BC FORM 51-901F

QUARTERLY REPORT

Incorporated as part of: Schedules B & C

ISSUER DETAILS:

|Name of Issuer           | IMAGIS TECHNOLOGIES INC.                                           
|------------------------ | -------------------------------------------------------------------
|For Quarter Ended        | March 31, 2002                                                     
|Date of Report           | May 9, 2002                                                        
|Issuer Address           | 1300 - 1075 West Georgia Street
Vancouver, British Columbia
V6E 3C9
|Issuer Fax Number        | (604) 684-4601                                                     
|Issuer Telephone Number  | (604) 684-2449                                                     
|Contact Name             | Sandra Buschau                                                     
|Contact Position         | Vice President, Investor Relations                                 
|Contact Telephone Number | (604) 684-2449                                                     
|Contact Email Address    | sandy@imagistechnologies.com                                       
|Web Site Address         | www.imagistechnologies.com                                         

CERTIFICATE

THE THREE SCHEDULES REQUIRED TO COMPLETE THIS REPORT ARE
ATTACHED AND THE DISCLOSURE CONTAINED THEREIN HAS BEEN APPROVED BY THE BOARD OF
DIRECTORS.  A COPY OF THIS REPORT WILL BE PROVIDED TO ANY SHAREHOLDER WHO
REQUESTS IT.

|Iain Drummond
Name of Director  | "Iain Drummond"
Sign (typed)  | 02/05/09
Date Signed (YY/MM/DD)
|------------------------------- | ----------------------------- | -------------------------------
|                                |                               |                                
|Altaf Nazerali
Name of Director | "Altaf Nazerali"
Sign (typed) | 02/05/09
Date Signed (YY/MM/DD)

---

SCHEDULE B:  SUPPLEMENTARY INFORMATION

1.     Analysis of expenses:

a)     Cost of materials

|Supplies                  | 10,267 
|------------------------- | -------
|Customs, duty and freight | 22     
|Total                     | $10,289

b)     Administration expenses

|Bank charges and interest, net               | 2,066   
|-------------------------------------------- | --------
|Consulting fees                              | 96,792  
|Foreign exchange                             | 19,189  
|Office and rent                              | 198,922 
|Management fees                              | 31,400  
|Salaries and benefits                        | 58,602  
|Professional fees                            | 66,239  
|Shareholder relations and regulatory filings | 278,821 
|Stock-based compensation                     | 145,031 
|Travel and entertainment                     | 100,116 
|Total                                        | $997,178

2.     Related party
transactions:

|Wages and benefits for three officers             | $80,545 
|------------------------------------------------- | --------
|Management fees for one director and two
officers | 47,900  
|Total                                             | $128,445

3.     Summary of securities
issued and options granted during the period ended March 31, 2002

a)     Summary of securities issued
during the period:

|Date
of
Issue | Type
of
Security | Type
of
Issue      | Number
or
Amount | Price | Total
Proceeds
|------------- | ---------------- | ------------------ | ---------------- | ----- | --------------
|01/04/02      | Common           | Option exercise    | 45,000           | $1.00 | $45,000       
|01/25/02      | Common           | Option exercise    | 13,500           | $1.00 | $13,500       
|01/29/02      | Common           | Option exercise    | 16,166           | $1.00 | $16,166       
|01/31/02      | Common           | Option exercise    | 25,833           | $1.00 | $25,833       
|02/04/02      | Common           | Warrant exercise   | 17,850           | $1.10 | $19,635       
|02/07/02      | Common           | Option exercise    | 5,000            | $1.00 | $5,000        
|02/08/02      | Common           | Bonus shares       | 37,500           | $2.10 | $78,750       
|02/19/02      | Common           | Option exercise    | 7,666            | $1.00 | $7,666        
|02/21/02      | Common           | Option exercise    | 4,000            | $1.00 | $4,000        
|02/26/02      | Common           | Warrant conversion | 70,000           | $2.17 | $151,900      
|02/28/02      | Common           | Option exercise    | 13,500           | $1.00 | $13,500       
|03/11/02      | Common           | Warrant exercise   | 35,000           | $2.55 | $89,250       
|03/11/02      | Common           | Warrant exercise   | 92,077           | $2.17 | $199,808      
|03/11/02      | Common           | Warrant exercise   | 4,150            | $1.10 | $4,565        
|03/11/02      | Common           | Warrant conversion | 150,816          | $2.17 | $327,271      
|03/19/02      | Common           | Option exercise    | 2,500            | $1.50 | $3,750        
|03/25/02      | Common           | Warrant exercise   | 35,058           | $2.17 | $76,076       

---

3.     Summary of securities
issued and options granted during the period ended March 31, 2002, continued

b)     Options/warrants granted
during the period:

|Date of
Grant | Type
of
Issue | Number  | Name                       | Exercise
Price | Expiry
Date
|------------- | ------------- | ------- | -------------------------- | -------------- | -----------
|01/18/02      | Warrant       | 50,000  | Pembridge Venture Partners | $2.20          | 01/18/04   
|01/31/02      | Option        | 10,000  | Employee                   | $2.24          | 01/31/07   
|02/08/02      | Option        | 100,000 | Consultant                 | $2.97          | 02/08/04   
|03/01/02      | Option        | 50,000  | Employees                  | $3.40          | 03/01/07   
|03/04/02      | Option        | 30,000  | Employees                  | $3.40          | 03/04/07   
|03/04/02      | Option        | 250,000 | Roy Davidson Trivett       | $3.40          | 03/04/07   

4.     Summary of securities as
at March 31, 2002

a)     Authorized share capital:
100,000,000 common shares without par value

b)     Number and recorded value for
shares issued and outstanding:

|Issued and outstanding
Balance March 31, 2002 | No. of shares
17,324,968 | Amount
$11,940,289
|--------------------------------------------- | ------------------------ | ------------------

c)     Description of options,
warrants and convertible securities outstanding:

Options

|Number of common shares
issuable | Exercise Price | Date of Expiry              
|-------------------------------- | -------------- | ----------------------------
|                                 |                |                             
|230,000                          | $0.30          | July 6, 2003                
|1,052,999                        | $1.00          | Various to August 30, 2006  
|977,500                          | $1.50 to $2.90 | Various to December 30, 2005
|2,260,499                        |                |                             

Warrants

|Number of common shares
issuable | Exercise Price | Date of Expiry          
|-------------------------------- | -------------- | ------------------------
|                                 |                |                         
|266,666                          | $1.25          | June 25, 2002           
|133,334                          | $1.25          | February 23, 2003       
|50,000                           | $4.00          | June 16, 2002           
|252,000                          | $1.10          | Various to May 6, 2003  
|114,666                          | $2.55          | November 9, 2002        
|678,840                          | $2.55          | Subject to qualification
|15,633                           | $2.17          | November 9, 2002        
|50,000                           | $2.20          | June 18, 2004           
|1,561,139                        |                |                         

---

4.     Summary of securities as
at March 31, 2002, continued

c)     Description of options,
warrants and convertible securities outstanding:

Convertible Securities

On November 9, 2001, 1,427,682 special warrants were sold at
a price of $2.17 per special warrant, each of which entitles the holder, upon
exercise and without payment of further consideration, to acquire one common
share of the Company and one-half of one common share purchase warrant (the
"Warrants") of the Company.  Each whole warrant will entitle the
holder to purchase one common share of the Company at a price of $2.55 for a
period of one year from the date the underlying shares are qualified for
resale.

During the period, 551,037 special warrants were converted
into one common share and 275,518 warrants.  35,000 of the related warrants were
exercised for gross proceeds to the Company of $89,250.

d)     Total Number of Shares in
Escrow

The 266,669 shares remaining in escrow were released on
February 23, 2002.

5.     List of directors and
officers as of May 9, 2002:

Oliver "Buck" Revell - Chairman and a Director
Iain Drummond - President, Chief Executive Officer and a Director
Ross Wilmot - Vice President, Finance and Chief Financial Officer
Sandra Buschau - Vice President, Investor Relations
Altaf Nazerali - Director
Robert Gordon - Director
Rory Godinho - Secretary and a Director
Frederick Clarke - Director
Andy Amanovich - Chief Technology Officer
Roy Trivett - Director

---

SCHEDULE C:     MANAGEMENT
DISCUSSION

DESCRIPTION OF BUSINESS

Forward-Looking Statements:

Statements in this Quarterly Report on Form 10-QSB,
including, but not limited to, those concerning Imagis Technologies Inc.'s
(the "Company") expectations of results of the Company's operations in
future periods, the amount and timing of revenues and earnings in future
periods, future sales, gross profits, sales and marketing expenses, technical
services expenses, technology development expenses, administration expenses,
product introductions and cash requirements include certain forward-looking
statements within the meaning of Section 21E of the Securities Exchange Act of
1934, as amended. As such, the Company's actual results may vary materially from
expectations as a result of certain factors including, but not limited to, the
failure of the market for the Company's products to grow as anticipated; the
success of certain strategic alliances among the Company and certain third
parties; product pricing or other initiatives of the Company's competitors; the
possibility that the Company's other customers defer purchasing decisions due to
economic or other conditions or will purchase products offered by the Company's
competitors; product development, product pricing or other initiatives of the
Company's competitors; variations in the level of orders which can be affected
by general economic conditions and in the markets served by the Company's
customers; international economic and political climates; difficulties or delays
in the functionality or performance of the Company's products; the Company's
timing of future product releases or improvements; the Company's failure to
respond adequately to either changes in technology or customer preferences;
changes in pricing; the Company's ability to manage growth; risk of nonpayment
of accounts receivable; changes in budgeted costs and the factors listed in
Exhibit 99.1 to this Quarterly Report, which is herein incorporated by
reference.

In some cases, you can identify forward-looking statements by
the Company's use of words such as "may," "will,"
"should," "could," "expect," "plan,"
"intend," "anticipate," "believe,"
"estimate," "predict," "potential" or
"continue" or the negative or other variations of these words, or
other comparable words or phrases.

Although the Company believes the expectations reflected in
its forward-looking statements are reasonable, it cannot guarantee future
results, levels of activity, performance or achievements or other future events.
The Company is under no duty to update any of our forward-looking statements
after the date of this filing. You should not place undue reliance on
forward-looking statements.

Unless otherwise indicated, all references herein are to
Canadian Dollars.

About Imagis

Imagis Technologies Inc. is a developer and marketer of
software applications and advanced biometric facial recognition software
solutions both as products and as a Software Development Kit.  These
applications provide a range of security solutions in various industry sectors
including airports, law enforcement, customs, immigration and other government
agencies, and gaming.  The Company currently has well over a hundred
installations, including Toronto's Pearson International Airport, the world's
16th busiest airport.  The Company markets its products through a
network of business partners located in North America, Asia, Europe and Latin
America, and has installations in the US, Canada, Mexico and the UK.

ID-2000 - Image Detection and Biometric Facial
Recognition

This software technology has enabled the Company to enter the
biometric market.

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

ID-2000 is also available as a Software Development Kit, or
SDK, which is designed to enable developers at the Company's business partners
to integrate its facial recognition capabilities into their own
applications.

---

In addition, the Company has adapted its facial recognition
software to include the identification of non-facial objects in background
imagery and personally identifiable markings, such as tattoos.  The biometric
solution purchased by the UK's National Crime Squad will be used to crack down
on international online child pornography.  The ability of law enforcement
agencies to identify background imagery, as well as victims and perpetrators, is
an important factor in preparing for and solving missing persons
investigations.

Secure-ID (Airport Security)

Secure-ID is designed to use ID-2000 to scan the faces of
travellers entering or leaving an airport, isolate individual faces, encode them
and match them against a database of serious criminals or known terrorists.  A
variation on the system is already in use at Toronto's Pearson International
Airport, where the Royal Canadian Mounted Police have successfully used it to
identify wanted individuals trying to enter Canada.

Secure-ID uses standard surveillance cameras and requires no
manual intervention.  While it is possible to identify individuals in a crowd,
cameras should be positioned where they can obtain clear images, such as the
check-in desk, metal detector, gate and so on.  Where there is a possible match,
a monitor in the security office will display the image of the passenger,
together with the image of the possible match in the database.  The security
officer at the screen will visually compare the two images and, if they match,
take appropriate action.

CABS - Computerized Arrest & Booking System

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

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

- captures more information than manual booking systems and
allows the information to be retrieved quickly from multiple locations;
- allows offender information to be used for multiple
inquiries and report generating purposes;
- generates automated line-ups based on user-specified
criteria;
- provides a variety of required reports and other
documents with the offender's photograph;
- allows the collection and retrieval of photographs of the
offender, including identifying physical marks such as tattoos, scars and other
markings;
- creates a database of offender information for access in
the case of subsequent arrests or for generation of suspect lists;
- can be integrated with livescan electronic fingerprinting
systems and with other computer software systems; and
- integrates with key dispatch systems, digital composite
drawing programs and digital fingerprint systems to provide a complete police
information management system.

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

Overview

Revenue for software and services has historically accounted
for a substantial portion of the Company's revenue.  Typically, the Company
enters into a fixed price contract with a customer for the licensing of selected
software products and the provision of specific services.  The Company generally
recognizes total revenue for software and services associated with a contract
using percentage of completion method based on the total costs incurred over the
total estimated costs to complete the contract.

---

The Company's revenue is dependent, in large part, on
significant contracts from a limited number of customers.  As a result, any
substantial delay in the Company's completion of a contract, the inability of
the Company to obtain new contracts or the cancellation of an existing contract
by a customer could have a material adverse effect on the Company's results of
operations.  The loss of certain contracts could have a material adverse effect
on the Company's business, financial condition, operating results and cash
flows.  As a result of these and other factors, the Company's results of
operations have fluctuated in the past and may continue to fluctuate from
period-to-period.

Recent events have increased awareness of and interest in
products that have law enforcement or other security applications.  There can be
no assurance, however, that such trends will continue or will result in
increased sales of the Company's products and services.

Comparison of results of operations for the three months
ended March 31, 2002 and 2001:

Revenues

The Company's total revenues increased 200% to $1,061,865 for
the first quarter ended March 31, 2002 over the comparable prior year first
quarter level of $353,836. The higher revenues were directly attributable to
higher software sales revenues while other revenues declined in the quarter from
the prior year amounts.

Sales of the Company's software products rose 410% to
$985,954 in the first quarter of this year as compared to $193,045 in 2001. The
large gain in software sales revenues this year arose primarily from the
inclusion of approximately 60% of the revenues earned to March 31, 2002, through
the Company's U.K. business partner, Serco PLC, as a result of a significant
order.

Support and services revenues for the first quarter of 2002,
at $59,830, were 48% lower than those in the comparable quarter in 2001 of
$114,696. The lower 2002 level masks a 14% gain in annual support contract
revenues this year over the 2001 first quarter amount. The overall decline
resulted from reduced revenues derived from contract services this year, and is
solely attributable to the completion of a single special contract that the
Company commenced in 2000 directly for BCIT, rather than through a partner,
which concluded in mid-2001. As stated last year, the Company is not seeking
such contract work but intends to remain focused on both development and more
profitable sales of its software products.

Other revenues were $16,081 for the first quarter of 2002,
down from $46,095 earned in the first quarter of 2001. These revenues are earned
from the sale of components, which are provided in conjunction with the
installation or ongoing support of the Company's products, and the level of
sales varies from period to period.

Operating costs

Operating costs totaled $2,201,367 for the first quarter in
2002, which is 120% higher than the total 2001 first quarter expenditures of
$1,001,724. The higher costs over the prior year first quarter resulted from
increases in staff in most functions, greater travel for both sales and
marketing and technical support, and exceptional corporate costs included in the
administration category. Operating costs include cost of materials, sales and
marketing, technical Services, technology development, administration, interest
and amortization.

Costs of materials and services

The costs of materials and services are incurred in
conjunction with the support services that the Company provides to customers.
These costs amounted to $10,289 in the first quarter of 2002, down 70% from the
costs incurred in the first quarter of 2001 of $33,848.

Sales and marketing

Sales and marketing costs for the first quarter of 2002, at
$557,748, were 114% higher than the comparable period in 2001 of $260,422. The
increase is attributable to higher costs incurred for new sales and marketing
representatives in the US, Europe and the Far East, all engaged on a contract
basis in the past few months. There were no sales and marketing representatives
on contract prior to this time and hence no comparable 2001 costs. In addition,
travel and trade show costs for both staff and representatives rose 195% due to
the increase in the number of staff members traveling and overall increase in
sales and marketing activity this year over that in the prior year when funds
were limited. The Company intends to further increase its sales and marketing
team during the year and, therefore, expects that quarterly sales and marketing
costs will increase in future quarters as a result.

---

Technical services

Costs for the technical services group were $239,397 in the
first quarter of this year, which is 37% higher than the comparable 2001 first
quarter costs of $175,018. The 2002 increase reflects primarily a 51% increase
in travel costs in support of the installation in Alameda County, California
("Alameda"), necessitated by the technical aspects of the application.
The technical services group generally assists the Company's strategic partners
in their installation of its products and also provides clients with any
technical support that they may require under annual support contracts.  These
costs primarily include expenses related to salaries, facilities and travel.
While the function costs have increased over the prior year, costs for future
quarters are expected to be in line with the first quarter level.

Technology development

Technology development costs for the first quarter ended
March 31, 2002 were $369,706, which is 35% higher than the 2001 comparable costs
of $273,643. The increase over the prior period reflects a number of additions
to staff and higher travel costs incurred during the quarter. The Company added
to its development staff throughout 2001 and continues to increase its
development group capability. During the quarter, the group finalized for
commercial release Version 8 of its ID-2000 facial recognition software, and is
providing special support and enhancements for both the Alameda and National
Crime Squad applications. Technology development costs are expected to remain at
this level throughout the year.

Administration

Administration costs for the first quarter of 2002 were
$997,178, which is 349% higher than for the comparable quarter in 2001 of
$221,985. Administrative costs include staff salaries and related benefits and
travel, professional fees, facility and support costs, shareholder, regulatory
and investor relations costs and special financial advisory costs incurred
related to the Company's corporate strategies and a special corporate
privatization proposal received in the quarter.

While staff costs remained comparable to those of the prior
year, generally all other categories were higher due the increased level of
corporate activity this year. Facilities costs rose approximately 50%,
professional fees rose over 300%, and shareholder, regulatory and investor
relations costs rose approximately 200%, the increase primarily reflecting the
Company's continued corporate branding efforts worldwide. The Company's
financial advisory services costs incurred in the 2002 first quarter aggregated
approximately $208,000, including a non-cash component with an imputed value of
$78,750, for 37,500 common shares granted as partial compensation to one of the
Company's advisors. No comparable financial advisory costs were incurred in the
2001 first quarter. The Company's administrative costs are expected to decline
to some degree from the first quarter level since such one-time costs as the
non-cash share issuance will not recur.  Additionally, the Company incurred
non-cash costs in 2002 of $145,031 for stock-based compensation as a result of
stock options and warrants that were issued as compensation to non-employees.
There were no comparable costs incurred in the 2001 first quarter.

Interest and amortization

Interest was earned this year on the additional funds on
deposit amounting to $4,827 whereas in the prior comparable quarter, the Company
incurred an expense of $32,032 related to outstanding advances that were
liquidated late in 2001. Amortization in the first quarter of 2002 amounted to
$31,876 as compared to $4,776 for the first quarter of 2001. The increase in
amortization expense reflects recent purchasing of equipment whereas in the
past, the Company leased most of its equipment to minimize cash outflows from
month to month and software purchases that were expensed in the period.

Net loss for the period

Overall, the Company incurred a net loss for the 2002 first
quarter of $1,139,502 or $.07 per share, which is 75% higher than the net loss
incurred in the first quarter of 2001 of $647,888 or $.05 per share. While
revenues rose 200% this period, significantly higher operating costs incurred in
virtually all categories to build the Company aggressively served to offset the
revenue gain.

SUBSEQUENT EVENTS

The Company has received an aggregate of  $94,975 in respect of 43,500
warrants that were exercised at various prices up to May 7, 2002.

---

An additional 210,208 special warrants were converted up to May 7, 2002,
resulting in the issuance of an additional 105,104 warrants exercisable at a
price of $2.55 up to November 9, 2002.

(a)     On April 2, 2002 50,000
special warrants were converted to common shares at a deemed price of $2.17 per
special warrant for total deemed proceeds to the Company of $108,500.

(b)     On April 5, 2002 160,208
special warrants were converted to common shares at a deemed price of $2.17 per
special warrant for total deemed proceeds to the Company of
$347,651.

FINANCINGS, PRINCIPAL PURPOSES AND MILESTONES

On November 9, 2001, the Company completed a brokered private
placement of $3,098,070 and a non-brokered private placement of $497,650.

Under the brokered private placement, the Company issued
1,427,682 special warrants at a price of $2.17 per special warrant, with each
special warrant being convertible into one common share and one-half of a
non-transferable share purchase warrant.  Each whole warrant entitles the holder
thereof to acquire an additional common share for a period of one year from the
date the underlying shares are qualified for resale (the "Qualification
Date") at a price of $2.55 per share.  Thomson Kernaghan & Co.
("Thomson Kernaghan) placed 920,770 special warrants and Canaccord Capital
Corporation ("Canaccord") placed 506,912 special warrants.

Thomson Kernaghan and Canaccord were paid a cash commission
of 8% of the gross proceeds received by the Company from the sale of the special
warrants and has issued agent's compensation options entitling them to
collectively purchase 142,768 common shares at a price of $2.17 per share for a
period of one year following the Qualification Date.

Under the non-brokered private placement, the Company issued
229,332 units at a price of $2.17 per unit, with each unit comprised of one
common share and one half of a warrant.  Each whole warrant entitles the holder
thereof to acquire an additional common share at a price of $2.55 per share for
a term expiring on November 9, 2002.

The Company intends to use the proceeds of the offering to
expand its sales and marketing activities, to add additional developers to its
research and development department and to accelerate its business opportunities
in the law enforcement, airport and security markets.

LIQUIDITY AND SOLVENCY

The Company's liquidity improved significantly in 2001, with
its cash on hand increasing from an opening position of $59,497 to the closing
balance at December 31, 2001 of $200,659 in cash and short-term investments
amounting to $2,560,000.  There were no short-term investments in 2000.  The
increase was realized through the exercise of the Company's options and
warrants, and the completion of three financings in the year. Funds derived in
the year from the exercise of options amounted to $395,834 and from the exercise
of warrants amounted to $1,523,700.

With respect to financing, in its first round, a private
placement, the Company issued 1,501,000 units priced at $1 per unit, each unit
convertible into one common share and one full warrant convertible into another
common share at a price of $1.10. This yielded proceeds of $1,501,000 to the
Company. The second financing, completed early in the fourth quarter, was also a
unit private placement, in this case for the issue of 229,332 units priced at
$2.17 per unit. Each unit consisted of one common share and a half warrant, with
two half warrants converting into one common share at an exercise price of
$2.55, and this netted cash of $497,650 to the Company. These two financings
provided an aggregate cash infusion to the Company of $1,998,650. The third
financing was completed shortly after the second and involved the sale of
1,427,682 special warrants also priced at $2.17 per special warrant, and yielded
net proceeds of $2,822,061. Each special warrant is convertible into one common
share and one half warrant on similar terms to those of the private placement
unit and at a price of $2.55. In total, during 2001 the Company raised
approximately $6.7 million.

These new funds were used primarily to sustain the Company's
operating loss for the year of $3,020,704. With the stronger cash position, the
Company was also able to extinguish its related party loans amounting to
$1,072,317, to make short-term deposits amounting to $2,560,000 and to acquire
additional computer equipment at a cost of $24,772. After the loss for the year
adjusted for non-cash items and these disbursements, the Company had a net gain
in cash in the year of $141,162 and when added to the cash on hand at the
beginning of the year of $59,497, cash at December 31, 2001 available for future
operations, exclusive of the additional funds on deposit of $2,560,000,
aggregated the above-noted amount of $200,659.

At present with this operating capital and two major
outstanding order commitments, management believes the Company is capable of
sustaining its operations throughout the remainder of the year with no further
financing requirements. However as noted above, its business plan for 2002
anticipates continuing product development work in both its traditional
biometric applications and in new development of non-biometric applications, In
addition, the Company recently identified other areas in discussions with its
newest strategic partner, the Sanyo Semiconductor Company, and consequently sees
the need to continue to add development staff.

From a marketing perspective, a number of international
opportunities have arisen and the Company's plan calls for added emphasis in
advancing awareness of its products internationally, and additional sales and
marketing staff are planned for this undertaking. Taking into account these
various new opportunities, the Company may consider additional financing this
year to funds its 2002 operations.