  system's  software is customized for the first  installation at
each chain so it can communicate  with that chain's  information  systems and is
modified as necessary to address the needs of each retailer.


                                       6
<PAGE>


     Optimal 6300 POS System

     The  Optimal  6300  POS(TM)  system  is  an   open-architecture,   PC-based
point-of-sale  cash  register  system  utilizing  Windows  NT/95 or Novel SFTIII
mirrored  servers.  We offer only the system  software  for the Optimal 6300 POS
system.

     The customer is responsible for purchasing the system hardware. The Optimal
6300 POS system  communicates  with a store's  information  systems and has been
designed for use as a conventional  cash register checkout system in high-volume
retailers such as supermarkets, department stores and warehouse stores.

     We were engaged by Price Chopper Supermarkets of Schenectady,  New York, to
develop and install  the Optimal  6300 POS system.  We receive a monthly fee for
the  continuing  development  of the  system.  The  Optimal  6300 POS  system is
presently  installed  in all of the over 100  Price  Chopper  supermarkets.  The
system is also installed at Atlantic Food Mart in Reading, Massachusetts.

Sales and Marketing

     We primarily  market our U-Scan systems  directly to customers  through our
own sales personnel.  Consistent with our strategy of increasing distribution of
the U-Scan systems,  we continue to actively review and evaluate other marketing
relationships.

     We have eight employees  dedicated to sales and marketing.  We plan to hire
additional sales and marketing employees to expand our direct sales force.

     To date,  we have  focused our  marketing  efforts  almost  exclusively  on
supermarket  and  supercenter  chains in the United  States.  We intend to begin
marketing our products in Europe in the near term.

     Sales to a retail chain typically follow a three-step process, in which the
customer takes delivery of a single U-Scan station and a supervisor  terminal in
a testing  facility,  then places a full system in a store for  evaluation,  and
finally decides whether to commit to a volume order.

     Before  delivering  a U-Scan  system  to the  first  store  of a chain,  we
customize the system, which typically takes two months. This process may include
modifying user graphics,  voice  instructions,  functions for specific  pricing,
couponing methods and software to meet the store's specifications.  This process
also includes integrating the U-Scan system with the store's information systems
so that data compiled at each U-Scan station is automatically transmitted to the
store's  information  systems  in the  same  way  data  would  be  compiled  and
transmitted by a manned cashier station.

     Once we have  completed the  customization  and  integration  process,  the
U-Scan system is delivered. Typically, the store will monitor the performance of
the  system  for a period of one to two  months  and  request  certain  software
modifications.  Upon the  completion  of a successful  first  installation,  the
U-Scan  system  generally  requires  only  minor  customization  to  accommodate
additional installations within the chain.

Research and Development

     Our research and development  efforts are focused on improving our existing
products and developing new products.  To date, most of the software relating to
our products has been developed internally by our employees.

     Features that have been  introduced  during the last 12 months  include the
following:

     o    EAS - We have  continued  to refine and simplify  the  integration  of
          Electronic  Article  Surveillance  systems  with  any  of  our  U-Scan
          systems.

     o    Paging - We have  introduced  a paging  unit that  allows  the  U-Scan
          system to page a  supervisor  if  assistance  is required in the event
          that the  supervisor  is not  standing at the  traditional  supervisor
          terminal.


                                       7
<PAGE>

     o    U-Scan Mobile Attendant(TM) device - We have completed the development
          of a  miniature,  wireless  handheld  unit  that  allows  a  range  of
          supervisor  functions to be performed  even when the supervisor is not
          standing at the traditional supervisor terminal.

     o    GUI - We have  developed  and  improved the  Graphics  User  Interface
          (GUI).

     o    Remote update - We have developed new mechanisms for automated  remote
          update of the U-Scan system software.

     We intend to increase  research and  development  efforts in the  following
areas:

     o    Developing  new  products  and  designs  and  extending  our  existing
          products into additional retail applications.

     o    Adapting  U-Scan  self-checkout  solutions for use in Europe and other
          international markets.

     o    Identifying  and  testing  new   (intelligent)   devices  to  increase
          reliability and improve serviceability of the U-Scan system.

     o    Developing a new lower profile, smaller footprint U-Scan system.

     o    Developing more sophisticated security algorithms.

     o    Developing support for alternative lane configurations,  including six
          lanes supervised by a single supervisor terminal.

     o    Researching the use of image recognition in self-checkout.

Our research and development  expenses,  net of tax credits,  were approximately
$1,224,000 in 2001, $913,000 in 2000 and $220,000 in 1999.

Product Assembly

     We assemble  all of our systems at our  Plattsburgh,  New York and Phoenix,
Arizona facilities. See Item 2--"Description of Properties."

Suppliers

     The U-Scan system is assembled from components  that are readily  available
from numerous  suppliers.  Given the open architecture of our system, we are not
dependent on any single supplier for any particular component. The U-Scan system
casing is specially manufactured for us by three suppliers.

Service and Field Support

     It is essential  to retailers  that  providers  offer timely and  efficient
software and hardware service and support. We provide both software and hardware
service and support for the U-Scan system for a fee.

     Software  support is provided  to all  customers  via our  helpdesk on a 24
hours per day, 365 days per year basis.  Our helpdesk and support  personnel are
trained to diagnose  software and hardware problems that may arise in the field.
Software  problems are  typically  solved  on-line,  as the U-Scan system can be
accessed on-line from our premises.

     Hardware support is provided by our own technicians,  including through our
Optimal Systems Services(TM) division, and a small number of independent service
companies   with  whom  we  have   contracted  and  who  are  certified  by  us.
Alternatively,  U-Scan  system  customers  can elect to have their own  facility
engineering  group perform hardware  maintenance on the system, in which case we
train such personnel.


                                       8
<PAGE>

     If there is a problem  caused by a hardware  malfunction,  which  cannot be
solved by the  customer  with the  support of our  helpdesk,  or another  matter
requiring  personnel to be on-site,  a technician  is  dispatched  to assist the
customer. We maintain certified technicians at our headquarters in Montreal, and
in 40 states and two provinces.

Installation Personnel

     It is  important  that our  systems  are able to be  quickly  and  reliably
installed  with  minimal  impact  on  store  operations.  Installations  can  be
performed by our technicians,  by the customer's trained and certified employees
or by certified  third party  installers.  For a typical  installation by us, an
experienced  technician  visits the store  before the  delivery of the system to
coordinate  all  aspects  of the  installation.  The goal is to ensure  that our
systems can be installed and fully operational within six hours.

Government Regulation

     We and certain of the components  that are used in our products are subject
to regulation by various agencies in the United States and in other countries in
which our products are sold.  Laser safety is regulated in the United  States by
the Food and Drug  Administration's  Center for Devices and Radiological  Health
and in Canada by the Radiation  Protection Bureau of Health Canada. In addition,
the U.S.  Occupational  Safety and Health  Administration and various states and
U.S. cities have promulgated  regulations  concerning  working  condition safety
standards in connection with the use of lasers in the workplace. Radio emissions
are the subject of  governmental  regulation in all countries in which we expect
to sell our products.  We also voluntarily submit our products for certification
for  product  safety  in the  United  States  and in  Canada  by the  nationally
recognized testing  laboratories,  the Underwriters  Laboratories,  Inc. and the
Canadian Standards Association, respectively.

Competition

     We compete against manufacturers of traditional  cashier-operated terminals
as  well as  developers  of  portable  hand-held  devices  and  other  partially
automated   self-scanning  devices,   including  NCR,  Symbol  Technologies  and
Productivity  Solutions.  Certain  of our  competitors  are  larger and may have
greater financial, technical, and marketing resources. We believe, however, that
the U-Scan system  performs more functions than any other  self-checkout  system
for retail use currently  available on the market. PSC has also recently entered
the self-checkout market.

     We  believe  that  the  principal   criteria  for  competition  within  the
self-checkout system market are the following:

     o    technological capability,

     o    product features,

     o    price,

     o    product support,

     o    ease of use,

     o    name recognition,

     o    distribution channel capability, and

     o    financial strength of the provider.

Intellectual Property

     We have registered or have filed  applications for the registration of over
one dozen  different  trademarks in the United  States,  Canada and the European
Union.


                                       9
<PAGE>

     We hold  patents  issued in the United  States,  Canada and certain  member
states of the European Union and have  additional  patents pending in the United
States for  various  components  of our  system.  Patents  pending in the United
States will also be filed, within prescribed delays, in various member states to
the international Patent Cooperation Treaty.

     As a general  policy,  we file domestic and foreign patent  applications to
protect our  technological  position and new product  development.  We intend to
continue to apply wherever  necessary to protect our patents in all countries in
which we operate.  Although we believe that our patents provide some competitive
advantage  and market  protection,  we rely for our success  primarily  upon our
proprietary  know-how,  innovative  skills,  technical  competence and marketing
abilities.  Furthermore,  there is no assurance  that these  patents will not be
challenged,  invalidated  or  circumvented  in the future.  We plan to apply for
additional patents on our products,  but our applications may not be granted and
any new products developed by us may not be patentable.

     We regard  our  software  as  proprietary  and  attempt  to protect it with
copyrights,  trade secret measures and nondisclosure  agreements.  Despite these
restrictions, it may be possible for competitors or users to copy aspects of our
products or to obtain  information  which we regard as trade  secrets.  Existing
copyright laws afford only limited practical  protection for computer  software.
The laws of foreign countries generally do not protect our proprietary rights in
our products to the same extent as the laws of the United States and Canada.  In
addition,  we may experience more difficulty in enforcing our proprietary rights
in certain foreign jurisdictions.

Employees

     As of December 31, 2001, we employed 502 (2000 - 288), full-time employees.

     Our employees are not represented by any collective  bargaining unit and we
have never experienced a work stoppage.  We believe that our employee  relations
are good.

Financial Information About Segments and Geographic Areas

     See note 16(a) of the notes to our consolidated financial statements, which
are included in Item 8 - "Financial Statements and Supplementary Data."

Enforceability of Civil Liabilities

     It may not be possible for shareholders to effect service of process within
the United  States upon our directors and officers and the experts named herein,
who are  residents  of  Canada,  or upon all or a  substantial  portion of their
assets and substantially all of our assets,  which are located in Canada. It may
also not be possible to enforce  against them judgments of U.S. courts under any
U.S. securities laws. There is doubt as to the enforceability in Canada of civil
liabilities predicated upon the U.S. securities laws.

Where You Can Find Additional Information

     We file  reports and other  information  with the  Securities  and Exchange
Commission. You may review these reports and other information without charge at
the Commission's Public Reference Room, 450 Fifth Street, N.W., Washington, D.C.
20549.  The  public  may  obtain  information  on the  operation  of the  Public
Reference  Room by  calling  the SEC at  1-800-SEC-0330.  The SEC  maintains  an
Internet site that contains reports, proxy and information statements, and other
information  regarding  issuers  that file  electronically  with the SEC,  which
Internet site is located at http://www.sec.gov.

     We are required to furnish to our  shareholders  annual reports  containing
audited consolidated financial statements certified by our chartered accountants
in Canada and quarterly  reports  containing  unaudited  financial  data for the
first three  quarters of each fiscal year  following  the end of the  respective
fiscal quarter. We prepare our consolidated  financial  statements in accordance
with  accounting  principles  which are  generally  accepted  in  Canada  with a
reconciliation to accounting principles generally accepted in the United States.


                                       10
<PAGE>

     You may  request  a copy  of  these  filings  at no  cost,  by  writing  or
telephoning us at the following address or telephone number:

                             Optimal Robotics Corp.
                             4700 de la Savane
                             Suite 101
                             Montreal, Quebec H4P 1T7
                             Attention: Leon P. Garfinkle
                             (514) 738-8885

     We are a foreign  private  issuer  under the rules and  regulations  of the
Commission.

Item 2. DESCRIPTION OF PROPERTIES

Facilities

     Our headquarters are located in approximately  51,000 square feet of leased
space at 4700 de la Savane,  Montreal,  Quebec,  under a lease  that  expires on
January  31,  2006,  subject  to our right to renew the lease for an  additional
28-month   period.   Our  systems  are  assembled  in  a  facility   located  in
approximately 43,000 square feet of leased space in Plattsburgh, New York, under
a  lease  that  expires  on  March  31,  2003,  and  in a  facility  located  in
approximately  26,000 square feet of leased space in Phoenix,  Arizona,  under a
lease that expires on September 30, 2004. The Plattsburgh and Phoenix leases may
be renewed for additional  three-year and four-year  periods,  respectively.  We
also  operate a technical  support hub in  approximately  19,200  square feet of
leased space in Covington, Kentucky.

     We also maintain  parts storage  facilities in 22 states and two provinces.
We intend to expand or to open additional hub facilities in the United States to
support current and future installations.

     The following is a summary of our facilities:

            Facility                          Location

     Headquarters              4700 de la Savane, Montreal, Quebec

     Systems Assembly          Plattsburgh, New York and Phoenix, Arizona

     Regional Facilities/      Arizona (Phoenix, Tucson, Glendale)
      Parts Storage Hubs       California (San Diego, Santa Ana, Rocklin)
                               Colorado ( Greeley)
                               Florida (Seffner)
                               Georgia (Jonesboro, Norcross Peachtree City,
                                Marietta, Savannah)
                               Illinois (Hillside, Urbana)
                               Indiana (Indianapolis, Fisher, Mishawaka, Kokomo)
                               Kentucky (Covington, Louisville)
                               Massachusetts (Canton, Northwood)
                               Maryland (Middle River, Timonium)
                               Michigan (Grand Rapids, Flint, Canton, Lansing,
                                Warren, Fulton, Clinton Township)
                               New Jersey (Edison)
                               New York (Holtsville)
                               North Carolina (Greensboro, Raleigh, Waxhaw,
                                Huntersville)
                               Ohio (Mogadore, Pickerington)
                               Oregon (Milwaulkie, Beaverton, Springfield)
                               South Carolina (Simpsonville)
                               Tennessee (Memphis, Hermitage, Knoxville,
                                Murfeesboro)
                               Texas (Houston, Irvings)
                               Virginia (Roanoke)
                               Washington (Seattle, Kent, Snohomish, Spanaway)
                               Wisconsin (Oak Creek)
                               Ontario (Ottawa, Cambridge)
                               Quebec (Montreal)


                                       11
<PAGE>


Item 3. LEGAL PROCEEDINGS

Legal Proceedings

     In each of 1995  and  1996,  we  received  a  demand  letter  from the same
claimant  alleging that the U-Scan system infringes upon the claimant's  patent.
In July 1999,  this claimant filed a civil action in the United States  District
Court for the District of Utah  against us and PSC, the former  assembler of the
U-Scan system,  alleging patent infringement.  A second party also sent a demand
letter to us in 1999,  and again in February 2001,  alleging a different  patent
infringement.  Although  after  consultation  with counsel,  we believe that the
former  claimant  should not prevail in its lawsuit and that the latter claimant
should not  prevail if a lawsuit is brought to assert its claim,  and that these
claims will not have a material adverse effect on our business or prospects,  no
assurance can be given that a court will not find that the system infringes upon
one or both of such  claimants'  rights.  A  determination  by a court  that the
system  infringes  upon either of the  claimant's  rights  would have a material
adverse effect on our business and results of operations.

     A subsidiary of Kroger has also been sued by the same claimant in the State
of Utah based upon the same issues underlying the suit filed against us in 1999.
At our expense,  our counsel is also  defending the subsidiary of Kroger in such
action.  Furthermore,  we are  contractually  bound to indemnify  Kroger for any
damages that it may incur in connection with such suit.

     We are also party to litigation arising in the normal course of operations.
We do not expect the  resolution  of such matters to have a  materially  adverse
effect on our financial position or results of operations.

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

     None.

Item 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
        MATTERS

     (a)  Market Information

          Our common shares trade on the Nasdaq National Market under the symbol
          "OPMR." The  following  table sets forth the range of high and low bid
          prices for our common shares as reported by the Nasdaq Stock Market.

                                                        Nasdaq Stock Market
                                                        -------------------
                                                        $ High        $ Low
                                                        -------       -----
          2002
          1st Quarter (through March 15, 2002).....      36.15         13.86

          2001
          1st Quarter..............................      38.38         25.56
          2nd Quarter..............................      38.15         23.19
          3rd Quarter..............................      53.48         24.50
          4th Quarter..............................      37.77         18.47

          2000
          1st Quarter..............................      47.00         30.50
          2nd Quarter..............................      46.25         33.38
          3rd Quarter..............................      40.88         25.25
          4th Quarter..............................      41.75         25.88

          Prior to September 2000, our common shares were quoted sporadically in
          the Canadian Dealing Network.  In September 2000, the Canadian Dealing
          Network merged with The Canadian Venture  Exchange.  Our common shares
          are not listed on The Canadian Venture Exchange.


                                       12
<PAGE>


     (b)  Holders

          At March 15,  2002,  there  were 1,846  stockholders  of record of our
          common shares.

     (c)  Dividends

          Our policy is to retain all  earnings,  if any are  realized,  for the
          development and growth of our business. We have never declared or paid
          cash  dividends on our common shares and we do not  anticipate  paying
          cash dividends in the foreseeable  future.  Any  determination  to pay
          dividends will be at the discretion of our Board of Directors and will
          depend upon our financial  condition,  results of operations,  capital
          requirements,  limitations  contained in loan agreements,  if any, and
          such other factors as our Board of Directors deems relevant.

Item 6. SELECTED FINANCIAL AND OTHER DATA

     The following  selected financial data as of December 31, 2001 and 2000 and
for the years ended  December 31,  2001,  2000 and 1999 are derived from and are
qualified by reference to our audited consolidated  financial statements,  which
are  included in Item  8--"Financial  Statements  and  Supplementary  Data." The
following  selected  financial data as of December 31, 1998 and 1997 and for the
years ended  December 31, 1998 and 1997 are derived  from our audited  financial
statements,  as  restated  for a  change  in  reporting  currency,  that are not
included herein.  Effective December 31, 1998, we adopted the U.S. dollar as the
reporting  currency for our financial  statements.  The  financial  data for all
periods prior to 1999,  for Canadian  generally  accepted  accounting  principle
(GAAP) purposes,  are presented in U.S. dollars in accordance with a translation
of  convenience  method using the  representative  exchange rate at December 31,
1998  of  US$1.00=Cdn.$1.5333--see  note 2 of  the  notes  to  our  consolidated
financial  statements,  which are included in Item 8--"Financial  Statements and
Supplementary Data."

     The data should be read in conjunction  with  "Management's  Discussion and
Analysis of Financial  Condition and Results of  Operations,"  our  consolidated
financial  statements,  the related  notes and the other  financial  information
included elsewhere in this Form 10-K.

     The selected  financial  data are  prepared on the basis of Canadian  GAAP,
which is  different in some regards from U.S.  GAAP.  For a  description  of the
material  differences  between  Canadian  GAAP and U.S.  GAAP in  regard  to our
consolidated financial statements,  see note 19 of the notes to our consolidated
financial  statements,  which are included in Item 8--"Financial  Statements and
Supplementary Data."


                                       13
<PAGE>

<TABLE>
<CAPTION>
                                                                                      Year ended December 31,
                                                                  -----------------------------------------------------------------
                                                                     2001          2000          1999          1998         1997
                                                                  ---------     ---------     ---------     ---------     ---------
                                                                          (U.S. dollars, in thousands except per share data)
<S>                                                               <C>           <C>           <C>           <C>           <C>
Income Statement Data:
Revenues .....................................................    $ 101,421     $  60,971     $  29,634     $   5,618     $   3,397
Cost of sales ................................................       63,159        45,558        23,457         5,135         2,709
                                                                  ---------     ---------     ---------     ---------     ---------
Gross margin .................................................       38,262        15,413         6,177           483           688
Selling, general, administrative and other expenses ..........       21,280        10,629         6,126         4,633         2,359
Research and development expenses, net of tax credits ........        1,224           913           220           210           294
Write-down of inventory ......................................           --            --           604            --            --
Investment income ............................................       (3,148)       (3,896)         (893)         (449)         (584)
                                                                  ---------     ---------     ---------     ---------     ---------
Earnings (loss) before income taxes ..........................       18,906         7,767           120        (3,911)       (1,381)
Provision for (recovery of) income taxes .....................        9,600         2,972        (3,532)           --            --
                                                                  ---------     ---------     ---------     ---------     ---------

Net earnings (loss) ..........................................    $   9,306     $   4,795     $   3,652     $  (3,911)    $  (1,381)
                                                                  =========     =========     =========     =========     =========
Weighted average number of common shares outstanding
   (thousands) ...............................................       14,705        13,104         9,699         7,464         7,410
Weighted average diluted number of common shares
   outstanding (thousands)(1) ................................       15,573        14,499        10,929         7,464         7,410
Basic net earnings (loss) per common share(2) ................    $    0.63     $    0.37     $    0.38     $   (0.52)    $   (0.19)
                                                                  =========     =========     =========     =========     =========
Diluted net earnings (loss) per common share(1)(2) ...........    $    0.60     $    0.33     $    0.33     $   (0.52)    $   (0.19)
                                                                  =========     =========     =========     =========     =========

Other data (unaudited):
U-Scan system sales:
      Systems sold during year ...............................          979           583           288            57            22
      Systems sold as at year-end ............................        1,937           958           375            87            30
U-Scan self-checkout stations sold as at year-end ............        7,706         3,808         1,498           346           120
Customer transactions (millions)(3) ..........................          350           150            45            12
</TABLE>

<TABLE>
<CAPTION>
Balance Sheet Data:                                                                         December 31,
                                                                  -----------------------------------------------------------------
                                                                     2001          2000          1999          1998         1997
                                                                  ---------     ---------     ---------     ---------     ---------
                                                                                    (U.S. dollars, in thousands)
<S>                                                               <C>           <C>           <C>           <C>           <C>
Cash, cash equivalents and short-term investments ............    $ 104,104     $  76,149     $  29,136     $   6,063     $  10,354
Working capital ..............................................      124,850       100,030        36,032         7,319        10,783
Total assets .................................................      147,391       111,273        44,206         9,329        11,848
Shareholders' equity .........................................      133,473       104,746        39,705         7,596        11,072
</TABLE>

<TABLE>
<CAPTION>
U.S. GAAP Financial Data:                                                              Year Ended December 31,
                                                                  -----------------------------------------------------------------
                                                                     2001          2000          1999          1998         1997
                                                                  ---------     ---------     ---------     ---------     ---------
                                                                          (U.S. dollars, in thousands except per share data)
<S>                                                               <C>           <C>           <C>           <C>           <C>
Revenues .....................................................    $ 101,421     $  60,971     $  29,634     $   5,618     $   3,397
Net loss .....................................................      (23,294)      (14,105)       (5,575)      (16,403)       (6,806)
Basic and diluted net loss per common share ..................        (1.58)        (1.08)        (0.57)        (2.20)        (0.92)
</TABLE>

<TABLE>
<CAPTION>
                                                                                            December 31,
                                                                  -----------------------------------------------------------------
                                                                     2001          2000          1999          1998         1997
                                                                  ---------     ---------     ---------     ---------     ---------
                                                                                    (U.S. dollars, in thousands)
<S>                                                               <C>           <C>           <C>           <C>           <C>
Total assets .................................................    $ 147,391     $ 111,273     $  44,191     $   9,312     $  12,679
</TABLE>

(1)  In 2001, we adopted the new  recommendations  of the Canadian  Institute of
     Chartered  Accountants  with respect to the calculation of diluted earnings
     per share,  which  requires the use of the treasury  stock method.  The new
     recommendations  have  been  applied  retroactively  and  accordingly,  all
     figures  presented  for periods prior to 2001 have been adjusted to conform
     to the new recommendations.  See note 2(n) of the notes to our consolidated
     financial statements,  which are included in Item 8-- "Financial Statements
     and Supplementary Data."

(2)  See note 15 of the notes to our consolidated  financial  statements,  which
     are included in Item 8-- "Financial Statements and Supplementary Data," for
     supplementary measure of net earnings per share.

(3)  Estimated,  based on reports  provided by our customers.  Prior to 1998, we
     did not track this data.


                                       14
<PAGE>

Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
        RESULTS OF OPERATIONS

     The  following  discussion  of  the  financial  condition  and  results  of
operations of our company  should be read in conjunction  with our  consolidated
financial statements for the years ended December 31, 2001, 2000 and 1999, which
are included in Item 8--"Financial  Statements and Supplementary  Data", and the
factors set forth below under "Forward-Looking  Statements." All dollar amounts,
other than those  expressed  in millions of  dollars,  have been  rounded to the
nearest thousand.

Overview

     We are the leading  provider of  self-checkout  systems to retailers in the
United  States.  Our  principal  product is the U-Scan  automated  self-checkout
system which  enables  shoppers to scan,  bag and pay for their  purchases  with
little or no assistance from store personnel.

     As of December 31, 2001,  we had sold 1,937 U-Scan  systems,  consisting of
7,706  checkout  stations,  across 42 states.  Based on reports  provided by our
customers,  we estimate that in 2001,  U-Scan systems processed over 350 million
customer  transactions.  The U-Scan system can be operated quickly and easily by
shoppers  and makes the  checkout  process more  convenient.  The U-Scan  system
reduces the cost of checkout  transactions  to  retailers  and  addresses  labor
shortage  problems by replacing  manned  checkout  counters  with our  automated
self-checkout stations.

     We believe that the potential market for self-checkout  solutions  includes
applications beyond  supermarkets and supercenters.  General merchandise stores,
home  improvement  stores and other  big-box  retailers  have begun to  purchase
self-checkout  systems.  Other  types of stores  that we have  identified  where
self-checkout  systems  could be used  include drug  stores,  warehouse  stores,
office superstores and toy stores.

     We  prepare  our  consolidated  financial  statements  in  accordance  with
accounting   principles   which  are   generally   accepted  in  Canada  with  a
reconciliation to accounting principles generally accepted in the United States,
as disclosed in note 19 of the notes to our consolidated  financial  statements,
which are included in Item 8--"Financial Statements and Supplementary Data."

Seasonality

     Our revenue and gross  margins  vary from quarter to quarter as a result of
the level of business volumes and seasonality of demand.

     Our  contracts  with key  customers  generally  provide a framework for the
overall  relationship with the customer.  Actual production volumes are based on
purchase  orders for the delivery of systems.  We minimize  risk relative to our
production  inventory by ordering  materials and components mainly to the extent
necessary to satisfy existing customer orders.

     Our annual and quarterly  operating  results are primarily  affected by the
level and timing of customer orders. Historically,  we have experienced seasonal
variation in revenue,  with revenue  typically  being  highest in the second and
third quarters and lowest in the first and fourth quarters.

Trends in our costs

     Gross margins on the sale of U-Scan systems are expected to increase during
the course of 2002. The increase is expected to result from greater efficiencies
over the assembly function of the U-Scan system, and the ability to leverage our
component requirements.

     We continue to focus on taking advantage of economies of scale and reducing
the  costs  of  installing  and  servicing  our  systems.  One  of  the  primary
responsibilities  of our purchasing  department is sourcing of new suppliers and
obtaining the best possible component prices.


                                       15
<PAGE>

     As a result of our continuing  cost-cutting  initiatives,  we experienced a
reduction in some of our  component  costs in 2001.  The decrease in the overall
cost per  system  was a direct  result of the  increase  in the number of U-Scan
systems  sold.  We  believe  that as the number of firm  commitments  we have to
purchase  the  U-Scan  increases,  we will be able  to  leverage  our  increased
component requirements into lower prices from suppliers.

     We  continue  to make  significant  investments  in our  infrastructure  to
support  our plan to further  increase  our  penetration  of  existing  customer
accounts and sell to new customers.

Acquisition of Alpha Microsystems

     On May 29, 2001,  we acquired  certain  assets and the ongoing  business of
Alpha Microsystems,  LLC ("Alpha"),  based in Santa Ana, California, for a total
purchase price of approximately $6.8 million,  of which $5.7 million was paid by
the  assumption of  liabilities  and $1.1 million was paid in cash. The acquired
assets  formed  the basis  for the  Optimal  Systems  Services  division  of our
company.  Optimal System  Services  performs  installation  and on-site  service
support for the U-Scan systems as well as computer hardware  maintenance support
for third party accounts.  See note 3 of the notes to our consolidated financial
statements,   which  are   included  in  Item   8--"Financial   Statements   and
Supplementary Data."

Critical accounting policies

     In December 2001,  the Commission  released  "Cautionary  Advice  Regarding
Disclosure  About  Critical  Accounting  Policies."  According to the Commission
release,  accounting  policies  are among the "most  critical"  if they are,  in
management's  view,  most important to the portrayal of the company's  financial
condition and results and most demanding on their calls on judgment.

     The  discussion  and  analysis of our  financial  condition  and results of
operations is based upon our consolidated financial statements,  which have been
prepared in accordance with accounting  principles generally accepted in Canada.
On an ongoing basis,  we evaluate our estimates,  including those related to bad
debts,   inventories,   investments,   intangible  assets,   income  taxes,  and
contingencies and litigation. We base our estimates on historical experience and
on various  other  assumptions  that are  believed  to be  reasonable  under the
circumstances,  the results of which form the basis for making  judgments  about
the carrying values of assets and liabilities that are not readily apparent from
other sources.  Actual results may differ from these  estimates  under different
assumptions or conditions.

Our critical accounting policies are:

          o Revenue  Recognition:  Over 90% of our revenues are derived from the
     sale of our U-Scan systems.  Revenue from these product sales is recognized
     upon shipment,  delivery or upon customer acceptance of the product,  based
     upon the terms as defined in the customer contract. In general,  sales to a
     retail  chain  follow a three-step  process,  in which the  customer  takes
     delivery of a single U-Scan  station,  then places a full system in a store
     for evaluation and finally  decides whether to commit to a volume order. No
     revenue  is  recognized  for a new  customer  until the  customization  and
     integration process is complete and accepted by the customer.  Installation
     service  revenue,  which  is  billed  separately  from  product  sales,  is
     recognized  at the time the  service  has been  provided  to the  customer.
     Installations  can be  performed  by  our  technicians,  by the  customer's
     trained and certified  employees,  or by certified third party  installers.
     Revenue from maintenance,  which is subject to separate service and support
     contracts, is deferred and amortized ratably over the term of the contract.

          o  Inventory:  Raw  material  inventories  are  stated at the lower of
     landed  cost and  replacement  cost.  Finished  goods  and work in  process
     inventories are stated at the lower of cost and net realizable  value. Cost
     is determined on the basis of actual costs.

     In order to provide  maintenance and repair  services to our customers,  we
     are required to maintain significant levels of replacement parts. Parts are
     stated at cost, less an allowance for obsolescence and shrinkage. The costs
     of refurbishing parts are included in the cost of sales as incurred.


                                       16
<PAGE>

     Periodic  revisions to allowance  estimates  are  required,  based upon the
     evaluation of several factors,  including changes in estimated product life
     cycles,  usage levels, and technology  changes.  Changes in these estimates
     are reflected immediately in income.

Supplementary measure of net earnings

     As a  result  of  unrealized  foreign  exchange  gains  which  arise on the
conversion of short-term  investments  and other monetary assets and liabilities
into Canadian dollars for purposes of determining  taxable income under Canadian
income tax  regulations,  we  recorded a future tax  liability  in the amount of
approximately  $2.2 million in 2001.  Because the U.S. dollar is our measurement
currency  and  our  consolidated  financial  statements  are  presented  in U.S.
dollars, these foreign exchange gains do not impact earnings before income taxes
even though the income tax  provision  includes a tax liability for these gains.
To illustrate  the impact of the foreign  exchange  gains,  management  has also
included in this  discussion  a  supplementary  measure of net  earnings for its
operating  performance,  which  excludes  the effects of future  income taxes on
unrealized  foreign exchange gains.  Supplementary net earnings is not a measure
of performance  under Canadian GAAP or U.S. GAAP and should not be considered in
isolation  or as a  substitute  for net  earnings  prepared in  accordance  with
Canadian  GAAP or  U.S.  GAAP.  See  note 15 of the  notes  to our  consolidated
financial  statements,  which are included in Item 8--"Financial  Statements and
Supplementary Data."

Functional currency

     During the third quarter of fiscal 2000, we determined  that our functional
currency had clearly  changed from the Canadian  dollar to the U.S. dollar as at
the beginning of the quarter. As a result of this change, which has been applied
prospectively  from July 1, 2000,  transactions  denominated in currencies other
than the U.S. dollar are translated into U.S. dollars using the temporal method.
Under this method,  monetary  assets and  liabilities  are translated  into U.S.
dollars at the exchange rate in effect on the balance  sheet date.  Non-monetary
assets and liabilities are translated into U.S.  dollars at historical  exchange
rates.  Revenues and expenses are translated  into U.S.  dollars at the exchange
rates prevailing at the dates of the respective transactions.  Translation gains
and losses are reflected in the statement of operations.

     Prior to July 1, 2000,  our  functional  currency was the Canadian  dollar.
Accordingly, the financial statements were translated from Canadian dollars into
U.S.  dollars  using the current rate method.  Gains and losses  resulting  from
translation  of  the  financial  statements  were  included  in  the  cumulative
translation  adjustment in shareholders'  equity. The translated amounts for the
non-monetary  items as at June 30,  2000 become the  historical  basis for those
items in  subsequent  periods.  With the  adoption  of the  U.S.  dollar  as our
functional  currency on July 1, 2000, the amount of the  cumulative  translation
adjustment has not changed.

Goodwill and other intangible assets

     In July 2001, the Financial Accounting Standards Board ("FASB") issued SFAS
141,  "Business  Combinations"  and  SFAS 142  "Goodwill  and  Other  Intangible
Assets".  SFAS 141,  which  replaces APB Opinion No. 16,  revises the accounting
standards for business combinations and is effective for acquisitions  initiated
after June 30, 2001.  SFAS 142,  which  replaces APB Opinion No. 17, revises the
standards in accounting for goodwill and other  intangibles and is effective for
fiscal years  beginning  after  December 15, 2001.  Similar  standards have been
adopted by the Canadian  Institute of Chartered  Accountants.  Effective for our
fiscal year  beginning  January 1, 2002,  SFAS 142 changes  the  accounting  for
goodwill from an amortization  method to an impairment-only  approach,  with the
effect that goodwill and other intangibles determined to have an indefinite life
are no  longer to be  amortized  but are to be tested  for  impairment  at least
annually.  In  addition,  SFAS 142  requires  acquired  intangible  assets to be
separately  recognized  if the  benefit  of the  intangible  assets is  obtained
through  contractual or other legal right,  or if the  intangible  assets can be
sold, transferred, licensed, rented or exchanged.

     As of January 1, 2002,  we had  unamortized  goodwill in the amount of $2.7
million,  and  unamortized  identifiable  intangible  assets  in the  amount  of
$905,000,  all of which will be subject to the transition provisions of SFAS 141
and SFAS 142. Amortization expense related to goodwill was $141,750 for the year
ended


                                       17
<PAGE>

December  31,  2001.  Because  of the  extensive  effort  needed to comply  with
adopting SFAS 141 and SFAS 142, it is not practicable to reasonably estimate the
impact of adopting these Statements on our consolidated  financial statements at
the date of this Form 10-K, including whether any transitional impairment losses
will be  required  to be  recognized  as the  cumulative  effect  of a change in
accounting principle.

Financial Condition

     Our cash and short-term investment portfolio amounted to $104,104,000 as at
December 31, 2001, compared to $76,149,000 as at December 31, 2000. The increase
relates  primarily to free cash flows generated by our company of $8,534,000 and
proceeds received from the exercise of options and warrants of $19,421,000. Free
cash flows in 2001 were comprised of cash flows from  operations  less cash used
for the purchase of capital assets and the  completion of the Alpha  acquisition
discussed above. Our portfolio of short-term  investments consists of short-term
discounted  notes  with  a  weighted  average  effective  yield  of  1.85%.  Our
investments are liquid and investment  grade.  The portfolio is invested in U.S.
and Canadian  dollar  denominated  securities,  which are short-term to minimize
interest rate risk.

     Our inventory position at year-end was $22,355,000,  up from $16,726,000 at
the end of 2000. The year-end inventory position included $2,779,000 of finished
goods and $542,000 of work in process,  compared to $3,543,000 of finished goods
and $589,000 of work in process in 2000.  The increase in 2001 resulted from the
increase in our  customer  base and the  additional  inventory  that we required
since we  commenced  assembling  our  products on January 1, 2001.  In addition,
included in the inventory were raw materials and replacement  parts amounting to
$6,970,000  and   $12,064,000,   respectively,   for  2001  and  $3,658,000  and
$8,935,000,   respectively,   for  2000.   The  increase  in  raw  materials  is
attributable to the fact that we began  assembling our U-Scan systems in January
2001. The replacement  part inventory  increased in order to service  additional
systems sold during the year. We believe that, considering our current installed
base and our  anticipated  sales for 2002,  this level of  replacement  parts is
appropriate for the current servicing and support of our customers.

     We have no long-term debt. Shareholders' equity as at December 31, 2001 was
$133,473,000 as compared to $104,746,000 as at December 31, 2000.

     We will  continue  to  invest  in  sales,  marketing  and  product  support
infrastructure.   We  will  continue  to  increase   spending  in  research  and
development activities in the areas of new technologies.  Additions to leasehold
improvements  and  equipment  will  continue,   including   enhancing   existing
facilities  and  computer  systems  for  research  and  development,  sales  and
marketing, support and administrative staff.

Quarterly Results

     The  following  table sets forth  certain  summarized  unaudited  quarterly
financial and other data for the periods presented.  The financial data has been
derived from unaudited financial  statements that, in the opinion of management,
reflect  all  adjustments,  consisting  only of  normal  recurring  adjustments,
necessary for a fair  presentation of such quarterly data. The operating results
for any quarter are not necessarily indicative of the results to be expected for
any future period.

     The summary  financial  data are  prepared  on the basis of Canadian  GAAP,
which is  different in some regards from U.S.  GAAP.  For a  description  of the
material  differences  between  Canadian  GAAP and U.S.  GAAP in  regard  to our
consolidated financial statements,  see note 19 of the notes to our consolidated
financial  statements,  which are included in Item 8--"Financial  Statements and
Supplementary Data."


                                       18
<PAGE>

<TABLE>
<CAPTION>
                                                                    For the quarter ended
                                ---------------------------------------------------------------------------------------------
                                Dec. 31,     Sept. 30,   June 30,   March 31,    Dec. 31,   Sept. 30,    June 30,   March 31,
                                  2001         2001        2001        2001        2000        2000        2000        2000
                                --------     --------    --------    --------    --------    --------    --------    --------
                                                      (U.S. dollars, in thousands except per share data)
                                                                          (unaudited)
<S>                             <C>          <C>         <C>         <C>         <C>         <C>         <C>         <C>
Revenues ....................   $ 16,971     $ 33,757    $ 31,085    $ 19,608    $ 12,543    $ 20,301    $ 16,123    $ 12,004
Cost of sales ...............     10,836       20,718      19,334      12,271       9,467      15,120      11,957       9,014
                                --------     --------    --------    --------    --------    --------    --------    --------
Gross margin ................      6,135       13,039      11,751       7,337       3,076       5,181       4,166       2,990
                                --------     --------    --------    --------    --------    --------    --------    --------
Earnings before income taxes          15        7,809       6,940       4,142         354       2,962       3,317       1,135
Provision for income taxes ..      2,028        3,258       2,692       1,622         136         133       1,269         434
                                --------     --------    --------    --------    --------    --------    --------    --------
Net earnings (loss) .........   $ (2,012)    $  4,551    $  4,248    $  2,520    $    218    $  1,829    $  2,047    $    701
                                ========     ========    ========    ========    ========    ========    ========    ========

Basic net earnings (loss) per
   common share .............   $  (0.13)    $   0.30    $   0.30    $   0.18    $   0.02    $   0.13    $   0.15    $   0.06
Diluted net earnings
   (loss) per common share(1)   $  (0.13)    $   0.28    $   0.28    $   0.17    $   0.01    $   0.12    $   0.14    $   0.06

Other data:
U-Scan systems
   sold during quarter ......        139          325         315         200         114         196         158         115
</TABLE>

(1)  In 2001, we adopted the new  recommendations  of the Canadian  Institute of
     Chartered  Accountants  with respect to the calculation of diluted earnings
     per share,  which  requires the use of the treasury  stock method.  The new
     recommendations  have  been  applied  retroactively  and  accordingly,  all
     figures  presented  for periods prior to 2001 have been adjusted to conform
     to the new recommendations.  See note 2(n) of the notes to our consolidated
     financial  statements,  included  in  Item  8-  "Financial  Statements  and
     Supplementary Data."

     The following table sets forth, for the periods indicated, income statement
data expressed as a percentage of total revenues:

<TABLE>
<CAPTION>
                                                                    For the quarter ended
                                ---------------------------------------------------------------------------------------------
                                Dec. 31,     Sept. 30,   June 30,   March 31,    Dec. 31,   Sept. 30,    June 30,   March 31,
                                  2001         2001        2001        2001        2000        2000        2000        2000
                                --------     --------    --------    --------    --------    --------    --------    --------
                                                                          (unaudited)
<S>                             <C>          <C>         <C>         <C>         <C>         <C>         <C>         <C>
Revenues ....................      100.0%       100.0%      100.0%      100.0%      100.0%      100.0%      100.0%      100.0%
Cost of sales ...............       63.9         61.4        62.2        62.6        75.5        74.5        74.2        75.1
                                --------     --------    --------    --------    --------    --------    --------    --------
Gross margin ................       36.1         38.6        37.8        37.4        24.5        25.5        25.8        24.9
                                --------     --------    --------    --------    --------    --------    --------    --------
Earnings before
    income taxes ............        0.0         23.1        22.3        21.1         2.8        14.6        20.6         9.4
Provision for
    income taxes ............       11.9          9.7         8.7         8.2         1.1         5.6         7.9         3.6
                                --------     --------    --------    --------    --------    --------    --------    --------
Net earnings (loss) .........      (11.9)%       13.4%       13.6%       12.9%        1.7%        9.0%       12.7%        5.8%
                                ========     ========    ========    ========    ========    ========    ========    ========
</TABLE>

Results of Operations

2001 Compared with 2000

     Total revenues  increased by $40,451,000,  or 66%, from 2000 to 2001. Sales
of our U-Scan  systems  grew from 583  systems  in 2000 to 979  systems in 2001,
producing  $33,512,000 of additional  systems revenues,  an increase of 58%. The
growth in sales  was due to a  significant  increase  in  orders  from  existing
customers as well as new  customers.  Service  contract  revenue  recognized for
hardware and software  maintenance  increased by  $6,682,000,  or 198%,  in part
because of the increased number of customers that entered into service contracts
with us after purchasing  U-Scan systems and in part due to the service revenues
generated by the Optimal  Systems  Services  division of our company,  which was
established  following  completion of the Alpha acquisition  discussed above. In
total,  service revenues  accounted for approximately 8.5% of our total revenues
in 2001 (2000- 5.1%).

     Total cost of sales  increased by  $17,601,000,  or 39%, from 2000 to 2001.
Overall gross margin  increased as a percentage of sales from 25% in 2000 to 38%
in 2001,  primarily  due to the increase in gross margin on system  sales.  This
margin increase resulted primarily from the fact that commencing January 1, 2001
we began to assemble all of our U-Scan systems.


                                       19
<PAGE>

     Gross research and development expenses increased by $966,000, or 91%, from
2000 to 2001. As a percentage of total revenues,  gross research and development
expenses  remained  constant  at  2%  for  both  2000  and  2001.  Research  and
development  expenses during the year included the cost of the completion of the
U-Scan Mobile  Attendant  device and the development of an electronic  signature
capture  interface  and process;  a paging  feature;  a lower  profile,  smaller
footprint  U-Scan  system;  and the  improvement  of the graphics user interface
(GUI).

     Selling,  general,  administrative and other expenses (including  operating
lease expenses) increased by $10,651,000,  or 100%, in 2001 compared to 2000. As
a percentage of total  revenues,  these expenses  increased from 17% to 21%. The
increase  in  selling,  general,  administrative  and other  expense in 2001 was
primarily  due to  increased  investment  in sales and  marketing,  support  and
administrative  staff  required  to  service  the  increased  customer  base and
strategic acquisitions.

     The provision  for income taxes  amounted to $9,600,000 in 2001 as compared
to $2,972,000 in 2000.  We have utilized all unclaimed  scientific  research and
experimental development expenditures and federal investment tax credits carried
forward to reduce our cash taxes payable for 2001.

     Our  effective tax rate for 2001 was 51% as compared to 38% during the same
period for 2000.  The increase was due to Canadian  income taxes  recognized  on
foreign exchange gains in the amount of approximately $2.2 million.  Because our
consolidated  financial  statements are presented in U.S.  dollars,  the foreign
exchange gains which, for Canadian income tax purposes,  arise on the conversion
into Canadian  dollars of our net monetary  assets  denominated in U.S.  dollars
create a tax  liability  even though  foreign  exchange  gains do not impact our
earnings  before income taxes.  Excluding the effect of Canadian income taxes on
these foreign exchange gains, the effective tax rate in 2001 would have been 39%
instead of 51%.

     Net income in 2001 was $9,306,000 (or $0.60 per share (diluted)),  compared
to $4,795,000 in 2000 (or $0.33 per share  (diluted)),  an increase of 94%. As a
measure of our financial performance, management uses supplementary net earnings
of  operating  performance.  Supplementary  net  earnings  exclude the effect of
future income taxes on unrealized  foreign  exchange gains, as discussed in note
15 of the notes to our consolidated financial statements,  which are included in
Item  8--"Financial  Statements and  Supplementary  Data."  Excluding the income
taxes on the foreign  exchange gains,  supplementary  measure of net earnings is
$11,479,000  for 2001, an increase of 139% compared with $4,795,000 for 2000. On
a per-share  basis, the  supplementary  measure of net earnings is $0.78 (basic)
and $0.74  (diluted) for 2001, as compared to $0.37 (basic) and $0.33  (diluted)
for 2000.

2000 Compared with 1999

     Total revenues increased by $31,336,000,  or 106%, from 1999 to 2000. Sales
of our U-Scan  systems  grew from 288  systems  in 1999 to 583  systems in 2000,
producing  $29,049,000 of additional systems revenues,  an increase of 103%. The
growth in sales  was due to a  significant  increase  in  orders  from  existing
customers.  Service  contract  revenue  recognized  for  hardware  and  software
maintenance increased by $2,370,000, or 238%, because of the increased number of
customers that entered into service  contracts with us after  purchasing  U-Scan
systems.

     Total cost of sales  increased by  $22,101,000,  or 94%, from 1999 to 2000.
Overall gross margin  increased as a percentage of sales from 21% in 1999 to 25%
in 2000,  primarily  representing  the increase in gross margin on system sales.
This increase resulted primarily from taking advantage of economies of scale and
reducing the costs of installing our systems.

     Gross research and development  expenses increased by $97,000, or 10%, from
1999 to 2000. As a percentage of total revenues,  gross research and development
expenses  decreased  from 3% in 1999 to 2% in  2000.  This  percentage  decrease
resulted from the substantial  increase in the number of systems sold in 2000 as
compared to 1999. Research and development expenses during the year included the
cost of the development of the biometrics  support feature and the U-Scan Mobile
Attendant device.

     As at December 31, 2000, for Canadian income tax purposes, we were entitled
to defer and deduct in future years certain scientific research and experimental
development expenditures incurred to that date. As of


                                       20
<PAGE>

December 31, 2000,  the amount of such deferred  deductions  was  Cdn.$3,228,000
(approximately  US  $2,153,000)  for  Canadian  federal  income tax purposes and
Cdn.$3,363,000  (approximately  US $2,243,000) for Quebec  provincial income tax
purposes.  These deductions could be carried forward indefinitely.  In addition,
we had  non-refundable  investment  tax  credits of  approximately  Cdn.$836,000
(approximately  US $558,000),  which could be carried forward to reduce Canadian
federal  income taxes  payable and which would expire in various  years  through
2010.

     During 1999, we retroactively  adopted the revised  recommendations  of the
Canadian  Institute of Chartered  Accountants  regarding  accounting  for income
taxes,  which are consistent with U.S. GAAP.  During the fourth quarter of 1999,
we received  purchase  commitments for a large number of systems which covered a
substantial portion of our fiscal 2000 budgeted sales target. In addition, there
had been a positive trend in our profitability and sales levels in the preceding
quarters. Based on these factors, we determined that as of December 31, 1999, it
was more likely than not that we would earn sufficient taxable income during the
allowable  carry-forward  period to fully  realize all of our future  income tax
assets as at that date.  Therefore,  as a result of this determination,  we were
required to record,  during the fourth  quarter of 1999,  an income tax recovery
with respect to these future income tax assets.

     With  respect to the future  income tax assets  recorded as at December 31,
2000,  we  determined  that it was still more likely than not that we would earn
sufficient  taxable  income during the allowable  carry-forward  period to fully
realize all of our future income tax assets.  Our ability to ultimately  realize
these future  income tax assets was dependent  upon our realizing  certain sales
levels  within the allowable  carry-forward  period,  thus  creating  sufficient
taxable  income to realize the benefit of these  assets.  Our ability to realize
these assets was also dependent on effective  control over our selling,  general
and administrative  expenses.  Our determination that we would realize these tax
assets  was based  upon the fact that we had  purchase  commitments  for a large
number of  systems  which  covered a  substantial  portion  of our  fiscal  2001
budgeted sales target, there was a positive trend in our profitability and sales
levels and we expected our gross and  operating  margins to increase as a result
of our having assumed the assembly responsibility for our systems.

     Selling,  general,  administrative and other expenses (including  operating
lease expenses) increased by $4,503,000,  or 74%, in 2000 compared to 1999. As a
percentage of total revenues,  these expenses  decreased from 21% in 1999 to 17%
in 2000.  During the last  quarter of 2000,  we  continued  to expand  sales and
marketing  efforts and hired additional  personnel,  as our backlog continued to
increase.  In addition, we incurred increased costs during 2000 in the following
areas:  engineering,   related  to  the  design,  development  and  early  phase
commercial  production of new casings for the U-Scan systems; the enlargement of
our Plattsburgh  facility in connection with the commencement of system assembly
at this facility; the enlargement of our head office premises to accommodate the
growth in the  number of our  employees;  and the  opening  of our  facility  in
Phoenix, Arizona.

Liquidity and Capital Resources

     As of December 31,  2001,  we had cash,  cash  equivalents  and  short-term
investments  of  $104,104,000  (2000 -  $76,149,000),  and  working  capital  of
$124,850,000 (2000 - $100,030,000).

     Operating activities generated  $13,678,000 of cash and cash equivalents in
2001, as compared to using  $8,631,000  in 2000.  In 2001,  we issued  1,762,645
common shares  pursuant to the exercise of options and warrants,  which resulted
in net cash proceeds of $19,421,000.  In 2000, we issued 1,625,000 common shares
pursuant to a public offering and 646,449 common shares pursuant to the exercise
of options and warrants,  which resulted in net cash proceeds of $58,682,000 and
$1,984,000, respectively.

     In 2001, we acquired certain assets and the ongoing business of Alpha for a
cash consideration of $1,141,000, as discussed above. In addition we had capital
expenditures of $4,004,000,  which principally related to computer equipment and
software,  testing  units and a  customer  list  purchased  from one of  Alpha's
customers.

     In 2000,  we had capital  expenditures  of  $3,070,000,  which  principally
related to computer equipment,  testing units and leasehold improvements related
to the expansion of our head office  premises,  our facility in Plattsburgh  and
the opening of our facility in Phoenix.


                                       21
<PAGE>

     We believe that our cash, cash equivalents and short-term  investments will
be adequate to meet our needs for at least the next 12 months.

     We have no financial obligations of significance other than long-term lease
commitments  for our  premises  in the  United  States  and  Canada.  These  are
summarized in note 12(a) of the notes to our consolidated  financial statements,
which are included in Item 8--"Financial Statements and Supplementary Data."

Forward-Looking Statements

     This Form 10-K  contains  certain  forward-looking  statements  within  the
meaning of Section 27A of the  Securities  Act of 1933, as amended,  and Section
21E of the Securities Exchange Act of 1934, as amended, which are intended to be
covered by the safe harbors created thereby. Words such as "expects", "intends",
"anticipates",  "plans", "believes", "seeks", "estimates", or variations of such
words and similar  expressions  are  intended to identify  such  forward-looking
statements.  Investors are cautioned that all forward-looking statements involve
risk and  uncertainty.  Although we believe that the assumptions  underlying the
forward-looking   statements  contained  herein  are  reasonable,   any  of  the
assumptions could be inaccurate,  and therefore,  there can be no assurance that
the  forward-looking  statements  included  in this Form  10-K will  prove to be
accurate.   In  light  of  the   significant   uncertainties   inherent  in  the
forward-looking  statements  included herein,  the inclusion of such information
should not be regarded as a  representation  of our company or any other  person
that the objectives and plans of our company will be achieved.

     The following  factors are not intended to represent a complete list of the
general or specific  factors  that may affect us. It should be  recognized  that
other factors,  including general economic factors and business strategies,  may
be significant,  presently or in the future, and the factors discussed below may
affect us to a greater extent than  indicated.  All  forward-looking  statements
attributable  to us or persons  acting on our behalf are expressly  qualified in
their entirety by the cautionary statements set forth herein. Except as required
by law, we  undertake no  obligation  to update any  forward-looking  statement,
whether as a result of new information, future events or otherwise.

     WE  PRINCIPALLY  DEPEND  ON ONE LINE OF  PRODUCTS.  Our  near-term  success
depends  principally  on the sales  volume of one line of  products,  the U-Scan
self-checkout  system.  Our  longer-term  success  depends  upon  the  continued
acceptance of and demand for this one product line, as well as new products that
we may bring to market. If the U-Scan systems experience  significant  problems,
competition from superior technology, or customer resistance, we could be harmed
significantly.

     Sales growth will depend on our generating  additional orders from existing
U-Scan system  customers,  as well as finding new  customers for the system.  We
believe that our  customers  will only purchase the system if they conclude that
shoppers will use it and that there are financial  benefits to their stores from
its  installation.  We believe that  shoppers  will use the system only if it is
convenient, easy to use and reliable.

     WE RELIED ON ONE  CUSTOMER  FOR A MAJORITY  OF OUR  REVENUES  IN 2001.  One
significant  customer,  through its various divisions and affiliates,  accounted
for more  than  half of our  revenues  in 2001,  and we rely on this  customer's
continued  willingness  to purchase  our U-Scan  systems.  We may not be able to
generate new customers for our U-Scan systems.

     WE MAY  NOT BE  ABLE  TO  MANAGE  OUR  GROWTH.  In  recent  years,  we have
experienced  significant  growth in sales. As a result,  we have had to hire and
train additional skilled personnel.  Should sales continue to increase,  we will
have to hire and train even more personnel to customize, install and support our
U-Scan  systems.  There is no assurance that we will be able to hire the skilled
personnel  we will need to meet  increased  demand,  should it develop.  This is
particularly  true for  installation  and support  personnel,  for whom there is
significant competition.  If we are unable to hire such personnel, our sales may
be adversely affected.  Despite our recent growth, we are still a small company,
and should demand for our products be unexpectedly  strong,  we may be unable to
fill our orders.


                                       22
<PAGE>

     WE RELY ON THIRD  PARTY  SUPPLIERS.  The U-Scan  system is  assembled  from
components that are readily available from numerous  suppliers.  Although we may
use a single supplier for particular components,  given the open architecture of
our system,  we are not  dependent  on any single  supplier  for any  particular
component.  Nevertheless, should any of our suppliers fail to deliver components
to us in a timely manner, it could disrupt our business.

     OUR U-SCAN SYSTEMS ARE ASSEMBLED AT TWO FACILITIES. We assemble our systems
at our main  facility in  Plattsburgh,  New York and at our facility in Phoenix,
Arizona.  A disruption of operations  at any of our  facilities  for any reason,
including  labor unrest or natural  disaster,  could have a  short-term  adverse
effect upon our business and results of operations.

     WE  MAY  NOT  BE  ABLE  TO  KEEP  PACE  WITH  CHANGES  IN  TECHNOLOGY.  The
self-checkout industry is rapidly developing.  The technology used by the U-Scan
system  is  changing  rapidly,  in  part  due to  the  evolving  demands  of our
customers.  To be  successful,  we will have to  anticipate  the  demands of our
customers  and improve our  existing  product  line and develop new  products to
satisfy them. If we fail to improve and develop products by the times and at the
prices  demanded by our  customers,  our business and prospects may be adversely
affected. Our competitors may introduce new technology that is better than ours.
If so, we will have to improve our technology in order to remain competitive. If
we are unable to do so, there might be an adverse impact on us.

     WE DEPEND UPON KEY PERSONNEL.  Our future success depends to a great extent
on the  continued  services of our senior  management  and other key  personnel,
including  sales  people.  Our success will also depend upon our ability to hire
and retain qualified personnel to assemble,  install and support our systems, to
improve  our  existing  products  and to develop  new ones.  These  people  will
include:

     o    programmers and other software engineers,

     o    project managers,

     o    installers, and

     o    hardware and software support personnel.

     The  competition  for these  people  may be  significant,  despite  current
economic  conditions.  Should we have difficulty  hiring or retaining  qualified
personnel, it could adversely affect our business and prospects.

     COMPETITION  COULD REDUCE  REVENUE FROM THE U-SCAN  SYSTEM.  The market for
checkout systems is very  competitive.  The chief rival for our U-Scan system is
the  traditional  manned  checkout  counter.   Although  the  use  of  automated
self-checkout  systems such as the U-Scan  system is  relatively  new, we expect
increasing  competition for sales of this product. The barriers to entering this
market may be low.  Certain of our  competitors  are larger and may have greater
financial and other resources.  Competitors include NCR, Symbol Technologies and
Productivity Solutions.  PSC has also recently entered the self-checkout market.
We may not be able to compete  successfully  against  these and other  companies
with greater  financial and other resources.  In the event that general economic
conditions  result in reduced  demand in our  industry,  our  competitors  could
develop  aggressive  pricing  practices,  which, in turn,  could result in price
reductions,  negatively  affecting  our operating  results,  reducing our profit
margins and potentially leading to a loss of market share.

     OUR  PRODUCTS  MAY CONTAIN  DEFECTS.  Our  products,  including  the U-Scan
system, are complex and, despite extensive testing, may contain undetected flaws
when  first  installed  for a new  customer.  This is  particularly  true of the
software  in the  U-Scan  system,  which  must be  adapted  to  each  customer's
information  systems.  If serious,  any such flaws could prevent or delay market
acceptance  of our  products  and cause us to incur  substantial  re-engineering
expenses.

     THE ADVERSE  RESOLUTION OF LITIGATION AGAINST US COULD ADVERSELY IMPACT OUR
BUSINESS.  We are  currently a defendant in an action  alleging  that the U-Scan
system  infringes  upon the  claimant's  patent,  and a second  party has sent a
demand  letter to us  alleging a  different  patent  infringement.  See Item 3 -
"Legal Proceedings." We are and may in the future be subject to other litigation
arising in the normal course of our business.  Litigation may be time consuming,
expensive and distracting from the conduct of our


                                       23
<PAGE>

business,  and the outcome of  litigation  is difficult to predict.  The adverse
resolution of any specific  lawsuit could have a material  adverse effect on our
business, results of operations, and financial condition.

     ORGANIZED LABOR MAY RESIST U-SCAN.  The U-Scan system  displaces  cashiers.
For this reason,  organized labor may seek  provisions in collective  bargaining
agreements that prevent stores from purchasing the system.

     WE   MAY   BE   VULNERABLE   TO   TECHNOLOGICAL    PROBLEMS.   We   are   a
technology-oriented  company and depend to a significant degree upon our ability
to communicate on-line or by telephone with the systems that we have sold. If we
are unable to access  these  systems due to  technological  problems  beyond our
control,  it will have a material  adverse  effect on our  ability to assist our
customers. Additionally, if our customers are unable to reach us by telephone or
via the  Internet,  we will also be unable to  respond to  questions  or address
serious  problems faced by these  customers.  If our ability to communicate with
our  systems  or our  customers  is  impaired,  our  business  may be  adversely
affected.  The Internet is subject to security and privacy  breaches,  which may
impact us or our customers.

     ECONOMIC  CONDITIONS  IN  THE  UNITED  STATES  AND  CANADA,  AFFECTING  THE
SELF-CHECKOUT  INDUSTRY, ARE BEYOND OUR CONTROL AND MAY RESULT IN REDUCED DEMAND
AND PRICING PRESSURE ON OUR PRODUCTS. There are trends and factors affecting the
self-checkout  industry,  which  are  beyond  our  control  and may  affect  our
operations. Such trends and factors include:

     o    adverse  changes in the public and private equity and debt markets and
          the ability of our  customers  to obtain  financing or to fund capital
          expenditures;

     o    visibility to, and the actual size and timing of, capital expenditures
          by our customers;

     o    the effects of war or acts of terrorism.

     Reduced capital spending and/or negative economic  conditions in the United
States and Canada could result in reduced demand for or pricing pressures on our
products. Reduced capital spending and/or negative economic conditions in Europe
could affect our plan to initiate sales of our systems in Europe.

Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

     The table below provides  information about our financial  instruments that
are sensitive to changes in interest rates and foreign currency exchange rates.

     Interest rate and foreign currency exchange rate sensitivity table

                                                         December 31, 2001
                                                     --------------------------
                                                     Maturing in        Fair
                                                     -----------        ----
                                                         2002          Value(1)
                                                         ----          --------
                                                           (U.S. dollars)

Short-term  discounted  notes  denominated in
U.S.  and  Canadian  dollars,  held for other
than  trading   purposes,   with  a  weighted
average  effective  yield  of  1.85%  (2000 -
6.5%),  maturing  between  March 19, 2002 and
May 31, 2002 (2000 - matured  between January
26,  2001  and  November  15,  2001),  with a
maturity value of $94,571,000.......................  $94,487,000    $94,635,000

(1)  Fair  value has been  determined  based  upon  quoted  market  values as at
     December 31, 2001.

     We  are  exposed  to  foreign  currency  exchange  rate   fluctuations.   A
significant  portion  of  our  expense  is  paid  in  Canadian  dollars,   while
substantially  all of our revenues are earned in U.S.  dollars.  If the Canadian
dollar  strengthens  in relation to the U.S.  dollar,  the effective cost of our
expenses (as reported in U.S.  dollars)  will  increase.  We have never tried to
hedge our  exchange  rate risk,  do not plan to do so and may not be  successful
should we attempt to do so in the future.  We are also exposed to interest  rate
fluctuation risk, which we do not systematically  manage. We presently invest in
short-term investment grade paper.


                                       24
<PAGE>

Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA




AUDITORS' REPORT TO THE SHAREHOLDERS


We have audited the consolidated  balance sheets of Optimal Robotics Corp. as at
December  31,  2001 and the  consolidated  statements  of  operations,  retained
earnings and cash flows for the year then ended. These financial  statements are
the responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audit.

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

In our opinion,  these consolidated  financial statements present fairly, in all
material respects, the financial position of the Company as at December 31, 2001
and the results of its  operations and its cash flows for the year then ended in
accordance with Canadian generally accepted accounting principles.

The  consolidated  financial  statements as at December 31, 2000 and for each of
the years in the two-year  period ended  December 31, 2000 were audited by other
auditors who expressed an opinion  without  reservation  on those  statements in
their report dated February 9, 2001.


/s/ KPMG LLP

Chartered Accountants


Montreal, Canada

February 18, 2002


                                       25
<PAGE>


Auditors' Report

To the Shareholders of
Optimal Robotics Corp.


We have audited the  consolidated  balance sheet of Optimal Robotics Corp. as at
December 31, 2000 and the  consolidated  statements of  operations,  deficit and
cash flows for each of the years in the two-year period ended December 31, 2000.
These financial  statements are the responsibility of the Company's  management.
Our responsibility is to express an opinion on these financial  statements based
on our audits.

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

In our opinion,  these consolidated  financial statements present fairly, in all
material respects, the financial position of the Company as at December 31, 2000
and the  results of its  operations  and its cash flows for each of the years in
the  two-year  period  ended  December  31,  2000 in  accordance  with  Canadian
generally accepted accounting principles.


/s/ PricewaterhouseCoopers LLP
Chartered Accountants


Montreal, Quebec, Canada
February 9, 2001


                                       26
<PAGE>

OPTIMAL ROBOTICS CORP.
Consolidated Balance Sheets

December 31, 2001 and 2000
(expressed in U.S. dollars)

<TABLE>
<CAPTION>
====================================================================================================================================
                                                                                                     2001                      2000
-----------------------------------------------------------------------------------------------------------------------------------
<S>                                                                                         <C>                       <C>
Assets

Current assets:
      Cash and cash equivalents                                                             $   9,616,430             $   5,006,982
      Short-term investments (note 4)                                                          94,487,326                71,141,910
      Accounts receivable (note 5)                                                              9,009,445                10,610,951
      Inventories (note 6)                                                                     22,355,267                16,725,885
      Tax credits receivable                                                                      884,057                   323,788
      Future income taxes (note 14)                                                               284,253                 2,420,718
      Prepaid expenses and deposits                                                               989,107                   327,039
      -----------------------------------------------------------------------------------------------------------------------------
                                                                                              137,625,885               106,557,273

Property, plant and equipment (note 7)                                                          6,130,347                 3,252,771

Intangibles (note 8)                                                                            3,635,163                       377

Future income taxes (note 14)                                                                          --                 1,462,227

-----------------------------------------------------------------------------------------------------------------------------------
                                                                                            $ 147,391,395             $ 111,272,648
====================================================================================================================================

Liabilities and Shareholders' Equity

Current liabilities:
      Accounts payable and accrued liabilities (note 9)                                     $   6,673,804             $   6,492,371
      Income taxes payable                                                                      4,794,476                        --
      Deferred revenue                                                                          1,307,312                    34,695
      -----------------------------------------------------------------------------------------------------------------------------
                                                                                               12,775,592                 6,527,066

Future income taxes (note 14)                                                                   1,143,213                        --

Shareholders' equity:
      Share capital (note 10)                                                                 126,476,633               107,050,914
      Other capital                                                                                 5,282                     9,684
      Retained earnings (deficit)                                                               8,475,146                  (830,545)
      Cumulative translation adjustment                                                        (1,484,471)               (1,484,471)
      -----------------------------------------------------------------------------------------------------------------------------
                                                                                              133,472,590               104,745,582

Commitments and contingencies (note 12)

-----------------------------------------------------------------------------------------------------------------------------------
                                                                                            $ 147,391,395             $ 111,272,648
====================================================================================================================================
</TABLE>

See accompanying notes to consolidated financial statements.

Approved by the Board of Directors

 /s/ HOLDEN L. OSTRIN           Director     /s/ NEIL S. WECHSLER       Director
-------------------------------              --------------------------


                                       27
<PAGE>


OPTIMAL ROBOTICS CORP.
Consolidated Statement of Operations

For each of the years in the three-year period ended December 31, 2001
(expressed in U.S. dollars)

<TABLE>
<CAPTION>
===================================================================================================================================
                                                                               2001                    2000                    1999
-----------------------------------------------------------------------------------------------------------------------------------
<S>                                                                   <C>                     <C>                     <C>
Revenues                                                              $ 101,421,243           $  60,970,505           $  29,634,246

Cost of sales                                                            63,158,749              45,557,943              23,457,413

-----------------------------------------------------------------------------------------------------------------------------------
Gross margin                                                             38,262,494              15,412,562               6,176,833

Expenses (income):
      Selling, general and administrative                                18,531,978               9,153,760               5,548,833
      Research and development (note 13)                                  1,223,956                 912,679                 219,956
      Amortization                                                        1,538,366                 850,872                 344,718
      Operating lease                                                     1,210,201                 624,834                 232,471
      Write-down of inventory                                                    --                      --                 604,364
      Investment income                                                  (3,147,698)             (3,896,899)               (893,694)
      -----------------------------------------------------------------------------------------------------------------------------
                                                                         19,356,803               7,645,246               6,056,648

-----------------------------------------------------------------------------------------------------------------------------------
Earnings before income taxes                                             18,905,691               7,767,316                 120,185

Income tax provision (recovery) (note 14)                                 9,600,000               2,972,239              (3,531,583)

-----------------------------------------------------------------------------------------------------------------------------------
Net earnings                                                          $   9,305,691           $   4,795,077           $   3,651,768
===================================================================================================================================

Earnings per common share (note 15)
===================================================================================================================================
</TABLE>

See accompanying notes to consolidated financial statements.


                                       28
<PAGE>


OPTIMAL ROBOTICS CORP.
Consolidated Statement of Retained Earnings

For each of the years in the three-year period ended December 31, 2001
(expressed in U.S. dollars)

<TABLE>
<CAPTION>
====================================================================================================================================
                                                                               2001                    2000                    1999
------------------------------------------------------------------------------------------------------------------------------------
<S>                                                                     <C>                     <C>                     <C>
Deficit, beginning of year                                              $  (830,545)            $(5,625,622)            $(9,277,390)

Net earnings                                                              9,305,691               4,795,077               3,651,768

-----------------------------------------------------------------------------------------------------------------------------------
Retained earnings (deficit), end of year                                $ 8,475,146             $  (830,545)            $(5,625,622)
===================================================================================================================================
</TABLE>

See accompanying notes to consolidated financial statements.


                                       29
<PAGE>


OPTIMAL ROBOTICS CORP.
Consolidated Statement of Cash Flows

For each of the years in the three-year period ended December 31, 2001
(expressed in U.S. dollars)

<TABLE>
<CAPTION>
===================================================================================================================================
                                                                                     2001                 2000                 1999
-----------------------------------------------------------------------------------------------------------------------------------
<S>                                                                          <C>                  <C>                  <C>
Cash flows from operating activities:
      Net earnings                                                           $  9,305,691         $  4,795,077         $  3,651,768
      Adjustments for items not affecting cash:
           Amortization of capital assets                                       1,538,366              850,872              344,718
           Unrealized foreign exchange loss (gain)
             on contract advance                                                       --                5,948              (14,016)
           Non-refundable tax credits                                                  --              (65,539)            (490,438)
           Future income taxes                                                  4,741,905            2,972,239           (3,531,583)
           Loss on securitization of accounts receivable                           73,955               86,686                   --
           Write-down of inventory                                                     --                   --              604,364
      Changes in operating assets and liabilities:
           Accounts receivable                                                 (6,544,104)         (13,365,678)          (3,256,151)
           Proceeds on securitization of accounts
             receivable                                                         9,458,760            7,222,898                   --
           Inventories                                                         (4,374,837)         (13,556,156)          (2,441,539)
           Tax credits receivable                                                (560,269)             (77,451)            (128,289)
           Prepaid expenses and deposits                                         (519,685)            (204,897)            (120,936)
           Accounts payable and accrued liabilities                            (3,960,049)           3,237,491            2,029,510
           Income taxes payable                                                 4,794,476                   --                   --
           Deferred revenue                                                      (276,037)            (532,007)             449,257
      -----------------------------------------------------------------------------------------------------------------------------
                                                                               13,678,172           (8,630,517)          (2,903,335)

Cash flows from financing activities:
      Proceeds from issuance of common shares                                  19,421,317           65,358,738           29,467,094
      Share issue costs                                                                --           (4,693,285)          (2,793,434)
      Deferred share issue costs                                                       --                   --              (55,616)
      Repayment of loans under Employee Stock
        Purchase Arrangement                                                           --                   --              141,348
      Decrease in contract advance                                                     --             (250,000)            (125,000)
      -----------------------------------------------------------------------------------------------------------------------------
                                                                               19,421,317           60,415,453           26,634,392

Cash flows from investing activities:
      Purchase of capital assets                                               (4,003,625)          (3,069,584)          (1,012,586)
      Cost of business acquisition (note 3)                                    (1,141,000)                  --                   --
      Increase in short-term investments                                      (23,345,416)         (47,707,424)         (18,460,828)
      -----------------------------------------------------------------------------------------------------------------------------
                                                                              (28,490,041)         (50,777,008)         (19,473,414)

-----------------------------------------------------------------------------------------------------------------------------------
Net increase in cash and cash equivalents                                       4,609,448            1,007,928            4,257,643

Effect of exchange rate changes on cash and
   cash equivalents                                                                    --             (500,030)            (297,049)

Cash and cash equivalents, beginning of year                                    5,006,982            4,499,084              538,490

-----------------------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents, end of year                                       $  9,616,430         $  5,006,982         $  4,499,084
===================================================================================================================================
</TABLE>

See accompanying notes to consolidated financial statements.


                                       30
<PAGE>


OPTIMAL ROBOTICS CORP.
Notes to Consolidated Financial Statements

For each of the years in the three-year period ended December 31, 2001
(expressed in U.S. dollars)

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

1.   Nature of operations:

     Optimal  Robotics  Corp.  (the  "Company")  is engaged in the  development,
     marketing,  installation  and servicing of automated  transaction  products
     designed for use in the retail  sector.  The  Company's  principal  product
     focus is its  U-Scan(R)  system,  a  self-service  checkout  system for the
     retail industry.

2.   Significant accounting policies:

     These  consolidated  financial  statements have been prepared in accordance
     with accounting  principles  generally accepted in Canada. These principles
     conform,  in all material respects,  with accounting  principles  generally
     accepted  in the  United  States,  except  as  described  in note  19.  The
     principal accounting policies of the Company are summarized as follows:

     (a)  Principles of consolidation:

          These  consolidated  financial  statements include the accounts of the
          Company   and   its   wholly-owned   subsidiaries.   All   significant
          intercompany   balances  and  transactions  have  been  eliminated  on
          consolidation.

     (b)  Cash and cash equivalents:

          Cash and cash  equivalents  consist of cash on hand and balances  with
          banks and all highly liquid debt  instruments  with original  terms to
          maturity of three months or less.

     (c)  Short-term investments:

          Short-term  investments,   which  management  intends  to  hold  until
          maturity,  include  investments  with maturities of greater than three
          months and less than a year and are carried at the lower of  amortized
          cost and market value.

     (d)  Securitizations:

          In 2001, the Company adopted the new  recommendations  of the Canadian
          Institute  of  Chartered  Accountants  regarding  the  accounting  for
          transfers of receivables  contained in Accounting Guideline (AcG-12) -
          Transfers of  Receivables.  This standard is similar to FASB Statement
          No. 140  "Accounting  for Transfers and Servicing of Financial  Assets
          and  Extinguishments  of  Liabilities".   The   recommendations   were
          effective  for sales of  receivables  after July 1, 2000.  There is no
          impact on the Company's  consolidated  financial position,  results of
          operations   and   cash   flows  as  a  result   of   adopting   these
          recommendations.

          Securitization  transactions  are recorded as sales of assets when the
          control of the assets is transferred  to the  purchaser.  Transactions
          recorded in this manner  result in the removal of the assets sold from
          the  Company's  balance  sheet.  Discount  fees  on the  portfolio  of
          receivables sold are recorded in selling,  general and  administrative
          expenses.


                                       31
<PAGE>


OPTIMAL ROBOTICS CORP.
Notes to Consolidated Financial Statements, Continued

For each of the years in the three-year period ended December 31, 2001
(expressed in U.S. dollars)

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

2.   Significant accounting policies (continued):

     (e)  Inventories:

          Raw  material  inventories  are stated at the lower of landed cost and
          replacement cost.  Finished goods and work in process  inventories are
          stated  at the  lower  of  cost  and  net  realizable  value.  Cost is
          determined on the basis of actual costs.

          In order to provide  maintenance and repair services to its customers,
          the Company is required to maintain  significant levels of replacement
          parts.  Parts are stated at cost,  less an allowance for  obsolescence
          and  shrinkage.  The costs of  refurbishing  parts are included in the
          cost of sales as incurred.

          Periodic revisions to allowance estimates are required, based upon the
          evaluation of several factors,  including changes in estimated product
          life cycles,  usage levels, and technology  changes.  Changes in these
          estimates are reflected immediately in income.

     (f)  Research and investment tax credits:

          Research and investment tax credits are recorded as a reduction of the
          related  expense or the cost of the assets  acquired.  Tax credits are
          recorded in the accounts when  reasonable  assurance  exists that they
          will be realized.

     (g)  Capital assets:

          Capital assets are recorded at cost. Amortization is provided for over
          the   estimated   useful  lives  of  the  capital   assets  using  the
          straight-line method at the following annual rates:

          ======================================================================
          Test units                                                      33%
          Equipment                                                       10%
          Leasehold improvements                         Over lease term plus
                                                           one renewal period
          Computer equipment and software                                 33%
          Customer list                                                   25%
          Patents                                                          5%
          ======================================================================


                                       32
<PAGE>

OPTIMAL ROBOTICS CORP.
Notes to Consolidated Financial Statements, Continued

For each of the years in the three-year period ended December 31, 2001
(expressed in U.S. dollars)

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

2.   Significant accounting policies (continued):

     (h)  Income taxes:

          The Company  provides for income  taxes using the asset and  liability
          method of tax allocation.  Under this method, future income tax assets
          and  liabilities  are  determined   based  on  deductible  or  taxable
          temporary  differences  between  financial  statement  values  and tax
          values  of assets  and  liabilities  using  enacted  income  tax rates
          expected  to be in effect  for the year in which the  differences  are
          expected to reverse.

          The Company  establishes a valuation  allowance  against future income
          tax assets if, based on available information,  it is more likely than
          not that  some or all of the  future  income  tax  assets  will not be
          realized.

     (i)  Goodwill:

          Goodwill represents the excess of the purchase  consideration over the
          fair  value of the net  assets  of  businesses  acquired  and is being
          amortized on a  straight-line  basis over a period of 10 years.  On an
          ongoing basis,  management  reviews the valuation and  amortization of
          goodwill, taking into consideration any events and circumstances which
          might have  impaired its value.  The Company  assesses  impairment  by
          determining  whether the unamortized  balance can be recovered through
          undiscounted  future cash flows to be derived from  operations  of the
          acquired business.  Any permanent  impairment in the value of goodwill
          is written off against earnings.

     (j)  Revenue recognition:

          Revenue from product sales is recognized  upon  shipment,  delivery or
          upon  customer  acceptance  of the  product,  based  upon the terms as
          defined in the customer contract.  Installation service revenue, which
          is billed separately from product sales, is recognized at the time the
          service has been provided to the customers.  Revenue from maintenance,
          which is subject to  separate  contracts,  is deferred  and  amortized
          ratably over the term of the contract.

     (k)  Foreign currency translation:

          Effective July 1, 2000,  the Company  adopted the United States dollar
          as  its  measurement  currency  as a  result  of the  significance  of
          business activities  conducted in the United States and the increasing
          proportion of operating,  financing and investing  transactions in the
          Canadian operations that are denominated in U.S. dollars.


                                       33
<PAGE>

OPTIMAL ROBOTICS CORP.
Notes to Consolidated Financial Statements, Continued

For each of the years in the three-year period ended December 31, 2001
(expressed in U.S. dollars)

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


2.   Significant accounting policies (continued):

     (k)  Foreign currency translation (continued):

          Monetary assets and liabilities of the Canadian and foreign operations
          denominated in currencies other than the U.S. dollar are translated at
          the rates of exchange  prevailing  at the balance  sheet dates.  Other
          assets and liabilities  denominated in currencies  other than the U.S.
          dollar are translated at the exchange rates prevailing when the assets
          were  acquired or the  liabilities  incurred.  Revenues  and  expenses
          denominated in currencies other than the U.S. dollar are translated at
          the  approximate  rate  of  exchange  in  effect  on the  date  of the
          transaction.  Foreign  exchange  gains and losses are  included in the
          determination of net earnings.

          Prior to July 1, 2000,  the  Company's  measurement  currency  was the
          Canadian dollar.  However,  the Company had adopted the U.S. dollar as
          its reporting currency effective December 31, 1998.  Accordingly,  the
          financial statements from December 31, 1998 to June 30, 2000 have been
          translated from Canadian  dollars into U.S.  dollars using the current
          rate  method.  Gains and  losses  resulting  from  translation  of the
          financial  statements  were  included  in the  cumulative  translation
          adjustment in shareholders'  equity.  As a result of the change in the
          measurement  currency to U.S.  dollars adopted in 2000, the cumulative
          translation account will not change.

     (l)  Research and development expenses:

          Research  costs,   which  include  all  costs  incurred  to  establish
          technological  feasibility,  are charged to  operations in the year in
          which they are incurred. Technological feasibility has been defined as
          the completion of the product design for the computer software.

          Once technological feasibility has been established, development costs
          are evaluated for deferral and subsequent amortization. As at December
          31, 2001, the Company has not deferred any development costs.

     (m)  Stock-based compensation plan:

          The  Company  maintains  a  stock-based  compensation  plan,  which is
          described in note 11. Under accounting  principles  generally accepted
          in Canada,  no  compensation  expense is recognized for this plan when
          stock options are issued to employees. Any consideration received from
          plan  participants upon exercise of stock options is credited to share
          capital.


                                       34
<PAGE>

OPTIMAL ROBOTICS CORP.
Notes to Consolidated Financial Statements, Continued

For each of the years in the three-year period ended December 31, 2001
(expressed in U.S. dollars)

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


2.   Significant accounting policies (continued):

     (n)  Earnings per share:

          In 2001, the Company adopted the new  recommendations  of the Canadian
          Institute of Chartered  Accountants with respect to the calculation of
          earnings per share. These new  recommendations  did not change the way
          in which basic earnings per share are  calculated.  Basic earnings per
          share are  determined  using  the  weighted  average  number of common
          shares  outstanding  during the period. The standard requires that the
          treasury  stock method be used for  calculating  diluted  earnings per
          share.  Diluted earnings per share are computed in a manner consistent
          with basic earnings per share except that the weighted  average shares
          outstanding  are  increased  to  include  additional  shares  from the
          assumed exercise of options and warrants,  if dilutive.  The number of
          additional  shares is calculated by assuming that outstanding  options
          and warrants were  exercised and that the proceeds from such exercises
          are used to  repurchase  common  shares at the  average  market  price
          during the reporting  period.  The new  recommendations  substantially
          eliminate the differences between Canadian and U.S. generally accepted
          accounting principles in this area.

          Previously,  fully diluted  earnings per share were  calculated on the
          assumption  that common stock options and warrants  which are dilutive
          are  exercised  at the  beginning  of the year or the date  granted if
          later,  and the funds derived  therefrom are invested at the Company's
          annual after tax cost of short-term financing.  Under this method, the
          net  earnings  available  to  shareholders  would be adjusted for this
          imputed interest.

     (o)  Use of estimates:

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


                                       35
<PAGE>

OPTIMAL ROBOTICS CORP.
Notes to Consolidated Financial Statements, Continued

For each of the years in the three-year period ended December 31, 2001
(expressed in U.S. dollars)

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

3.   Business acquisition:

     On May 29,  2001,  the  Company  acquired  certain  assets and the  ongoing
     business of Alpha Microsystems,  LLC, based in Santa Ana, California, for a
     total purchase price of approximately  $6.8 million,  of which $5.7 million
     was paid by the  assumption  of  liabilities  and $1.1  million was paid in
     cash.

     Details of the acquisition are as follows:

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

     Net assets acquired, at assigned values:
          Accounts receivable                                       $ 1,387,105
          Inventories                                                 1,254,545
          Capital assets                                              1,175,000
          Other assets                                                  142,383
          Accounts payable and accrued liabilities                   (2,756,482)
          Notes payable                                              (1,385,000)
          Deferred revenue                                           (1,548,654)
          ----------------------------------------------------------------------
                                                                     (1,731,103)

         Goodwill                                                     2,872,103

     ---------------------------------------------------------------------------
     Net assets acquired for cash                                    $ 1,141,000
     ===========================================================================

4.   Short-term investments:

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

          Short-term  discounted notes denominated
          in U.S.  and in Canadian  dollars with a
          weighted  average   effective  yield  of
          1.85%  (2000 - 6.5%),  maturing  between
          March 19,  2002 and May 31, 2002 (2000 -
          matured  between  January  26,  2001 and
          November 15, 2001)                        $94,487,326      $71,141,910
     ===========================================================================


                                       36
<PAGE>

OPTIMAL ROBOTICS CORP.
Notes to Consolidated Financial Statements, Continued

For each of the years in the three-year period ended December 31, 2001
(expressed in U.S. dollars)

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


5.   Accounts receivable:

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

     Trade accounts receivable                    $  7,846,012      $  8,287,492
     Accrued interest                                  259,943         1,309,772
     Other                                           1,203,490         1,013,687
     Less allowance for doubtful accounts             (300,000)               --

     ---------------------------------------------------------------------------
                                                  $  9,009,445      $ 10,610,951
     ===========================================================================

     Under an  agreement  with a  Canadian  chartered  bank which  provides  the
     Company with the right to sell designated  accounts  receivable to the bank
     on a  non-recourse  basis,  during  the year,  the  Company  sold  accounts
     receivable  with  an  aggregate   carrying  value  of  $9,532,715  (2000  -
     $7,309,584) for net proceeds  amounting to $9,458,760  (2000 - $7,222,898).
     The excess of the carrying value over the net proceeds on securitization of
     these  accounts  receivable of $73,955 (2000 - $86,686) has been charged to
     selling, general and administrative expense.


6.   Inventories:

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

     Finished goods                             $ 2,778,678          $ 3,543,262
     Work in process                                542,378              589,424
     Raw materials                                6,969,536            3,657,967
     Replacement parts                           12,064,675            8,935,232

     ---------------------------------------------------------------------------
                                                $22,355,267          $16,725,885
     ===========================================================================


                                       37
<PAGE>

OPTIMAL ROBOTICS CORP.
Notes to Consolidated Financial Statements, Continued

For each of the years in the three-year period ended December 31, 2001
(expressed in U.S. dollars)

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

7.   Property, plant and equipment:

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

     Cost:
          Test units                                 $1,945,912       $  926,564
          Equipment                                   1,514,170          716,441
          Leasehold improvements                      2,375,127        1,751,151
          Computer equipment and software             3,214,396        1,407,920
          ----------------------------------------------------------------------
                                                      9,049,605        4,802,076

     Accumulated amortization:
          Test units                                    898,364          531,548
          Equipment                                     188,350           72,727
          Leasehold improvements                        716,944          462,932
          Computer equipment and software             1,115,600          482,098
          ----------------------------------------------------------------------
                                                      2,919,258        1,549,305

     ---------------------------------------------------------------------------
     Net carrying amount                             $6,130,347       $3,252,771
     ===========================================================================

     8.   Intangibles:

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

     Cost:
          Goodwill                                 $2,872,103         $       --
          Customer list                               786,414                 --
          Patents                                     158,364             13,686
          ----------------------------------------------------------------------
                                                    3,816,881             13,686

     Accumulated amortization:
          Goodwill                                    141,750                 --
          Customer list                                26,000                 --
          Patents                                      13,968             13,309
          ----------------------------------------------------------------------
                                                      181,718             13,309

     ---------------------------------------------------------------------------
     Net carrying amount                           $3,635,163         $      377
     ===========================================================================


                                       38
<PAGE>

OPTIMAL ROBOTICS CORP.
Notes to Consolidated Financial Statements, Continued

For each of the years in the three-year period ended December 31, 2001
(expressed in U.S. dollars)

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

9.   Accounts payable and accrued liabilities:

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

     Trade accounts payable                         $5,186,110        $5,355,993
     Accrued salaries and benefits                   1,102,516           431,912
     Sales taxes payable                               286,788           547,158
     Book overdraft (1)                                 98,390           157,308

     ---------------------------------------------------------------------------
                                                    $6,673,804        $6,492,371
     ===========================================================================

(1)  Represents the excess of outstanding  cheques over bank balances on certain
     of the Company's cash accounts.

10.  Share capital:

     The Company's  authorized  share capital consists of an unlimited number of
     Class "A" shares, and Class "B" and Class "C" preference shares.

     -    The Class "A" shares are designated as common shares.

     -    The Class "B"  preference  shares are  voting,  non-participating  and
          redeemable  at the  option  of the  Company  for  the  amount  paid up
          thereon.  In the event of the  liquidation,  dissolution or wind-up of
          the Company,  the Class "B" preference  shares rank in priority to all
          other classes.

     -    The Class "C"  preference  shares are  issuable in series with rights,
          privileges,  restrictions and conditions  designated by the directors.
          In the  event  of  the  liquidation,  dissolution  or  wind-up  of the
          Company,  the Class "C"  preference  shares  rank in  priority  to the
          common shares.


                                       39
<PAGE>

OPTIMAL ROBOTICS CORP.
Notes to Consolidated Financial Statements, Continued

For each of the years in the three-year period ended December 31, 2001
(expressed in U.S. dollars)

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

10.  Share capital (continued):

     Changes in the issued and outstanding share capital are as follows:

<TABLE>
<CAPTION>
     =====================================================================================
                                                                 Number of
                                                                    common
                                                                    shares         Dollars
     -------------------------------------------------------------------------------------
     <S>                                                         <C>         <C>
     Balance, December 31, 1998                                  7,475,278   $  16,850,531

     Issued for cash pursuant to public offering                 3,000,000      27,000,000
     Share issue costs, net of related future income taxes              --      (1,803,821)
     Issued for cash pursuant to exercise of stock options         934,271       2,393,538
     Issued pursuant to exercise of warrants:                       27,692              --
          Ascribed value from other capital                             --           2,681
          Cash                                                          --          73,556
     Repayment of loans under Employee Stock Purchase
       Arrangement                                                      --         141,348

     -------------------------------------------------------------------------------------
     Balance, December 31, 1999                                 11,437,241      44,657,833

     Issued for cash pursuant to public offering                 1,625,000      63,375,000
     Share issue costs, net of related future income taxes              --      (2,976,532)
     Issued for cash pursuant to exercise of stock options         578,500       1,763,983
     Issued pursuant to exercise of warrants:                       67,949              --
          Ascribed value from other capital                             --          10,875
          Cash                                                          --         219,755
     -------------------------------------------------------------------------------------
     Balance, December 31, 2000                                 13,708,690     107,050,914

     Issued for cash pursuant to exercise of stock-options       1,409,225      17,433,431
     Issued pursuant to exercise of warrants:                      353,420              --
          Ascribed value from other capital                             --           4,402
          Cash                                                          --       1,987,886

     -------------------------------------------------------------------------------------
     Balance, December 31, 2001                                 15,471,335   $ 126,476,633
     =====================================================================================
     </TABLE>

During 2001, the Company issued 1,409,225 common shares pursuant to the exercise
of stock options with exercise prices ranging between $3.00 and $47.00 per share
and 353,420  common  shares  pursuant to the exercise of warrants  with exercise
prices  ranging  between  Cdn$5.00 and $6.60 per share.  Total proceeds from the
issuance of these shares amounted to $19,421,317.


                                       40
<PAGE>

OPTIMAL ROBOTICS CORP.
Notes to Consolidated Financial Statements, Continued

For each of the years in the three-year period ended December 31, 2001
(expressed in U.S. dollars)

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

10.  Share capital (continued):

     During 2000, the Company filed a registration statement with the Securities
     and Exchange Commission  qualifying the issuance of 1,625,000 common shares
     for gross proceeds of $39.00 per share. The net proceeds from this offering
     amounted to $60,398,468, after deducting underwriting commissions and other
     expenses of $2,976,532 (net of future income taxes of $1,772,369).

     During 1999, the Company filed a registration statement with the Securities
     and Exchange Commission  qualifying the issuance of 3,000,000 common shares
     for gross proceeds of $9.00 per share.  The net proceeds from this offering
     amounted to $25,196,179, after deducting underwriting commissions and other
     expenses of $1,803,821 (net of future income taxes of $989,613).


11.  Stock option plan/warrants:

     (a)  Stock option plan:

          The Company has a stock option plan that  provides for the granting of
          options to employees  and  directors for the purchase of the Company's
          common  shares.  Options may be granted by the Board of Directors  for
          terms of up to ten  years.  The  Board of  Directors  establishes  the
          exercise period,  vesting terms and other conditions for each grant at
          the grant date.  Options may be granted  with  exercise  prices at the
          then current market price. Upon its  establishment in 1997,  3,000,000
          common shares were authorized for issuance pursuant to options granted
          under the stock option plan. On April 26, 2000, the Board of Directors
          approved,  subject to the  approval  of  shareholders  and  regulatory
          authorities, a 3,000,000-share increase in the number of common shares
          that  may be  issued  under  this  plan.  Immediately  prior  to  this
          increase,  1,111,271  common  shares had been  issued  pursuant to the
          stock  option  plan and an  additional  1,888,000  common  shares were
          underlying  options  outstanding  under  this plan.  Shareholders  and
          regulatory  authorities  approved the April 26, 2000 amendment to this
          plan in June  2000.  On  October  12,  2001,  the  Board of  Directors
          approved,  subject to the  approval  of  shareholders  and  regulatory
          authorities,  a  further  3,000,000-share  increase  in the  number of
          common shares that may be issued under this plan. Immediately prior to
          this increase, 2,543,725 common shares had been issued pursuant to the
          stock  option  plan and an  additional  3,305,025  common  shares were
          underlying options  outstanding under this plan.  Options  outstanding
          under the plan  expire  between  five and ten years  after the date of
          grant and vest either immediately or over a period of up to two years.


                                       41
<PAGE>

OPTIMAL ROBOTICS CORP.
Notes to Consolidated Financial Statements, Continued

For each of the years in the three-year period ended December 31, 2001
(expressed in U.S. dollars)

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

11.  Stock option plan/warrants (continued):

     (b)  Other options granted under employment agreements:

          The Company had granted  options under certain  employment  agreements
          and established certain terms for some options granted under the stock
          option plan as follows:

          (i)  In 1997, options to purchase 1,200,000 common shares were granted
               to three senior officers. These options have an exercise price of
               $3.00 per share and expire in 2002. As at December 31, 2001, none
               of these options to purchase common shares are outstanding  (2000
               - 460,000 outstanding).

          (ii) The   employment   agreements   provide  that  in  the  event  of
               termination by the Company  without cause,  the exercise price of
               all  options,  warrants  or rights  would be amended to a nominal
               value. At December 31, 2001,  options to purchase 2,097,000 (2000
               - 2,062,000) common shares with a weighted average exercise price
               of $29.06  (2000 - $18.02)  were  subject to this  provision,  of
               which 927,000 (2000 - 1,312,000) options were exercisable.

     (c)  Options subject to reload provision:

          In 1997,  options to purchase  312,000  common  shares  were  granted,
          including  282,000 which were granted to three senior  officers with a
          reload  feature  whereby upon exercise of the option,  a new option is
          issued with an exercise  price equal to the then current market price.
          Two  consecutive  reloads are  permitted.  The holder was permitted to
          exercise the options  without  paying cash by accepting  the number of
          shares having a value equal to the in-the-money  value of the options.
          This right was irrevocably waived by the holders of options to acquire
          307,000 common shares in 1998 and the options for the remaining  5,000
          expired in the same year.

          During 2001,  289,000 (2000 - 20,000) of these options were  exercised
          and  immediately  reloaded at the then  current  market  price.  As at
          December 31, 2001,  options granted,  which are subject to this reload
          provision, all of which are exercisable, are as follows:

          ======================================================================
                                                                    Number of
                                                                      options
          Exercise price                                          outstanding
          ----------------------------------------------------------------------

          $16.13                                                   18,0009(1)
          $35.55                                                   284,000(2)
          $44.57                                                     5,000(2)

          ----------------------------------------------------------------------
                                                                   307,000
          ======================================================================

          (1)  These options may be reloaded one more time.

          (2)  These options may no longer be reloaded.


                                       42
<PAGE>

OPTIMAL ROBOTICS CORP.
Notes to Consolidated Financial Statements, Continued

For each of the years in the three-year period ended December 31, 2001
(expressed in U.S. dollars)

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

11.  Stock option plan/warrants (continued):

     (d)  Details of all outstanding stock options are as follows:

<TABLE>
<CAPTION>
          ================================================================================================
                                            United States dollar exercise
                                                                    price   Canadian dollar exercise price
                                            -----------------------------   ------------------------------

                                                                 Weighted                         Weighted
                                                                  average                          average
                                                Number of  exercise price        Number of  exercise price
                                                  options       per share          options       per share
          ------------------------------------------------------------------------------------------------
<S>                                             <C>                <C>             <C>              <C>
          Balance, December 31, 1998            1,666,000          $ 3.18          360,000          $ 2.08

          Granted                               1,028,000           19.81               --              --
          Expired                                  (1,000)           3.00               --              --
          Exercised                              (636,000)           3.13         (300,000)           2.00

          ------------------------------------------------------------------------------------------------
          Balance, December 31, 1999            2,057,000           11.49           60,000            2.50

          Granted                               1,398,000           25.60               --              --
          Expired                                  (3,500)          29.96               --              --
          Exercised                              (518,500)           3.24          (60,000)           2.50

          ------------------------------------------------------------------------------------------------
          Balance, December 31, 2000            2,933,000           19.66               --              --

          Granted                               1,846,000           30.62               --              --
          Expired                                  (5,500)          27.43               --              --
          Exercised                            (1,409,225)          12.37               --              --

          ------------------------------------------------------------------------------------------------
          Balance, December 31, 2001            3,364,275          $28.73               --          $   --
          ================================================================================================
</TABLE>


                                       43
<PAGE>

OPTIMAL ROBOTICS CORP.
Notes to Consolidated Financial Statements, Continued

For each of the years in the three-year period ended December 31, 2001
(expressed in U.S. dollars)

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

11.  Stock option plan/warrants (continued):

     (e)  Details of outstanding stock options are as follows:

          The  following  table  summarizes   information  concerning  currently
          outstanding and exercisable options:

          ======================================================================
                                                                        Weighted
                                                                         average
                                       Number of        Number of      remaining
                                         options          options    contractual
          Exercise price             outstanding      exercisable           life
          ----------------------------------------------------------------------

          $12.88                           5,000            5,000      2.0 years
          $16.13                          18,000           18,000      0.3 years
          $22.45                          70,000               --      9.8 years
          $25.25                       1,170,775          487,525      8.6 years
          $30.05                       1,484,500               --      9.5 years
          $30.97                           2,500               --      9.4 years
          $31.25                         317,000          317,000      2.9 years
          $32.38                           7,500            3,750      8.7 years
          $35.55                         284,000          284,000      0.3 years
          $44.57                           5,000            5,000      0.3 years

          ----------------------------------------------------------------------
                                       3,364,275        1,120,275
          ======================================================================


                                       44
<PAGE>

OPTIMAL ROBOTICS CORP.
Notes to Consolidated Financial Statements, Continued

For each of the years in the three-year period ended December 31, 2001
(expressed in U.S. dollars)

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

11.  Stock option plan/warrants (continued):

      (f)  Details of outstanding warrants are as follows:

<TABLE>
<CAPTION>
           ================================================================================================
                                             United States dollar exercise
                                                                     price   Canadian dollar exercise price
                                            ------------------------------   ------------------------------
                                                                  Weighted                         Weighted
                                                                   average                          average
                                                 Number of  exercise price        Number of  exercise price
                                                  warrants       per share         warrants       per share
           ------------------------------------------------------------------------------------------------
<S>                                                <C>               <C>            <C>               <C>
           Balance, December 31, 1998              307,267           $6.58          160,000           $4.28

           Exercised                                (7,692)           6.50          (20,000)           1.75

           ------------------------------------------------------------------------------------------------
           Balance, December 31, 1999              299,575            6.58          140,000            4.64

           Exercised                               (30,769)           6.50          (40,000)           3.75

           ------------------------------------------------------------------------------------------------
           Balance, December 31, 2000              268,806            6.59          100,000            5.00

           Exercised                               253,420            6.59         (100,000)           5.00

           ------------------------------------------------------------------------------------------------
           Balance, December 31, 2001               15,386           $6.50               --           $  --
           ================================================================================================
</TABLE>

          The  following  table  summarizes   information   regarding  currently
          outstanding warrants:

          ----------------------------------------------------------------------
                                                   Number of            Weighted
                                                    warrants             average
                                                 outstanding           remaining
                                                         and         contractual
          Exercise price                         exercisable                life
          ----------------------------------------------------------------------

          $ 6.50                                      15,386            8 months
          ======================================================================

          These warrants expire on August 29, 2002.


                                       45
<PAGE>

OPTIMAL ROBOTICS CORP.
Notes to Consolidated Financial Statements, Continued

For each of the years in the three-year period ended December 31, 2001
(expressed in U.S. dollars)

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

12.  Commitments and contingencies:

      (a)  Operating leases:

           The Company has entered  into  operating  leases for its premises and
           certain office equipment. The minimum amounts payable for each of the
           next five  years,  excluding  the  Company's  proportionate  share of
           common operating costs, are approximately as follows:

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

          2002                                                         $ 973,000
          2003                                                           637,000
          2004                                                           475,000
          2005                                                           388,000
          2006                                                           243,000

          ----------------------------------------------------------------------
                                                                     $ 2,716,000
          ======================================================================

     (b)  In 1995 and 1996,  the Company  received  demand letters from the same
          claimant  alleging  patent  infringement.  In June 1999,  the claimant
          filed a civil action alleging patent infringement in the United States
          District  Court for the  District of Utah  against the Company and PSC
          Inc., one of the Company's suppliers.  In addition, a similar suit has
          been  filed  in the  State  of  Utah  against  one  of  the  Company's
          customers.  The  Company  is  contractually  bound  to  indemnify  the
          customer for any damages it incurs in  connection  with such suit.  At
          the Company's  expense,  the Company's legal counsel is defending this
          suit.  The Company also received a lawyer's  letter from another party
          in 1999, and again in February 2001, alleging  infringement of another
          patent.

          The Company  believes  these claims to be without merit and intends to
          vigorously  defend its position.  Consequently,  no provision has been
          made in these financial statements with respect to the above claims.

     (c)  The  Company is party to  litigation  arising in the normal  course of
          operations. The Company does not expect the resolution of such matters
          to have a  materially  adverse  effect on the  financial  position  or
          results of operations of the Company.

                                       46
<PAGE>
OPTIMAL ROBOTICS CORP.
Notes to Consolidated Financial Statements, Continued

For each of the years in the three-year period ended December 31, 2001
(expressed in U.S. dollars)

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

13.  Research and development expenses:

<TABLE>
<CAPTION>
     ====================================================================================
                                                       2001           2000           1999
     ------------------------------------------------------------------------------------
<S>                                             <C>            <C>            <C>
     Gross research and development expenses    $ 2,023,956    $ 1,057,579    $   960,440
     Less research tax credits                     (800,000)      (144,900)      (421,519)
     Tax credits on prior years' expenditures
       not previously recognized                         --             --       (318,965)

     ------------------------------------------------------------------------------------
                                                $ 1,223,956    $   912,679    $   219,956
     ====================================================================================
</TABLE>

14.  Income taxes:

     The income tax provision  differs from the amount  computed by applying the
     combined  Canadian  federal and Quebec tax rates to earnings  before income
     taxes.  The reasons for the  difference  and the related tax effects are as
     follows:

<TABLE>
<CAPTION>
     ====================================================================================
                                                         2001          2000          1999
     ------------------------------------------------------------------------------------
<S>                                               <C>           <C>           <C>
     Earnings before income taxes                 $18,905,691   $ 7,767,316   $   120,185
     ------------------------------------------------------------------------------------
     Combined Canadian federal and Quebec
       provincial income taxes at 37% (2000 and
       1999 - 38%)                                $ 6,995,106   $ 2,951,580   $    45,670
     Change in valuation allowance                         --            --    (3,597,341)
     Foreign exchange (1)                           2,173,331            --            --
     Permanent differences and other                  431,563        20,659        20,088

     ------------------------------------------------------------------------------------
     Income tax provision (recovery)              $ 9,600,000   $ 2,972,239   $(3,531,583)
     ====================================================================================
</TABLE>

     (1)  For purposes of calculating the income tax provision of the Company, a
          tax liability is recognized on the foreign  exchange gains which arise
          on the  conversion  into Canadian  dollars of the net monetary  assets
          denominated  in U.S.  dollars  which  is  required  for tax  purposes.
          Because these financial statements are presented in U.S. dollars, this
          foreign  exchange  gain does not impact  earnings  before income taxes
          even though the income tax provision includes a tax liability for this
          gain.  Future  fluctuations  in the foreign  exchange rate between the
          Canadian  and U.S.  dollar  will  change  the  amount  of the  foreign
          exchange  gains  (losses)  and thus the  provision  for  income  taxes
          thereon.


                                       47
<PAGE>
OPTIMAL ROBOTICS CORP.
Notes to Consolidated Financial Statements, Continued

For each of the years in the three-year period ended December 31, 2001
(expressed in U.S. dollars)

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

14.  Income taxes (continued):

     The provision for (recovery of) income taxes is composed of the following:

<TABLE>
<CAPTION>
     =====================================================================================
                                                         2001          2000           1999
     -------------------------------------------------------------------------------------

<S>                                               <C>           <C>            <C>
     Current income taxes                         $ 4,858,095   $        --    $        --
     Future income taxes                            4,741,905     2,972,239         65,758
     Benefit of prior years' non-capital losses
       not previously recognized                           --            --     (3,597,341)

     -------------------------------------------------------------------------------------
                                                  $ 9,600,000   $ 2,972,239    $(3,531,583)
     =====================================================================================
</TABLE>

The future income tax balances are summarized as follows:

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

     Future income tax assets (liabilities):
          Research and development tax credits
            (net of related income taxes)           $  (340,115)     $   452,525
          Non-capital losses                                 --          656,698
          Share issue costs                           1,370,985        1,938,971
          Research and development expenses                  --          779,075
          Capital assets                               (141,808)          55,676
          Foreign exchange gain                      (1,748,022)              --

     ---------------------------------------------------------------------------
     Net future income tax asset (liability)        $  (858,960)     $ 3,882,945
     ===========================================================================

     Presented as:
          Current                                   $   284,253      $ 2,420,718
          Long-term                                  (1,143,213)       1,462,227

     ---------------------------------------------------------------------------
                                                    $  (858,960)     $ 3,882,945
     ===========================================================================

     Management  believes that it is more likely than not that all future income
     tax assets will be realized  and,  accordingly,  no valuation  allowance is
     required.


                                       48
<PAGE>

OPTIMAL ROBOTICS CORP.
Notes to Consolidated Financial Statements, Continued

For each of the years in the three-year period ended December 31, 2001
(expressed in U.S. dollars)

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

15.  Earnings per share:

     A  reconciliation  between  basic  and  diluted  earnings  per  share is as
     follows:

     ===========================================================================
                                                  2001         2000         1999
     ---------------------------------------------------------------------------

     Earnings per share:
          Basic weighted average number of
            common shares outstanding       14,704,636   13,104,361    9,699,385
          ======================================================================

          Basic earnings per share          $     0.63   $     0.37   $     0.38
          ======================================================================

     Diluted earnings per share:
          Basic weighted average number
            of common shares outstanding    14,704,636   13,104,361    9,699,385
          Plus impact of stock options
            and warrants                       867,903    1,394,373    1,229,294

          ----------------------------------------------------------------------
          Diluted common shares             15,572,539   14,498,734   10,928,679
          ======================================================================

          Diluted earnings per share        $     0.60   $     0.33   $     0.33
          ======================================================================

     Comparative  figures have been  restated to reflect the adoption of the new
     accounting recommendations on a retroactive basis. The change in the method
     of  calculating  earnings  per share only  applied to diluted  earnings per
     share, the effect of which is shown as follows:

     ===========================================================================
                                                            2000            1999
     ---------------------------------------------------------------------------

     Diluted earnings per share:
          As previously reported                        $   0.35        $   0.35
          Restated                                          0.33            0.33

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


                                       49
<PAGE>

OPTIMAL ROBOTICS CORP.
Notes to Consolidated Financial Statements, Continued

For each of the years in the three-year period ended December 31, 2001
(expressed in U.S. dollars)

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

15.  Earnings per share (continued):

     Supplementary  measures of earnings  do not have any  standardized  meaning
     prescribed by generally  accepted  accounting  principles and are therefore
     unlikely to be comparable to similar measures presented by other companies.
     The purpose of  presenting  a  supplementary  measure of net  earnings  and
     earnings per share is to illustrate the tax impact of the foreign  exchange
     gain which arises on the  conversion  of the  short-term  investments  into
     Canadian dollars for purposes of determining  taxable income under Canadian
     income tax regulations as described in note 14.

<TABLE>
<CAPTION>
     ==========================================================================================
                                                           2001            2000            1999
     ------------------------------------------------------------------------------------------
<S>                                                 <C>           <C>             <C>
     Net earnings                                   $ 9,305,691   $   4,795,077   $   3,651,768

     Add back effect of future income taxes
       on foreign exchange gain                       2,173,331              --              --

     ------------------------------------------------------------------------------------------
     Supplementary measure of net earnings          $11,479,022   $   4,795,077   $   3,651,768
     ------------------------------------------------------------------------------------------

     Supplementary measure of earnings per share:
          Basic                                     $      0.78   $        0.37   $        0.38
          Diluted                                          0.74            0.33            0.33

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

16.  Segmented information:

     (a)  Segment:

          The  Company  operates in one  segment,  the  development,  marketing,
          installation,  servicing  and sale of automated  transaction  products
          designed  for  use  in the  retail  sector.  Substantially  all of the
          Company's  revenue is derived from sales to  retailers  located in the
          United States and is denominated in U.S.  dollars.  Capital assets and
          intangibles by geographic area are as follows:

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

          Canada                                 $4,436,119           $2,782,757
          United States                           5,329,391              470,391

          ----------------------------------------------------------------------
                                                 $9,765,510           $3,253,148
          ======================================================================


                                       50
<PAGE>

OPTIMAL ROBOTICS CORP.
Notes to Consolidated Financial Statements, Continued

For each of the years in the three-year period ended December 31, 2001
(expressed in U.S. dollars)

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

16.  Segmented information (continued):

     (b)  Major customers:

          Sales to major  customers  (customers  from which 10% or more of total
          revenue is derived  during the  specified  period) are  summarized  as
          follows:

          ======================================================================
                                      2001               2000               1999
          ----------------------------------------------------------------------

          Customer 1           $65,134,835        $27,903,357        $15,909,477
          Customer 2            14,109,411          9,887,156                N/A
          Customer 3                   N/A          9,852,775          8,267,126

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

17.  Financial instruments:

     (a)  Credit risk:

          Credit risk  results from the  possibility  that a loss may occur from
          the failure of another party to perform  according to the terms of the
          contract.  Financial  instruments that potentially subject the Company
          to concentrations of credit risk consist primarily of cash, short-term
          investments  and  accounts  receivable.  Cash  is  maintained  with  a
          high-credit  quality  financial  institution.  Short-term  investments
          consist of short-term  discounted notes issued by high-credit  quality
          corporations.  For accounts receivable,  the Company performs periodic
          credit   evaluations  and  typically  does  not  require   collateral.
          Allowances are maintained for potential credit losses  consistent with
          the credit risk,  historical trends,  general economic  conditions and
          other information.

     (b)  Interest rate risk:

          The Company's exposure to interest rate risk is as follows:

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

          Cash and cash equivalents                          Fixed interest rate
          Short-term investments                             Fixed interest rate
          Accounts receivable                               Non-interest bearing
          Tax credits receivable                            Non-interest bearing
          Accounts payable and accrued liabilities          Non-interest bearing

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


                                 51
<PAGE>

OPTIMAL ROBOTICS CORP.
Notes to Consolidated Financial Statements, Continued

For each of the years in the three-year period ended December 31, 2001
(expressed in U.S. dollars)

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

17.  Financial instruments (continued):

     (c)  Fair value:

          Fair value  estimates  are made as of a  specific  point in time using
          available information about the financial instrument.  These estimates
          are  subjective  in  nature  and  often  cannot  be  determined   with
          precision.

          The Company has determined that the carrying values of cash,  accounts
          receivable,  tax  credits  receivable,  accounts  payable  and accrued
          liabilities  are reasonable  estimates of their fair values due to the
          relatively short periods to maturity of these instruments.

          The fair value of  short-term  investments  as at  December  31,  2001
          amounted to approximately  $94,635,000 (2000 - $72,346,000)  which was
          calculated by reference to various market data.


18.  Supplementary disclosure of cash flow information:

<TABLE>
<CAPTION>
     ================================================================================
                                                       2001         2000         1999
     --------------------------------------------------------------------------------
<S>                                              <C>          <C>          <C>
     Cash paid during the year for:
          Interest                               $  105,368   $   34,747   $   38,786
          Income taxes                               63,621       26,660           --

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

     Cash and cash equivalents consist of:
          Cash balances with banks               $3,486,203   $3,248,024   $1,741,344
          Short-term investments                  6,130,227    1,758,958    2,757,740

     --------------------------------------------------------------------------------
                                                 $9,616,430   $5,006,982   $4,499,084
     ================================================================================
</TABLE>


                                       52
<PAGE>

OPTIMAL ROBOTICS CORP.
Notes to Consolidated Financial Statements, Continued

For each of the years in the three-year period ended December 31, 2001
(expressed in U.S. dollars)

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


19.  Canadian/U.S. Reporting Differences:

     The  consolidated  financial  statements  of the  Company  are  prepared in
     accordance with Canadian generally accepted accounting principles ("GAAP"),
     which conform,  in all material respects,  with those generally accepted in
     the United States except as described below:

     (a)  Consolidated Statement of Operations:

          The  reconciliation  of  net  earnings  reported  in  accordance  with
          Canadian GAAP to U.S. GAAP is as follows:

<TABLE>
<CAPTION>
          =========================================================================================================================
                                                                                2001                   2000                   1999
          -------------------------------------------------------------------------------------------------------------------------
<S>                                                                     <C>                    <C>                    <C>
          Net earnings in accordance with
            Canadian GAAP:                                              $  9,305,691           $  4,795,077           $  3,651,768
               Stock-based compensation costs (1)                        (32,600,037)           (18,900,560)            (9,227,197)

          ------------------------------------------------------------------------------------------------------------------------
          Net earnings (loss) in accordance with
            U.S. GAAP                                                    (23,294,346)           (14,105,483)            (5,575,429)

          Other comprehensive income (loss):
               Foreign currency translation adjustments
                 (note 19 (c))                                                    --             (2,136,533)               652,062

          ------------------------------------------------------------------------------------------------------------------------
          Comprehensive income (loss)                                   $(23,294,346)          $(16,242,016)          $ (4,923,367)
          ========================================================================================================================

          Earnings (loss) per share under U.S.
            GAAP:
               Basic                                                    $      (1.58)          $      (1.08)          $      (0.57)
               Diluted                                                         (1.58)                 (1.08)                 (0.57)
          ========================================================================================================================
</TABLE>

     The weighted  average number of common shares  outstanding  for purposes of
     determining  basic  and  diluted  earnings  (loss)  per  share are the same
     amounts disclosed for Canadian GAAP purposes in note 15.

     (1)  Stock-based compensation:

          For stock-based  compensation  plans with  employees,  as permitted by
          Statement of Financial  Accounting  Standards No. 123 (SFAS 123),  the
          Company has chosen to use the  intrinsic  value method which  requires
          compensation costs to be recognized on the difference, if any, between
          the  quoted  market  price of the stock as at the  grant  date and the
          amount the  individual  must pay to acquire the stock.  Certain of the
          Company's stock options are variable because the exercise price is not
          known until the options are exercised. As a result,  compensation cost
          is measured on the date the options are exercised.


                                       53
<PAGE>

OPTIMAL ROBOTICS CORP.
Notes to Consolidated Financial Statements, Continued

For each of the years in the three-year period ended December 31, 2001
(expressed in U.S. dollars)

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


19.  Canadian/U.S. Reporting Differences (continued):

     (a)  Consolidated Statement of Operations (continued):

          (1)  Stock-based compensation (continued):

               UnderCanadian  GAAP,  stock-based  compensation  expense  is  not
               recognized.

          If the fair value-based  accounting method under SFAS No. 123 had been
          used to account for stock-based compensation costs relating to options
          and  warrants  issued  to  employees,  the net  earnings  and  related
          earnings per share figures under U.S. GAAP would be as follows for the
          years ended December 31:

<TABLE>
<CAPTION>
          =====================================================================================================
                                                                2001                 2000                 1999
          -----------------------------------------------------------------------------------------------------
<S>                                                   <C>                  <C>                  <C>
          Reported net earnings (loss)                $  (23,294,346)      $  (14,105,483)      $   (5,575,429)
          Pro forma adjustment to compensation
            expense                                          916,185            2,639,436            3,945,618

          -----------------------------------------------------------------------------------------------------
          Pro forma net earnings (loss)               $  (22,378,161)      $  (11,466,047)      $   (1,629,811)
          =====================================================================================================

          Pro forma loss per share:
               Basic                                  $        (1.52)      $        (0.87)      $        (0.17)
               Diluted                                         (1.52)               (0.87)               (0.17)

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

          The fair value of each option grant was determined using the following
          method and assumptions.

          The weighted  averaged fair value of each option  granted is estimated
          on the date of grant using the  Black-Scholes  pricing  model with the
          following weighted average assumptions:

<TABLE>
<CAPTION>
          =====================================================================================================
                                                                2001                 2000                 1999
          -----------------------------------------------------------------------------------------------------
<S>                                                             <C>                  <C>                  <C>
          Risk-free interest rate                               4.36%                5.18%                5.58%
          Expected volatility                                     76%                  95%                  80%
          Expected life in years                                 8.6                  9.9                 3.44
          Expected dividend yield                                nil                  nil                  nil

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


                                       54
<PAGE>

OPTIMAL ROBOTICS CORP.
Notes to Consolidated Financial Statements, Continued

For each of the years in the three-year period ended December 31, 2001
(expressed in U.S. dollars)

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


19.  Canadian/U.S. Reporting Differences (continued):

     (a)  Consolidated Statement of Operations (continued):

          The following table  summarizes the weighted  average  grant-date fair
          value per share for options granted:

<TABLE>
<CAPTION>
=================================================================================================================
                                                                                                        Weighted
                                                                                                         average
                                                                                                      grant-date
                                                                                     Number of        fair value
                                                                                       options         per share
-----------------------------------------------------------------------------------------------------------------
<S>                                                                                  <C>                <C>
          1999:
               Exercise price per share equal to market price per share              1,028,000          $  11.60

          2000:
               Exercise price per share equal to market price per share              1,398,000             22.78

          2001:
               Exercise price per share equal to market price per share              1,846,000             22.22

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

          Management believes that the effects of applying SFAS No. 123 on a pro
          forma  basis are not  likely to be  representative  of the  effects on
          reported  pro forma net  earnings  for future  years as the  estimated
          compensation  costs reflect only options  granted to December 31, 2001
          and do not consider awards which may occur in future years,  the terms
          and conditions of which may vary.

          Dividend  yield  was  excluded  from the  calculation  since it is the
          present  policy of the  Company  to retain  all  earnings  to  finance
          operations.  In addition, option valuation models require the input of
          highly  subjective  assumptions  including  the  expected  stock price
          volatility.  Because the Company's stock options have  characteristics
          significantly  different  from those of traded  options,  and  because
          changes in the subjective  input  assumptions  can  materially  affect
          their fair value  estimate,  in  management's  opinion,  the  existing
          models do not  necessarily  provide a reliable  single  measure of the
          fair value of its stock options.


                                       55
<PAGE>

OPTIMAL ROBOTICS CORP.
Notes to Consolidated Financial Statements, Continued

For each of the years in the three-year period ended December 31, 2001
(expressed in U.S. dollars)

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


19.  Canadian/U.S. Reporting Differences (continued):

      (b)  Consolidated Balance Sheets:

           Differences  between  Canadian and U.S.  GAAP are not material in the
           presentation  of the assets,  liabilities and  shareholders'  equity.
           However, the following differences should be noted:

           (i)  Share capital:

<TABLE>
<CAPTION>
           ====================================================================================================
                                                                                    2001                   2000
           ----------------------------------------------------------------------------------------------------
<S>                                                                        <C>                    <C>
           Share capital in accordance with Canadian GAAP                  $ 126,476,633          $ 107,050,914
           Stock-based compensation costs on options
             exercised
                Current year                                                     237,750             24,519,022
                Cumulative effect of prior years                              39,630,814             15,111,792
           Change in reporting currency (2)                                    2,587,999              2,587,999

           ----------------------------------------------------------------------------------------------------
           Share capital in accordance with U.S. GAAP                      $ 168,933,196          $ 149,269,727
           ====================================================================================================
</TABLE>

           (ii) Other capital:

<TABLE>
<CAPTION>
           ====================================================================================================
                                                                                    2001                   2000
           ----------------------------------------------------------------------------------------------------
<S>                                                                        <C>                    <C>
           Other capital in accordance with Canadian GAAP                  $       5,282          $       9,684
           Stock-based compensation costs:
                Current year                                                  32,600,037             18,900,560
                Cumulative effect of prior years                              45,935,047             27,034,487
           Stock-based compensation costs on options exercised:
                Current year                                                    (237,750)           (24,519,022)
                Cumulative effect of prior years                             (39,630,814)           (15,111,792)
           Change in reporting currency (2)                                      968,350                968,350

           ----------------------------------------------------------------------------------------------------
           Other capital in accordance with U.S. GAAP                      $  39,640,152          $   7,282,267
           ====================================================================================================
</TABLE>


                                       56
<PAGE>

OPTIMAL ROBOTICS CORP.
Notes to Consolidated Financial Statements, Continued

For each of the years in the three-year period ended December 31, 2001
(expressed in U.S. dollars)

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


19.  Canadian/U.S. Reporting Differences (continued):

     (b)  Consolidated Balance Sheets (continued):

          (iii) Retained earnings (deficit):

<TABLE>
<CAPTION>
                                                                                2001                 2000
          ===============================================================================================
<S>                                                                   <C>                  <C>
          Retained earnings (deficit) in accordance
            with Canadian GAAP                                        $    8,475,146       $     (830,545)
          Stock-based compensation costs:
            Current year                                                 (32,600,037)         (18,900,560)
            Cumulative effect of prior years                             (45,935,047)         (27,034,487)
          Share issue costs (1)                                             (833,919)            (833,919)
          Change in reporting currency (2)                                (1,188,668)          (1,188,668)

          -----------------------------------------------------------------------------------------------
          Retained earnings (deficit) in accordance
            with U.S. GAAP                                            $  (72,082,525)      $  (48,788,179)
          ===============================================================================================
</TABLE>

          (1)  Share issue costs:

               Under  SFAS No.  123,  transactions  in which an entity  acquires
               goods and  services  from  non-employees  in exchange  for equity
               instruments are required to be recorded at fair value. In 1996, a
               total of 285,600 warrants were granted to non-employees, the fair
               value of which was  $833,919  and has been  charged to deficit as
               share issue costs.

          (2)  Change in reporting currency:

               In 1998,  the Company  adopted the U.S.  dollar as its  reporting
               currency. Under Canadian GAAP, at the time of change in reporting
               currency,  the  historical  financial  statements  were presented
               using  a  translation  of  convenience.   Under  U.S.  GAAP,  the
               financial  statements,  including  prior  years,  are  translated
               according to the current rate method. Accordingly, the cumulative
               translation  account  included  as part of  shareholders'  equity
               under Canadian GAAP does not exist for U.S. GAAP purposes.

     (c)  Accumulated Other Comprehensive Income (Loss):

          Under  U.S.  GAAP,  SFAS No.  130,  "Reporting  Comprehensive  Income"
          establishes  standards for reporting and presentation of comprehensive
          income  and its  components  in a full  set of  financial  statements.
          Comprehensive  income  consists of net  earnings  (loss) and all other
          changes in shareholders'  equity that do not result from  transactions
          with  shareholders.  These changes include cumulative foreign currency
          translation  adjustments.   The  statement  requires  only  additional
          disclosures  in the  consolidated  financial  statements;  it does not
          affect the Company's financial position or results of operations.


                                       57
<PAGE>

OPTIMAL ROBOTICS CORP.
Notes to Consolidated Financial Statements, Continued

For each of the years in the three-year period ended December 31, 2001
(expressed in U.S. dollars)

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


19.  Canadian/U.S. Reporting Differences (continued):

     (c)  Accumulated Other Comprehensive Income (Loss) (continued):

          Accumulated other comprehensive  income (loss),  which resulted solely
          from the  translation of the financial  statements up to June 30, 2000
          in accordance with the current rate method, is summarized as follows:

<TABLE>
<CAPTION>
          ============================================================================================
                                                                                2001              2000
          --------------------------------------------------------------------------------------------
<S>                                                                     <C>               <C>
          Opening balance                                               $ (3,018,233)     $   (881,700)
          Change during the year                                                  --        (2,136,533)

          --------------------------------------------------------------------------------------------
          Closing balance                                               $ (3,018,233)     $ (3,018,233)
          ============================================================================================
</TABLE>

     (d)  Supplementary information:

          Under U.S. GAAP and SEC rules, separate disclosure is required for the
          following   statement  of  operations  items.   There  is  no  similar
          requirement under Canadian GAAP.

<TABLE>
<CAPTION>
          ============================================================================================
                                                              2001              2000              1999
          --------------------------------------------------------------------------------------------
<S>                                                   <C>               <C>               <C>
          Foreign exchange gains (losses)             $    (90,110)     $  1,507,340      $   (104,002)
          Advertising expense                              124,916            49,625                --

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

     (e)  Recent accounting pronouncements:

          In July 2001, FASB issued SFAS 141,  "Business  Combinations" and SFAS
          142 "Goodwill and Other Intangible  Assets".  SFAS 141, which replaces
          APB Opinion No. 16,  revises the  accounting  standards  for  business
          combinations  and is effective for  acquisitions  initiated after June
          30, 2001.  SFAS 142,  which  replaces APB Opinion No. 17,  revises the
          standards in  accounting  for goodwill  and other  intangibles  and is
          effective for fiscal years beginning after December 15, 2001.  Similar
          standards  have been  adopted by the  Canadian  Institute of Chartered
          Accountants. Effective for the Company's fiscal year beginning January
          1, 2002,  the statement  changes the  accounting  for goodwill from an
          amortization method to an impairment-only  approach. In addition, this
          statement  requires  acquired   intangible  assets  to  be  separately
          recognized if the benefit of the intangible assets is obtained through
          contractual or other legal right,  or if the intangible  assets can be
          sold, transferred, licensed, rented or exchanged. The Company does not
          expect  SFAS  No.  142 to  have a  material  impact  on its  financial
          statements.


                                       58
<PAGE>

OPTIMAL ROBOTICS CORP.
Notes to Consolidated Financial Statements, Continued

For each of the years in the three-year period ended December 31, 2001
(expressed in U.S. dollars)

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


19.  Canadian/U.S. Reporting Differences (continued):

     (e)  Recent accounting pronouncements (continued):

          In August  2001,  FASB  issued  SFAS No.  143,  "Accounting  for Asset
          Retirement  Obligations".  SFAS No. 143 requires the Company to record
          the fair value of an asset retirement obligation as a liability in the
          period  in which  it  incurs a legal  obligation  associated  with the
          retirement of tangible  long-lived assets. This statement is effective
          for the Company's  fiscal year beginning  January 1, 2003. The Company
          does  not  expect  SFAS  No.  143 to  have a  material  impact  on its
          financial statements.

          In  October  2001,  FASB  issued  SFAS No.  144,  "Accounting  for the
          Impairment  or Disposal of Long-lived  Assets".  SFAS No. 144 provides
          accounting guidance for long-lived assets to be disposed of other than
          by sale,  and to be disposed of by sale.  This  statement is effective
          for the Company's  fiscal year beginning  January 1, 2002. The Company
          does not expect SFAS No. 144 to have an initial material impact on its
          financial statements upon adoption.

20.  Comparative figures:

     Certain  of the  comparative  figures  have been  reclassified  in order to
     conform with the current year's presentation.


                                       59
<PAGE>


Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
        AND FINANCIAL DISCLOSURE

     None.

Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

     The names, ages and positions of our directors and officers at December 31,
2001, are as follows:

<TABLE>
<CAPTION>
  Name                                    Age   Position
  ----                                    ---   --------
<S>                                       <C>   <C>
Neil S. Wechsler......................    35    Co-Chairman, Chief Executive Officer and Director
Holden L. Ostrin(1)...................    41    Co-Chairman and Director
Henry M. Karp.........................    47    President, Chief Operating Officer and Director
Gary S. Wechsler, C.A. ...............    43    Treasurer and Chief Financial Officer
Ike Tamigian..........................    42    Senior Vice-President and Chief Technology Officer
Elliot Brenhouse......................    48    Senior Vice-President and General Manager
Leon P. Garfinkle.....................    41    Senior Vice-President, General Counsel, Secretary and Director
O. Bradley McKenna, C.A...............    51    Vice President, Administration and Human Resources
Charles Morris........................    44    Vice-President, Software Development
Frank Alcaraz.........................    53    Vice-President, Operations
Catherine Rotiroti....................    43    Vice-President, Project Management
Martin J. Reiss.......................    47    Vice-President, Sales
James S. Gertler(1)...................    35    Director
Thomas D. Murphy......................    48    Director
Sydney Sweibel(1).....................    51    Director
Jonathan J. Ginns.....................    37    Director
</TABLE>

-------------
(1)  Member of Audit Committee

     As at the time of our 2000 annual and special meeting of shareholders,  the
number of directors of our company was set at five,  divided into three classes,
the first class  consisting  of one  director  and the second and third  classes
consisting  of  two  directors   each.  At  our  1998  annual   meeting  of  our
shareholders,  Messrs.  Karp and  Garfinkle,  as  members  of a single  class of
directors,  were  elected  to hold  office  until the  close of our 2001  annual
meeting of  shareholders;  at our 1999 annual meeting of  shareholders,  Messrs.
Ostrin and Gertler,  as members of a single class of directors,  were elected to
hold office until the close of our 2002 annual meeting of  shareholders;  and at
our 2000 annual and special meeting of  shareholders,  Mr. N. Wechsler,  as sole
member of a class of  directors,  was elected to hold office  until the close of
our 2003 annual meeting of  shareholders.  In July 2000, the number of directors
was  increased to six and Mr.  Murphy was appointed as a director to hold office
until the close of our 2001 annual meeting of shareholders.

     Pursuant to their employment agreements,  each of Messrs. N. Wechsler, Karp
and Ostrin must be nominated by our company for election as a director. See Item
11--"Executive Compensation."

     Executive  officers of our company are  appointed  annually by our Board of
Directors and serve until their successors are duly appointed and qualified.

     Neil S.  Wechsler has been a director of our company  since June 1995.  Mr.
Wechsler has been our Chief  Executive  Officer  since  October 1994 and was our
Chairman  from June 1996 through June 1999,  at which time Mr.  Wechsler and Mr.
Holden L. Ostrin each became Co-Chairman. Mr. Wechsler earned a Bachelor of Arts
degree from McGill  University  in 1988 and a Bachelor of Civil Law degree and a
Bachelor of Common Law degree from McGill University in 1992.

     Holden L. Ostrin has been a director of our  company  since June 1996.  Mr.
Ostrin was our Vice Chairman from June 1996 through June 1999, at which time Mr.
Ostrin and Mr. N. Wechsler each became  Co-Chairman.  From May 1995 to May 1996,
Mr. Ostrin was an independent business consultant. Prior to


                                       60
<PAGE>
April  1995,  Mr.  Ostrin was Vice  President  and  Director  of CIBC Wood Gundy
Securities Inc., a Canadian  investment  dealer. Mr. Ostrin earned a Bachelor of
Arts degree from Boston University in 1982 and a Juris Doctor degree from Boston
University School of Law in 1985.

     Henry M. Karp has been a director  and the Chief  Operating  Officer of our
company since June 1996. Since June 1999, Mr. Karp has been our President.  From
June 1996 through June 1999, Mr. Karp was our Executive Vice President, and from
December  1994  to  May  1996,  Mr.  Karp  was  our  Vice  President,   Business
Development.  Mr. Karp earned a Bachelor of Arts degree in Economics from McGill
University  in 1976 and a Master of Business  Administration  degree from McGill
University in 1978.

     Gary S. Wechsler,  C.A. has been the Treasurer and Chief Financial  Officer
of our company since May 1994. For over five years until May 1999, Mr.  Wechsler
was a partner of Victor & Gold, a  Montreal-based  accounting firm. Mr. Wechsler
continues to act as a consulting  partner for Victor & Gold. Mr. Wechsler earned
a Bachelor of  Commerce  degree from McGill  University  in 1980.  Mr.  Wechsler
obtained his Chartered Accountant designation in 1983. Neil S. Wechsler and Gary
S. Wechsler are brothers.

     Ike  Tamigian  has been the  Senior  Vice-President  and  Chief  Technology
Officer  of our  company  since  June  2000.  From June 1998 to June  2000,  Mr.
Tamigian was our Vice-President,  Software  Development.  From June 1995 to June
1998, Mr. Tamigian was our Director of Software Development. Prior to June 1995,
Mr.    Tamigian   was   the   Senior   Design    Engineer/Microprocessors    and
Microcontroller-Based  Systems at Centrodyne Inc. for more than four years.  Mr.
Tamigian  earned  a  Bachelor  of  Electrical  Engineering  degree  from  McGill
University in 1987.

     Elliot Brenhouse has been Senior  Vice-President and General Manager of our
company since June 2000.  From June 1998 to June 2000, Mr.  Brenhouse was a Vice
President  of our  company.  Prior to June  1998,  Mr.  Brenhouse  held  various
managerial positions with the aerospace division of AlliedSignal Canada Inc. for
more than five years. Mr. Brenhouse earned a Bachelor of Electrical  Engineering
degree from McGill University in 1976.

     Leon P.  Garfinkle  has been a director of our company  since June 1996 and
has been our Senior  Vice-President,  General  Counsel and Secretary  since July
2000.  Prior to July  2000,  Mr.  Garfinkle  was a partner  with the law firm of
Goodman  Phillips &  Vineberg,  in  Montreal,  Quebec.  Mr.  Garfinkle  earned a
Bachelor of Commerce  degree from McGill  University in 1982, a Bachelor of Laws
degree from the University of Toronto in 1985 and a Bachelor of Laws degree from
the University of Montreal in 1986.

     O. Bradley McKenna,  C.A. has been the  Vice-President,  Administration and
Human Resources of our company since June 1999. From March 1994 until June 1999,
Mr. McKenna was our Controller. Mr. McKenna earned a Bachelor of Commerce degree
from Loyola College in 1973 and a Master of Business  Administration degree from
McGill  University  in 1975.  Mr.  McKenna  obtained  his  Chartered  Accountant
designation in 1978.

     Charles Morris has been Vice-President, Software Development of our company
since June 2000.  From June 1998 to June 2000,  Mr.  Morris was our  Director of
Software Development. Prior to June 1998, Mr. Morris was our Manager of Software
Development.  Prior to August 1996,  Mr. Morris was a software  consultant.  Mr.
Morris earned a Bachelor of Science degree in Mathematics  and Computer  Science
from  McGill  University  in 1979,  a Bachelor  of  Theology  degree from McGill
University  in  1984  and a  Master  of  Divinity  from  the  Montreal  Diocesan
Theological College in 1985.

     Frank Alcaraz has been Vice-President, Operations of our company since June
2000.  From November 1998 to June 2000, Mr. Alcaraz was our Director of Cost and
Quality Control. Prior to November 1998, Mr. Alcaraz was Product Costing/Program
Manager with the aerospace  division of  AlliedSignal  Canada Inc. for more than
five years. Mr. Alcaraz earned a Bachelor of Mechanical  Engineering degree from
Concordia  University in 1968 and a Bachelor of Commerce  degree from  Concordia
University in 1974.

     Catherine  Rotiroti  has been  Vice-President,  Project  Management  of our
company since September 2000. From June 1997 to September 2000, Ms. Rotiroti was
our  Director  of Project  Management.  Prior to


                                       61
<PAGE>


June 1997, Ms. Rotiroti was Director MIS of Cumberland Pharmacies.  Ms. Rotiroti
earned a Bachelor  of Arts  degree in  Mathematics  and  Computer  Science  from
Concordia University in 1980.

     Martin J. Reiss has been  Vice-President,  Sales of our company  since July
2000.  Prior to July 2000, Mr Reiss was a Sales  Director of PSC, Inc. Mr. Reiss
earned a Bachelor of Science degree in Economics  from  University of Georgia in
1977.

     James S. Gertler has been a director of our company  since  November  1997.
Since May 1993,  he has been the Vice  President  of Corporate  Development  for
Daily News,  L.P. and U.S.  News and World Report,  L.P. From 1996 to 2001,  Mr.
Gertler was also the Vice President of Corporate Development of Applied Graphics
Technologies,  Inc. Mr. Gertler earned a Bachelor of Science degree in Economics
from the Wharton School of the University of  Pennsylvania in 1988 and a Masters
of Business Administration degree from Harvard University in 1992.

     Thomas D. Murphy has been a director of our  company  since July 2000.  Mr.
Murphy is the  President of Peak Tech  Consulting,  a firm that  specializes  in
information  technology  management and related  benefit  realization.  Prior to
January  2000,  Mr.  Murphy was Vice  President,  Information  Technology of The
Kroger Co. Mr. Murphy earned a Bachelor of Arts degree in Education and Sciences
from Western State College, Colorado in 1976.

     Sydney  Sweibel has been a director of our company since October 2001.  Mr.
Sweibel has more than 25 years  experience  in taxation  and business law and in
1994 established the law firm of Sweibel Novek, in Montreal, Quebec. Mr. Sweibel
earned a bachelors of arts degree from Sir George  Williams  University  in 1971
and a bachelors degree in civil law from McGill University in 1974.

     Jonathan J. Ginns has been a director of our company  since  October  2001.
Since  1996,  Mr.  Ginns  has  been  Managing  Partner  of ACON  Investments,  a
Washington  D.C.  based  private  equity  investment  firm.  Mr.  Ginns earned a
Bachelor of Arts  degree  from  Brandeis  University  in 1986,  and a Masters of
Business Administration degree from Harvard University in 1992.

Audit Committee

     The Audit Committee of our Board of Directors  performs services related to
the completion of the audit of our consolidated financial statements.  The Audit
Committee has  responsibility  for, among other things,  (i) reviewing the scope
and results of the audit with the  independent  auditors,  (ii)  reviewing  with
management and the independent auditors our consolidated  financial  statements,
(iii)  considering  the adequacy of our  internal  accounting,  bookkeeping  and
control  procedures,  and (iv)  reviewing  any  non-audit  services  and special
engagements  to be performed by the  independent  auditors and  considering  the
effects of such  performance on the auditors'  independence.  The members of our
Audit Committee are Messrs. Ostrin, Gertler and Murphy.


                                       62
<PAGE>


Item 11. EXECUTIVE COMPENSATION

Summary Compensation Table

     The  compensation  paid to the Chief  Executive  Officer  and the two other
executive   officers  of  our  company   (collectively,   the  "Named  Executive
Officers"),  for each of the three most recently  completed  fiscal years is set
forth in the following table.

<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------
                                                Annual                 Long Term
                                           Compensation ($)           Compensation
                                    ----------------------------------------------------
                                                                Common Shares Underlying
    Name and Position        Year   Salary(1)         Bonus(1)         Options
----------------------------------------------------------------------------------------
<S>                          <C>     <C>              <C>                <C>
Neil S. Wechsler             2001    435,934          189,854            345,000(2)
   Co-Chairman and          ------------------------------------------------------------
   Chief Executive Officer   2000    252,491           73,559            250,000
                            ------------------------------------------------------------
                             1999    123,166           30,791            284,000(3)
----------------------------------------------------------------------------------------
Holden L. Ostrin             2001    435,934          189,854            359,000(4)
   Co-Chairman              ------------------------------------------------------------
                             2000    252,491           73,559            250,000
                            ------------------------------------------------------------
                             1999    123,166           30,791            284,000(3)
----------------------------------------------------------------------------------------
Henry M. Karp                2001    435,934          189,854            355,000(5)
   President and            ------------------------------------------------------------
   Chief Operating Officer   2000    252,491           73,559            250,000
                            ------------------------------------------------------------
                             1999    123,166           30,791            284,000(3)
----------------------------------------------------------------------------------------
</TABLE>

(1)  We pay salaries and bonuses in Canadian  dollars.  The  respective  average
     exchange rates for 1999,  2000 and 2001 were used to convert these salaries
     into dollars:  US$1.00=Cdn.$1.4858  (1999);  US$1.00=Cdn.$1.4852 (2000) and
     US$1.00=Cdn$1.5484 (2001).

(2)  Includes   80,000  common  shares   issuable   pursuant  to  the  automatic
     replacement  ("reload")  feature of an option granted in 1997 and exercised
     in 2001.  See  footnote (3) under Item  12--"Security  Ownership of Certain
     Beneficial Owners and Management."

(3)  Includes   94,000  common  shares   issuable   pursuant  to  the  automatic
     replacement  ("reload")  feature of an option granted in 1997 and exercised
     in 1999.  See  footnote (3) under Item  12--"Security  Ownership of Certain
     Beneficial Owners and Management."

(4)  Includes   94,000  common  shares   issuable   pursuant  to  the  automatic
     replacement  ("reload")  feature of an option granted in 1997 and exercised
     in 2001.  See  footnote (3) under Item  12--"Security  Ownership of Certain
     Beneficial Owners and Management."

(5)  Includes   90,000  common  shares   issuable   pursuant  to  the  automatic
     replacement  ("reload")  feature of an option granted in 1997 and exercised
     in 2001.  See  footnote (3) under Item  12--"Security  Ownership of Certain
     Beneficial Owners and Management."


                                       63
<PAGE>


Option Grants in 2001

     The following table provides  information  regarding options granted to the
Named  Executive  Officers  during 2001.  These grants are also reflected in the
Summary Compensation Table.

<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------
                                                                             Potential Realizable
                                                                               Value at Assumed
                                                                            Annual Rates of Stock
                                                                            Price Appreciation for
                                        Individual Grants                     Option Term ($) (1)
                      -------------------------------------------------- --------------------------------
                                      Percent of
                      Common Shares      Total
                        Underlying  Options Granted Exercise
                         Options    to Employees in  Price  Expiration
Name                   Granted (#)       2001         ($)      Date           5%               10%
---------------------------------------------------------------------------------------------------------
<S>                      <C>             <C>         <C>     <C>         <C>              <C>
Neil S. Wechsler         265,000         15.53       30.05   13/06/11    5,008,045        12,691,370
                      -----------------------------------------------------------------------------------
                          80,000          4.69       35.55     5/5/02    1,788,576         4,532,604
---------------------------------------------------------------------------------------------------------
Holden L. Ostrin         265,000         15.53       30.05   13/06/11    5,008,045        12,691,370
                      -----------------------------------------------------------------------------------
                          94,000          5.51       35.55     5/5/02    2,101,577         5,325,809
---------------------------------------------------------------------------------------------------------
Henry M. Karp            265,000         15.53       30.05   13/06/11    5,008,045        12,691,370
                      -----------------------------------------------------------------------------------
                          90,000          5.28       35.55     5/5/02    2,012,148         5,099,179
---------------------------------------------------------------------------------------------------------
</TABLE>

(1)  The dollar amounts under these columns  represent the potential  realizable
     value of each option  granted  assuming that the market price of the common
     shares  appreciates in value from the date of grant to the expiration  date
     at  the 5%  and  10%  annual  rates  prescribed  by the  SEC  and  are  for
     illustration  purposes  only.  They are not  intended to forecast  possible
     future appreciation, if any, of the price of the common shares.

     Aggregated Option and Warrant Exercises in 2001 and Year-end Option Values

     The  following  table  provides  information  regarding  option and warrant
exercises  by the Named  Executive  Officers in 2001 and the amount and value of
the Named Executive  Officers'  exercised and unexercised options as of December
31, 2001.

<TABLE>
<CAPTION>
 ------------------------------------------------ --------------------------- --------------------------
                                                   Number of Common Shares
                          Option and Warrant       Underlying Unexercised       Value of Unexercised
                              Exercises                    Options            In-the-Money Options ($)
                      --------------------------- --------------------------- --------------------------
                         Common
                         Shares
                      Acquired on     Value
 Name                   Exercise  Realized ($)    Exercisable  Unexercisable  Exercisable  Unexercisable
 -------------------------------------------------------------------------------------------------------
<S>                     <C>         <C>             <C>            <C>         <C>          <C>
 Neil S. Wechsler       280,000      5,977,421      309,000(1)     390,000     1,923,550    2,706,000
 -------------------------------------------------------------------------------------------------------
 Holden L. Ostrin       394,000      8,287,952      309,000        390,000     1,653,000    2,706,000
 -------------------------------------------------------------------------------------------------------
 Henry M. Karp          450,000     10,520,431      309,000(2)     390,000     1,730,000    2,706,000
 -------------------------------------------------------------------------------------------------------
</TABLE>

(1)  Does not include an additional  14,000 common shares  issuable  pursuant to
     the reload  feature of an option  granted in 1997.  See  footnote (3) under
     Item 12--"Security Ownership of Certain Beneficial Owners and Management."

(2)  Does not include an additional 4,000 common shares issuable pursuant to the
     reload  feature of an option  granted in 1997.  See footnote (3) under Item
     12--"Security Ownership of Certain Beneficial Owners and Management."

     Executive Employment Agreements

     We have entered into employment agreements with each of the Named Executive
Officers. The agreements, the terms of which are identical, were entered into as
of May 5, 1997.  They were designed to assure us of the continued  employment of
each officer in his respective executive positions with our company.

     Under the terms of these agreements,  each of which has been amended,  each
officer  receives a minimum  annual  salary and an annual bonus in an amount not
less than 25% of the salary then in effect.


                                       64
<PAGE>


Additional bonuses may also be paid in whatever amounts and at whatever times as
determined by our Board of Directors.

     Each of these agreements provided for an option grant. The option grant was
designed to provide  incentive in a manner similar to and commensurate  with the
incentive  arrangements for senior executives of other high technology companies
of  comparable  size and scope.  The option  grants  took into  account  that no
options had been granted in 1996 and none were going to be granted in 1998. Each
officer was granted an option to acquire  400,000  common  shares at an exercise
price of $3.00 per share (collectively the "Executive  Options").  The last sale
price of the  common  shares  prior to May 4,  1997 was  $2.75  per  share.  The
Executive  Options have been  exercised  in full by each of the Named  Executive
Officers.

     The  agreements  provide that we will pay or reimburse  the officer for the
premiums for a life and disability term insurance policy with a minimum coverage
of $5,000,000.  The agreements  also provide for the forgiveness of indebtedness
of the officer if he leaves the employment of our company for any reason.

     In the event of the sale of all or  substantially  all of our assets or the
acquisition by any person of outstanding shares of our company representing more
than 50% of the votes  attached to all of our  outstanding  voting shares at any
time during the term of the agreement or within 12 months thereafter (unless the
officer  has had his  employment  terminated  for cause),  the  officer  will be
entitled to a bonus in an amount not less than the aggregate of his then-current
salary and bonus,  and the term  insurance,  for which we have been  reimbursing
premiums will be converted to a whole life insurance  policy and we will pay the
entire cost of the premium for that whole life insurance policy. In addition, in
each such circumstance,  the exercise price of all options,  warrants and rights
to  purchase  common  shares  which are held by the  officer  shall,  subject to
regulatory approval, be reduced to Cdn.$1.00 in the aggregate.

     If the officer's  services are terminated  other than for cause or death or
disability,  or in the event that the officer terminates his employment with our
company for good reason (as  defined in the  agreements)  within six months of a
change of control (as defined in the agreements), (i) we will pay to the officer
an amount  equal to five  times the sum of (a) the  highest  salary  paid to him
during the term and (b) the  highest  aggregate  bonuses  paid to him during any
year during the term,  (ii) the  exercise  price of all  options,  warrants  and
rights  held by the  officer  to  purchase  common  shares  shall be  reduced to
Cdn.$1.00  in the  aggregate  and all of such options  shall become  immediately
exercisable  and will expire  within 90 days of the  termination  of the covered
officer's  employment with our company,  (iii) the term insurance,  for which we
have been  reimbursing  premiums  will be  converted  to a whole life  insurance
policy  and we will pay the  entire  cost of the  premium  for that  whole  life
insurance policy,  and (iv) we will acquire medical  insurance  coverage for the
officer and his family for a period of five years,  equivalent  to the  coverage
already enjoyed by the officer as a senior officer of our company.

     The  agreements  each  contain a covenant on the part of the officer not to
compete with our company for a period of 24 months following the date upon which
he ceases to be an employee of our company.

Compensation of Directors

     In June 2001, options to purchase 35,000 common shares at an exercise price
of $30.05 per share were granted to each of Messrs.  Murphy and  Gertler,  being
our two  non-executive  directors at the time,  and in October 2001,  options to
purchase  35,000  common  shares at an  exercise  price of $22.45 per share were
granted  to each of  Messrs.  Ginns and  Sweibel,  our two  other  non-executive
directors.  These options become  exercisable as to 50% of the underlying shares
on the first  anniversary  of their grant and will become  exercisable as to the
remaining 50% of the underlying shares on the second anniversary of their grant.
These options expire after ten years.

     As of  2002,  we  shall  pay  an  annual  fee of  $10,000  to  each  of our
non-executive directors.


                                       65
<PAGE>


Options to Purchase Securities

     On February 7, 1997,  our Board of  Directors  adopted a share  option plan
known as the 1997 Stock Option Plan (as amended, the "1997 Plan").

     Pursuant  to the  provisions  of the 1997  Plan,  we may grant  options  to
purchase common shares to our full-time  employees or directors.  Options may be
granted for a term of up to 10 years and the term during  which such options may
be exercised  will be  determined  by our Board of Directors at the time of each
grant of options.  The conditions of vesting and exercise of the options and the
option price will be established by our Board of Directors when such options are
granted  and the option  price shall not  involve a discount  greater  than that
permitted by law and by the  regulations,  rules and policies of the  securities
regulatory authorities to which we may then be subject.

     Options  granted  under the 1997 Plan cannot be  assigned  or  transferred,
except by will or by the laws of descent and distribution of the domicile of the
deceased  optionee.  Upon  an  optionee's  employment  with  our  company  being
terminated for cause or upon an optionee being removed from office as a director
or  becoming  disqualified  from  being a  director  by law,  any  option or the
unexercised  portion  thereof  shall  terminate  forthwith.   If  an  optionee's
employment  with our company is terminated  otherwise than by reason of death or
termination  for cause, or if any optionee ceases to be a director other than by
reason  of  death,  removal  or  disqualification  by  law,  any  option  or the
unexercised  portion thereof may be exercised by the optionee for that number of
shares  only which he was  entitled  to acquire  under the option at the time of
such  termination  or  cessation,  provided  that  such  option  shall  only  be
exercisable  within 90 days after such  termination or cessation or prior to the
expiration of the term of the option,  whichever occurs earlier.  If an optionee
dies while employed by our company or while serving as a director, any option or
the  unexercised  portion  thereof  may be  exercised  by the person to whom the
option is transferred by will or the laws of descent and  distribution  for that
number of shares  only which the  optionee  was  entitled  to acquire  under the
option at the time of death, provided that such option shall only be exercisable
within 180 days  following  the date of death or prior to the  expiration of the
term of the option, whichever occurs earlier.

     Upon  its  establishment,  3,000,000  common  shares  were  authorized  for
issuance pursuant to options granted under the 1997 Plan. On April 26, 2000, our
Board of  Directors  approved,  subject  to the  approval  of  shareholders  and
regulatory  authorities,  a  3,000,000-share  increase  in the  number of common
shares  that may be  issued  under  the  1997  Plan.  Immediately  prior to this
increase,  1,111,271 common shares had been issued pursuant to the 1997 Plan and
an additional  1,888,000 common shares were underlying options outstanding under
this plan.  Shareholders and regulatory  authorities approved the April 26, 2000
amendment  to the 1997 Plan in June 2000.  On  October  12,  2001,  our Board of
Directors  approved,  subject to the  approval of  shareholders  and  regulatory
authorities,  a further 3,000,000-share  increase in the number of common shares
that may be issued  under the 1997  Plan.  Immediately  prior to this  increase,
2,543,725  common  shares  had been  issued  pursuant  to the  1997  Plan and an
additional  3,305,025 common shares were underlying  options  outstanding  under
this plan.


                                       66
<PAGE>


Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

     The  following  table  sets  forth,  as  of  February  14,  2002,   certain
information  regarding the beneficial ownership of our common shares by (i) each
person known to us to be a beneficial owner of more than 5% of the common shares
of our company,  (ii) each director and Named  Executive  Officer of our company
and (iii) all directors and officers of our company as a group.

                                                   Number and Nature
                                                           of
                                                       Beneficial
Name of Beneficial Owner                                Ownership     Percent(1)
------------------------                                ---------     ----------
Neil S. Wechsler...................................     325,750(2)(3)    2.06%
Henry M. Karp......................................     313,000(3)(4)    1.98%
Holden L. Ostrin...................................     309,000(3)(5)    1.96%
Wellington Management Company, LLP.................   1,564,440(6)      10.11%
Leon P. Garfinkle..................................        5,000(3)(7)    *
James S. Gertler...................................       17,500(8)       *
Thomas D. Murphy...................................            0(9)       *
Sydney Sweibel.....................................            0(10)      *
Jonathan J. Ginns..................................            0(11)      *
All directors and officers as a group (16 persons).    1,108,400(3)(12)  6.69%

*    does not exceed one percent (1%)

(1)  Assumes  no  issuance  of  common  shares   reserved  for  issuance   under
     outstanding options and warrants,  except for those held by the director or
     officer.

(2)  Excludes  unvested options to purchase 390,000 common shares.  Mr. Wechsler
     holds vested  options to purchase  323,000  common shares  (inclusive of an
     option to purchase  14,000  common shares which may be issued in accordance
     with the automatic replacement mechanism described in note (3) below).

(3)  On May 5, 1997, an option to purchase  94,000 common shares granted to each
     of Messrs.  N.  Wechsler,  Ostrin and Karp,  an option to  purchase  20,000
     common shares  granted to Mr. G.  Wechsler and an option to purchase  5,000
     common shares granted to Mr. Garfinkle,  were each granted upon terms which
     provide that upon its exercise,  the option shall be automatically replaced
     with an option for an equal number of shares, at an exercise price equal to
     the then  current  market  value of the  common  shares.  This  replacement
     mechanism  can  operate  twice  during the term of the  option.  The common
     shares currently underlying these replacement options have been included in
     the number of common shares beneficially owned by these optionees.

(4)  Excludes unvested options to purchase 390,000 common shares. Mr. Karp holds
     vested options to purchase 313,000 common shares (inclusive of an option to
     purchase  4,000 common  shares which may be issued in  accordance  with the
     automatic replacement mechanism described in note (3) above).

(5)  Excludes  unvested  options to purchase  390,000 common shares.  Mr. Ostrin
     holds vested options to purchase 309,000 common shares.

(6)  The address of this beneficial owner is 75 State Street,  Boston, MA 02109.
     The  information  in this  table is based  exclusively  on the most  recent
     Schedule 13G filed by this beneficial  owner with the Commission.  Based on
     the Form 13G filed by this  beneficial  owner,  it has shared  voting power
     with respect to 1,249,840 of these shares and shared dispositive power with
     respect to 1,564,440 of these shares.  We make no  representation as to the
     accuracy or completeness of the information reported.

(7)  Includes vested options to purchase 5,000 common shares.  Excludes unvested
     options to purchase 62,500 common shares.

(8)  Includes vested options to purchase 17,500 common shares. Excludes unvested
     options to purchase 47,500 common shares.

(9)  Excludes unvested options to purchase 47,500 common shares.

(10) Excludes unvested options to purchase 35,000 common shares.

(11) Excludes unvested options to purchase 35,000 common shares.

(12) Includes  vested  options,  warrants and options vesting within 60 days, to
     purchase an aggregate of 1,092,250 common shares. Excludes unvested options
     to purchase 2,030,000 common shares.


                                       67
<PAGE>


Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Indebtedness of Directors and Employees

     The aggregate  indebtedness  to our company of all employees,  officers and
directors and former employees, officers and directors is $114,485 which relates
to an unsecured  home-loan  agreement with Holden L. Ostrin,  the Co-Chairman of
our  company.  This loan is  non-interest  bearing  and is  repayable  in annual
installments  of $11,448  through  and  including  July 1, 2012.  The  foregoing
indebtedness  is  denominated in Canadian  dollars,  and has been converted at a
rate of US$1.00=Cdn.$1.4849.

Transactions with Management

     The  employment  agreements  that we have with each of the Named  Executive
Officers  provide that we will pay or reimburse the officer for the premiums for
a life  and  disability  term  insurance  policy  with  a  minimum  coverage  of
$5,000,000.  The agreements  also provide for the forgiveness of indebtedness of
the officer if he leaves the employment of our company for any reason.  See Item
11--"Executive Compensation - Executive Employment Agreement."

Item 14. EXHIBITS AND REPORTS ON FORM 8-K

(a)  Exhibits

 Exhibit
  Number                                 Exhibit
 -------  ----------------------------------------------------------------------
  3.1     Certificate and Articles of Continuance  (incorporated by reference to
          Exhibit 3.1 to the Company's  Registration Statement on Form F-1, file
          333-4950, filed with the Commission on October 24, 1996)

  3.2     By-laws  (incorporated  by reference  to Exhibit 3.2 to the  Company's
          Annual  Report  on  Form  10-K,  File  No.  0-28572,  filed  with  the
          Commission on March 8, 1999)

  3.3     Certificate  and Articles of Amendment  (incorporated  by reference to
          Exhibit 3.3 to the  Company's  Annual Report on Form 10-K for the year
          ended December 31, 2000, filed with the Commission on March 1, 2001)

  4       Specimen  certificate of the common shares  (incorporated by reference
          to Exhibit 1.1 to the Company's Registration Statement on Form 8, File
          No. 0-28572, filed with the Commission on July 17, 1996)

  10.1    Employment Agreement with Neil S. Wechsler  (incorporated by reference
          to Exhibit I to the Company's  Annual Report on Form 10-K for the year
          ended December 31, 1997, filed with the Commission on March 31, 1998)

  10.2    Amendment to Employment Agreement with Neil S. Wechsler  (incorporated
          by reference to Exhibit 10.4 to the  Company's  Annual  Report on Form
          10-K for the year ended  December 31, 1999,  filed with the Commission
          on March 8, 1999)

  10.3    Amendment to Employment Agreement with Neil S. Wechsler

  10.4    Employment  Agreement with Henry M. Karp (incorporated by reference to
          Exhibit II to the  Company's  Annual  Report on Form 10-K for the year
          ended December 31, 1997, filed with the Commission on March 31, 1998)

  10.5    Amendment to Employment  Agreement with Henry M. Karp (incorporated by
          reference to Exhibit 10.6 to the Company's  Annual Report on Form 10-K
          for the year ended  December 31, 1999,  filed with the  Commission  on
          March 8, 1999)

  10.6    Amendment to Employment Agreement with Henry M. Karp

  10.7    Employment  Agreement with Holden L. Ostrin (incorporated by reference
          to Exhibit  III to the  Company's  Annual  Report on Form 10-K for the
          year ended  December 31, 1997,  filed with the Commission on March 31,
          1998)


                                  68
<PAGE>


  10.8    Amendment to Employment  Agreement with Holden L. Ostrin (incorporated
          by reference to Exhibit 10.8 to the  Company's  Annual  Report on Form
          10-K for the year ended  December 31, 1999,  filed with the Commission
          on March 8, 1999)

  10.9    Amendment to Employment Agreement with Holden L. Ostrin

  21      List of Subsidiaries  (incorporated  by reference to Exhibit 21 to the
          Company's  Annual Report on Form 10-K for the year ended  December 31,
          1999, filed with the Commission on February 24, 2000)

  23.1    Consent of KPMG LLP

  23.2    Consent of PricewaterhouseCoopers LLP

(b)  Reports on Form 8-K

     The  following  reports on Form 8-K were filed for the year ended  December
31, 2001:

     1.   Form 8-K filed with the Commission on February 1, 2001 (Item
          7 - Exhibits); and

     2.   Form 8-K filed with the Commission on May 18, 2001 (Item 4 -
          Changes  in  Registrant's  Certifying  Accountant;  Item 7 -
          Exhibits).


                                  69
<PAGE>


                              SIGNATURES

Pursuant to the  requirements of Section 13 or 15(d) of the Securities  Exchange
Act of 1934,  the  registrant  has duly  caused  this report to be signed on its
behalf by the undersigned, thereunto duly authorized.


March 28, 2002                      Optimal Robotics Corp.


                                   By: /s/   NEIL S. WECHSLER
                                       -----------------------------------------
                                       Neil S. Wechsler, Co-Chairman
                                       (Principal Executive Officer)


                                   By: /s/   GARY S. WECHSLER
                                       -----------------------------------------
                                       Gary S. Wechsler, Chief Financial Officer
                                       (Principal Accounting Officer)


Pursuant to 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.


March 28, 2002                          By: /s/ NEIL S. Wechsler
                                            ------------------------------------
                                            Neil S. Wechsler, Director


March 28, 2002                          By: /s/ HOLDEN L. OSTRIN
                                            ------------------------------------
                                            Holden L. Ostrin, Director


March 28, 2002                          By: /s/ HENRY M. KARP
                                            ------------------------------------
                                            Henry M. Karp, Director


March 28, 2002                          By: /s/ JAMES S. GERTLER
                                            ------------------------------------
                                            James S. Gertler, Director


March 28, 2002                          By: /s/ LEON P. GARFINKLE
                                            ------------------------------------
                                            Leon P. Garfinkle, Director


March 28, 2002                          By: /s/ THOMAS D. MURPHY
                                            ------------------------------------
                                            Thomas D. Murphy, Director


March 28, 2002                          By: /s/ SYDNEY SWEIBEL
                                            ------------------------------------
                                            Sydney Sweibel, Director


March 28, 2002                          By: /s/ JONATHAN J. GINNS
                                            ------------------------------------
                                            Jonathan J. Ginns, Director


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