SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    FORM 10-Q

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

                  For the quarterly period ended March 31, 2004

                         Commission file number 0-28572

                               OPTIMAL GROUP INC.
             (Exact name of registrant as specified in its charter)

CANADA                                      98-0160833
(State or Other Jurisdiction of             (I.R.S. Employer Identification No.)
Incorporation or Organization)

   3400 de Maisonneuve Blvd. W., 12th floor, Montreal, Quebec, Canada H3Z 3B8

                                 (514) 738-8885
              (Registrant's Telephone Number, including Area Code)

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.

Yes |x| No |_|

Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act).

Yes |x| No |_|

At April 26, 2004, the registrant had 22,178,403 Class "A" shares (without
nominal or par value) outstanding.


<PAGE>

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

            Consolidated Financial Statements of
            (Unaudited)

            OPTIMAL GROUP INC.
            (formerly Optimal Robotics Corp.)

            Three-month periods ended March 31, 2004 and 2003
            (expressed in US dollars)


<PAGE>

OPTIMAL GROUP INC.
(formerly Optimal Robotics Corp.)
Consolidated Financial Statements
(Unaudited)

Three-month periods ended March 31, 2004 and 2003
(expressed in US dollars)

Financial Statements

     Consolidated Balance Sheets.............................................  1

     Consolidated Statements of Operations...................................  2

     Consolidated Statements of Deficit......................................  3

     Consolidated Statements of Cash Flows...................................  4

     Notes to Consolidated Financial Statements..............................  5


<PAGE>

OPTIMAL GROUP INC.
(formerly Optimal Robotics Corp.)
Consolidated Balance Sheets
(Unaudited)

March 31, 2004 and December 31, 2003
(expressed in US dollars)

<TABLE>
<CAPTION>
===================================================================================================
                                                                       March 31,       December 31,
                                                                            2004               2003
---------------------------------------------------------------------------------------------------
                                                                                          (Audited)
<S>                                                                 <C>               <C>
Assets

Current assets:
     Cash and cash equivalents                                      $   7,145,381     $   4,211,964
     Short-term investments                                            66,488,375        74,301,582
     Accounts receivable, net of allowance for doubtful accounts
       of $248,288 ($284,576 at December 31, 2003)                     15,958,804        11,082,962
     Income taxes receivable                                              546,130           546,130
     Tax credits receivable                                               376,000           376,000
     Inventories (note 5)                                              25,632,520        22,938,125
     Future income taxes                                                  245,284           331,829
     Prepaid expenses and deposits                                      1,322,240         1,075,691
     ----------------------------------------------------------------------------------------------
                                                                      117,714,734       114,864,283

Deferred acquisition costs (note 15)                                      349,985                --

Property and equipment                                                  6,245,370         6,290,188

Goodwill and other intangible assets (note 6)                          14,948,968        12,109,838

Future income taxes                                                     2,562,978         2,278,016

---------------------------------------------------------------------------------------------------
                                                                    $ 141,822,035     $ 135,542,325
===================================================================================================

Liabilities and Shareholders' Equity

Current liabilities:
     Bank indebtedness (note 7)                                     $  10,462,887     $  10,726,076
     Accounts payable and accrued liabilities                           9,682,013         8,400,100
     Deferred revenue                                                  11,444,016         2,860,122
     Future income taxes                                                  133,806           133,806
     ----------------------------------------------------------------------------------------------
                                                                       31,722,722        22,120,104

Future income taxes                                                            --           129,583

Shareholders' equity:
     Share capital (note 8)                                           122,102,244       122,102,244
     Additional paid-in capital                                             5,282             5,282
     Deficit                                                          (10,523,742)       (7,330,417)
     Cumulative translation adjustment                                 (1,484,471)       (1,484,471)
     ----------------------------------------------------------------------------------------------
                                                                      110,099,313       113,292,638
Contingencies (note 9)
Subsequent events (note 15)
---------------------------------------------------------------------------------------------------
                                                                    $ 141,822,035     $ 135,542,325
===================================================================================================
</TABLE>

See accompanying notes to unaudited consolidated financial statements.


                                      -1-
<PAGE>

OPTIMAL GROUP INC.
(formerly Optimal Robotics Corp.)
Consolidated Statements of Operations
(Unaudited)

Three-month periods ended March 31, 2004 and 2003
(expressed in US dollars)

===============================================================================
                                                        2004            2003
-------------------------------------------------------------------------------

Revenues                                           $ 20,415,675    $ 16,300,225

Cost of sales                                        14,538,873      10,684,082

-------------------------------------------------------------------------------
Gross margin                                          5,876,802       5,616,143

Expenses (income):
     Selling, general and administrative              7,601,249       6,143,544
     Research and development (note 10)                 201,854         229,284
     Amortization                                     1,034,233         632,234
     Restructuring                                           --         247,500
     Operating lease                                    971,091         416,155
     Investment income                                 (258,786)       (268,422)
     Foreign exchange                                  (151,514)        153,756
     --------------------------------------------------------------------------
                                                      9,398,127       7,554,051

-------------------------------------------------------------------------------
Loss before income taxes                             (3,521,325)     (1,937,908)

Recovery of income taxes (note 11)                     (328,000)     (1,957,000)

-------------------------------------------------------------------------------
Net (loss) earnings                                $ (3,193,325)   $     19,092
===============================================================================

Weighted average number of shares:
     Basic                                           14,936,235      14,936,235
     Plus impact of stock options                         1,012              --

-------------------------------------------------------------------------------
     Diluted                                         14,937,247      14,936,235
===============================================================================

(Loss) earnings per share:
     Basic                                         $      (0.21)   $       0.00
     Diluted                                              (0.21)           0.00

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

See accompanying notes to unaudited consolidated financial statements.


                                      -2-
<PAGE>

OPTIMAL GROUP INC.
(formerly Optimal Robotics Corp.)
Consolidated Statements of Deficit
(Unaudited)

Three-month periods ended March 31, 2004 and 2003
(expressed in US dollars)

================================================================================
                                                       2004             2003
--------------------------------------------------------------------------------

Deficit, beginning of period                      $ (7,330,417)    $ (1,162,025)

Net (loss) earnings                                 (3,193,325)          19,092

-------------------------------------------------------------------------------
Deficit, end of period                            $(10,523,742)    $ (1,142,933)
===============================================================================

See accompanying notes to unaudited consolidated financial statements.


                                      -3-
<PAGE>

OPTIMAL GROUP INC.
(formerly Optimal Robotics Corp.)
Consolidated Statements of Cash Flows
(Unaudited)

Three-month periods ended March 31, 2004 and 2003
(expressed in US dollars)

<TABLE>
<CAPTION>
===========================================================================================
                                                                     2004           2003
-------------------------------------------------------------------------------------------

<S>                                                              <C>            <C>
Cash flows from operating activities:
     Net (loss) earnings                                         $(3,193,325)   $    19,092
     Adjustments for:
         Amortization                                              1,034,233        632,234
         Foreign exchange                                           (263,189)            --
         Future income taxes                                        (328,000)    (1,537,000)
     Changes in operating assets and liabilities:
         Accounts receivable                                      (3,409,343)    (9,387,475)
         Income taxes                                                     --       (578,730)
         Tax credits receivable                                           --       (190,000)
         Inventories                                                 925,730       (410,671)
         Prepaid expenses and deposits                              (182,013)      (480,451)
         Accounts payable and accrued liabilities                    223,420        790,556
         Deferred revenue                                          6,092,897      6,276,423
     --------------------------------------------------------------------------------------
                                                                     900,410     (4,866,022)

Cash flows from investing activities:
     Additions to property and equipment and intangible assets    (2,430,215)      (674,146)
     Business acquisition (note 4)                                (3,000,000)            --
     Deferred acquisition costs                                     (349,985)            --
     Decrease (increase) in short-term investments                 7,813,207       (477,287)
     --------------------------------------------------------------------------------------
                                                                   2,033,007     (1,151,433)

-------------------------------------------------------------------------------------------
Net increase (decrease) in cash during the period                  2,933,417     (6,017,455)

Cash, beginning of period                                          4,211,964      9,615,348

-------------------------------------------------------------------------------------------
Cash, end of period                                              $ 7,145,381    $ 3,597,893
===========================================================================================

Supplementary disclosure of cash flow information:
     Cash paid during the period for:
         Interest                                                $   138,703    $     8,310
         Income taxes                                                     --        158,730

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

See accompanying notes to unaudited consolidated financial statements.


                                      -4-
<PAGE>

OPTIMAL GROUP INC.
(formerly Optimal Robotics Corp.)
Notes to Consolidated Financial Statements
(Unaudited)

Three-month periods ended March 31, 2004 and 2003
(expressed in US dollars)

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

1.    Interim financial information:

      These consolidated financial statements have been prepared by management
      in accordance with Canadian generally accepted accounting principles. The
      unaudited balance sheet as at March 31, 2004 and the unaudited statements
      of operations, deficit and cash flows for the periods ended March 31, 2004
      and 2003 reflect all adjustments which, in the opinion of management, are
      necessary to a fair statement of the results of the interim periods
      presented. The results of operations and cash flows for any quarter are
      not necessarily indicative of the results or cash flows for an entire
      year. These interim consolidated financial statements follow the same
      accounting policies and methods of their application as described in note
      2 of the annual consolidated financial statements for the year ended
      December 31, 2003. The interim consolidated financial statements do not
      include all disclosures required for annual financial statements and
      should be read in conjunction with the most recent annual consolidated
      financial statements of Optimal Group Inc. (formerly Optimal Robotics
      Corp.) (the "Company") as at and for the year ended December 31, 2003.

      All amounts in the attached notes are unaudited unless specifically
      identified.

2.    Significant accounting policies:

      Stock-based compensation:

      Effective January 1, 2003, the Company adopted the fair value-based method
      to account for stock-based compensation and other stock-based payments.
      Under the fair value-based method, compensation cost is measured at fair
      value at the date of grant and is expensed over the award's vesting
      periods.

      In accordance with the standard, the following disclosure is required to
      report the pro forma net earnings and earnings per share as if the fair
      value-based method had been used to account for employee stock options
      granted during fiscal 2002:

<TABLE>
<CAPTION>
      ===================================================================================
                                                            Three months ended March 31,
      -----------------------------------------------------------------------------------

                                                               2004               2003
      -----------------------------------------------------------------------------------

<S>                                                        <C>                <C>
      Net (loss) income, as reported                       $(3,193,325)       $    19,092

      Deduct:
          Total stock-based employee compensation
            expense determined under fair value-based
            method for all awards granted in fiscal 2002,
            net of related taxes of nil                             --           (461,921)
      -----------------------------------------------------------------------------------
      Pro forma net loss                                   $(3,193,325)       $  (442,829)
      ===================================================================================
</TABLE>


                                      -5-
<PAGE>

OPTIMAL GROUP INC.
(formerly Optimal Robotics Corp.)
Notes to Consolidated Financial Statements, Continued
(Unaudited)

Three-month periods ended March 31, 2004 and 2003
(expressed in US dollars)

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

2.    Significant accounting policies (continued):

      Stock-based compensation (continued):

      =========================================================================
                                                   Three months ended March 31,
      -------------------------------------------------------------------------

                                                      2004                2003
      -------------------------------------------------------------------------

      (Loss) earnings per share:
          Basic:
               As reported                          $  (0.21)          $   0.00
               Pro forma                               (0.21)             (0.03)
          Diluted:
               As reported                             (0.21)              0.00
               Pro forma                               (0.21)             (0.03)

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

      There were no options granted in the three-month periods ended March 31,
      2004 and 2003. The pro forma adjustment for fiscal 2003 relates to the
      amortization of compensation cost for options granted during fiscal 2002
      over the vesting periods.

3.    New accounting standard:

      Asset retirement obligations:

      This standard was established for the recognition, measurement and
      disclosure of liabilities for asset retirement obligations and the
      associated retirement cost. The standard applies to legal obligations
      associated with the retirements of a tangible long-lived asset that
      results from acquisition, development or normal operations. The standard
      requires an entity to record the fair value of a liability for an asset
      retirement obligation in the period in which it is incurred and when a
      reasonable estimate of fair value can be made. An entity is subsequently
      required to allocate the asset retirement cost to expense using a
      systematic and rational method over its estimated life. The standard is
      effective for fiscal years beginning on or after January 1, 2004. The
      adoption of this standard is not expected to have a material impact on the
      Company's financial statements.


                                      -6-
<PAGE>

OPTIMAL GROUP INC.
(formerly Optimal Robotics Corp.)
Notes to Consolidated Financial Statements, Continued
(Unaudited)

Three-month periods ended March 31, 2004 and 2003
(expressed in US dollars)

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

4.    Business acquisition:

      On February 27, 2004, the Company acquired the hardware service division
      of Systech Retail Systems ("Systech"). The Company believes that the
      combination of this division with Optimal's existing service organization
      will contribute positively to the Company's financial results in 2004.

      The net assets acquired for cash were approximately $3.0 million, subject
      to the determination of certain post closing adjustments, if any. The
      acquisition was accounted for by the Company using the purchase method and
      the results of Systech are consolidated with those of the Company from the
      date of acquisition.

      The following table summarizes the estimated fair value of the assets
      acquired and liabilities assumed at date of acquisition. The Company is in
      the process of finalizing its valuation of the net assets acquired,
      including goodwill and other intangible assets; thus, the allocation of
      the purchase price is subject to refinement.

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

      Assets acquired:
          Accounts receivable                                        $ 1,466,499
          Inventories                                                  3,620,125
          Property and equipment                                         273,706
          Prepaid expenses and deposits                                   64,536
          Goodwill and other intangible assets                         1,124,624
          ----------------------------------------------------------------------
                                                                       6,549,490

      Liabilities assumed:
          Accounts payable and accrued liabilities                     1,058,493
          Deferred revenue                                             2,490,997
          ----------------------------------------------------------------------
                                                                       3,549,490

      --------------------------------------------------------------------------
      Net assets acquired for cash                                   $ 3,000,000
      ==========================================================================


                                      -7-
<PAGE>

OPTIMAL GROUP INC.
(formerly Optimal Robotics Corp.)
Notes to Consolidated Financial Statements, Continued
(Unaudited)

Three-month periods ended March 31, 2004 and 2003
(expressed in US dollars)

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

5.    Inventories:

      ==========================================================================
                                                        March 31,   December 31,
                                                             2004           2003
      --------------------------------------------------------------------------
                                                                     (Audited)

      Finished goods                                  $ 1,167,803    $ 1,182,541
      Work in process                                     816,533        641,370
      Raw materials                                     2,605,564      3,203,305
      Product and service replacement parts            21,042,620     17,910,909

      --------------------------------------------------------------------------
                                                      $25,632,520    $22,938,125
      ==========================================================================

6.    Goodwill and other intangible assets:

<TABLE>
<CAPTION>
      =======================================================================================
                                                                                    March 31,
                                                                                         2004
      ---------------------------------------------------------------------------------------
                                                 Gross carrying    Accumulated       Net book
                                                         amount   amortization          value
      ---------------------------------------------------------------------------------------
<S>                                                 <C>            <C>            <C>
      Goodwill (i)                                  $ 7,094,580    $   141,750    $ 6,952,830
      Customer contracts and customer
        relationships                                 3,399,720        283,310      3,116,410
      Patent costs                                    3,246,497        176,369      3,070,128
      Customer list                                     786,413        379,886        406,527
      License                                           371,266         92,817        278,449
      Goodwill and other intangibles acquired on
        acquisition of Systech (ii)                   1,124,624             --      1,124,624

      ---------------------------------------------------------------------------------------
                                                    $16,023,100    $ 1,074,132    $14,948,968
      =======================================================================================
</TABLE>

      (i)   During fiscal 2004, an adjustment of $139,327 was made to increase
            goodwill attributable to the acquisition of the ongoing business of
            RBA Inc. for liabilities estimated at the time of the purchase. As
            at March 31, 2004, the valuation of the net assets acquired had not
            been completed.


                                      -8-
<PAGE>

OPTIMAL GROUP INC.
(formerly Optimal Robotics Corp.)
Notes to Consolidated Financial Statements, Continued
(Unaudited)

Three-month periods ended March 31, 2004 and 2003
(expressed in US dollars)

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

6.   Goodwill and other intangible assets (continued):

      (ii)  The Company is in the process of finalizing its valuation of the net
            assets acquired, including the determination of post-closing
            adjustments and the allocation to goodwill and other intangible
            assets.

     ===========================================================================
                                                                    December 31,
                                                                            2003
     ---------------------------------------------------------------------------
                                                                       (Audited)

                                      Gross carrying   Accumulated      Net book
                                              amount  amortization         value
     ---------------------------------------------------------------------------

     Goodwill                            $ 6,955,253   $   141,750   $ 6,813,503
     Customer contracts and customer
       relationships                       3,399,720       141,655     3,258,065
     Patent costs                          1,393,693       105,034     1,288,659
     Customer list                           786,414       340,564       445,850
     License                                 371,264        67,503       303,761

     ---------------------------------------------------------------------------
                                         $12,906,344   $   796,506   $12,109,838
     ===========================================================================

7.   Bank indebtedness:

     The Company has credit facilities in the amount of approximately CA$15
     million (U.S.$11.6 million), which can be utilized in the form of loans or
     bankers' acceptances in Canadian dollars. At March 31, 2004, the Company
     utilized US$10,463,000 of the facilities. The borrowings are due on demand
     and bear interest either at the bank's prime rate or the market rate for
     bankers' acceptances plus an acceptance fee of 0.75% per annum, depending
     on the form of the facility utilized. The facilities are secured by a
     first ranking moveable hypothec on short-term investments.


                                      -9-
<PAGE>

OPTIMAL GROUP INC.
(formerly Optimal Robotics Corp.)
Notes to Consolidated Financial Statements, Continued
(Unaudited)

Three-month periods ended March 31, 2004 and 2003
(expressed in US dollars)

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

8.    Share capital:

      (a)   Issued and outstanding share capital were as follows:

            ====================================================================
                                 March 31, 2004             December 31, 2003
                            ------------------------    ------------------------
                              Number     Book value       Number     Book value
            --------------------------------------------------------------------

            Common shares   14,936,235  $122,102,244    14,936,235  $122,102,244
            ====================================================================

      (b)   Stock options:

            Details of all outstanding stock options are as follows:

            ====================================================================
                                                                Weighted average
                                                                  exercise price
                                                    Number             per share
            --------------------------------------------------------------------

            Balance, December 31, 2003               5,000                $ 6.40
            Expired/cancelled                           --                    --

            --------------------------------------------------------------------
            Balance, March 31, 2004                  5,000                $ 6.40
            ====================================================================

            These stock options were issued outside the Company's stock option
            plan to two consultants who are not employees of the Company.

9.    Contingencies:

      (a)   The Company received a legal letter from a claimant in 1999, and
            again in February 2001, alleging infringement of a patent. In March
            2003, this claimant also sent a third demand letter alleging
            infringement of additional patents. The Company believes these
            claims to be without merit and intends to vigorously defend its
            position should this claimant initiate a civil action. No amounts
            have been specified in these claims. It is not possible at this time
            to make an estimate of the amount of damages, if any, that may
            result and, accordingly, no provision has been made in these
            financial statements with respect to such claims.

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


                                      -10-
<PAGE>

OPTIMAL GROUP INC.
(formerly Optimal Robotics Corp.)
Notes to Consolidated Financial Statements, Continued
(Unaudited)

Three-month periods ended March 31, 2004 and 2003
(expressed in US dollars)

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

10.  Research and development:

     ===========================================================================
                                                    Three months ended March 31,
     --------------------------------------------------------------------------

                                                       2004              2003
     --------------------------------------------------------------------------
     Gross research and development expenses        $ 201,854         $ 419,284
     Less tax credits                                      --          (190,000)

     --------------------------------------------------------------------------
                                                    $ 201,854         $ 229,284
     ===========================================================================

11.  Income taxes:

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

<TABLE>
<CAPTION>
      =================================================================================
                                                           Three months ended March 31,
      ---------------------------------------------------------------------------------

                                                               2004             2003
      ---------------------------------------------------------------------------------

<S>                                                        <C>              <C>
      Loss before income taxes                             $(3,521,325)     $(1,937,908)
      =================================================================================

      Combined Canadian federal and Quebec
          provincial income taxes at 31% (2003 - 33%)      $(1,096,707)     $  (642,610)
      Foreign exchange (1)                                      25,695       (1,244,219)
      Benefits of losses not recorded                          783,798               --
      Differences in tax rates in foreign jurisdictions        (52,851)              --
      Permanent differences and other                           12,065          (70,171)

      ---------------------------------------------------------------------------------
      Income tax recovery                                  $  (328,000)     $(1,957,000)
      =================================================================================
</TABLE>


                                      -11-
<PAGE>

OPTIMAL GROUP INC.
(formerly Optimal Robotics Corp.)
Notes to Consolidated Financial Statements, Continued
(Unaudited)

Three-month periods ended March 31, 2004 and 2003
(expressed in US dollars)

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

11.   Income taxes (continued):

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

      The recovery of income taxes is composed of the following:

      =========================================================================
                                                  Three months ended March 31,
      -------------------------------------------------------------------------

                                                      2004              2003
      -------------------------------------------------------------------------

      Current income taxes                        $        --       $  (420,000)
      Future income taxes                            (328,000)       (1,537,000)

      -------------------------------------------------------------------------
                                                  $  (328,000)      $(1,957,000)
      =========================================================================

12.   Segmented information:

      The Company operates in two segments, namely the development, marketing,
      installation and sale of automated transaction products designed for use
      in the retail sector, and hardware maintenance and repair outsourcing
      services. The corporate segment is responsible for the Company's financial
      and corporate direction, and also includes general expenses which cannot
      be directly attributed to a specific segment. Management measures the
      results of operations based on segment gross margin provided by each
      business segment.


                                      -12-
<PAGE>

OPTIMAL GROUP INC.
(formerly Optimal Robotics Corp.)
Notes to Consolidated Financial Statements, Continued
(Unaudited)

Three-month periods ended March 31, 2004 and 2003
(expressed in US dollars)

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

12.   Segmented information (continued):

      (a)   Information on the operating segments is as follows:

<TABLE>
<CAPTION>
            ============================================================================================================
                                                                    Hardware and
                                              Systems, parts            software       Corporate and
                                                   and other         maintenance        eliminations        Consolidated
            ------------------------------------------------------------------------------------------------------------
<S>                                            <C>                 <C>                 <C>                 <C>
            Three months ended
              March 31, 2004:

            Revenues from external
              customers                        $   6,938,586       $  13,477,089       $          --       $  20,415,675
            Cost of sales                          4,877,178           9,661,695                  --          14,538,873
            ------------------------------------------------------------------------------------------------------------
            Segment gross margin                   2,061,408           3,815,394                  --           5,876,802
            Amortization                             606,187             428,046                  --           1,034,233
            Interest income                               --                  --            (258,786)           (258,786)
            Loss before taxes                       (475,396)           (778,019)         (2,267,910)         (3,521,325)
            Income tax recovery                           --                  --            (328,000)           (328,000)

            Three months ended
              March 31, 2003:

            Revenues from external
              customers                        $  11,164,814       $   5,135,411       $          --       $  16,300,225
            Cost of sales                          7,852,451           2,831,631                  --          10,684,082
            ------------------------------------------------------------------------------------------------------------
            Segment gross margin                   3,312,363           2,303,780                  --           5,616,143
            Amortization                             579,373              52,861                  --             632,234
            Interest income                               --                  --            (268,422)           (268,422)
            Income (loss) before taxes              (508,515)            366,273          (1,795,666)         (1,937,908)
            Income tax recovery                           --                  --          (1,957,000)         (1,957,000)

            March 31, 2004:

            Total assets                       $  16,505,447       $  45,112,899       $  80,203,689       $ 141,822,035

            Total additions to property and
              equipment and intangibles        $   1,994,429       $   1,775,243       $      58,873       $   3,828,545

            December 31, 2003:

            Total assets                       $  16,663,937       $  36,063,125       $  82,815,263       $ 135,542,325

            Total additions to property and
              equipment and intangibles        $   1,572,858       $   7,564,947       $     394,446       $   9,532,251

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


                                      -13-
<PAGE>

OPTIMAL GROUP INC.
(formerly Optimal Robotics Corp.)
Notes to Consolidated Financial Statements, Continued
(Unaudited)

Three-month periods ended March 31, 2004 and 2003
(expressed in US dollars)

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

12.  Segmented information (continued):

      (b)   Geographic information is as follows:

<TABLE>
<CAPTION>
            =================================================================================
                                                                   Property and equipment
                                        Revenues                       and intangibles
                              -----------------------------     -----------------------------
                                    Three months ended
                                         March 31,                 March 31,     December 31,
                                   2004             2003                2004             2003
            ---------------------------------------------------------------------------------
                                                                                    (audited)
<S>                           <C>              <C>              <C>              <C>
            Canada            $  8,243,767     $  2,077,559     $ 15,820,850     $ 13,804,936
            United States       11,421,339       14,152,515        5,305,993        4,581,268
            United Kingdom         750,569           70,151           67,495           13,822

            ---------------------------------------------------------------------------------
                              $ 20,415,675     $ 16,300,225     $ 21,194,338     $ 18,400,026
            =================================================================================
</TABLE>

            Revenues were derived from customers located in the geographic
            areas.

13.   Canada/U.S. reporting differences:

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

      (a)   Consolidated statement of operations:

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

<TABLE>
<CAPTION>
            ======================================================================================
                                                                     Three months ended March 31,
            --------------------------------------------------------------------------------------

                                                                         2004              2003
            --------------------------------------------------------------------------------------

<S>                                                                  <C>               <C>
            Net (loss) earnings in accordance with Canadian GAAP     $(3,193,325)      $    19,092
            Stock-based compensation costs (i)                                --                --
            --------------------------------------------------------------------------------------
            Net (loss) earnings in accordance with U.S. GAAP         $(3,193,325)      $    19,092
            ======================================================================================

            (Loss) earnings per share under U.S. GAAP:
                 Basic                                               $     (0.21)      $      0.00
                 Diluted                                                   (0.21)             0.00
            ======================================================================================
</TABLE>


                                      -14-
<PAGE>

OPTIMAL GROUP INC.
(formerly Optimal Robotics Corp.)
Notes to Consolidated Financial Statements, Continued
(Unaudited)

Three-month periods ended March 31, 2004 and 2003
(expressed in US dollars)

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

13.   Canadian/U.S. reporting differences (continued):

      (a)   Consolidated statement of operations (continued):

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

            (i)   Stock-based compensation:

                  Effective January 1, 2003, the Company adopted the fair value
                  recognition provisions of FASB Statement 123, Accounting for
                  Stock-based Compensation, prospectively to all employee awards
                  granted, modified or settled after January 1, 2003. Awards
                  under the Company's plan vest either immediately or over a
                  period of two years. Therefore, the cost related to
                  stock-based compensation included in the determination of net
                  earnings is less than that which would have been recognized if
                  the fair value based method had been applied to all awards
                  since the original effective date of Statement 123.

                  The following table illustrates the effect on net income and
                  earnings per share if the fair value based method had been
                  applied to all outstanding and unvested awards in each period:

<TABLE>
<CAPTION>
                  =========================================================================================
                                                                              Three months ended March 31,
                  -----------------------------------------------------------------------------------------

                                                                                 2004               2003
                  -----------------------------------------------------------------------------------------

<S>                                                                          <C>                <C>
                  Reported net (loss) earnings                               $(3,193,325)       $    19,092

                  Add: Stock-based employee compensation expense
                    determined under the intrinsic value method included
                    in reported net earnings, net of related taxes of nil             --                 --

                  Deduct: Total stock-based employee compensation
                    expense determined under fair value based method
                    for all awards, net of related taxes of nil                       --         (5,125,020)

                  -----------------------------------------------------------------------------------------
                  Pro forma net loss                                         $(3,193,325)       $(5,105,928)
                  =========================================================================================
</TABLE>


                                      -15-
<PAGE>

OPTIMAL GROUP INC.
(formerly Optimal Robotics Corp.)
Notes to Consolidated Financial Statements, Continued
(Unaudited)

Three-month periods ended March 31, 2004 and 2003
(expressed in US dollars)

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

13.   Canadian/U.S. reporting differences (continued):

      (a)   Consolidated statement of operations (continued):

            (i)   Stock-based compensation (continued):

                  =============================================================
                                                   Three months ended March 31,
                  -------------------------------------------------------------
                                                     2004                 2003
                  -------------------------------------------------------------

                  Earnings (loss) per share:
                      Basic:
                        As reported                $ (0.21)             $  0.00
                        Pro forma                    (0.21)               (0.34)
                      Diluted:
                        As reported                  (0.21)                0.00
                        Pro forma                    (0.21)               (0.34)
                  =============================================================

      (b)   Consolidated balance sheets:

<TABLE>
<CAPTION>
            ==================================================================================================
                                                   March 31, 2004                      December 31, 2003
                                           -------------------------------     -------------------------------
                                             Canadian              US             Canadian             US
                                               GAAP               GAAP              GAAP              GAAP
            --------------------------------------------------------------------------------------------------
                                                                                             (Audited)
<S>                                        <C>               <C>               <C>               <C>
            Shareholders' equity:
                 Share capital             $ 122,102,244     $ 164,558,807     $ 122,102,244     $ 164,558,807
                 Additional paid-in
                   capital                         5,282        29,862,009             5,282        29,862,009
                 Deficit                     (10,523,742)      (81,303,270)       (7,330,417)      (78,109,945)
                 Cumulative translation
                   adjustment                 (1,484,471)               --        (1,484,471)               --
                 Accumulated other
                   comprehensive loss                 --        (3,018,233)               --        (3,018,233)

            --------------------------------------------------------------------------------------------------
                                           $ 110,099,313     $ 110,099,313     $ 113,292,638     $ 113,292,638
            ==================================================================================================
</TABLE>

14.   Comparative figures:

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


                                      -16-
<PAGE>

OPTIMAL GROUP INC.
(formerly Optimal Robotics Corp.)
Notes to Consolidated Financial Statements, Continued
(Unaudited)

Three-month periods ended March 31, 2004 and 2003
(expressed in US dollars)

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

15.   Subsequent events:

      (a)   Terra Payments Inc.:

            On January 20, 2004, the Company entered into a Combination
            Agreement with Terra Payments Inc. ("Terra"), a Canadian
            publicly-traded company that offers proprietary technology and
            services to businesses to accept credit card, electronic cheque and
            direct debit payments. Terra processes credit card payments
            primarily for non-face-to-face transactions, including
            mail-order/telephone order, licensed on-line gaming and other
            on-line merchants, as well as for retail point-of-sale merchants.
            Terra also processes cheques and direct debits online and by
            telephone.

            The agreement provides for a stock-for-stock merger in which 0.4532
            shares of the Company's common shares are exchanged for each share
            of Terra, the total purchase price of approximately $64.6 million
            (including estimated transaction costs of the Company) being paid
            through of the issuance of approximately 7.2 million common shares
            by the Company and the assumption of options and warrants issued by
            Terra.

            The estimated fair value of the assets to be acquired and
            liabilities to be assumed includes tangible assets of approximately
            $110 million, goodwill and other intangible assets of $45 million
            and liabilities of $91 million. The Company is presently proceeding
            to finalize its valuation of the assets to be acquired and
            liabilities to be assumed, including the allocation of the purchase
            price to identifiable intangible assets and goodwill. Thus, the
            allocation of the purchase price will be subject to final
            modifications.

            The per share value of the shares issued as consideration for the
            business acquisition was $8.48 which was determined using the
            Company's average closing share price on NASDAQ over a reasonable
            period before and after the date the terms of the business
            combination were agreed to and announced.

            Each outstanding Terra stock option and warrant has become a stock
            option or warrant to acquire 0.4532 of a common share of the
            Company. The Company will effectively issue approximately 1.8
            million stock options and warrants having a fair value of
            approximately $5.6 million, or a weighted average of $3.08 per
            share, to acquire the Terra options and warrants. The fair value of
            the vested stock options and warrants of approximately $2.5 million
            will be recorded as purchase consideration. The fair value of the
            unvested stock options of approximately $3.1 million will be
            recorded as deferred compensation, which will be amortized over the
            vesting period of three years.


                                      -17-
<PAGE>

OPTIMAL GROUP INC.
(formerly Optimal Robotics Corp.)
Notes to Consolidated Financial Statements, Continued
(Unaudited)

Three-month periods ended March 31, 2004 and 2003
(expressed in US dollars)

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

15.   Subsequent events (continued):

      (a)   Terra Payments Inc. (continued):

            The transaction was completed on April 6, 2004, following the
            approval by the shareholders of both companies. The Company will
            account for the transaction using the purchase method from the
            closing date. Acquisition costs of $349,985 related to this
            transaction incurred prior to March 31, 2004 are recorded as
            "deferred acquisition costs" on the consolidated balance sheet.

      (b)   Sale of U-Scan(R) business:

            On April 8, 2004, the Company completed the sale of its U-Scan(R)
            self-checkout business, including all related tangible assets,
            intellectual property rights, and obligations to Fujitsu Transaction
            Solutions Inc. ("Fujitsu") for $35 million in cash plus the
            assumption of liabilities. The purchase price is subject to
            adjustments at the date of closing based on the net assets at that
            date. Fujitsu funded the payment of a termination fee owed by the
            Company to NCR Corporation as a result of the termination of their
            offer to purchase the self-checkout business.

            At March 31, 2004, the net assets to be sold were approximately $23
            million, comprised of $16 million of working capital, $3.9 million
            of property and equipment and $3.3 million of intangible assets. The
            results of operations of this business for the three months ended
            March 31, 2004 and 2003 were as follows:

<TABLE>
<CAPTION>
            ==========================================================================
                                                         Three months ended March 31,
                                                            2004               2003
            --------------------------------------------------------------------------

<S>                                                    <C>                <C>
            Systems and hardware service revenue       $ 11,107,894       $ 15,133,406
            Cost of sales                                 7,973,062         10,121,695
            --------------------------------------------------------------------------
                                                          3,134,832          5,011,711

            Expenses:
                 Selling, general and administrative      3,473,409          4,324,013
                 Amortization                               609,204            488,761
                 Operating lease                            274,705            319,158
                 Research and development                   201,854            229,284
                 Restructuring                                   --            247,500
            --------------------------------------------------------------------------
                                                          4,559,172          5,608,716
            --------------------------------------------------------------------------
            Loss before income taxes                   $  1,424,340       $    597,005
            ==========================================================================
</TABLE>


                                      -18-
<PAGE>

OPTIMAL GROUP INC.
(formerly Optimal Robotics Corp.)
Notes to Consolidated Financial Statements, Continued
(Unaudited)

Three-month periods ended March 31, 2004 and 2003
(expressed in US dollars)

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

15.   Subsequent events (continued):

      (b)   Sale of U-Scan(R) business (continued):

      The results of operations include management assumptions and adjustments
      related to cost allocations which are inherently subjective. The Company
      will account for the U-Scan(R) self-checkout business as discontinued
      operations beginning in the second quarter of fiscal 2004.


                                      -19-
<PAGE>

Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations

      The following discussion of the financial condition and results of
operations of our company should be read in conjunction with our audited
consolidated financial statements for the year ended December 31, 2003, and the
factors set forth below under "Forward-Looking Statements". All dollar amounts
are expressed in U.S. dollars and, other than those expressed in millions of
dollars, have been rounded to the nearest thousand.

Overview

      We have recently completed a number of transactions in connection with our
pursuing a strategy of repositioning our business activities with the goal of
enhancing potential long-term financial results. We believe these transactions
will reposition us as a strong payment processing and services company. As a
result of these transactions, we will likely have a more balanced and stable
business mix and, combined with our strong balance sheet, continued
opportunities to grow our business on a more strategic basis. At the same time,
we will monitor our business activities and intend to take advantage of
strategic and transactional opportunities that may arise, with a focused
approach on potential acquisitions.

      On April 6, 2004, the name of the Company was changed from Optimal
Robotics Corp. to Optimal Group Inc.

Significant developments

      On April 8, 2004, we completed the sale of our U-Scan self-checkout
business to Fujitsu Transaction Solutions, Inc. for $35 million plus the
assumption of liabilities. Prior to completion of the sale, we were a leading
North American provider of both self-checkout systems to retailers, and depot
and field services to retail, financial services and other third-party accounts.
We had approximately 1,000 employees, which included approximately 800 software
and hardware professionals, with facilities in Montreal, Quebec, Plattsburgh,
New York, Santa Ana, California, and Toronto, Ontario and operations throughout
North America. We will account for the sale of the U-Scan self-checkout business
as discontinued operations in the second quarter of 2004. See note 15(b) to our
interim consolidated financial statements.

      On April 6, 2004, we completed the amalgamation of a wholly owned
subsidiary with Terra Payments Inc. The amalgamated company is a wholly-owned
subsidiary of our company and will continue its business under the name of
Optimal Payments Inc. We believe that this combination will provide us with a
superior platform for enhanced growth and financial results.

      Optimal Payments is a growing presence in the payment processing industry
and provides technology and services that businesses require to accept credit
card, electronic check and direct debit payments. Optimal Payments processes
credit card payments primarily for non-face-to-face transactions, including
mail-order/telephone-order, licensed online gaming and other online merchants,
as well as for retail point-of-sale merchants. Optimal Payments also processes
checks and direct debits online and by telephone. It is headquartered in
Montreal with operations throughout North America and in the United Kingdom. See
note 15(a) to our interim consolidated financial statements.

      On February 27, 2004, we acquired the hardware service division of Systech
Retail Systems at a net cost of $3 million, subject to post-closing adjustments.
We believe that the combination


                                      -20-
<PAGE>

of the Systech hardware service division with our existing service organization
will contribute positively to our financial results in 2004 and should add over
$11 million in annual revenues. The acquisition was accounted for using the
purchase method of accounting. The results of Systech have been consolidated
with our results from the date of the acquisition

      As a result of these transactions, we will operate in two segments; the
payment processing business, through Optimal Payments, and the service business
through Optimal Services Group.

New accounting policy

Asset Retirement Obligations

      This standard was established for the recognition, measurement and
disclosure of liabilities for asset retirement obligations and the associated
retirement cost. The standard applies to legal obligations associated with the
retirement of tangible long-lived assets that results from acquisition,
development or normal operations. The standard requires an entity to record the
fair value of a liability for an asset retirement obligation in the period in
which it is incurred and when a reasonable estimate of fair value can be made.
An entity is subsequently required to allocate the asset retirement cost to
expense using a systematic and rational method over its estimated life. The
standard is effective for fiscal years beginning on or after January 1, 2004.
The adoption of this standard is not expected to have a material impact on our
financial statements.

Financial Condition

      Our cash and short-term investment portfolio amounted to $73,634,000 as at
March 31, 2004, compared to $78,514,000 as at December 31, 2003. The decrease
relates primarily to cash used to acquire the hardware service division of
Systech in the amount of $3 million and the acquisition of property and
equipement and patent costs. Our portfolio of liquid and investment grade
investments consist of U.S.- and Canadian-dollar denominated discounted notes
and bonds.

      Our inventory position at March 31, 2004 was $25,633,000 up from
$22,938,000 at the end of 2003. This increase is mainly attributable to
replacement parts inventories amounting to $21,043,000 at March 31, 2004
compared to $17,911,000 at December 31, 2003 due to the acquisition of the
hardware service division of Systech. The raw material inventory decreased to
$2,606,000 at March 31, 2004 from $3,203,000 at December 31, 2003 mainly due to
the timing of purchases. A significant portion of our inventories was sold to
Fujitsu as part of the sale of the U-Scan business in April 2004.

      Bank indebtedness at March 31, 2004 was $10,463,000, which was incurred on
September 30, 2003 in connection with the acquisition of the RBA service
business and the repayment of its existing debt. Due to the current low-interest
rate environment coupled with the rapid decline of the U.S. dollar in relation
to the value of the Canadian dollar, we made a determination that it would be
advantageous to us to utilize a portion of our bank operating credit facility to
finance the RBA acquisition. In doing so, we were able to obtain a favorable
interest rate in connection with that loan.

      We have no long-term debt. Shareholders' equity as at March 31, 2004 was
$110,099,000 as compared to $113,293,000 as at December 31, 2003. The decrease
is attributable to net loss for the period.


                                      -21-
<PAGE>

Results of Operations

First Three Months of 2004 Compared with First Three Months of 2003

      Total revenues increased by $4,115,000, or 25%, in the first three months
of the year compared to last year. Product sales declined due to a decrease in
orders from customers, which we attribute primarily to the reluctance of major
North American food retailers to spend on capital. Service revenue recognized
for hardware and software maintenance increased by $8,342,000, due primarily to
the completion of the RBA acquisition and the acquisition of the hardware
service division of Systech, the results of which were consolidated from
February 27, 2004, the date of acquisition. In total, service revenue accounted
for approximately 66% of our total revenues in 2004 as compared to approximately
32% in 2003.

      Total cost of sales increased by $3,855,000, or 36%, in the three-month
period ended March 2004 compared to the first quarter of 2003. The increase was
consistent with the increase in sales. Overall gross margin decreased as a
percentage of sales from 34% in 2003 to 29% in 2004, primarily due to the
increased percentage of service contract revenue in 2004 compared to 2003, which
generated a lower gross margin compared to the gross margin generated by system
sales.

      Research and development expenses decreased by $27,000, or 12%, from 2003
to 2004.

      Selling, general, administrative and operating lease expenses increased by
$2,012,000, or 31%, in 2004 due to increased expenses as a result of the
completion of the RBA and Systech acquisitions.

      Our net loss was $3,193,000 in the quarter compared to earnings of $19,000
in the first quarter of 2003. On a per share basis, we lost $0.21 compared to
$0.00 (basic and diluted basis) in 2003. For the quarter ended March 31, 2004,
we recorded a tax recovery of $328,000.

Liquidity and Capital Resources

      As of March 31, 2004, we had cash and short-term investments of
$73,634,000 (December 31, 2003 - $78,514,000), and working capital of
$85,992,000 (December 31, 2003 - $92,744,000).

      Operating activities generated $900,000 of cash and cash equivalents in
the first three months of 2004, compared to the use of cash of $4,866,000 during
the first three months of 2003. The generation of cash was due to a quicker
turnover of accounts receivable.

      In the first three months of 2004, we invested $2,430,000 (2003-
$674,000), to purchase property, equipment and intangible assets, which
principally related to leasehold improvements, computer equipment and software,
testing units and patents costs.

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


                                      -22-
<PAGE>

Forward-Looking Statements

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

      The following factors are not intended to represent a complete list of the
general or specific factors that may affect us. It should be recognized that
other factors, including general economic factors and business strategies, may
be significant, presently or in the future, and the factors discussed below may
affect us to a greater extent than indicated. These risks factors are discussed
in the context of the business as it exists at the date of this Form 10-Q.
Except to the extent set forth below, risk factors related to the self-checkout
business, which we no longer operate have ceased to be relevant to us. Risks
related to our service business are presented below under "RISKS RELATED TO
SERVICE BUSINESS" and risks related to the payments business are presented under
"RISKS RELATED TO PAYMENT BUSINESS". All forward-looking statements attributable
to us or persons acting on our behalf are expressly qualified in their entirety
by the cautionary statements set forth herein. Except as required by law, we
undertake no obligation to update any forward-looking statement, whether as a
result of new information, future events or otherwise.

RISKS RELATED TO SERVICE BUSINESS

      LOSS OF KEY PERSONNEL IN THE SERVICES BUSINESS. Our ability to complete
the integration of the RBA business and to grow our service business is
particularly dependent upon the services of a few key personnel, the loss of any
of whom could adversely affect our service business and overall results of
operations.

      LOSS OF CONTRACT-BASED REVENUE. As is customary in the computer services
industry, we can experience reductions in our contract-based revenue, as
customers may eliminate certain equipment or services from coverage under their
contracts. We believe that the principal reasons for the loss of contract-based
revenue are the replacement of the equipment being serviced with new equipment
covered under a manufacturer's warranty, the discontinuance of the use of
equipment being serviced for a customer due to obsolescence or a customer's
determination (based on cost, quality and scope of services) to utilize a
competitor's services or to move technical support services in house. There can
be no assurance that we will be able to offset the reduction of contract-based
revenue and maintain revenue growth through new contracts in the future. Any
failure to enter into new contracts, add additional services and equipment to
existing contracts or consummate acquisitions could have a material adverse
effect on our results.

      DEPENDENCE ON COMPUTER INDUSTRY TRENDS. Our future success is dependent
upon (i) the continuation of a number of trends in the computer industry,
including the migration


                                      -23-
<PAGE>

by information technology end-users to multi-vendor and multi-system computing
environments, the overall increase in the sophistication and interdependency of
computing technology, and a focus by information technology managers on cost
efficient management, and (ii) our ability to diversify our services to meet the
needs of clients with respect to these trends. We believe that these trends have
resulted in a movement by both end-users and original equipment manufacturers
(each, an "OEM") towards outsourcing and an increased demand for support service
providers that have the ability to provide a broad range of multi-vendor support
services. There can be no assurance that these trends will continue in the
future

      RAPID TECHNOLOGICAL CHANGE. Rapid technological change and compressed
product life cycles are prevalent in the computer industry, which may lead to
the development of improved or lower cost technologies, higher quality hardware
with significantly reduced failure rates and maintenance needs, or customer
decisions to replace rather than continue to repair and maintain aging hardware,
which could result in a reduced need for our services in the future. Moreover,
such rapid technological changes could adversely affect our ability to predict
equipment failure rates and, therefore, to establish prices that provide
adequate financial results. Similarly, new computer systems could be built based
upon proprietary, as opposed to open, systems that cannot be serviced by us.

      VARIABILITY OF PER INCIDENT REVENUES. Per incident revenues, which consist
primarily of revenues from services performed for customers on an as requested
basis (e.g., projects, help desk services, parts repair, installations and
moves, installation and de-installation of computer equipment), are subject to
monthly variation due to the nature of per incident revenue transactions. It is
difficult for us to estimate the impact or amount of future per incident
revenues because per incident revenues are dependent on customer demand, which
fluctuates based upon various factors such as competition and customers' use of
internal employees. We may not be able to generate significant amounts of per
incident revenue in the future.

      WE OPERATE IN A HIGHLY COMPETITIVE MARKET AND THERE IS NO ASSURANCE THAT
WE WILL BE ABLE TO COMPETE SUCCESSFULLY AGAINST CURRENT OR FUTURE COMPETITORS.
Competition among computer support service providers, both OEM's and independent
service organizations, is intense. We believe that a significant portion of
industry hardware maintenance services is currently serviced by OEM service
organizations. The remainder of the technology support services market is
serviced by a small number of larger, independent companies, such as ourselves,
offering a broader range of service capabilities, as well as numerous small
companies focusing on narrower areas of expertise or serving limited geographic
areas.

      In many instances, OEM service organizations have greater resources than
us, and, because of their access to the OEM's engineering data, may be able to
respond more quickly to servicing equipment that incorporates new or emerging
technologies. Moreover, some OEM's do not make available to end-users or
independent service organizations the technical information, repairable parts,
diagnostics, information that relates to engineering changes and other support
items required to service their products, and design and sell their products in
a manner so as to make it virtually impossible for a third party to perform
maintenance services without potentially infringing upon certain proprietary
rights of the OEM. In addition, OEM's are sometimes able to develop proprietary
remote diagnostic or monitoring systems, which we may not be able to offer.
Therefore, OEM service organizations sometimes have a cost and timing advantage
over us because we must first develop or acquire from another party the required
support items before we can provide services for that equipment. An OEM's cost
advantage, the unavailability of required support items or various proprietary
rights of the OEM may preclude us from servicing certain


                                      -24-
<PAGE>

products. Furthermore, OEM's usually provide warranty coverage for new equipment
for specified periods, during which it is not economically feasible for us to
compete for the provision of maintenance services. To the extent that OEM's
choose, for marketing reasons or otherwise, to expand their warranty periods or
terms, our business may be adversely affected.

      SINGLE SUPPLIERS FOR INVENTORY. Spare parts purchases are made from OEM's
and other vendors. We, from time to time, will have only a single supplier for a
particular part, which, in some cases, may be the OEM for such spare part.
Should a supplier be unwilling or unable to supply any part or component in a
timely manner, our business could be adversely affected.

      DIFFICULTIES IN MANAGING INVENTORY. In order to service our customers, we
are required to maintain a high level of spare parts for extended periods of
time. Any decrease in the demand for our maintenance services could result in a
substantial portion of our spare parts becoming excess, obsolete or otherwise
unusable. In addition, rapid changes in technology could render significant
portions of our spare parts obsolete, thereby giving rise to write-offs and a
reduction in financial results. Our inability to manage our spare parts or the
need to write them off in the future could have a material adverse effect on our
business, financial results and results of operations.

      FAILURE TO PRICE FIXED FEE CONTRACTS ACCURATELY. Under some of our
contracts, the customer pays a fixed fee for customized bundled services that
are priced by us based on our best estimates of various factors, including
estimated future equipment failure rates, cost of spare parts and labor
expenses. There can be no assurance that we will be able to estimate these
factors with sufficient accuracy in order to price these fixed fee contracts on
terms favorable to us. Our failure to price these fixed fee contracts accurately
could have a material adverse effect on our financial results.

      WE MAY BE UNABLE TO FIND SUITABLE ACQUISITION CANDIDATES AND MAY NOT BE
ABLE TO SUCCESSFULLY INTEGRATE BUSINESSES THAT MAY BE ACQUIRED INTO OUR
OPERATIONS. As part of our recent history and future growth strategy, we have
acquired, and intend to continue to acquire, other businesses. In the future, we
may continue to seek acquisition candidates and, from time to time, engage in
exploratory discussions with suitable candidates. There can be no assurance,
however, that we will be able to identify and acquire targeted businesses or
obtain financing for such acquisitions on satisfactory terms. The process of
integrating acquired businesses into our operations may result in unforeseen
difficulties and may require a disproportionate amount of resources and
management attention. In connection with future acquisitions, we may incur
significant charges to earnings. Future acquisitions may be financed through the
issuance of common shares, which may dilute the ownership of our shareholders,
or through the incurrence of indebtedness. Furthermore, there can be no
assurance that competition for acquisition candidates will not escalate, thereby
increasing the costs of making acquisitions or making suitable acquisitions
unattainable.


                                      -25-
<PAGE>

RISKS RELATED TO PAYMENT BUSINESS

      The payment business is subject to a number of risks, which, should they
materialize, can have a material adverse effect on our business, revenues,
operating results and financial condition, including those set forth below:

      RISKS OF LOSS DUE TO FRAUD AND DISPUTES. We face risks of loss due to
fraud and disputes between consumers and merchants, including the unauthorized
use of credit card and bank account information and identity theft, merchant
fraud, disputes over the quality of goods and services, breaches of system
security, employee fraud and use of our system for illegal or improper purposes.
[I'm not sure we need to spell it out ... but the risk of merchant insolvency is
not clear here]

      When a consumer pays a merchant for goods or services using a credit card
and the cardholder disputes the charge, the amount of the disputed item gets
charged back to us and the credit card associations may levy fees against us.
Chargebacks may arise from the unauthorized use of a cardholder's card number or
from a cardholder's claim that a merchant failed to perform. Chargebacks may
also arise when a consumer pays a merchant for goods or services using a check
and the financial institution returns the check. In addition, if our chargeback
rate becomes excessive, credit card associations can also require us to pay
fines and have done so in the past.

      In turn, we attempt to recover from the merchant the amount charged back
and the amount of such fines, however, we may not always be successful in doing
so, for reasons which could include merchant insolvency. We have taken measures
to detect and reduce the risk of fraud, but cannot be assured of their total
effectiveness.

      SECURITY AND PRIVACY BREACHES IN OUR ELECTRONIC TRANSACTIONS. Any
inability on our part to protect the security and privacy of our electronic
transactions could have a material adverse effect on our profitability. A
security or privacy breach could:

      o     expose us to additional liability and to potentially costly
            litigation;

      o     increase expenses relating to resolution of these breaches;

      o     deter customers from using our product; and

      o     decrease market acceptance of electronic commerce transactions
            generally.

      We cannot assure that the use of applications designed for data security
and integrity will address changing technologies or the security and privacy
concerns of existing and potential customers.

      OUR PAYMENT SYSTEM MIGHT BE USED FOR ILLEGAL OR IMPROPER PURPOSES. Despite
measures that have been taken to detect and prevent identity theft, unauthorized
uses of credit cards and similar misconduct, our payment systems remain
susceptible to potentially illegal or improper uses. These may include illegal
online gaming, fraudulent sales of goods or services, illicit sales of
prescription medications or controlled substances, software and other
intellectual property piracy, money laundering, bank fraud, child pornography
trafficking, prohibited sales of alcoholic beverages and tobacco products and
online securities fraud. Despite measures that we have taken to detect and
lessen the risk of this kind of conduct, we cannot be assured that these
measures will succeed.

      COMPLIANCE WITH AND CHANGES TO ASSOCIATION RULES AND PRACTICES. As a
registered party, we must comply with the operating rules of the Visa(R) and
MasterCard(R)


                                      -26-
<PAGE>

credit card associations and NACHA for checks. The associations' members set
these rules. The associations could adopt operating rules with which we might
find it difficult or even impossible to comply.

      Furthermore, in cases of fraud or disputes between consumers and
merchants, we face chargebacks when cardholders dispute items for which they
have been billed. If our chargebacks become excessive, our processing suppliers
could fine us or terminate our ability to accept credit cards for payments. The
termination of our relationship with credit card associations or acquiring banks
would limit our ability to provide transaction-processing services.

      FAILURE TO DEVELOP PRODUCTS AND LACK OF ACCEPTANCE FOR PRODUCTS UNDER
DEVELOPMENT. The success of our electronic payments operations depends upon
acceptance of our technology. There can be no assurance that we will not
experience difficulties that could delay or prevent the successful development,
introduction and marketing of new products and enhancements, or that our new
products and enhancements will be introduced in a timely fashion or will
adequately meet the requirements of the marketplace and achieve market
acceptance.

      FAILURE OF OUR SYSTEMS OR THE SYSTEMS OF THIRD PARTIES; RISKS ASSOCIATED
WITH OPERATING ON THE INTERNET. Fires, floods, earthquakes, power losses,
telecommunications failures, break-ins, security breaches and similar events
could damage our systems. Computer viruses, disgruntled or rogue employees,
electronic break-ins or other similar disruptive problems, including those
beyond our control, could also adversely affect our systems. Our business and
reputation could be adversely affected if such systems were affected by any of
these occurrences. Our existing or future insurance policies may not adequately
compensate us for any losses that may occur due to any failures or interruptions
in our systems.

      In particular, depending on volume growth, we may need to expand and
upgrade our technology, transaction-processing systems and network
infrastructure. We could experience periodic temporary capacity constraints,
which may cause unanticipated system disruptions, slower response times and
lower levels of customer service. We may be unable to accurately project the
rate or timing of increases, if any, in the use of our services or to expand and
upgrade our systems and infrastructure to accommodate these increases in a
timely manner.

      Our success in our online business will depend, in large part, on other
companies maintaining the Internet infrastructure. In particular, we will rely
on the ability of ISPs, telecommunication and other companies to maintain a
reliable network backbone that provides adequate speed, data capacity and the
infrastructure or complementary products and services necessary to establish and
maintain the Internet as a viable commercial medium.

      Users of electronic payment services are highly concerned about the
security of transmissions over public networks. Individuals could possibly
circumvent the measures that we take to protect customer transaction data. To
the extent that our activities involve the storage and transmission of
proprietary information, such as credit card or bank account numbers, security
breaches could damage our reputation and expose us to a risk of loss or
litigation and possible liability.

      UNCERTAINTY AS TO THE LEGAL STATUS OF INTERNET GAMING. As electronic
commerce in general and most of the products and services that we offer are
relatively new, the manner in which existing provincial, federal and foreign
government regulations may be applied is uncertain and difficult to predict. Due
to the relatively recent development of Internet gaming, there are few laws or
regulations that deal directly with the payment processing of this application


                                      -27-
<PAGE>

and there is uncertainty as to the legal status of Internet gaming. While some
jurisdictions have taken the position that Internet gaming is legal and have
adopted or are in the process of reviewing legislation to regulate Internet
gaming in such jurisdictions, other jurisdictions have taken the opposite view
and enacted legislation to attempt to restrict or prohibit Internet gaming. For
example, in the United States for the past several years there have been
conflicting efforts to clarify the status of Internet gaming. In the summer of
2003, the United States House of Representatives passed legislation that would
prohibit the acceptance of a credit card, electronic funds transfer or any other
bank instrument in connection with unlawful Internet gambling. The bill left the
definition of "unlawful" gambling essentially unchanged, however. A contrasting
bill, currently pending before the House Judiciary Committee, would establish a
commission to recommend regulations to provide for Internet gambling. A
prohibitory bill similar to the legislation that passed the House has been
introduced in the United States Senate and is pending there. Both the Senate
prohibitory bill and the House regulatory bill have received hearings but no
further action yet has been taken. Should such a bill pass and become law, it is
likely that regulations would come into effect anywhere from six to nine months
after such passage which would make the funding of online gaming accounts by
U.S. residents unlawful. This would have a significant negative impact on us. As
a result, we have taken the initiative and continue to invest in the
diversification of our revenue base towards the continued diminishing of our
reliance on online gaming payments emanating from U.S. residents. Since we
derive a substantial portion of our revenue from processing transactions for
licensed online gaming, we may be exposed to governmental investigations and/or
lawsuits initiated by the public in jurisdictions where gambling is restricted
or prohibited. Any adverse findings or rulings rendered against us in such
jurisdictions could have a material adverse effect on our business, revenues,
operating results and financial condition. This uncertainty could affect us
indirectly through the effect experienced by our clients and on their revenues
and directly in the event that we are restricted from conducting our activities,
such as if the banks through which we settle our clients' transactions terminate
their agreements with us or significantly increase the costs to us for their
services, or certain credit card issuing banks continue to reject Internet
gaming transactions.

      OUTCOME OF LITIGATION. There is a risk that criminal and civil
proceedings, including class actions brought by or on behalf of public entities
or private individuals, could be initiated against us, ISPs, credit card
processors and others involved in the Internet gaming industry. Any future legal
proceedings against us relating to Internet gaming could involve substantial
litigation expense, penalties, fines, injunctions or other prohibitions being
invoked against us or our licensees or others and the diversion of the attention
of key executives. The outcome of any litigation cannot be predicted.

      GOVERNMENT REGULATION OF INTERNET COMMERCE. As electronic commerce over
the Internet develops, it may be the subject of increasing government regulation
and there is a risk that well-established financial institutions and credit card
companies will be able to influence the development of regulations in a manner
which prioritizes their interests to our detriment. In addition, much of the
current legislation relating to commercial transactions pre-dates and may be
incompatible with Internet electronic commerce. There can be no assurance that
regulators will not choose to enact or enforce legislation in a manner that
would restrict our operations and other aspects of the electronic commerce
market. Moreover, it may take years to determine the extent to which existing
laws relating to issues such as intellectual property ownership and
infringement, libel and personal privacy are applicable to the Internet.

      Existing legislation in Canada, the United States and abroad regulate
communications or commerce specifically; however, the application of such laws
in the context of the Internet and electronic commerce is uncertain. Laws and
regulations that address issues such as user privacy,


                                      -28-
<PAGE>

pricing, online content regulation, taxation and the characteristics and quality
of online products and services are under consideration by federal, provincial,
state, local and foreign governments and agencies.

      In Canada, the Personal Information Protection and Electronic Documents
Act was passed into law by the federal government effective January 1, 2001.
Currently, this law regulates the inter-provincial collection, use and
disclosure of personal information. This law is in addition to several
provincial laws covering the same subject matter within a province currently in
force or being considered.

      In the United States, several telecommunication companies have petitioned
the Federal Communications Commission to regulate ISPs and online service
providers. The Federal Trade Commission and government agencies in certain
states of the United States have been investigating certain Internet companies
regarding their use of personal information. We could incur additional expenses
if any new regulations regarding the use of personal information are introduced
affecting the way in which we do business or if these agencies choose to
investigate our privacy practices.

      Any new laws or regulations relating to the Internet, or particular
applications or interpretations of existing laws, could decrease the growth in
the use of the Internet, decrease the demand for our electronic commerce
services, or increase the costs associated with providing such services or
transmitting data over the Internet and generally stunt the development of the
Internet and our growth.

      EFFECTS OF ACQUISITIONS. Part of our strategy will be to make
acquisitions. There can be no assurance that, in the future, acquisition
candidates will be found on terms suitable to us. Acquisitions involve a number
of special risks, including time and expenses associated with identifying and
evaluating acquisitions, the diversion of management's attention from day-to-day
operations, the difficulty in integrating widely dispersed operations with
distinct corporate cultures, the potential loss of key employees of the acquired
company, the difficulty of incorporating acquired technologies successfully, the
potential impairment of relationships with employees, clients and strategic
partners and the inability to maintain uniform standards, controls, procedures
and policies. In addition, customer satisfaction or performance problems at a
single acquired firm could have a material adverse effect on our reputation.
Acquisitions may also result in the potentially dilutive issuance of equity
securities, the incurring of debt, the write-off of research and development and
capitalized costs, integration costs and goodwill and other intangible assets.

      DEPENDENCE ON STRATEGIC RELATIONSHIPS AND SUPPLIERS. We have established
and will continue to establish relationships with strategic partners and
suppliers to help supply, promote and distribute our products and services. We
are dependent upon maintaining as well as creating these relationships with
strategic partners and suppliers, especially strategic banking relationships.
The credit card companies and financial institutions on whom we rely in order to
process our electronic transactions have adopted guidelines for the processing
of transactions, including gaming transactions. We believe that our operations
comply in all material respects with these guidelines. However, credit card
companies and financial institutions could nonetheless decide in the future to
refuse to process transactions us or to process online gaming transactions
generally. Any such decision, when made by a particular credit card company or
financial institution, could be implemented with little or no advance notice to
us. Should we not be able to conclude alternative arrangements with other credit
card companies or financial institutions within the delays imposed by any such
termination, or at all, our ability to carry out


                                      -29-
<PAGE>

payment transactions would be impaired and we may not then be able to continue
to carry on our business.

      PROTECTION OF PRODUCTS AND COPYRIGHTS. We rely primarily upon a
combination of copyright, trademark and trade secret laws, non-disclosure and
release of interest in intellectual property agreements and license agreements
to establish and protect proprietary rights in our products and technology. The
source codes for our products and technology are protected both as trade secrets
and as unpublished, unregistered copyrighted works; however, we currently have
no patents for our products and technology.

      Despite these precautions, it may be possible for a third party to copy or
otherwise obtain and use our products or technology without authorization or to
develop similar technology independently. Policing unauthorized use of our
products and services is and will continue to be difficult, particularly in the
global environment in which we operate, and the laws of other jurisdictions may
afford us little or no effective protection of our intellectual property. The
global nature of the Internet will make it difficult to control the ultimate
destinations of our products or services. We rely in part on "on-screen"
licenses, which are not manually signed by end-users and, therefore, may be
unenforceable under some laws. There is no assurance that any steps taken by us
will prevent others from misappropriating our technology. We may engage in
litigation related to our intellectual property; however, such litigation,
whether successful or unsuccessful, could result in substantial costs and
diversions of resources.

      In addition, there is no assurance that our products and services are not
within the scope of intellectual property rights held by others, either now or
in the future. If any claims are asserted, we may seek to obtain a license under
a third party's intellectual property rights. There can be no assurance that
such a license would be available on reasonable terms or at all. We may also
decide to defend against a claim of infringement; but litigation, even if
successful, is costly and may have a material adverse effect on us regardless of
the eventual outcome.

      COMPETITIVE MARKET FOR OUR PRODUCTS AND SERVICES. Potential competitors to
our electronic commerce solutions include credit card companies, banks, payment
processors and other entities, any of which may have greater financial
resources, an entrenched position in the market or brand recognition. These
potential competitors may be able to require that their own technology, rather
than the technology of others, including our own, be used in connection with
their payment mechanisms. Furthermore, the barriers to entry into most Internet
markets, including the electronic commerce segments, are relatively low, making
them accessible to a wide number of entities. Therefore, competition is likely
to intensify as our market develops and matures, which could result in price
reductions, reduced margins or loss of market share.

      Furthermore, there can be no assurance that we will be able to identify,
develop, manufacture, market or support new products or offer new services
successfully, that such new products or services will gain market acceptance, or
that we will be able to respond effectively to technological changes or product
announcements by competitors. Any failure by us to anticipate or respond
adequately to technological developments and customer requirements or any
significant delays in product developments or introductions could result in a
loss of market share or revenues.

      There can be no assurance that our competitors will not develop
technologies and products that are as or more effective and efficient than our
products or that our technologies and products will not be rendered obsolete by
such developments. As well, there can be no assurance that other companies with
greater financial and technological resources will not develop electronic


                                      -30-
<PAGE>

commerce technologies for the Internet with similar or better capabilities than
our products or that we will be able to compete successfully against existing
competitors or future entrants into the market. Products developed by
competitors may achieve greater market acceptance than our products.

      TECHNOLOGICAL DEFECTS AND PRODUCT DEVELOPMENT DELAYS. Products and
services based on sophisticated technology and computing systems often encounter
development delays, and the underlying technology may contain undetected errors
or failures when introduced or when the volume of services provided increases.
We may experience delays in the development of our products, or the technology
and computing systems underlying our services, such as our transaction
processing services. In addition, despite testing, it is possible that our
technology may nevertheless contain errors, and this could delay product
launches and innovations and damage customer relations.

      RISKS ASSOCIATED WITH ENCRYPTION TECHNOLOGY. A significant barrier to
electronic commerce and communication is the secure transmission of confidential
information over public networks. Our electronic commerce software uses
encryption and authentication technology to provide the security and
authentication necessary to effect secure transmission of confidential
information. Despite the fact that we strive to make use of proven applications
for premium data security and integrity to process electronic transactions,
there can be no assurance that use of these applications will be sufficient to
address changing market conditions or the security and privacy concerns of
existing and potential clients. A security or privacy breach may cause our
clients to lose confidence in our services, deter clients from using our
services, harm our reputation, expose us to liability, increase our expenses
from potential remediation costs, and decrease market acceptance and growth of
our product offerings.

      SYSTEM RISKS AND SERVICE DELAY OR INTERRUPTION RISKS. Our ability to
process electronic transactions depends on bank processing and credit card
systems. These systems and operations are vulnerable to damage or interruption
from human error, natural disasters, telecommunication failures, break-ins,
sabotage, computer viruses, intentional acts of vandalism and similar events. In
order to prepare for certain types of system problems, we have developed and are
testing a formal disaster recovery plan. Any system failure, including network,
software or hardware failure, that causes a delay or interruption in our
electronic payment services could result in reduced use, reduced revenue and
harm to our reputation, brand and relations with merchants and end-users.

      Delayed response times and interruptions in service associated with our
electronic transaction processing, including delays or interruptions relating to
high volumes of traffic or technological problems, may result in a loss of
merchants and end-users using our electronic payment software for transaction
processing.

      EXCHANGE RATE RISKS. The majority of our revenues are generated in U.S.
dollars and a significant portion of our expenses is incurred in Canadian
dollars. Any fluctuation in the value of the Canadian dollar relative to the
U.S. dollar may result in variations in our revenues and earnings. We have not
implemented a currency hedging program.

      RISK OF UNAUTHORIZED DISCLOSURE OF MERCHANT AND CARDHOLDER DATA. We
collect and store sensitive data about merchants and cardholders, including
names, addresses, social security numbers, drivers' license numbers, checking
and savings account numbers and payment history records, such as account
closures and returned checks. In addition, we maintain a database of cardholder
data relating to specific transactions, including payment


                                      -31-
<PAGE>

card numbers and cardholder addresses, in order to process the transactions and
for fraud prevention and other internal processes. If a person penetrates our
network security or otherwise misappropriates sensitive merchant or cardholder
data, we could be subject to liability or business interruption.

      Although we require that our agreements with service providers who have
access to merchant and customer data include confidentiality obligations that
restrict these parties from using or disclosing any customer or merchant data
except as necessary to perform their services under the applicable agreements,
there can be no assurance that these contractual measures will prevent the
unauthorized disclosure of merchant or customer data. In addition, our
agreements with financial institutions require us to take certain protective
measures to ensure the confidentiality of merchant and consumer data. Any
failure to adequately take these protective measures could result in protracted
or costly litigation.

      LOSS OF KEY PERSONNEL. The loss of key personnel or damage to their
reputations could adversely affect our relationships with card associations,
bank sponsors and other service providers, which would adversely affect our
business.

      RISK OF ADVERSE BUSINESS CONDITIONS. General economic conditions have
caused some of the merchants we serve to experience difficulty in supporting
their current operations and implementing their business plans. If these
merchants make fewer sales of their products and services, we will have fewer
transactions to process, resulting in lower revenues.

      In addition, in a recessionary environment, the merchants we serve could
be subject to a higher rate of insolvency, which could adversely affect us
financially. We bear credit risk for chargebacks related to billing disputes
between credit card holders and bankrupt merchants. If a merchant seeks relief
under bankruptcy laws or is otherwise unable or unwilling to pay, we may be
liable for the full transaction amount of a chargeback.

RISKS RELATED TO LITIGATION STEMMING FROM OUR OPERATION OF THE U-SCAN BUSINESS

      We recently settled an action alleging that the U-Scan(R) self-checkout
systems that we marketed infringed upon the claimant's patent. A second party
has sent demand letters to us alleging a different patent infringement. See Item
3 - "Legal Proceedings." We may in the future be subject to other litigation,
which relates to our having carried on the self-checkout business. Litigation
may be time consuming, expensive and distracting from the conduct of our current
businesses, and the outcome of litigation is difficult to predict. The adverse
resolution of any specific lawsuit could have a material adverse effect on our
business, results of operations, and financial condition.


                                      -32-
<PAGE>

Item 3. Quantitative and Qualitative Disclosures About Market Risk

      There have been no material changes to market risk, as discussed in our
Annual Report on Form 10-K annual report for the year ended December 31, 2003.

Item 4. Controls and Procedures

      As of March 31, 2004 (the "Evaluation Date"), under the supervision and
with the participation of our management, including our Chief Executive Officer
and our Chief Financial Officer, we evaluated the effectiveness of the design
and operation of our disclosure controls and procedures, as defined in Rule
13a-14(c) under the Securities Exchange Act of 1934, as amended (the "Exchange
Act"). Based upon this evaluation, our Chief Executive Officer and our Chief
Financial Officer concluded that, as of the Evaluation Date, our disclosure
controls and procedures were adequate to ensure that information required to be
disclosed by us in the reports filed or submitted by us under the Exchange Act
is recorded, processed, summarized and reported within the time periods
specified in the SEC's rules and forms.

      Additionally, our Chief Executive Officer and Chief Financial Officer have
determined that there have been no significant changes in our internal controls
or in other factors that could significantly affect our internal controls
subsequent to the Evaluation Date.


                                      -33-
<PAGE>

PART II. OTHER INFORMATION

Item 1. Legal Proceedings

      In each of 1995 and 1996, we received a demand letter from the same
claimant alleging that the U-Scan system infringes upon the claimant's patent.
In July 1999, this claimant, International Automated Systems, Inc. ("IAS"),
filed a civil action in the United States District Court for the District of
Utah against us and PSC, the former assembler of the U-Scan system, alleging
patent infringement. Kroger and two of its subsidiaries were also sued by IAS in
the action based upon the same issues underlying its suit filed against us in
1999 and they were contractually entitled to be indemnified by us for any
damages for any patent infringement. On January 27, 2004, we entered into a
settlement agreement with IAS, which resolved all potential claims by IAS and
brought this action to an end. The amount that we paid to end the action is not
considered to be material to us.

      A second party also sent a demand letter to us in 1999, and again in
February 2001, alleging a different patent infringement. In March 2003, this
second party sent a third demand letter to us alleging infringement of
additional patents. Although, after consultation with counsel, we believe that
this second claimant should not prevail if a lawsuit is brought to assert its
claims and that the assertion of these claims will not have a material adverse
effect on our business or prospects, no assurance can be given that a court will
not find that the U-Scan self-checkout system infringes upon such claimant's
rights. We sold our self-checkout business on April 8, 2004, and no longer
market or sell the U-Scan self-checkout system.

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

Item 2. Changes in Securities

      The registrant has nothing to report under this item.

Item 3. Defaults Upon Senior Securities

      The registrant has nothing to report under this item.

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

      The registrant has nothing to report under this item.


                                      -34-
<PAGE>

Item 5. Other Information

Reporting Status

      We were a foreign private issuer under the rules and regulations of the
Commission as of March 31, 2004. As in the past, we intend to voluntarily file
annual reports on Form 10-K and quarterly reports on Form 10-Q.

Item 6. Exhibits and Reports on Form 8-K

(a)   Exhibits

Exhibit
Number                          Exhibit
------               -----------------------------

10.17       Employement Agreement with Gary S. Wechsler

10.18       Combination Agreement between Optimal Robotics Corp. and Terra
            Payments Inc.

10.19       Asset Purchase Agreement among NCR Corporation, and certain of its
            affiliates, and Optimal Robotics Corp. and certain of its
            affiliates.

31.1        Certification pursuant to Section 302 of the Sarbanes-Oxley Act of
            2002

31.2        Certification pursuant to Section 302 of the Sarbanes-Oxley Act of
            2002

32.1        Certification pursuant to Section 1350, Chapter 63 of Title 18,
            United States Code, as adopted pursuant to Section 906 of the
            Sarbanes-Oxley Act of 2002.

32.2        Certification pursuant to Section 1350, Chapter 63 of Title 18,
            United States Code, as adopted pursuant to Section 906 of the
            Sarbanes-Oxley Act of 2002.

(b)   Reports on Form 8-K

The following reports on Form 8-K were filed for the three-month period ended
March 31, 2004.

      1.    Form 8-K filed with the Commission on January 23, 2004 (Item 9)

      2.    Form 8-K filed with the Commission on January 28, 2004 (Item 9)

      3.    Form 8-K filed with the Commission on February 17, 2004 (Item 9)

      4.    Form 8-K filed with the Commission on February 20, 2004 (Item 9)

      5.    Form 8-K/A filed with the Commission on March 9, 2004 (Items 2 and
            7)

      6.    Form 8-K filed with the Commission on March 10, 2004 (Item 5)

      7.    Form 8-K/A filed with the Commission on March 26, 2004 (Item 5)


                                      -35-
<PAGE>

                                   Signatures

Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.

                                             OPTIMAL GROUP INC.


Dated: April 29, 2004               By:  /s/ Holden L. Ostrin
                                         ---------------------------------------
                                             Holden L. Ostrin
                                             Co-Chairman


                                    By:  /s/ Gary S. Wechsler
                                         ---------------------------------------
                                             Gary S. Wechsler
                                             Treasurer and Chief Financial
                                             Officer


                                      -36-