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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549



FORM 10-QSB

(Amendment No. 1)



|x |  | QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|- |  | ---------------------------------------------------------------------------------



For the quarterly period ended September 30, 2007





| ̈ |  | TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
|- |  | ---------------------------------------------------------------



For the transition period from

to



Commission file number 000-24911





BRAINTECH, INC.

|                                                                 
|-----------------------------------------------------------------
|(Exact name of small business issuer as specified in its charter)





|                                                               |  |                                     
|-------------------------------------------------------------- |  | ------------------------------------
|Nevada                                                         |  | 98-0168932                          
|(State or other jurisdiction of incorporation or organization) |  | (I.R.S. Employer Identification No.)





930 West 1stStreet, Unit #102, North Vancouver, B.C., Canada V7P 3N4

|                                        
|----------------------------------------
|(Address of principal executive offices)



(604) 988-6440

|                           
|---------------------------
|(Issuers telephone number)





N/A

|                                                                                  
|----------------------------------------------------------------------------------
|(Former name, former address and former fiscal year, if changed since last report)

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

Indicate by check mark whether the registrant is a shell company
(as defined in Rule 12b-2 of the Exchange Act).   Yes  ̈  No x



APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY

PROCEEDINGS DURING THE PRECEDING FIVE YEARS

Check whether the registrant filed all documents and reports required
to be filed by Section 12, 13 or 15(d) of the Exchange Act after the distribution of securities under a plan confirmed by a court.   Yes  ̈  No  ̈



APPLICABLE ONLY TO CORPORATE ISSUERS

State the number of shares outstanding of each of the issuers classes of common equity, as of the latest practicable date: 45,047,335 common shares issued
and outstanding as of November 13, 2007.



|
|
|

Transitional Small Business Disclosure Format (Check one):  Yes  ̈  No x









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Braintech, Inc.

Form 10-QSB

(Amendment No. 1)

TABLE OF CONTENTS



|                                             |  |        
|-------------------------------------------- |  | -------
|PART I. FINANCIAL INFORMATION                |  |        
|                                             | 
|Item 1. Financial Statements                 |  | page 3 
|                                             | 
|Item 2. Managements Discussion and Analysis |  | page 18
|                                             | 
|PART II. OTHER INFORMATION                   |  |        
|                                             | 
|Item 6. Exhibits                             |  | page 32



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Explanatory Note

Braintech, Inc. is filing this Amendment No. 1 on Form 10-QSB/A (the Form 10-QSB/A) to amend its Quarterly Report on Form 10-QSB for the quarterly period ended September 30, 2007 that was filed with the Securities
and Exchange Commission on November 14, 2007 (the Form 10-QSB). This Form 10-QSB/A is being filed to replace Part I, Items 1 and 2 of the Form 10-SBB to correct an error related to accounting for stock-based compensation expense.
Braintech, Inc. has determined that additional non-cash stock-based compensation expenses should have been recorded with respect to certain stock options granted during the first and second quarter of 2007. This restatement will result in a net
decrease in non-cash expense for the third quarter of 2007 of $51,303. No other amendments or changes are being made in this Form 10-QSB/A.

PART IFINANCIAL INFORMATION



|ITEM 1. | FINANCIAL STATEMENTS
|------- | --------------------

Each of the following items is contained in our
Condensed Consolidated Financial Statements and form part of this quarterly report.

(i) Condensed Consolidated Balance Sheets as at
September 30, 2007 (unaudited) and December 31, 2006;

(ii) Condensed Consolidated Statements of Operations (unaudited) for the
three and nine months ended September 30, 2007 and 2006;

(iii) Condensed Consolidated Statement of Stockholders Deficiency
(unaudited) for the nine months ended September 30, 2007;

(iv) Condensed Consolidated Statements of Cash Flows (unaudited) for the
nine months ended September 30, 2007 and 2006; and

(v) Notes to Condensed Consolidated Financial Statements (unaudited) for the nine
months ended September 30, 2007 and 2006.



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Condensed Consolidated Financial Statements

(Expressed in United States dollars)

BRAINTECH, INC.

Nine months ended September 30, 2007 and 2006

Three months ended September 30, 2007 and 2006

(Unaudited  Prepared by Management)



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BRAINTECH, INC.

Condensed Consolidated Balance Sheets

(Expressed in United States dollars)



|                                                      |  |                   |             |   |                  |   |             |  
|----------------------------------------------------- |  | ----------------- | ----------- | - | ---------------- | - | ----------- | -
|                                                      |  | September 30,2007 |             |   | December 31,2006 |  
|                                                      |  | (unaudited)       |             |   |                  |  
|Assets                                                |  |                   |             |   |                  |   |             |  
|Current assets:                                       |  |                   |             |   |                  |   |             |  
|Cash and cash equivalents                             |  | $                 | 787,262     |   |                  | $ | 16,950      |  
|Accounts receivable                                   |  |                   | 1,090,557   |   |                  |   | 1,224,010   |  
|Inventory                                             |  |                   | 9,418       |   |                  |   | 10,297      |  
|Prepaid expenses                                      |  |                   | 86,013      |   |                  |   | 47,930      |  
|                                                      |  |                   |             |   |                  |   |             |  
|                                                      |  |                   | 1,973,250   |   |                  |   | 1,299,187   |  
|Fixed assets                                          |  |                   | 45,816      |   |                  |   | 29,373      |  
|                                                      |  |                   |             |   |                  |   |             |  
|                                                      |  | $                 | 2,019,066   |   |                  | $ | 1,328,560   |  
|                                                      |  |                   |             |   |                  |   |             |  
|                                                      |  |                  
|Liabilities and Stockholders Equity (Deficiency)     |  |                   |             |   |                  |   |             |  
|Current liabilities:                                  |  |                   |             |   |                  |   |             |  
|Accounts payable                                      |  | $                 | 74,764      |   |                  | $ | 260,415     |  
|Accrued liabilities                                   |  |                   | 460,354     |   |                  |   | 317,387     |  
|Deferred leasehold inducements (note 3)               |  |                   | 19,483      |   |                  |   | 30,155      |  
|Deferred revenue (note 4)                             |  |                   | 497,103     |   |                  |   | 197,383     |  
|Due to related party                                  |  |                   | 125,608     |   |                  |   | 112,874     |  
|Current portion of bank loan (note 5)                 |  |                   | 1,540,000   |   |                  |   | 490,000     |  
|                                                      |  |                   |             |   |                  |   |             |  
|                                                      |  |                   | 2,717,312   |   |                  |   | 1,408,214   |  
|Bank loan (note 5)                                    |  |                   | 722,837     |   |                  |   | 1,982,837   |  
|                                                      |  |                   |             |   |                  |   |             |  
|Total liabilities                                     |  |                   | 3,440,149   |   |                  |   | 3,391,051   |  
|                                                      |  |                   |             |   |                  |   |             |  
|                                                      |  |                  
|Stockholders equity (deficiency):                    |  |                   |             |   |                  |   |             |  
|Common stock (note 6):                                |  |                   |             |   |                  |   |             |  
|Authorized: 200,000,000 shares, with $0.001 par value |  |                   |             |   |                  |   |             |  
|Issued: 37,017,335 shares                             |  |                   | 37,017      |   |                  |   | 30,732      |  
|(December 31, 2006  30,732,433)                      |  |                   |             |   |                  |   |             |  
|Additional paid-in capital                            |  |                   | 26,551,878  |   |                  |   | 23,930,944  |  
|Accumulated deficit                                   |  |                   | (28,009,978 | ) |                  |   | (26,024,167 | )
|                                                      |  |                   |             |   |                  |   |             |  
|                                                      |  |                   | (1,421,083  | ) |                  |   | (2,062,491  | )
|                                                      |  |                   |             |   |                  |   |             |  
|                                                      |  | $                 | 2,019,066   |   |                  | $ | 1,328,560   |  
|                                                      |  |                   |             |   |                  |   |             |  

See accompanying notes to condensed consolidated financial statements.



5



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BRAINTECH, INC.

Condensed Consolidated Statements of Operations

(Unaudited  Prepared by Management)

(Expressed in United States dollars)



|                                                                    |  |                               |            |   |                                |   |            |      |  |   |            |   |  |   |            |  
|------------------------------------------------------------------- |  | ----------------------------- | ---------- | - | ------------------------------ | - | ---------- | ---- |  | - | ---------- | - |  | - | ---------- | -
|                                                                    |  | Nine Months EndedSeptember 30 |            |   | Three Months EndedSeptember 30 |  
|                                                                    |  | 2007                          |            |   | 2006                           |   |            | 2007 |  |   | 2006       |  
|Sales                                                               |  | $                             | 2,205,854  |   |                                | $ | 692,505    |      |  | $ | 936,919    |   |  | $ | 131,958    |  
|Cost of sales                                                       |  |                               | 173,307    |   |                                |   | 37,234     |      |  |   | 73,413     |   |  |   | 8,663      |  
|                                                                    |  |                               |            |   |                                |   |            |      |  |   |            |   |  |   |            |  
|Gross margin                                                        |  |                               | 2,032,547  |   |                                |   | 655,271    |      |  |   | 863,506    |   |  |   | 123,295    |  
|                                                                    |  |                               |            |  
|Operating expenses:                                                 |  |                               |            |   |                                |   |            |      |  |   |            |   |  |   |            |  
|Research and development                                            |  |                               | 429,206    |   |                                |   | 517,555    |      |  |   | 139,987    |   |  |   | 165,938    |  
|Selling, general and administration                                 |  |                               | 2,034,323  |   |                                |   | 1,668,271  |      |  |   | 524,662    |   |  |   | 464,607    |  
|                                                                    |  |                               |            |   |                                |   |            |      |  |   |            |   |  |   |            |  
|                                                                    |  |                               | 2,463,529  |   |                                |   | 2,185,826  |      |  |   | 664,649    |   |  |   | 630,545    |  
|                                                                    |  |                               |            |   |                                |   |            |      |  |   |            |   |  |   |            |  
|Operating income/(loss)                                             |  |                               | (430,982   | ) |                                |   | (1,530,555 | )    |  |   | 198,857    |   |  |   | (507,250   | )
|                                                                    |  |                               |            |  
|Non-operating:                                                      |  |                               |            |   |                                |   |            |      |  |   |            |   |  |   |            |  
|Interest income                                                     |  |                               | 1,251      |   |                                |   | 274        |      |  |   | 662        |   |  |   |           |  
|Interest expenseother                                              |  |                               |           |   |                                |   | (4,274     | )    |  |   |           |   |  |   |           |  
|Financing expenses                                                  |  |                               |            |   |                                |   |            |      |  |   |            |   |  |   |            |  
|Interest on convertible debentures                                  |  |                               |           |   |                                |   | (133,905   | )    |  |   |           |   |  |   | (54,348    | )
|Accretion of convertible debentures                                 |  |                               |           |   |                                |   | (481,209   | )    |  |   |           |   |  |   | (112,380   | )
|Fair value of warrants issued on conversion of debentures           |  |                               |           |   |                                |   | (9,772     | )    |  |   |           |   |  |   |           |  
|Interest on bank loan                                               |  |                               | (131,484   | ) |                                |   | (655       | )    |  |   | (41,626    | ) |  |   | (655       | )
|Fair value of equity issued as compensation to bank loan guarantors |  |                               | (1,327,241 | ) |                                |   |           |      |  |   | 97,500     |   |  |   |           |  
|Bank loan guarantee expenses                                        |  |                               | (7,355     | ) |                                |   |           |      |  |   | (316       | ) |  |   |           |  
|Fair value of warrants issued on settlement of debentures           |  |                               |           |   |                                |   | (452,375   | )    |  |   |            |   |  |   | (452,375   | )
|Fair value of equity issued as compensation for financing services  |  |                               | (90,000    | ) |                                |   |           |      |  |   |           |   |  |   |           |  
|                                                                    |  |                               |            |   |                                |   |            |      |  |   |            |   |  |   |            |  
|                                                                    |  |                               | (1,554,829 | ) |                                |   | (1,081,916 | )    |  |   | 56,220     |   |  |   | (619,758   | )
|                                                                    |  |                               |            |   |                                |   |            |      |  |   |            |   |  |   |            |  
|Net income/(loss) for the period                                    |  | $                             | (1,985,811 | ) |                                | $ | (2,612,471 | )    |  | $ | 255,077    |   |  | $ | (1,127,008 | )
|                                                                    |  |                               |            |   |                                |   |            |      |  |   |            |   |  |   |            |  
|Income/(loss) per share information:                                |  |                               |            |   |                                |   |            |      |  |   |            |   |  |   |            |  
|Basic                                                               |  | $                             | (0.06      | ) |                                | $ | (0.11      | )    |  | $ | 0.01       |   |  | $ | (0.04      | )
|Diluted                                                             |  | $                             | (0.06      | ) |                                | $ | (0.11      | )    |  | $ | 0.01       |   |  | $ | (0.04      | )
|                                                                    |  |                               |            |   |                                |   |            |      |  |   |            |   |  |   |            |  
|Weighted average number of shares outstanding                       |  |                               |            |   |                                |   |            |      |  |   |            |   |  |   |            |  
|Basic                                                               |  |                               | 34,109,250 |   |                                |   | 24,442,699 |      |  |   | 35,301,354 |   |  |   | 25,105,159 |  
|Diluted                                                             |  |                               | 34,109,250 |   |                                |   | 24,442,699 |      |  |   | 45,611,845 |   |  |   | 25,105,159 |  
|                                                                    |  |                               |            |   |                                |   |            |      |  |   |            |   |  |   |            |  

See accompanying notes to condensed consolidated financial statements.



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BRAINTECH, INC.

Condensed Consolidated Statements of Stockholders Equity (Deficiency)

(Unaudited  Prepared by Management)

(Expressed in United States dollars)



|                                                               |                 |              |        |                           |        |  |                    |            |   |                                    |   |             |   |  |   |            |  
|-------------------------------------------------------------- | --------------- | ------------ | ------ | ------------------------- | ------ |  | ------------------ | ---------- | - | ---------------------------------- | - | ----------- | - |  | - | ---------- | -
|                                                               |                 | Common stock |        | Additionalpaid-in capital |        |  | Accumulateddeficit |            |   | Totalstockholdersequity (deficit) |  
|                                                               | Numberof shares |              | Amount |                           |        | 
|Balance, December 31, 2006                                     |                 | 30,732,433   |        | $                         | 30,732 |  | $                  | 23,930,944 |   |                                    | $ | (26,024,167 | ) |  | $ | (2,062,491 | )
|                                                               |                 |              |        |                           |       
|Common stock transactions (net of share issue costs)           |                 |              |        |                           |        |  |                    |            |   |                                    |   |             |   |  |   |            |  
|Shares issued for cash (net of subscriptions received in 2006) |                 | 3,664,902    |        |                           | 3,665  |  |                    | 598,339    |   |                                    |   |            |   |  |   | 602,004    |  
|Shares issued for services rendered                            |                 | 265,000      |        |                           | 265    |  |                    | 95,135     |   |                                    |   |            |   |  |   | 95,400     |  
|Shares issued to bank loan guarantors                          |                 | 2,325,000    |        |                           | 2,325  |  |                    | 993,675    |   |                                    |   |            |   |  |   | 996,000    |  
|Shares issued for finders fees                                |                 | 30,000       |        |                           | 30     |  |                    | (30        | ) |                                    |   |            |   |  |   |           |  
|Cash paid for finders fees                                    |                 |             |        |                           |       |  |                    | (4,020     | ) |                                    |   |            |   |  |   | (4,020     | )
|Fair value of warrants issued to bank loan guarantors          |                 |             |        |                           |       |  |                    | 331,241    |   |                                    |   |            |   |  |   | 331,241    |  
|Fair value of stock options expensed                           |                 |              |        |                           |        |  |                    | 606,594    |   |                                    |   |            |   |  |   | 606,594    |  
|Loss for the period                                            |                 |             |        |                           |       |  |                    |           |   |                                    |   | (1,985,811  | ) |  |   | (1,985,811 | )
|                                                               |                 |              |        |                           |        |  |                    |            |   |                                    |   |             |   |  |   |            |  
|Balance, September 30, 2007                                    |                 | 37,017,335   |        | $                         | 37,017 |  | $                  | 26,551,878 |   |                                    | $ | (28,009,978 | ) |  | $ | (1,421,083 | )
|                                                               |                 |              |        |                           |        |  |                    |            |   |                                    |   |             |   |  |   |            |  

See accompanying notes to condensed consolidated financial statements.



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BRAINTECH, INC.

Condensed Consolidated Statements of Cash Flows

(Unaudited  Prepared by Management)

(Expressed in United States dollars)



|                                                                                   |  |                                |            |   |      |   |            |  
|---------------------------------------------------------------------------------- |  | ------------------------------ | ---------- | - | ---- | - | ---------- | -
|                                                                                   |  | Nine months ended September 30 |           
|                                                                                   |  | 2007                           |            |   | 2006 |  
|Cash flows from operations:                                                        |  |                                |            |   |      |   |            |  
|Loss for the period                                                                |  | $                              | (1,985,811 | ) |      | $ | (2,612,471 | )
|Items not involving cash:                                                          |  |                                |            |   |      |   |            |  
|Amortization                                                                       |  |                                | 15,732     |   |      |   | 17,601     |  
|Shares issued for services rendered                                                |  |                                | 95,400     |   |      |   | 173,750    |  
|Stock options expensed                                                             |  |                                | 606,594    |   |      |   | 179,879    |  
|Accretion of convertible debentures                                                |  |                                |           |   |      |   | 481,209    |  
|Fair value of warrants issued on conversion of debentures                          |  |                                |           |   |      |   | 9,772      |  
|Fair value of warrants issued on settlement of debentures                          |  |                                |           |   |      |   | 452,375    |  
|Fair value of warrants and common shares issued as compensation to loan guarantors |  |                                | 1,327,241  |   |      |   |           |  
|Changes in non-cash operating working capital:                                     |  |                                |            |   |      |   |            |  
|Accounts receivable                                                                |  |                                | 133,453    |   |      |   | 237,895    |  
|Inventory                                                                          |  |                                | 879        |   |      |   | 198        |  
|Prepaid expenses                                                                   |  |                                | (38,083    | ) |      |   | (21,268    | )
|Accounts payable and accrued liabilities                                           |  |                                | (42,684    | ) |      |   | 43,866     |  
|Due to related party                                                               |  |                                | 12,734     |   |      |   |           |  
|Accrued interest on convertible debentures                                         |  |                                |           |   |      |   | 133,905    |  
|Deferred leasehold inducements                                                     |  |                                | (10,672    | ) |      |   | (11,962    | )
|Deferred revenue                                                                   |  |                                | 299,720    |   |      |   | (52,287    | )
|                                                                                   |  |                                |            |   |      |   |            |  
|Net cash provided by (used in) operations                                          |  |                                | 414,503    |   |      |   | (967,538   | )
|                                                                                   |  |                                |            |   |      |   |            |  
|                                                                                   |  |                               
|Cash flows from investments:                                                       |  |                                |            |   |      |   |            |  
|Purchase of fixed assets                                                           |  |                                | (32,175    | ) |      |   | (2,875     | )
|                                                                                   |  |                                |            |   |      |   |            |  
|Net cash used in investments                                                       |  |                                | (32,175    | ) |      |   | (2,875     | )
|                                                                                   |  |                                |            |   |      |   |            |  
|                                                                                   |  |                               
|Cash flows from financing:                                                         |  |                                |            |   |      |   |            |  
|Common shares issued, net of issue costs                                           |  |                                | 597,984    |   |      |   | 475,325    |  
|Decrease in amount due to related party                                            |  |                                |           |   |      |   | (899       | )
|Common share subscriptions received                                                |  |                                |           |   |      |   |           |  
|Proceeds from bank loan                                                            |  |                                |            |   |      |   | 400,000    |  
|Repayment of bank loan                                                             |  |                                | (210,000   | ) |      |   |           |  
|Redemption of debentures                                                           |  |                                |           |   |      |   | (396,787   | )
|                                                                                   |  |                                |            |   |      |   |            |  
|Net cash provided by (used in) financing                                           |  |                                | 387,984    |   |      |   | 477,639    |  
|                                                                                   |  |                                |            |   |      |   |            |  
|Increase (decrease) in cash and cash equivalents                                   |  |                                | 770,312    |   |      |   | (492,774   | )
|Cash and cash equivalents, beginning of period                                     |  |                                | 16,950     |   |      |   | 522,943    |  
|                                                                                   |  |                                |            |   |      |   |            |  
|Cash and cash equivalents, end of period                                           |  | $                              | 787,262    |   |      | $ | 30,169     |  
|                                                                                   |  |                                |            |   |      |   |            |  
|                                                                                   |  |                               
|Supplemental information:                                                          |  |                                |            |   |      |   |            |  
|Non-cash financing:                                                                |  |                                |            |   |      |   |            |  
|Shares and warrants issued on conversion of convertible debentures                 |  |                                |           |   |      |   | 39,988     |  
|Shares issued for services rendered                                                |  | $                              | 95,400     |   |      |   |           |  
|Warrants issued on settlement of debentures                                        |  |                                |           |   |      |   | 452,375    |  
|Shares and warrants issued to bank loan guarantors                                 |  | $                              | 1,327,241  |   |      | $ |           |  
|                                                                                   |  |                                |            |   |      |   |            |  

See accompanying notes to condensed consolidated financial statements.



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BRAINTECH, INC.

Notes to Condensed Consolidated Financial Statements

(Unaudited  Prepared by Management)

(Expressed in United States dollars)

Nine months ended September 30,
2007 and 2006



|1. | Description of business and future operations:
|-- | ----------------------------------------------

Braintech, Inc. (the Company) together with its wholly owned subsidiary, Braintech Canada, Inc. is a high tech development company, developing advanced software for the vision guidance of robotic systems. All sales of its
products and services are made in this industry segment. In the nine months ended September 30, 2007, 99% of sales revenue (2006  100%) was generated from ABB Inc. (ABB).

These condensed consolidated financial statements have been prepared on the going concern basis under which an entity is considered to be able to realize
its assets and satisfy its liabilities in the ordinary course of business. The Company has generated only small amounts of revenues and is continuing to develop its business. Operations to date have been primarily financed by equity transactions.
The Companys future operations and its continuation as a going concern are dependent upon its ability to raise additional capital, increase sales of its products by leveraging its Exclusive Global Channel Partner Agreement with ABB, generating
positive cash flows from operations and ultimately attaining profitability. There can be no assurances that appropriate financings having favourable economic terms will be available as required.

Based on its current financial position, the Company believes that its present and anticipated cash resources from operations and equity financing will be
sufficient to pay ongoing cash operating expenses throughout 2007 and 2008. The minimum revenue commitments by ABB pursuant to the Exclusive Global Channel Partner Agreement dated May 5, 2006 should result in positive operating income and
positive cash flow for 2007 and 2008. There can be no assurance that an equity financing can be obtained as anticipated and there can be no assurance that ABB will fulfill its minimum revenue commitments. If the Company cannot do either, there is a
risk that the business will fail. The consolidated financial statements do not include any adjustments relating to the recoverability of assets and classification of assets and liabilities that might be necessary should the Company be unable to
continue as a going concern.



|2. | Basis of presentation:
|-- | ----------------------



| | (a) | Unaudited financial information:
| | --- | --------------------------------

These condensed
consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America and reflect all adjustments (all of which are normal and recurring in nature) that, in the opinion of
management, are necessary for fair presentation of the interim financial information. The results of operations for the interim periods presented are not necessarily indicative of the results to be expected for any subsequent quarter or for the
entire year ending December 31, 2007. Certain information and footnote disclosures normally included in annual financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted. These
unaudited condensed consolidated financial statements and notes included herein have been prepared on a basis consistent with and should be read in conjunction with the Companys audited consolidated financial statements and notes for the year
ended December 31, 2006, as filed in its annual report on Form 10-KSB.



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| | (b) | Principals of consolidation:
| | --- | ----------------------------

These condensed consolidated
financial statements include the accounts of the Company, and its wholly-owned subsidiary Braintech Canada, Inc., incorporated under the Company Act (British Columbia) on March 30, 1994. All material inter-company balances and
transactions have been eliminated.



| | (c) | Use of estimates:
| | --- | -----------------

The preparation of financial statements
in accordance with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and
liabilities as at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Significant areas requiring the use of estimates relate to the impairment of assets and rates for amortization,
estimated amount of income tax balances and the estimated balances of accrued liabilities, and the calculation of stock-based compensation expense. Actual amounts may differ from these estimates.



| | (d) | Stock based compensation:
| | --- | -------------------------

In December 2004, the Financial
Accounting Standards Board (the FASB) issued Statement of Financial Accounting Standards (SFAS) No. 123R, Share Based Payment. SFAS No. 123R requires companies to estimate the fair value of share-based payment
awards on the date of grant using an option-pricing model. The value of the portion of the award that is ultimately expected to vest is recognized as expense over the requisite service period in the Companys financial statements. Stock based
compensation expense recognized during the period is based on the value of the portion of the share based payment awards that is ultimately expected to vest during the period. The Company estimates the fair value of stock options using the
Black-Scholes valuation model, consistent with the provisions of SFAS No. 123R. The Black-Scholes valuation model requires the input of highly subjective assumptions, including the options expected life and the price volatility of the
underlying stock. The expected stock price volatility assumption was determined using historical volatility of the Companys common stock. The fair value of each option grant is estimated on the date of grant using the Black-Scholes option
valuation model and expensed using the straight-line amortization approach.

The Company adopted SFAS 123R effective January 1, 2006,
using the Modified Prospective Method. This method requires that awards granted, modified, repurchased or cancelled in the quarter beginning after the adoption date use the fair value method to recognize stock based compensation. Also any unvested
options, where compensation expense was amortized over the vesting period, and was previously disclosed in the notes to financial statements as pro-forma, shall now be expensed over the same amortization period.



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| | (d) | Stock-based compensation (continued):
| | --- | -------------------------------------

In applying the
Modified Prospective Application method, the Company recorded stock based compensation cost totaling the amount that would have been recognized had the fair value method been applied since the effective date of SFAS No. 123. Previous amounts
have not been restated. Accordingly, the Company recorded stock based compensation of $606,595 for the nine months ended September 30, 2007 (2006$179,879).

As at January 1, 2006, the Company had an unrecorded deferred stock based compensation balance related to stock options of $263,132 before estimated forfeitures. In the Companys pro-forma disclosures prior
to the adoption of SFAS No. 123R, the Company accounted for forfeitures upon occurrence. SFAS No. 123R requires forfeitures to be estimated at the time of grant and revised if necessary in subsequent periods if actual forfeitures differ
from those estimates. Accordingly, as of January 1, 2006, the Company estimated that the stock based compensation for the awards not expected to vest was nil, and therefore, the unrecorded deferred stock based compensation balance related to
stock options was not adjusted for estimated forfeitures.

The weighted average fair value of stock options granted during the nine months
ended September 30, 2007 was $0.35 per option (2006$0.37). The fair value was estimated using the Black-Scholes option valuation model and the following weighted average assumptions:



|                        |  |                   |   |  |                   |  
|----------------------- |  | ----------------- | - |  | ----------------- | -
|                        |  | Nine Months Ended |  
|                        |  | September 30,2007 |   |  | September 30,2006 |  
|Expected life (years)   |  | 2.0               |   |  | 2.0               |  
|Risk free interest rate |  | 4.70              | % |  | 5.01              | %
|Expected volatility     |  | 168               | % |  | 152               | %
|Dividend yield          |  | 0                 | % |  | 0                 | %

As of September 30, 2007, the unrecorded deferred stock based compensation balance related to
stock options was $301,405 and will be recognized over an estimated weighted average amortization period of 1.06 years (2006$160,478, 0.95 years).



| | (e) | Deferred leasehold inducements:
| | --- | -------------------------------

Leasehold inducements are
deferred and amortized to reduce rent expense on a straight-line basis over the term of the lease.



| | (f) | Income/(loss) per share:
| | --- | ------------------------

Basic income/(loss) per share is
computed by dividing net income/(loss) by the weighted average number of common shares outstanding during the period.

Diluted income/(loss)
per share is computed by dividing the net income/(loss) by the weighted average number of common shares outstanding during the period plus potential dilutive common shares. All potential dilutive common shares are excluded from the computation of
net loss per share because they are anti-dilutive. Dilutive common share equivalent shares consist of stock options and share purchase warrants and are calculated using the treasury stock method.



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The number of shares used to calculate income/(loss) per share was reduced by 300,000 shares in each
period for shares issued and held by the Company.



| | (g) | Revenue recognition:
| | --- | --------------------

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

Cash received or accounts receivable recorded in advance of meeting the revenue recognition criteria are recorded as deferred revenue and the costs related to that revenue are recorded as deferred costs.



|3. | Deferred leasehold inducements:
|-- | -------------------------------



|                             |  |                                |         |   |      |   |         |  
|---------------------------- |  | ------------------------------ | ------- | - | ---- | - | ------- | -
|                             |  | Nine Months Ended September 30 |        
|                             |  | 2007                           |         |   | 2006 |  
|Balance, beginning of period |  | $                              | 30,155  |   |      | $ | 48,264  |  
|Amortization                 |  |                                | (14,334 | ) |      |   | (13,968 | )
|Foreign exchange adjustment  |  |                                | 3,662   |   |      |   | 2,006   |  
|                             |  |                                |         |   |      |   |         |  
|Balance, end of period       |  | $                              | 19,483  |   |      | $ | 36,302  |  
|                             |  |                                |         |   |      |   |         |  



|4. | Deferred revenue:
|-- | -----------------



|                                                         |  |                                |         |   |      |   |          |  
|-------------------------------------------------------- |  | ------------------------------ | ------- | - | ---- | - | -------- | -
|                                                         |  | Nine Months Ended September 30 |        
|                                                         |  | 2007                           |         |   | 2006 |  
|Balance, beginning of period                             |  | $                              | 197,383 |   |      | $ | 98,551   |  
|Revenue invoiced and deferred for future recognition     |  |                                | 370,297 |   |      |   | 73,566   |  
|Previously deferred revenue recognized in current period |  |                                | (70,577 | ) |      |   | (125,853 | )
|                                                         |  |                                |         |   |      |   |          |  
|Balance, end of period                                   |  | $                              | 497,103 |   |      | $ | 46,264   |  
|                                                         |  |                                |         |   |      |   |          |  



|5. | Bank loan and loan guarantee:
|-- | -----------------------------

On October 23,
2006 the Company completed a series of transactions redeeming all of the outstanding Secured Convertible Debentures. To facilitate the transaction, the Company obtained a bank loan of up to $2,500,000 from the Royal Bank of Canada. The loan is
repayable as to interest only at the rate of Libor plus 1.50% until June 30, 2007. Monthly principal payments plus interest at the rate of Libor plus 1.50% are due as follows: June 30, 2007 to December 31, 2007, $70,000;
January 31, 2008 to May 31, 2008, $110,000; June 30, 2008 to November 30, 2008, $195,000; December 31, 2008, remaining balance due.

The Royal Bank required that standby letters of credit securing the full amount of the loan be provided. Certain accredited investors (the LC Providers) agreed to provide the letters of credit to the bank
and as compensation the Company agreed to issue one Unit for each one dollar pledged as security for the bank



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loan. Each Unit consists of two (2) shares of the common stock of the Company; three (3) share purchase warrants, each warrant entitling the holder
to purchase one (1) additional share of common stock at a price of $0.30 per share for a period of five (5) years; and one and one-half (11/2) share purchase warrants, each warrant entitling the holder to purchase one (1) additional share of common stock at a price of $0.50 per share for a period of five (5) years. A general security
agreement covering all of the Companys real, personal and intangible property has been pledged as security to the LC Providers.

A total of $2,450,000 letters of credit have been obtained to secure the bank loan and accordingly 4,900,000 common shares, 7,350,000 warrants exercisable at $0.30 and 3,675,000 warrants exercisable at $0.50 have been issued. As further
compensation, the exercise price of 312,500 share purchase warrants previously held by certain LC providers has been reduced from $1.00 to $0.30 per share and the term of those warrants has been extended by 24 months, so that they now expire
May 2, 2010.

$2,150,000 of the letters of credit were received October 23, 2006 and, accordingly, we issued 4,300,000 common
shares, 6,450,000 warrants exercisable at $0.30 and 3,225,000 warrants exercisable at $0.50. On October 23, 2006 we recorded as an expense, $1,376,000 on account of the fair value of the common shares issuance and $2,350,617 on account of the
fair value of the warrant issuance. The fair value of the common shares was calculated using the closing market price of the common stock on October 23, 2006 ($0.32) and the fair value of the warrants was calculated using the Black-Scholes
option valuation model and the following assumptions: dividend yield 0%, expected volatility 167%, risk-free interest rate 4.90%, and an expected term of two (2) years.

$300,000 of the letters of credit were received February 5, 2007 and, accordingly, we issued 600,000 common shares, 900,000 warrants exercisable at
$0.30 and 450,000 warrants exercisable at $0.50. On February 5, 2007 we recorded as an expense, $180,000 on account of the fair value of the common shares issuance and $302,835 on account of the fair value of the warrant issuance. The fair
value of the common shares was calculated using the closing market price of the common stock on February 5, 2007 ($0.30) and the fair value of the warrants was calculated using the Black-Scholes option valuation model and the following
assumptions: dividend yield 0%, expected volatility 165%, risk-free interest rate 4.92%, and an expected term of two (2) years.

The
Agreement governing the LC Providers and the Loan Guarantee terms required that the Company file a Registration Statement such that the securities issued to the LC Providers would qualify for resale pursuant to the Registration Statement. The
Agreement contained penalty provisions if the Company did not file a Registration Statement, and if the Registration Statement did not become effective, within certain time provisions. Upon review, the Company determined that the penalty provision
clauses applied and the Company agreed to issue one additional common share to the LC Providers that delivered letters of credit on or before October 23, 2006. Owen Jones, the Companys CEO and a director and James Speros, an independent
director, both of whom delivered letters of credit on or before October 23, 2007, elected not to participate in the additional share issuance. Accordingly, on August 10, 2007, the Company issued 1,625,000 common shares at a deemed price of
$0.48 per share.

Prior to the receipt of the final letters of credit, cash collateral had been pledged by accredited investors to allow the
Royal Bank of Canada to fund the total amount of the loan. The receipt of the final letters of credit allowed for the release of the cash collateral. As compensation for pledging the cash collateral, on March 22, 2007 the company issued to one
of the accredited investors 100,000 common shares and 100,000 share purchase warrants exercisable at $0.30 exercisable for a period of three years. On March 22, 2007



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we recorded as an expense, $36,000 on account of the fair value of the common shares issuance and $28,406 on account of the fair value of the warrant
issuance. The fair value of the common shares was calculated using the closing market price of the common stock on March 22, 2007 ($0.36) and the fair value of the warrants was calculated using the Black-Scholes option valuation model and the
following assumptions: dividend yield 0%, expected volatility 165%, risk-free interest rate 4.58%, and an expected term of two (2) years. As further compensation, the exercise price of 1,008,548 share purchase warrants previously held by the
accredited investor was reduced from $0.60 to $0.30 per share and the term of those warrants has been extended by 36 months, so that they now expire January 18, 2011.

The Companys Chief Executive Officer provided $400,000 in letters of credit and also pledged a portion of the cash collateral. The Chief Executive Officer received no compensation for providing his portion of
the cash collateral.



|6. | Common stock:
|-- | -------------

On January 16, 2007 the Company
issued 1,895,000 units at $0.20 per unit in a private placement representing subscription proceeds of $379,000. $259,000 of the subscription proceeds was received prior to December 31, 2006. Each unit comprises one common share and one share
purchase warrant. Each share purchase warrant has a three (3) year term and is exercisable at any time into one common share at a price of $0.25 per share. A finders fee of 30,000 units and $1,500 was paid in conjunction with this private
placement.

On February 5, 2007 the Company issued 300,000 units as compensation
for the provision of letters of credit securing the bank loan (note 4). Each Unit consists of two (2) shares of the common stock of the Company; three (3) share purchase warrants, each warrant entitling the holder to purchase one
(1) additional share of common stock at a price of $0.30 per share for a period of five (5) years; and one and one-half (11/2) share purchase warrants, each warrant entitling the holder to purchase one (1) additional share of common stock at a price of $0.50 per share for a period of five (5) years.

On February 21, 2007 the Company issued 275,000 units at $0.20 per unit in a private placement representing subscription proceeds of $55,000. Each
unit comprises one common share and one share purchase warrant. Each share purchase warrant has a three (3) year term and is exercisable at any time into one common share at a price of $0.25 per share.

On March 22, 2007 the Company issued 265,000 common shares at a deemed price of $0.36 per share for services rendered. Of these shares, 250,000 were
issued to a director of the Company.

On June 18, 2007 the Company issued 1,304,286 units at $0.28 per unit in a private placement
representing subscription proceeds of $365,200. Each unit comprises one common share and one share purchase warrant. Each share purchase warrant has a three (3) year term and is exercisable at any time into one common share at a price of $0.30
per share. A finders fee of $2,520 was paid in conjunction with this private placement.



|7. | Stock options:
|-- | --------------

A summary of the Companys
stock option activity is as follows:



|                            |  |                 |   |  |                               |     
|--------------------------- |  | --------------- | - |  | ----------------------------- | ----
|                            |  | Numberof shares |   |  | Weightedaverageexercise price
|Balance, December 31, 2006  |  | 3,396,000       |   |  | $                             | 0.48
|Options granted             |  | 2,410,000       |   |  | $                             | 0.45
|Options exercised           |  | (137,000        | ) |  | $                             | 0.35
|Vested options expired      |  | (272,000        | ) |  | $                             | 0.61
|Unvested options forfeited  |  | (25,000         | ) |  | $                             | 0.46
|                            |  |                 |   |  |                               |     
|Balance, September 30, 2007 |  | 5,372,000       |   |  | $                             | 0.46
|                            |  |                 |   |  |                               |     



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Of those outstanding at September 30, 2007, 4,429,500 are exercisable (December 31,
20062,847,250), having a weighted average exercise price of $0.43 (December 31, 2006$0.47).

The Company has reserved 1,500,000
common shares pursuant to the 1997 Stock Option Plan, 1,500,000 common shares pursuant to the 2000 Stock Option Plan, 2,500,000 common shares pursuant to the 2003 Stock Option Plan, and 10,000,000 common shares pursuant to the 2007 Stock Option
Plan. Subject to the requirements of any stock exchange on which the Companys shares are listed, 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 1997 and 2000 plans and the Companys Compensation Committee has discretion to set the price, terms, vesting schedules, and other terms and conditions for options granted under the 2003 and 2007 plans.



|8. | Share purchase warrants:
|-- | ------------------------

A summary of the
Companys share purchase warrant activity is as follows:



|                                     |  |                 |   |  |                               |      |                                                 |     
|------------------------------------ |  | --------------- | - |  | ----------------------------- | ---- | ----------------------------------------------- | ----
|                                     |  | Numberof shares |   |  | Weightedaverageexercise price |      | Weightedaverageremainingcontractual life(years)
|Balance, December 31, 2006           |  | 20,176,509      |   |  | $                             | 0.37 |                                                 | 3.62
|Warrants granted                     |  |                 |   |  |                               |      |                                                 |     
|Private placement                    |  | 3,474,286       |   |  | $                             | 0.27 |                                                 | 2.86
|Finders fee                         |  | 30,000          |   |  | $                             | 0.25 |                                                 | 2.50
|Compensation to bank loan guarantors |  | 1,450,000       |   |  | $                             | 0.36 |                                                 | 4.46
|Warrants expired                     |  | (50,000         | ) |  | $                             | 0.50 |                                                 |    
|Warrants exercised                   |  | (53,616         | ) |  | $                             | 0.25 |                                                 |    
|                                     |  |                 |   |  |                               |      |                                                 |     
|Balance, September 30, 2007          |  | 25,027,179      |   |  | $                             | 0.34 |                                                 | 3.09
|                                     |  |                 |   |  |                               |      |                                                 |     



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Of the warrants outstanding at September 30, 2007, 5,961,324 were held by the Companys Chief
Executive Officer (December 31, 20064,741,324).



|9. | Commitments:
|-- | ------------

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



|                         |  |   |        
|------------------------ |  | - | -------
|Year ending December 31: |  |   |        
|2007                     |  | $ | 56,775 
|2008                     |  |   | 151,400
|                         |  |   |        
|                         |  | $ | 208,175
|                         |  |   |        



|10. | Registration statement:
|--- | -----------------------

On April 20, 2007 the
Company filed a Form SB-2 Registration Statement under the Securities Act of 1933. The registration statement relates to the resale by certain selling stockholders of up to 13,977,494 shares of common stock and 23,694,259 shares of common stock
issuable to security holders upon exercise of share purchase warrants. The 37,671,753 shares that may be resold were acquired by the selling stockholders in various private placement offerings, as payment for services rendered, as repayment of
promissory notes, as finders fees, as consideration pursuant to a debenture settlement arrangement, and as compensation for the provision of letters of credit. All of these transactions were exempt from the registration requirements of the
Securities Act of 1933. On May 11, 2007 the United States Securities and Exchange Commission declared the Registration Statement to be effective.



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|11. | Subsequent events:
|--- | ------------------

On October 22, 2007, the
Company entered into an employment agreement with Frederick Weidinger pursuant to which Mr. Weidinger would become the Companys Chief Executive Officer and Chairman of the Board of Directors. In order to compensate Mr. Weidinger and
to provide the means for Mr. Weidinger to attract senior level executives to his management team, the Company created the 2007 Bonus Stock and Bonus Stock Option Incentive Plan (the Bonus Plan). The Bonus Plan provides for the
issuance of up to 30 Million (30,000,000) shares of the Companys common stock. The aggregate amount of stock to be issued as Bonus Stock is not to exceed 20 Million (20,000,000) shares and the aggregate number of shares to be issued
pursuant to the exercise of Bonus Stock Options is not to exceed 10 Million (10,000,000) shares (the Bonus Securities). The granting of Bonus Securities will usually be subject to certain milestones and in the event that Bonus
Securities are granted prior to the achievement of those specified milestones, such Bonus Securities will be subject to escrow restrictions.

On October 22, 2007, Mr. Weidinger was granted 8,000,000 shares of Bonus Stock of which 7,000,000 were subject to certain milestones and as such are being held in escrow pending completion of the milestones.

On October 22, 2007, Mr. Weidinger was granted options to purchase 3 Million (3,000,000) shares of the Companys common stock at an
exercise price of $0.42 per share. Of these options 2 Million (2,000,000) vested immediately and 1 Million (1,000,000) will vest on the achievement of a certain milestone.



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|ITEM 2. | MANAGEMENTS DISCUSSION AND ANALYSIS
|------- | ------------------------------------

CAUTIONARY NOTICE REGARDING
FORWARD LOOKING STATEMENTS

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

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

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

Where we say we, us, our, or the Company, we mean Braintech Inc. and our subsidiary, Braintech Canada, Inc.

OVERVIEW

We were incorporated in Nevada on March 4, 1987 under the name Tome Capital Inc. We changed our name
to Nevada Manhattan Mining Inc. on August 15, 1988, then back to Tome Capital Inc. on July 5, 1990, to Offshore Reliance Ltd. on February 19, 1003, to Cozy Financial Corporation on April 20, 1993 and to Braintech, Inc. on
January 3, 1994.

We have one wholly-owned subsidiary. Braintech Canada, Inc. was incorporated in British Columbia Canada on March 30, 1994 under
the name Brainware Systems Inc. Brainware Systems Inc. changed its name to Braintech Canada, Inc. on September 19, 2001. Braintech Canada, Inc. carries out our research and development activities, employs our technical and managerial personnel,
and carries on our sales activities.

We are in the business of developing technologies and products used in machine or computerized vision
guidance systems. Machine vision is the application of electronic imaging, image processing, and image analysis techniques to applications in the manufacturing industries for the purpose of control (process control, quality control, machine control,
and robot control). Since entering into a strategic alliance with ABB Inc. in March, 2000, we have focused on the development and implementation of vision guidance systems for robots used in the automobile manufacturing industry. ABB Inc., which is
based in Europe and employs over 165,000 people in more than 100 countries, is a major supplier of industrial robots and manufacturing automation systems.

Effective February 1, 2004, we entered into an Exclusive Channel Partner Agreement with ABB Inc. whereby we agreed to work together to develop and market vision guided robotic systems to ABBs North American automotive customers.
Early successes convinced ABB to create a marketing strategy centered on a brand called TrueView. TrueView Vision Guided Robotics systems fully integrate our technology. In January 2005, we expanded the scope of our February 1, 2004
exclusive channel partner agreement to allow ABB to market TrueView in the European Economic Union and to sub-license TrueView to their business partners on a worldwide basis.

On May 5, 2006 we entered into a new Exclusive Global Channel Partner Agreement with ABB for the licensing of our vision guided robotics technologies and software
products. The stated purpose of the agreement is to allow ABB to establish a leadership position in the global automobile and general manufacturing vision guided robotics



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markets by strategically marketing the TrueView family of vision guided robotic systems as their global standard. As part of the new Exclusive Global Channel
Partner Agreement, ABB has agreed to guarantee a minimum purchase of our eVF runtime licenses totaling US$10,500,000 for the period ending December 31, 2008. The minimum guarantees are allocated on an annual basis as follows:
2006$1,500,000; 2007$3,500,000; 2008$5,500,000. In addition to the purchase commitments, ABB Inc. has agreed to provide US$300,000 for research and development of a vision guided robotic bin picking technology. In exchange for ABB
Inc. entering into this agreement and for providing the purchase and research commitments, we have granted ABB Inc. an exclusive global channel partner license for the use of our software products in the automotive market and in specified general
industry markets. As at November 13, 2007, ABB has fulfilled all of its commitments regarding the Exclusive Global Channel Partner Agreement.

In
addition to supplying vision guided robotic systems to ABB Inc., we have provided them with upgrades for previously installed systems, we have held training seminars for their technical staff and we have provided engineering services to assist them
in the design of vision guided robotic systems. We expect this type of revenue to continue especially in light of our new Exclusive Global Channel Partner Agreement.

Our principal product is eVisionFactory (eVF). eVF is a comprehensive software environment used in the design, development, operation, and support of vision guided robotic systems. We use the eVF environment and
its array of comprehensive components to develop the custom vision guided robotic systems that we sell for use in industrial automation situations. We have also developed comprehensive training procedures that allow other users, such as integrators
and channel partners, to develop customized vision guided robotic systems. eVF consists of two principal elements, a development environment and an Internet based service and support system (CoBuss). The Internet based service and support
system is still in the development stage and will be released separately.

On October 22, 2007, we entered into an Employment Agreement with Frederick
Weidinger pursuant to which Mr. Weidinger would become our Chief Executive Officer and Chairman of our Board of Directors. The base salary for Mr. Weidinger is US$258,000 per year and he will be entitled to receive performance cash bonuses
at the discretion of the Board of Directors. Also under the agreement, Mr. Weidinger is entitled to recommend for appointment, and the Directors have agreed to appoint, two nominees of Mr. Weidinger to our Board of Directors and in
preparation for our 2008 annual general meeting, we have agreed to increase the size of our Board of Directors to seven and allow Mr. Weidinger to nominate an additional director who has experience in the defense industry in the United States.

In order to compensate Mr. Weidinger and to provide the means for Mr. Weidinger to attract senior level executives to his management team, the
Company created the 2007 Bonus Stock and Bonus Stock Option Incentive Plan (the Bonus Plan). The Bonus Plan provides for the issuance of up to 30,000,000 shares of the Companys common stock. The aggregate amount of stock to be
issued as Bonus Stock is not to exceed 20,000,000 shares and the aggregate number of shares to be issued pursuant to the exercise of Bonus Stock Options is not to exceed 10,000,000 shares (the Bonus Securities). The granting of Bonus
Securities will usually be subject to certain milestones and in the event that Bonus Securities are granted prior to the achievement of those specified milestones, such Bonus Securities will be subject to escrow restrictions.

On October 22, 2007, Mr. Weidinger was granted 8,000,000 shares of Bonus Stock of which 7,000,000 were subject to certain milestones and as such are being held
in escrow pending completion of the milestones. In accordance with the terms of the Bonus Plan and the Employment Agreement, Mr. Weidinger purchased the 8,000,000 shares of Bonus Stock for the purchase price of $0.01 per share. In the event
that an individual milestone is not achieved, we will repurchase the related shares from Mr. Weidinger for the purchase price of $0.01 per share.

On
October 22, 2007, Mr. Weidinger was granted options to purchase 3,000,000 shares of the Companys common stock at an exercise price of $0.42 per share. Of these options 2,000,000 vested immediately and 1,000,000 will vest on the
achievement of a certain milestone.



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The milestones and the Bonus Securities related to the milestones are as follows:



|            |  |                                                                                                           |  |             |  |                   
|----------- |  | --------------------------------------------------------------------------------------------------------- |  | ----------- |  | ------------------
|Milestone   |  | Milestone Description                                                                                     |  | Bonus Stock |  | BonusStock Options
|            |  | Execution of Employment Agreement                                                                         |  | 1,000,000   |  | 2,000,000         
|Milestone 1 |  | May 1, 2008  six month anniversary                                                                       |  | 1,000,000   |  |                   
|Milestone 2 |  | Renewal or extension of ABB Agreement or other strategic agreement with industrial company                |  | 1,000,000   |  |                   
|Milestone 3 |  | Establishment of an executive office in the Metro DC area                                                 |  | 1,000,000   |  |                   
|Milestone 4 |  | Establishment of a strategic relationship with a United States Federal Government Contractor/Integrator   |  | 500,000     |  |                   
|Milestone 5 |  | Establishment of a strategic relationship with Microsoft or a manufacturing company in the consumer space |  | 500,000     |  |                   
|Milestone 6 |  | Listing of the Companys stock on either the AMEX or NASDAQ Stock Exchanges                               |  | 1,000,000   |  | 1,000,000         
|Milestone 7 |  | Achieving Gross Revenue of US$6,000,000 in a twelve month rolling period or less                          |  | 1,500,000   |  |                   
|Milestone 8 |  | Achieving Gross Revenue of US$10,000,000 in a twelve month rolling period or less                         |  | 500,000     |  |                   
|Total       |  |                                                                                                           |  | 8,000,000   |  | 3,000,000         

We have not at any time been able to generate sufficient revenue from sales of our products or services to sustain
ongoing operations, and other than our agreement with ABB Inc., we do not have any established distribution channels for our services or products. From inception on January 3, 1994 to September 30, 2007, we have generated total revenues of
only $6,835,602 and as of September 30, 2007, we have incurred an aggregate deficit of $28,009,978. We may continue to incur significant additional operating losses as our product development, research and development, and marketing efforts
continue. Operating losses may fluctuate from quarter to quarter as a result of differences in the timing of expenses incurred and revenue recognised.

Unless we significantly expand our operations and incur additional expenses, we believe that our present and anticipated cash resources from operations and equity financing will be sufficient to pay our ongoing cash operating expenses
throughout 2007 and 2008. At our current level of activity, the minimum revenue commitments by ABB pursuant to the Exclusive Global Channel Partner Agreement dated May 5, 2006 should result in positive net earnings and cash flow for 2007 and
2008. There can be no assurance that an equity financing can be obtained as anticipated and there can be no assurance that ABB will fulfil its minimum revenue commitments. If we cannot do either, there is a risk that our company will fail. Our
consolidated financial statements do not include any adjustments relating to the recoverability of assets and classification of assets and liabilities that might be necessary should our company be unable to continue as a going concern.

Critical Accounting Policies and Changes to Existing Accounting Policies

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

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

Revenue Recognition

We follow the software revenue recognition rules
outlined in the American Institute of Certified Public Accountants Statement of Position (SOP) 97-2. We recognize revenue when there is a persuasive evidence of a contract, delivery has occurred, the fee is fixed or determinable, collection is
reasonably assured, and there are no substantive performance obligations remaining. Any cash received in advance of meeting these criteria is recorded as deferred revenue on our balance sheet. Changes in contractual arrangements or customer
relationships in the future could impact the extent or timing of revenue recognition.



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Income Taxes

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

Stock based Compensation

In December 2004, the Financial Accounting
Standards Board (the FASB) issued Statement of Financial Accounting Standards (SFAS) No. 123R, Share Based Payment. SFAS No. 123R requires companies to estimate the fair value of share-based payment awards on
the date of grant using an option-pricing model. The value of the portion of the award that is ultimately expected to vest is recognized as expense over the requisite service period in the Companys financial statements. Stock based
compensation expense recognized during the period is based on the value of the portion of the share based payment awards that is ultimately expected to vest during the period. We estimate the fair value of stock options using the Black-Scholes
valuation model, consistent with the provisions of SFAS No. 123R. The Black-Scholes valuation model requires the input of highly subjective assumptions, including the options expected life, the price volatility of the underlying stock,
and the risk free interest rate. The expected stock price volatility assumption was determined using historical volatility of our common stock. The fair value of each option grant is estimated on the date of grant using the Black-Scholes option
valuation model and the fair value is amortized on a straight line basis.

We adopted SFAS 123R effective January 1, 2006, using the Modified
Prospective Method. This method requires that awards granted, modified, repurchased or cancelled in the quarter beginning after the adoption date use the fair value method to recognize stock based compensation. Also any unvested options, where
compensation expense was amortized over the vesting period, and was previously disclosed in the notes to financial statements as pro-forma, shall now be expensed over the same amortization period.

Effects of Foreign Currency Exchange Rates and Inflation

While we
record our financial statements in United States dollars, many of our expenses are incurred in Canadian dollars. As a result, fluctuations in the Canadian dollar exchange rate can affect our expenses, and thus our profit or loss. During the nine
months ended September 30, 2007 we realized a foreign exchange loss of $23,138. The foreign exchange loss resulted principally from transactions recorded in United States dollars for reporting purposes, but actually carried out in Canadian
dollars. As at the date of this quarterly report, we have not engaged in exchange rate-hedging activities. To the extent we implement such hedging activities in the future, we cannot assure that we will be successful.

In the year ended December 31, 2006 and the nine months ended September 30, 2007 inflation has had a limited impact on our operations. However, there can be no
assurance that inflation will not have a material adverse effect on our results of operations in the future.

Quantitative and Qualitative Disclosures
about Market Risk

As at September 30, 2007 we have not entered into or acquired financial instruments that have a material market risk. We have no
financial instruments for trading or other purposes or derivative or other financial instruments with off balance sheet risk. All financial assets and liabilities, except the bank loan, are due within the next twelve months and are classified as
current assets or liabilities in the consolidated balance sheet provided with this report. The fair value of all financial instruments at September 30, 2007, except the bank loan, approximate their carrying values.

To September 30, 2007, the majority of our cash costs have been realized or incurred in Canadian dollars. To date we have not entered into foreign currency
contracts to hedge against foreign currency risks between the Canadian



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dollar or other foreign currencies and our reporting currency, the United States dollar. Generally, however, we attempt to manage our risk of exchange rate
fluctuations by maintaining sufficient net assets in Canadian dollars to retire our liabilities as they come due.

Results of Operations

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

The majority of our cash costs have been incurred in
Canadian dollars. Our reporting currency is the United States dollar. At the end of each reporting period, we translate our expenses incurred in Canadian dollars into United States dollars at the average exchange rate for the period. Fluctuations in
the foreign exchange rate can have a substantial influence on reported expenses even though the actual expenditure has not increased or decreased to the same extent.

Nine-month period ended September 30, 2007 compared with the nine month period ended September 30, 2006.

The average exchange rate used to translate the Canadian Dollar into the United States Dollar for the nine month period ended September 30, 2007 was 1.10606. For the nine month period ended September 30, 2006, the average exchange
was 1.13321. The change in our operating expenses illustrates the effect fluctuating foreign exchange rates have on our reported results. We reported an increase in operating expenses of $277,703 from $2,185,826 for the nine month period ended
September 30, 2006, to $2,463,529 for the nine month period ended September 30, 2007. However, when adjusted for the change in the foreign exchange rate (that is, by excluding the effect of the change in exchange rates from the comparative
periods levels), and elimination of the stock based compensation portion of the expense, the actual change in operating expense activity was a decrease of approximately $193,500. The foreign exchange adjustment accounted for an increase of
approximately $44,500 in the reported operating expenses. We have isolated the effect the fluctuating foreign exchange rate had on our reported results in the discussion below.

Revenue from operations for the nine month period ended September 30, 2007 was $2,205,854 (September 30, 2006$692,505). The amount of our revenues is calculated in accordance with the software revenue
recognition rules outlined in the American Institute of Certified Public Accountants Statement of Position (SOP) 97-2 as discussed in the critical accounting policies section above.

During the nine month period ended September 30, 2007 we invoiced $2,426,055 for software licenses delivered for installation in automobile manufacturing plants. Of
this amount, we deferred $370,297 for future revenue recognition in accordance with SOP 97-2. We also recorded $77,069 for engineering services and $73,026 of previously deferred revenue.

Cost of sales for the nine month period ended September 30, 2007 was $173,307 or approximately 7.9% of revenue.

During the nine month period ended September 30, 2006 we invoiced $402,390 for software licenses delivered for installation in automobile manufacturing plants. Of
this amount, we deferred $73,566 for future revenue recognition in accordance with SOP 97-2. We also recorded $150,000 for research and development services related to the bin picking project, $89,421 for engineering services and $124,250 of
previously deferred revenue.

Cost of sales for the nine month period ended September 30, 2006 was $37,234 or approximately 5.4% of revenue.

We reported that research and development expenses decreased $88,349 from $517,555 for the nine month period ended September 30, 2006 to $429,206 for
the nine month period September 30, 2007. Stock option expense allocated to research and development was $32,500 for the nine month period ended September 30, 2006 and $5,409 for the nine month period ended September 30, 2007 and
therefore accounted for $27,091 of the decrease. A Precarn funding grant of $83,090 was accrued to offset our expense during the nine month period ended September 30, 2007. No such accrual occurred during the nine month period ended
September 30, 2006. After eliminating the stock option expense decrease and the funding grant decrease, the foreign exchange differential accounted for an increase of approximately $9,241, indicating that the actual research and development
activity increased approximately $31,100.



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We reported that selling, general, and administrative expenses increased $366,052 from $1,668,271 for the nine month
period ended September 30, 2006 to $2,034,323 for the nine month period ended September 30, 2007. Stock option expense in the amount of $147,379 was recorded for the nine month period ended September 30, 2006 and $601,186 for the nine
month period ended September 30, 2007 accounting for $453,807 of the increase. The foreign exchange differential accounted for an increase of approximately $34,300, indicating an actual decrease in activity of approximately $122,100. The
principal factors contributing to the changes were as follows:



| |  |  | Reported general and administrative salaries decreased approximately $56,300 from $707,600 to $763,900. The foreign exchange differential accounted for an increase
of approximately $17,000, resulting in an actual decrease in activity of approximately $73,300. The actual decrease resulted from the decrease of our administrative staff by two employees.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Reported amortization expenses decreased approximately $1,900 from $17,600 to $15,700. The foreign exchange differential was negligible.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Reported legal expenses decreased approximately $14,400 from $131,200 to $116,800. The foreign exchange differential accounted for an increase of approximately
$2,800, resulting in an actual decrease in activity of approximately $17,200. The actual decrease is principally a result of a decrease in patent application and registration expenses.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Reported accounting expenses increased approximately $7,900 from $20,700 to $28,600. The foreign exchange differential accounted for an increase of approximately
$700, resulting in an actual increase in activity of approximately $7,200. The actual increase related to a general increase in the cost of accounting, auditing, and tax services.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Reported travel and marketing expenditures decreased approximately $58,500 from $262,400 to $206,900. The foreign exchange differential accounted for an increase of
approximately $4,900, resulting in an actual decrease in activity of approximately $63,400. The individual components of the reported decrease are as follows: investor relations decreased $165,800 from $213,200 to $47,400, travel increased $12,000
from $29,400 to $41,400, trade shows increased from nil to $100,900 and marketing materials decreased from $1,100 to Nil.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Reported rent and premises cost increased approximately $14,600 from $175,500 to $190,100. The foreign exchange differential accounted for an increase of
approximately $4,600, resulting in an actual increase in activity of approximately $10,000.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Three month period ended
September 30, 2007 compared with the three month period ended September 30, 2006.

The average exchange rate used to translate the
Canadian Dollar into the United States Dollar for the three month period ended September 30, 2007 was 1.04719. For the three month period ended September 30, 2006 the average exchange rate was 1.12121. The change in our operating expenses
illustrates the effect fluctuating foreign exchange rates have on our reported results. We reported an increase in operating expenses of $34,104 from $630,545 for the three month period ended September 30, 2006 to $664,649 for the three month
period ended September 30, 2007. However, when adjusted for the change in the foreign exchange rate (that is, by excluding the effect of the change in exchange rates from the comparative periods levels), and elimination of the stock based
compensation portion of the expense, the actual change in operating expense activity was a decrease of approximately $8,700. The foreign exchange adjustment accounted for an increase of approximately $39,700 in the reported operating expenses. We
have isolated the effect the fluctuating foreign exchange rate had on our reported results in the discussion below.

Revenue from operations for the three
month period ended September 30, 2007 was $936,919 (September 30, 2006$131,958). The amount of our revenues is calculated in accordance with the software revenue recognition rules outlined in the American Institute of Certified Public
Accountants Statement of Position (SOP) 97-2 as discussed in the critical accounting policies section above.



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During the three month period ended September 30, 2007 we invoiced $988,436 for software licenses delivered for
installation in automobile manufacturing plants. Of this amount, we deferred $142,567 for future revenue recognition in accordance with SOP 97-2. We also recorded $61,864 for engineering services and $29,186 of previously deferred revenue.

Cost of sales for the three month period ended September 30, 2007 was $73,413 or approximately 7.8% of revenue.

During the three month period ended September 30, 2006 we invoiced $88,913 for software licenses delivered for installation in automobile manufacturing plants. Of
this amount, we deferred $17,781 for future revenue recognition in accordance with SOP 97-2. We also recorded $24,698 for engineering services and $36,128 of previously deferred revenue.

Cost of sales for the three month period ended September 30, 2006 was $8,663 or approximately 6.6% of revenue.

We
reported that research and development expenses decreased $25,951 from $165,938 for the three month period ended September 30, 2006 to $139,987 for the three month period September 30, 2007. Stock option expense allocated to research and
development was $10,543 for the three month period ended September 30, 2006 and Nil for the three month period ended September 30, 2007 and therefore accounted for $10,543 of the decrease. A Precarn funding grant of $28,720 was accrued to
offset our expense during the three month period ended September 30, 2007. No such accrual occurred during the three month period ended September 30, 2006. After eliminating the stock option expense decrease and the funding grant decrease,
the foreign exchange differential accounted for an increase of approximately $9,200, indicating that the actual research and development activity increased approximately $22,500.

We reported that selling, general, and administrative expenses increased $60,055 from $464,607 for the three month period ended September 30, 2006 to $524,662 for the three month period ended September 30,
2007. Stock option expense in the amount of $49,930 was reported for the three month period ended September 30, 2006 and $63,622 for the three month period ended September 30, 2007 accounting for $13,692 of the increase. The foreign
exchange differential accounted for an increase of approximately $30,400, indicating an actual increase in activity of approximately $15,900. The principal factors contributing to the changes were as follows:



| |  |  | Reported general and administrative salaries decreased $11,100 from $246,789 to $235,719. The foreign exchange differential accounted for an increase of
approximately $15,600, resulting in an actual decrease in activity of approximately $26,700. The actual decrease resulted from the decrease of our administrative staff by two employees.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Reported amortization expenses increased approximately $1,300 from $5,200 to $6,500. The foreign exchange differential accounted for an increase of approximately
$400, resulting in an actual increase of approximately $900.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Reported legal expenses increased approximately $13,700 from $47,400 to $61,100. The foreign exchange differential accounted for an increase of approximately
$4,000, resulting in an actual increase in activity of approximately $9,700. The actual increase is principally a result of an increase in patent application and registration expenses.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Reported accounting expenses increased approximately $100 from $7,900 to $8,000. The foreign exchange differential accounted for an increase of approximately $500,
resulting in an actual decrease in activity of approximately $400. The actual decrease related to a general decrease in the cost of accounting and auditing services.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Reported travel and marketing expenditures increased approximately $12,000 from $15,100 to $27,100. The foreign exchange differential accounted for an increase of
approximately $1,800, resulting in an actual increase in activity of approximately $10,200. The individual components of the reported increase are as follows: investor relations increased $6,300 from $7,000 to $13,300, travel increased $2,600 from
$4,300 to $6,900, and trade show expense increased from nil to $1,500.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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| |  |  | Reported rent and premises cost increased approximately $8,900 from $58,500 to $67,400. The foreign exchange differential accounted for an increase of approximately
$4,400, resulting in an actual increase in activity of approximately $4,500.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Liquidity and Capital Resources

Working Capital and Operations

As of September 30, 2007,
we had $787,262 in cash and cash equivalents and a working capital deficit of $744,062 and as of September 30, 2006, we had $30,169 in cash and cash equivalents and a working capital deficit of $2,665,495.

Our cash position as at November 13, 2007 is approximately $400,000 and our trade accounts receivable are approximately $1,000,000.

We estimate that, at our current level of operation, our cash expenses are approximately $275,000 per month. We base this estimate on the following data:



| |  |  | As at November 13, 2007, we have 20 employees and our salary costs are approximately $185,000 per month. For the first nine months of 2007, our average monthly
cash expenditures for general, overhead and administration, exclusive of salary costs, were approximately $90,000 per month. We expect that our general overhead and administrative costs, exclusive of salary costs, will remain constant over the next
six months.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | We do not expect to incur significant capital expenditures during the remainder of 2007 or 2008 unless they result from an increase in our level of operation.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Our Exclusive Global Channel Partner Agreement dated May 5, 2006 with ABB Inc. provides for a minimum purchase guarantee of our eVF Runtime Licenses totalling
US$10,500,000 for the period ending December 31, 2008. The minimum purchase guarantees are allocated on an annual basis as follows: 2006$1,500,000; 2007$3,500,000; 2008$5,500,000. As at August 10, 2007, ABB has fulfilled
all of its commitments regarding the Exclusive Global Channel Partner Agreement.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

We expect that interest payments on our bank loan will
total approximately $155,000 during the year ending December 31, 2007 and approximately $85,000 during the year ending December 31, 2008. We are scheduled to make principal payments totalling $420,000 during the year ending
December 31, 2007 and $2,052,837 during the year ending December 31, 2008. Unless we experience significant growth in activity and expenditures during 2008, we expect that the minimum purchase commitments by ABB during 2007 and 2008
($3,500,000 and $5,500,000 respectively) will be sufficient to service these debt requirements and produce a positive cash flow during 2007 and 2008.

Financing Activities

Because our business has not been profitable we have been required to finance the development of our products,
to pay the costs of marketing those products, and to cover operating losses by way of equity financing. From January 1, 2005 to November 13, 2007 we obtained financing as follows:

Bank Loan and Loan Guarantee

On October 23, 2006 we completed a
transaction redeeming all of our outstanding secured convertible debentures. To facilitate the transaction, we arranged a bank loan of up to $2,500,000 from the Royal Bank of Canada. The loan is repayable as to interest only at the rate of Libor
plus 1.50% until June 30, 2007. Monthly principal payments plus interest at the rate of Libor plus 1.50% are due as follows: June 30, 2007 to December 31, 2007, $70,000; January 31, 2008 to May 31, 2008, $110,000;
June 30, 2008 to November 30, 2008, $195,000; December 31, 2008, remaining balance due. We anticipate that the minimum purchases guaranteed in accordance with the ABB Exclusive Global Channel Partner Agreement will provide sufficient
cash flow to service these interest and principal payments.



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The Royal Bank required that standby letters of credit securing
the full amount of the loan be provided. Certain accredited investors (the LC Providers) agreed to provide the letters of credit to the bank and as compensation we agreed to issue one Unit for each one dollar pledged as security for the
bank loan. Each Unit consists of two (2) shares of our common stock, three (3) share purchase warrants, each warrant entitling the holder to purchase one (1) additional share of common stock at a price of $0.30 per share for a period
of five (5) years; and one and one-half (11/2) share purchase warrants, each whole warrant entitling the holder to
purchase one (1) additional share of common stock at a price of $0.50 per share for a period of five (5) years. A general security agreement covering all of our real, personal and intangible property has been pledged as security to the LC
Providers.

A total of $2,450,000 letters of credit have been obtained to secure the bank loan and accordingly we have issued 4,900,000 common
shares, 7,350,000 warrants exercisable at $0.30 and 3,675,000 warrants exercisable at $0.50. As further compensation, the exercise price of 312,500 share purchase warrants previously held by certain LC Providers have been reduced from $1.00 to $0.30
per share and the term of those warrants has been extended by 24 months, so that they now expire May 2, 2010.

$2,150,000 of the letters of credit
were received October 23, 2006 and, accordingly, we issued 4,300,000 common shares, 6,450,000 warrants exercisable at $0.30 and 3,225,000 warrants exercisable at $0.50. On October 23, 2007 we recorded as an expense, $1,376,000 on account
of the fair value of the common shares issuance and $2,350,617 on account of the fair value of the warrant issuance. The fair value of the common shares was calculated using the closing market price of the common stock on October 23, 2006
($0.32) and the fair value of the warrants was calculated using the Black-Scholes option valuation model and the following assumptions: dividend yield 0%, expected volatility 167%, risk-free interest rate 4.90%, and an expected term of two
(2) years.

$300,000 of the letters of credit were received February 5, 2007 and, accordingly, we issued 600,000 common shares, 900,000 warrants
exercisable at $0.30 and 450,000 warrants exercisable at $0.50. On February 5, 2007 we recorded as an expense, $180,000 on account of the fair value of the common shares issuance and $302,835 on account of the fair value of the warrant
issuance. The fair value of the common shares was calculated using the closing market price of the common stock on February 5, 2007 ($0.30) and the fair value of the warrants was calculated using the Black-Scholes option valuation model and the
following assumptions: dividend yield 0%, expected volatility 165%, risk-free interest rate 4.92%, and an expected term of two (2) years.

The
Agreement governing the LC Providers and the Loan Guarantee terms required that the Company file a Registration Statement such that the securities issued to the LC Providers would qualify for resale pursuant to the Registration Statement. The
Agreement contained penalty provisions if the Company did not file a Registration Statement, and if the Registration Statement did not become effective, within certain time provisions. Upon review, the Company determined that the penalty provision
clauses applied and the Company agreed to issue one additional common share to the LC Providers that delivered letters of credit on or before October 23, 2006. Owen Jones, a director and former Chief Executive Officer and James Speros, an
independent director, both of whom delivered letters of credit on or before October 23, 2007, elected not to participate in the additional share issuance. Accordingly, on August 8, 2007, the Company issued 1,625,000 common shares at a
deemed price of $0.48 per share.



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Prior to the receipt of the final letters of credit, cash collateral had been pledged by accredited investors to allow
the Royal Bank of Canada to fund the total amount of the loan. The receipt of the final letters of credit allowed for the release of the cash collateral. As compensation for pledging the cash collateral, on March 22, 2007 we issued to one of
the accredited investors 100,000 common shares and 100,000 share purchase warrants exercisable at $0.30 for a period of three years. On March 22, 2007 we recorded as an expense, $36,000 on account of the fair value of the common shares issuance
and $28,406 on account of the fair value of the warrant issuance. The fair value of the common shares was calculated using the closing market price of the common stock on March 22, 2007 ($0.36) and the fair value of the warrants was calculated
using the Black-Scholes option valuation model and the following assumptions: dividend yield 0%, expected volatility 165%, risk-free interest rate 4.58%, and an expected term of two (2) years. As further compensation, the exercise price of
1,008,548 share purchase warrants previously held by the accredited investor were reduced from $0.60 to $0.30 per share and the term of those warrants has been extended by 36 months, so that they now expire January 18, 2011.

Owen Jones, a director and former Chief Executive Officer pledged a portion of the cash collateral and received no compensation for providing his portion of the cash
collateral.

Private Placements

At directors meetings held October 13, 2004 and December 21, 2004, approval was given to a private placement of 1,750,000 units at a price of $0.40 per unit for gross proceeds of $700,000. Each unit
comprises one share and one-half (1/2) share purchase warrant. Each whole warrant has a five (5) year term and is
exercisable at any time into one common share at a price of $0.50 per share. The private placement closed on various dates between December 1, 2004 and March 4, 2005. In conjunction with this private placement, we paid $32,880 and issued
24,500 units as finders fees.

At a directors meeting held March 10, 2005,
approval was given to a private placement of up to 1,875,000 units at a price of $0.80 per unit for total proceeds of $1,500,000. Each unit comprises one common share and one half-share (1/2) share purchase warrant. Each whole warrant has a three (3) year term and is exercisable at any time into one common share at a price of $1.00 per share. On
May 3, 2005 we closed $1,307,000 of the private placement. In conjunction with this portion of the private placement, we paid $39,210 and issued 52,500 shares as finders fees.

At a directors meeting held October 5, 2005, approval was given to a private placement of up to 6,000,000 units at a price of $0.50 per unit for total
proceeds of $3,000,000. Each unit comprises one common share and one share purchase warrant. Each share purchase warrant entitles the holder to purchase one additional share for two (2) years at US$0.60 per share. On January 23, 2006 we
issued 1,008,548 units on account of this private placement.

At a directors meeting held May 30, 2006, approval was given to a private
placement of up to $3,000,000. The financing term sheet executed to implement the private placement offered 10,000,000 units at $0.30 per unit. Each Unit comprises one common share and one share purchase warrant. Each share purchase warrant entitles
the holder to purchase one additional share for three (3) years at US$0.50 per share. On August 30, 2006 we issued 1,549,332 units on account of this private placement representing $464,800.

By directors consent resolution dated November 24, 2006, approval was given to a private placement of up to $1,200,000. The financing term sheet executed to
implement the private placement offered 6,000,000 units at $0.20 per unit. Each Unit comprises one common share and one share purchase warrant. Each share purchase warrant entitles the holder to purchase one additional share for three (3) years
at US$0.25 per share. On January 16, 2007 we issued 1,895,000 units on account of this private placement representing $379,000. We also paid $1,500 and issued 30,000 units as a finders fee on account of this private placement. On
February 21, 2007 we issued 275,000 units on account of this private placement representing $55,000.

At a directors meeting held March 22,
2007, approval was given to a private placement of up to $756,000. The financing term sheet executed to implement the private placement offered 2,700,000 units at $0.28 per unit. Each Unit comprises one common share and one share purchase warrant.
Each share purchase warrant entitles the holder to purchase one additional share for three (3) years at US$0.30 per share. On June 18, 2007 we issued 1,304,286 units on account of this private placement representing gross proceeds of
$365,200. A finders fee of $2,520 was paid in conjunction with this private placement.



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Employee Stock Options

The exercise of 192,000 employee stock options has generated $59,400 from January 1, 2005 to November 13, 2007.

Bonus Stock Grant

In accordance with the terms of his Employment Agreement (see above), on October 22, 2007, Mr. Weidinger purchased 8,000,000 shares of common
stock for the purchase price of $0.01 per share generating $80,000.

Off-Balance Sheet Arrangements

We have no significant off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in
financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to stockholders.

Going Concern Statement

Due to the uncertainty of our ability to meet our current operating and capital expenses, in their report on our
consolidated audited financial statements for the year ended December 31, 2006, our independent registered public accounting firm included an explanatory paragraph regarding concerns about our ability to continue as a going concern. Our
consolidated audited financial statements contained additional note disclosures describing the circumstances that led to this disclosure by our independent registered public accounting firm.

There is substantial doubt about our ability to continue as a going concern as the continuation of our business is dependent upon obtaining further financing, successful
and sufficient market acceptance of our software products, the continuing successful development of our computerized vision systems and, finally, achieving a profitable level of operations. The issuance of additional equity securities by us could
result in a significant dilution in the equity interests of our current stockholders. Obtaining commercial loans, assuming those loans would be available, will increase our liabilities and future cash commitments.

There are no assurances that we will be able to obtain further funds required for our continued operations. We are pursuing various financing alternatives to meet our
immediate and long-term financial requirements. There can be no assurance that additional financing will be available to us when needed or, if available, that it can be obtained on commercially reasonable terms. If we are not able to obtain the
additional financing on a timely basis, we will not be able to proceed with our expansion program and may not be able to meet our other obligations as they become due.

RISK FACTORS

An investment in our common stock involves a number of very significant risks. You should carefully
consider the following risks and uncertainties in addition to other information in this quarterly report in evaluating our company and its business before purchasing shares of our common stock. Our business, operating results and financial condition
could be seriously harmed due to any of the following risks. You could lose all or part of your investment due to any of these risks.

We may require
additional funds to achieve our current business strategy. Our inability to obtain such financing will inhibit our ability to expand or even maintain our business operations.

We may need to raise additional funds through public or private debt or sale of equity to achieve our current business strategy. The financing we need may not be available when needed. Even if this financing is
available, it may be on terms that we deem unacceptable or are materially adverse to your interests with respect to dilution of



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book value, dividend preferences, liquidation preferences, or other terms. Our inability to obtain financing will inhibit our ability to implement our
business strategy, and as a result, could require us to diminish or suspend our business strategy and possibly cease our operations. If we are unable to obtain financing on reasonable terms, we could be forced to delay, scale back or cease our
operations, which could put your investment dollars at significant risk.

We have a history of losses and have a significant deficit, which raises
substantial doubt about our ability to continue as a going concern.

We have generated only $6,835,602 in revenues since our incorporation to
September 30, 2007 and we expect to incur operating losses in the future. Our net loss from inception on January 3, 1994 to September 30, 2007 was $28,009,978. We had cash in the amount of $787,262 as of September 30, 2007. We
estimate our average monthly cash operating expenses to be approximately $275,000 each month. We cannot provide assurances that we will be able to successfully develop our business. These circumstances raise substantial doubt about our ability to
continue as a going concern as described in an explanatory paragraph to our independent auditors report on our audited financial statements, dated February 28, 2007. If we are unable to continue as a going concern, investors will likely
lose all of their investments in our company.

Most of our assets and some of our directors and officers are outside the United States, with the
result that it may be difficult for investors to enforce within the United States any judgments obtained against us or any of our directors or officers.

Most of our assets are located outside the United States and we do not currently maintain a permanent place of business within the United States. In addition, some of our directors and officers are nationals and/or residents of countries
other than the United States, and all or a substantial portion of such persons assets are located outside the United States. As a result, it may be difficult for investors to enforce within the United States any judgments obtained against us
or our officers or directors, including judgments predicated upon the civil liability provisions of the securities laws of the United States or any state thereof. Consequently, you may be effectively prevented from pursuing remedies under U.S.
federal securities laws against them.

Because we can issue additional common shares, purchasers of our common stock may incur immediate dilution and
may experience further dilution.

We are authorized to issue up to 200,000,000 common shares, of which 45,047,335 are issued and outstanding as of
November 13 2007. Our board of directors has the authority to cause our company to issue additional shares of common stock without the consent of any of our shareholders. Consequently, our shareholders may experience more dilution in their
ownership of our company in the future.

We may lose our competitiveness if we are not able to protect our proprietary technology and
intellectual property rights against infringement, and any related litigation may be time-consuming and costly.

Our success and ability to
compete depends to a significant degree on our proprietary technology. If any of our competitors copy or otherwise gain access to our proprietary technology or develop similar products independently, we may not be able to compete as effectively. The
measures we have implemented to protect our proprietary technology and other intellectual property rights are currently based upon a combination of provisional patent applications, patents, trademarks and trade secrets. These measures, however, may
not be adequate to prevent the unauthorized use of our proprietary technology and our other intellectual property rights. Further, the laws of foreign countries may provide inadequate protection of such intellectual property rights. We may need to
bring legal claims to enforce or protect such intellectual property rights. Any litigation, whether successful or unsuccessful, may result in substantial costs and a diversion of our companys resources. In addition, notwithstanding our rights
to our intellectual property, other persons may bring claims against us alleging that we have infringed on their intellectual property rights or claims that our intellectual property rights are not valid. Any claims against us, with or without
merit, could be time consuming and costly to defend or litigate, divert our attention and resources, result in the loss of goodwill associated with our business or require us to make changes to our products.



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We plan to rely on a single channel partner to distribute and generate sales of our products. If our channel
partner is unsuccessful in distributing and generating sales of our products, or if the relationship with our channel partner is terminated and we are unable to find a suitable replacement, our business may fail and investors may lose their entire
investment.

We plan to rely solely on ABB Inc. to purchase our products and distribute them to end users. If ABB is unsuccessful in generating
sales of our products, or if the relationship with ABB is terminated and we are unsuccessful in establishing a relationship with an alternative channel partner who offers to purchase and distribute our products for similar prices, our results of
operations could be adversely affected, our business may fail and investors may lose their entire investment.

A decline in the price of our
common stock could affect our ability to raise further working capital and adversely impact our ability to continue operations.

A prolonged
decline in the price of our common stock could result in a reduction in the liquidity of our common stock and a reduction in our ability to raise capital. Because a portion of our continued operations will be financed through the sale of equity
securities, a decline in the price of our common stock could be especially detrimental to our liquidity and our operations. Such reductions may force us to reallocate funds from other planned uses and may have a significant negative effect on our
business plan and operations, including our ability to develop new products and continue our current operations. If our stock price declines, we can offer no assurance that we will be able to raise additional capital or generate funds from
operations sufficient to meet our obligations. If we are unable to raise sufficient capital in the future, we may not be able to have the resources to continue our normal operations.

The market price for our common stock may also be affected by our ability to meet or exceed expectations of analysts or investors. Any failure to meet these expectations, even if minor, may have a material adverse
effect on the market price of our common stock.

Our common stock is illiquid and the price of our common stock may be negatively impacted by
factors which are unrelated to our operations.

Our common stock currently trades on a limited basis on the OTC Bulletin Board. Trading of
our stock through the OTC Bulletin Board is frequently thin and highly volatile. There is no assurance that a sufficient market will develop in our stock, in which case it could be difficult for shareholders to sell their stock. The market price of
our common stock could fluctuate substantially due to a variety of factors, including market perception of our ability to achieve our planned growth, quarterly operating results of our competitors, trading volume in our common stock, changes in
general conditions in the economy and the financial markets or other developments affecting our competitors or us. In addition, the stock market is subject to extreme price and volume fluctuations. This volatility has had a significant effect on the
market price of securities issued by many companies for reasons unrelated to their operating performance and could have the same effect on our common stock.

The sale of a substantial number of shares of our common stock into the public market may result in significant downward pressure on the price of our common stock and could affect the ability of our stockholders to realize the current
trading price of our common stock.

The sale of a substantial number of shares of our common stock in the public market could cause a reduction in
the market price of our common stock. We had 45,047,335 shares of common stock issued and outstanding as of November 13, 2007. On April 20, 2007 we filed a registration statement under the Securities Act of 1933. The registration statement
relates to the resale by certain selling stockholders of up to 13,977,494 shares of common stock and 23,694,259 shares of common stock issuable to security holders upon exercise of share purchase warrants. On May 11, 2007, this registration
statement was declared effective and the selling stockholders may resell up to 37,671,753 shares of our common stock, representing 84% of our current issued and outstanding shares. The 13,977,494 shares registered by this registration statement are
included in the number of our issued and outstanding common shares as of November 13, 2007, shown above. Any significant downward pressure on the price of our common stock as the selling stockholders sell the shares of our common stock could
encourage short sales by the selling stockholders or others. Any such short sales could place further downward pressure on the price of our common stock. If the price of our common stock goes down, investors could lose most of the value of their
investments.



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We operate in a highly competitive industry. Many of our competitors have greater financial, technical, sales and
marketing resources, better name recognition and a larger customer base than ours. Our failure to compete effectively in the areas of hiring qualified personnel, product line and price may adversely affect our ability to generate revenue.

The market for vision guided robotics is subject to frequent product introductions with improved price and/or performance characteristics. Even if we are
able to introduce products which meet customer requirements in a timely manner, there can be no assurance that our existing and new products will gain enough market acceptance to allow us to increase our revenues. Many of our competitors have
greater financial, technical, sales and marketing resources, better name recognition and a larger customer base than ours. They may be better able to attract qualified personnel than we will. In addition, many of our large competitors may offer
customers a broader product line, which may provide a more comprehensive solution than our current solutions. Competitors products may add features, increase performance or sell at lower prices. We cannot predict whether our products will
compete successfully with such new or existing competing products. Increased competition in the industry could result in significant price competition, reduced profit margins or loss of market share, any of which could have a material adverse effect
on our ability to generate revenues and successfully operate our business. If we go out of business, investors will lose their entire investment.

Rapid technological changes in the vision guided robotics industry could render our products non-competitive or obsolete and consequently affect our ability to generate revenues, causing us to go out of business and investors to lose
their entire investment.

The vision guided robotics industry is characterized by rapidly changing technology and evolving industry standards. We
believe that our success will depend in part on our ability to develop our products or enhance our current products and to introduce our improved products promptly into the market. We can make no assurance that our technology will not become
obsolete due to the introduction of alternative technologies by competitors. If we are unable to continue to develop and introduce new products to meet technological changes and changes in market demands, our business and operating results,
including our ability to generate revenues, could be adversely affected. If we go out of business, investors will lose their entire investment.

We
do not intend to pay dividends and there will be less ways in which you can make a gain on any investment in Braintech Inc.

We have never paid any
cash dividends and currently do not intend to pay any dividends for the foreseeable future. Because we do not intend to declare dividends, any gain on an investment in our company will need to come through the appreciation of the price of our common
stock. There can be no assurance that the price of our common stock will increase.

Trading of our stock may be restricted by the SECs penny
stock regulations, which may limit a stockholders ability to buy and sell our stock.

The Securities and Exchange Commission has adopted
regulations which generally define penny stock to be any equity security that has a market price (as defined) less than $5.00 per share or an exercise price of less than $5.00 per share, subject to certain exceptions. Our securities are
covered by the penny stock rules, which impose additional sales practice requirements on broker-dealers who sell to persons other than established customers and accredited investors. The term accredited investor refers
generally to institutions with assets in excess of $5,000,000 or individuals with a net worth in excess of $1,000,000 or annual income exceeding $200,000 or $300,000 jointly with their spouse. The penny stock rules require a broker-dealer, prior to
a transaction in a penny stock not otherwise exempt from the rules, to deliver a standardized risk disclosure document in a form prepared by the SEC which provides information about penny stocks and the nature and level of risks in the penny stock
market. The broker-dealer also must provide the customer with current bid and offer quotations for the penny stock, the



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compensation of the broker-dealer and its salesperson in the transaction and monthly account statements showing the market value of each penny stock held in
the customers account. The bid and offer quotations, and the broker-dealer and salesperson compensation information, must be given to the customer orally or in writing prior to effecting the transaction and must be given to the customer in
writing before or with the customers confirmation. In addition, the penny stock rules require that prior to a transaction in a penny stock not otherwise exempt from these rules, the broker-dealer must make a special written determination that
the penny stock is a suitable investment for the purchaser and receive the purchasers written agreement to the transaction. These disclosure requirements may have the effect of reducing the level of trading activity in the secondary market for
the stock that is subject to these penny stock rules. Consequently, these penny stock rules may affect the ability of broker-dealers to trade our securities. We believe that the penny stock rules discourage investor interest in and limit the
marketability of our common stock.

NASD sales practice requirements may also limit a stockholders ability to buy and sell our stock.

In addition to the penny stock rules described above, the National Association of Securities Dealers (NASD) has adopted rules that require
that in recommending an investment to a customer, a broker-dealer must have reasonable grounds for believing that the investment is suitable for that customer. Prior to recommending speculative low priced securities to their non-institutional
customers, broker-dealers must make reasonable efforts to obtain information about the customers financial status, tax status, investment objectives and other information. Under interpretations of these rules, the NASD believes that there is a
high probability that speculative low priced securities will not be suitable for at least some customers. The NASD requirements make it more difficult for broker-dealers to recommend that their customers buy our common stock, which may limit your
ability to buy and sell our stock and have an adverse effect on the market for our shares.

PART II. OTHER INFORMATION



|ITEM 6. | EXHIBITS
|------- | --------

INDEX TO EXHIBITS

Exhibits



|        |  |                                                                                                                         
|------- |  | ------------------------------------------------------------------------------------------------------------------------
|Number  |  | Exhibit                                                                                                                 
|3.1(1)  |  | Articles of Incorporation, dated February 27, 1987                                                                      
|        | 
|3.2(1)  |  | Articles of Amendment, dated July 14, 1998                                                                              
|        | 
|3.3(1)  |  | Articles of Amendment, dated June 28, 1990                                                                              
|        | 
|3.4(1)  |  | Articles Of Amendment of the Company, dated February 8, 1993                                                            
|        | 
|3.5(1)  |  | Articles of Amendment of the Company, dated April 6, 1993                                                               
|        | 
|3.6(1)  |  | Articles of Amendment of the Company, dated December 6, 1993                                                            
|        | 
|3.7(5)  |  | Restated Articles of Incorporation of the Company dated June 1, 2000                                                    
|        | 
|3.8(1)  |  | By-Laws of the Company                                                                                                  
|        | 
|3.9(6)  |  | Amendment to By-Laws of the Company                                                                                     
|        | 
|4.1(1)  |  | Specimen Stock Certificate                                                                                              
|        | 
|4.2(2)  |  | 1997 Stock Option Plan                                                                                                  
|        | 
|4.3(2)  |  | 2000 Stock Option Plan                                                                                                  
|        | 
|4.4(4)  |  | Amended 2000 Stock Option Plan dated November 1, 2000                                                                   
|        | 
|10.1(4) |  | Agreement for Escrow of Share Certificate & Promissory Note between Edward White and the Company dated February 27, 2001
|        | 
|10.2(5) |  | Agreement for Escrow of Share Certificate and Promissory Note between Babak Habibi and the Company dated June 21, 2001  
|        | 
|10.3(7) |  | License Agreement with Marubeni Corporation                                                                             
|        | 
|10.4(8) |  | Certificate of Reverse Stock Split                                                                                      



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|          |  |                                                                                                                    
|--------- |  | -------------------------------------------------------------------------------------------------------------------
|10.5(9)   |  | Corporate Governance Committee Charter                                                                             
|          | 
|10.6(9)   |  | Audit Committee Charter                                                                                            
|          | 
|10.7(9)   |  | Compensation Committee Charter                                                                                     
|          | 
|10.8(9)   |  | Code of Business Conduct and Ethics for Directors, Officers and Employees                                          
|          | 
|10.9(9)   |  | Corporate Governance Guidelines                                                                                    
|          | 
|10.10(10) |  | Loan Agreement                                                                                                     
|          | 
|10.11(10) |  | General Security Agreement                                                                                         
|          | 
|10.12(10) |  | Service Agreement with Elite Financial Communications Group                                                        
|          | 
|10.13(10) |  | 2003 Stock Option Plan                                                                                             
|          | 
|10.14(11) |  | Lease Agreement dated July 30, 2003 between Hoop Realty and Braintech Canada, Inc.                                 
|          | 
|10.15(12) |  | ABB Exclusive Channel Partner Agreement for Licensing of Braintechs Technologies                                  
|          | 
|10.16(13) |  | ABB Exclusive Channel Partner Agreement for Licensing of Braintechs Technologies                                  
|          | 
|10.17(14) |  | Marketing Communications Services Agreement with Baldacci Communications, LLC,                                     
|          | 
|10.18(15) |  | ABB Exclusive Global Channel Partner Agreement for Licensing of Braintechs Technologies                           
|          | 
|10.19(16) |  | Form of Loan Guarantee and Subscription Agreement                                                                  
|          | 
|10.20(16) |  | General Security Agreement dated October 18, 2006                                                                  
|          | 
|10.21(17) |  | 2007 Bonus Stock and Bonus Stock Option Incentive Plan                                                             
|          | 
|10.22(17) |  | Employment Agreement with Edward White                                                                             
|          | 
|10.23(17) |  | Employment Agreement with Owen Jones                                                                               
|          | 
|10.24(17) |  | Employment Agreement with Frederick Weidinger                                                                      
|          | 
|11.1*     |  | Computation of net loss per share                                                                                  
|          | 
|31.1*     |  | Certificate of Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002               
|          | 
|31.2*     |  | Certificate of Principal Financial and Accounting Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
|          | 
|32.1*     |  | Certificate of Principal Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002               
|          | 
|32.2*     |  | Certificate of Principal Financial and Accounting Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002



|* | Filed herewith
|- | --------------

|(1) | Exhibit already on fileexhibit to our Form 10-SB registration statement filed September 25, 1998.
|--- | --------------------------------------------------------------------------------------------------

|(2) | Exhibit already on fileexhibit to our Schedule 14A proxy information filed March 1, 2000.
|--- | ------------------------------------------------------------------------------------------

|(3) | Exhibit already on fileexhibit to our Form S-1 registration statement filed February 11, 2000.
|--- | -----------------------------------------------------------------------------------------------

|(4) | Exhibit already on fileexhibit to our Form 10-KSB for the year ended December 31, 2000.
|--- | ----------------------------------------------------------------------------------------

|(5) | Exhibit already on fileexhibit to our Form S-1/A registration statement filed July 3, 2001.
|--- | --------------------------------------------------------------------------------------------

|(6) | Exhibit already on fileexhibit to our Form 10-KSB for the year ended December 31, 2001
|--- | ---------------------------------------------------------------------------------------

|(7) | Exhibit already on fileexhibit to our Form 8-K filed July 5, 2002.
|--- | -------------------------------------------------------------------

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

|(9) | Exhibit already on fileexhibit to our Form 10KSB for the year ended December 31, 2002.
|--- | ---------------------------------------------------------------------------------------

|(10) | Exhibit already on fileexhibit to our Form 10QSB covering the quarter ended March 31, 2003.
|---- | --------------------------------------------------------------------------------------------

|(11) | Exhibit already on fileexhibit to our Form 10QSB covering the quarter ended September 30, 2003.
|---- | ------------------------------------------------------------------------------------------------

|(12) | Exhibit already on fileexhibit to our Form 8-K filed March 9, 2004.
|---- | --------------------------------------------------------------------

|(13) | Exhibit already on fileexhibit to our Form 8-K filed January 19, 2005.
|---- | -----------------------------------------------------------------------

|(14) | Exhibit already on fileexhibit to our Form 8-K filed March 3, 2005.
|---- | --------------------------------------------------------------------

|(15) | Exhibit already on fileexhibit to our Form 10QSB covering the quarter ended March 31, 2006.
|---- | --------------------------------------------------------------------------------------------

|(16) | Exhibit already on fileexhibit to our Form 8-K filed October 26, 2006.
|---- | -----------------------------------------------------------------------

|(17) | Exhibit already on fileexhibit to our Form 8-K filed October 31, 2007.
|---- | -----------------------------------------------------------------------

|(18) | Exhibit already on fileexhibit to our Form 10-QSB filed November 14, 2007
|---- | --------------------------------------------------------------------------



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SIGNATURES

In accordance with the requirements of the Exchange Act, the registrant caused this Amendment No. 1 to report to be signed on its behalf by the undersign, thereunto duly authorized



|                |  |                                                                                   
|--------------- |  | ----------------------------------------------------------------------------------
|BRAINTECH, INC.
|                | 
|By:             |  | /s/ Frederick Weidinger                                                           
|                |  | Frederick Weidinger                                                               
|                |  | Chief Executive Officer and Director (Principal
Executive Officer)                
|                |  | Date: March 18, 2008                                                              
|                | 
|By:             |  | /s/ Edward A. White                                                               
|                |  | Edward A. White                                                                   
|                |  | Senior Vice-President, Administration (Principal
Financial and Accounting Officer)
|                |  | Date: March 18, 2008                                                              



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