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

                                   FORM 10-KSB

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

                                   (Mark One)
[X]  Annual report  pursuant to Section 13 or 15(d) of the  Securities  Exchange
     Act of 1934

                   For the fiscal year ended December 31, 2001

[ ]  Transition  report  pursuant  to  Section  13 or  15(d)  of the  Securities
     Exchange Act of 1934

        For the transition period from _______________ to _______________

                          Commission File No. 000-27365

                        ELECTRONIC IDENTIFICATION, INC.
--------------------------------------------------------------------------------
                 (Name of Small Business Issuer in its Charter)


           Nevada                                             88-0440528
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(State or other jurisdiction of                            (I.R.S. Employer
incorporation or organization)                           Identification Number)

  #411 - 1200 West Pender Street, Vancouver, BC, Canada                V6E 2S9
--------------------------------------------------------------------------------
      (Address of principal executive offices)                     (Postal Code)

                    Issuer's telephone number: (604) 684-8002

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

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

                         Common Stock, $0.001 Par Value
--------------------------------------------------------------------------------
                                (Title of Class)

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

Check if  there is no  disclosure  contained  herein  of  delinquent  filers  in
response to Item 405 of Regulation  S-B, and will not be contained,  to the best
of the  Company'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. [ ]

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The Issuer's revenues for its year ended December 31, 2001 were $nil.

As of June 30, 2003,  the  aggregate  market value of the voting and  non-voting
common equity held by non-affiliates  was approximately  $247,940 based upon the
closing price per share as reported on the Nasdaq Pink Sheets Market.

There were 3,542,283 outstanding shares of the issuer's Common Stock on June 30,
2003


DOCUMENTS INCORPORATED BY REFERENCE

None.


FORWARD-LOOKING STATEMENTS

Statements  contained  in this  report  which are not  historical  in nature are
forward-looking   statements  within  the  meaning  of  the  Private  Securities
Litigation  Reform  Act  of  1995.  These  forward-looking   statements  include
statements  in Item 1.  Business,  Item 5. Market for Common  Equity and Related
Stockholder  Matters,  and  Item 6.  Management's  Discussion  and  Analysis  of
Financial  Condition and Results of  Operations,  which can be identified by the
use of forward-looking  terminology such as believes, expects, plans, estimates,
predicts, potential, continue, may, will, should, or anticipates or the negative
thereof or other variations thereon or comparable terminology, or by discussions
of strategy. These statements are only predictions and involve known and unknown
risks,  uncertainties  and other  factors,  including  the risks in the  section
entitled "Risk  Factors",  that may cause our or our industry's  actual results,
levels of activity,  performance or achievements to be materially different from
any future results, levels of activity, performance or achievements expressed or
implied  by these  forward-looking  statements.  Although  we  believe  that the
expectations  reflected in the forward  looking  statements are  reasonable,  we
cannot   guarantee   future   results,   levels  of  activity,   performance  or
achievements.  Except as required be applicable  law,  including the  securities
laws of the United States, we do not intend to update any of the forward-looking
statements to conform these statements to actual results.

Such  forward-looking  statements  involve certain risks and uncertainties  that
could cause actual results to differ materially from anticipated results.  These
risks and  uncertainties  include  regulatory  constraints,  changes  in laws or
regulations  governing  the  Company's  products and  international  trade,  the
ability of the Company to market  successfully  its products in an  increasingly
competitive  worldwide market,  changes in the Company's  operating or expansion
strategy,  failure to  consummate or  successfully  integrate  proposed  product
developments,  the ability of the Company to manage growth,  the general economy
of the  United  States and the  specific  global  markets  in which the  Company
competes,  the  availability of financing from internal and external sources and
other  factors as may be identified  from time to time in the Company's  filings
with the Securities and Exchange Commission or in the Company's press releases.



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                         ELECTRONIC IDENTIFICATION, INC.

                                   FORM 10-KSB
                   FOR THE FISCAL YEAR ENDED DECEMBER 31, 2001

                                                                            PAGE

ITEM 1  DESCRIPTION OF BUSINESS ...............................................4

ITEM 2  DESCRIPTION OF PROPERTIES ............................................15

ITEM 3  LEGAL PROCEEDINGS ....................................................15

ITEM 4  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS ..................16

ITEM 5  MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS..............17

ITEM 6  MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION ............18

ITEM 7  FINANCIAL STATEMENTS..................................................25

ITEM 8  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
        AND FINANCIAL DISCLOSURE .............................................50

ITEM 9  DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL
        PERSONS; COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT ...........51

ITEM 10 EXECUTIVE COMPENSATION ...............................................52

ITEM 11 SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT .......53

ITEM 12 CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS .......................54

ITEM 13 EXHIBITS AND REPORTS ON FORM 8-K .....................................54

ITEM 14 CONTROLS AND PROCEDURES ..............................................54

SIGNATURES ...................................................................54



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                                     PART I

ITEM 1. DESCRIPTION OF BUSINESS

COMPANY OVERVIEW

The Company was incorporated in Nevada on May 14, 1992 and is in the development
stage  with  its  principal  business  activities  being  directed  towards  the
development and marketing of contactless smart ID card systems (Smart Card(s) or
Smart ID Card  System(s)).  Generally the size of a credit card, Smart Cards add
the ability and  intelligence to store and process  information  with a computer
chip embedded inside the card. Smart Cards are used in a number of corporate and
government applications including (i) access to restricted areas (replacing keys
and paper  identification  cards),  (ii) public  transportation  fare collection
(replacing bus tokens, taxi cab charge cards, airline or railway tickets), (iii)
point of sale  purchases.  Smart  Card  technology  is also  used in  industrial
applications  such as attaching a Smart Tag containing the Smart Card technology
to a  manufactured  product in order to track the product from the assembly line
through  quality  control,  warehousing,  inventory  control,  distribution  and
warranty.

The Company's  Smart Card systems  utilize  contact and  contactless  as well as
batteryless systems and therefore do not require the use of a magnetic stripe or
insertion into a terminal as required by contacted  cards  (Contacted  Card(s)),
such as credit cards and ATM cards.  Contacted  Cards in use today are typically
limited to storing information as opposed to intelligent Smart Cards, which have
processing  capabilities  similar to that of a personal computer.  The Company's
Smart Card System involves direct  wireless radio frequency  communications  and
magnetic  induction  between a chip in the Smart Card and a terminal.  Moreover,
the  Company's  contactless  Smart Card  Systems do not require  insertion  in a
terminal or the use of a keypad and  therefore may be used by all members of the
population  regardless of age or physical ability and in both indoor and outdoor
locations.

For consumers and  providers of goods and  services,  the Company's  Smart Cards
offer the convenience and accuracy of high speed transaction  processing without
the requirement of carrying cash,  checks or credit cards,  thereby reducing the
threat of theft,  inventory  shrinkage,  and payment  fraud  resulting  from the
handling  of cash or the  counterfeiting  of cash or  credit  cards.  Goods  and
services  providers do not risk loss from (i) accepting  cash or checks that may
be  subsequently  stolen from them after payment by consumers or (ii)  accepting
credit cards which may have been stolen prior to such payment.  Consumer loss is
limited  because the Smart Card is programmed to purchase only specific goods or
services.  Thus, the Smart Card is not as attractive to a thief when compared to
stolen cash, checks or credit cards.

The Smart Card is designed to  complement  credit cards rather than replace them
in  that  Smart  Card   applications   involve  the  storage  and   handling  of
substantially  more data than credit  cards and can  therefore be used for other
applications  (rather  than  just  purchase  and  sale  transactions),  such  as
identification of the user, loyalty programs and other portable data functions.

The Company markets its Smart Card Systems through its own direct sales force, a
combination  of joint ventures and strategic  alliances and selective  licensing
and  distributorship  arrangements and agreements with independent Agents in the
United States and in foreign countries.

On October 25,  2002 the Company  entered  into an  Agreement  And Plan Of Share
Exchange with Advanced Biometrics, Inc. ("ABI"), in which all outstanding common
stock of ABI will be exchanged for 95% of the total outstanding shares and share


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equivalents of the common stock of the Company. The Closing Date was extended to
May 30,  2003.  Upon  closing,  the former ABI  shareholders  will  control  the
combined  entity.  Additional  terms of the  agreement  required  ABI to advance
$25,000 in interim  financing  by October 28, 2002,  ABI to raise an  additional
$500,000 at closing or within a  reasonable  period  thereafter,  the Company to
issue  1,000,000  common  stock at a price of $0.10 per share to settle debts in
the amount of $100,000, and obtain director and shareholder approvals.

On March 1, 2000,  the Company  acquired,  through a  reorganization  agreement,
Girne Acquisition  Corporation ("Girne").  Girne was a corporation organized and
existing  under the laws of the State of  Delaware.  At that date,  Girne was an
inactive  shell company.  Under the terms and  conditions of the  reorganization
agreement,  each  issued  and  outstanding  share of  common  stock of Girne was
exchanged  pro rata for an aggregate  of 1,000 shares of voting  common stock of
the  Company at $0.001  par value per share.  As a result,  the  Company  issued
300,000 shares of common stock for the acquisition of Girne.  Immediately  after
the transaction,  the former shareholders of the Company controlled the combined
entity. For accounting  purposes,  this transaction has been accounted for as an
issuance of common  shares by the Company for the net monetary  assets of Girne,
which were nominal.  Pursuant to the reorganization  agreement,  the Company was
the  surviving  corporation  and  was  continued  under  its  present  name as a
corporation in the State of Nevada.

On May 3, 1999,  the Company  merged with RFID Systems Corp.  ("RFID").  At that
date, the Company was an inactive shell company.  RFID was a developmental stage
enterprise  and was  developing  automatic  identification  and data  collection
systems  utilizing radio  frequency  identification  technology.  The Company is
continuing  in this line of  business.  The Company  had 1,000  shares of common
stock outstanding.  Under the terms and conditions of the Agreement, each issued
and  outstanding  share of common stock of RFID was converted  into one share of
common  stock of the  Company.  Immediately  after the  transaction,  the former
shareholders of RFID controlled the combined  entity.  This transaction has been
accounted for as a recapitalization  of RFID,  effectively as if RFID had issued
common  shares  to  acquire  the  net  monetary  assets  of the  Company.  Under
recapitalization  accounting,  these  financial  statements  reflect the assets,
liabilities,  revenues and  expenses of RFID from its  inception on May 14, 1992
combined with those of the Company from the date the merger was completed.


SUBSEQUENT EVENTS

In the first quarter of 2002,  43,750 shares of common stock of the Company were
issued for settlement of debt, 96,375 shares of common stock of the Company were
issued pursuant to stock subscription  agreements,  and 311,250 shares of common
stock of the Company were issued for settlement of consulting  services incurred
by the Company.

On March 20, 2002,  pursuant to the terms of the ABI share  exchange  agreement,
the Company  completed a reverse  split of its common stock on an 8 for 1 basis,
such that every eight shares of common stock issued and outstanding  immediately
prior to the reverse  split was changed into and  constitute  one share of fully
paid common  stock of the Company.  Additionally,  all  outstanding  options and
warrants to acquire  Company  stock,  which have not been exercised or cancelled
prior to the closing of the share exchange, were adjusted and changed to account
for the 8 to 1 reverse  stock  split.  All  share  amounts  disclosed  have been
retroactively adjusted.

The Company entered into a Debt Settlement  Agreement on October 25, 2002 with a
creditor  owed  $220,000.  The  Company  agreed to repay  $100,000 in cash or by
issuance  of common  stock  upon the  above ABI  merger  being  approved  by the


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<PAGE>

Company's and ABI's shareholders,  and a further $120,000 at the rate of $10,000
per month.  The creditor  agreed to reduce the balance of $120,000 to $75,000 by
acceptance of a cash payment of $15,000.

On October  25,  2002,  the Board of  Directors  of the Company  authorized  the
classification and issuance of 5,000,000 shares of the Company's Preferred Stock
as "Series A Convertible  Preferred  Stock",  representing all of the authorized
shares of the Company's  Preferred  Stock.  The Series A  Convertible  Preferred
Stock are voting,  redeemable,  8%  non-cumulative  and have a $0.001 par value.
Each ten Series A Convertible  Preferred  Stock is  convertible  into one common
stock at the option of the holder.  The purchase price of the preferred stock is
$0.01 per share.

The Company  received  subscription  agreements  from ABI for the acquisition of
5,000,000  Series A Convertible  Preferred  Stock for total proceeds of $50,000,
which was received during the period from October 27, 2002 to January 27, 2003.

On January 27, 2003, the Company completed a private placement offering with ABI
consisting  of  125,000  units at a price of $0.04  per unit to net the  Company
proceeds  of $5,000.  Each unit  consists  of one share of common  stock and one
common stock share purchase warrant. Each warrant entitles the holder to acquire
one additional  share of common stock  exercisable at a price of $0.06 per share
on or before January 27, 2005.

DESCRIPTION OF DEMONSTRATIONS

Since 1998, the Company has conducted numerous  demonstrations of its technology
and may have the potential for  implementation on a larger scale. In some cases,
these  demonstration  phases  often take 6-12 months or longer.  Examples of the
Company's Smart Card demonstration projects (two of which are discussed below as
representative of the Company's potential) include the following:

The  Kingdom  of  Saudi  Arabia  -  Dammam:   Electronic  Visa,  Hajj  visa  and
identification  cards,  expatriate  visa and  identification  cards  and  access
control and identification for prisons.

The Kingdom of Saudi Arabia expressed  interest in smart ID cards for use in the
following areas:

1. Fraud proof  identification of prisoners,  detainees and staff in the prisons
systems: The use of the company's smart cards will enable the prison authorities
to monitor  prisons  within the facility,  monitor their  movements,  record and
track the movement of prisoners from one prison facility to another. There are a
total of 92 prisons in the Kingdom of Saudi Arabia. The intent is to monitor the
prisoners within each prison from a central  headquarters  location.  All of the
prisons will be integrated to a central monitoring location.

2. The use of the Company's  identification  and visa cards for Hajj (The annual
Muslim  pilgrimage):  Hardware  and  software  would be  installed  at all major
embassies  throughout  the world.  Pilgrims  would get their visas issued on the
smart card at the  embassies  and this smart card would double as a visa card at
the same time.  This card would  enable the bearer to enter the  country for the
sole purpose of attending  the Hajj.  When the card is issued at the  embassies,
the  fingerprint  and photo of the bearer is embedded  onto the chip in the card
and recorded on the integrated  database residing in the Saudi Arabia.  When the
bearer lands in Saudi  Arabia,  the card is read through the use of a reader and
the identity of the bearer can be verified by taking another fingerprint to find
a match to the fingerprint on the card. If a match is found the bearer is waived
through, thus speeding the process at immigration. The bearer holds the card for
further  verification  at  other  points  at the Hajj  locations  if  needed  or


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required. When exiting, the bearer of the card is required to return the card in
order to record the exit of the person in the database.

3. The Kingdom needs a tamper and fraud proof system of  identification  for the
expatriates in the country:  The  expatriates are brought in to work on employer
sponsored  visas that are valid for  anywhere  from 1-3 years and can be renewed
annually  or longer.  Our Smart  Cards can  provide  this tamper and fraud proof
system, with the information residing on the database.

United Arab Emirates ("UAE") - Abu Dhabi: National and Expatriate identification
cards, electronic visa cards.

The UAE issued a contract for consultancy on  identification  cards for both its
nationals and expatriates to Ernst & Young in September 2000. The UAE requires 2
identification  cards,  one for the nationals and the other for the expatriates.
The smart cards will be fraud proof and tamperproof. These cards will be used to
identify the person,  have their  identification on the national  database.  The
expatriates  will probably have an expiry date on their cards and the cards will
specify  what  benefits  they  are or are not  entitled  to as  compared  to the
nationals.  There  may also be a  requirement  for the  smart  cards to serve as
e-visas  between  the Arabian  Gulf  Cooperation  Council  (AGCC)  countries  of
Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and United Arab Emirates.

SMART CARD INDUSTRY OVERVIEW

Smart Card products,  including the Company's Smart Card (collectively  referred
to as generic  smart cards),  are  typically the size of a plastic  credit/debit
card  containing an  integrated  circuit chip (chip) which can process and store
information.  Today's generic smart cards typically have the processing power of
an early 1980's vintage personal computer,  minus a keyboard,  display and power
supply.  Because generic smart cards are really portable computers,  they can be
programmed to perform virtually any function that can be implemented by software
in the available memory space. Generic smart cards benefit directly from ongoing
advances in semiconductor  technology making available  continuously  increasing
performance and features at declining cost.

There  are  two  basic  types  of  generic   smart   cards,   memory  cards  and
microprocessor cards, each of which can interface between the generic smart card
and a terminal on a contacted or contactless  basis.  Memory cards are typically
used to store and retrieve  information  only and do not have the  capability of
performing  complex  processing of  information.  Microprocessor  cards are true
smart cards in that they contain a central  processing  unit within a chip which
can  perform a number of  functions,  including  complex  arithmetic  operations
required for security.  In excess of 90% of all generic smart cards sold in 1995
were memory cards with contacted interfaces requiring alignment and insertion of
the generic  smart card into a terminal to complete an  electrical  circuit with
the metal  contacts on the surface of the card.  While  contacted  generic smart
cards have found broad use in high volume, cost sensitive applications,  such as
pay phone systems which use contacted generic smart cards, they are expensive to
maintain,  less reliable and may be considered too slow for applications such as
transportation.  To address the perceived  shortcomings of the contacted generic
smart card, a contactless  generic smart card was first developed and introduced
in the early 1990's.  According to the  consulting  firm Frost & Sullivan,  more
than 676 million generic smart cards were issued in 1996.

According to the U.S.  Federal  Reserve,  68% of the  approximately  360 billion
financial  transactions  completed  in 1995 were for  transactions  of less than
$2.00 each. Electronic commerce using electronic funds transfer, magnetic stripe
cards and generic  smart cards  accounted  for less than ten percent of all such
transactions,  but  grew  at  an  annual  rate  of  17%  versus  1%  growth  for


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transactions  using  cash,  coin  and  checks.  The  Company  believes  that the
evolution of personal computers,  the Internet and generic smart cards represent
technologies  that will  contribute to the growth of electronic  commerce in the
future.  According  to a report by Killen &  Associates,  "Non-Banks  Smart Card
Strategies:  New Opportunities To Increase Sales and Profits", the generic smart
card market will triple to 30 billion transactions by 2005.

Asia,  Latin  America and North  America are areas  generally  believed to be of
greatest potential for generic smart card growth.

Costs  play an  important  role in this  emerging  industry.  Reports  in  "Card
Technology" magazine (September 1997) indicate that price competition is fierce.
Frost & Sullivan  reported average selling prices of Contactless  Smart Cards in
mid-1996 at $5.50 per unit at high volume.  During 1997,  the Company's  largest
Contactless Smart Card competitors sold these cards at $2.50 per unit and lower,
affecting profit margins on the products.

Generic smart card products and markets have only recently begun to develop, are
rapidly  evolving  and are  characterized  by an  increasing  number  of  market
entrants who have developed or are developing a wide variety of products.  As is
typical in a new and rapidly evolving industry, demand and market acceptance for
new products are subject to a high level of  uncertainty.  There is no assurance
that the Company's Smart Cards will become widely accepted.  If the market fails
to  develop,  develops  more  slowly  than  expected,   becomes  saturated  with
competitors,  or if the Company's Smart Cards do not achieve market  acceptance,
the  Company's  business,  operating  results  and  financial  condition  may be
materially adversely affected.

STRATEGY

The Company's  mission is to achieve  sustained  leadership  in  developing  and
delivering  contactless and the new combi-card  (contact and contactless)  Smart
Card  solutions for  electronic  identification,  access  control,  security and
immigration,  while securing worldwide acceptance and usage of its technology in
Smart Card chips.  The following  discussions  represent the Company's  business
strategy.

PRODUCT DEVELOPMENT

The Company believes its compression  technology  provides  distinct  advantages
over known  competing  Smart Card  Systems  including:  (i) higher  speed making
possible  real-time  processing;  (ii) lower power  consumption  with no battery
requirements;  and (iii)  reliability with a virtually  unlimited card life. The
Company  continues to demonstrate its abilities in the fields of radio frequency
(RF) analog and digital circuit design.  The Smart Card Systems developed by the
Company offer a level of security and flexibility in contactless  operation that
could only previously be achieved in contacted operation.

Key to the success of new  generations  of Smart Card  Systems is the  Company's
strength in both the front end and back end protocol  implementation.  This core
competency  is  important  because  of the  continuous  evolution  of Smart Card
standards.  The Company's product development team strives to develop Smart Card
Systems  which will not only comply with the evolving  standards,  but will also
continue to communicate with existing legacy systems.

The Company  intends to continue to develop  Smart Card Systems  utilizing  next
generation  architecture.  Next generation architecture evolves into an Internet
oriented interface that is both browser and micro browser (wireless  application
protocol  or WAP)  based.  This will  allow the new  system to operate in a much
smaller  technology  footprint  moving  toward the PDA or  handheld  size with a


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wireless  backbone.  The next  generation  will also  include the  creation of a
driver  library to  provide  support  for  several  card / reader and  biometric
devices.  This will assure compatibility with the political as well as technical
interests of the customer base.

The back end  integration  problems  will also be solved in the next  generation
architecture.  Customers  are  looking  for a  single  smart  card to be able to
interface with several back end legacy service delivery  systems.  These include
passports,  driver  licenses,  healthcare,  etc. To achieve  this  capability  a
layered  e-business  integration  backbone  will be created.  This will  include
support for:

1. A formal architecture and development methodology,
2. A distributed application development environment,
3. An integrated management and monitoring capability,
4. Required transport technologies (messaging, IIOP, etc),
5. Formatting,
6. Routing,
7. Transformation (including but not limited to XML),
8. Application and legacy technology connectors (adapters),
9. Business process design and automated tracking.


The Company  incurred  R&D  expenses of $27,008 in 2001 and $3,914 in 2000.  The
majority  of  the  costs  of  R&D  activities  were  incurred  in  prior  years.
Approximately  $20,000 in current year R&D costs were  incurred  pursuant to the
terms of a licensing agreement with Alternative Technologies as disclosed in the
financial  statements.  The  remaining  $7,000  was  paid for  certain  software
development services.

MARKETING

The Company promotes its Smart Card Systems using a multi-faceted  marketing and
sales  strategy.  The  Company's  near term  strategy  is  designed  to  address
primarily  systems in the  identification,  access  control and security  market
segments.

The  Company's  Smart Card Systems are custom based systems  requiring  software
modification  for varied  users.  The Company  believes that these custom system
applications  offer the greatest  opportunity  for its  technology  for the next
several years.

A key  component  of  the  Company's  marketing  strategy  will  be to  leverage
strategic alliances to develop new users and obtain market share in its targeted
markets.

The Company  plans to market its Smart Card  Systems  technology  to  commercial
organizations in the Middle East, which is the Company's  primary market for its
systems and technology. The Company has established an Internet web site and has
electronic mail capability.

The Company has not recorded any sales to date but is pursuing  opportunities in
the Middle East.

MANUFACTURING AND ASSEMBLY

The Company will subcontract  substantially all of its manufacturing operations.
The Company will contract with third parties to manufacture  the Company's Smart
Card products in order to avoid capital  intensive  investments and to focus the
Company's limited resources on product applications and software development.

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<PAGE>

The  Company  will  subcontract  assembly  of Smart  Cards,  terminals  and card
lamination to several  companies which  specialize in this area. With increasing
production   volumes,   the  Company  will   consolidate  its  outside  contract
manufacturing  in  order  to gain  economies  of scale  and to  improve  product
quality.

COMPETITION

The  market for Smart  Card  products  is new,  intensely  competitive,  quickly
evolving  and subject to rapid  technological  change.  Competitors  may develop
superior  products  or products  of similar  quality  for sale at lower  prices.
Moreover,  there can be no assurance  that the Company's  Smart Card will not be
rendered obsolete by changing technology or new industry standards.  The Company
expects competition to persist and increase in the future. The Company's current
and potential competitors are primarily companies with established contacted and
contactless  Smart Card products that have longer operating  histories,  greater
name  recognition,  larger customer bases and significantly  greater  financial,
technical  and  marketing  resources  than the Company.  This  intense  level of
competition  could  materially  adversely  affect the Company's future business,
operating results and financial condition.

Competitive  factors in the industry include  transaction  speed, the extent and
flexibility of Smart Card memory,  reliability,  transaction  accuracy and cost,
all of which are  discussed  below.  There can be no assurance  that the Company
will be able to compete  successfully  against current or future  competitors or
that  competitive  pressures faced by the Company will not materially  adversely
affect its  business,  operating  results and financial  condition.  Many of the
Company's  competitors have the financial  resources necessary to enable them to
withstand  substantial  price and  product  competition,  which are  expected to
increase, and to implement extensive advertising and promotional programs,  both
generally and in response to efforts by other competitors to enter into existing
markets or introduce new products.

The industry is also  characterized  by frequent  introductions of new products.
The Company's  ability to compete  successfully will be largely dependent on its
ability to anticipate and respond to various  competitive  factors affecting the
Smart Card industry. These competitive factors include new products which may be
introduced,  changes  in  customer  preferences,   demographic  trends,  pricing
strategies  by  competitors  and  consolidation  in the industry  where  smaller
companies with leading edge technologies may be acquired by larger multinational
companies.

Contacted  Cards  represent  the  Company's  primary  competition  in electronic
commerce  applications.  Contacted Card competitors  include such  multinational
firms as Gemplus,  Schlumberger and Group Bull. The Company believes that it can
compete against  Contacted Cards because the Company's  contactless  Smart Cards
(i) operate at higher speeds,  (ii) do not require the time and effort  involved
in  inserting  the Smart Card in a terminal  or  removing  the Smart Card from a
wallet or purse,  (iii) use  reliable  solid  state  electronics  with no moving
parts,  exposed  contact  points or  magnetic  stripes  which can be erased by a
magnetic field, and (iv) are lower in cost over the product life.

The Company also competes  against  contactless  Smart Cards designed by Philips
GmbH, Sony Corporation, Gemplus, Motorola and Micron Communications, Inc., which
use contactless  technologies similar to the Company's  technology.  The Company
believes that its Smart Card Systems can compete against these other contactless
technologies because the Company's contactless Smart Cards (i) operate at higher
speeds,  (ii)  have  higher  endurance  and  (iii)  the  Company's   proprietary
compression  technology has the ability to compress and store a higher volume of
information.  This  includes  having a photo and  fingerprint  on the Smart Card
which does not require batteries for power.

                                       10
<PAGE>

PATENTS AND TRADE SECRETS

The Company will rely on its own patents,  trade secrets and  copyrights as well
as the patents,  trade  secrets and  copyrights  of its licensors to protect its
Smart Card technology and compression. Due to rapid changes in the generic smart
card  industry,  the Company  believes  that  development  of trade  secrets and
unpatented   proprietary   knowledge  in   connection   with  new  products  and
technologies  are generally as important as patent and  copyright  protection in
establishing and maintaining a competitive  advantage.  To date, the Company has
one Canadian patent pending. There can be no assurance that any of the Company's
future patent applications will be granted, that any current or future patent or
patent  application  will  provide  significant  protection  for  the  Company's
products or  technology,  be of commercial  benefit to the Company,  or that the
validity  of  such  patents  or  patent  applications  will  not be  challenged.
Furthermore,  there can be no  assurance  that any  patent  underlying  licensed
technology  will not be  challenged.  Moreover,  there can be no assurance  that
foreign  patent,  trade  secret or  copyright  laws will  protect the  Company's
technologies  or that the Company  will not be  vulnerable  to  competitors  who
attempt to copy or use the Company's Smart Card products or processes.

EMPLOYEES

As of June 30, 2003, the Company has no consultants or employees.

RISK FACTORS

Much of the information included in this annual report includes or is based upon
estimates,    projections   or   other   "forward-looking    statements".   Such
forward-looking  statements  include any projections or estimates made by us and
our  management  in  connection  with  our  business  operations.   While  these
forward-looking  statements,  and any assumptions upon which they are based, are
made in good faith and reflect our current  judgment  regarding the direction of
our business, actual results will almost always vary, sometimes materially, from
any  estimates,   predictions,   projections,   assumptions,   or  other  future
performance   suggested   herein.   We   undertake  no   obligation   to  update
forward-looking  statements to reflect events or  circumstances  occurring after
the date of such statements.

Such  estimates,  projections  or  other  "forward-looking  statements"  involve
various risks and  uncertainties  as outlined  below. We caution readers of this
annual  report that  important  factors in some cases have affected and , in the
future,  could  materially  affect  actual  results and cause actual  results to
differ materially from the results expressed in any such estimates,  projections
or other  forward-looking  statements.  In  evaluating  us, our business and any
investment  in our business,  readers  should  carefully  consider the following
factors.

Limited  operating  history,  limited  revenues,  and  continuing  losses  raise
substantial doubt about our ability to continue as a going concern.

The Company  began  operations in May 1992 and has a limited  operating  history
upon which potential investors may base an evaluation of its performance.  Since
inception,  the Company has focused its efforts and resources on  development of
its technology and on identifying  products and  applications  for  introduction
into the market.  During the period since  inception on May 14, 1992 to December
31, 2001, the Company incurred operating losses aggregating $15,677,171.  In the
three years ended December 3,1 2001, the Company has generated no sales revenue.
At December 31, 2001, the Company has a working  capital  deficiency of $719,556
and a  stockholders'  deficit of  $682,170.  The  Independent  Auditors'  Report
covering  the  Company's  December  31,  2001  financial  statements,   included


                                       11
<PAGE>

elsewhere in this Annual  Report,  contains an explanatory  paragraph  about the
Company's  ability to continue as a going concern.  The financial  statements do
not include any  adjustments  as a result of this  uncertainty.  There can be no
assurance that the Company's  operations  will generate  sufficient  revenues to
fund its operations and to allow it to become profitable.

Developing and unproven market for the Company's Smart Card products.

Smart card products and markets have only recently begun to develop, are rapidly
evolving and are  characterized  by an increasing  number of market entrants who
have developed or are developing a wide variety of products.  As is typical in a
new and rapidly evolving industry, demand and market acceptance for new products
are subject to a high level of  uncertainty.  There can be no assurance that the
Smart Card Systems designed by the Company will become widely accepted.  Because
the  market  for the  Company's  Smart  Cards  is new and  evolving,  it is also
difficult to predict with any assurance the future growth rate, if any, and size
of the market. If a market fails to develop,  develops more slowly than expected
or becomes  saturated with  competitors,  or if the Company's Smart Cards do not
achieve  market  acceptance,  the  Company's  business,  operating  results  and
financial condition may be materially adversely affected.

Competition, and frequent product introductions.

The  market for Smart  Card  products  is new,  intensely  competitive,  quickly
evolving  and subject to rapid  technological  change.  Competitors  may develop
superior  Smart Card  products or products of similar  quality for sale at lower
prices.  Moreover, there can be no assurance that the Company's Smart Cards will
not be rendered obsolete by changing technology or new industry  standards.  The
Company expects competition to persist and increase in the future. The Company's
current and potential  competitors are primarily  subsidiaries of  multinational
companies with established  Contacted Card and contactless Smart Card businesses
which have longer operating histories, greater name recognition, larger customer
bases and significantly  greater  financial,  technical and marketing  resources
than the Company.  This intense level of competition could materially  adversely
affect the Company's future business, operating results and financial condition.

Competitive  factors in the industry include  transaction  speed, the extent and
flexibility of Smart Card memory,  reliability,  transaction  accuracy and cost.
Current competitors  include such multinational  firms as Gemplus,  Schlumberger
and Group Bull,  which  primarily  offer  Contacted  Cards,  and  Philips  GmbH,
Motorola,  Sony  Corporation  and  Micron  Communications,   Inc.,  which  offer
primarily contactless Smart Cards.

There can be no assurance that the Company will be able to compete  successfully
against current or future competitors or that competitive pressures faced by the
Company will not materially adversely affect its business, operating results and
financial  condition.  Many of the  Company's  competitors  have  the  financial
resources  necessary to enable them to withstand  substantial  price and product
competition,  which  are  expected  to  increase,  and  to  implement  extensive
advertising and promotional programs,  both generally and in response to efforts
by other  competitors to enter into existing  markets or introduce new products.
The industry is also  characterized  by frequent  introductions of new products.
The Company's  ability to compete  successfully will be largely dependent on its
ability to anticipate and respond to various  competitive  factors affecting the
industry,  including new products which may be  introduced,  changes in customer
preferences,  demographic  trends and pricing  strategies by competitors,  which
could adversely affect the Company's operating margins.

                                       12
<PAGE>

New Product Development.

The  Company  may  experience  difficulties  that  could  delay or  prevent  the
development,  introduction and marketing of new Smart Card products. The Company
will be substantially dependent in the near future upon Smart Card products that
are currently being developed.  There can be no assurance that,  despite testing
by the Company,  errors will not be found in the Company's  Smart Card products,
or, if errors are  discovered,  corrected in a timely manner.  If the Company is
unable to develop on a timely  basis  existing  or new Smart  Card  products  or
enhancements to existing products,  or if its Smart Card products do not achieve
market  acceptance,  the  Company's  business,  operating  results and financial
condition may be materially adversely affected.

Expansion.

The Company will seek to develop and expand its Smart Card products and increase
its  marketing  operations.  Expansion  will  place  substantial  strains on the
Company's management and its operational,  accounting and information  resources
and systems. Successful management of growth will require the Company to improve
its financial controls,  operating  procedures and information  systems,  and to
hire,  train,  motivate and manage its employees and consultants.  The Company's
failure to manage growth effectively would have a material adverse effect on its
results of operations and its ability to execute its business strategy.

Obsolescence and technological change.

The  markets  for Smart Card  products  are  characterized  by rapidly  changing
technology and evolving industry  standards that result in product  obsolescence
and short product life cycles.  Accordingly,  the Company's success is dependent
upon its ability to  anticipate  technological  changes in the  industry  and to
continually  identify,  develop and successfully  market new Smart Card products
that  satisfy   evolving   technologies,   customer   preferences  and  industry
requirements.  There can be no assurance that  competitors will not market Smart
Card products which have perceived advantages over those of the Company or which
render the Company's Smart Card products obsolete or less marketable.

Impediments to market acceptance of products.

As with other new  products  designed  to replace  existing  products  or change
product designs, potential customers may be reluctant to integrate the Company's
Smart Card products into their systems unless the products are proven to be both
reliable  and  available at a  competitive  price in an assured  quantity.  Even
assuming product acceptance, the Company's customers may be required to redesign
their systems to effectively use the Company's Smart Card products. The time and
costs  necessary for such redesign could delay or prevent  market  acceptance of
the Company's Smart Card products.  A lack of, or delay in, market acceptance of
one or more of the Company's  Smart Card  products  could  adversely  affect the
Company's operations.

Dependence on manufactures and suppliers.

The Company's  reliance upon outside  manufacturers and suppliers is expected to
continue  and  involves  several  risks,  including  limited  control  over  the
availability of components, delivery schedules, pricing and product quality. The
Company  may also  experience  delays,  expenses  and lost  sales  should  it be
required to locate and qualify alternative suppliers.

                                       13
<PAGE>

Reliance upon patents and trade secrets.

The Company  relies on its patents,  trade secrets and copyrights to protect its
Smart Card  technology.  Although  the Company  intends to enforce its  patents,
trade secrets and copyrights  aggressively,  there can be no assurance that such
protection will be available in any particular instance or that the Company will
have the financial  resources  necessary to adequately  enforce its rights.  The
unavailability  of such  protection or the inability to enforce  adequately such
rights could materially  adversely  affect the Company's  business and operating
results. The Company operates in a competitive environment in which it would not
be unlikely for a third party to claim that certain of the Company's  present or
future Smart Card  products or licensed  technology  may infringe the patents or
rights of such third parties.  If any such  infringements  exist or arise in the
future,  the Company may be exposed to liability for damages and may be required
to obtain  licenses  relating  to  technology  incorporated  into the  Company's
products. The Company's inability to obtain such licenses on acceptable terms or
the  occurrence of related  litigation  could  materially  adversely  affect the
Company's operations.

Need for additional financing.

The Company  anticipates,  based on  currently  proposed  plans and  assumptions
relating to its  operations,  that its current cash on hand plus  projected cash
flow from its Rights  Offering will be  sufficient  to satisfy its  contemplated
cash  requirements for at least 12 months following the date of this Report.  In
the  event  that  the  Company's  plans  change,  its  assumptions  prove  to be
inaccurate  or its cash  flow  prove to be  insufficient  (due to  unanticipated
expenses, inadequate revenues, difficulties, problems or otherwise), the Company
may be required to seek  additional  financing  or curtail its  activities.  Any
issuance of equity  securities  would result in dilution to the interests of the
Company's  stockholders  and any issuance of debt  securities  would subject the
Company  to  risks  that  interest  rates  may  increase  or  cash  flow  may be
insufficient  to repay such  indebtedness.  The Company has no  arrangements  or
understandings  for  additional  financing  and there can be no  assurance  that
additional financing will be available to the Company if required.

Dependence upon custom system development projects.

The Company will rely upon custom system development  projects for a significant
part of its revenues. The inability of the Company to replace completed projects
with new projects will adversely affect the Company's operations.

Dependence upon qualified personnel and executive officers.

The  Company's  operations  depend in part upon its  ability  to retain and hire
qualified  personnel,  of  which  there  can  be  no  assurance.  The  Company's
operations are also dependent  upon the continued  services of Terry Kirby,  its
Chairman and Chief Executive Officer, and certain other consultants. The loss of
services of the Company's  executive officer or any of its consultants,  whether
as a result of death,  disability  or otherwise,  could have a material  adverse
effect  upon the  Company's  operations.  The Company  does not have  employment
agreements with its executive officers.

Control by  principal  stockholders;  authorization  and  issuance of  preferred
stock; prevention of changes in control.

There is no one single  shareholder who owns 10% or more of the Company's Common
Stock. The Company's Certificate of Incorporation  authorizes the issuance of up
to 5,000,000  shares of Preferred  Stock with such rights and preferences as may
be determined  from time to time by the Board of Directors.  Accordingly,  under


                                       14
<PAGE>

the  Certificate  of   Incorporation,   the  Board  of  Directors  may,  without
shareholder  approval,   issue  Preferred  Stock  with  dividend,   liquidation,
conversion,  voting, redemption or other rights which could adversely affect the
voting power or other rights of the holders of the Common Stock. The issuance of
any shares of  Preferred  Stock  having  rights  superior to those of the Common
Stock may result in a decrease in the value or market  price of the Common Stock
and could  further  be used by the Board of  Directors  as a device to prevent a
change  in  control  of the  Company.  The  Company  has not  issued  any of the
Preferred Shares to date and has no plans to issue Preferred Shares. The Company
has no other  anti-takeover  provisions in its Certificate of  Incorporation  or
Bylaws.  Holders of the Preferred Stock may have the right to receive dividends,
certain preferences in liquidation and conversion rights.

No dividends.

The Company has not paid any  dividends  on its Common Stock and does not intend
to pay dividends in the foreseeable future.

Possible volatility of securities prices.

The market price of the Common Stock may be highly volatile. Factors such as the
Company's  operating  results  or public  announcements  by the  Company  or its
competitors may have a significant effect on the market price of the securities.
In  addition,  market  prices for the  securities  of many small  capitalization
companies  have  experienced  wide  fluctuations  due to variations in quarterly
operating  results,  general  economic  conditions  and other factors beyond the
Company's control.

Limitations on liability of directors.

The Company's Certificate of Incorporation substantially limits the liability of
the  Company's  directors  to the  Company  and its  stockholders  for breach of
fiduciary or other duties to the Company.

ITEM 2. DESCRIPTION OF PROPERTIES

The Company's  headquarters  are located in a 3,000 square foot rented  facility
that it shares with an unrelated  company in Vancouver,  British  Columbia.  The
Company was charged a base monthly  amount of $13,600 up to June 30, 2002,  that
included accounting,  secretarial and consulting services.  The Company believes
its  existing  facility is  adequate  for its  current  needs and that  suitable
additional  or  substitute  space will be  available  as needed on  commercially
reasonable terms.

ITEM 3. LEGAL PROCEEDINGS

During 1997,  the Company  contracted  with  Chemoco to provide  services to the
Company.  As advance  consideration  of the  services to be provided by Chemoco,
individuals  related  to the  Company  transferred  19,445  common  stock of the
Company to Chemoco.  It is the Company's belief that Chemoco did not fulfill its
obligations  for the  services to be provided  and as a result,  the transfer of
common stock from individuals related to the Company to Chemoco was canceled. On
September 15, 1999, Chemoco commenced an action against the Company and a former
officer  of the  Company  claiming  for the  delivery  of  87,500  shares of the
Company, or in the alternative,  damages for the Company not delivering the said
shares to the Plaintiff.  Since the commencement of the action and the filing of
the Statement of Defense in November 1999, the solicitors for the Plaintiff have
filed a Notice of  Intention  to  withdraw as  solicitors  in this  matter.  The
outcome of this claim is unknown.  It is management's belief that any claim that
may arise from this situation is without merit.

                                       15
<PAGE>

On June 29, 1999, a former  director of the Company  commenced an action against
the Company  claiming,  inter alia,  for a  declaration  that he was entitled to
12,500  warrants  of the  Company  exercisable  at $3.00 per share and a further
declaration  that he was entitled to 75,000  warrants  exercisable  at $2.00 per
share  which were issued and  subsequently  cancelled.  The claim also  includes
damages for breach of contract and interest with costs.  The Company has filed a
defense  denying  any  claims  of the  former  director  in and to the  warrants
alleged.  To date,  no further  activity has been  commenced  and the outcome is
unknown.

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

There are no such matters to submit during the year 2001.



                                       16
<PAGE>

                                     PART II

ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

The Company's  Common Stock is quoted on NASD Pink Sheet market under the symbol
EIDT. The Company's Common Stock was previously quoted on NASD  Over-The-Counter
Bulletin Board under the symbol EISQ, until May 22, 2002.

The following table sets forth, for the periods  indicated the range of high and
low sales prices per share of the Company's  Common  Stock,  as reported on NASD
Over-The-Counter Bulletin Board, after taking into account the 1:8 reverse split
on March 20, 2002.

                                         Low Bid             High Ask
                                         -------             --------
            1st Qtr. 2000                 $1.92               $56.96
            2nd Qtr. 2000                 $7.20               $26.48
            3rd Qtr. 2000                 $5.20               $11.44
            4th Qtr. 2000                 $1.60                $5.68

            1st Qtr. 2001                 $1.52                $4.32
            2nd Qtr. 2001                 $1.12                $2.16
            3rd Qtr. 2001                 $0.72                $3.28
            4th Qtr. 2001                 $0.64                $2.00

As of June 30, 2003 the last reported  sale price of the Company's  Common Stock
was $0.07 per share.

The  source  of  this  information  is  Yahoo  Finance  quotation  services  and
broker-dealers  making a market in the  Company's  common  stock.  These  prices
reflect inter-dealer prices,  without retail markup,  markdown or commission and
may not represent actual transactions.

The Company  underwent a 1:8 reverse split of its common stock for  shareholders
of record at March 20, 2002, and is reflected in the above table.

Holders

On June 30, 2003,  the  Company's  common stock was held by  approximately  7000
shareholders of record and an indeterminate  number of investors through nominee
or street name accounts with brokers.

Dividends

The Company has not  declared or paid  dividends  on its Common  Stock since its
formation,  and  the  Company  does  not  anticipate  paying  dividends  in  the
foreseeable  future.  Although  the  Company  does not  currently  have a credit
facility,  future credit facilities,  if any, are likely to prohibit the payment
of dividends.  Declaration or payment of dividends,  if any, in the future, will
be at the  discretion of the Board of Directors and will depend on the Company's
then current financial  condition,  results of operations,  capital requirements
and other factors deemed relevant by the Board of Directors.

Transfer Agent and Registrar

The transfer  agent and registrar  for our common stock is Olde  Monmouth  Stock
Transfer Company Inc., 200 Memorial Parkway, Atlantic Highlands, New Jersey, USA
07716.



                                       17
<PAGE>

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

The following table outlines certain selected financial data, which should be
read in conjunction with, and are qualified in their entirety by, the financial
statements and related notes thereto.

STATEMENT OF OPERATIONS DATA FOR THE YEAR ENDED DECEMBER 31
<table>
      ------------------------------------------ ----------- ------------ ------------
      <S>                                             <C>          <C>          <C>
                                                      2001         2000         1999
      ------------------------------------------ ----------- ------------ ------------
      Revenues                                         $ nil        $ nil        $ nil
      ------------------------------------------ ----------- ------------ ------------
      Interest income                                      5          nil          990
      ------------------------------------------ ----------- ------------ ------------
      Loss from operations                        (1,873,556)  (2,711,506)  (1,792,872)
      ------------------------------------------ ----------- ------------ ------------
      Net loss                                    (1,971,005)  (2,711,506)  (3,051,195)
      ------------------------------------------ ----------- ------------ ------------
      Net loss per share - basic and diluted           (0.71)       (1.18)       (1.76)
      ------------------------------------------ ----------- ------------ ------------
      Weighted average shares outstanding          2,759,874    2,300,549    1,743,920
      ------------------------------------------ ----------- ------------ ------------
</table>
BALANCE SHEET DATA AS AT DECEMBER 31

      ------------------------------------------ ----------- ------------
                                                      2001         2000
      ------------------------------------------ ----------- ------------
      Cash                                             $ 112        $ 874
      ------------------------------------------ ----------- ------------
      Working capital deficit                       (719,556)    (400,745)
      ------------------------------------------ ----------- ------------
      Total assets                                    41,164       57,233
      ------------------------------------------ ----------- ------------
      Total liabilities                              723,334      530,115
      ------------------------------------------ ----------- ------------
      Stockholders' deficit                         (682,170)    (472,882)
      ------------------------------------------ ----------- ------------

PLAN OF OPERATION

Assuming the  Company's  proposed  transaction  with Advanced  Biometrics,  Inc.
("ABI")  completes  as  expected,  over the next twelve month period the Company
will  continue  implementing  a strategic and focused  operations  plan focusing
primarily  on the  perfection  of its Live  Grip  technology,  specifically  for
release with the Company's  (currently  named) Chronolog 2.0 time and attendance
application.  The  Company  will also  endeavor  to build  out its  intellectual
property  portfolio via the filing of derivative  patents,  new and  provisional
patents,  and  other  related  intellectual   property  right  filings  such  as
trademarks and copyrights.  From a marketing standpoint,  the next twelve months
will consist of a period of brand  introduction and brand building such that the
Company's  brand is  recognizable  in its  target  market  segment,  namely  the
national and international security market.

Overview of Plan

In the next twelve-month  period,  ABI will implement an aggressive  development
strategy for its biometrics technologies and applications, specifically its Live


                                       18
<PAGE>

Grip  technology  and the  Chronolog  2.0. The  foundation  of the strategy will
center  on  the  development,  testing,  acquisition,   licensing  and  sale  of
biometrics  technologies and security products. ABI envisions its development in
three  strategic  phases:  Development,  Beta Period,  and Product  Introduction
concurrent with Intellectual Property Integration.

Phase I ~ Development

In  this  initial  phase,   continuing  in  and  throughout  2003,  and  lasting
approximately  into the  first  and/or  the  second  quarter  of 2004,  ABI will
continue to assemble a core scientific  engineering  team required for designing
and  building the most cost  effective,  feature-laden  commercial  applications
utilizing ABI's core proprietary patented Live Grip technology. This will entail
further product  design,  testing,  and prototype  development for the Chronolog
2.0.  Aligned with these efforts will be ABI's  securing of  additional  related
patents and trademarks,  the filing of extensions on existing  patents,  and the
filing of additional  international patent and trademark  applications where not
already filed.

Concurrently during this phase, ABI will continue to aggressively  establish and
formalize business  relationships with potential customers and manufacturers for
technology  applications.  Specifically,  this will entail the  creation of long
term domestic and international licensing, joint venture and sales relationships
in multiple areas such as government  agencies,  security  sensitive  industries
(chemical,  biological,  radiological),  airports,  public  utilities  and power
related  business,  medical  research  facilities,  weapons  manufacturers,  and
electronic commerce related ventures.  ABI has been in advanced discussions with
several  companies  and  organizations,  including  but  not  limited  to,  Time
Equipment  Company,  Boeing,  Singapore  Technologies,  various  branches of the
United  States  Armed  Forces,  the FAA, as well as others,  all  interested  in
implementing ABI's Live Grip(TM) Technology.

Phase II - Beta Period

This phase is  expected to begin  approximately  Q1 2004 and may last as long as
six months,  whereby all  prototypes  for the Chronolog 2.0 time and  attendance
application are expected to be completed and the Company will  intensively  beta
test each internally and with selected customers such that the completed product
will be wholly  functional,  user  friendly  and  capable of  receiving  outside
technical support.

Concurrently  with this  phase,  the Company  will  continue  to  establish  and
formalize  business  relationships  with customers and manufacturers for further
technology  applications,  including  door  access  devices,  as well as medical
diagnostic  uses.  This will  include  the  creation of  potential  distribution
alliances,   manufacturing  alliances,   customer  relationships  and  licensing
relationships.


Phase III - Product Introduction & Intellectual Property Integration

In  this  phase,   beginning  from  approximately  Q2  2004,  the  Company  will
aggressively  introduce  is  Chronolog  2.0 time and  attendance  device  in the
domestic  market.  This will include the  marketing and promotion of the product
via print,  traditional and electronic  media. The Company is expected to have a
significant  presence at select trade  conferences  and related  security themed
events.  The  company  will  also  actively  work  with  both in house  and sub-
contracted sales executives to open various sales  opportunities for the product
line.

                                       19
<PAGE>

With the  introduction  of the Chronolog  2.0 time and  attendance  device,  the
Company will also begin to integrate  other  applications  it has  developed and
patented utilizing its Live Grip technology. This is expected to initially focus
on the door  access  device  market.  During  this  phase  the  company  and its
scientific team will create full spec breakdowns for such future products, model
and then beta test. The Company will also begin to actively facilitate licensing
relationships  for the  exploitation  of such  applications  in areas  where the
Company desires to co-venture and/or partner with other  strategically  situated
ventures to  manufacture  and  distribute  said Live Grip  equipped  door access
devices.

Product Research & Development

The  technology  group within the company is mandated by  management to initiate
multiple  research and  development  projects  specifically  focused on creating
improved  models of its Chronolog 2.0 time and attendance  device and developing
its  Live  Grip  technology  for  use in  door  access  devices,  as well as the
potential  for medical  diagnostic  applications.  Such  product  research  will
necessarily  include  investigation into improved  technologies that can deliver
the requisite  authenticating data in a more expedient and less intrusive manner
than  delivered by  competitive  applications.  Laboratory  testing,  scientific
evaluation,   and  beta  model  creation  for  demonstration   versions  of  the
applications  will also be undertaken at the Company's  facilities in Kennewick,
Washington.

Satisfaction of Cash Requirements/Next 12 Months

The Company does not currently have  sufficient cash on hand to fund its plan of
operations  for the next 12 months.  Additional  funds will be required  through
additional  sales of the  Company's  common  shares  and/or loans from  existing
shareholders.  However,  there can be no assurance that the Company will be able
to obtain additional funds to support the Company's  liquidity  requirements or,
that such  financing,  if available,  will be obtained on terms  favorable to or
affordable by the Company.

Plant & Equipment

The  Company  foresees  no  expected  purchases  or sale  of  plant  or  related
facilities  and no  significant  purchases or sale of  equipment  other than the
items required to create the stand alone Chronolog 2.0 beta tested demonstration
product,  as well as  equipment  necessary  for the  door  access  devices.  The
creation  of any  devices  will be  outsourced  such  that  the  company's  only
equipment  costs  will be those  related  facilitating  its  initial  design for
manufacture.

Employees

The Company  foresees  significant  changes in the number of employees  over the
next twelve  months.  When the Company  formally  introduces  its  Chronolog 2.0
product to the time and attendance  market,  concurrent  with the development of
the door access  device  product  line,  the company  expects to be staffed with
approximately 20 individuals.


RESULTS OF OPERATION

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

REVENUES.  Revenues were nil in 2001 and nil in 2000.  The Company has conducted
demonstrations of its technology that may have the potential for  implementation


                                       20
<PAGE>

on a larger scale. In some cases,  these  demonstration  projects are rolled out
for full-scale implementation, however the demonstration phase often takes 6- 12
months or longer.

RESEARCH AND DEVELOPMENT  EXPENSES (R&D).  R&D increased to $27,008 in 2001 from
$3,914 in 2000.  The majority of the costs of R&D  activities  were  incurred in
prior  years.  Approximately  $20,000  in current  year R&D costs were  incurred
pursuant to the terms of a licensing agreement with Alternative  Technologies as
disclosed in the financial statements. The remaining $7,000 was paid for certain
software development services

GENERAL AND  ADMINISTRATIVE  EXPENSES (G&A). G&A increased to $1,148,877 in 2001
from $753,339 in 2000. This increase is due to higher expenses  incurred for G&A
consulting  and  contract  services.  In 2001,  the  Company  maintained  strong
business  relationships  with its key  consultants  and hired new consultants to
form strategic partnerships and alliances.

SALES AND  MARKETING  EXPENSES  (S&M).  Sales and marketing  expenses  decreased
slightly to $671,534 in 2001 from  $685,468 in 2000.  The company  continues  to
work with its S&M consultants to demonstrate the Company's technology and market
its products.

DEPRECIATION AND  AMORTIZATION  EXPENSE.  Depreciation and amortization  expense
decreased  slightly  to  $15,819  in 2001 from  $16,743  in 2000.  There were no
capital  asset  additions in the current  year.  Current year  depreciation  and
amortization  is comprised of continuing  amortization of existing  assets.  The
Company's  primary assets are its compression  technology and the  demonstration
and testing equipment that includes computers and equipment.

INTEREST  ON LONG TERM  DEBT.  During  2001,  the  Company  incurred  $10,323 in
interest  expense due to a consultant of the Company.  During 2000,  the Company
incurred   $1,252,042  in  interest   expense  which   includes   $1,249,335  of
amortization of the effective  discount equal to the intrinsic value  calculated
based on the difference  between the quoted market price of the Company's common
stock and the conversion price on conversions of debt.

NET LOSS. As of December 31, 2001, the Company has approximately $9.7 million in
net operating  losses that may be deducted in the  calculation  of United States
taxable  income of future  periods until their expiry on years ranging from 2011
to 2021.  As of December 31, 2001,  the Company has  approximately  $3.3 million
non-capital  losses that may be deducted in the calculation of Canadian  taxable
income of future  periods until their expiry on years ranging from 2006 to 2008.
Net loss for the year ended  December  31,  2001 was  $1,971,005  as compared to
$2,711,506  for the year ended  December 31, 2000.  The majority of the decrease
resulted  from the  reduction in interest on long-term  debt from  $1,252,042 in
fiscal 2000 to $10,323 in fiscal 2001.  The 2000 figure  included  $1,249,335 of
the  amortization  of  the  effective  premium  equal  to  the  intrinsic  value
calculated  based on the  difference  between  the quoted  market  price and the
conversion price on conversions of debt. During 2001, the amortization was $nil.

LIQUIDITY AND CAPITAL RESOURCES

The  Company's  primary  need for capital is for the sales and  marketing of its
products.

The Company's capitalization of $14,995,001 as of December 31, 2001 is comprised
entirely of stockholders'  equity.  The Company has short-term debt of $723,334,
long-term debt of nil and stockholders' deficit of $682,170.

                                       21
<PAGE>

The Company has generated  substantial  operating losses since inception and has
yet to  generate  revenues  to fund  its  operations.  The  Company  has not yet
completed a significant  number of substantial sales  transactions  covering the
application  of its  products  and,  as a result,  an  uncertainty  exists as to
whether the Company will be able to successfully market and sell its products to
third parties at sufficient prices and volumes to fund its operations. From 1996
to 2001, the Company  experienced  significant  cash flow deficits and liquidity
shortages and funded its operations primarily through the issuance of its common
stock for debt and related party borrowings.

During 2002, the Company did not generate  operating revenues from product sales
or development  contracts.  In addition,  the Company  significantly reduced its
level  of  operating  expenses.  There  is no  assurance  the  Company  will  be
successful  in  developing  and  marketing  its  products or that the  Company's
operations will generate sufficient revenues to fund its operations and to allow
it to become profitable.

Management of the Company  funded its 2002  operations  through a combination of
related party loans and offerings of its preferred stock.  There is no assurance
that sufficient product sales or future sales of common stock or preferred stock
will occur or that  additional  proceeds  will be received  from such  potential
offerings.  The  Company  currently  does  not  have  an  available  source  for
short-term borrowings.

These factors,  among others,  raise  substantial doubt about the ability of the
Company to continue as a going concern.  The financial statements do not include
any adjustments relating to the recoverability of assets and carrying amounts of
liabilities  that might be necessary should the Company be unable to continue as
a going concern.

CASH FLOW

The Company had cash and cash  equivalents  of $112 and $874 as of December  31,
2001 and 2000, respectively.

During 2001, the Company raised $219,046 from financing  activities  compared to
$551,000  during  the 2000  fiscal  year.  The  Company  received  $77,100  from
subscriptions for shares of common stock and $141,946 from the issuance of short
term debt for the year ended  December 31, 2001. The Company  received  $426,000
from the issuance of  convertible  debentures  and $125,000 from the issuance of
loan payable for the year ended December 31, 2000.

The Company  used $342 in  investing  activities  during the 2001 fiscal year as
compared to $12,931  during the 2000 fiscal  year.  The majority of the decrease
resulted  from reducing the purchase of fixed assets from $11,760 in fiscal 2000
to nil in fiscal 2001.

The Company  reduced cash used in operating  activities  from $545,266 in fiscal
2000 to  $219,466  in fiscal  2001.  The Company  incurred  less cash  operating
expenditures as a result of generating  less cash from financing  sources during
the year.

APPLICATION OF CRITICAL ACCOUNTING POLICIES

Our financial  statements are prepared in accordance with accounting  principles
generally  accepted  in the  United  States  of  America.  We have not  produced
significant  revenues from our principal business and we are a Development Stage
Company as defined by Statement of Financial Accounting Standard ("SFAS") No. 7.
Preparing financial  statements in accordance with generally accepted accounting
principles  requires  management to make estimates and assumptions  which affect


                                       22
<PAGE>

the reported  amounts of assets and liabilities and the disclosure of contingent
assets and  liabilities  at the balance  sheet  dates,  and the  recognition  of
revenues and expenses for the reporting periods. These estimates and assumptions
are affected by management's application of accounting policies.

Property and Equipment

Fixed assets are carried at cost less accumulated amortization.  Amortization is
calculated  annually for furniture and equipment on the straight line basis at a
rate  of 20%  per  annum,  and  for  computers  and  technology  equipment  on a
declining-balance  basis at a rate of 30% per  annum.  We review  and assess the
underlying value of fixed assets as the situation  dictates to determine whether
a provision for impairment  should be recorded.  Such  determination  is made by
comparing  the  carrying   value  of  fixed  assets  to  the  future  cash  flow
(undiscounted)  expected  to  result.  When  these  cash flows are less than the
carrying  value,  impairment is calculated by reference to the fair value of the
specific assets.

Intangible Assets

Patents are recorded at cost and amortized using the straight-line method over a
period of five years.

Income Taxes

Income taxes are accounted for under the asset and  liability  method.  Deferred
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 and operating
loss and tax credit  carry  forwards.  Deferred tax assets and  liabilities  are
measured  using  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 deferred tax assets and  liabilities  of a change in tax
rates is recognized in income in the period that includes the enactment date. To
the extent that the  realization  of deferred tax assets is not considered to be
more likely than not, a valuation allowance is provided.

Recent Accounting Pronouncements

In December  2002,  the FASB issued SFAS No. 148,  "Accounting  for  Stock-Based
Compensation - Transition and Disclosure",  which amends SFAS No. 123 to provide
alternative methods of transition for a voluntary change to the fair value based
method of accounting for stock-based employee  compensation.  In addition,  SFAS
No. 148  expands the  disclosure  requirements  of SFAS No. 123 to require  more
prominent  disclosures in both annual and interim financial statements about the
method of accounting for stock-based employee compensation and the effect of the
method used on reported results.  The transition  provisions of SFAS No. 148 are
effective  for fiscal  years ended  after  December  15,  2002.  The  disclosure
provisions of SFAS No. 148 are effective  for financial  statements  for interim
periods  beginning after December 15, 2002. The Company does not expect adoption
of  this  standard  to  have a  material  effect  on the  Company's  results  of
operations or financial position.

In October 2002, the FASB issued SFAS No. 147 "Acquisitions of Certain Financial
Institutions--an   amendment  of  FASB  Statements  No.  72  and  144  and  FASB
"Interpretation  No. 9", but it does not have any relationship to the operations
of the Company and therefore a description of such and its respective  impact on
the Company's operations has not been disclosed.

                                       23
<PAGE>

In June 2002,  the FASB issued SFAS No. 146,  "Accounting  for Costs  Associated
with  Exit  or  Disposal  Activities".  The  provisions  of this  Statement  are
effective for exit or disposal  activities that are initiated after December 31,
2002, with early  application  encouraged.  This Statement  addresses  financial
accounting and reporting for costs  associated with exit or disposal  activities
and  nullifies  Emerging  Issues Task Force (EITF)  Issue No.  94-3,  "Liability
Recognition for Certain Employee Termination Benefits and Other Costs to Exit an
Activity (including Certain Costs Incurred in a Restructuring)".  This Statement
requires  that a  liability  for a cost  associated  with an  exit  or  disposal
activity be recognized  when the  liability is incurred.  The Company will adopt
SFAS No.  146 on  January  1,  2003 and its  impact  is not  expected  to have a
material effect on its financial position or results of operations.

In April 2002, the FASB issued SFAS No. 145,  "Rescission of FASB Statements No.
4, 44, and 64,  Amendment of FASB Statement No. 13, and Technical  Corrections".
The  Company  elected the early  adoption  of SFAS 145 in fiscal year 2001.  The
provisions of SFAS 145 have been applied  retroactively.  Under Statement 4, all
gains and losses from extinguishment of debt were required to be aggregated and,
if material,  classified as an  extraordinary  item,  net of related  income tax
effect. SFAS No. 145 eliminates Statement 4 and, thus, the exception to applying
Opinion 30 to all gains and  losses  related to  extinguishments  of debt.  As a
result,  gains and losses from  extinguishment  of debt should be  classified as
extraordinary  items only if they meet the criteria in Opinion 30.  Accordingly,
as losses  resulting from the settlement of debt by issuance of common stock did
not meet the criteria for  extraordinary  items under Opinion 30, they have been
presented  as  a  component  of  continuing  operations  on  the  statements  of
operations.

                                       24
<PAGE>



ITEM 7. FINANCIAL STATEMENTS


Index to Financial Statements
                                                                            PAGE

Independent Auditors' Report .................................................26

Balance Sheets as at December 31, 2001 and 2000 ..............................27

Statement of Operations for the years ended December 31, 2001, 2000
and 1999 and for the period from May 14, 1992 (inception) through
December 31, 2001.............................................................28

Statement of Stockholders' Deficit for the period from May 14, 1992
(inception) through December 31, 2001......................................29-30

Statement of Cash Flows for the years ended December 31, 2001, 2000
and 1999 and for the period from May 14, 1992 (inception) through
December 31, 2001..........................................................31-32

Notes to Financial Statements..............................................33-48

Schedule of General and Administrative, Sales and Marketing, and Research
and Development Expenses for the years ended December 31, 2001, 2000
and 1999 and for the period from May 14, 1992 (inception)
through December 31, 2001.....................................................49
















                                       25
<PAGE>

 [OBJECT OMITTED]
  KPMG  LLP
  Chartered Accountants
  Box 10426, 777 Dunsmuir Street                        Telephone (604) 691-3000
  Vancouver BC V7Y 1K3                                  Telefax   (604) 691-3031
  Canada                                                www.kpmg.ca



INDEPENDENT AUDITORS' REPORT

To the Stockholders and Director of
Electronic Identification, Inc.

We have audited the  accompanying  balance sheets of Electronic  Identification,
Inc. (a development  stage  enterprise) as at December 31, 2001 and 2000 and the
related statements of operations,  stockholders' deficit and cash flows for each
of the years in the three year period ended December 31, 2001 and for the period
from inception on May 14, 1992 to December 31, 2001. These financial  statements
are the  responsibility of the Company's  management.  Our  responsibility is to
express an opinion on these financial statements based on our audits.

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

In our opinion,  the financial  statements  referred to above present fairly, in
all material respects, the financial position of Electronic Identification, Inc.
as at December 31, 2001 and 2000 and the results of its  operations and its cash
flows for each of the years in the three year period ended December 31, 2001 and
for  the  period  from  inception  on May 14,  1992 to  December  31,  2001,  in
accordance with accounting principles generally accepted in the United States of
America.

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

/s/   KPMG LLP
--------------

Chartered Accountants
Vancouver, Canada

March 22, 2002, except as to notes 3(l),17(c) and 17(d)
   which are as of October 25, 2002, note 17(e)
   which is as of October 30, 2002 and notes 17(f) and 17(g)
   which are as of January 27, 2003.


                                       26
<PAGE>



                         ELECTRONIC IDENTIFICATION, INC.
                        (A Development Stage Enterprise)

Balance Sheets
(Expressed in United States dollars)

December 31, 2001 and 2000
<table>
<caption>
===============================================================================================
                                                                         2001            2000
-----------------------------------------------------------------------------------------------
<S>                                                                      <C>             <C>
Assets

Current assets:
     Cash                                                        $          112  $          874
     Amounts receivable                                                   3,666           3,496
-----------------------------------------------------------------------------------------------
     Total current assets                                                 3,778           4,370

Fixed assets (note 6)                                                    32,940          45,134

Patents (note 7)                                                          4,446           7,729
-----------------------------------------------------------------------------------------------

-----------------------------------------------------------------------------------------------
Total assets                                                     $       41,164  $       57,233
-----------------------------------------------------------------------------------------------

Liabilities and Stockholders' Deficit

Current liabilities:
     Accounts payable and accrued liabilities                    $      378,142  $      291,188
     Due to director (note 8(a))                                        183,869          46,269
     Due to stockholder (note 9)                                        114,377          67,658
     Short-term debt (note 10)                                           46,946               -
-----------------------------------------------------------------------------------------------
     Total current liabilities                                          723,334         405,115

Long-term debt                                                                -         125,000
-----------------------------------------------------------------------------------------------
Total liabilities                                                       723,334         530,115

Stockholders' deficit:
     Preferred stock:
       Authorized:  5,000,000 stock, with $0.001 par value
       Issued:  nil (2000 - nil)
     Common stock (note 11):
       Authorized:  8,750,000 stock, with $0.001 par value
       Issued:  3,090,908 stock (2000 - 2,418,113)                        3,091           2,418
     Additional paid-in capital                                      14,991,910      13,230,866
     Deficit accumulated during the development stage               (15,677,171)    (13,706,166)
-----------------------------------------------------------------------------------------------
     Total stockholders' deficit                                       (682,170)       (472,882)
-----------------------------------------------------------------------------------------------

-----------------------------------------------------------------------------------------------
Total liabilities and stockholders' deficit                      $       41,164  $       57,233
===============================================================================================
</table>
Future operations (note 2)
Contingencies (note 12)
Commitments (note 16)
Subsequent events (note 17)


See accompanying notes to financial statements


                                       27
<PAGE>




                        ELECTRONIC IDENTIFICATION, INC.
                        (A Development Stage Enterprise)

Statements of Operations
(Expressed in United States dollars)
<table>
<caption>
===============================================================================================================
                                                                                                  Period from
                                                                                                 inception on
                                                               Years ended December 31,        May 14, 1992 to
                                               ------------------------------------------------   December 31,
                                                         2001            2000            1999            2001
---------------------------------------------------------------------------------------------------------------
<S>                                                      <C>             <C>             <C>             <C>
Revenue:
   Revenue                                        $           -   $           -   $           -  $      254,996
   Interest and other income                                  5               -             990           5,001
---------------------------------------------------------------------------------------------------------------
                                                              5               -             990         259,997

Expenses:
   General and administrative (schedule)              1,148,877         753,339         922,097       5,424,375
   Sales and marketing (schedule)                       671,534         685,468         303,875       3,738,918
   Research and development (schedule)                   27,008           3,914          55,993       1,628,490
   Interest on long-term debt (note 15)                  10,323       1,252,042         493,586       2,287,977
   Depreciation and amortization                         15,819          16,743          18,311         163,399
   Write-off of leasehold improvements                        -               -               -          32,131
---------------------------------------------------------------------------------------------------------------
                                                      1,873,561       2,711,506       1,793,862      13,275,290
---------------------------------------------------------------------------------------------------------------

---------------------------------------------------------------------------------------------------------------
Operating loss                                       (1,873,556)     (2,711,506)     (1,792,872)    (13,015,293)

---------------------------------------------------------------------------------------------------------------
Loss due to settlement of debt by
   issuance of common stock (note 3(f))                 (97,449)              -      (1,258,323)     (2,018,840)

Equity loss in and write-down of investment
   in and advances to RFID Datachip
   Technologies Inc. (note 5)                                 -               -               -        (358,835)

Write-off of advances to Infotag Corporation                  -               -               -        (284,203)
---------------------------------------------------------------------------------------------------------------

---------------------------------------------------------------------------------------------------------------
Net loss for the period                           $  (1,971,005)  $  (2,711,506)  $  (3,051,195) $  (15,677,171)
---------------------------------------------------------------------------------------------------------------


Net loss per common share information:
     Basic and diluted                            $       (0.71)  $       (1.18)  $       (1.76)

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


Weighted average number of common
   shares used in computing net loss per
   share, basic and diluted                           2,759,874       2,300,549       1,743,920

---------------------------------------------------------------------------------------------------------------
</table>
See accompanying notes to financial statements




                                       28
<PAGE>




                        ELECTRONIC IDENTIFICATION, INC.
                        (A Development Stage Enterprise)

Statements of Stockholders' Deficit
(Expressed in United States dollars)
<table>
<caption>

=======================================================================================================================
                                                                                                Deficit
                                                      Common stock                          Accumulated           Total
                                                        (note 11)           Additional       during the   stockholders'
                                               ------------------------        paid-in      development          equity
                                                    Shares       Amount        capital            stage       (deficit)
-----------------------------------------------------------------------------------------------------------------------
<S>                                                  <C>          <C>            <C>              <C>             <C>
Balance, May 14, 1992 (inception)                        -  $         -  $           -  $             -  $            -

Loss for the period                                      -            -              -             (185)           (185)
Stock issued for cash                              389,153          389            311                -             700
-----------------------------------------------------------------------------------------------------------------------
Balance, December 31, 1992                         389,153          389            311             (185)            515

Loss for the period                                      -            -              -              (80)            (80)
-----------------------------------------------------------------------------------------------------------------------
Balance, December 31, 1993                         389,153          389            311             (265)            435

Loss for the period                                      -            -              -              (80)            (80)
-----------------------------------------------------------------------------------------------------------------------
Balance, December 31, 1994                         389,153          389            311             (345)            355

Loss for the period                                      -            -              -          (25,627)        (25,627)
Stock issued for cash                               55,556           56         19,944                -          20,000
-----------------------------------------------------------------------------------------------------------------------
Balance, December 31, 1995                         444,709          445         20,255          (25,972)         (5,272)

Loss for the period                                      -            -              -       (1,312,673)     (1,312,673)
Stock returned to Company for cancellation        (284,445)        (284)           284                -               -
Stock issued for secured notes receivable           27,778           28        183,782                -         183,810
Stock issued for cash                               26,751           27        963,096                -         963,123
-----------------------------------------------------------------------------------------------------------------------
Balance, December 31, 1996                         214,793          216      1,167,417       (1,338,645)       (171,012)

Loss for the period                                      -            -              -       (3,521,956)     (3,521,956)
Stock issued for cash                               27,778           27        999,973                -       1,000,000
Stock issued on settlement of convertible
   debentures                                       79,879           80        499,919                -         499,999
Stock issued to settle expenses                      6,298            6         24,994                -          25,000
Intrinsic value of beneficial conversion of
   liabilities (note 15)                                 -            -        316,000                -         316,000
Stock issue costs                                        -            -       (225,112)               -        (225,112)
-----------------------------------------------------------------------------------------------------------------------
Balance, December 31, 1997                         328,748          329      2,783,191       (4,860,601)     (2,077,081)

Loss for the period                                      -            -              -       (3,082,864)     (3,082,864)
Stock issued on settlement of accounts
   payable                                          47,917           48        344,368                -         344,416
Stock issued for cash                              325,667          326        769,917                -         770,243
Stock issued on settlement of notes payable         37,255           37        152,553                -         152,590
Stock issued on settlement of convertible
   debentures                                      243,074          243        687,388                -         687,631
Stock issued on settlement of legal claims          31,250           31        132,828                -         132,859
Stock issued on settlement of loan payable          44,445           44        116,458                -         116,502
Stock issued to settle expenses                    126,153          126        439,738                -         439,864
Intrinsic value of beneficial conversion of
   liabilities (note 15)                                 -            -        175,653                -         175,653
Settlement of debt by issuance of common
   stock                                                 -            -        663,068                -         663,068
Cancellation of redeemable common stock
   issued to RFID Datachip Technologies Inc.             -            -        226,670                -         226,670
Stock issue costs                                        -            -       (174,056)               -        (174,056)
-----------------------------------------------------------------------------------------------------------------------

Balance, December 31, 1998, carried
   forward                                       1,184,509        1,184      6,317,776       (7,943,465)     (1,624,505)
</table>


                                       29
<PAGE>



                        ELECTRONIC IDENTIFICATION, INC.
                        (A Development Stage Enterprise)

Statements of Stockholders' Deficit (Continued)
(Expressed in United States dollars)
<table>
<caption>
=======================================================================================================================
                                                                                                Deficit
                                                      Common stock                          Accumulated           Total
                                                        (note 11)           Additional       during the   stockholders'
                                               ------------------------        paid-in      development          equity
                                                    Shares       Amount        capital            stage       (deficit)
-----------------------------------------------------------------------------------------------------------------------
<S>                                                  <C>          <C>            <C>              <C>             <C>
Balance, December 31, 1998, brought
   forward                                       1,184,509  $     1,184  $   6,317,776  $    (7,943,465) $   (1,624,505)

Net loss for the period                                               -              -       (3,051,195)     (3,051,195)
Stock issued on the settlement of
   subscriptions received for common stock         430,000          430      1,059,570                -       1,060,000
Stock issued to settle expenses                    251,500          252        375,061                -         375,313
Stock issued on settlement of notes payable         62,500           62         99,938                -         100,000
Stock issued on settlement of convertible
   debentures                                      249,020          249        401,783                -         402,032
Intrinsic value of beneficial conversion of
   liabilities (note 15)                                 -            -        474,117                -         474,117
Settlement of debt by issuance of common
   stock (note 3(f))                                     -            -      1,258,323                -       1,258,323
Stock issue costs                                        -            -        (48,474)               -         (48,474)
Compensatory benefit of stock options
   (note 11(e))                                          -            -        485,828                -         485,828
-----------------------------------------------------------------------------------------------------------------------

Balance, December 31, 1999                       2,177,529        2,177     10,423,922      (10,994,660)       (568,561)

Loss for the period                                      -            -              -       (2,711,506)     (2,711,506)

Stock issued to settle expenses                    113,500          114      1,131,686                -       1,131,800
Stock issued on the settlement of debt             120,834          121        425,879                -         426,000
Stock issued on recapitalization transaction
   of Girne Acquisition Corporation (note
   4(a))                                            37,500           37            263                -             300
Stock cancelled                                    (31,250)         (31)          (219)               -            (250)
Intrinsic value of beneficial conversion of
   liabilities (note 15)                                 -            -      1,249,335                -       1,249,335
-----------------------------------------------------------------------------------------------------------------------

Balance, December 31, 2000                       2,418,113        2,418     13,230,866      (13,706,166)       (472,882)

Loss for the period                                      -            -              -       (1,971,005)     (1,971,005)

Stock issued to settle expenses                    475,512          476        902,674                -         903,150
Stock issued to settle debt                        197,283          197        219,803                -         220,000
Subscriptions for units received in cash
   (note 11(b))                                          -            -         77,100                -          77,100
Loss due to settlement of debt by issuance
   of common stock (note 3(f))                           -            -         97,449                -          97,449
Compensatory benefit of stock options
   (note 11(e))                                          -            -        464,018                -         464,018
-----------------------------------------------------------------------------------------------------------------------

Balance, December 31, 2001                       3,090,908  $     3,091  $  14,991,910  $   (15,677,171) $     (682,170)
-----------------------------------------------------------------------------------------------------------------------
</table>
See accompanying notes to financial statements.



                                       30
<PAGE>




                        ELECTRONIC IDENTIFICATION, INC.
                        (A Development Stage Enterprise)

Statements of Cash Flows
(Expressed in United States dollars)
<table>
<caption>
===========================================================================================================================
                                                                                                                Period from
                                                                                                               inception on
                                                                           Years ended December 31,         May 14, 1992 to
                                                                  ----------------------------------------     December 31,
                                                                       2001           2000            1999             2001
---------------------------------------------------------------------------------------------------------------------------
<S>                                                                    <C>            <C>             <C>              <C>
Cash flows from operating activities:
   Loss for the period                                     $     (1,971,005) $  (2,711,506)  $  (3,051,195)  $  (15,677,171)
   Items not involving cash:
     Depreciation and amortization                                   15,819         16,743          18,311          163,399
     Loss due to settlement of debt by issuance of
       common stock (note 3(f))                                      97,449              -       1,258,323        2,018,840
     Equity loss in and write-down of investment in and
       advances to RFID Datachip Technologies Inc. (note 5)               -              -               -          358,835
     Write-off of leasehold improvements                                  -              -               -           32,131
     Write-off of advances to Infotag Corporation                         -              -               -          284,203
     Write-down of fixed assets                                           -              -               -           35,252
     Loss on disposal of fixed assets                                     -              -               -           10,771
     Acquisition of in-process research and development                   -              -               -          340,108
     Expenses settled with the issuance of notes payable                                 -               -          154,131
     Expenses settled with the issuance of stock                    903,150      1,131,800         375,313        2,875,126
     Stock issued on recapitalization transaction of
       Girne Acquisition Corporation (note 4(a))                          -            300               -              300
     Stock cancelled                                                      -           (250)              -             (250)
     Intrinsic value of beneficial conversion of
       liabilities into common stock (note 15)                            -      1,249,335         474,117        2,215,105
     Compensatory benefit of stock options (note 11(e))             464,018              -         485,828          949,846
   Changes in non-cash operating working capital:
     Amounts receivable                                                (170)           783          45,648           (3,667)
     Prepaid expenses and deposits                                        -            351             (11)               -
     Restricted cash                                                      -              -          47,394                -
     Accounts payable and accrued liabilities                        86,954       (111,121)        (65,752)         701,767
     Due to director (note 8(a))                                    137,600          6,791          39,478          183,869
     Due to stockholder (note 9)                                     46,719       (128,492)         22,444          114,378
     Accounts payable to be settled with common stock                     -              -               -          291,006
---------------------------------------------------------------------------------------------------------------------------
   Net cash used in operating activities                           (219,466)      (545,266)       (350,102)      (4,952,021)

Cash flows from investing activities:
   Bank overdraft                                                         -              -               -                -
   Purchase of fixed assets                                               -        (11,760)              -         (262,861)
   Acquisition of patent                                               (342)        (1,171)              -          (14,923)
   Advances to RFID Datachip Technologies Inc. (note 5)                   -              -               -         (132,165)
   Other advances                                                         -              -               -         (440,501)
---------------------------------------------------------------------------------------------------------------------------
   Net cash used in investing activities                               (342)       (12,931)              -         (850,450)

Cash flows from financing activities:
   Subscriptions received for common stock (note 11(b))              77,100              -               -        1,137,100
   Net proceeds on issuance of common stock                               -              -               -        2,354,899
   Net proceeds on issuance of convertible debentures                     -        426,000         353,558        1,938,780
   Issuance of short-term debt                                      141,946              -               -          141,946
   Issuance of loan payable                                               -        125,000               -          229,858
---------------------------------------------------------------------------------------------------------------------------
   Net cash provided by financing activities                        219,046        551,000         353,558        5,802,583
---------------------------------------------------------------------------------------------------------------------------

Increase (decrease) in cash                                            (762)        (7,197)          3,456              112

Cash, beginning of period                                               874          8,071           4,615                -
---------------------------------------------------------------------------------------------------------------------------

Cash, end of period                                        $            112   $        874   $       8,071   $          112
---------------------------------------------------------------------------------------------------------------------------
</table>


                                       31
<PAGE>




                         ELECTRONIC IDENTIFICATION, INC.
                        (A Development Stage Enterprise)

Statements of Cash Flows (Continued)
(Expressed in United States dollars)
<table>
<caption>
===========================================================================================================================
                                                                                                                Period from
                                                                                                               inception on
                                                                           Years ended December 31,         May 14, 1992 to
                                                                  ----------------------------------------     December 31,
                                                                       2001           2000            1999             2001
---------------------------------------------------------------------------------------------------------------------------
<S>                                                                    <C>            <C>             <C>              <C>
Supplemental non-cash investing and financing activities:
     Stock issued on the settlement of
       subscriptions received for common stock             $              -   $          -   $   1,060,000   $    1,060,000
     Stock issued on settlement of accounts payable                       -              -               -          344,416
     Stock issued on settlement of notes payable                          -              -         100,000          252,570
     Stock issued on settlement of convertible debentures                 -        426,000         402,032        2,015,663
     Stock issued on settlement of legal claims                           -              -               -          132,858
     Stock issued on settlement of loans payable                    220,000              -               -          336,502
     Common stock issued on settlement of expenses                  903,150      1,131,800         375,313        2,875,126
     Stock issued on recapitalization transaction of
       Girne Acquisition Corporation (note 4(a))                          -            300               -              300
     Stock cancelled                                                      -           (250)              -             (250)
     Cancellation of redeemable common stock                              -              -               -          226,670
     Intrinsic value of beneficial conversion of
       liabilities into common stock (note 15)                            -      1,249,335         474,117        2,215,105
     Loss due to settlement of debt by issuance of
       common stock (note 3(f))                                      97,449              -       1,258,323        2,018,840
     Issuance of common stock in exchange for secured
       notes                                                              -              -               -          183,810
     Issuance of redeemable common stock                                  -              -               -          226,670
     Authorized par value change resulting in an
       increase in additional paid in capital                             -              -          52,117           52,117

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


Supplementary cash flow information:
   Cash paid for taxes                                        $           -  $           -   $           -   $            -
   Cash paid for interest                                                 -          2,707          28,921           59,010

===========================================================================================================================
</table>
See accompanying notes to financial statements.



                                       32
<PAGE>




                        ELECTRONIC IDENTIFICATION, INC.
                        (A Development Stage Enterprise)

Notes to Financial Statements
(Expressed in United States dollars)

Years ended December 31, 2001, 2000 and 1999

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

1.   General:

     On April 23, 1999 Electronic Identification,  Inc. (the "Company" or "El2")
     signed an Agreement  and Plan of Merger with RFID Systems  Corp.  ("RFID").
     This merger was completed on May 3, 1999.

     On March 1, 2000, the Company acquired, through a reorganization agreement,
     Girne Acquisition  Corporation ("Girne").  Girne is a corporation organized
     and existing under the laws of the State of Delaware.  At that date,  Girne
     was an inactive shell company (note 4).

     EI(2) is in the development  stage with its principal  business  activities
     being  directed   towards  the  development  and  marketing  of  electronic
     identification  issuing and  authentication  systems to identify  people in
     secure,  convenient and cost effective  ways. The Company's  identification
     systems  combine radio  frequency  technology and biometric  identification
     technologies  to effectively  control the flow of people and information in
     offices,  over  the  Internet  or  across  borders;  as well as for  highly
     sensitive security applications such as passports, driver licenses, credit,
     banking and access control cards.


2.   Future operations:

     These  financial  statements  have been prepared on the going concern basis
     under which an entity is considered to be able to realize on its assets and
     satisfy its  liabilities  in the ordinary  course of  business.  During the
     period since  inception  on May 14, 1992 to December 31, 2001,  the Company
     has incurred operating losses aggregating  $15,677,171.  In the three years
     ended  December 31, 2001,  the Company has generated no sales  revenue.  At
     December 31, 2001, the Company has a working capital deficiency of $719,556
     and a  stockholders'  deficit of $682,170.  These factors cause there to be
     substantial  doubt  about the  Company's  ability  to  continue  as a going
     concern.

     The Company's ability to meet its obligations as they come due is primarily
     dependent upon securing  additional  financing,  whether from operations or
     otherwise,  and market acceptance of its products.  Management continues to
     pursue  additional  sources of  financing;  however,  to March 22,  2002 no
     funding  arrangements have been made and there can be no guarantee that the
     required  additional  financing will be obtained or, if available,  will be
     available  on  satisfactory  terms.  Failure to  identify  and obtain  such
     financing  will limit the Company's  ability to satisfy its  obligations as
     they come due which may, in turn,  impair the Company's ability to continue
     as a going concern. This could also negatively impact the recoverability of
     the carrying value of assets.

     These financial  statements do not include any adjustments  relating to the
     recoverability of assets and amounts and classification of liabilities that
     might be  necessary  should the  Company be unable to  continue  as a going
     concern.  If the Company is unable to continue as a going  concern,  assets
     and liabilities  could require  restatement on a liquidation  basis,  which
     would differ materially from the going concern basis.


                                       33
<PAGE>


3.   Significant accounting policies:

     (a)  Basis of presentation:

          These financial  statements are prepared in accordance with accounting
          principles generally accepted in the United States of America.

          The Company has not produced  significant  revenues from its principal
          business and is a  Development  Stage  Company as defined by Financial
          Accounting Standard ("FAS") No. 7.

     (b)  Foreign currency translation:

          The Company's  functional and reporting  currency is the United States
          dollar.  Transactions  undertaken in a currency  other than the United
          States dollar are remeasured into United States dollars using exchange
          rates at the date of the transaction.  Monetary assets and liabilities
          denominated in foreign currencies are remeasured at each balance sheet
          date at the exchange rate prevailing at the balance sheet date.  Gains
          and losses arising on  remeasurement or settlement of foreign currency
          denominated transactions or balances are included in the determination
          of income.  Foreign currency  transactions are primarily undertaken in
          Canadian dollars. The Company has not, to the date of these financials
          statements,  entered into derivative  instruments to offset the impact
          of foreign currency fluctuations.

     (c)  Use of estimates:

          The  preparation of financial  statements in accordance with generally
          accepted  accounting  principles requires management to make estimates
          and  assumptions  which  affect  the  reported  amounts  of assets and
          liabilities and the disclosure of contingent assets and liabilities at
          the balance sheet dates,  and the recognition of revenues and expenses
          for the reporting periods. Areas where significant estimates have been
          applied include the assessment of the ultimate  liability  arising out
          of legal  contingencies  and the  recoverability  of fixed  assets and
          patents. Actual results could differ from these estimates.

     (d)  Fixed assets:

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

          ======================================================================
          Assets                                   Basis                    Rate
          ----------------------------------------------------------------------

          Furniture and equipment                  Straight-line             20%
          Computers and technology equipment       Declining-balance         30%

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


                                       34
<PAGE>


3.   Significant accounting policies (continued):

     (d)  Fixed assets (continued):

          The Company reviews and assesses the underlying  value of fixed assets
          as the  situation  dictates  to  determine  whether  a  provision  for
          impairment should be recorded. Such determination is made by comparing
          the   carrying   value  of  fixed  assets  to  the  future  cash  flow
          (undiscounted) expected to result. When these cash flows are less than
          the carrying value,  impairment is calculated by reference to the fair
          value of the specific assets.

     (e)  Patents:

          Patents are  recorded at cost and  amortized  using the  straight-line
          method over a period of five years.

     (f)  Common stock issuances:

          During the year, common stock of the Company was issued for settlement
          of  indebtedness.  The Company incurred a loss of $97,449 (2000 - nil;
          1999 - $1,258,323) on settlements  resulting from differences  between
          the market value of common stock issued at the settlement date and the
          carrying value of the debt.

          Stock issue costs are  accounted  for as a reduction  in the  proceeds
          from the issuance of common stock.

     (g)  Research and development costs:

          Research and development costs are expensed as incurred.

     (h)  Stock-based compensation:

          The Company has elected to apply the  intrinsic  value  principles  of
          Accounting  Principles  Board  Opinion  No. 25,  Accounting  for Stock
          Issued  to  Employees  ("APB  25"),  and  related  interpretations  in
          accounting  for its stock options  granted to employees and directors.
          Under APB 25, compensation expense is only recorded to the extent that
          the  exercise  price is less than the market  value of the  underlying
          stock on the  measurement  date  which is  usually  the date of grant.
          Stock-based compensation for employees is recognized on an accelerated
          basis over the vesting period of the individual options. Stock options
          granted  to  non-employees  are  accounted  for  under  SFAS No.  123,
          Accounting  for  Stock-Based  Compensation,  and are recognized at the
          fair value of the options as determined by an option  pricing model as
          the related  services are provided and the options earned.  Fair value
          information with respect to options granted to employees and directors
          is disclosed in accordance with SFAS 123 (see note 11(e)).


                                       35
<PAGE>


3.   Significant accounting policies (continued):

     (i)  Comprehensive  loss:

          The Company's net loss is equal to comprehensive loss for all periods.

     (j)  Income taxes:

          Income taxes are accounted  for under the asset and liability  method.
          Deferred 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 and  operating  loss and tax credit carry
          forwards.  Deferred  tax assets and  liabilities  are  measured  using
          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 deferred tax assets and liabilities of a change
          in tax rates is  recognized  in income in the period that includes the
          enactment  date.  To the extent that the  realization  of deferred tax
          assets is not  considered  to be more  likely  than not,  a  valuation
          allowance is provided.

     (k)  Net loss per common share:

          Loss per common  share is  calculated  based on the  weighted  average
          number of common shares  outstanding,  which  excludes  subscribed but
          unissued shares.

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

     (l)  New accounting standard:

          In  April  2002,  the  Financial  Accounting  Standards  Board  issued
          Statement of Financial  Accounting Standard (SFAS) No. 145, Rescission
          of FASB Statements No. 4, 44, and 64,  Amendment of FASB Statement No.
          13, and Technical Corrections.  The Company elected the early adoption
          of SFAS 145 in fiscal year 2001.  The provisions of SFAS 145 have been
          applied retroactively.

          Under  Statement 4, all gains and losses from  extinguishment  of debt
          were  required to be  aggregated  and, if material,  classified  as an
          extraordinary  item,  net of related  income tax effect.  SFAS No. 145
          eliminates Statement 4 and, thus, the exception to applying Opinion 30
          to all gains and  losses  related  to  extinguishments  of debt.  As a
          result,  gains  and  losses  from  extinguishment  of debt  should  be
          classified  as  extraordinary  items only if they meet the criteria in
          Opinion 30.

          Accordingly,  as  losses  resulting  from  the  settlement  of debt by
          issuance of common  stock (note  3(f)) did not meet the  criteria  for
          extraordinary  items under  Opinion 30, they have been  presented as a
          component of continuing operations on the statements of operations.


                                       36
<PAGE>


4.   Reorganization and recapitalization transactions:

     (a)  Girne reorganization:

          On March 1,  2000,  the  Company  acquired,  through a  reorganization
          agreement,  Girne, a corporation organized and existing under the laws
          of the State of Delaware.  At that date,  Girne was an inactive  shell
          company.   Under  the  terms  and  conditions  of  the  reorganization
          agreement,  each issued and outstanding share of common stock of Girne
          was exchanged pro rata for an aggregate of 125 shares of voting common
          stock of the Company at $0.001 par value per share.  As a result,  the
          Company  issued 37,500 shares of common stock for the  acquisition  of
          Girne.  Immediately after the transaction,  the former shareholders of
          the Company controlled the combined entity.  For accounting  purposes,
          this  transaction  has been  accounted  for as an  issuance  of common
          shares by the Company for the net monetary  assets of Girne which were
          nominal.

          Pursuant  to  the  reorganization   agreement,  the  Company  was  the
          surviving  corporation  and was continued  under its present name as a
          corporation in the State of Nevada.

     (b)  RFID recapitalization:

          In 1999,  EI2 merged with RFID.  El2 was a  corporation  organized and
          existing under the laws of the State of Nevada.  At that date, El2 was
          an inactive shell company.  RFID was a developmental  stage enterprise
          and  was  developing  automatic  identification  and  data  collection
          systems utilizing radio frequency  identification  technology.  El2 is
          continuing in this line of business.

          El2 had 1,000 shares of common stock outstanding.  Under the terms and
          conditions  of the  Agreement,  each issued and  outstanding  share of
          common  stock of RFID was  converted  into  0.125  common  shares  (as
          adjusted for reverse stock split (note 17(a)) share of common stock of
          the  Company).   Immediately   after  the   transaction,   the  former
          shareholders of RFID controlled the combined entity.

          This transaction has been accounted for as a recapitalization of RFID,
          effectively  as if RFID had issued  common  shares to acquire  the net
          monetary  assets of El2. The net monetary  assets acquired by El2 were
          as follows:

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

          Total assets                                            $      176,108
          Total liabilities                                            1,800,613

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


          Under recapitalization  accounting, these financial statements reflect
          the  assets,  liabilities,  revenues  and  expenses  of RFID  from its
          inception on May 14, 1992 combined with those of El2 from the date the
          merger was completed.

                                       37
<PAGE>




5.   Investment in and advances to RFID Datachip Technologies Inc. ("Datachip"):

     During  1996,  the  Company  acquired  49.9% of the issued and  outstanding
     common stock of Datachip,  an unrelated party prior to the transaction,  by
     way of a stock exchange. Datachip received 6,297 redeemable common stock of
     the Company  valued at $36 per stock (as adjusted for reverse  stock splits
     (note 11(a) and (note  17(a)).  During fiscal 1997,  management  determined
     that a permanent impairment in the value of its investment had occurred and
     as a result,  the  investment  in Datachip  was  written  down to a nominal
     value.  During  fiscal 1998,  pursuant to a legal  settlement,  the Company
     returned all common stock of Datachip for consideration equal to the return
     and  cancellation of the redeemable  common stock  previously  issued,  and
     wrote-off the balance of the carrying value of its investment in Datachip.


6.   Fixed assets:
<table>
<caption>
     ===============================================================================================
                                                                    Accumulated             Net book
     December 31, 2001                                 Cost        amortization                value
     -----------------------------------------------------------------------------------------------
     <S>                                               <C>                 <C>                 <C>
     Furniture and equipment                  $      18,062         $    10,373         $      7,689
     Computers and technology equipment              82,363              57,112               25,251
     -----------------------------------------------------------------------------------------------

                                              $     100,425         $    67,485         $     32,940
     ===============================================================================================


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

     Furniture and equipment                  $      18,062         $     7,341         $     10,721
     Computers and technology equipment              82,363              47,950               34,413
     -----------------------------------------------------------------------------------------------

                                              $     100,425         $    55,291         $     45,134
     ===============================================================================================


7.   Patents:

     ===============================================================================================
                                                                          Years ended December 31,
                                                                   ---------------------------------
                                                                           2001                 2000
     -----------------------------------------------------------------------------------------------

     Cost                                                          $     16,269         $     15,927
     Accumulated amortization                                            11,823                8,198
     -----------------------------------------------------------------------------------------------

                                                                   $      4,446         $      7,729
     ===============================================================================================
</table>

                                       38
<PAGE>


8.   Related party transactions:

     (a)  Due to director:

          The amount due to a director  represents  a loan  provided  as well as
          expenses  paid on behalf of the  Company  by a  director.  The loan is
          non-interest   bearing,   unsecured  and  has  no  specific  terms  of
          repayment.

     (b)  Transactions with director and officer:

          During the year,  the Company was charged a total of $150,000  (2000 -
          nil; 1999 - nil) for management and consulting services performed by a
          director and officer of the Company.


9.   Due to stockholder:

     The amount  due to a minority  stockholder  represents  services  and loans
     provided to the Company. The loans are non-interest bearing,  unsecured and
     have no specific terms of repayment.


10.  Short-term debt:

     Short-term debt consists of the following:


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

     Non-interest bearing, unsecured notes payable,
     with no specific terms of repayment             $    46,946     $         -

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


11.  Common stock:

     (a)  Reverse stock split:

          On May 4, 1998,  the  Company  resolved to  consolidate  the number of
          preferred and common stock  outstanding  by a ratio of 4.5 old for one
          new common stock.  On March 30, 2002, the Company  completed a reverse
          split of its common stock on an 8 for 1 basis (note 17(a)). The effect
          of  these  reverse  stock  splits  have  been  applied   retroactively
          throughout these financial statements.


                                       39
<PAGE>


11.  Common stock (continued):

     (b)  Subscriptions received:

          On October 31, 2001, the Company  received $18,800 for the purchase of
          23,500 units of the Company. Each unit consists of one common stock of
          the Company and one common stock purchase  warrant.  Each full warrant
          entitles  the  holder to  purchase  one  share of common  stock of the
          Company at $0.80  expiring on October  31,  2002.  As at December  31,
          2001, these units had not been issued.

          On September 6, 2001, the Company received $58,300 for the purchase of
          72,875 units of the Company. Each unit consists of one common stock of
          the Company and one common stock purchase  warrant.  Each full warrant
          entitles  the  holder to  purchase  one  share of common  stock of the
          Company at $1.60  expiring on  September  6, 2002.  As at December 31,
          2001, these units had not been issued.

     (c)  Stock purchase warrants:

          Activity during the year ended December 31, 2001 is as follows:
<table>
          =====================================================================================================
                                             Outstanding                                            Outstanding
          -----------------------------------------------------------------------------------------------------
                                 Exercise      December,                                Expired/      December,
          Expiry date               price           2000       Granted    Exercised    cancelled          2001
          -----------------------------------------------------------------------------------------------------
          <S>                         <C>            <C>           <C>          <C>          <C>            <C>
          June 20, 2002            $23.42            556             -            -            -            556
          =====================================================================================================


          Activity during the year ended December 31, 2000 is as follows:

          =====================================================================================================
                                             Outstanding                                            Outstanding
          -----------------------------------------------------------------------------------------------------
                                 Exercise      December,                                Expired/      December,
          Expiry date               price           1999       Granted    Exercised    cancelled           2000
          -----------------------------------------------------------------------------------------------------

          June 20, 2002            $23.42            556             -            -            -            556
          =====================================================================================================


          Activity during the year ended December 31, 1999 is as follows:

          =====================================================================================================
                                             Outstanding                                            Outstanding
          -----------------------------------------------------------------------------------------------------
                                 Exercise      December,                                Expired/      December,
          Expiry date               price           1998       Granted    Exercised    cancelled           1999
          -----------------------------------------------------------------------------------------------------

          June 20, 2002            $23.42            556             -            -            -            556
          Note 12(b)                $2.00              -        75,000            -       75,000              -
          =====================================================================================================
</table>

                                       40
<PAGE>

11.  Common stock (continued):

     (d)  Non-cash consideration:

          Shares  issued for non-cash  consideration  are valued at their market
          price at the date of agreement for issuance.

     (e)  Stock options:

          The Company  reserved 400,000 common shares pursuant to the 1999 stock
          option plan. An additional  678,125  common shares were  authorized in
          2001.  The  Company's  Board of Directors  has  discretion  to set the
          price,  term,  vesting  schedules,  and other terms and conditions for
          options  granted under the plan,  subject to the  requirements  of any
          stock exchange on which the Company's  shares are listed.  The options
          granted to date generally vest immediately and expire three years from
          the date of grant.

          On August 22, 2001, the Company re-priced 390,625 vested stock options
          originally  issued  on  February  24,  1999  from  $3.60 to  $0.80.  A
          compensatory  amount of  $63,587  was  recognized  that  reflects  the
          increase in the fair value of the  options,  all of which were granted
          to  non-employees,  due to the  re-pricing.  On November 7, 2001,  the
          Company again  re-priced  these stock options from $0.80 to $3.60.  No
          additional  compensation  resulted from this re-pricing.  A summary of
          the Company's stock option activity is as follows:

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

          Balance, December 31, 1999                390,625       $         3.60
          Options granted                                 -                    -
          Options exercised                               -                    -
          Options cancelled / expired                     -                    -
          ----------------------------------------------------------------------

          Balance, December 31, 2000                390,625                 3.60
          Options granted                           687,500                 0.80
          Options exercised                               -                    -
          Options cancelled / expired                     -                    -
          ----------------------------------------------------------------------

          Balance, December 31, 2001              1,078,125       $         1.81
          ======================================================================

                                       41
<PAGE>

11.  Common stock (continued):

     (e)  Stock options (continued):

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

<table>
<caption>
          ==========================================================================================
                                           Outstanding                           Exercisable
                               ---------------------------------------  ----------------------------
                                            Weighted
                                             average
                                           remaining          Weighted                      Weighted
                               Number    contractual           average     Number            average
          Exercise prices    of shares   life (years)   exercise price     of shares  exercise price
          ------------------------------------------------------------------------------------------
            <S>                  <C>           <C>                <C>          <C>              <C>
          $ 3.60               390,625         0.15              $3.60      390,625            $3.60
            0.80               296,875         2.64               0.80      296,875             0.80
            0.80               390,625         2.85               0.80      390,625             0.80
          ==========================================================================================

                             1,078,125           1.82            $1.84    1,078,125            $1.84
          ==========================================================================================
</table>

          As employee  options  granted in 1999 have an exercise  price equal to
          the  market  price at the date of  grant,  there  was no  compensation
          expense  recorded for  employees and directors in 1999 pursuant to the
          requirements  of APB 25. No options  were granted to employees in 2000
          or 2001.

          Had the  compensation  benefit been determined based on the fair value
          at the grant  dates of the  stock  options  and  charged  to  earnings
          consistent with the measurement provision of FAS 123, the impact would
          be as follows:

<table>
<caption>
          =====================================================================================================
                                                                                                   Period from
                                                                                                  inception on
                                                                                               May 14, 1992 to
          -----------------------------------------------------------------------------------------------------
                                                            Years ended December 31,               December 31,
                                                 ----------------------------------------------
                                                          2001            2000             1999            2001
          -----------------------------------------------------------------------------------------------------
          <S>                                             <C>              <C>              <C>             <C>
          Loss for the period, as reported       $  (1,971,005)  $  (2,711,506)   $  (3,051,195) $  (15,677,171)
          Estimated fair value of option grants
             to employees                                    -               -         (292,743)       (292,743)
          -----------------------------------------------------------------------------------------------------

          Pro forma loss                         $  (1,971,005)  $  (2,711,506)   $  (3,343,938) $  (15,969,914)
          -----------------------------------------------------------------------------------------------------

          Loss per share                         $      (0.71)   $       (1.18)   $      (1.76)

          =====================================================================================================
</table>

                                       42
<PAGE>

11.  Common stock (continued):

     (e)  Stock options (continued):

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

          ======================================================================
                                                             Options
                                         ---------------------------------------
                                          Interest
                                              rate           Term     Volatility
          ----------------------------------------------------------------------

          Year ended December 31, 2001           -              -              -
          Year ended December 31, 2000           -              -              -
          Year ended December 31, 1999      5.875%          3 yrs            80%

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

         The weighted-average fair value of stock options granted for the year
         ended December 31, 2001, 2000 and 1999 was as follows:

<table>
<caption>
          =====================================================================================================
                                           Weighted average                          Weighted average grant
                                            exercise price                               date fair value
                                 ---------------------------------              ------------------------------
                                        Year ended December 31,                      Year ended December 31,
          -----------------------------------------------------------------------------------------------------
                                      2001         2000       1999                2001         2000       1999
          -----------------------------------------------------------------------------------------------------
          <S>                          <C>          <C>        <C>                 <C>          <C>        <C>
          Exercise price is
            less than market
            value on grant date      $ 0.80       $    -    $     -              $ 0.80       $    -     $    -
          Exercise price is
            equal to market
            value on grant date        0.80            -       3.60                0.32            -       2.00
          Exercise price
            exceeds market
            value on grant date           -            -          -                   -            -          -
          All options                  0.80            -       3.60                0.48            -       2.00
          =====================================================================================================
</table>

     (f)  Rights:

          Pursuant to the  Agreement  and Plan of merger signed and completed on
          May 3,  1999,  each  stockholder  of  RFID  who  sent in  their  stock
          certificates for transfer into certificates  representing stock of the
          Company  prior to May 31, 1999 will receive a right to  purchase,  for
          every ten  pre-consolidation  stocks owned and tendered, an additional
          pre-consolidation  share of common stock at 75% of the market price of
          the  Company  stock as of the date of  exercise.  The  rights  will be
          exercisable for thirty days after filing of the registration statement
          with the Securities Exchange Commission. No registration statement has
          been filed as of December 31, 2001. Rights outstanding at December 31,
          2001 are 150,644 (2000 -150,644).

                                       43
<PAGE>




12.  Contingencies:

     The Company has determined  that it is not possible at this time to predict
     the final outcome of the  following  legal  contingencies.  The Company has
     accrued its best estimate of potential damages that may be awarded pursuant
     to  these  legal  contingencies.  Any  adjustment  to that  amount  will be
     recorded in the period determinable.

     (a)  Chemoco NV ("Chemoco"):

          During 1997, the Company  contracted with Chemoco to provide  services
          to  the  Company.  As  advance  consideration  of the  services  to be
          provided by Chemoco,  individuals  related to the Company  transferred
          19,445  common  stock of the Company to Chemoco.  It is the  Company's
          belief that Chemoco did not fulfill its  obligations  for the services
          to be provided  and as a result,  the  transfer  of common  stock from
          individuals  related  to the  Company  to  Chemoco  was  canceled.  On
          September 15, 1999,  Chemoco  commenced an action  against the Company
          and a former  officer of the  Company  claiming  for the  delivery  of
          87,500 shares of the Company,  or in the alternative,  damages for the
          Company not  delivering  the said shares to the  Plaintiff.  Since the
          commencement  of the action and the filing of the Statement of Defense
          in November 1999, the solicitors for the Plaintiff have filed a Notice
          of Intention to withdraw as solicitors in this matter.  The outcome of
          this claim is unknown.  It is management's  belief that any claim that
          may arise from this situation is without merit.

     (b)  Former director claim:

          On June 29, 1999, a former director of the Company commenced an action
          against the Company  claiming,  inter alia, for a declaration  that he
          was entitled to 12,500  warrants of the Company  exercisable  at $3.00
          per share and a further  declaration  that he was  entitled  to 75,000
          warrants  exercisable  at  $2.00  per  share  which  were  issued  and
          subsequently cancelled.  The claim also includes damages for breach of
          contract  and  interest  with  costs.  The Company has filed a defense
          denying  any  claims of the  former  director  in and to the  warrants
          alleged.  To date,  no further  activity  has been  commenced  and the
          outcome is unknown.

                                       44
<PAGE>

13.  Income taxes:

     The  tax  effect  of the  significant  temporary  differences  which  would
     comprise tax assets and liabilities at December 31, 2001 are as follows:

     ==========================================================================
     Deferred tax assets:
       Patents                                                   $      122,000
       Operating loss carryforwards                                   3,298,000
     --------------------------------------------------------------------------

     Total deferred tax assets                                        3,420,000

     Valuation allowance                                             (3,417,000)
     --------------------------------------------------------------------------

     Net deferred tax assets                                              3,000

     Deferred tax liability:
       Capital assets                                                    (3,000)
     --------------------------------------------------------------------------

     Net deferred tax liability                                  $            -
     ==========================================================================


     In assessing the realizability of deferred tax assets, management considers
     whether it is more likely than not that some portion or all of the deferred
     tax assets will not be realized.  The ultimate  realization of deferred tax
     assets is dependent upon the generation of future taxable income during the
     periods in which those temporary differences become deductible.  Management
     considers the  scheduled  reversal of deferred tax  liabilities,  projected
     future  taxable  income,  and  tax  planning   strategies  in  making  this
     assessment.  The amount of the  deferred  tax asset  considered  realizable
     could change  materially  in the near term based on future  taxable  income
     during the carry forward period.

     The  Company  has  approximately  $9,700,000  of net  operating  loss carry
     forwards  available for US income tax purposes to reduce  taxable income of
     future  years.  These net  operating  loss carry  forwards  expire in years
     ranging from 2011 to 2021.

     The Company has  approximately  $3,300,000 of non-capital  losses available
     for Canadian  income tax purposes to reduce  taxable income of future years
     that expire as follows:

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

     Year ending December 31:

     2006                                                         $      600,000
     2007                                                              1,300,000
     2008                                                              1,400,000
     ---------------------------------------------------------------------------

                                                                  $    3,300,000
     ===========================================================================

                                       45
<PAGE>

14.  Fair value of financial instruments:

     The Company's  short-term  financial  instruments  consist of cash, amounts
     receivable,  accounts payable and accrued liabilities, and short-term debt.
     The fair value of these financial  instruments  approximate  their carrying
     values due to their short-term to liquidation.

     The  fair  values  of due to  stockholder  and due to  director  cannot  be
     reasonably  determined due to their related party nature. Due to the nature
     of the  relationship  between the  Company and the related  parties and the
     lack of a  ready  market  for  such  indebtedness,  it is not  possible  to
     estimate the current fair value of this indebtedness.

     The Company has not entered into off-balance  sheet derivative  instruments
     at the date of these financial statements.


15.  Interest on long-term debt:

     Interest  on  long-term  debt  includes  nil  (2000  -  $1,249,335;  1999 -
     $474,117) of amortization  of the effective  premium equal to the intrinsic
     value  calculated  based on the difference  between the quoted market price
     and the conversion price on conversions of debt.


16.  Commitments:

     On  October 4, 2001,  the  Company  entered  into an  exclusive,  worldwide
     license  agreement  with  Alternative  Technologies  ("AT").  The agreement
     allows  the  Company  to make,  use and  sell  products  based  on  certain
     technology  and  intellectual  property  rights held by AT in exchange  for
     royalties of up to three percent on revenues derived from future sales.

     Additionally,  the  agreement  requires  the Company to  compensate  AT for
     consulting  services at a fixed rate of 2,812.5 free trading  shares of the
     Company's common stock per quarter,  regardless of the number of consulting
     hours  provided.  AT is required to provide up to eight hours of consulting
     services  per month.  The  compensation  must also have a minimum  value of
     $6,750 per  quarter.  In the event the  Company's  share  price falls below
     $2.40 per share,  the number of shares shall be increased to compensate for
     the reduced value. This compensation provision shall terminate at such time
     as the licensed products become commercially viable, defined as the time at
     which the royalties exceed $6,000 per month.

     The initial term of the license  agreement is for five years and,  provided
     that certain conditions are met, can be renewed for additional, consecutive
     five-year  terms.  As at December 31,  2001,  there are no amounts owed for
     royalties  under the terms of this  agreement.  However,  $10,000  has been
     accrued at  December  31, 2001 for fees owed to AT in  connection  with the
     execution of this license  agreement.  For the year ended December 31, 2001
     the Company  also paid AT $6,000 and issued  15,625  shares of common stock
     valued at $13,650 for consulting services provided.

                                       46
<PAGE>

17.  Subsequent events:

     (a)  On February 7, 2002, the Company and Advanced Biometrics, Inc. ("ABI")
          have agreed to a share exchange.

          On March 20, 2002, pursuant to the terms of the agreement, the Company
          completed  a reverse  split of its  common  stock on an 8 for 1 basis,
          such that every eight shares of common  stock  issued and  outstanding
          immediately  prior to the  reverse  split  shall be  changed  into and
          constitute one share of fully paid and non-assessable  common stock of
          the Company.  Additionally,  all  outstanding  options and warrants to
          acquire  Company  stock,  which have not been  exercised  or cancelled
          prior to the closing of the share exchange,  would have to be adjusted
          and changed to account for the 8 to 1 reverse  stock split.  All share
          amounts have been retroactively adjusted for all periods presented.

          Upon  closing,   the  share  exchange   agreement   provides  for  ABI
          shareholders  to control  the  combined  entity.  Conditions  prior to
          closing  include  obtaining  shareholder  approval,  the resolution of
          certain  outstanding  obligations  of the  Company,  completing a debt
          conversion and the completion of two additional  private placements of
          the Company.

     (b)  In the first  quarter of 2002,  the Company  issued a total of 451,375
          shares of common stock as follows.  On January 17, 2002, 96,375 common
          shares were issued  pursuant to stock  subscription  agreements  (note
          11(b)),  and 43,750 common shares were issued to settle debt. On March
          8, 2002, 311,250 shares were issued for consulting services.

     (c)  The Company entered into an Agreement and Plan of Share Exchange dated
          October 25, 2002 with ABI, in which all  outstanding  common  stock of
          ABI will be  exchanged  for 95% of the total  outstanding  shares  and
          share  equivalents  of the common stock of the Company.  Upon closing,
          the  former  ABI  shareholders   will  control  the  combined  entity.
          Additional  terms of the agreement  required ABI to advance $25,000 in
          interim  financing  by October 28,  2002,  ABI to raise an  additional
          $500,000  at closing or within a  reasonable  period  thereafter,  the
          Company to issue 1,000,000  shares of common stock at a price of $0.10
          per  share to  settle  debts in the  amount of  $100,000,  and  obtain
          director and shareholder approvals.

     (d)  The Company entered into a Debt Settlement Agreement dated October 25,
          2002 with a creditor  which is owed  $220,000.  The Company  agreed to
          repay  $100,000 in cash or by issuance of common  stock upon the above
          ABI merger being approved by the Company's and ABI's shareholders, and
          a further  $120,000  at the rate of $10,000  per month.  The  creditor
          agreed to reduce the balance of $120,000 to $75,000 by acceptance of a
          cash payment of $15,000.

                                       47
<PAGE>

17.  Subsequent events (continued):

     (e)  On October 30, 2002, the Board of Directors of the Company  authorized
          the  classification  and issuance of 5,000,000 shares of the Company's
          preferred stock as Series A convertible preferred stock,  representing
          all of the authorized  shares of the Company's  preferred  stock.  The
          Series A  convertible  preferred  stock  are  voting,  redeemable,  8%
          non-cumulative,  $0.001  par  value.  Each ten  Series  A  convertible
          preferred stock is convertible  into one common stock at the option of
          the holder.  The purchase  price of the  preferred  stock is $0.01 per
          share.

     (f)  The  Company  received  subscription   agreements  from  ABI  for  the
          acquisition  of 5,000,000  Series A  convertible  preferred  stock for
          total proceeds of $50,000.  The Company received these proceeds during
          the period from October 27, 2002 to January 27, 2003.

     (g)  On  January  27,  2003,  the  Company  completed  a private  placement
          offering with ABI  consisting of 125,000 units at a price of $0.04 per
          unit to net the Company proceeds of $5,000.  Each unit consists of one
          share of common  stock and one common  stock share  purchase  warrant.
          Each warrant  entitles the holder to acquire one  additional  share of
          common  stock  exercisable  at a price of $0.06 per share on or before
          January 27, 2005.


                                       48
<PAGE>

                        Electronic Identification, Inc.
                        (A Development Stage Enterprise)

Schedules of General and Administrative, Sales and Marketing,
   and Research and Development Expenses
(Expressed in United States dollars)

<table>
<caption>
==============================================================================================================
                                                                                                   Period from
                                                                                                  inception on
                                                                                               May 14, 1992 to
                                                         Years ended December 31,                 December 31,
                                             -----------------------------------------------
                                                       2001            2000             1999              2001
--------------------------------------------------------------------------------------------------------------
<S>                                                    <C>              <C>              <C>               <C>
General and administrative:
     Administrative fees                     $        1,275   $      16,631   $       22,215     $      64,358
     Bad debts                                            -               -                -            75,778
     Bank charges and interest                          364             198            1,348            45,850
     Licenses and dues                               12,123               -                -            12,123
     Consulting and contract services               994,286         498,235          731,799         2,612,080
     Legal and professional                          84,816         184,860          150,909         1,034,774
     Office                                          12,180          13,675           23,647           160,985
     Rent                                             9,690          10,099           10,098           143,270
     Salaries and benefits                                -               -                -           766,458
     Stock administration                             6,974           5,317           13,495            39,228
     Telephone                                        2,173           3,207            2,772            56,754
     Travel and accommodation                         6,712          15,610            2,558           302,655
     Foreign exchange (gain) loss                    18,284           5,507          (36,744)          110,062
--------------------------------------------------------------------------------------------------------------
                                             $    1,148,877   $     753,339   $      922,097     $   5,424,375
==============================================================================================================


Sales and marketing:
     Advertising                             $            -   $           -   $            -     $      16,749
     Consulting and contract services               641,778         637,375          123,561         2,258,576
     Entertainment and promotion                      4,868          14,522           19,190           159,577
     Investor relations                               3,318           3,367           99,618           388,397
     Office                                           5,983             281            4,080            84,246
     Rent                                                 -               -                -           137,318
     Salaries and benefits                                -               -            2,287           291,342
     Telephone and Internet                           2,172           3,207            2,772            24,679
     Travel and accommodation                        13,415          26,716           52,367           378,034
--------------------------------------------------------------------------------------------------------------

                                             $      671,534   $     685,468   $      303,875     $   3,738,918
==============================================================================================================


Research and development:
     Acquired in-process research and
       development                           $            -   $           -   $            -     $     340,108
     Consulting and contract services                27,008           2,291           53,013           224,817
     Office                                               -             231                -           101,373
     Salaries and benefits                                -               -                -           727,739
     Supplies                                             -             798                -           183,615
     Travel and accommodation                             -             594            2,980            50,838
--------------------------------------------------------------------------------------------------------------

                                             $       27,008   $       3,914   $       55,993     $   1,628,490
==============================================================================================================
</table>

                                       49
<PAGE>

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

On May 23, 2003,  Electronic  Identification,  Inc. (the Company)  dismissed its
independent accountants, KPMG LLP, Chartered Accountants (KPMG), and on the same
date engaged the services of Manning Elliott,  Chartered  Accountants as its new
independent  accountants  for the year ending  December 31, 2002.  The Company's
Board of  Directors  recommended  and  approved  the  dismissal  of KPMG and the
appointment of Manning Elliott, Chartered Accountants.

During the years ended December 31, 2001 and 2000,  there were no  disagreements
between  the  Company  and  KPMG  on any  matter  of  accounting  principles  or
practices, financial statement disclosure, or auditing scope or procedure.

                                       50
<PAGE>

                                    PART III

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

The members of the Board of Directors of the Company serve until the next annual
meeting of the  stockholders,  or until their successors have been elected.  The
officers are  appointed  by the Board of  Directors  and hold office until their
earlier death, retirement, resignation or removal.

There are no agreements  for any officer or director to resign at the request of
any other person,  and none of the officers or directors  named below are acting
on behalf of, or at the direction of, any other person.

Name                   Age    Position                            Director Since

Terry A. Kirby         54     President, Secretary, Treasurer     April 20, 1999
                              and Director

Information as to our officer/director and key employees is as follows:

Terry A. Kirby

Mr.  Kirby  has been  Chairman,  CEO and  Director  of the  Company,  since  its
inception  and was a director of the  predecessor  company,  RFID Systems  Corp.
since 1996.  Mr.  Kirby also serves as the sole  officer and  director of Global
Industrial Services, Inc, a publicly traded reporting company, and has held that
position  since  December  1999.  Mr.  Kirby  served as  President  of Crescendo
Corporate  Development,  Inc.,  a company  involved  in  corporate  development,
promotion  and investor  relations.  From 1996 to 1997,  he was  Vice-President,
Corporate  Development  of Alpine  Exploration  Corporation,  currently  African
Minerals  on the CDNX,  a company  involved in precious  metals  exploration  in
Western  Africa.  From 1994 to 1996,  Mr. Kirby was  responsible  for  Corporate
Development for Kensington  Resources Ltd., a public company involved in a joint
venture diamond  exploration  program in Saskatchewan  with Monopros,  a DeBeers
company.  From  1993 to 1994,  he was  Vice-President,  International  Sales and
Marketing  of Hot  In-Place  Asphalt  Recycling  Inc, an  international  company
providing  rehabilitation  methods to various government agencies, and from 1989
to 1992 he was a  principal  of R.W.  Blacktop  Ltd.,  a company  that  provides
environmentally  and economically sound asphalt highway  resurfacing  solutions.
From 1986 to 1989,  Mr. Kirby was Managing  Partner of First  Marketing  Inc., a
company that developed  Kingman Island, an interactive theme park in Washington,
D.C. and Harbour Front, a redevelopment  project on Toronto's  waterfront.  From
1983 to 1986, he was  Director,  Corporate  Sponsorships  of EXPO '86, the World
Exposition in Vancouver, BC Canada.

Conflicts of Interest Related to Other Business Activities

Terry Kirby, our sole officer and director has existing responsibilities and, in
the future,  may have  additional  responsibilities,  to provide  management and
services to other entities in addition to the Company. As a result, conflicts of
interest between the Company and the other activities of those persons may occur
from time to time.

We will  attempt to resolve any such  conflicts  of  interest in our favor.  Mr.
Kirby devotes approximately 70% of his time to our business.

Section 16(a) Beneficial Ownership Reporting Compliance

                                       51
<PAGE>

Section 16(a) of the Securities  Exchange Act of 1934, as amended (the "Exchange
Act"),  requires that the Company's officers and directors,  and persons who own
more  than ten  percent  (10%) of a  registered  class of the  Company's  equity
securities,  file  reports of ownership  and changes of ownership  with the SEC.
Officers, directors and greater than ten percent (10%) shareholders are required
by SEC  regulation  to furnish the Company  with copies of all such reports they
file.

Based  solely  on its  review  of the  copies of such  reports  received  by the
Company, and on written  representations by the Company's officers and directors
regarding their  compliance  with the applicable  reporting  requirements  under
Section 16(a) of the Exchange Act, the Company  believes  that,  with respect to
its fiscal year ended December 31, 2001, the Company's sole officer and director
and all of the persons  known to the Company to own more than ten percent  (10%)
of the Company's Common Stock, either failed to file, on a timely basis, or have
yet to file the required beneficial ownership reports with the SEC.

ITEM 10. EXECUTIVE COMPENSATION

Any compensation received by our officers,  directors,  and management personnel
will be determined from time to time by our Board of Directors.  Currently,  our
officers,   directors,   and   management   personnel  are  reimbursed  for  any
out-of-pocket expenses incurred on our behalf.

Summary Compensation Table

The table set forth below  summarizes the annual and long-term  compensation for
services  in all  capacities  to us  payable  to our  President.  None of  other
significant  employees  total annual salary and bonus are  anticipated to exceed
$50,000  during the year ending  December 31, 2002.  Our Board of Directors  has
adopted a  non-qualified  stock  option plan for our  officers,  key  employees,
directors,  agents,  advisors and  consultants  which could result in additional
compensation.

<table>
<caption>
                                                     Annual compensation                    Long term compensation
                                         --------------------------------------------------------------------------------
                                                                                         Awards                Payouts
                                                                              --------------------------------------------
Name and Position                Year    Salary     Bonus ($)  Other Annual     Restricted      Securities      LTIP          All
                                                                                   Stock        underlying      Payouts      other
                                                                                  Awards          options/                    Comp.
                                                                                                    SARs
                                            ($)                     ($)            ($)              (#)           ($)          ($)
------------------------------------------------------------------------------------------------------------------------------------
<S>                              <C>        <C>        <C>          <C>            <C>              <C>           <C>          <C>
Terry Kirby,                     2000        0          0            0              0                0             0            0
President, Secretary,
Treasurer                        2001     150,000       0            0              0             300,000          0            0
------------------------------------------------------------------------------------------------------------------------------------
</table>
Compensation of Directors

Our director, Terry Kirby, receives no extra compensation for his service on our
board of directors.

Employment Contracts

We have no employment contracts with any of our employees.

                                       52
<PAGE>

Stock Option Plan

Under the Stock Option Plan  maintained  by the  Company,  the Company can grant
non-qualified  stock  options to officers,  key  employees,  directors,  agents,
advisors or consultants of the Company.

--------------------------------------------------------------------------------
 Name             Number of    Percent of total     Exercise
                 securities      options/SARs          or
                 underlying      granted to           base
                options/SARS     employees in         price
                 granted (#)     fiscal year          ($/Sh)   Expiration Date
--------------------------------------------------------------------------------
Terry Kirby        66,875          22.29%             $0.80   August 22, 2004
--------------------------------------------------------------------------------
Terry Kirby       233,125          77.71%             $0.80   November 7, 2004
--------------------------------------------------------------------------------

On August 22, 2001,  the Company  granted Mr. Kirby  options to purchase  66,875
shares of the  Company's  common  stock and on  November  7, 2001,  the  Company
granted  Mr.  Kirby  options to  purchase an  additional  233,125  shares of the
Company's  common stock.  The options are  exercisable at $0.80 per share,  vest
immediately and expire when Mr. Kirby ceases to maintain a business relationship
with the Company or subsidiary.


ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The  following  table sets forth certain  information  known to the Company with
respect to the beneficial  ownership of its Common Stock as of June 30, 2003, by
(i) each person known by the Company to be the beneficial  owner of more than 5%
of the outstanding  Common Stock, (ii) each director of the Company,  (iii) each
named executive officer,  and (iv) all directors and officers as a group. Except
as otherwise  indicated,  the Company believes that the beneficial owners of the
Common Stock listed below, based on information  furnished by such owners,  have
sole  investment  and voting  power  with  respect  to such  shares,  subject to
community property laws where applicable.

   Name and Address
   of Beneficial Owner (1)      Amount of Ownership (2)     Percent of Class (3)
   -----------------------      -----------------------     --------------------

   Terry Kirby                          301,389 (4)                  8.5%

   Officers and directors as a Group
   (1 person)                           301,389                      8.5%

(1)  Unless otherwise indicated, the address of each beneficial owner is that of
     the Company.

(2)  Beneficial ownership is determined in accordance with the rules of the SEC,
     based on factors  including  voting and  investment  power with  respect to
     shares.  Common  stock  subject  to  options  currently   exercisable,   or
     exercisable  within 60 days after June 30, 2003, are deemed outstanding for
     computing the percentage  ownership of the person holding such options, but
     are not deemed  outstanding for computing the percentage  ownership for any
     other person.

(3)  Based on an aggregate of 3,542,283  shares of Company's Common Stock issued
     and outstanding as of June 30, 2003.

                                       53
<PAGE>

(4)  Includes 1,389 shares  directly owned by Mr. Kirby and 300,000 options that
     are currently exercisable.

ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

During the fiscal year ended  December 31, 2001, the Company was charged a total
of $150,000 for management and consulting  services  performed by a director and
officer of the Company.

ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K

(a)  Exhibits.

     Number    Description
     ------    -----------
     3.1*      Articles of  Incorporation  (incorporated by reference to Exhibit
               3.1 to the  registrant's  Amended  Form  10-QSB,  filed  with the
               Securities and Exchange Commission on June 20, 2000).

     3.2*      Certificate of Change in Number of Authorized Shares.

     3.3*      By-Laws   (incorporated  by  reference  to  Exhibit  3.2  to  the
               registrant's  Amended Form 10-QSB,  filed with the Securities and
               Exchange Commission on June 20, 2000).

     99.1      Section 906 Certifications under Sarbanes-Oxley Act of 2002

     *    Previously filed

(b)  Reports on Form 8-K.

          No  reports  on Form 8-K were  filed  during  the last  quarter of the
          period covered by this report.

ITEM 14. CONTROLS AND PROCEDURES

(a) Evaluation of disclosure  controls and  procedures.  The issuer's  principal
executive  officer and  principal  financial  officer  have  concluded  that the
effectiveness   of  the  issuer's   controls  and   procedures  (as  defined  in
ss.240.13a-14(c) and 240.15d-14(c)), as of June 30, 2003, are sufficient.

(b) There have been no changes in internal controls in the previous year.

                                   SIGNATURES

In  accordance  with  Section 13 or 15(d) of the Exchange  Act,  the  Registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.

                                    (Registrant) ELECTRONIC IDENTIFICATION, INC.


                                              By: /s/ Terry A. Kirby
                                              ---------------------------------
                                                      Terry A. Kirby, President
                                               Date: July 25, 2003

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

                                              By: /s/ Terry A. Kirby
                                              ----------------------------------
                                                      Terry A. Kirby, President,
                                               Secretary/Treasurer and Director
                                               Date: July 25, 2003

                                       54
<PAGE>
Exhibit 99.1

                                  CERTIFICATION

I, Terry A. Kirby, certify that:


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

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

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

4.   I am responsible for establishing and maintaining  disclosure  controls and
     procedures  (as  defined in Exchange  Act Rules  13a-14 and 15d-14) for the
     registrant and have:

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

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

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

5.   I have disclosed,  based on my most recent evaluation,  to the registrant's
     auditors and the audit  committee of  registrant's  Board of Directors  (or
     persons performing the equivalent functions):

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

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

6.   I have  indicated  in this annual  report  whether  there were  significant
     changes in internal  controls or in other factors that could  significantly
     affect  internal  controls  subsequent  to  the  date  of  my  most  recent
     evaluation,  including any  corrective  actions with regard to  significant
     deficiencies and material weaknesses.



     Date:  July 25, 2003


        /s/   Terry Kirby
        -----------------------------------------
              Terry A. Kirby
              President, Chief Executive Officer
              and Treasurer(Principal Executive
              Officer and Principal Financial Officer)

                                       55
<PAGE>


                                  CERTIFICATION

                            CERTIFICATION PURSUANT TO

                             18 U.S.C. SECTION 1350

                             AS ADOPTED PURSUANT TO

                  SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002



In  connection  with the Annual  Report  Pursuant  to Section 13 or 15(d) of the
Securities  Exchange  Act of 1934 on Form 10-KSB of  Electronic  Identification,
Inc. (the  "Company")  for the period ended December 31, 2001, as filed with the
Securities and Exchange  Commission on the date hereof (the "Report"),  I, Terry
Kirby, President, Treasurer, Principal Executive Officer and Principal Financial
Officer of the  Company,  certify,  pursuant to 18 U.S.C.  Sec.1350,  as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

1) the Report fully complies with the  requirements of Section 13(a) or 15(d) of
the Securities Exchange Act of 1934, as amended; and

2) the  information  contained in the Report  fairly  presents,  in all material
respects, the financial condition and results of operations of the Company.



     Date:  July 25, 2003


        /s/   Terry Kirby
        -----------------------------------------
        Terry A. Kirby
        President and Chief Executive Officer
        (Principal Executive Officer and
        Principal Financial Officer)



                                       56
<PAGE>