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

                          FORM 10-KSB

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

          For the Fiscal Year Ended December 31, 1999

                               OR

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

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

               Commission File Number: 000-30090
                   -------------------------
                    IMAGIS TECHNOLOGIES INC.
         (Name of small business issuer in its charter)

British Columbia, Canada                     Not Applicable
(State or other jurisdiction of         (I.R.S. Employer Identification No.)
incorporation or organization)

1300 - 1075 West Georgia Street
Vancouver, British Columbia                           V6E 3C9
(Address of principal executive offices)             (Zip Code)

                         (604) 684-2449
        (Issuer's telephone number, including area code)
                   _________________________

Securities registered under Section 12(b) of the Act: None
Securities registered under Section 12(g) of the Act: Common Stock, no par
  value

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

Check if there is no disclosure of delinquent filers pursuant to Item 405 of
Regulation S-B is not contained in this form, and no disclosure will be
contained, to the best of the registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form
10-KSB or any amendment to this Form 10-KSB. [ ]

State issuer's revenues for its most recent fiscal year.  $722,193

State the aggregate market value of the voting and non-voting common equity
held by non-affiliates computed by reference to the price at which the common
equity was sold, or the average bid and asked price of such common equity, as
of March 27, 2000.   $47,304,457

<PAGE>

                    IMAGIS TECHNOLOGIES INC.

                          FORM 10-KSB

              For the Year Ended December 31, 1999

                             INDEX

PART I                                                                      3

Item 1.  Description of Business                                            3
Item 2.  Description of Property                                           14
Item 3.  Legal Proceedings                                                 15
Item 4.  Submission of Matters to a Vote of Security Holders               15

PART II                                                                    16
Item 5.  Market for Common Equity and Related Stockholder Matters          16
Item 6.  Management's Discussion and Analysis                              17
Item 7.  Financial Statements                                              20
Item 8.  Changes in and Disagreements with Accountants on Accounting and
         Financial Disclosure                                              21

PART III                                                                   21
Item 9.  Directors, Executive Officers, Promoters and Control Persons;
         Compliance With Section 16(a) of the Exchange Act.                21
Item 10. Executive Compensation                                            23
Item 11. Security Ownership of Certain Beneficial Owners and Management    24
Item 12. Certain Relationships and Related Transactions                    25
Item 13. Exhibits and Reports on Form 8-K                                  26

                                      1

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NOTE REGARDING FORWARD LOOKING STATEMENTS

Except for statements of historical fact, certain information contained herein
constitutes "forward-looking statements," including, without limitation,
statements containing the words "believes," "anticipates," "intends," "expects,"
and words of similar import, as well as all projections of future results.  Such
forward-looking statements involve known and unknown risks, uncertainties and
other factors which may cause the actual results or achievements of the
Registrant to be materially different from any future results or achievements
of the Registrant expressed or implied by such forward-looking statements.  Such
factors include, but are not limited to, the following: the Registrant's limited
operating history, history of losses, risks involving new product development,
competition, management of growth and integration, risks of technological
change, the Registrant's dependence on key personnel, marketing relationships
and third party suppliers, the Registrant's ability to protect its intellectual
property rights and the other risks and uncertainties described under
"Description of Business - Risk Factors" in this Form 10-KSB.  Certain of the
forward-looking statements contained in this annual report are identified with
cross-references to this section and/or to specific risks identified under
"Description of Business - Risk Factors".

CURRENCY AND EXCHANGE RATES

The following table sets out the exchange rates for one Canadian dollar ("Cdn$")
expressed in terms of one United States dollar ("US$") in effect at the end of
the following period, and the average exchange rates (based on the average of
exchange rates on the last day of each month in such periods) and the range of
high and low exchange rates for such periods.

                                U.S. Dollars Per Canadian Dollar
                                 Fiscal Year Ended December 31,
                    1999         1998         1997         1996         1995
End of period      0.6925       0.6504       0.6999       0.7301       0.7323
High for period    0.6744       0.7105       0.7487       0.7513       0.7527
Low for period     0.6925       0.6341       0.6945       0.7235       0.7023
Average for period 0.6535       0.6714       0.7197       0.7329       0.7305

Exchange rates are based upon the noon buying rate in New York City for cable
transfers in foreign currencies as certified for customs purposes by the Federal
Reserve Bank of New York.  The noon rate of exchange on December 31, 1999 as
reported by the United States Federal Reserve Bank of New York for the
conversion of Canadian dollars into United States dollars was Cdn$1.00 =
US$0.6925.  Unless otherwise indicated in this annual report on Form 10-KSB
(the "Annual Report" or "Form 10-KSB"), all references herein are to Canadian
dollars.

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                            PART I

Item 1.  Description of Business.

History of the Company

Incorporation/Name Changes/Initial Business

Imagis Technologies Inc. ("Imagis" or the "Company"), a British Columbia
corporation, and its wholly-owned subsidiary, Imagis Cascade Technologies Inc.
("Imagis Cascade"), a British Columbia corporation, is in the business of
developing and marketing computer software applications for the law
enforcement, security and gaming industries.

Imagis was incorporated on March 23, 1998, as a British Columbia corporation
under the name 561648 B.C. Ltd., and commenced trading on the Vancouver Stock
Exchange (the "VSE") on September 29, 1998 as a Venture Capital Pool ("VCP").
A VCP is a "blind pool" company formed by qualified individuals that raises
funds through an initial public offering ("IPO") of securities, the proceeds
of which must be used primarily to investigate business opportunities for
acquisition by the VCP.  As a VCP, Imagis' sole business from the time of
incorporation was to investigate business opportunities with a view to
completing a Qualifying Transaction under the applicable rules of the VSE.  A
Qualifying Transaction is a transaction whereby the VCP: (a) issues or makes
issuable securities representing more than 25% of its securities issued and
outstanding immediately prior to the issuance in consideration for the
acquisition of significant assets; (b) enters into an arrangement,
amalgamation, merger or reorganization with another issuer with significant
assets, whereby the ratio of securities which are distributed to the security
holders of the VCP and the other issuer results in the security holders of the
other issuer acquiring control of the resulting entity; or (c) otherwise
acquires "significant assets", but excludes a transaction whereby, prior to
completion of the Qualifying Transaction, a VCP issues for cash securities
representing more than 25% of its securities issued and outstanding
immediately prior to the issuance.   "Significant assets" means assets other
than cash or securities of another issuer which, when acquired by the VCP,
results in the VCP meeting the minimum listing requirements set by the VSE for
a venture company, in accordance with the applicable rules of the VSE.  On
July 6, 1998 Imagis changed its name from 561648 B.C. Ltd. to Colloquium
Capital Corp.

On February 23, 1999, Imagis acquired all of the outstanding shares of Imagis
Cascade, thereby completing a Qualifying Transaction and becoming classified
as a venture company by the VSE.  As a result of the acquisition, the Company
changed its name from Colloquium Capital Corp. to Imagis Technologies Inc. on
February 25, 1999.

Acquisition of Imagis

On February 23, 1999, Imagis acquired one hundred percent (100%) of the shares
in the capital of Imagis Cascade pursuant to a Share Purchase Agreement among
Imagis, Imagis Cascade and the former shareholders of Imagis Cascade (the
"Former Imagis Shareholders") dated December 14, 1998 (the "Imagis
Acquisition").  Imagis paid a purchase price of $2,632,000, plus contingent
additional consideration of up to $400,000 (see discussion of contingency
below) to the Former Imagis Shareholders, allocated as described below.  The
Former Imagis Shareholders were Pacific Cascade Consultants Ltd. ("Pacific"),
Sonora Logging Limited ("Sonora") and 385078 B.C. Ltd. ("B.C. Ltd").  Pacific,
a Canadian company is owned by FWC Holdings Ltd., an entity controlled by
Frederick W. Clarke, a current director of Imagis, and Andrew Amanovich, the
current Chief Technology Officer of Imagis.  Sonora, a private Canadian
company, is controlled by Pamela Markie Clarke, the daughter of Mr. Clarke.
B.C. Ltd., a private Canadian company, has no other affiliation with Imagis
other than as a former shareholder of Imagis Cascade.

Under the terms of the Share Purchase Agreement, the parties thereto agreed to
the following:

(a)  Imagis collectively paid Pacific, Sonora and B.C. Ltd. $2,632,000, plus
contingent additional consideration of up to $400,000.  The purchase price was
paid to the Former Imagis Shareholders as follows:

(i)  $100,000 to Pacific, by application of the sum of $100,000 paid by
Imagis to Imagis Cascade on behalf of the Former Imagis Shareholders pursuant
to a Confidentiality and Standstill

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Agreement among Imagis, Imagis Cascade and the Former Imagis Shareholders,
dated October 6, 1998, in part payment of the purchase price (which amount
has been applied),

(ii) $1,632,000 by allotment and issue to the Former Imagis Shareholders and
First Capital Invest Corp. ("FCIC") (a corporation to which the Former Imagis
Shareholders were indebted in connection with a $350,000 bridge loan provided
to Imagis Cascade by FCIC) of 3,400,000 shares of common stock of Imagis (the
"Shares") at $0.48 per Share allocated as follows:

(A)  1,764,706 Shares to Pacific,
(B)  441,176 Shares to Sonora,
(C)  294,118 Shares to B.C. Ltd. and
(D)  900,000 Shares to FCIC

The Shares are subject to a one-year hold period;

(iii)     $900,000 by certified cheque to be paid to Pacific on or before April
30, 1999; $150,000 of this amount has been paid through the subscription by
Pacific on March 19, 1999 on a private placement basis for 267,857 Shares at
$0.56 per Share, and the balance of which was paid and accepted on May 6,
1999; and

(iv) up to $400,000 payable to Pacific if, as and when, certain warrants
issued by Imagis are exercised to raise up to $400,000 net to Imagis'
treasury.

(b)  In consideration for renouncing his right to acquire up to a 6% equity
interest in Imagis Cascade, Imagis issued a warrant to purchase 400,000 Shares
at an exercise price of $1.25 per share to Iain Drummond (the "Drummond
Warrant").  See "ITEM 6 - EXECUTIVE COMPENSATION".

(c) In consideration for locating and negotiating an employment agreement
between Imagis and Iain Drummond, Imagis issued a warrant to purchase 24,000
Shares at an exercise price of $1.25 per Share to Armitage Associates Ltd.
(the "Armitage Warrant").

History of Business

Imagis' wholly owned subsidiary, Imagis Cascade, acquired substantially all of
its current assets pursuant to two technology purchase agreements, dated March
6, 1998, between Imagis Cascade, Pacific and B.C. Ltd.  Pursuant to the
purchase agreements, Pacific and B.C. Ltd. became the holders of all of the
issued and outstanding shares of Imagis Cascade.  Pacific received 3,000,000
common shares of Imagis Cascade and B.C. Ltd. received 400,000 common shares
of Imagis Cascade.  Pacific subsequently transferred 600,000 Imagis Cascade
common shares to Sonora.

Pacific was established in 1989 by Andrew Amanovich, Imagis' Chief Technology
Officer and Frederick Clarke, a director of Imagis.  Pacific's core business
was the engineering of complex timber harvesting systems, the management of
map-based data and the development of 3D landscape visualization technology.

The Imagis Cascade technology and Imagis' initial customer base was developed
originally by B.C. Ltd., a company incorporated in 1990 and founded by Penny
Walker of Victoria, B.C.  B.C. Ltd. was a software developer and reseller in
the area of geographical information systems and remote sensing services for
the natural resources industry.  B.C. Ltd. also developed and marketed several
software systems to manage digital images and recognized the commercial
opportunity for software tools that manage digital image databases.

In July 1994, Pacific entered into a strategic alliance with B.C. Ltd. and
loaned B.C. Ltd. funds to provide working capital in exchange for an option to
acquire shares.  The two companies worked cooperatively on the development of
several software projects.  In 1995, Pacific acquired the operations and
revenues of B.C. Ltd., as well as its intellectual property, the rights to the
developed products, products under development and source code.

Pursuant to two technology purchase agreements dated March 6, 1998, Pacific
and B.C. Ltd. sold to Imagis Cascade all rights to the business that is now
carried on by Imagis and the intellectual property.  Under these agreements,

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Pacific and B.C. Ltd. became the holders of all of the issued and outstanding
shares of Imagis Cascade.  The terms of these technology purchase agreements
were as follows:

- Agreement between B.C. Ltd. and Imagis Cascade:  B.C. Ltd. sold its business
and technology to Imagis Cascade for a purchase price of $600,000 which paid
by issuance of 400,000 shares of Imagis Cascade at a price of $1.50 per share.

- Agreement between Pacific and Imagis Cascade:  Pacific sold its business and
technology to Imagis Cascade for a purchase price of $1.5 million which paid
by issuance of 3,000,000 shares of Imagis Cascade at a price of $0.50 per
share plus a royalty equal to 5% of gross sales of the software products (the
"5% Royalty").

The technology purchase agreements transferred the technology associated with
CABS, ID-Inmate, Fraud-ID, ENVISAGE, ELMS AND AIREIS to Imagis Cascade,
including all source code, object code, link libraries, applications function
calls, file structures, screen layouts, hardware integration routines and
documentation for both current and past releases.  All relevant documentation,
including manuals and brochures used in operation, manufacturing, maintenance
and marketing of the products was included.

As part of the acquisition by Imagis of all the issued and outstanding shares
of Imagis Cascade, Pacific agreed to cancel the 5% Royalty.

The technology purchase agreements described above transferred the technology
associated with CABS, ID-Inmate, Fraud-ID, ENVISAGE, ELMS AND AIREIS to Imagis
Cascade, including all source code, object code, link libraries, applications
function calls, file structures, screen layouts, hardware integration routines
and documentation for both current and past releases.

Imagis' Chief Technology Officer, Andrew Amanovich and its Chief Engineer,
David Lutes, who was instrumental in developing the original Imagis Cascade
product line, continue their work in the research, development, applications
of all software and the core technology within Imagis' subsidiary, Imagis
Cascade.

Business of the Company

General Overview

Imagis develops, markets, implements and supports computer software
applications for digital identification and image management to clients in the
law enforcement and security industries.  Imagis' principal product is the
Computerized Arrest and Booking System ("CABS") which is used by law
enforcement agencies for compiling information associated with booking a
suspect, including capturing images of the person and any identifying marks.
In addition, Imagis has developed, markets, implements and supports other
computer software applications for the law enforcement industry, including
ID-INMATE, an integrated information and video imaging system for use in
corrections facilities admission and discharge, and for the security industry,
namely ENVISAGE, an electronic identification and security access system.
Imagis has also developed a facial recognition system for the law enforcement
and security industries called ID-2000.

Law enforcement agencies face a common challenge of a need for time and cost
efficient arrest and booking systems.  Historically, law enforcement agencies
have relied on manual arrest and booking systems.  More recently, the law
enforcement industry has begun to recognize the need for automated systems to
increase the efficiency of police officers and to control costs.  CABS
substantially reduces the time needed for an officer to process and book
offenders into the judicial system.  By removing the "paper and picture"
element from this tedious procedure, Imagis believes that an officer can
process a repeat offender in less than one third the time required by manual
systems.  This translates directly into substantial cost savings for police
departments of any size, in addition to the operational benefits that they
gain, such as faster identification of suspects.

Products

Current Products

Imagis' current products are designed to run on PCs under Windows 95, Windows
98, and Windows 2000.  The software's graphical user interface is based on
Microsoft ACCESS and the underlying database is built on ORACLE

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RDBMS and SRL SERVER.  The software is modular in design, permitting specific
functions to be added to meet individual client preferences.

The current release of CABS is Version 7.0 which provides fast program
execution due to its use of 32-bit program code and specialized code for
enhancing data sharing over wide-area networks.  Imagis has integrated its
ID-2000 proprietary facial recognition software, as part of the image analysis
portion of the CABS software.  See "Note Regarding Forward Looking
Statements."

CABS - Computerized Arrest & Booking System

CABS is an integrated information and imaging system developed for the Royal
Canadian Mounted Police ("RCMP") and other law enforcement agencies.  CABS
currently has separate modules for offenders, non-offenders, staff and
evidence.  The offender module automates booking activities and reports, the
production of mugshots and the generation of line-ups.  Pictures of criminal
suspects, as well as their marks, scars, tattoos and fingerprints, are all
captured in the offender module of CABS.  The non-offender module provides an
electronic database of persons, such as teachers and day-care providers, who
are required to be registered with the RCMP.  The staff module provides for
the creation and management of staff identification.  The evidence module
provides for electronic management of photographs of evidence obtained in
connection with a criminal arrest.

The CABS system is designed to collect the same information that would be
recorded manually during a traditional booking situation and to store all of
the information and photo images that are required in connection with
arresting and prisoner reports.  Compared to manual bookings, CABS offers the
following advantages:

- captures more information than manual booking systems and allows the
information to be retrieved quickly from multiple locations;

- allows offender information to be used for multiple inquiries and report
generating purposes;

- generates automated line-ups based on user-specified criteria;

- provides a variety of required reports and other documents with the
offender's photograph;

- allows the collection and retrieval of photographs of the offender,
including identifying physical marks such as tattoos, scars and other
markings;

- creates a database of offender information for access in the case of
subsequent arrests or for generation of suspect lists;

- can be integrated with livescan electronic fingerprinting systems and with
other computer software systems; and

- integrates with key dispatch systems, digital composite drawing programs and
digital fingerprint systems to provide a complete police information
management system.

CABS advanced data sharing capabilities allow different authorities to access
decentralised information.  Imagis has recently implemented its first regional
data sharing system.  This allows RCMP detachments to share live information
entered by their individual detachments.  The major advantage of this data
sharing system is that it allows one detachment to search a larger database
containing offender information when booking a suspect, increasing the
probability that the booking officer will discover prior arrests for the same
individual.  The RCMP does not retain any ownership interest or residual
rights over the CABS system.

ID-INMATE - Corrections Admission/Discharge System

ID-INMATE is an integrated information and video imaging system developed for
correction agencies.  ID-INMATE is a variant of CABS developed to manage
records in corrections agencies, hospitals and other institutions.  ID-INMATE
currently has separate modules for the admission and discharge of persons to
and from corrections agencies and for staff records.  The admission and
discharge module automates admissions and discharge activities and reports.
It is designed to collect the same information that would be recorded manually
during a traditional admission or discharge situation, providing image capture
of the inmate's face and other physical features, as well as personal effects.
In addition, this module provides automatic line-up creation.  The staff
module provides for the creation and management of staff identification using
staff photos to create identification cards and staff photo listings.

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ENVISAGE - Electronic Identification System

ENVISAGE is an electronic identification system developed specifically for the
security market.  ENVISAGE enables the electronic production of customised
full-color identification cards.  These identification cards can be produced
within minutes and include options such as photographs, graphic images, text,
barcodes, and fingerprints.  In addition, ENVISAGE integrates advanced photo
identification capabilities, including signature, single impression
fingerprint, ghosting, and access control.  In most cases, ENVISAGE can be
integrated with existing security systems.

ID-2000 - Image Detection and Biometric Facial Recognition

This is the key software product that is positioning Imagis in the biometric
market.

ID-2000 is a facial recognition software system designed for the law
enforcement, gaming and security industries that captures an offender's image,
typically via a video camera and then creates a biometric code that can be
compared to other encoded images in a database.  ID-2000 allows an individual
in a database to be identified in seconds, using only an image or photograph
as the search criterion.  Matching records will be displayed as a list,
together with their associated thumbnail images.  From this, any record can be
selected and full details, together with a full size image, displayed.
Extensive linkages enable the database to be mined to display details of
aliases, known associates, vehicles, etc., as well as images of other
distinguishing features such as marks, scars and tattoos.  Where appropriate,
details of previous crimes, gang memberships, etc. can also be displayed.

Markets

CABS has been installed in more than 35 sites in Canada and the United States.
As part of its customer support activities, Imagis has assisted in the
development of a CABS Users Group in British Columbia.  Besides serving to
coordinate user requests for new features, the Users Group has assisted in
gaining acceptance of the product by the British of Columbia Association of
Chiefs of Police and led to approval for a pilot project to link Greater
Vancouver mainland police departments into a regional data-sharing system.

The security industry targeted by Imagis consists of organizations
implementing software-based security systems.  ENVISAGE and its predecessor
product have been installed in over 60 sites in the U.S. and Canada, including
a number of Revenue Canada offices.  This system has been interfaced to
student registration systems on various college and university campuses, as
well as to point-of-sale systems in hospitals, transportation facilities, and
other commercial locations.

Competition

The law enforcement and security software markets are highly competitive and
fragmented, consisting of many fast growing rapidly changing competitors. The
principle competitive factors affecting the market for Imagis' products
include: supplier competency, product functionality, performance and
reliability of technology, depth and experience in distribution and
operations, ease of implementation, rapid deployment, customer service and
price.  There are at least twenty-seven companies which have commercially
available products that have some application similarities to Imagis' products
for CABS, ID-INMATE and POSITIVE-ID.  Twenty-one of these companies have
products that include arrest and booking or jail management functions and six
of them market facial recognition software.  The following software products
compete most directly with CABS and ID-INMATE:

     IWS (ImageWare Software)
     Smith & Wesson - EBS (Electronic Booking System)
     Spillman - BookMate and Jail Management

The Company believes that IWS' installations are across the United States,
including statewide mugshot/booking software installed in Arizona.  Smith &
Wesson markets comprehensive software portfolio for use in the law enforcement
and security industries.  Spillman's market is primarily located in Utah and
the Pacific Northwestern United States.  These companies are likely to be the
most significant competitors to Imagis in their respective geographic areas.
Imagis believes, however, that its strong reference base in Canada will
provide it with a competitive advantage in expanding into new geographic
markets.

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In the area of facial recognition, Miros (TrueFace), Smith & Wesson (ASID -
Automated Suspect Identification System), Vissage Technology (Vissage Gallery)
and Visionics (FaceIt) are companies that have products with application
similarities to ID-2000.

It is also evident that there are large high technology companies with
sophisticated image capturing and processing software, particularly associated
with facial image analysis and recognition.  These companies appear to be
focused on other industries where image analysis has commercial,
entertainment, scientific, or medical applications, but they could also enter
the law enforcement and security areas by adding the appropriate software
modules.

Intellectual Property Rights

The Company's success is dependent on its ability to protect its intellectual
property rights.  Imagis relies principally on a combination of copyright and
trade secret laws, non-disclosure agreements and other contractual provisions
to establish and maintain its proprietary rights.

As part of its confidentiality procedures, Imagis generally enters into
nondisclosure and confidentiality agreements with each of its key employees,
consultants and business partners and limits access to and distribution of its
technology, documentation and other proprietary information.  In particular,
Imagis has entered into non-disclosure agreements with each of its employees
and business partners.  The terms of the employee non-disclosure agreements
include provisions requiring assignment to Imagis of employee inventions.  In
addition, Imagis' source code for its software products is maintained in a
controlled environment within the technology and development group.  For
security purposes, a copy of the source code is maintained in a lock-box at
the Bank of Montreal in Vancouver, accessible only by the Board of Directors
of Imagis.  There can be no assurance that Imagis' efforts to protect its
intellectual property rights will be successful.  Despite Imagis' efforts to
protect its intellectual property rights, unauthorized third parties,
including competitors, may from time to time copy or reverse engineer certain
portions of Imagis' technology and use such information to create competitive
products.

Policing the unauthorized use of Imagis' technology is difficult, and, while
Imagis is unable to determine the extent to which piracy of Imagis' technology
exists, such piracy can be expected to be a persistent problem.  In
addition, the laws of certain countries in which Imagis' technology is or may
be licensed do not protect its products and intellectual property rights to
the same extent as do the laws of Canada and the United States.  As a result,
sales of products based on Imagis' technology in such countries may increase
the likelihood that Imagis' technology might be infringed upon by unauthorized
third parties.

It is possible that the scope, validity and/or enforceability of Imagis'
intellectual property rights could be challenged by competitors or other
parties.  Imagis is currently in the process of recording its interests in
certain of its intellectual property rights with relevant authorities in
applicable jurisdictions.  The results of such challenges before
administrative bodies or courts depend on many factors which cannot be
accurately assessed at this time.  Unfavorable decisions by such
administrative bodies or courts could have a negative impact on Imagis'
intellectual property rights.  Any such challenges, whether with or without
merit, could be time consuming, result in costly litigation and diversion of
resources, cause product shipment delays or require Imagis to enter into
royalty or licensing agreements.  Such royalty or licensing agreements, if
required, may not be available on terms acceptable to Imagis or at all.  In
the event of a claim of product infringement against Imagis and Imagis'
failure or inability to license the infringed or similar technology, Imagis'
business, operating results and financial condition could be materially
adversely affected.

Imagis has not registered any trademarks in the Canada, the United States or
elsewhere.

Research & Development

The integrated information and video imaging systems is characterized by rapid
technological change and increasing user requirements.  Accordingly, Imagis
must be able to provide new products to modify and enhance existing products
on a timely and continuing basis in order to be competitive.  To accomplish
this objective, Imagis' strategy is to utilize proven technology to further
enhance its existing products and to create new products.  Where appropriate,
Imagis may acquire complementary technology developed by third parties for
integration into Imagis' products.

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Imagis personnel have considerable experience and expertise in the development
of integrated information and video imaging systems specifically designed for
use in the law enforcement industry.  Imagis' chief technology personnel were
initial developers of Imagis' imaging products and have been involved in the
development of each of the eight versions of the CABS product.  Imagis'
software product development personnel employ modular software architecture,
object-oriented software development and graphical user interface design
technologies to develop scaleable, modular products.

In order to add significant additional value to Imagis' product line and a
major differentiator to CABS and other Imagis products, Imagis plans to
release ID-2000 commercially during 1999.  Imagis plans further enhancements
to ID-2000 to increase its market share in the law enforcement industry.  In
addition, Imagis plans to further enhance the product for introduction into
the security industry, particularly in the area of access control.

As of December 31, 1999, Imagis' research and development staff consisted of
nine employees in the Victoria office and the Chief Technology Officer in our
Vancouver head office.

During the fiscal year ended December 31, 1999, Imagis' total expenditures for
research and development was $614,509.  Management believes that timely and
continuing product development is critical to Imagis' success and plans to
continue to allocate significant resources to product development.

Plan of Operation and Business Strategy

Imagis' objective is to be a leading provider of biometric facial recognition
systems in Canada, the United States and globally.  Imagis' strategy
encompasses the following key elements:

Leverage core capabilities to develop configurable products.  Imagis has
substantial experience and expertise in (I) software application development
for integrated information and video imaging systems; (ii) a variety of
computer platforms and operating environments; (iii) the technical issues
associated with installing an integrated information and video imaging system;
and (iv) the business and operating issues in planning, managing and
installing integrated information and video imaging systems.  Imagis intends
to utilize these core capabilities to develop configurable products that can
be scaled and expanded to meet a customer's specific requirements.

Expand market share of automated arrest and booking and facial recognition
systems.  Imagis designed CABS to the specifications of the RCMP and has
installed the system in over 30 RCMP detachments, including the two largest
detachments in Canada.  Imagis intends to focus on expanding its existing
market share in the area of automated arrest and booking systems in Canada and
the United States by incorporating enhancements, such as ID-2000, and increasing
the functionality of CABS, and by continuing to provide its customers, through
its network of business partners, with superior service and support.

Leverage key business partner relationships.  To market its products to a
wider variety of potential customers, Imagis has developed key relationships
with a select number of companies in Canada, the United States and Mexico to
resell or market Imagis' products directly or as a part of an integrated
solution and to provide consulting, integration and after-sales product
support.  Imagis plans to add additional business partner relationships to
enhance the distribution of its products world-wide.

Business Partners

Imagis has several business partners in Canada and the United States that
resell and market Imagis' products and that provide consulting, integration
and after-sales product support to Imagis' clients.  Imagis believes that
business partners can provide substantial sales leverage, including access to
established client bases, and can serve as a source of qualified sales and
technical staff at a relatively low cost.  Imagis plans to expand the business
partner network, thereby minimizing the cost of establishing new offices and
training personnel.  With its current business strategy of developing business
partners and utilizing value-added resellers ("VARs") for both sales and
installation support services, Imagis intends to leverage its position in
Canada to secure key installations in the United States.  See "Note Regarding
Forward Looking Statements."

Imagis currently has business partner agreements with the following companies:
Maritime Information Technology Inc. ("MITI"); Impact Solutions Corporation;
West Covina Service Group; Radian Inc.; Vilsa; Orion Scientific Systems Inc.;
Cerulean Technology Inc.; Fujitsu (Malaysia); ExWay; RCM Technologies; and
PICS SmartCard.

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The major terms of the business partner agreements are similar.  All agreements
are non-exclusive; typically have a three-year term; define a relationship in
which the business partner is responsible for selling Imagis' products to
end-users, and subsequently providing first-line customer support, while
Imagis provides technical support to the business partner.  The business
partner earns a discount on list price of Imagis' products, typically 40%.
Imagis frequently integrates its products with those of its business
partners.

MITI is a large information technology provider in Canada with offices in
Toronto, Ottawa, Saint John, Fredericton, Moncton and Halifax.   MITI provides
information technology sales, service, and support to large corporations and
government agencies in Canada, through their staff of over 450. Under MITI's
agreement with Imagis, MITI is authorized to sell all of Imagis' products in
the Atlantic Provinces of Canada (including New Brunswick, Nova Scotia, Prince
Edward Island, and Newfoundland), and the Province of Ontario.

Impact is a California-based developer of law-enforcement software, which
Imagis believes is complimentary to Imagis' products.   Under its agreement
with Imagis, Impact is authorized to sell all of Imagis' products in the
United States.

The West Covina Service Group is a police department which markets
law-enforcement products to other police departments.  Based east of Los
Angeles, West Covina has customer base of 30 departments, mostly on the US
West Coast, which uses their text-based Record Management System ("RMS").
West Covina recently installed CABS to add imaging facilities to RMS, and are
now promoting this capability to their users.

Radian is a Virginia-based developer of comprehensive management systems for
the jail-administration market. Radian has signed an agreement with Imagis to
use CABS as an arrest and booking module as part of their jail administration
product.

Vilsa is a systems integrator based in Mexico City.  Vilsa has offices
throughout Central and South America.  Under their agreement with Imagis,
Vilsa is authorized to sell all Imagis products throughout Central and South
America.

ORION Scientific Systems is an international software consulting firm founded
in 1978.  Based in Sacramento, California, Orion has approximately 140
employees.

Cerulean Technology Inc. develops and markets advanced real-time wireless
technology for application in a number of markets, including cable, HVAC,
financial services, healthcare, utilities, and public safety.  Imagis is
working with Cerulean and their partner network on the provision of our
applications in a wireless environment.  Based in Marlborough, Massachusetts,
Cerulean was founded in 1992.

Fujitsu in Kuala Lumpur, Malaysia are the principal supplier of IT systems to
the Royal Malaysian Police.  We are currently working with them on a project
to supply CABS / ID-2000 to the Police.  They also have a significant
opportunity to supply ID-2000-based security systems to the Malaysia-based
Star Cruise Group, for security purposes in cruise ships.

ExWay is a Tokyo, Japan based company which is 80% owned by NTT.  Their focus
is on SmartCards, and we are working with them on adding facial recognition to
the card which NTT plans to propose for the National Social Security Systems
in Japan and Peru.  NTT have requested our agreement for them to sell this
system anywhere in the world.

RCM Technologies is a Pennsauken, New Jersey based company which was founded
in 1971.  They are a provider of Business, Technology and Resource solutions
in Information Technology and Professional Engineering to customers in the
corporate and government sectors.  RCM is promoting CABS through its offices
in North America.

PICS SmartCard is a Burnaby, British Columbia company which was founded in
1967.  To capture high-quality images can require specialist hardware,
particularly in terms of cameras and capture cards.  As the provision of these
is not part of our business model, we have come to an agreement with PICS
SmartCard, who have offices in Seattle and Vancouver, to provide the necessary
hardware components to our Business Partners when required.

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Under the business partner agreements, the Business Partners have agreed to
sell Imagis' products as part of their standard product line.  While they
typically have designated territories (as described above), the Business
Partners may sell Imagis' products anywhere they have opportunities, including
Canada, the United States and other countries.  Imagis provides training and
ongoing support, through training and support programs, on product
demonstration, operation, installation, and customer support to the Business
Partners' staff.  The Business Partners have agreed to promote the products
and maintain sales and support teams to handle these functions.

During 1999, Imagis added several partners in the United States, Japan and
Latin America.

Sales & Marketing

Other than in western Canada, Imagis sells its products exclusively through
its business partner network.  Sales within western Canada are conducted
principally by Imagis' direct sales force.  Imagis' target customer typically
prefers to purchase from a supplier with whom they have an established
relationship, who understands their business needs, can provide local
demonstrations and demonstration systems, can directly supply hardware
components in addition to software and provides local software support within
the customer's time zone.  By relying on its local direct sales force in
British Columbia and the local sales force of its business partners elsewhere,
Imagis believes it satisfies its customers' preferences, while increasing the
sales resources promoting the product.

Imagis offers its customers the option to license or subscribe to its software
products.  Under the subscription model, a customer is charged 1/24th of the
license price per month for the duration of the subscription agreement,
thereby providing Imagis an ongoing revenue stream.  The subscription model
provides customers with free software upgrades and updates.  The Newmarket,
Ontario detachment of the RCMP was the first customer to use the subscription
model.

The modular design of CABS enables the installation of an inexpensive
entry-level departmental system for approximately $20,000 (where budgetary
considerations preclude the user from investing in a larger system), while
providing the opportunity to enhance the system over time as funds become
available.  A comprehensive system for a large police department costs up to
approximately $100,000. CABS is priced on a server basis, the license covering
the specific number of police officers using the server.  The price per
officer declines incrementally as the total number of police officers
increases.

Imagis focuses its marketing efforts primarily on the CABS product.  Imagis
markets CABS directly to police detachments through Internet advertising
(www.imagis-cascade.com) and through attendance at national and international
law enforcement conferences and trade shows.  Imagis also relies on its
business partners to market CABS directly to police detachments in their local
sales region.

Employees

As of December 31, 1999, Imagis had 20 full-time employees, including 7 in
research and development, 4 in marketing and sales, 3 in customer support and
6 in management, finance and administration.  Imagis' success will depend in
large part on its ability to attract and retain skilled and experienced
employees.  None of Imagis' employees are covered by a collective bargaining
agreement and Imagis believes that its relations with its employees is good.
Imagis does not currently have any key man life insurance on any of its
directors or executive officers.

Risk Factors

Imagis' business is subject to the following risks. These risks also could
cause actual results to differ materially from results projected in any
forward-looking statement in this report.

Limited Operating History; History of Losses; Increased Expenses

Imagis commenced operations in March 1998 and therefore has only a limited
operating history upon which an evaluation of its business and prospects can
be based.  Imagis and its predecessors incurred net losses of $2,141,386 and
$1,320,439 in the years ended December 31, 1999 and December 31, 1998,
respectively.  Imagis has never been profitable and there can be no assurance
that, in the future, Imagis will be profitable on a quarterly or annual basis.
Imagis plans to increase its operating expenses to expand its sales and
marketing operations, fund greater levels of research and development, broaden
its customer support capabilities and increase its administration resources.
In view of the rapidly evolving nature of Imagis' business and markets and
limited operating history,

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Imagis believes that period-to-period comparisons of financial results are not
necessarily meaningful and should not be relied upon as an indication of
future performance.

New Product Development

Imagis expects that a significant portion of its future revenue will be
derived from the sale of newly introduced products and from enhancement of
existing products.  See "Forward-Looking Statements." Imagis' success will
depend in part upon its ability to enhance its current products on a timely
and cost-effective basis and to develop new products that meet changing market
conditions, including changing customer needs, new competitive product
offerings and enhanced technology.  There can be no assurance that Imagis will
be successful in developing and marketing on a timely and cost-effective basis
new products and enhancements that respond to such changing market conditions.
If Imagis is unable to anticipate or adequately respond on a timely or
cost-effective basis to changing market conditions, to develop new software
products and enhancements to existing products, to correct errors on a timely
basis or to complete products currently under development, or if such new
products or enhancements do not achieve market acceptance, Imagis' business,
financial condition, operating results and cash flows could be materially
adversely affected.  In light of the difficulties inherent in software
development, Imagis expects that it will experience delays in the completion
and introduction of new software products. See "Forward-Looking Statements."

Lengthy Sales Cycles

The purchase of a computerized arrest and booking system is often an
enterprise-wide decision for prospective customers and requires Imagis
(directly or through its business partners) to engage in sales efforts over an
extended period of time and to provide a significant level of education to
prospective customers regarding the use and benefits of such systems. Due in
part to the significant impact that the application of CABS has on the
operations of a business and the significant commitment of capital required by
such a system, potential customers tend to be cautious in making acquisition
decisions.  As a result, Imagis' products generally have a lengthy sales cycle
ranging from three to nine months.  Consequently, if sales forecast from a
specific customer for a particular quarter are not realized in that quarter,
the Company may not be able to generate revenue from alternative sources in
time to compensate for the shortfall.  The loss or delay of a large contract
could have a material adverse effect on Imagis' quarterly financial condition,
operating results and cash flows, which may cause such results to be less than
analysts' expectations.  Moreover, to the extent that significant contracts
are entered into and required to be performed earlier than expected, operating
results for subsequent quarters may be adversely affected.

Dependence on Key Personnel

Imagis' performance and future operating results are substantially dependent
on the continued service and performance of its senior management and key
technical and sales personnel.  Imagis intends to hire a number of additional
technical and sales personnel.  See "Forward-Looking Statements." Competition
for such personnel is intense, and there can be no assurance that Imagis can
retain its key technical, sales and managerial employees or that it will be
able to attract or retain highly qualified technical and managerial personnel
in the future.  The loss of the services of any of Imagis' senior management
or other key employees or the inability to attract and retain the necessary
technical, sales and managerial personnel could have a material adverse effect
upon Imagis' business, financial condition, operating results and cash flows.
With the exception of Andy Amanovich, Chief Technology Officer, and David
Lutes, Chief Engineer, Imagis does not currently maintain "key man" insurance
for any senior management or other key employees.

Dependence on Marketing Relationships

Imagis' products are primarily marketed by Imagis' business partners.  Imagis'
existing agreements with business partners of its products are nonexclusive
and may be terminated by either party without cause.  Such organizations are
not within the control of Imagis, are not obligated to purchase products from
Imagis and may also represent and sell competing products.  There can be no
assurance that Imagis' existing business partners will continue to provide the
level of services and technical support necessary to provide a complete solution
to Imagis' customers or that they will not emphasize their own or third-party
products to the detriment of Imagis' products.  The loss of these business
partners, the failure of such parties to perform under agreements with Imagis
or the inability of Imagis to attract and retain new business with the
technical, industry and application experience required to market Imagis'

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products successfully could have a material adverse effect on Imagis' business,
financial condition, operating results and cash flows.

Additionally, with respect to most sales, Imagis supplies products and
services to a customer through a third party supplier acting as a project
manager or systems integrator.  In such circumstances, Imagis has a
sub-contract to supply its products and services to the customer through the
prime contractor.  In these circumstances, Imagis is at risk that situations
may arise outside of its control that could lead to a delay, cost over-run or
cancellation of the prime contract which could also result in a delay, cost
over-run or cancellation of Imagis' sub-contract.  The failure of a third
party supplier to supply its products and services or perform its contractual
obligations to the customer in a timely manner could have a material adverse
effect on Imagis' financial condition, results of operations and cash flows.

Competition

The markets for arrest and booking systems, jail management systems, facial
recognition software, security software and fraud detection and tracking
systems are highly competitive.  Numerous factors affect Imagis' competitive
position, including supplier competency, product functionality, performance
and reliability of technology, depth and experience in distribution and
operations, ease of implementation, rapid deployment, customer service and
price.

Imagis primarily competes in the arrest and booking systems market with Epic
Solutions, ImageWare Software, Smith & Wesson and Spillman.  Imagis' primary
competitors in the facial recognition software market with ImageWare (FaceID),
Miros (Trueface), Smith & Wesson (ASID - Automated Suspect Identification
System), Vissage Technology (Vissage Gallery) and Visionics (FaceIt).

Certain of Imagis' competitors have substantially greater financial,
technical, marketing and distribution resources than Imagis.  As a result,
they may be able to respond more quickly to new or emerging technologies and
changing customer requirements, or to devote greater resources to the
development and distribution of existing products.  There can be no assurance
that Imagis will be able to compete successfully against current or future
competitors or alliances of such competitors, or that competitive pressures
faced by Imagis will not materially adversely affect its business, financial
condition, operating results and cash flows.

Proprietary Technology

Imagis' success is dependent on its ability to protect its intellectual
property rights.  Imagis relies principally upon a combination of copyright
and trade secret laws, non-disclosure agreements and other contractual
provisions to establish and maintain its rights.  The source codes for Imagis'
products and technology are protected both as trade secrets and as unpublished
copyrighted works.  To date, Imagis has not applied for any patents or
trademarks.  As part of its confidentiality procedures, Imagis enters into
nondisclosure and confidentiality agreements with each of its key employees,
consultants, distributors, customers and corporate partners, to limit access
to and distribution of its software, documentation and other proprietary
information.  There can be no assurance that Imagis' efforts to protect its
intellectual property rights will be successful.  Despite Imagis efforts to
protect its intellectual property rights, unauthorized third parties,
including competitors, may be able to copy or reverse engineer certain
portions of Imagis' software products, and use such copies to create
competitive products.

Policing the unauthorized use of Imagis' products is difficult, and, while
Imagis is unable to determine the extent to which piracy of its software
products exists, software piracy can be expected to continue.  In addition,
the laws of certain countries in which Imagis' products are or may be licensed
do not protect its products and intellectual property rights to the same
extent as do the laws of Canada and the United States.  As a result, sales of
products by Imagis in such countries may increase the likelihood that Imagis'
proprietary technology is infringed upon by unauthorized third parties.

In addition, because third parties may attempt to develop similar technologies
independently, Imagis expects that software product developers will be
increasingly subject to infringement claims as the number of products and
competitors in Imagis' industry segments grow and the functionality of
products in different industry segments overlaps.  Although Imagis believes
that its products do not infringe on the intellectual property rights of third
parties, there can be no assurance that third parties will not bring
infringement claims (or claims for indemnification resulting from infringement
claims) against Imagis with respect to copyrights, trademarks, patents and
other proprietary rights.  Any such claims, whether with or without merit, could
be time consuming, result in costly

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litigation and diversion of resources, cause product shipment delays or require
Imagis to enter into royalty or licensing agreements.  Such royalty or licensing
agreements, if required, may not be available on terms acceptable to Imagis or
at all.  A claim of product infringement against Imagis and failure or
inability of Imagis to license the infringed or similar technology could have
a material adverse effect on Imagis' business, financial condition, operating
results and cash flows.

Exchange Rate Fluctuations

Because Imagis' reporting currency is the Canadian dollar, its operations
outside Canada face additional risks, including fluctuating currency values
and exchange rates, hard currency shortages and controls on currency exchange.
Currently Imagis has limited operations outside Canada, but it intends to
begin marketing its products in the United States, Europe and Mexico later
this year.  Imagis does not currently engage in hedging activities or enter
into foreign currency contracts in an attempt to reduce Imagis' exposure to
foreign exchange risks.  In addition, to the extent Imagis has operations
outside Canada, Imagis is subject to the impact of foreign currency
fluctuations and exchange rate charges on Imagis' reporting in its financial
statements of the results from such operations outside Canada.  Since such
financial statements are prepared utilizing Canadian dollars as the basis for
presentation, results from operations outside Canada reported in the financial
statements must be restated into Canadian dollars utilizing the appropriate
foreign currency exchange rate, thereby subjecting such results to the impact
of currency and exchange rate fluctuations.

Need for Additional Financing

Revenue from Imagis' operations is not sufficient to finance the cost of
development and marketing of its technology.  Accordingly, Imagis must raise
substantial additional funding.  Imagis expects to be able to meet its
financial obligations for approximately the next 12 months.  There is no
assurance that, after such period, Imagis will be able to secure financing or
that such financing will be obtained on terms favorable to Imagis.  Failure to
obtain adequate financing could result in significant delays in development of
new products and a substantial curtailment of operations.

Risk of Software Defects

Software products as complex as those offered by Imagis frequently contain
errors or defects, especially when first introduced or when new versions or
enhancements are released.  Despite product testing, Imagis has in the past
released products with defects in certain of its new versions after
introduction and experienced delays or lost revenue during the period required
to correct these errors.  Imagis regularly introduces new versions of its
software.  There can be no assurance that, despite testing by Imagis and its
customers, defects and errors will not be found in existing products or in new
products, releases, versions or enhancements after commencement of commercial
shipments.  Any such defects and errors could result in adverse customer
reactions, negative publicity regarding Imagis and its products, harm to the
Imagis' reputation, loss or delay in market acceptance or required product
changes, any of which could have a material adverse effect upon its business,
results of operations, financial condition and cash flows.

Product Liability

The license and support of products by the Registrant may entail the risk of
exposure to product liability claims.  A product liability claim brought
against the Registrant or a third party that the Registrant is required to
indemnify, whether with or without merit, could have a material adverse effect
on the Registrant's business, financial condition, operating results and cash
flows.

Directors' and Officers' Involvement in Other Projects

Many of the officers and directors of Imagis serve as directors, officers
and/or employees of companies other than Imagis.  While Imagis believes that
such officers and directors will be devoting adequate time to effectively
manage Imagis, there can be no assurance that such other positions will not
negatively impact an officer's or director's duties for Imagis.

Item 2.  Description of Property.

The Company subleases an approximately 800 square foot facility at 1300-1075
West Georgia Street in Vancouver, British Columbia from International Portfolio
Management Inc.  These premises are used as the Company's

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headquarters, and includes the finance team as well as a large portion of the
sales team.  This lease is on a month to month basis, with monthly payments
totaling $6,000.

The Company leases an approximately 5,600 square foot facility at 1027 Pandora
Avenue in Victoria, British Columbia from Walter & Norman Lee.  These premises
house the Company's development and technical support teams, as well as handles
the coordination of the sales and marketing function.   This leasing agreement
is for a three-year term, with monthly payments of $6,300.


The Company leases an approximately 300 square foot facility used as a small
sales office at 200-38 Auriga Drive in Nepean, Ontario.  The payments under this
lease are $963 per month, with an expiry date of June 30, 2000.

Item 3.  Legal Proceedings.

From time to time, the Company may be involved in litigation relating to
claims arising out of its operations in the normal course of business.  As of
the date of this report, the Company is not a party to any legal proceedings,
the adverse outcome of which, in management's opinion, individually or in the
aggregate, would have a material effect on the Company's results of operations
or financial position.

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

None

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PART II

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

The Company's common stock, no par value (the "Common Stock"), began trading on
the Canadian Venture Exchange under the symbol "CAP" on September 29, 1998 and
changed its symbol to "NAB" on February 25, 1999.  The table below establishes
the reported high and low sales prices for the Common Stock for the period from
September 29, 1998 to December 31, 1999 (as reported on the Canadian Venture
Exchange).  The last reported closing price of the Common Stock on the Canadian
Venture Exchange on March 27, 2000 was Cdn $5.85.

                                        High           Low
                                        ----           ----

September 30, 1998                  Cdn $0.55      Cdn $0.50
December 31, 1998                        0.90           0.50
March 31, 1999                           1.20           0.65
June 30, 1999                            1.24           0.80
September 30, 1999                       0.90           0.60
December 31, 1999                        0.95           0.60

As of March 27, 2000, there were 13 holders of record based on the records of
the Company's transfer agent which does not include beneficial owners of
Common Stock whose shares are held in the names of various securities brokers,
dealers and registered clearing agencies.

The Company has never paid dividends on the Common Stock and does not intend
to pay dividends on the Common Stock in the foreseeable future.  The Board of
Directors of the Company intends to retain any earnings to provide funds for
the operation and expansion of the Company's business.  See "Item 7.
Management's Discussion and Analysis of Financial Condition and Results of
Operations - Sources of Funds."

On October 1, 1999, the Company agreed to sell convertible debentures having an
aggregate principal value of $595,200 to three placees.  Each debenture has a
one year term and bears interest at the rate of 8% per annum.  The debenture
was convertible into units at the rate of $0.64 per unit, each unit consisting
of one common share and one non-transferable share purchase warrant.  Subsequent
to year end, all of the debentures were converted.  The attached warrants enable
the debenture holders to purchase an equal number of additional common shares
for two years, at a price of $0.64 per share if exercised in the first year and
$0.74 per share if exercised in the second year.  As of March 27, 2000, all but
200,000 of the warrants had been exercised.

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Item 6.  Management's Discussion and Analysis

Forward Looking Statements:

Statements in this Annual Report on Form 10-KSB, including those concerning
our expectations of future sales revenues, gross profits, technology
development, sales and marketing, and administrative expenses, product
introductions and cash requirements, include forward-looking statements.  As
such, our actual results may vary materially from our expectations.  Factors
which could cause our actual results to differ from expectations include
variations in the level of orders which can be affected by general economic
conditions, and in the markets served by our customers, the international
economic and political climates, difficulties or delays in product
functionality or performance, the timing of future product releases, failure
to respond adequately to either changes in technology or customer preferences,
changes in our pricing or our competitors, ability to manage growth, risk of
nonpayment of accounts receivable and changes in budgeted costs, all of which
constitute significant risks.  There can be no assurance that our results of
operations will not be adversely affected by one or more of these factors.

Overview:

In February, 1999, we completed our acquisition of Imagis-Cascade Technologies
Inc., a privately-held company, and in the second quarter, we completed a
financing raising approximately Cdn$2.9 million before financing costs. Our
acquisition, more fully described in the notes to the audited financial
statements appended and in our Form 10-SB filed in 1999, was accounted for as
a reverse take-over whereby the company acquired is deemed the parent for
reporting purposes and the acquirer is considered to be the acquired entity.
This treatment conforms with generally accepted accounting principles in
Canada and provide the same results as those applicable in the United States
for such transactions.

Prior to the acquisition, Imagis-Cascade Technologies Inc. had developed
software programs directed to the security industry, primarily jails and other
government agencies, and was in the process of developing its current primary
product, CAB's, and other related products for the law enforcement sector. In
addition, due to the lack of funding, the company's management was heavily
focussed on finding funds to continue operations. Consequently the results
reported for the prior year, before the acquisition, are not particularly
comparable to the current period, either in respect to products and operations
or to functional cost categorization. In addition, prior to the acquisition,
as the company was small and privately held, many specific details on
individual product sales information as well as certain detailed functional
costing information that could be used for analytical purposes were not
tracked either in the company's accounting system or by other means in a
meaningful manner. The comparative numbers reported in the past for some
functional costs included reasonable management allocations between
categories.

Results of Operations for the years ended December 31, 1999 and 1998:

Revenues:

Our revenues for 1999 were $722,193, representing a gain of $167,033 or 30 per
cent over the previous year level of $555,160. The 1999 revenues include
approximately $332,114 from sales of our new CAB's software product and
accounts for essentially all of the year over year improvement. There were no
sales of this product in 1998. Revenues in 1999 from annual support contracts
related to older software programs sold in the past and other services
amounted to $173,639, and from hardware and other equipment sales were
$216,440.

As noted previously, prior year sales revenues were for older products sold
into other markets and for related hardware. Aggregate sales of these older
software products and revenues from support services provided in 1998
aggregated $335,160, almost twice that of 1999 sales revenues, while sales of
hardware approximated $220,000.

Purchases of materials:

Our 1999 purchases of hardware and other materials aggregated $222,919, 41 per
cent more than our expenditures in the prior year of $158,472. The hardware
required is dependent on individual customer needs dictated to some degree by
the size of the installation, so year to year changes reflect primarily the
mix of customers and their needs in each year and don't reflect a trend.
Moreover, in the future we expect that both hardware sales revenues and costs

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will decline substantially due to a significant change of sales strategy which
we recently adopted. The change involves the establishment of strategic
partners to market our products to their customer bases. We expect that these
partners will be quite able to directly fulfil this hardware component need,
and this transfer will thereby cause a reduction in our hardware revenues and
costs. But we anticipate that our software sales will grow as a result of the
contribution of these partners to more than compensate for our loss of this
hardware revenue source and any contribution to profits.

Sales and marketing:

Our expenditures on Sales and marketing for the year were $927,593 which is
substantially higher than for the comparable prior year of $606,775. As
previously indicated, we changed our marketing approach during the year to
engage strategic partners which can provide a far wider geographic reach and
also supplement the technical support requirements of customers. This strategy
expands our effective sales force through the partners and frees our technical
staff to focus more exclusively on product development. We also engaged three
regional sales managers mid-year to develop and manage our partner
relationships. Sales and marketing costs in the current year included salaries
of $294,768, travel of $375,878 and other advertising materials and support
costs of $256,947. In 1998, while salaries appear higher at approximately
$376,000, as previously indicated all prior period costs reported include some
reasonable allocations to sales and marketing activities from the
administrative category as detailed records separating all costs by function
were not maintained. The above 1998 salary and other cost categories include
costs for some technology development activity also. The 1998 travel was
$84,000 and all other costs amounted to $146,775. The lower travel and other
support costs reflects Imagis Cascades' limited funds during this prior
period.

Technology development:

Our development costs in the current year were $614,509. The technical staff
was more than doubled in size over the year and two new product modules,
Evidence ID and ID 2000, were advanced to the beta stage and then released
before year end. Salary costs of $465,428 were the largest cost component at
76 per cent of the total. Travel and support costs constituted the remaining
24 per cent or $149,081. Prior year costs for the year to date, as previously
noted, were not segregated, but included in the Sales and marketing category
and with Administrative costs.

Administrative:

Our Administrative costs for the current year were $900,013, slightly lower
than the prior year level of $950,608. Included in this function are salaries
and other office support costs of $620,997, professional fees, primarily
legal, of $153,548, shareholder and regulatory costs of $59,920 and travel and
other of $65,548. The 1998 comparative administrative costs included salaries
and support costs of $649,000, legal and other professional fees of $131,000
and travel and other of $170,608. As noted above, some Technology development
costs are included in the 1998 amounts reported in this category and
consequently comparability is affected.

Other Costs and Expenses:

Other costs and expenses include amortization of $56,109, approximately 64 per
cent higher than the previous year amount of $34,252. The increase reflects
our added expenditures to equip our new staff. As well, there was an inventory
valuation reduction of $111,836 following our acquisition of Imagis Cascade
and a detailed review of the inventories.

Loss for the Year:

Overall we experienced a net loss for the period of $2,110,786 or $(0.28) per
share. The loss is considerably larger than that of the prior year of
$1,320,439 or $(0.39) per common share. The higher loss this year essentially
reflects the higher Sales and marketing and Technology development costs from
year to year. The current year per share amount, however, is a lessor amount
due to the effect of the common share issuances arising from our acquisition
and financing transactions in the year.

18

<PAGE>

Due to the addition of the three regional sales managers, we expect our Sales
and marketing costs to be significantly higher in future periods, the increase
reflecting salary and travel costs of these new individuals. We have also
recently adopted an expanded biometric direction and plan to add a number of
development staff over the next year. This will increase Technology
development costs, primarily salaries, in the coming year also.

Liquidity and Capital Resources:

We completed our acquisition of Imagis-Cascade Technologies Inc. in February
with the issue of 3.4 million common shares to the Imagis Cascade
shareholders. Following this, we completed a public offering and sold 2.4
million common shares at a per share value of $1.23. This yielded to us gross
proceeds of $2,952,000. We also completed a private placement of 535,714
common shares issued at a price of $0.56 per share to yield
proceeds of $300,000, and together after costs they aggregated $3,017,484. We
used some of these funds to repay a cash obligation which was part of the
negotiated terms of the acquisition in the amount of $900,000. We used an
additional $280,000 to reduce notes payable to a balance of $130,000 at year
end.

The remaining funds allowed us to operate through to the latter part of the
year. During the year, we incurred total operating costs $2,832,979 offset to
some degree by our sales revenues of $722,193, both amounts adjusted for
delays in collections of receivables and payments of costs. Our cash resources
were reduced from delayed collections reflected in the increase of trade
receivables at year end amounting to $124,910. However this benefit was more
than offset by necessary payments of overdue trade payables of $216,569.

Also during the year, we purchased office equipment and software totaling
$70,161. In our view, this relatively low level is fairly representative of
our expected annual capital expenditure levels in the future since we will
require additional equipment only when we engage more development and other
staff.

Due to the reduced cash position which arose in the fourth quarter, we
undertook to raise additional capital by issuing 595.2 convertible debenture
units yielding $595,200 in cash to our company. Each debenture unit valued at
$1,000 has a one year term and bears interest at the rate of eight(8) per
cent, and has a full warrant attached. At year end, we had received $356,480
of the above total. These partial proceeds sustained us through to year end,
although at year end, our cash position had fallen to $9,682, and our working
capital position had declined to a deficit of ($198,034).

Subsequent to the year end, we received the remainder of the debenture
subscription funds and issued the debenture units. Our cash position was
strengthened further when a portion of the debenture warrants were exercised
in February which contributed additional cash of $395,200.  And in March, we
were successful in completing a private placement of 875,000 common shares
priced at $0.80 per share which added cash of $700,000 more for operations.
With the additional equity subscription subsequent to year end, our cash
position as of March 27, 2000 is approximately $495,000.  While we believe
that this will be sufficient to fund our current level of operations for the
remainder of the year, as a result of our expanded focus on developing new
biometric applications and capabilities, we expect to be seeking additional
funding in the latter part of the current year to finance this extensive
development work.

19

<PAGE>

Item 7.  Financial Statements and Supplementary Data.

The financial statements of Imagis required by this Item 7 are set forth at
the pages indicated at Item 13 (a)(1).

Item 8.  Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure.

None

20

<PAGE>

PART III

Item 9.  Directors, Executive Officers, Promoters and Control Persons;
Compliance With Section 16(a) of the Exchange Act.

Executive Officers and Directors

The following table sets forth certain information concerning Imagis'
executive officers and directors as of December 31, 1999:

Name                Age            Position with the Company

Iain Drummond       54             President, Chief Executive Officer
                                     and Director
Ross Wilmot         56             Chief Financial Officer
Andy Amanovich      42             Chief Technology Officer
Sandra E. Buschau   49             Secretary and Director
Altaf Nazerali*     46             Director
Rory Godinho*       41             Director
Frederick Clarke*   64             Director
_____________________
*  Audit Committee Member

Iain Drummond has served as a Director since February 12, 1999, as President
and Chief Executive Officer of Registrant since February 23, 1999 and of
Imagis Cascade Technologies Inc. since September 1, 1998.  He has extensive
management experience in the high technology industry.  Most recently he
served as the Vice-President, Strategic Partnerships with Alis Technologies of
Montreal, Quebec, a provider of integrated language-handling technologies and
translation solutions, from 1990 to 1998, where he set up the international
sales network for its language translation software products.  Previously, he
was President of Clan Technologies, a developer and marketer of executive
information systems, in Canada from 1988 to 1990.  Prior to that, he worked
with International Computers Limited, a supplier of integrated computer
systems, from 1966 to 1988, including serving as President for ICL Canada, a
wholly owned subsidiary of International Computers Limited focused on selling
integrated computer systems to large retailers.

Ross Wilmot has served as the Chief Financial Officer of Imagis since July 7,
1998.  Mr. Wilmot was a Director of Imagis from July 7, 1998 to February 12,
1999.  Mr. Wilmot has over 25 years of international business experience in
the resources and technology industries.  His principal occupation is as a
corporate executive of a number of publicly traded companies.  He serves as
the President of Paloma Ventures Inc., an inactive Vancouver Stock Exchange
issuer with no current business activity, and as Vice-President, Finance of
the following companies:  (a) Multivision Communications Corp., the operator
of MMDS TV systems in Bolivia (August 1995 to present); (b) Breckenridge
Resources Ltd., a junior exploration company with mining interests in China
(January 1995 to present); (c) CTF Technologies Inc., a company engaged in the
servicing of electronic refueling technology in Brazil (July 1996 to present);
(d) Harambee Mining Corp., an inactive Vancouver Stock Exchange junior
exploration company with exploration projects in Africa (January 1997 to
present); (e) Botex Industries Corp., a company engaged in the development and
manufacturing of plastic-based material used as replacement for traditional
rubber, plastic, and latex compounds in many applications (June 1996 to
present); (f) Intacta Technologies Inc. (formerly, InfoImaging Technologies
Inc.), a software technology company, (1997 to present); (g) Plata Minerals
Corp., an inactive Vancouver Stock Exchange company with no current business
interest (January 1995 to present).  Mr. Wilmot holds a Bachelor of Science
and a Masters of Science in metallurgical engineering from the University of
Toronto and is a chartered accountant.

Andrew Amanovich has served as the Chief Technology Officer of Imagis since
February 23, 1999.  In addition, Mr. Amanovich serves as the Chief Technology
Officer of Imagis.  In 1989, Mr. Amanovich founded Pacific, a consulting
service engaged in forestry mapping and surveys, where he developed computer
simulation models for forest visualization modeling and was involved in forest
engineering, geotechnical engineering, digital mapping and software
development of technology in March of 1998.  Mr. Amanovich holds a Bachelor of
Science from the University of British Columbia.

21

<PAGE>

Sandra E. Buschau has served as the Secretary of Imagis since March 10, 1999.
Ms. Buschau has been a Director of Imagis since July 7, 1998.  In addition,
Ms. Buschau has served in the following capacities of other companies:  (a)
Secretary and Director of Multivision Communications Corp., the operator of
MMDS TV systems in Bolivia (November 1995 to present); (b) Corporate Secretary
of CTF Technologies Inc., a company engaged in the servicing of electronic
refueling technology in Brazil (April 1998 to present); (c) Secretary of Plata
Minerals Corp., an inactive Vancouver Stock Exchange company with no current
business interest (February 1998 to present); (d) Secretary of Intacta
Technologies Inc. (formerly, InfoImaging Technologies Inc.), a software
technology company (May 1997 to present); and (e) Secretary of Breckenridge
Resources Ltd., a junior exploration company with mining interests in China
(September 1992 to present).

Altaf Nazerali has served as a Director of Imagis since July 7, 1998.  Mr.
Nazerali also served as President and Chief Executive Officer from July 7,
1998 through February 23, 1999.  In addition, Mr. Nazerali has served in the
following capacities of other companies:  (a) Chief Executive Officer
(November 1995 to present), President and Director (each October 1995 to
present) of Multivision Communications Corp., the operator of MMDS TV systems
in Bolivia (b) Director of CTF Technologies Inc., a company engaged in the
servicing of electronic refueling technology in Brazil (April 1998 to
present); (c) President and Director of Intacta Technologies Inc. (formerly,
InfoImaging Technologies Inc.), a software technology company (October 1997 to
present); and (d) Chief Executive Officer and President of Canbras
Communications Corp., an operator of pay television and telephone systems in
Brazil (November 1994 to October 1995).

Rory Godinho has been a Director of Imagis since July 7, 1998.  Mr. Godinho is
a Principal with the law firm of Godinho Sinclair (since its formation in
1991).  Mr. Godinho restricts his practice to the areas of securities and
corporate commercial law. In addition, he serves in the following capacities
of other companies:  (a) Secretary of Harambee Mining Corp., an inactive
Vancouver Stock Exchange junior exploration company with exploration projects
in Africa (August 1996 to present); (b) Secretary of Intertech Minerals Corp.,
a junior diamond exploration company with property in Northwest Territories
Canada (January 1999 to present); and President and Director of dot.com
Technologies Inc., an inactive Vancouver Stock Exchange company with no
current business (July 1999 to present).  Mr. Godinho holds an LL.B. from the
University of British Columbia.

Frederick Clarke has been a Director of Imagis since February 12, 1998.  In
addition, over the past five years, Mr. Clarke has divided his time serving in
the following positions of the following companies:  (a) founder and Chairman
of the Board of The Clarke Group Companies, a diversified forestry
conglomerate based in Mission, British Columbia; (b) advisor/consultant to
Green River Log Sales (1996) Ltd.; (c) chairman of the board of Re-Con
Building Products Inc., provider of building materials; and (d) officer and
Director of Pacific Cascade Consultants Ltd.

Board of Directors

Each member of the Board of Directors is elected annually and holds office
until the next annual meeting of shareholders or until his successor has been
elected or appointed, unless his office is earlier vacated in accordance with
the Bylaws of Imagis.  Officers serve at the discretion of the Board and are
appointed annually.  The Board currently has one committee, the Audit
Committee and an Advisory Board.

None of Imagis' directors or executive officers are parties to any arrangement
or understanding with any other person pursuant to which said individual was
elected as a director or officer of Imagis.  No director or executive officer
of Imagis has any family relationship with any other officer or director of
Imagis.

Audit Committee

The Audit Committee recommends independent accountants to Imagis to audit
Imagis' financial statements, discusses the scope and results of the audit
with the independent accountants, reviews Imagis' interim and year-end
operating results with Imagis' executive officers and Imagis' independent
accountants, considers the adequacy of the internal accounting controls,
considers the audit procedures of Imagis and reviews the non-audit services to
be performed by the independent accountants.  The members of the Audit
Committee are Fred Clarke, Altaf Nazerali and Rory Godinho.

22

Advisory Board

The following table sets forth the members of the Company's Advisory Board as
of December 31, 1999:

          Name
          ----
          Oliver Revell
          Reid Morden
          Wade Nesmith
          Robert Gordon

The Advisory Board's main purpose is to participate in defining the business
strategy of Imagis and to aid in implementing that strategy by acting as a
liaison to persons and organizations in the law enforcement and security
industries.

Oliver Revell has served as a member of the Advisory Board to Imagis since
March 25, 1999.  Mr. Revell served for over 30 years in the U.S. Federal
Bureau of Investigation ("FBI").  Mr. Revell served in various positions with
the FBI, eventually becoming Associate Deputy Director of the FBI, the second
highest career position within the FBI.  Throughout his FBI career, he served on
numerous presidential and vice-presidential task forces and was appointed as
Vice-Chairman of the Interagency Group for Counter-Intelligence and the
Terrorist Crisis Management Committee of the National Security Council.  Mr.
Revell is a Life Member of the International Association of Chiefs of Police
and was the founding Chairman of its Committee on Terrorism.

Reid Morden has served as a member of the Advisory Board of Imagis since April
12, 1999.  Mr. Morden is currently a Partner of Sussex Circle Toronto.  He is
also a member of the Advisory Board, York University International MBA
Program, a member of the Canadian Committee of the Council for Security and
Cooperation in Asia Pacific and a member of the International Advisory Board
of the (Washington, D.C.-based) Institute for the Study of Terrorism and
Violence.  Mr. Morden served as the President and Chief Executive Officer of
Atomic Energy of Canada from 1994 through 1998.  From 1991 to 1994 he served
as Deputy Minister, Department of Foreign Affairs and International Trade.
From 1987 to 1991 he directed the Canadian Security Intelligence Service.

Wade Nesmith has served as a member of the Advisory Board to Imagis since
March 11, 1999.  Mr. Nesmith has practiced law since 1979 mainly in the
securities and regulatory environment.  He served as the Superintendent of
Brokers for the Province of British Columbia from 1989 to 1992.
Robert Gordon is currently the senior vice president of Oracle Corporation
responsible for Oracle's operations in the Netherlands, Belgium, the Middle
East and Africa.  Previously, Mr. Gordon was President and CEO of Oracle
Canada.  Prior to joining Oracle in 1991, Mr. Gordon held senior management
positions at IBM, Northern Telecom and Bell Atlantic.  Mr. Gordon is a past
chair of the Information Technology Association of Canada (ITAC).

The Company is a foreign private issuer and, as such, its insiders are not
required to file reports under Section 16(a).

Item 10.  Executive Compensation.

Compensation of Executive Officers

The following table sets forth compensation information for the fiscal year of
Imagis ended December 31, 1999:

23

<PAGE>

Summary Compensation Table

Name and Principal Position   Iain Drummond, President and Chief Executive
                              Officer

Fiscal Year                        1999

Compensation
Salary ($)                         $137,500
Bonus ($)                          N/A
Other Annual Compensation ($)      N/A

Long Term Compensation
Securities Under Options (#)       N/A

All Other Compensation ($)         $500,000(1)

(1)  Mr. Drummond was issued a warrant to purchase 400,000 shares of Imagis
at an exercise price of $1.25 per share in consideration for renouncing his
right to acquire up to a 6% equity in Imagis Cascade.

Employment Agreements

Pursuant to an agreement dated February 23, 1999, the Registrant retained Iain
Drummond to act as President and Chief Executive Officer effective September
1, 1998 (the "Employment Agreement").  Pursuant to the Employment Agreement,
Mr. Drummond's current annual salary is $144,000.  If the Registrant achieves
its annual sales targets during Mr. Drummond's first year of employment, Mr.
Drummond will receive a bonus of $75,000.  If the Registrant exceeds sales
targets during Mr. Drummond's first year of employment, Mr. Drummond's bonus
could equal up to 100% of his salary, as determined in the discretion of the
Board of Directors.  For all years after Mr. Drummond's first year of
employment, Mr. Drummond will receive a bonus of 50% of his base salary for
that year, if the Registrant achieves its annual sales targets during that
year.  Any bonus paid to Mr. Drummond must be paid in cash within 90 days of
fiscal year end.  In addition, under the terms of the Employment Agreement and
the Share Purchase Agreement, the Registrant issued a warrant to purchase
400,000 shares at an exercise price of $1.25 to Mr. Drummond (the "Drummond
Warrant").  The Drummond Warrant is exercisable in accordance with the
following vesting schedule:

(a) 133,333 Shares may be acquired after February 23, 2000;
(b) 133,333 Shares may be acquired after February 23, 2001;
(c) 133,334 Shares may be acquired after February 23, 2002.

Once vesting has occurred with respect to a portion of the shares, Mr.
Drummond has two years from the date of vesting with respect to that portion
of the vested shares only to purchase the Common Shares.  In addition, the
Drummond Warrant is exercisable only if on the date of such exercise, Mr.
Drummond is a director, officer or employee of Imagis

There were no stock options granted to the named executive officer during the
fiscal year ended December 31, 1999.

Compensation of Directors

During the most recently completed financial year ended December 31, 1999,
there was no compensation paid by Imagis to the directors for their services
as directors except as otherwise disclosed herein. There are no standard
arrangements for any such compensation to be paid other than reimbursement for
expenses incurred in connection with their services as directors.

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

The following table sets forth certain information concerning the number of
shares of Common Stock owned beneficially as of December 31, 1999 by: (i) each
person known to Imagis to own more than five percent (5%) of any class of
Imagis' voting securities; (ii) each director of Imagis; and (iii) all
directors and officers as a group.  Unless otherwise indicated, the
shareholders listed possess sole voting and investment power with respect to
the shares shown.

24

<PAGE>

TITLE OF       NAME AND ADDRESS         AMOUNT AND NATURE OF     PERCENT
  CLASS        OF BENEFICIAL OWNER BENEFICIAL OWNER         OF CLASS(1)

Common Stock   Iain Drummond (2)             400,000        5.7%
               3307 W. 6th
               Vancouver, B.C. V6R 1T2
               Canada

Common Stock   Sandra E. Buschau (3)         230,000        3.5%
               2337 Quayside Drive
               Vancouver, B.C. V5P 4W9
               Canada

Common Stock   Altaf Nazerali (4)            330,000        5.0%
               555 Palisade Drive
               N. Vancouver, B.C. V7R 2H9
               Canada

Common Stock   Rory Godinho (5)              200,000        3.0%
               1590 23rd Street
               W. Vancouver, B.C. V7V 4W9
               Canada

Common Stock   Frederick Clarke (6)          2,082,563      31.5%
               33610 E. Broadway Ave.
               Mission, B.C. V2V 4M4
               Canada

Common Stock   Andy Amanovich                2,032,563      31.0%
               1300-1075 W. Georgia St.
               Vancouver, B.C. V6E 3C9
               Canada

Common Stock   First Capital Invest Corp. (7)1,167,857      17.8%
               International Trust Bldg.
               Wickham Cay
               Road Town Tortola
               PO Box 659, BVI

Common Stock   All directors and officers    3,242,563      44.6%
               as a group (7 persons) (8)

(1)  Based on an aggregate 6,558,214 Shares outstanding as of March 31, 1998.
(2)  All 400,000 Shares are issuable pursuant to a warrant and are
     exercisable within 60 days of March 31, 1999.
(3)  Includes options to purchase 75,000 Shares within 60 days of March 31,
     1999.
(4)  Includes options to purchase 80,000 Shares within 60 days of March 31,
     1999.
(5)  Includes options to purchase 100,000 Shares within 60 days of March 31,
     1999.
(6)  2,032,563 Shares are indirectly held through Pacific.  Mr. Clarke
     controls FWC Holdings Ltd. which owns 50% of Pacific.  Andy Amanovich, the
     current Chief Technology Officer of the Corporation, owns the other 50% of
     Pacific. Includes Fred Clarke options to purchase 50,000 Shares within 60
     days of March 31, 1999.
(7)  Based on regulatory filings with the British Columbia Securities
     Commission, First Capital Invest Corp. is controlled by Kurt Dalmata.
(8)  Includes options and warrants to purchase 705,000 Shares within 60 days
     of March 31, 1999.

Imagis is not aware of any arrangement which might result in a change in
control in the future.

Item 12.  Certain Relationships and Related Transactions.

On February 23, 1999, Imagis acquired one hundred percent of the shares in the
capital of Imagis Cascade pursuant to a Share Purchase Agreement among Imagis,
Imagis Cascade and the shareholders of Imagis Cascade dated December 14, 1998.
Certain officers and directors and persons related to them were involved in
the transaction.  See "ITEM 1- DESCRIPTION OF BUSINESS - Acquisition of
Imagis".

The promoters of Imagis were Altaf Nazerali, Rory Godhino, Sandra Buschau and
Ross Wilmot.  The promoters of Imagis Cascade (prior to the acquisition by
Imagis of February 23, 1999) were Pacific Cascade Consulting,

25

<PAGE>

Frederick Clarke and Andrew Amanovich, 385078 B.C. Ltd., a British Columbia
company controlled by Penny Walker, and Sonora Logging, controlled by Pamella
Markie Clarke.

Except as otherwise disclosed herein, no director, senior officer, principal
shareholder, or any associate or affiliate thereof, had any material interest,
direct or indirect, in any transaction since the beginning of the last
financial year of Imagis that has materially affected Imagis, or any proposed
transaction that would materially affect Imagis, except for an interest arising
from the ownership of shares of Imagis where the member will receive no extra or
special benefit or advantage not shared on a pro rata basis by all holders of
shares in the capital of Imagis.

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

(a)1.  Financial Statements:

       See Index to Financial Statements and Schedule on page F-1

    2. Financial Statement Schedule:

       See Index to Financial Statements and Schedule on page F-1

    3. Exhibits.  The following exhibits are filed (or incorporated by
       reference herein) as part of this Form 10-KSB:

       3.1*     Articles of Incorporation

       4.1*     Shareholder Agreement dated February 23, 1999 among the Original
                Shareholders and the Former Imagis Shareholders

       4.2*     Escrow Agreement for a Venture Capital Pool Issuer dated July 3,
                1998 among Colloquium Capital Corp., CIBC Mellon Trust Company
                and Sandra Buschau, Altaf Nazerali, Shafiq Nazerali, Rory
                Godinho and Ross Wilmot

       4.3      Convertible Note Subscription Agreement dated October 1, 1999

       10.1*    Incentive Stock Option Agreements dated July 7, 1998 between the
                Registrant and each of Sandra E. Buschau, Altaf Nazerali and
                Ross Wilmot

       10.2*    Confidentiality and Non-Competition Agreement dated February 23,
                1999 among the Registrant, Imagis, the Former Imagis
                Shareholders and the principals of the Former Imagis
                Shareholders

       10.3*    Revenue Assignment Agreement dated December 15, 1998 among
                Imagis, Pacific, Imagis Solutions (US) Incorporated and Imagis
                North West Solutions Inc.

       10.4*    Agency Agreement dated March 29, 1999 among the Registrant and
                the Agents

       10.5*    Subscription Agreement dated January 26, 1999 between the
                Registrant and Pacific Cascade Consultants Ltd.

       10.6*    Subscription Agreement dated January 26, 1999 between the
                Registrant and First Capital Invest Corp.

       10.7*    Incentive Stock Option Agreements dated February 25, 1999 and
                March 25, 1999 between the Registrant and certain directors,
                employees and service providers of the Registrant or affiliates
                or subsidiaries thereof

26

<PAGE>

       10.8*    Consulting Services Agreement effective February 25, 1999
                between the Registrant and Shafiq Nazerali-Walji

       10.9*    Drummond Warrant

       10.10*   Armitage Warrant

       10.11*   Employment Agreement dated February 23, 1999 between the
                Registrant and Iain Drummond

       10.12*   Technology Purchase Agreement among Imagis Technologies Ltd.,
                Imagis Cascade Technologies Inc. and Penelope Walker, Richard
                Graham and William Hawkes dated March 6, 1998

       10.13*   Technology Purchase Agreement between Pacific Cascade
                Consultants Ltd. and Imagis Cascade Technologies Inc. dated
                March 6, 1998

       10.14*   Share Purchase Agreement

       10.15*   Confidentiality and Standstill Agreement

       10.16    Loan Agreement between the Registrant and Rexton Corporation
                dated October 15, 1999

       16.1*   Letter to SEC from Elliott Tulk Pryce and Anderson dated December
               10, 1998 regarding change in certifying accounts

       21.1*   List of Subsidiaries

       27.1    Financial Data Schedule

*  Previously filed as part of the Registrant's Registration Statement on Form
10-SB (File No. 000-30090).
_________________________

(b) Reports on Form 8-K.
None.

27

<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, in the City of Vancouver,
Province of British Columbia, on March 30, 2000.

                                   IMAGIS TECHNOLOGIES INC.


                                   /s/  Iain Drummond
                                   --------------------------------
                                   Iain Drummond
                                   President and Chief Executive
                                   Officer

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

Signature           Title                                     Date

/s/  Iain Drummond       President, Chief Executive Officer   March 30, 2000
Iain Drummond            and Director

/s/  Ross Wilmot         Vice President Finance and Chief     March 30, 2000
Ross Wilmot              Financial Officer

/s/  Sandra Buschau      Director                             March 30, 2000
Sandra Buschau

/s/  Frederick Clarke    Director                             March 30, 2000
Frederick Clarke

/s/  Altaf Nazerali      Director                             March 30, 2000
Altaf Nazerali

28

<PAGE>

IMAGIS TECHNOLOGIES INC.

INDEX TO FINANCIAL STATEMENTS

Independent Auditors' Report                      F-2
Consolidated Balance Sheets                       F-3
Consolidated Statements of Operation and Deficit  F-4
Consolidated Statements of Cash Flows             F-5
Notes to Consolidated Financial Statements        F-6

F-1

<PAGE>

AUDITORS' REPORT TO THE SHAREHOLDERS

We have audited the consolidated balance sheets of Imagis Technologies Inc.
(formerly Colloquium Capital Corp.) as at December 31, 1999 and 1998 and the
consolidated statements of operations and deficit and cash flows for the years
then ended.  These financial statements are the responsibility of the
Company's management.  Our responsibility is to express an opinion on these
financial statements based on our audits.

We conducted our audits in accordance with Canadian 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 financial statements present fairly, in all material
respects, the financial position of the Company as at December 31, 1999 and
1998 and the results of its operations and its cash flows for the years then
ended in accordance with Canadian generally accepted accounting principles.
As required by the Company Act (British Columbia), we report that, in our
opinion, these principles have been applied on a consistent basis.

Canadian generally accepted accounting principles vary in certain significant
respects from accounting principles generally accepted in the United States.
Application of accounting principles generally accepted in the United States
would have affected shareholders' equity as at December 31, 1999 and 1998 and
the results of operations for the years then ended to the extent summarized in
note 14.

/s/ KPMG LLP
Chartered Accountants

Vancouver, Canada
February 11, 2000

COMMENTS BY AUDITOR FOR U.S. READERS ON CANADA-US REPORTING DIFFERENCES

In the United States, reporting standards for auditors require the addition of
an explanatory paragraph (following the opinion paragraph) when the financial
statements are affected by conditions and events that cast substantial doubt
on the Company's ability to continue as a going concern, such as those
described in note 1 to the financial statements.  Our report to the
shareholders dated February 11, 2000 is expressed in accordance with Canadian
reporting standards which do not permit a reference to such events and
conditions in the auditors' report when these are adequately disclosed in the
financial statements.

/s/ KPMG LLP
Chartered Accountants

Vancouver, Canada
February 11, 2000

F-2

<PAGE>

IMAGIS TECHNOLOGIES INC.
(Formerly Colloquium Capital Corp.)

Consolidated Balance Sheets
(Expressed in Canadian dollars)

December 31, 1999 and 1998

                                                          1999           1998
Assets
Current assets:
Cash                                                $    9,682     $   38,804
Accounts receivable                                    251,073        126,163
Inventories                                             45,834        111,836
                                                    ----------     ----------
                                                       306,589        276,803
Capital assets (note 3)                                 84,176         70,124
                                                    ----------     ----------
                                                    $  390,765     $  346,927
                                                    ==========     ==========
Liabilities and Deficiency in Net Assets
Current liabilities:
Accounts payable and accrued liabilities            $  299,920     $  644,681
Notes payable (note 4)                                 130,000        590,000
Deferred revenue                                        68,025             --
Current portion of obgligation under capital lease       6,678          6,667
                                                    ----------     ----------
                                                       504,623      1,241,348
Obligation under capital lease (note 5)                  2,226          9,445
Advances payable (note 6)                              356,480             --
Payable to Pacific Cascade Consultants Ltd. (note 7)   463,342        416,572
                                                    ----------     ----------
                                                     1,326,671      1,667,365
Deficiency in net assets:
Share capital (note 8)                               3,223,995              1
Deficit                                             (4,159,901)    (1,320,439)
                                                    ----------     ----------
                                                      (935,906)    (1,320,438)
Operations (note 1)
Commitments (note 11)
Subsequent events (note 13)
                                                    ----------     ----------
                                                    $  390,765     $  349,927
                                                    ==========     ==========

See accompanying notes to consolidated financial statements.

On behalf of the Board:

/s/ Iain Drummond                       /s/ Sandra Buschau
President, CEO & Director               Director

F-3

<PAGE>

IMAGIS TECHNOLOGIES INC.
(Formerly Colloquium Capital Corp.)

Consolidated Statements of Operations and Deficit
(Expressed in Canadian dollars)

                                                                  Period from
                                                             incorporation on
                                                 Year ended   January 9, 1998
                                                December 31,  to December 31,
                                                        1999             1998

Revenues                                            $  722,193     $  555,160

Expenses:
Purchase of materials                                  222,919        158,472
Sales and marketing                                    927,593        606,775
Technology development                                 614,509             --
Administration                                         900,013        950,608
Write-off of inventory                                 111,836             --
Amortization                                            56,109         34,252
Write-off of deferred financing charges                     --        125,492
                                                    ----------     ----------
                                                     2,832,979      1,875,599
                                                    ----------     ----------
Net loss                                             2,110,786      1,320,439
Deficit, beginning of period                         1,320,439             --
Adjustment to deficit due to application of
  accounting principles for reverse take-
  over accounting                                      728,676             --
                                                    ----------     ----------
Deficit, end of period                              $4,159,901     $1,320,439
                                                    ==========     ==========
Loss per share                                      $    (0.28)    $    (0.39)
Weighted average number of shares outstanding        7,623,034      3,400,000
                                                    ==========     ==========

See accompanying notes to consolidated financial statements.

F-4

<PAGE>

IMAGIS TECHNOLOGIES INC.
(Formerly Colloquium Capital Corp.)

Consolidated Statement of Cash Flows
(Expressed in Canadian dollars)

                                                                  Period from
                                                             incorporation on
                                                 Year ended   January 9, 1998
                                               December 31,   to December 31,
                                                       1999              1998
Cash provided by (used in):
Cash flows from operating activities:
  Net loss                                         $(2,110,786)   $(1,320,439)
  Items not involving the use of cash:
    Amortization                                        56,109         34,252
    Gain on settlement of accounts payable and
      accrued liabilities                             (161,205)            --
  Changes in non-cash operating working capital:
    Accounts receivable                               (124,910)      (126,163)
    Inventories                                         66,002       (111,836)
    Deferred revenue                                    68,025             --
    Accounts payable and accrued liabilites           (216,569)       644,681
                                                    ----------     ----------
  Cash flows used in operating activities           (2,423,334)      (879,505)

Cash flows from investing activities:
  Cash consideration paid on business combination,
    net of cash acquired                              (669,153)            --
  Purchase of capital assets                           (70,161)       (84,342)
                                                    ----------     ----------
                                                      (739,314)       (84,342)
Cash flows from financing activities:
  Issuance of common shares for cash, net of
    cash costs                                       3,017,484              1
  Repayment of notes payable                          (280,000)       590,000
  Repayment of obligation under capital lease           (7,208)        (3,922)
  Loan from Pacific Cascade Consultants Ltd.            46,770        416,572
  Receipt of advances payable                          356,480             --
                                                    ----------     ----------
                                                     3,133,526      1,006,650
                                                    ----------     ----------
Increase (decrease) in cash                            (29,122)        38,804
Cash, beginning of period                               38,804             --
                                                    ----------     ----------
Cash, end of period                                 $    9,682     $   38,804
                                                    ==========     ==========
Supplementary information and disclosure of non-cash financing
  and investing activities:
    Interest paid                                   $   13,926     $    9,851
    Income taxes paid                                       --             --
    Non-cash transactions not reported above:
      Acquisition of a capital asset by capital lease       --         20,034
      Issuance of common shares for services rendered   87,875             --
      Advances payable eliminated on business
        combination                                   (180,000)            --
                                                    ==========     ==========

See accompanying notes to consolidated financial statements.

F-5

<PAGE>

IMAGIS TECHNOLOGIES INC.
(Formerly Colloquium Capital Corp.)

Notes to Consolidated Financial Statements
(Expressed in Canadian dollars)

Years ended December 31, 1999 and 1998

1.   Operations:

Imagis Technologies Inc. (formerly Colloquium Capital Corp.) ("Imagis" or,
subsequent to the transaction described below, the "Company") was incorporated
under the Company Act (British Columbia) on March 23, 1998.  The common shares
of the Company were listed on the Vancouver Stock Exchange, now the Canadian
Venture Exchange (the "Exchange"), on September 9, 1998 as a venture capital
pool corporation ("VCP") as defined by the policies of the exchange.  Under the
terms of the exchange's policies, Imagis had 18 months from the date of listing
to complete a Qualifying Transaction.

On October 6, 1998, Imagis, Imagis Cascade Technologies ("Imagis Cascade"), a
private Canadian company which develops and markets law enforcement software
products, and the Imagis Cascade shareholders entered into a Confidentiality
and Standstill Agreement pursuant to which Imagis was able to complete due
diligence respecting the business and affairs of Imagis Cascade.  On October
16, 1998, Imagis gave notice to the Imagis Cascade shareholders of its
intention to acquire all of the issued and outstanding shares of Imagis
Cascade.

Effective February 23, 1999, Imagis acquired 100% of the outstanding shares of
Imagis Cascade.

As set out in the Share Purchase Agreement, consideration for the acquisition
of all of the shares of Imagis Cascade was $2,632,000, plus contingent
additional consideration of up to $400,000, paid as follows:

(a)  as to $100,000 by application of an existing deposit on the closing
     date;

(b)  as to $1,632,000 by allotment and issue to Imagis Cascade's shareholders
     of 3,400,000 common shares of the Company at a deemed value of $0.48 per
     share;

(c)  as to $900,000 in cash on or before April 30, 1999; and

(d)  up to $400,000 payable to a shareholder if, as and when, the warrants
     comprised in the Offering described below are exercised to raise up to
     $400,000 net to the Company's treasury.

In consideration for renouncing his right to acquire up to a 6% equity
interest in Imagis Cascade, on closing Imagis issued to the president of
Imagis Cascade, a warrant to purchase 400,000 common shares of the Company at
a price of $1.25 per share exercisable for a two year period subsequent to
vesting which will occur equally on an annual basis over a three year period.
In addition, Imagis issued a warrant to purchase 24,000 common shares at a
price of $1.25 per share for a one year period to an unrelated party for
services provided.

F-6

<PAGE>

1.   Operations (continued):

In addition, the Company paid a finders fee with the issuance of 100,000
shares at a deemed value of $0.48 per share.

As the shares issued in this transaction resulted in the recipients gaining
voting control over Imagis, the acquisition is accounted for as a reverse
take-over in accordance with accounting principles generally accepted in
Canada.  The net assets deemed to have been acquired comprised cash of
$239,522 less accounts payable of $33,012 resulting in a value assigned to the
shares issued of $206,510.  During the period from January 1, 1999 to
completion of the acquisition, Imagis incurred operating costs of
approximately $30,000.  Application of reverse take-over accounting results in
the following:

(a)  The consolidated financial statements of the combined entity being
     issued under the name of the legal parent but being considered to be a
     continuation of the financial statements of the legal subsidiary; and

(b)  Imagis Cascade's assets, liabilities, revenues and expenses being
     included in the consolidated financial statements of the Company at
     their carrying values and the comparative figures reflect the results of
     operations of Imagis Cascade for its most recent fiscal period ended
     December 31, 1998.

These financial statements have been prepared on a going concern basis which
includes the assumption that the Company will be able to realize its assets
and settle its liabilities in the normal course of business.  At December 31,
1999, the Company has a deficiency in net assets of $935,906 and has a working
capital deficiency of $198,034 and will require continued financial support
from its shareholders and creditors.  Failure to obtain ongoing support of its
shareholders and creditors may make this basis of accounting inappropriate in
which case the Company's assets and liabilities would need to be recognized at
their liquidation values.  These financial statements do not include any
adjustment due to this going concern uncertainty.

2.   Significant accounting policies:

The Company prepares its financial statements in accordance with generally
accepted accounting principles in Canada and reflect the following significant
accounting policies:

(a)  Basis of presentation:

These financial statements include the accounts of the Company and its wholly
owned subsidiary, Imagis Cascade Technologies, Inc.  All material intercompany
balances and transactions have been eliminated.

(b)  Inventories:

Inventories are recorded at the lower of cost, calculated on a weighted
average basis, and estimated net realizable value.

F-7

<PAGE>

2.   Significant accounting policies (continued):

(c)  Capital assets:

Capital assets are recorded at cost and are amortized over their estimated
useful lives on a straight-line basis at the following annual rates:

Asset                                   Rate

Computer hardware                        30%
Computer software                       100%
Furniture and fixtures                   20%

(d)  Revenue recognition:

(i)  Software sales revenue:

Revenue is recognized on the later of title passing to the customer and
customer acceptance of the product.  The Company provides for estimated
return and warranty costs on recognition of revenue.

(ii) Support revenue:

Revenue from the sales of contract support services have been deferred and are
amortized to revenue over the period that the support services will be
provided.

(e)  Use of estimates:

The preparation of financial statements in accordance with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the amounts reported or disclosed in the financial statements.
Actual amounts may differ from these estimates.

(f)  Foreign currency:

Monetary items denominated in foreign currencies are translated to Canadian
dollars at exchange rates in effect at the balance sheet date.  Revenues and
expenses are translated to using rates in effect at the time of the
transactions.  Foreign exchange gains and losses are included in income.

(g)  Income taxes:

The Company uses the asset and liability method of accounting for income
taxes.  Under the asset and liability method, future tax assets and
liabilities are recognized for the future tax consequences attributable to
differences between the financial statement carrying amounts of existing
assets and liabilities and their respective tax bases.  Future tax assets and
liabilities are measured using enacted or substantively enacted tax rates
expected to apply to taxable income in the years in which those temporary
differences are expected to be recovered or settled.  The effect on future tax
assets and liabilities of a change in tax rates is recognized to income in the
period that includes the date of enactment or substantive enactment.

F-8

<PAGE>

2.   Significant accounting policies (continued):

(h)  Stock option plan:

The Company has a stock option plan, which is described in note 8.  No
compensation expense is recognized when stock options are issued.  Any
consideration paid on exercise of stock options is credited to share capital.

(i)  Loss per share:

Loss per share is calculated using the weighted average number of shares
outstanding during the fiscal period.  This average includes outstanding
common shares issued in a reporting period from their date of issuance.  Fully
diluted per share amounts are not presented as the effect of outstanding
options and warrants is anti-dilutive.

(j)  Comparative figures:

Certain prior year amounts have been reclassified to conform with the basis
of presentation adopted in the current year.

3.   Capital assets:

                                                      Accumulated    Net book
1999                                      Cost       amortization       Value
Furniture and fixtures                    $  61,094    $  17,422    $  43,672
Computer hardware                            99,362       58,858       40,504
                                          ---------    ---------    ---------
                                          $ 160,456    $  76,280    $  84,176
                                          =========    =========    =========
1998
Furniture and fixtures                    $  12,487    $   5,203    $   7,284
Computer hardware                            91,889       29,049       62,840
                                          ---------    ---------    ---------
                                          $ 104,376    $  34,252    $  70,124
                                          =========    =========    =========

F-9

<PAGE>

4.   Notes payable:

                                                           1999          1998
First Capital Invest Corp., a shareholder             $ 100,000     $ 350,000
Due to a director                                        30,000        10,000
Colloquium Capital Corp.                                     --       220,000
International Portfolio Management Inc.                      --        10,000
                                                      ---------     ---------
                                                      $ 130,000     $ 590,000
                                                      =========     =========

Notes payable are non-interest bearing, unsecured and repayable on demand.

5.   Obligation under capital lease:

                                                           1999          1998
Minimum lease payments:
     1999                                             $      --     $   7,393
     2000                                                 7,393         7,393
     2001                                                 3,080         3,080
                                                      ---------     ---------
                                                         10,473        17,866
Less implicit interest portion at 9.8%                   (1,569)       (1,754)
                                                      ---------     ---------
                                                          8,904        16,112
Less current portion of capital lease obligation         (6,678)       (6,667)
                                                      ---------     ---------
                                                      $   2,226     $   9,445
                                                      =========     =========

6.   Advances payable:

During the year ended December 31, 1999, the Company agreed to sell 595.2
convertible note units, each note unit consisting of one $1,000 convertible
debenture and 1,562.5 share purchase warrants.  The convertible debenture has
a one year term and bears interest at a rate of 8% per annum.

A holder of the convertible debenture has the option to convert it into common
shares of the Company at a rate of $0.64 per share up until one year from the
closing of this placement.  After the first anniversary, the Company may
convert outstanding convertible debentures to common shares of the Company at a
rate not lower than $0.15 per share.

Each share purchase warrant provides for the acquisition of one common share
of the Company at a rate of $0.64 up until the first anniversary, and at a
rate of $0.74 until the second anniversary of the closing of this placement.

As of December 31, 1999, the Company had received $356,480 of the $595,200
convertible note units.  Subsequent to year end, the Company received the
remaining $238,720 (note 13).

F-10

<PAGE>

7.   Payable to Pacific Cascade Consultants Ltd.:

The payable to Pacific Cascade Consultants Ltd. ("Pacific Cascade"), a
significant shareholder of the Company, is non-interest bearing, unsecured and
has no specific terms of repayment.  Pacific Cascade has confirmed in writing
that it does not intend to demand repayment in the next twelve months.

8.   Share capital:

(a)  Authorized:

     100,000,000 common shares without par value

(b)  Issued:

                                                         Number
                                                      of shares        Amount
Imagis Cascade prior to transaction described in
  note 1:
    Balance December 31, 1998                         3,400,000     $       1
                                                      =========     =========
Imagis prior to transaction discussed in note 1:
  Issued for cash:
    On private placement                                800,000     $ 120,000
    On initial public offering                        1,500,000       450,000
    Share issuance costs                                     --       (61,575)
                                                      ---------     ---------
Balance, December 31, 1998                            2,300,000       508,425
Exercise of warrants                                    150,000        45,000
                                                      ---------     ---------
Shares capital prior to reverse take-over             2,450,000       553,425
Issued on reverse take-over business
  combination (note 1)                                3,400,000       206,510
Adjustment required by reverse take-over
  business combination accounting principles                 --      (641,299)
Issued for services related to the reverse take-over    172,500        87,875
                                                      ---------     ---------
                                                      6,022,500       206,511
Issued for cash on private placement                  2,935,714     3,252,000
Costs of financing                                           --      (234,516)
                                                      ---------     ---------
Balance, December 31, 1999                            8,958,214    $3,223,995
                                                      =========     =========

F-11

<PAGE>

8.   Share capital (continued):

(c)  Escrowed shares:

As at December 31, 1999 and 1998, 800,000 common shares are being held in
escrow.  One third of these common shares will be released on the first,
second and third anniversaries of the closing date of the acquisition of
Imagis Cascade Technologies, Inc., which was February 23, 1999.

(d)  Warrants:

At December 31, 1999, the following warrants were outstanding:

December 31,                             December 31,  Exercise
1998        Granted Exercised    Expired         1999     price   Expiry date
150,000          --  (150,000)        --           --    $   --            --
 24,000          --        --         --       24,000    $ 1.25      02/23/00
400,000          --        --         --      400,000    $ 1.25      02/23/01
     --   2,400,000        -- (2,400,000)          --    $   --            --
     --     360,000        --   (360,000)          --    $ 1.23            --
-------   ---------   -------  ---------      -------
574,000   2,760,000  (150,000)(2,760,000)     424,000
=======   =========   =======  =========      =======

(e)  Options:

The Company has granted stock options to certain employees, directors,
advisors and shareholders to buy an aggregate of 825,000 (1998 - 230,000)
common shares of the Company at prices ranging between $0.30 and $1.00 (1998 -
$0.30).  All options expire five years from the date of grant.  A summary of
the status of the Company's stock options at December 31, 1999 and 1998 and
changes during the years ended on those dates is presented below:

                               1999                      1998
                             Weighted average          Weighted average
                    Shares     exercise price Shares     exercise price
Outstanding,
 beginning of year  230,000            $0.30       --            $  --
Granted             595,000             1.00  230,000             0.30
                    -------            -----  -------            -----
                    825,000            $0.80  230,000            $0.30
                    =======            =====  =======            =====

F-12

<PAGE>

8.   Share capital (continued):

(e)  Options (continued):

The following table summarizes information about stock options outstanding at
December 31, 1999:

Options outstanding

Range of exercise prices          $0.30 to $1.00
Number outstanding at
  December 31, 1999               825,000
Weighted average remaining
  contractual life                4.08 years
Weighted average exercise price   $0.80

Options exercisable

Number exercisable at
  December 31, 1999               604,583
Weighted average exercise price   $0.73

9.   Related party transactions:

Related party transactions not disclosed elsewhere are as follows:

(a)  included in accounts payable and accrued liabilities is $74,134 (1998 -
     $141,594) which is due to companies with a director in common.

(b)  included in administration expense is $104,002 (1998 - $16,836) for
     payments made to a company with a director in common for services
     rendered to the Company.

10.  Income taxes:

Income tax expense differs from the amount that would be computed by applying
the federal and provincial statutory income tax rates of 45.6% (1998 - 45.6%)
to income before income taxes due to valuation allowances provided against
losses incurred in the year:

Future income tax assets are as follows:

                                                           1999          1998
Future income tax asset:
  Loss carry forwards                                $1,531,000    $  533,000
  Less valuation allowance                           (1,531,000)     (533,000)
                                                      ---------     ---------
                                                     $       --    $       --
                                                      =========     =========

F-13

<PAGE>

10.  Income taxes (continued):

As at December 31, 1999, the Company (including its subsidiary) has
non-capital loss carry forwards aggregating approximately $3,358,000 available
to reduce taxable income otherwise calculated in future years.  These losses
expire as follows:

2004                                                     $1,169,000
2005                                                        217,000
2006                                                      1,972,000
                                                          ---------
                                                         $3,358,000
                                                          =========

As indicated above, the tax benefits related to these loss carry forwards, the
application of which may be restricted, has not been recognized in these
financial statements as management does not consider it more likely than not
that such assets will be realized in the carry forward period.

11.  Commitments:

The Company is committed to the following operating lease payments for
equipment over the next five years:

2000                                                     $   27,144
2001                                                         19,859
2002                                                          6,392
2003                                                            835
2004                                                             --
                                                          ---------
                                                         $   54,230
                                                          =========

12.  Financial instruments and risk management:

(a)  Fair values

The fair value of the Company's financial instruments, represented by cash,
accounts receivable, accounts payable and accrued liabilities and advances
payable, approximates their carrying values due to their ability to be
promptly liquidated or their immediate or short term maturity.  The fair value
of the notes payable and payable to Pacific Cascade Consultants Ltd. are not
readily determinable due to the nature of the relationship between the
creditors and the Company.

(b)  Credit risk:

The Company is exposed to credit risk only with respect to uncertainty as to
timing and amount of collectibility of accounts receivable.  At December 31,
1999, no one customer had a balance receivable of more than $52,000.

F-14

<PAGE>

12.  Financial instruments and risk management (continued):

(c)  Foreign currency risk:

Foreign currency risk is the risk to the Company's earnings that arises from
fluctuations in foreign currency exchange rates, and the degree of volatility
of these rates.  Only a small portion of the Company's sales are derived in
United States dollars, and, accordingly, foreign exchange risk is not
considered by management to be a material risk at December 31, 1999.

13.  Subsequent events:

Subsequent to December 31, 1999:

(a)  The Company issued 11,581 common shares for services provided related to
     the convertible debenture (note 6).

(b)  The convertible note units offering was completed on January 10, 2000
     when the final payment was received by the Company.  The Company issued
     the convertible debentures and related share purchase warrants on the
     closing date of the convertible note units.

(c)  On February 4, 2000, 152,000 share purchase warrants issued with the
     convertible note units were exercised.


(d)  The Company issued 435,000 options to employees and directors of the
     Company.

14.  United States generally accepted accounting principles:
These consolidated financial statements have been prepared in accordance with
generally accepted accounting principles in Canada ("Canadian GAAP") which
differ in certain respects with accounting principles generally accepted in
the United States ("US GAAP").  Material issues that could give rise to
measurement differences to these consolidated financial statements are as
follows:

(a)  Stock-based compensation:

As described in note 8, the Company has granted stock options to certain
consultants and employees. These options are granted for services provided to
the Company.  For US GAAP purposes, Statement of Financial Accounting
Standards No. 123 ("FAS 123") requires that an enterprise recognize or, at its
option, disclose the impact of the fair value of stock options and other forms
of stock-based compensation in the determination of income.  The Company has
elected under FAS 123 to continue to measure compensation cost for stock
options granted to employees by the intrinsic value method set out in APB
Opinion No. 25.  As options are granted at exercise prices based on the market
price of the Company's shares at the date of grant, no intrinsic value
adjustment is required.  However, options granted to non-employee consultants
are required to be measured at their fair value at the date of issuance and
recognized by a charge against income over their vesting period.

F-15

<PAGE>

14.  United States generally accepted accounting principles (continued):

(b)  The effect of these accounting differences on deficit, net loss and loss
per share under United States accounting principles are as follows:

                                                          1999           1998
Deficit, Canadian GAAP                             $(4,159,901)   $(1,320,439)
Cumulative stock based compensation (a)               (114,224)            --
                                                     ---------      ---------
Deficit, US GAAP                                   $(4,274,125)   $(1,320,439)
                                                     =========      =========

Net loss, Canadian GAAP                            $(2,110,786)   $(1,320,439)
Stock based compensation (a)                          (114,224)            --
                                                     ---------      ---------
Net loss, US GAAP                                  $(2,225,010)   $(1,320,439)
                                                     ---------      ---------
Net loss per share, US GAAP                        $     (0.29)   $     (0.39)
                                                     =========      =========

F-16