BC FORM 51-901F

QUARTERLY REPORT

Incorporated as part of: Schedules B & C

ISSUER DETAILS:

|Name of Issuer           | IMAGIS TECHNOLOGIES INC.                                           
|------------------------ | -------------------------------------------------------------------
|For Quarter Ended        | June 30, 2001                                                      
|Date of Report           | August 9, 2001                                                     
|Issuer Address           | 1300 - 1075 West Georgia Street
Vancouver, British Columbia
V6E 3C9
|Issuer Fax Number        | (604) 684-4601                                                     
|Issuer Telephone Number  | (604) 684-4691                                                     
|Contact Name             | Sandra Buschau                                                     
|Contact Position         | Secretary                                                          
|Contact Telephone Number | (604) 684-4691                                                     
|Contact Email Address    | sbuschau@ipm.bc.ca                                                 
|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) | 01/08/09
Date Signed (YY/MM/DD)
|------------------------------ | ---------------------------- | -------------------------------
|                               |                              |                                
|Rory Godinho
Name of Director  | "Rory Godinho"
Sign (typed)  | 01/08/09
Date Signed (YY/MM/DD)

---

SCHEDULE B:  SUPPLEMENTARY INFORMATION

1.     Analysis of expenses:

a)     Cost of materials

|Services | 39,689   
|-------- | ---------
|Supplies | 29,778   
|Total    | $  69,467

b)     Administration expenses

|Bank charges and interest, net               | 2,432     
|-------------------------------------------- | ----------
|Consulting fees                              | 27,650    
|Foreign exchange                             | 2,322     
|Office and rent                              | 198,186   
|Management fees                              | 27,300    
|Salaries and benefits                        | 82,120    
|Professional fees                            | 55,212    
|Shareholder relations and regulatory
filings | 14,937    
|Travel and entertainment                     | 118,279   
|Total                                        | $  528,438

2.     Related party
transactions:

|Wages and benefits for two officers               | 160,391   
|------------------------------------------------- | ----------
|Management fees for one director and two
officers | 39,300    
|Total                                             | $  199,691

3.     Summary of securities
issued and options granted during the period ended June 30, 2001

a)     Summary of securities issued
during the period:

|Date
of
Issue | Type
of
Security | Type
of
Issue     | Number
or
Amount | Price | Total
Proceeds
|------------- | ---------------- | ----------------- | ---------------- | ----- | --------------
|04/26/01      | Common           | Private placement | 973,000          | $1.00 | 973,000       
|05/07/01      | Common           | Private placement | 418,000          | $1.00 | 418,000       

b)     Options/warrants granted
during the period:

|Date of
Grant | Type
of
Issue | Number  | Name            | Exercise
Price | Expiry
Date
|------------- | ------------- | ------- | --------------- | -------------- | -----------
|05/14/01      | Option        | 100,000 | Iqbal Akram     | $1.50          | 05/13/06   
|05/14/01      | Option        | 5,000   | Carrie Cesarone | $1.50          | 05/13/06   
|05/14/01      | Option        | 100,000 | Rory Godinho    | $1.50          | 05/13/06   
|05/14/01      | Option        | 100,000 | Altaf Nazerali  | $1.50          | 05/13/06   
|05/14/01      | Option        | 100,000 | Shafiq Walji    | $1.50          | 05/13/06   
|05/14/01      | Option        | 25,000  | Nick Vermeulen  | $1.50          | 05/13/06   
|05/14/01      | Option        | 20,000  | Dave Lutes      | $1.50          | 05/13/06   
|05/14/01      | Option        | 10,000  | James Smith     | $1.50          | 05/13/06   
|05/14/01      | Option        | 10,000  | Kevin Rintoul   | $1.50          | 05/13/06   
|05/14/01      | Option        | 10,000  | John Stauft     | $1.50          | 05/13/06   
|05/14/01      | Option        | 10,000  | Tami Renton     | $1.50          | 05/13/06   
|04/26/01      | Warrant       | 97,500  | IPM             | $1.10          | 04/25/03   

---

|04/26/01 | Warrant | 99,000  | Max Fugman           | $1.10 | 04/25/03
|-------- | ------- | ------- | -------------------- | ----- | --------
|04/26/01 | Warrant | 49,500  | Ladymeade Finance    | $1.10 | 04/25/03
|04/26/01 | Warrant | 30,000  | Nadir Walji          | $1.10 | 04/25/03
|04/26/01 | Warrant | 59,700  | Canaccord Capital    | $1.10 | 04/25/03
|04/26/01 | Warrant | 10,000  | Haywood Securities   | $1.10 | 04/25/03
|04/26/01 | Warrant | 500,000 | 414826 B.C. Limited  | $1.10 | 04/25/03
|04/26/01 | Warrant | 97,000  | Chriscar Investments | $1.10 | 04/25/03
|04/26/01 | Warrant | 100,000 | Dawn M. Peck         | $1.10 | 04/25/03
|05/07/01 | Warrant | 100,000 | 414826 B.C. Limited  | $1.10 | 05/06/03
|05/07/01 | Warrant | 115,000 | Bank Sal. Oppenheim  | $1.10 | 05/06/03
|05/07/01 | Warrant | 203,000 | Valor Invest Limited | $1.10 | 05/06/03
|05/07/01 | Warrant | 30,300  | Canaccord Capital    | $1.10 | 05/06/03
|         |         |         |                      |       |         

4.     Summary of
securities as at June 30, 2001

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, June 30, 2001 | No. of shares
14,463,298 | Amount
$7,728,713
|--------------------------------------------- | ------------------------ | -----------------

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               
|636,498                          | $1.00          | Various to January 19, 2005
|1,040,000                        | $1.50 to $2.90 | Various to May 13, 2006    
|1,906,498                        |                |                            

Warrants

|Number of common shares
issuable | Exercise Price | Date of Expiry        
|-------------------------------- | -------------- | ----------------------
|                                 |                |                       
|266,666                          | $1.25          | February 23, 2002     
|133,334                          | $1.25          | February 23, 2003     
|50,000                           | $4.00          | June 16, 2002         
|1,491,000                        | $1.10          | Various to May 6, 2003
|1,941,000                        |                |                       

Convertible Securities

Nil

d)     Total Number of Shares in
Escrow

270,670 shares are being held in escrow.  These shares will
be released on February 23, 2002.

---

5.     List of directors and
officers as of August 9, 2001:

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 - Secretary 
Altaf Nazerali - Director
Robert Gordon - Director
Rory Godinho - Director
Frederick Clarke - Director
Andy Amanovich - Chief Technology Officer

---

SCHEDULE C:  MANAGEMENT DISCUSSION

DESCRIPTION OF BUSINESS

Statements in this Report, including those concerning Imagis
Technologies Inc.'s (the "Company" or "Imagis") expectations
of 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 27A of the U.S. Securities Act of 1933, as amended
(the "Securities Act"), and Section 21E of the U.S. 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, 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, the Company's failure to respond adequately
to either changes in technology or customer preferences, changes in pricing or
that of the Company's competitors, the Company's ability to manage growth, risk
of nonpayment of accounts receivable, and changes in budgeted costs.

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.
Moreover, neither it nor anyone else assumes responsibility for the accuracy and
completeness of forward-looking statements.  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.

In February 1999, the Company completed the acquisition of
Imagis Cascade, and in the second quarter of the year ended December 31, 1999,
the Company completed a financing that raised approximately $2.9 million before
offering costs.  The acquisition was accounted for as a reverse take-over
whereby the Company acquired, in this case Imagis Cascade, is deemed the parent
for reporting purposes and the acquirer, in this case Imagis Technologies Inc.,
is considered the target or acquired entity.  This treatment conforms with
generally accepted accounting principles in Canada, which are essentially
identical to those applicable in the United States for such transactions.

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

DISCUSSION OF OPERATIONS AND FINANCIAL CONDITION

TO MARCH 31, 2001

Comparison of Results of Operations for the three months
ended March 31, 2001 and March 31, 2000:

Revenues:

The Company's revenues for the quarter ended March 31, 2001
were $353,836, compared to $195,135 for the quarter ended March 31, 2000, which
represents an increase of approximately 81%.  Sales of the Company's software
increased approximately 108% to $193,045 for the quarter ended March 31, 2001,
compared to $92,742 for the quarter ended March 31, 2000.  Support and service
revenues increased approximately 57% to $160,791 for the quarter ended March 31,
2001, compared to $102,393 for the quarter ended March 31, 2000.

Operating Costs:

The Company's operating costs increased for the quarter ended
March 31, 2001 to $1,001,724, compared to $821,044 for the quarter ended March
31, 2000, which represents an increase of approximately 22%.  Operating costs
include cost of materials and services, sales and marketing, technical services,
technology development, administration, amortization and interest.

---

Cost of Materials and Services:

The Company's materials and service costs in conjunction with
the support services that it provides to customers for the quarter ended March
31, 2001 were $33,848, compared to $27,025 for the quarter ended March 31, 2000,
which represents an increase of approximately 25%.  This increase reflects costs
associated with the higher support revenues earned to date.

Sales and Marketing:

The Company's sales and marketing costs for the quarter ended
March 31, 2001 were $260,422, compared to $223,894 for the quarter ended March
31, 2000, which represents an increase of approximately 16%. This increase is
attributable to higher salary costs reflecting additions to staff over the prior
year. Travel and trade show costs also rose slightly due to the increase in
staff over the prior year level.

Technical Services:

The Company's technology services costs for the quarter ended
March 31, 2001 were $175,018, compared to $149,948 for the quarter ended March
31, 2000, which represents an increase of 17%.  This increase reflects staff
additions to the technical services group. The technical services group assists
the Company's strategic partners in the installation of its products and also
provides clients with all technical support they may require under the Company's
annual support contracts, and includes costs for salaries, facilities and
travel.

Technology Development:

The Company's technology development costs for the quarter
ended March 31, 2001 were $273,643, compared to $175,218 for the quarter ended
March 31, 2000, which represents an increase of 56%.  This increase over the
prior period reflects several additions to staff that were necessary, primarily
to continue the development of ID-2000. Recently, the Company completed the
conversion of its core technology into a software development kit (SDK) format
which permits a far broader range of applications of this facial recognition
software. Staff salaries accounted for approximately 73% of the total costs of
this function with the remainder attributable to support facilities.

Administration:

The Company's administration costs for the quarter ended
March 31, 2001 were $221,985, compared to $222,755 for the quarter ended March
31, 2000. Administrative costs include staff salaries, professional fees,
facility and support costs, shareholder and regulatory costs. Costs in each
category were generally consistent with the prior year period, except for
professional fees and travel costs which were higher in 2001. These increases,
however, were more than offset by a foreign exchange gain of $34,993 realized in
the quarter.

Amortization:

The Company's amortization costs for the quarter ended March
31, 2001 were $4,776, compared to $22,204 for the quarter ended March 31, 2000.
The decline in amortization costs reflects the Company's decision, following the
acquisition of Imagis Cascade, to initiate a lease-financing program for all
purchases of new equipment and, as a consequence, the Company's existing fixed
assets are almost fully depreciated at this time.

Interest:

The Company's interest costs for the quarter ended March 31,
2001 were $32,032, compared to no such costs for the quarter ended March 31,
2000.   The interest costs are related to the debt portion of the convertible
loan.

Net Loss for the Period:

The Company's net loss for the quarter ended March 31, 2001
was $647,888, or $0.05 per share, compared to $625,909, or $0.06 per share, for
the quarter ended March 31, 2000, which represents a decrease of approximately
4%.

---

Liquidity and Capital Resources:

At year-end, the Company's cash position was $59,497,
however, the Company announced its intention to arrange for additional
financing for working capital purposes. Due to market weakening in the first
quarter of 2001, the Company was delayed in completing the announced private
placement of approximately $1.4 million and only completed the first closing of
973,000 shares, which yielded gross proceeds to the Company of $973,000 on April
26, 2001. In the interim, the Company arranged for a line of credit of up to
$200,000 from related parties and received $95,000 from this line. As
compensation for the advancement of the funds from related parties under this
credit arrangement, the Company issued 20,000 common shares valued at the then
current market price of $1.45 per share, or $29,000. This was a non-cash cost to
the Company.  In addition, during the quarter, the Company received other
advances of $176,004 from related parties outside of this credit arrangement, an
advance on the intended private placement of $48,500 and proceeds from the
exercise of 6,333 options and 80,000 warrants which yielded $70,333.
Consequently, cash inflows from financing activities aggregated $388,167 for the
first quarter of 2001.

Due to the Company's operating loss in the quarter, it
experienced a net reduction in its available cash of $647,888.  This was
significantly offset, however, by a substantial reduction in the Company's
outstanding receivables of $312,254 and the receipt of additional prepayments of
annual support contract fees providing $57,306. The net impact on cash from
operations as a result of these adjustments and the reduction in the Company's
current liabilities of $173,824 was a reduction in cash of $415,344.

In summary, while the Company added cash through various
means totaling $388,167, as a result of the first quarter operating loss which
reduced its available cash after adjustments by $415,344, the Company closed the
quarter with a net reduction in its cash amounting to $28,813 and had cash on
hand of $30,684 at the end of the quarter.

As noted above, the Company completed a private placement of
973,000 units following the quarter end. Each unit was priced at $1.00 and
consisted of one (1) common share and one (1) share purchase warrant to purchase
an additional common share at an exercise price of $1.10 for a period of one (1)
year from the closing date.

Presently, the Company is slightly ahead of planned revenues,
while its costs are on budget.  The Company expects its operating costs to
remain essentially constant throughout the remainder of the year.  Based upon
management's projections at this time, the Company believes that it will be able
to sustain its operations over the near term and, the Company completes the
second and final closing with net proceeds of approximately $400,000, management
believes that no further financing will be necessary for the remainder of the
year to meet its internal targets for staffing and operations.

There is no assurance that the Company will be able to secure financing or that such financing will be obtained on terms favorable to the Company.  Failure to obtain adequate financing could result in significant delays in development of new products and a substantial curtailment of operations.

TO JUNE 30, 2001

Comparison of Results of Operations for the three months ended June 30,
2001 and 2000:

Revenues:

The Company's revenues for the quarter ended June 30, 2001
were $743,625, compared to $258,646 for the quarter ended June 30, 2000, which
represents an increase of approximately 188%.  Sales of the Company's software
increased approximately 288% to $656,047 for the quarter ended June 30, 2001,
compared to $169,021 for the quarter ended June 30, 2000.  Support and services
were $87,578 and were virtually unchanged for the quarter ended June 30, 2001
when compared to $89,625 for the quarter ended June 30, 2001, even though 2001
revenues from support contracts actually rose by approximately $20,000 as a
result of the overall increased number of installations.  This gain, however,
was offset by lower revenues from other sources.

Operating Costs:

The Company's operating costs decreased for the quarter ended
June 30, 2001 to $1,023,511, compared to $1,087,811 for the quarter ended June
30, 2000, which represents an decrease of approximately 6%.  Operating costs
include cost of materials and services, sales and marketing, technical services,
technology development, administration, amortization and interest.

---

Cost of materials and services:

The Company's materials and service costs in conjunction with
the support services that it provides to customers for the quarter ended June
30, 2001 were $35,619, compared to $27,574 for the quarter ended June 30, 2000,
which represents an increase of approximately 29%.

Sales and marketing:

The Company's sales and marketing costs for the quarter ended
June 30, 2001 were $195,013, compared to $386,295 for the quarter ended June 30,
2000, which represents an decrease of approximately 50%. This decrease resulted
primarily from lower travel, tradeshow exhibit and marketing material costs.

Technical services:

The Company's technical services costs for the quarter ended
June 30, 2001 were $217,413, compared to $152,507 for the quarter ended June 30,
2000, which represents an increase of approximately 43%.  The technical services
group oversees and assists the Company's strategic partners with the
installation of Imagis' products and also provides users any technical support
they may require under annual support contracts. Costs include salaries,
facilities and travel. The increase during the current period reflects the
travel costs incurred in support of the installation of the Company's Alameda
County sale.

Technology Development:

The Company's technology development costs for the quarter
ended June 30, 2001 were $255,879, compared to $208,936 for the quarter ended
June 30, 2000, which represents an increase of approximately 22%. This increase
over the prior period reflects costs associated with several additions to staff
over the prior period and higher infrastructure costs incurred for additional
space and equipment for such new staff.  During the year, the Company completed
the conversion of its core technology into a software development kit (SDK)
format that permits a far broader range of applications of this facial
recognition software.

Administration:

The Company's administration costs for the quarter ended June
30, 2001 were $306,453, compared to $299,814 for the quarter ended June 30,
2000. Administrative costs include staff salaries, professional fees, facility
and support costs, and shareholder and regulatory costs. Costs for travel were
higher in the 2001 quarter, however, the increase was offset by lower consulting
costs. All other costs were essentially in line with the prior year period.

Amortization:

The Company's amortization costs for the quarter ended June
30, 2001 were $3,534, compared to $12,685 for the quarter ended June 30, 2000.
This decrease in amortization expenses reflects a strategy, following the
acquisition of Imagis-Cascade, to lease all new equipment. The Company's
existing fixed assets are almost fully depreciated at this time.

Interest:

The Company's interest costs for the quarter ended June 30,
2001 were $9,600, compared to no such costs for the quarter ended June 30, 2000.
The interest costs are related to the debt portion of the convertible loan.

Net Loss for the Period:

The Company's net loss for the quarter ended June 30, 2001
was $279,886, or $0.02 per share, compared to $829,165, or $0.07 per share, for
the quarter ended June 30, 2000.

---

Comparison of Results of Operations for the six-month periods ended June
30, 2001 and 2000:

Revenues:

The Company's revenues for the six-month period ended June
30, 2001 were $1,097,461, compared to $453,781 for the six-month period ended
June 30, 2000, which represents an increase of approximately 142%.  Sales of the
Company's software increased approximately 224% to $849,092 for the six-month
period ended June 30, 2001, compared to $261,763 for the six-month period ended
June 30, 2000.  Support and services increased approximately 29% to $248,369 for
the six-month period ended June 30, 2001, compared to $192,018 for the six-month
period ended June 30, 2001.

Operating Costs:

The Company's operating costs increased for the six-month period ended June
30, 2001 to $2,025,235, compared to $1,908,855 for the six-month period ended
June 30, 2000, which represents an increase of approximately 6%.

Cost of materials and services:

The Company's materials and service costs in conjunction with
the support services that it provides to customers for the six-month period
ended June 30, 2001 were $69,467, compared to $54,599 for the six-month period
ended June 30, 2000. These costs are incurred primarily for outside services in
conjunction with the support provided to users. During the six-month period
ended June 30, 2000, costs included $35,750 for equipment purchases made on
behalf of, and resold to customers in conjunction with, installations. The
Company discontinued such purchases in 2000 and now relies on its business
partners to provide any requisite equipment required by customers.

Sales and marketing:

The Company's sales and marketing costs for the six-month
period ended June 30, 2001 were $455,435, compared to $610,189 for the six-month
period ended June 30, 2000, which represents an decrease of approximately 25%.
This decrease resulted primarily from lower travel, tradeshow exhibit and
marketing material costs.

Technical services:

The Company's technical services costs for the six-month
period ended June 30, 2001 were $392,431, compared to $302,455 for the six-month
period ended June 30, 2000, which represents an increase of approximately 30%.
The higher costs during the current period reflect the travel costs incurred in
support of the installation of the Company's Alameda County sale.

Technology Development:

The Company's technology development costs for the six-month
period ended June 30, 2001 were $529,522, compared to $384,154 for the six-month
period ended June 30, 2000, which represents an increase of approximately 38%.
This increase in the current year reflects costs for several additions to staff
and higher infrastructure costs incurred for additional space and equipment.

Administration:

The Company's administration costs for the six-month period
ended June 30, 2001 were $528,438, compared to $522,569 for the six-month period
ended June 30, 2000. Costs for travel were significantly higher in the 2001,
however, the increase was offset by lower consulting costs and professional
fees.  All other costs were essentially in line with the prior year period.

Amortization:

The Company's amortization costs for the six-month period
ended June 30, 2001 were $8,310, compared to $34,889 for the six-month period
ended June 30, 2000. This decrease reflects the Company's use of operating
leases for all its equipment needs. The Company's existing fixed assets are
almost fully depreciated at this time.

---

Interest:

The Company's interest costs for the six-month period ended
June 30, 2001 were $41,632, compared to no such costs for the six-month period
ended June 30, 2000.

Net Loss for the Period:

The Company's net loss for the six-month period ended June
30, 2001 was $927,774, or $0.07 per share, compared to $1,455,074, or $0.13 per
share, for the six-month period ended June 30, 2000.

SUBSEQUENT EVENTS

There have been no significant subsequent events.

FINANCINGS, PRINCIPAL PURPOSES AND MILESTONES

The financings completed during the three-month period
provided the Company with gross proceeds of $1,391,000.  The proceeds were
intended for general working capital purposes and were, in part, utilized in the
repayment of $646,287 in related party loans that were advanced pending the
closing of the financing.  In addition, funds were directed toward operations
for technology development, the improvement of the Company's existing products
and the completion of the conversion of the Company's core technology into a
software development kit.  As well, funds were allocated to the reduction of the
Company's accounts payable balance in an effort to keep short-term debts
current.

LIQUIDITY AND SOLVENCY

The Company's financial statements are prepared assuming it
will continue as a going concern.  The Company has suffered losses from
operations and it has no established source of significant revenue.
Accordingly, the Company's auditors have qualified their report on our
consolidated financial statements as at December 31, 2000 and 1999 and for the
period ended December 31, 2000 because of substantial doubts as to our ability
to continue as a going concern.

The Company's cash position at the beginning of the year was
$59,497.  Due to a general weakening in financial markets in the first quarter
of this fiscal year, the completion of the Company's planned private placement
was delayed. In the interim, the Company arranged for a line of credit of up to
$200,000 from related parties and received $145,000 from this line during the
first quarter. As compensation for advancing funds by related parties under this
credit arrangement, the Company issued 20,000 common shares at the then current
market price for an aggregate value of $29,000.  This amount represents a
non-cash cost to the Company.  In addition, during the first quarter, the
Company received other advances which include: (i) $31,004 from related parties
outside of this credit arrangement, (ii) an advance on the intended private
placement of $48,500 and (iii) proceeds from the exercise of 6,333 options and
17,500 warrants which yielded an aggregate of $20,333 in gross proceeds to the
Company.

During the second quarter, the Company was successful in
completing its private placement with net proceeds to the Company of $1,300,752,
after subtracting the funds already advanced to the Company. The Company sold
1,391,000 units at a price per unit of $1.00, with each unit consisting of one
(1) common shares of the Company and one (1) non-transferable share purchase
warrant of the Company exercisable at a price per share of $1.10 for a period of
one (1) year from the closing date (a "Unit").

From these funds, the Company made partial payments totaling
$646,287 on various loans from related parties. Consequently, net cash inflows
from financing activities in the second quarter and for the first half of this
fiscal year aggregated $505,409 and $893,576, respectively.

In regard to operations, while the Company's operating loss
for the first half was $927,774, its impact on cash resources was significantly
reduced by adjustments for non-cash working capital items, primarily an increase
in accounts receivable of $635,518, such that the net reduction in cash for the
first half of this fiscal year was $377,927.

In summary, the Company has successfully increased revenues
and continues to maintain its functional costs at budgeted levels in accordance
with its plans for growth, while also reducing the level of its operating losses
from prior periods. The operating loss for the first six months after
adjustments as noted above caused a net draw down of Imagis' cash resources of
$377,927. As a result of the cash contribution from the financing closed in the
second quarter, however, subtracting the adjusted operating loss and loan

---

repayments made following the financing, the Company's
overall cash balance has grown from $59,497 at the beginning of this fiscal year
to $573,510 at June 30, 2001.

Based on our projections at this time, management believes
that the Company will require approximately $400,000 in additional financing for
Company to fund its capital requirements for the balance of 2001.

There is no assurance that the Company will be able to secure
financing or that such financing will be obtained on terms favorable to the
Company.  Failure to obtain adequate financing could result in significant
delays in development of new products and a substantial curtailment of
operations.