# 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, 2002
|----------------- | -------------

|Date of Report | August 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) | 02/08/09
        Dated Signed (YY/MM/DD)
|-------------------------------------- | ------------------------------------ | ----------------------------------------

|Altaf Nazerali
        Name of Director | "Altaf Nazerali"
        Signed (typed) | 02/08/09
        Dated Signed (YY/MM/DD)
|--------------------------------------- | --------------------------------------- | ----------------------------------------



---

## SCHEDULE B:
SUPPLEMENTARY INFORMATION

1.  Analysis of expenses:

|a) | Cost of materials | 
|-- | ----------------- | 

| | Supplies | 103,288
| | -------- | -------

| | Customs, duty and freight | 1,066
| | ------------------------- | -----

| | Consulting and commissions | 49,107
| | -------------------------- | ------

| | Consulting and commissions | 49,107
| | -------------------------- | ------

| | Total | $153,461
| | ----- | --------

|b) | Administration expenses | 
|-- | ----------------------- | 

| | Bank charges and interest, net | 5,734
| | ------------------------------ | -----

| | Consulting fees | 450,476
| | --------------- | -------

| | Foreign exchange | 61,718
| | ---------------- | ------

| | Office and rent | 378,095
| | --------------- | -------

| | Insurance | 105,560
| | --------- | -------

| | Management fees | 74,467
| | --------------- | ------

| | Salaries and benefits | 74,027
| | --------------------- | ------

| | Professional fees | 149,923
| | ----------------- | -------

| | Shareholder relations and regulatory filings | 309,886
| | -------------------------------------------- | -------

| | Stock-based compensation | 147,181
| | ------------------------ | -------

| | Travel and entertainment | 254,256
| | ------------------------ | -------

| | Total | $2,011,323
| | ----- | ----------

|2. | Related party transactions: | 
|-- | --------------------------- | 

| | Salaries for three officers | $176,624
| | --------------------------- | --------

| | Management fees for two officers | 74,467
| | -------------------------------- | ------

| | Total | $251,091
| | ----- | --------

|3. | Summary of securities
issued and options granted during the three month period ended June 30, 2002 | 
|-- | -------------------------------------------------------------------------------------------------- | 

|a) | Summary of securities
issued during the period: | 
|-- | ----------------------------------------------- | 

| | Date of Issue | Type of Security | Type of Issue | Number of Amount | Price | Total Proceeds
| | ------------- | ---------------- | ------------- | ---------------- | ----- | --------------

| | 04/02/02 | Common | Warrant exercise | 4,500 | $1.10 | $4,950
| | -------- | ------ | ---------------- | ----- | ----- | ------

| | 04/02/02 | Common | Warrant conversion | 50,000 | $2.17 | $108,500
| | -------- | ------ | ------------------ | ------ | ----- | --------

| | 04/05/02 | Common | Warrant conversion | 45,000 | $2.17 | $97,650
| | -------- | ------ | ------------------ | ------ | ----- | -------

| | 04/05/02 | Common | Warrant conversion | 115,208 | $2.17 | $250,001
| | -------- | ------ | ------------------ | ------- | ----- | --------

| | 04/08/02 | Common | Warrant exercise | 5,000 | $2.55 | $12,750
| | -------- | ------ | ---------------- | ----- | ----- | -------

| | 04/12/02 | Common | Warrant exercise | 150 | $1.10 | $165
| | -------- | ------ | ---------------- | --- | ----- | ----

| | 04/12/02 | Common | Warrant exercise | 3,350 | $1.10 | $3,685
| | -------- | ------ | ---------------- | ----- | ----- | ------

| | 04/17/02 | Common | Warrant exercise | 5,000 | $2.55 | $12,750
| | -------- | ------ | ---------------- | ----- | ----- | -------

| | 04/23/02 | Common | Warrant exercise | 22,500 | $2.55 | $53,375
| | -------- | ------ | ---------------- | ------ | ----- | -------

| | 04/26/02 | Common | Warrant exercise | 3,000 | $1.10 | $3,300
| | -------- | ------ | ---------------- | ----- | ----- | ------

| | 05/08/02 | Common | Warrant exercise | 33,456 | $2.55 | $85,313
| | -------- | ------ | ---------------- | ------ | ----- | -------

| | 05/10/02 | Common | Warrant conversion | 45,400 | $2.17 | $98,518
| | -------- | ------ | ------------------ | ------ | ----- | -------

| | 05/13/02 | Common | Warrant exercise | 34,562 | $2.55 | $88,133
| | -------- | ------ | ---------------- | ------ | ----- | -------

| | 05/13/02 | Common | Warrant conversion | 45,000 | $2.17 | $97,650
| | -------- | ------ | ------------------ | ------ | ----- | -------

| | 05/13/02 | Common | Warrant exercise | 72,500 | $1.10 | $12,750
| | -------- | ------ | ---------------- | ------ | ----- | -------

| | 05/23/02 | Common | Warrant exercise | 72,500 | $1.10 | $12,750
| | -------- | ------ | ---------------- | ------ | ----- | -------

| | 05/23/02 | Common | Warrant exercise | 12,500 | $2.55 | $31,875
| | -------- | ------ | ---------------- | ------ | ----- | -------

| | 05/28/02 | Common | Warrant exercise | 5,000 | $1.10 | $5,500
| | -------- | ------ | ---------------- | ----- | ----- | ------



---

| | 06/05/02 | Common | Warrant exercise | 57,604 | $2.55 | $146,890
| | -------- | ------ | ---------------- | ------ | ----- | --------

| | 06/07/02 | Common | Warrant exercise | 7,000 | $1.10 | $7,700
| | -------- | ------ | ---------------- | ----- | ----- | ------

| | 06/12/02 | Common | Option exercise | 21,505 | $2.97 | $63,870
| | -------- | ------ | --------------- | ------ | ----- | -------

| | 06/12/02 | Common | Option exercise | 3,000 | $1.99 | $5,970
| | -------- | ------ | --------------- | ----- | ----- | ------

| | 06/17/02 | Common | Optionexercise | 10,000 | $1.00 | $10,000
| | -------- | ------ | -------------- | ------ | ----- | -------

| | 06/27/02 | Common | Warrant exercise | 156,500 | $1.10 | $172,150
| | -------- | ------ | ---------------- | ------- | ----- | --------

|b) | Options/warrants
granted during the period: | 
|-- | ------------------------------------------- | 

| | Date of Grant | Type of Issue | Number | Name | Exercise Price | Expiry Date
| | ------------- | ------------- | ------ | ---- | -------------- | -----------

| | 05/15/02 | Option | 185,000 | Employees | $3.50 | 5/15/07
| | -------- | ------ | ------- | --------- | ----- | -------

| | 05/15/02 | Option | 15,000 | Employees | $3.40 | 5/15/07
| | -------- | ------ | ------ | --------- | ----- | -------

|3. | Summary of securities as at June 30, 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 | No. of shares | Amount
| | ---------------------- | ------------- | ------

| | Balance June 30, 2002 | 18,082,703 | $13,383,675
| | --------------------- | ---------- | -----------

|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
| | ------- | ----- | ------------

| | 1,042,999 | $1.00 | August 30, 2006
| | --------- | ----- | ---------------

| | 534,500 | $1.50 to $2.90 | Various to December 30, 2005
| | ------- | -------------- | ----------------------------

| | 418,495 | $3.40 | March 4, 2007
| | ------- | ----- | -------------

| | 200,000 | $3.40 to $3.590 | May 15, 2007
| | ------- | --------------- | ------------

| | 2,425,994 |  | 
| | --------- |  | 

| | Warrants | 
| | -------- | 

| | Number of common shares issuable | Exercise Price | Date of Expiry
| | -------------------------------- | -------------- | --------------

| | 266,666 | $1.25 | August 31, 2002
| | ------- | ----- | ---------------

| | 133,334 | $1.25 | February 23, 2003
| | ------- | ----- | -----------------

| | 114,666 | $2.55 | November 9, 2002
| | ------- | ----- | ----------------

| | 508,218 | $2.55 | November 9, 2002
| | ------- | ----- | ----------------

| | 15,633 | $2.17 | November 9, 2002
| | ------ | ----- | ----------------

| | 50,000 | $2.20 | June 18, 2004
| | ------ | ----- | -------------

| | 1,088,517 |  | 
| | --------- |  | 



---

|3. | Summary of securities as at June 30, 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, 300,608 special warrants were converted into one common share and
150,304 warrants. 170,622 of the related warrants were exercised for gross
proceeds to the Company of $435,086.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

4.  List of
directors and officers as of August  13, 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
Altaf Nazerali - Director
Rory Godinho - Secretary
Andy Amanovich - Chief Technology Officer
Roy Trivett - Director
Richard Katrusiak - Vice President Sales
Murray Jamieson - Vice President Product Development
Robert Gordon - Director
Deepak Chopra - Director
Treyton Thomas - Director



---

## SCHEDULE C:
MANAGEMENT DISCUSSION
DESCRIPTION OF
BUSINESS
Forward-Looking Statements:

Statements in this Quarterly report about the Company's future results, levels of
activity, performance, goals or achievements or other events constitute forward
looking statements.  These statements involve known or unknown risks, uncertainties
and other factors that may cause actual results or events to differ materially from
those anticipated in such forwardlooking statements.  These factors include, among
others, those described in connection with the forward-looking statements, and
the factors described under the heading "Risk Factors" in Exhibit 99.1 to this
Quarterly Report, which is hereby 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. Moreover, neither the Company nor anyone
else assumes responsibility for the accuracy or completeness of such 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.

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;  o generates  automated  line-ups based on  user-specified
criteria;
|- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 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.

Comparison of Results of
Operations for the three months ended June 30, 2002 and June 30, 2001:

## Revenues

Imagis total revenues increased
33% to $991,740 for the second quarter ended June 30, 2002 over the
comparable prior year second quarter level of $745,204. The higher revenues were
primarily attributable to higher software sales revenues, while support and
services revenues declined in the quarter from the prior year amount.

Sales of the Companys
software products rose 41% to $922,622 in the second quarter of this
year as compared to $656,047 for the second quarter in 2001. The increase in
software sales revenues this year primarily reflects the revenue generated
from the licensing contract with Zixsys Inc. ("Zixsys") announced in May of this year.

Support and services
revenues for the second quarter of 2002 were $51,821 and were 41% lower than
those in the comparable quarter in 2001 of $87,578. The lower 2002 level
resulted from reduced revenues derived from contract services this year, and is
solely attributable to the completion of a single special contract the Company
had taken on in 2000 directly rather than through a partner and which concluded
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 $17,297
for the second quarter of 2002, whereas comparable revenues of only $1,579 were
earned in the second quarter of the prior year. These revenues represent
primarily interest earned on short-term investments.

## Operating
Expenses

Operating expenses totaled
$2,649,612 for the second quarter in 2002, which is 158% higher than the
2001 second quarter operating expenses of $1,025,090. The higher costs over the
prior year second quarter resulted from increases in permanent and contracted
staff, greater travel in sales and marketing and administration, and exceptional
corporate costs included in the administrative category. Operating costs include
cost of materials and services, sales and marketing, technical services,
technology development, administration, interest and amortization.

## Cost 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 $143,172 in the second quarter of
2002, which is significantly higher than the level in the second quarter of 2001
of $35,619. The higher costs reflect a one-time purchase amounting to
approximately $71,700 of a component software package required for the
installation at Alameda, and a withholding tax charge of $49,000 applied to the
Zixsys revenues.

## Sales and
Marketing

Sales and marketing
expenses for the second quarter of 2002 were $836,177, and were 329% higher
than those in the comparable period in 2001 of $195,013. The increase is
attributable to higher costs incurred for new sales representatives in the US,
Europe and the Far East, all engaged on a contract basis in the past few months.
There were no contracted sales representatives prior to this time, and hence no
comparable 2001 contract costs. In addition, travel and trade show costs for
both staff and these representatives rose approximately 280% due to the
increase in the number traveling and overall activity this year over that in the
prior year when funds were limited. The Company may increase its sales team
further in the year through additions to its contract sales group should the
need arise but no further additions are currently contemplated. Consequently, the
Company expects that quarterly sales and marketing expenses will continue at
approximately the current level in future quarters.

15

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## Technical
Services

Costs for the technical
services group were $209,822 in the second quarter of this year, which is 3%
lower than the comparable 2001 second quarter costs of $217,413. The
costs in both years reflect primarily the travel costs in support of the Alameda
installation, necessitated by the technical aspects of the application. This
installation is now completed and in the 30-day acceptance period. The technical
services group generally assists the Companys strategic partners in their
installation of Imagis products and also provides clients any technical
support they may require under annual support contracts, and includes primarily
costs for salaries, facilities and travel. As the Alameda project is essentially
complete at this time, costs for future quarters are expected to trend lower
than the second quarter level.

## Technology
Development

The technology development
expenses for the second quarter of 2002 were $413,011, which is 61%
higher than the 2001 comparable costs of $255,879. The increase over the prior
period reflects a number of additions to staff and higher travel costs incurred
this year. The Company has been adding to its development staff throughout 2001
and continues to increase its development group capability. Along with its
regular project development assignments, the group is providing special support
and enhancements to the UK National Crime Squad application. Technology development
expenses are expected to remain at this approximate level throughout the
remainder of the year.

## Administration

Administrative costs for
the second quarter of 2002 were $1,014,145, which is 229% higher than
for the comparable quarter in 2001 of $308,032. Administrative costs include
staff salaries and related benefits and travel, consulting and professional fees, facility and
support costs, shareholder, regulatory and investor relations costs and 2002
special financial advisory costs incurred related to the Companys
corporate strategies, which includes the new strategic partnership achieved with OSI
Systems, Inc. and a special corporate privatization proposal received in the
first quarter.

While staff costs remained
comparable to those of the prior year, generally all other categories were
higher due the higher level of corporate activity this year. Facility and
support costs generally rose approximately 140% due to the overall
permanent and contracted staff growth over the prior year, travel rose 49%,
consulting and professional fees rose approximately 500%, and shareholder,
regulatory and investor relations costs rose approximately 60%.  This last
increase primarily reflects the Companys continued corporate
branding efforts worldwide with greater focus during the second quarter in
United States. The Companys financial advisory services costs, incurred in
the second quarter 2002 and included in consulting and professional fees, aggregated
approximately $241,000 or 73% of total consulting and professional fees expense. No
comparable financial advisory costs were incurred in the 2001 second quarter.
The Companys administrative costs are expected to decline to some degree
from the second quarter level since the contracted advisory services are
concluded now.

## Interest and
Amortization

Interest expense incurred
this year related to financing of equipment amounted to $8,499, down slightly
from the level in the prior comparable quarter of $9,600. Amortization in the
second quarter of 2002 amounted to $24,786 as compared to $3,534 for the second
quarter of 2001. The increase in amortization expense reflects recent purchases
of equipment, whereas in the past the Company leased most of its equipment to
minimize initial cash outflows.

## Net Loss for
the Period

Overall, the Company
incurred a net loss for the 2002 second quarter of $1,657,872 or $.09 per share,
which is 492% higher than the net loss incurred in the second quarter of
2001 of $279,886 or $.02 per share. While revenues rose 33% in the
quarter, significantly higher operating costs incurred in sales and marketing,
technology development and administration significantly offset the revenue gain.

16

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Comparison of Results of
Operations for the six months ended June 30, 2002 and June 30, 2001:

## Revenues

Imagis total revenues for
the first six months increased 87% to $2,053,605 over the comparable
prior year first half revenues of $1,100,262. As was the case for the second
quarter, the higher revenues were primarily attributable to higher software
sales, while other revenue categories were lower in the half than the prior year
amounts.

Sales of the Companys
software products rose 125% to $1,908,576 in the first six months of
this year as compared to $849,092 for the first six months in 2001. The increase in
software sales revenues this year primarily resulted from revenues generated from the
Alameda and NCS installations and the Zixsys licensing contract announced in the
second quarter of this year.

Support and services
revenues for the first half of 2002 were $111,651, which is 47% lower
than those in the comparable period in 2001 of $210,095. As noted for the
quarter, the lower 2002 level resulted from reduced revenues derived from
contract services this year, different from 2001 when revenues were also derived
from a special contract the Company had undertaken. First half 2002 revenues
from support contracts were virtually unchanged from those earned in the first
half of 2001.

Other revenues were $33,378
for the six months this year, whereas revenues of $41,075 were earned in the
first half of the prior year. These revenues represent both interest earned on
short-term cash investments and miscellaneous replacement parts sales.

## Operating
Expenses

Operating expenses totaled
$4,850,979 for the first six months in 2002, which is 139% higher than
the 2001 first half costs of $2,028,036. The higher costs over the prior year
first half resulted from increases in staff, greater travel for sales and
marketing and administration, and exceptional corporate finance costs included
in the administrative category.

## Cost of
Materials and Services

The costs of materials and
services amounted to $153,461 in the first half of 2002, which is 121%
higher than the level in the first half of 2001 of $69,467. As for the quarterly
results, the higher costs reflect primarily the one time expenditure in the
second quarter of $71,700 for software related to Alameda, and a withholding tax
charge of $49,000 applied on the Zixsys revenues.

## Sales and
Marketing

Sales and marketing expenses
for the first six months of 2002 were $1,393,925, which is 206% higher
than for the comparable six-month period in 2001 of $455,435. Of the increase,
approximately $313,000 represents costs incurred for new sales and marketing
representatives located throughout the world. 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 approximately 153% due to the increase in the
number traveling and overall activity this year over that in the prior year.

## Technical
Services

Costs for the technical
services group were $449,219 for the first half of this year, which is 14%
higher than the comparable 2001 first half costs of $392,431. As noted for
the quarter, the costs in both years reflect primarily the travel costs in
support of the Alameda installation, necessitated by the very technical aspects
of the application. The installation ultimately involved full system integration
of Imagis software with 31 regional detachments operating under varying
legacy database systems.

## Technology
Development

The Technology development
expenses for the first six months of 2002 were $782,717, which is 48%
higher than the 2001 comparable expenses of $529,522. The increase over the
prior period reflects a number of additions to permanent staff and higher travel
costs incurred this year.

17

---

## Administration

Administrative expenses for
the first six months of 2002 were $2,011,323, which is 281% higher than
the expenses incurred in the comparable six months in 2001 of $531,239. The
overall increase can be attributed to a number of factors. Facility costs rose
approximately 105%, travel rose 102%, consulting and professional fees rose
approximately 290%, and shareholder, regulatory and investor relations
costs rose approximately 80%, the increase primarily reflecting the
Companys continued corporate branding efforts worldwide with greater focus
during the second quarter in United States. As noted above, the Companys
financial advisory services costs, incurred in the 2002 second quarter and
included in consulting and professional fees, aggregated approximately $241,000 which
represents 40% of total consulting and professional fees expense. No comparable financial advisory
costs were incurred in the first half of 2001.

## Interest and
Amortization

Interest expense for the first
half this year for financed capital equipment amounted to $3,672, down 91%
from the level in the prior comparable six-month period of $41,632.
Amortization for the first six months of 2002 amounted to $56,662 as compared to
$8,310 for the first six months 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 at the time of purchase.

## Net Loss for
the Period

Overall, the Company
incurred a net loss for the first six months of 2002 of $2,797,374 or $.16 per
share, which is 202% higher than the net loss incurred in the first six
months of 2001 of $927,774 or $.07 per share. As was the case for the second
quarter, while revenues rose 87% in the first half, the higher operating
costs incurred in sales and marketing, technology development and particularly
administration significantly offset this revenue gain.

## SUBSEQUENT
EVENTS

(a)  
On July 8, 2002, the Company received $1,750,000 US from OSI Systems Inc. for
1,166,667 shares at a price of $1.50 US ($2.28 CDN). OSI Systems also received
291,667 share purchase warrants (expiring July 7, 2004) entitling them to
purchase 291,677 common shares of the Company for $1.50 US.

(b)  On July 12, 2002,
30,000 common stock purchase options were exercised for total proceeds to the
Company of $30,000.

## FINANCINGS,
PRINCIPAL PURPOSES AND MILESTONES

No financings were undertaken during the period.

## LIQUIDITY AND
SOLVENCY

The Companys cash on
hand at the beginning of the year, including funds on deposit, aggregated
$2,760,659, and during the first six months of 2002, the Company received
additional funds of $1,315,874 from the exercise of both options and warrants.
In total, 167,670 options were exercised which provided $214,255 and 606,757
warrants yielded $1,101,618.

The Company used these
funds primarily to finance its operating loss for the six-month period. The
impact on cash of the loss of $2,797,374, after adjustment for non-cash items
and changes to other working capital accounts in the period, primarily an
increase in trade and accrued accounts receivable aggregating $419,877, was
reduced to $2,646,330. The Company also used funds to purchase capital equipment
amounting to $205,183 for the first half.

To meet the requirements of the
adjusted loss coupled with the equipment purchases, a call on the Company's short-term cash
deposits amounting to $1,640,833 was made.

In summary, the Company's
cash position rose by $104,135 from $200,659 at the beginning of the year to $304,794 at June 30, 2002,
and additional funds on deposit declined from $2,560,000 at January 1, 2002 to $919,167
at the period end. The increase of $104,135



---

resulted from the additions
to cash from the option and warrant exercises and the call on the Companys
invested funds netted against the demands on cash for the operations and the
capital expenditures incurred during the first six months.

As reported in the first
quarter, the Company received a proposal to discuss privatization from the
Pembridge Group of Boston, an investment management group. As a consequence, the
Company had formed a special committee of its board and also engaged Raymond
James Ltd. to act as its financial adviser to assess the proposal and consider
alternative strategies. Subsequent to the period end, on July 9, 2002 the
Company announced that the discussions toward privatization had concluded by
mutual consent with Pembridge with the decision not to proceed further.
Concurrently, the Company announced the closing of a private placement of
1,166,667 common shares, priced at US$1.50 per share, to raise additional funds
of US$1.75 million and a strategic partnership with OSI Systems, Inc.

As indicated at year-end,
management continues to believe that based on current projections, the Company
will be able to sustain its operations over the near term with its present cash
resources and that no further financing for the remainder of the year will be
necessary to meet its internal targets for staffing and operations.