BRAINTECH INC/BC, S-1, 2000-02-11

BRAINTECH INC/BC
S-1, 2000-02-11
COMPUTER INTEGRATED SYSTEMS DESIGN

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<PAGE>

AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON FEBRUARY ____, 2000
REGISTRATION NO. 333-_______

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------------
FORM S - 1
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
BRAINTECH, INC.
(Exact name of Registrant as specified in its charter)

<S> <C> <C>
NEVADA 98-0168932
------------------------------- ---------------------------- -------------------
(State or other Jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)
</TABLE>

930 West First Street, Suite 102, North Vancouver,
British Columbia, Canada V7P 3N4
Telephone (604) 988-0440
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)

National Registered Agent
1090 Vermont Avenue, Suite 910
Washington, D.C. 20005
TELEPHONE (202) 371-8090
(Name, address, including zip code, and telephone number, including area code,
of agent for service)

COPIES TO:
Grant Sutherland, Chairman
BrainTech, Inc.
1600 - 777 Dunsmuir Street
Vancouver, British Columbia
V7Y 1K4
Tel: (604) 688-0047 Fax: (604) 688-0094
Approximate date of commencement of proposed sale to the public:
As soon as practicable after this registration statement
becomes effective.

If any of the securities being registered on this Form are to be
offered on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act, check the following box. /x/
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. / /
If this form is a post-effective amendment filed pursuant to Rule
462(c) under the Securities Act, check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering. / /

If delivery of the prospectus is expected to be made pursuant to Rule
434, check the following box. [ ]

CALCULATION OF REGISTRATION FEE

<TABLE>
<CAPTION>
- ------------------------- ------------------- ------------------------- ------------------------- --------------------
Title of Each Class of Proposed Maximum Proposed Maximum
Securities to be Amount to be Offering Price Per Aggregate Offering Amount of
Registered Registered Share(1) Price(1) Registration Fee
<S> <C> <C> <C> <C>
- ------------------------- ------------------- ------------------------- ------------------------- --------------------
Common Shares 11,095,000 $3.00 $33,285,500 $8,787
- ------------------------- ------------------- ------------------------- ------------------------- --------------------
</TABLE>

(1) Estimated solely for the purpose of computing the registration fee
pursuant to Rule 457(a) under the Securities Act of 1933.

The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant
shall file a further amendment which specifically states that this
Registration Statement shall thereafter become effective in accordance with
Section 8(a) of the Securities Act of 1933 or until the Registration
Statement shall become effective on such date as the Commission, acting
pursuant to Section 8(a), shall determine.

<PAGE>

BRAINTECH, INC.

Cross Reference Sheet to Item 501(b) of Regulation S-K Showing Location in
Prospectus of Information Required by Items of Form S-1

REGISTRATION STATEMENT ITEM NUMBER LOCATION OR CAPTION IN PROSPECTUS
<S> <C>
1. Forepart of Registration Statement and Outside Front Outside Front Cover Page
Cover Page of Prospectus
2. Inside Front and Outside Back Cover Pages of Inside Front and Outside Back Cover Pages
Prospectus
3. Summary Information, Risk Factors Prospectus Summary; Risk Factors; Selected Consolidated
Financial Data;
Ratio of Earnings to Fixed Changes Not applicable
4. Use of Proceeds Prospectus Summary; Use of Proceeds
5. Determination of Offering Price Risk Factors; Nature of Trading Market; Plan of
Distribution
6. Dilution Not Applicable.
7. Selling Security Holders Selling Shareholders
8. Plan of Distribution Plan of Distribution
9 Description of Securities to be Registered Description of Capital Stock
10. Interests of Named Experts and Counsel Not applicable
11. Information with respect to the Registrant
(a) (1) Description of Business Prospectus Summary; Business - The Company
(2) Description of Property Business - Description of Property
(3) Legal Proceedings Business - Legal Proceedings
(4) Control of Registrant Principal Shareholders
(5) Nature of Trading Market Nature of Trading Market
(6) Exchange Controls and Other Limitations Enforcement of Civil Liabilities; Description of
Affecting Security Holders Capital Stock
(7) Taxation Not Applicable
(8) Selected Financial Data Selected Consolidated Financial Data;
(9) Management's Discussion and Analysis Management's Discussion and Analysis of Financial
of Financial Condition and Results Condition and Results of Operations
of Operations
(10)Quantitative and Qualitative Not Applicable
Disclosures about Market Risk
(11)Directors and Officers of Registrant Management - Directors, Executive Officers and Key
Employees
(12)Compensation of Directors and Officers Management - Executive Compensation
(13)Options to Purchase Securities from Management - Executive Compensation ; Description of
the Registrant or Subsidiaries Capital Stock - Options to Purchase Securities from the
Company
(14) Interest of Management in Certain Certain Transactions
Transactions
(b) Financial Statements Financial Statements
12. Disclosure of Commission Position on Indemnification Not Applicable.
for Securities Act Liability
</TABLE>

<PAGE>

INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT
BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR
THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE
SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE
UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF
ANY SUCH STATE.

(Legend printed vertically on cover page)

<PAGE>

SUBJECT TO COMPLETION, DATED FEBRUARY 4, 2000

PROSPECTUS
BRAINTECH, INC.

11,095,000 Shares of Common Stock

This Prospectus relates to the offering of up to an aggregate of 11,095,000
shares of BrainTech, Inc. common stock (the "Shares"), which may be offered
from time to time by the persons named in this Prospectus under the heading
"Selling Shareholders."

The Selling Shareholders acquired the Shares pursuant to:

(a) a private placement of 4,400,000 shares, at a price of $0.15 per
share, which we conducted in March 1999;
(b) a private placement of 2,600,000 shares, at a price of $0.15 per
share, which we conducted in June 1999;
(c) private placements of 2,935,000 shares, at a price of $0.15 per share,
which we conducted in September and October 1999; and
(d) a private placement of 1,160,000 shares, at a price of $0.60 per
share, which we conducted in December 1999.

The Shares may be offered for sale from time to time by each Selling
Shareholder acting as principal for its own account or in brokerage
transactions at prevailing market prices or in transactions at negotiated
prices. No representation is made that any Shares will or will not be offered
for sale. We will not receive any proceeds from the sale of the Shares. It is
not possible at the present time to determine the price to the public in any
sale of the Shares by the Selling Shareholders and each Selling Shareholder
reserves the right to accept or reject, in whole or in part, any proposed
purchaser of Shares. Accordingly, the public offering price and the amount of
any applicable sales or underwriting discounts or commissions will be
determined at the time of such sale by the Selling Shareholders. We will pay
all costs, expenses and fees incurred in connection with the registration of
the Shares, estimated to be approximately $130,000. However, all selling and
other expenses incurred by the Selling Shareholders will be borne by the
Selling Shareholders. See "PLAN OF DISTRIBUTION".

Our common shares trade through the OTC Bulletin Board under the symbol
"BNTI". See "NATURE OF TRADING MARKET".

FOR A DISCUSSION OF CERTAIN RISKS OF AN INVESTMENT IN THE SHARES OFFERED
HEREBY, SEE "RISK FACTORS".

NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED THESE SECURITIES OR DETERMINED IF THIS
PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENCE.

<PAGE>

ADDITIONAL INFORMATION

We have filed with the Securities and Exchange Commission in Washington D.C.
a Registration Statement on Form S-1 under the United States Securities Act
of 1933, as amended, with respect to the securities offered hereby. This
Prospectus, which is a part of the Registration Statement, does not contain
all of the information set forth in the Registration Statement, certain parts
of which (including the schedules and exhibits) are omitted in accordance
with the rules and regulations of the Commission. In addition, we are subject
to the reporting requirements of the Securities and Exchange Act of 1934 (the
"Exchange Act") and, in accordance therewith, file reports, including annual
reports on Form 10-KSB, and other information with the Commission. The
Registration Statements and the schedules and exhibits thereto and the
reports and other information we have filed with the Commission under the
Exchange Act may be inspected and copied by the public at the Public
Reference Room maintained by the Commission at Room 1024, Judicial Plaza, 450
Fifth Street, N.W., Washington, D.C. 20549. Information on the operation of
the Public Reference Room can be obtained by calling the SEC at
1-800-SEC-0330.

ENFORCEMENT OF CIVIL LIABILITIES

The enforcement by investors of civil liabilities under the federal
securities laws of the United States may be adversely affected by the fact
that some or all of our directors and officers may be residents of Canada,
that some or all of the experts named in the Registration Statement may be
residents of Canada, and that all or a substantial portion of our assets and
the assets of those persons may be located outside the United States. As a
result, it may be difficult for holders of the Shares to effect service of
process within the United States upon our directors and officers who are not
residents of the United States, or upon experts named in the Registration
Statement who are not residents of the United States, or to realize in the
United States upon judgments of courts of the United States predicated upon
civil liabilities under the federal securities laws of the United States.

Investors are also cautioned that there is doubt as to the enforceability in
Canada against us or our directors or officers who are not residents of the
United States or experts named in the Registration Statement who are not
residents of the United States in original actions, or in actions for
enforcement of judgments of United States courts of liabilities predicated
solely upon the federal securities laws of the United States.

<PAGE>

PROSPECTUS SUMMARY

THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE MORE
DETAILED INFORMATION AND CONSOLIDATED FINANCIAL STATEMENTS AND THE NOTES
THERETO INCLUDED ELSEWHERE IN THIS PROSPECTUS.
- -------------------------------------------------------------------------------

THE COMPANY

Our business is currently developing in two principal directions.

VISION SYSTEMS

The historical core of our business has been the development of vision
systems and related hardware and software products.

We have recently completed an automated vision system that sorts and inspects
brake shoes for Satisfied Brake Products Inc. of Cornwall, Ontario. This
project represented our first major contract for the development of a custom
vision system. In addition, we have submitted a feasibility study to Toyota
Canada Ltd. to develop a system that sorts and inspects automobile wheels.

We have also developed specialized hardware and software products to assist
in the development of customized vision systems. The BrainTron Processor
performs mathematical operations used in recognizing and classifying visual
images. The first generation BrainTron Processor was completed in 1995, and
was produced in both hardware and software forms. The second generation
BrainTron Processor is nearing completion in software form. The Odysee
Development Studio, completed during 1999, is a software program which allows
us to combine the different software components of a vision system quickly
and efficiently. Further information on these products is given under the
heading "BUSINESS - Services and Products - Vision Systems".

INTERNET PRODUCTS

In July 1998 we also commenced development of the IMPAC accelerator board.
The IMPAC board was originally intended to perform logical and mathematical
operations used in vision systems. As development of the IMPAC board has
progressed, our focus has shifted to developing applications which sort and
filter data transmitted over the Internet.

During the last quarter of 1999 we also developed "Wizmaster", a program
designed to be incorporated into the Dr. Bean product of Sideware Systems
Inc. We plan to pursue additional product development opportunities with
Sideware Systems Inc. Further information on the IMPAC board and Wizmaster is
given under the heading "BUSINESS - Services and Products - Internet
Technologies".

We have a limited operating history, and have not yet generated material
operating revenues. An investment in our shares is speculative and involves a
high degree of risk. The principal risks affecting our business and
securities are set out below under the heading "RISK FACTORS".

THE OFFERING
- -------------------------------------------------------------------------------

<PAGE>

- -------------------------------------------------------------------------------

Common Shares being offered by the Selling
Shareholders in the Offering: 11,095,000
Common Shares to be outstanding after the
Offering: 43,986,833
Use of Proceeds: We will not receive any
proceeds from the sale of the
Shares offered hereby.
OTC Bulletin Board Symbol: BNTI
Risk Factors: Investment in the Shares
offered hereby involves
certain risks. Each
prospective investor should
carefully consider all of the
matters described herein
under "RISK FACTORS."
- -------------------------------------------------------------------------------

<PAGE>

SUMMARY OF CONSOLIDATED FINANCIAL INFORMATION

The following table sets out a summary of the consolidated historical
financial and operating data for the periods indicated. The summary data is
qualified by, and should be read in conjunction with, the Consolidated
Financial Statements and the related notes thereto and "MANAGEMENT'S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS",
contained elsewhere herein. The historical financial data is not necessarily
indicative of our future results.

Nine months Year ended Year ended Year ended Year ended
ended Sept. 30, Dec. 31, Dec. 31, Dec. 31, Dec. 31,
1999 1998 1997 1996 1995
(000's) (000's) (000's) (000's) (000's)
<S> <C> <C> <C> <C> <C>

Sales Revenue $Nil $58 $Nil $Nil $Nil

Profit (Loss) (936) (2,110) (930) (959) (748)
for the period

(Loss) per share (0.03) (0.07) (0.04) ( 0.05) (0.05)
for the period
</TABLE>

Our financial statements are presented in United States dollars, and dollar
figures stated in this Prospectus refer to United States dollars (except
where specified otherwise). As our head office is in Canada, many of our
transactions (including payment of salaries to our employees) are completed
in Canadian dollars ("Cdn$"). For purposes of this Prospectus, Canadian
dollar amounts have been converted to United States dollars at an exchange
rate of Cdn$1.00 = US$0.68.
- --------------------------------------------------------------------------------

RISK FACTORS

PROSPECTIVE INVESTORS SHOULD CAREFULLY CONSIDER THE FACTORS SET FORTH BELOW
IN ADDITION TO OTHER INFORMATION CONTAINED AND INCORPORATED IN THIS
PROSPECTUS, IN EVALUATING AN INVESTMENT IN THE SECURITIES OFFERED HEREBY.

RISKS RELATING TO OUR BUSINESS

<PAGE>

WE HAVE A LIMITED We began developing software and
OPERATING AND SALES hardware products for vision systems in
HISTORY ON WHICH TO January 1994. We completed the first
EVALUATE OUR generation BrainTron processor in 1995
PROSPECTS and the Odysee Development Studio in
1999. We are nearing completion of the
second generation BrainTron processor.
We use these products in the development
of customized vision systems. We have
never generated material sales revenue
from independent sales of these
products.

During 1998 we began to seek
opportunities to develop customized
vision systems for industrial
applications. We obtained our first
significant contract for the supply
of a customized vision system in
September 1999. Prior to September
30, 1999 we had not generated
material operating revenue from sales
of custom vision systems.

During 1999 we completed a prototype
for the IMPAC accelerator board, and
we are investigating potential
Internet-related applications for the
IMPAC board. Those investigations are
at a preliminary stage, and we have
not yet identified applications or
markets in which the IMPAC board
might be profitably exploited.

Accordingly, we have a limited
operating and sales history. As a
result, we do not have information
from which we can make reliable
estimates of future revenues,
expenses or profits.

WE HAVE INCURRED We have incurred operating losses
SUBSTANTIAL OPERATING consistently since entering the
LOSSES AND MAY NOT BE technology field. As at September 30,
PROFITABLE IN THE 1999, we had an accumulated deficit
FUTURE during the development phase of $6.7
million. We have only recently completed
our first major contract for the sale of
a custom vision system. We have no
assurance that we will be able to
generate sufficient revenue to achieve
profitable operation, to achieve
positive cash flow, or to continue our
business as a going concern. Failure to
achieve profitability within the time
frame expected by our investors may
adversely affect the market price of
our common shares.

WE FACE A RISK OF As we have not generated sufficient
INSOLVENCY revenue from operations to sustain our
ongoing operations, we face a risk of
insolvency if we are not able to raise
sufficient capital to cover any future
operating losses. Our audited financial
statements include a note stating that
our future operations are dependent upon
continued support by shareholders, the
achievement of profitable operations,and
the successful raising of additional
financing.

<PAGE>

OUR SERVICES AND We do not have an established history or
PRODUCTS MAY NOT GAIN record of sales.
MARKET ACCEPTANCE
We have recently completed our first
major contract for the sale of a custom
vision system. However, purchasers of
custom vision systems commonly make "one
of" purchases, and acquire customized
systems designed for their particular
needs. Accordingly, we have no assurance
that any of our vision system customers
will be repeat customers, or that our
sales to these customers will be
followed by additional sales to other
customers.

We have also recently completed a
prototype of the IMPAC accelerator
board. Our investigation into
potential applications for the IMPAC
board is at a preliminary stage. We
have not identified any specific or
well defined market in which the
IMPAC board might be profitably
exploited.

We cannot assure that our services or
products will gain sufficient market
acceptance, or achieve sufficient sales
revenue, to allow us to achieve
profitable operation, to achieve
positive cash flow, or to continue our
business as a going concern.

OUR FUTURE OPERATING We do not have sufficient operating
COSTS ARE UNCERTAIN history to make accurate projections of
our future operating costs. In order to
achieve profitable operation, we may
have to hire additional personnel in a
number of fields, including research and
development, marketing, and product
service and support. As well, we will
have to incur additional marketing and
overhead costs. As a result of our
limited operating history and our lack
of historical sales revenue, we are not
able to make reliable projections as to
the number of additional personnel that
will be required, the cost of employing
such additional personnel, or the level
of marketing and overhead expenses we
will incur.

<PAGE>

WE FACE SIGNIFICANT We presently plan to offer products and
COMPETITION FROM services in both the vision systems
OTHER TECHNOLOGY market and the market for
COMPANIES Internet-related computer applications.
Both markets are highly competitive and
rapidly changing. If we are unable to
compete effectively our business,
financial condition, and operating
results will be materially adversely
affected. Many of our current and
potential competitors have longer
operating histories, greater name
recognition, and substantially greater
financial, technical, marketing,
management, service, support and other
resources than we have. Our competitors
may be able to expand and develop their
technologies more quickly than we can,
to devote greater resources to the
development and marketing of their
products, or to respond more quickly to
changing opportunities or technologies.
Many of our competitors in the vision
systems industry may also be located
closer to large industrial cities,
making it easier for them to attract
customers.

To the extent that we enter the market
for Internet-related computer products,
we will be entering a market dominated
by large corporations which have assets
much greater than ours, and which might
be able to develop products duplicating
the features of any products we develop
at modest cost. We face a continual risk
that market opportunities or product
features which we intend to exploit can,
within a short period of time, become
dominated by much larger and wealthier
corporations, rendering our products
obsolete or non-competitive.

WE MAY NOT BE ABLE TO To be competitive we must develop and
DEVELOP NEW PRODUCTS introduce, on a timely basis, new
OR ENHANCE EXISTING products and product enhancements which
PRODUCTS ON A TIMELY meet the demands of the marketplace. We
BASIS cannot assure that we will be able to do
so, or to respond effectively to
technological changes or new product
announcements by others. Failure to
introduce new products or enhancements
could have a material adverse impact on
our business, operating results, and
financial condition.

<PAGE>

WE DO NOT HAVE We do not have established distribution
ESTABLISHED channels for any of our products or
DISTRIBUTION CHANNELS services. In the marketing of custom
vision systems, we depend almost
exclusively on direct sales to end
users. We cannot assure that this can be
a profitable means of marketing custom
vision systems, or that it will bring us
sufficient market exposure to generate
profitable levels of sales.

If we are successful in developing
Internet-related products using the
IMPAC accelerator board, we will have to
develop distribution channels to ensure
that those products are brought to
market. We presently have no specific
plans for the marketing of any such
products, and no established
distribution channels through which
such products could be sold.

FAILURE TO MANAGE We could experience rapid growth in
GROWTH PROPERLY orders, revenues, personnel, marketing
COULD STRAIN activities, and complexity of products.
RESOURCES AND AFFECT We cannot assure that we will be able to
OUR BUSINESS manage the significant strains that
future growth may place on our
administrative infrastructure, systems,
and controls.

Qualified technical personnel are in
great demand in all high technology
industries. Increased sales of our
products may require us to hire
additional personnel to install and
support our products and services. We
may also be required to hire additional
technical personnel to continue
development of our products and
services. Our success will depend to a
substantial degree on our ability to
attract, train, motivate, and retain
qualified personnel. Inability to do
so may have a material adverse impact
on our business, operating results and
financial condition.

LOSS OF KEY PERSONNEL Our success is substantially dependent
COULD ADVERSELY on the performance of our employees,
AFFECT OUR BUSINESS many of whom have worked together for a
short period of time. Our work force is
relatively small, and we thus employ
only a small number of employees in
specific fields important to our
business.

The departure of a single employee or a
small number of employees could
materially adversely affect our
business. We cannot assure that we will
be able to attract and retain qualified
personnel on acceptable terms. We do
not have key man insurance on any of
our employees.

<PAGE>

WE MAY BE UNABLE TO Some of our products, and the software
PROTECT OUR we use in developing vision systems, are
PROPRIETARY proprietary. To protect our proprietary
TECHNOLOGY technology we rely on confidentiality
agreements with key employees and third
parties and on trade secret, trademark,
and copyright laws. Although we attempt
to maintain confidentiality of, and
prevent improper disclosure of, our
proprietary technology, we cannot assure
that we have adequately protected our
technology from misappropriation.

Pursuant to a License Agreement dated
January 5, 1995, we hold a
non-exclusive license from Willard W.
Olson ("Olson") to use the Olson
Reticular Brainstem algorithm (the
"ORB"). We understand that Olson
holds a license from Motorola Corp.,
pursuant to which he was given the
authority and legal power to grant
the license given to us under the
License Agreement. We do not have a
complete copy of the license
agreement between Motorola Corp. and
Olson, which has been withheld on
grounds of confidentiality. We are
thus not able to confirm directly the
authority and legal power of Olson to
grant the license contained in the
License Agreement. However, attorneys
for Olson have provided us with
copies of certain provisions
contained in the license agreement
between Motorola Corp. and Olson,
which provisions appear to us to
authorize the license granted to us
pursuant to the License Agreement. In
addition, we have made it publicly
known for over three years that we
have used the ORB algorithm in the
development of the first generation
BrainTron processor, and have
received no notice of any objection
from Motorola Corp. We have no reason
to believe that our use of the ORB
algorithm is not properly authorized
under the License Agreement.

ORB is the subject matter of U.S.
Patent #5,390,261 (expiry date
February 14, 2012) and Taiwan Patent
No. 62531, currently owned by
Motorola Corp. To the best of our
knowledge, neither patent has been
challenged in any form of court
proceedings, with the result that
there exists no judicial confirmation
of the validity or enforceability of
the patents. We can not assure that
any of the patents referred to herein
are valid or enforceable.

We are the registered owner of the
trademarks "BrainTech" and
"BrainTron". We cannot assure that
our trademarks will not be
challenged, invalidated, infringed,
circumvented or held unenforceable.
Software code which we write is
protected by copyright. However, we
have not registered copyright in any
of our existing software code.
Copyright protection does not prevent
other technology companies from
designing or marketing other systems
which perform functions similar to,
and compete directly with, our
products and systems.

<PAGE>

OTHER COMPANIES MAY If any of our products or systems
CLAIM THAT OUR violate third party proprietary rights
PRODUCTS INFRINGE we may be required to re-engineer our
THEIR COPYRIGHTS OR products or systems or seek to obtain
PATENTS licenses from third parties. We have no
reason to believe that any of our
products or systems infringe the
proprietary rights of third parties.
However, we do not conduct comprehensive
patent searches to determine whether the
technology used in our products
infringes any third party patents.

Some of the markets in which we
compete are characterised by the
existence of a large number of
patents and frequent litigation for
financial gain based on patents with
broad, and sometimes questionable,
application. As the number of our
services and products increases, the
markets in which our services and
products are sold expand, and the
functionality of those services and
products grows and overlaps with
services or products offered by
competitors, we may become
increasingly subject to infringement
claims. Although we have no reason to
believe any of our services or
products infringe the proprietary
rights of third parties, we cannot
assure that infringement claims will
not be asserted against us in the
future or that any such claims will
not require us to enter into royalty
arrangements or result in costly
litigation.

OUR BUSINESS COULD Both vision systems and computer
SUFFER IF OUR SYSTEMS products are complex. Systems we develop
OR PRODUCTS FAIL TO or products we sell may contain
PERFORM PROPERLY undetected errors, or bugs, which result
in product failures. Our systems or
products may also be incompatible with
other software or hardware used by our
customers or potential customers.
Product or system performance
failures could result in loss of or
delay in revenues, loss of market
share, failure to achieve market
acceptance, or injury to our
reputation.

WE COULD INCUR If any of our systems or products fail,
SUBSTANTIAL COSTS AS A a customer may assert a claim for
RESULT OF LEGAL CLAIMS substantial damages against us,
regardless of whether we are
responsible for the failure.
Liability claims could require us to
spend significant time and money in
litigation or to pay significant
damages.

We currently carry limited insurance,
which may not cover claims against us
for financial losses, and which will
not be sufficient in amount to cover
large claims. In addition, there can
be no assurance that any insurance
coverage will be available in the
future on reasonable terms, that
insurance we purchase will be
sufficient to cover any claims
against us, or that insurers will not
deny coverage with respect to any
future claim.

<PAGE>

WE MAY BE AFFECTED BY Many existing computer systems and
UNEXPECTED YEAR 2000 software products do not properly
PROBLEMS recognise dates after December 31, 1999.
This Year 2000 problem could result
in miscalculations, data corruption,
system failures or disruptions of
operations. To the best of our
knowledge, all of our products and
internal systems are Year 2000
compliant and we have not experienced
any material Year 2000 problems to
date. However, we are subject to the
possibility of Year 2000 problems
affecting our products, the
components of vision systems we
install, our customers' systems, our
internal systems, or the systems of
vendors, any one of which could have
a material adverse effect on our
business, operating results and
financial condition.

WE MAY NOT BE ABLE TO We will require additional capital to
RAISE THE ADDITIONAL continue the development of our services
CAPITAL WE NEED and products, to pay the costs of
marketing those services and
products, and to cover operating
losses until we are able to become
profitable. Owing to the speculative
and uncertain nature of our business,
we are unable to calculate the
amounts of additional capital which
we may have to raise, although such
amounts may be substantial. The
extent and timing of our capital
requirements will depend on many
factors, including continued progress
in our product development programs
and market response to our products
and services.

Our ability to raise capital will
depend on our perceived ability to
develop and bring to the market
products and services capable of
generating sales revenue at
profitable levels. To raise
additional capital, we may have to
issue additional shares, which may
dilute the interests of existing
shareholders substantially.
Alternatively, we may have to borrow
large sums, and assume obligations to
make substantial interest and capital
payments. We may also have to sell
significant interests in some or all
of our products. We cannot assure
that we will be able to raise the
amount of capital we require, or that
we will be able to raise capital on
terms that enhance the value of our
common shares.

<PAGE>

WE FACE POTENTIAL In December 1993 we issued certificates
LIABILITY ARISING OUT OF for 1,500,000 shares in the name of
PAST STOCK Arthur Scott. The shares were to be
TRANSACTIONS issued in consideration for Mr. Scott
completing the design of the first
generation BrainTron processor. Mr.
Scott severed his relationship with
us shortly after the share
certificates were issued, and did not
do the design work for which the
shares were to be issued. We have
retained possession of the
certificates since the time they were
issued, and intend to cancel the
certificates. It is our position that
Mr. Scott has no entitlement to the
shares in question, and no claim has
been advanced in respect of the
shares by Mr. Scott. We believe the
risk of a successful claim against us
in respect of the 1,500,000 shares as
minimal.

We also face the risk that previous
corporate management may have issued
shares or share purchase warrants
which were not properly recorded in
the corporate records, and of which
present management are unaware. We
have recently received inquiries from
people who claim to have acquired
shares and warrants in our company,
at a time when it was operating under
a different name and under different
management. As the price of our stock
has risen recently, we believe that
any such potential claims may
materialize in the near future. We
face the risk that we may have to
recognize the claims of third parties
who acquired shares or share purchase
warrants under previous management,
and that we may thus have additional
shares issued and outstanding beyond
the amount shown in our corporate
records. We also face the risk that
we may not have a reliable means of
evaluating the claims of parties who
claim to have acquired shares or
share purchase warrants under
previous management, and that we may
thus be forced to recognize claims
which are not in fact valid. We have
no reliable means of determining how
many shares or share purchase
warrants may be involved, although at
present we have no reason to believe
that the number will be material.

<PAGE>

COMPANY DIRECTORS ARE We have agreements with Sideware Systems
INVOLVED IN OTHER Inc. and TechWest Management Inc. which
COMPANIES DOING may be material to our future
BUSINESS WITH US profitability. Sideware Systems Inc. is
a public company whose shares trade
on the Canadian Venture Exchange and
the OTC Bulletin Board. Grant
Sutherland, Owen Jones, and James
Speros, our directors, are also
directors of Sideware Systems Inc.
TechWest Management Inc. is a private
company whose shareholders include
Owen Jones and Grant Sutherland.

One of our agreements with Sideware
Systems Inc. is a cost sharing
agreement pursuant to which costs
relating to our business premises and
certain personnel are shared.
Sideware Systems Inc. is a
development stage software company
which has not achieved profitable
operation. There can be no assurance
that Sideware Systms Inc. will be
able to pay the costs for which it is
responsible under the cost sharing
arrangement, with the result that our
cash requirements to continue
operation may be substantially
increased. We do not share proceeds
from the sale of our securities or
our intellectual property (except as
granted pursuant to express licenses)
with Sideware Systems Inc. From time
to time, either our payments or those
of Sideware Systems, Inc. pursuant to
the cost sharing agreement described
above may exceed the required
proportionate share. Accordingly,
those payments are reconciled and
adjusted from time to time, as
required. See "CERTAIN TRANSACTIONS".

During the final quarter of 1999 we
developed "Wizmaster", a program
designed to be incorporated into the
Dr. Bean product of Sideware Systems
Inc. We plan to pursue additional
opportunities to develop products in
cooperation with Sideware Systems Inc.
Accordingly, our involvement with
Sideware Systems Inc. may increase in
the future.

WE ARE INVOLVED IN We are presently involved in certain
COURT PROCEEDINGS court proceedings. The principal court
proceedings are described under
"BUSINESS - Legal Proceedings." In
those proceedings, claims exceeding
$600,000 have been advanced against
us.

We are prosecuting our claims and
defending our position in all of the
litigation proceedings. While we
believe that our positions will be
sustained, there is a risk of losing
some of the court actions. The
results could include substantial
pecuniary judgements against us.

RISKS ASSOCIATED WITH THIS OFFERING OF COMMON SHARES

<PAGE>

OUR COMMON SHARES The stock market in general has recently
ARE PARTICULARLY experienced extreme price and volume
VOLATILE fluctuations. In addition, the market
prices of securities of technology
companies, particularly
Internet-related companies, have been
extremely volatile, and have
experienced price fluctuations that
have often been unrelated or
disproportionate to the operating
performance of these companies. These
broad fluctuations could adversely
affect the price of our common shares.

We believe that factors such as the
announcement of new products or
technologies by us or by our
competitors and quarterly
fluctuations in financial results are
expected to cause the market price of
our common shares to vary
substantially. In addition, our net
sales or results of operations in
future quarters may be below the
expectations of public market
securities analysts and investors. In
such event, the price of our common
shares would likely decline, perhaps
substantially.

WE DO NOT EXPECT TO We have never declared or paid cash
PAY DIVIDENDS IN THE dividends on our capital stock. We
FORESEEABLE FUTURE currently intend to retain any earnings
to finance the expansion and
development of our business and,
therefore, do not anticipate paying
any cash dividends in the foreseeable
future.

OUR SHARES ARE SUBJECT The Securities and Exchange Commission
TO RULES GOVERNING has adopted regulations which generally
"LOW PRICED STOCK" define "penny stock" to be any equity
security that has a market price (as
defined in their regulations) less
than US$5.00 per share, subject to
certain exceptions. Our securities
may be covered by the penny stock
rules, which impose additional sales
practice requirements on
broker-dealers who sell to persons
other than established customers and
accredited investors (generally,
institutions with assets in excess of
US$5,000,000 or individuals with net
worth in excess of US$1,000,000 or
annual income exceeding US$200,000 or
US$300,000 jointly with their
spouse). For transactions covered by
this rule, the broker-dealers must
make a special suitability
determination for the purchase and
receive the purchaser's written
agreement to the transaction prior to
the sale. Consequently, the rule may
affect the ability of broker-dealers
to sell our securities, and the
ability of shareholders to sell their
shares in secondary markets.

CAUTIONARY NOTICE REGARDING FORWARD LOOKING STATEMENTS

This Prospectus contains forward-looking statements which involve risks and
uncertainties. These statements relate to future events or our future
financial performance, and are identified by terminology such as "may",
"will", "should", "scheduled", "plan", "intend", "estimate", "potential",
"continue", "believe," "anticipate," "expect", and similar expressions. These
statements are only predictions. Actual results may differ significantly from
the results discussed in the forward-looking statements. Factors that might
cause such a difference include, but are not limited to, those discussed
under the heading "RISK

<PAGE>

FACTORS". Readers are cautioned not to place undue reliance on these
forward-looking statements, which speak only as of the date hereof. We
undertake no obligation to publicly release the results of any revisions to
these forward-looking statements which may be made to reflect events or
circumstances after the date hereof or to reflect the occurrence of
unanticipated events.

USE OF PROCEEDS

We will not receive any proceeds from the sale of Shares offered hereby, all
of which will be received by the Selling Shareholders.

NATURE OF TRADING MARKET

Our common shares are currently trading through the OTC Bulletin Board under
the symbol "BNTI".

The following table sets forth the high and low sale prices for our common
shares for the quarters indicated.

1999 HIGH LOW CLOSE
- ---- ---- --- -----
($) ($) ($)
Fourth Quarter 1.18 0.20 1.06
Third Quarter 0.33 0.21 0.27
Second Quarter 0.43 0.17 0.31
First Quarter 0.31 0.14 0.17

1998
- ----

Fourth Quarter 0.37 0.195 0.25
Third Quarter 1.08 0.234 0.27
Second Quarter 0.94 0.43 0.73
First Quarter 0.63 0.29 0.50

1997
- ----

Fourth Quarter 0.39 0.15 0.21
Third Quarter 0.48 0.20 0.34
Second Quarter 0.51 0.26 0.30
First Quarter 0.57 0.29 0.41

The source of this information is the OTC-BB. The quotations reflect
inter-dealer prices, without retail mark-up, mark-down or commission and may
not represent actual transactions.

Subsequent to December 31, 1999 our share price has appreciated
substantially. As at February 1, 2000 the closing price for our shares was
$3.50.

As at February 1, 2000 we have 43,986,833 shares issued and outstanding. Our
shareholders' list as at February 1, 2000 shows approximately 250 registered
shareholders. Approximately 24 million shares are

<PAGE>

registered in the name of CEDE & Co., a depository. Based on research into
the indirect holdings registered to various depositories and financial
institutions, we estimate that we have over 4,000 beneficial shareholders.

DIVIDEND POLICY

We have never paid cash dividends on our capital stock. We currently intend
to retain all earnings, if any, to finance the growth and development of our
business. We do not anticipate paying any cash dividends in the foreseeable
future.

CAPITALIZATION

The following table sets forth our consolidated capitalization as of
September 30, 1999. This table should be read in conjunction with
"MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS" and the Consolidated Financial Statements and related notes
thereto included elsewhere in this Prospectus.

September 30, 1999
(dollars in thousands)
(audited)
Cash and cash equivalents 134
Short-term debt and current portion of long-term debt: Nil
Short-term debt facility 134
Current porting of long-term debt Nil
Total Nil
Long-term debt: Nil
Contingent Liability 600

Total 768

Shareholder's equity:
Common Stock, 50 million shares authorized 40
39,721,333 issued and outstanding
Additional paid-in capital 6,160
Retained earnings (6,691)
Total capitalization 277

SELECTED CONSOLIDATED FINANCIAL DATA

<PAGE>

The selected consolidated financial data set forth below for the fiscal years
ended April 30, 1998, 1997, 1996, 1995, and 1994 were derived from our
audited consolidated financial statements. The selected consolidated
financial data for the nine month period ended September 30, 1999 were
derived from our unaudited consolidated financial statements which, in the
opinion of the management, have been prepared on the same basis as the
audited consolidated financial statements and contain all adjustments
necessary for a fair presentation of the financial condition and results of
operations for such period. The financial data should be read in conjunction
with "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS" and our Consolidated Financial Statements and the Notes
thereto.

Nine Months ended
September 30, Years ended December 31
1999 1998 1997 1996 1995 1994
(000's) (000's) (000's) (000's) (000'S) (000's)
<S> <C> <C> <C> <C> <C> <C>
Sales Revenue $Nil $58 $Nil $Nil $Nil $Nil

Profit (Loss) for the
period (935) (2,110) (930) (959) (748) (1,006)

Profit (Loss) per
share (0.03) (0.07) (0.04) (0.05) (0.04) (0.06)

Total assets 273 143 193 170 115 166

Total S/H Equity (550) (990) (645) (523) (757) (8)

Total R&D expend. 443 321 149 260 179 231
</TABLE>

We have no long-term debt and have not paid any dividends.

MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis should be read in conjunction with
"Selected Consolidated Financial Data" and our consolidated financial
statements and the notes thereto included elsewhere in this Prospectus.

OVERVIEW

Our company was incorporated in 1987. In 1994 we began developing products
for use in visual recognition systems. In the last half of 1999, we secured
our first major contract to develop a customized vision system. During the
last half of 1999 we also completed the first prototype of the IMPAC
accelerator board. We plan to use the IMPAC board to develop technology which
filters and interprets data transmitted over the Internet. See "BUSINESS -
Services and Products - Internet Technologies".

As of September 30, 1999 we have incurred aggregate net losses of
approximately $6.7 million since we entered the technology field in 1994. We
expect to continue to incur significant operating losses over the foreseeable
future. Operating losses may fluctuate from quarter to quarter as a result of
differences in the timing of expenses incurred and revenue recognized.

<PAGE>

RESULTS OF OPERATIONS

NINE MONTH PERIOD ENDED SEPTEMBER 30, 1999 COMPARED WITH NINE MONTH PERIOD
ENDED SEPTEMBER 30, 1998

During the nine month period ended September 30, 1999 we did not receive any
operating revenue. During the nine month period ended September 30, 1998 we
recorded operating revenue of $53,278. This amount included payments from
Cordis, a Johnson & Johnson company, for a feasibility study in respect of a
shunt inspection system, from NGI Technology Inc. for the purchase of a
BrainTron processor, and from Epson Portland Inc. for a prototype print
quality inspection system.

Cost of sales for the nine month period ended September 30, 1998 was $27,006.
This figure is an estimate, based on a pro rata portion of the total cost of
sales of $30,005 recorded for the fiscal year ended December 31, 1998. As we
had no operating revenue for the nine month period ended September 30, 1999,
we had no cost of sales during that period either.

Research and development expenses for the nine month period ended September
30, 1999 were $442,790, compared with $114,631 for the nine month period
ended September 30, 1998. Research and development expenses (which are
reported net of government grants) were reduced during the period ended
September 30, 1998 by grants totalling $44,983 from the National Research
Council of Canada. Those funds were used for the development of the Odysee
Development Studio. Salaries allocated to research and development (including
bonuses and payments to contract workers) increased from $112,716 for the
nine month period ended September 30, 1998 to $286,368 for the nine month
period ended September 30, 1999. Research and development expenses for the
nine month period ended September 30, 1999 also included $141,400 in payments
to North Shore Circuit Design of Austin, Texas for work performed on the
IMPAC accelerator board. There was no similar payment during the nine month
period ended September 30, 1998.

Consulting and contractor expenses decreased to $4,210 for the nine month
period ended September 30, 1999 from $32,900 for the nine month period ended
September 30, 1998. Consulting and contractor expenses for the nine month
period ended September 30, 1998 included costs incurred in preparing a
business plan. There was no similar expense during the nine month period
ended September 30, 1999.

Salaries and benefits, excluding compensation expenses in respect of employee
stock options, were $92,083 for the nine month period ended September 30,
1999, compared with $202,517 for the nine month period ended September 30,
1998. The principal reason for the decrease was the adjustment made to our
cost sharing agreement with Sideware Systems Inc., described below. Our
compensation expense for employee stock options was nil for the nine month
period ended September 30, 1999 and $837,800 for the nine month period ended
September 30, 1998. Inclusive of stock option compensation expenses, salaries
and benefits were approximately $92,083 for the nine month period ended
September 30, 1999 and $1,040,317 for the nine month period ended September
30, 1998.

General, selling, and administrative expenses increased to $396,879 for the
nine month period ended September 30, 1999 from $362,351 for the nine month
period ended September 30, 1998. Several factors contributed to the increase.
Our foreign exchange expense increased from $18,496 to $73,287. Our foreign
exchange expense results principally from adjusting entries made in respect
of transactions

<PAGE>

recorded in United States dollars, but actually carried out in Canadian
dollars. Accounting costs increased from $22,528 to $28,500, principally as a
result of costs incurred in resolving accounting issues relating to our
incentive stock options and costs incurred in registering our shares pursuant
to the Securities Exchange Act of 1934. Rent expenses decreased from $37,747
to $32,960, principally as a result of the adjustment made to our cost
sharing agreement with Sideware Systems Inc., described below. Travel and
promotion expenses remained approximately consistent for the nine month
periods ended September 30, 1999 and September 30, 1998, being $91,298 and
$93,481 respectively.

YEAR ENDED DECEMBER 31, 1998 COMPARED WITH YEAR ENDED DECEMBER 31, 1997

During the year ended December 31, 1998 we received operating revenue of
$57,510 from the sale of prototype vision systems and related services. We
received $18,000 from Epson Portland Inc. for sale of a prototype print
quality inspection system, $30,000 from Cordis, a Johnson & Johnson company,
for a feasibility study in respect of a shunt inspection system, and $7,500
from Tantus Electronics Corp. in respect of a proposed fruit inspection
system for Sunkist Growers. We also received $2,010 from NGI Technology, Inc.
for a purchase of the BrainTron processor. For the year ended December 31,
1997 we did not receive any operating revenue.

Cost of sales for the year ended December 31, 1998 were $30,005. This figure
included $1,250 in hardware costs and $28,755 in internal manpower costs. The
internal manpower costs related to work done on those projects which
generated revenue, as described above. As we had no operating revenue for the
year ended December 31, 1997, we had no cost of sales during that period
either.

Research and development expenses for the year ended December 31, 1998 were
$321,378, compared with $148,527 for the year ended December 31, 1997.
Research and development expenses during 1998 included $116,294 paid to North
Shore Circuit Design of Austin, Texas for work on the IMPAC accelerator board
and on a prototype vision system. By comparison, during 1997 we paid North
Shore Circuit Design $11,000 for work on the prototype vision system (which
amount was allocated to "Consulting and contractors" in our December 31, 1997
financial statements). The balance of the increase in research and
development expenses from 1997 to 1998 was due principally to an increase in
the number of our research and development personnel.

Consulting and contractor expenses increased to $24,785 for the year ended
December 31, 1998 from $17,770 for the year ended December 31, 1997.
Consulting and contractor expenses for the year ended December 31, 1998
included approximately $17,000 for costs incurred in preparing a business
plan. There was no similar expense during the year ended December 31, 1997.
During the year ended December 31, 1997 we also paid North Shore Circuit
Design approximately $11,000 for work on a prototype vision system. As stated
above, during the year ended December 31, 1998 payments to North Shore
Circuit Design were allocated to research and development.

Salaries and benefits increased to $1,226,230 for the year ended December 31,
1998 from $415,014 for the year ended December 31, 1997. The principal reason
for the increase was a compensation expense of $927,800 in respect of stock
options issued to officers, employees and consultants during the year ended
December 31, 1998. The corresponding compensation expense for the year ended
December 31, 1997 was $200,000. After deduction of the charges in respect of
stock options, salaries and benefits for the year ended December 31, 1998
were $327,185, which exceeded the comparable figure for the year ended
December 31, 1997 by approximately $83,416. The principal reason for this
increase was

<PAGE>

additional personnel.

General, selling, and administrative expenses increased to $560,180 for the
year ended December 31, 1998 from $348,731 for the year ended December 31,
1997. Several factors contributed to the increase. Accounting costs increased
from approximately $14,000 to approximately $38,000, principally as a result
of costs incurred in registering our shares under the Securities and Exchange
Act of 1934. Legal costs increased from approximately $78,000 to
approximately $140,000, principally as a result of the costs incurred in
registering our shares and in legal disputes. Travel and trade show costs
increased from approximately $40,000 to approximately $75,000, principally as
a result of increased trade show participation. Premises costs increased from
approximately $55,000 to approximately $70,000, principally as a result of
the additional lease space which we occupied beginning September 1, 1998.
Equipment rental increased from approximately $800 to approximately $16,000.
This increase resulted from payments which we made to reimburse Techwest
Management Inc. for a portion the cost of certain equipment. The equipment in
question was acquired by Techwest Management Inc. through a sale to, and
lease back from, a financial institution. As both our company and Sideware
Systems Inc. used the equipment, each company reimbursed Techwest Management
Inc. for 50% of the lease payments. During the year ending December 31, 1998
we also paid approximately $31,000 (inclusive of applicable taxes) as
compensation for the services of Grant Sutherland, our corporate Chairman.
Mr. Sutherland did not receive any cash remuneration during the year ending
December 31, 1997.

YEAR ENDED DECEMBER 31, 1997 COMPARED WITH YEAR ENDED DECEMBER 31, 1996

We did not have any sales revenue during either 1997 or 1996.

Research and development expenses decreased to $148,527 in 1997 from $260,384
in 1996. Research and development expenses decreased primarily because we
began to do more development work with our own personnel, as opposed to
relying on outside consultants.

Expenses for consultants and contractors decreased to $17,770 in 1997 from
$204,114 in 1996. The principal reason for this decrease was the inclusion of
performance bonuses totalling $150,000 in 1996 to consultants who provided
technical services to us. In addition, during 1997 we reduced our reliance on
outside contractors and consultants.

Salaries and benefits increased to $415,014 in 1997 from $134,408 in 1996.
The principal reason for this increase was a compensation expense of
$200,000, relating to the granting of stock options at prices below
prevailing market prices for our stock, during 1997. (The options in question
were granted pursuant to a directors' resolution passed December 17, 1997,
and pursuant to Stock Option agreements dated as at December 17, 1997.
However, the Stock Option agreements were not actually executed and delivered
until July 1998). In addition, we hired additional personnel in 1997, due to
an increased level of development and marketing activity.

Selling, general and administrative expenses increased to $348,731 in 1997
from $314,839 in 1996. The magnitude of this increase is such that it cannot
be attributed to any specific reason.

LIQUIDITY AND CAPITAL RESOURCES

During the nine month period ended September 30, 1999 we raised approximately
$1.4 million in

<PAGE>

financing through private placements of shares. In addition, subsequent to
September 30, 1999, we have raised approximately $1,250,000 through private
placements of shares and the exercise of incentive stock options. As at
February 1, 2000 our cash balance is approximately $1,000,000.

As at February 1, 2000 we employ 6 full time and 10 part time officers or
employees. Our monthly salary costs are approximately $45,000 per month.

For the nine month period ended September 30, 1999 our average monthly
general, overhead and administrative costs, exclusive of salary costs, were
approximately $45,000 per month. During the nine month period ended September
30, 1999 we also incurred capital expenditures of approximately $38,000 for
computer equipment and software.

We do not presently plan to incur significant capital expenditures or to
increase our salary or other operating costs significantly during the first
six months of our current fiscal year. Any significant capital expenditures
or increases in operating costs will be dependent on raising additional
capital or generating revenue from the sales of our products or services.

During the nine month period ended September 30, 1999 we paid $114,000,
allocated to "Research and development", to North Shore Circuit Design for
work on the IMPAC accelerator board. Most of the work of North Shore Circuit
Design was complete by the end of 1999. We expect that we will pay North
Shore Circuit Design approximately $50,000 for additional work during the
first six months of 2000.

Based on the foregoing, we expect that our average monthly expenditures
during the period up to June 30, 2000 will be approximately $100,000 per
month, or approximately $500,000 for the period February 1, 2000 to June 30,
2000. Accordingly, our present cash balance should be sufficient to pay our
anticipated cash expenditures to June 30, 2000.

We will continue our attempts to raise additional equity capital. During the
first half of 2000 we will attempt to raise approximately $4,000,000 in
additional private placement financing. As yet we have not developed specific
plans for raising additional capital.

YEAR 2000

Many currently installed computer systems and software products are coded to
accept only two digit entries in the date code field. These date code fields
will need to accept four digit entries to distinguish 21st century dates from
20th century dates. As a result, computer systems and/or software used by
many companies may need to be upgraded to comply with such "Year 2000"
requirements.

Our Year 2000 compliance program was conducted under the direction of our
systems administrator. Beginning in the middle of 1998, our systems
administrator commenced analyzing individual components of our computer
systems to identify any components which were not Year 2000 compliant.

Our systems administrator confirmed that all of the individual computers in
our system are Year 2000 compliant. The only software component that was
identified as potentially non-compliant was our accounting system. In May
1999 we replaced our accounting system with a Year 2000 compliant system. The
cost of the system was approximately $40,000, which was shared with Sideware
Systems Inc.

<PAGE>

As at the date of this Prospectus, we have not encountered any material Year
2000 problems.

As we believe that all of our internal systems are Year 2000 compliant, and
as we have not encountered any material Year 2000 problems to date, we have
not developed any contingency plan.

With the exception of the local electrical utility, we are unaware of any
present suppliers, on whom we are dependent, whose supply of goods or
services might be interrupted by Year 2000 problems. We have not made any
material investigations of any individual suppliers, and have not developed a
contingency plan.

All of our current products are Year 2000 compliant. We have not undertaken
any investigation to determine whether any of the products we have sold in
the past are non-compliant. However, given the small volume of our historical
sales, we do not foresee a material risk of liability arising in respect of
our past sales.

EFFECTS OF FOREIGN CURRENCY EXCHANGE RATES AND INFLATION

While we record our financial statement in United States dollars, many of our
expenses are incurred in Canadian dollars. As a result, fluctuations in the
Canadian dollar exchange rate can affect our expenses, and thus our profit or
loss. During the nine month period ended September 30, 1999 we incurred a
foreign exchange expense of $73,287. Our foreign exchange expense results
principally from adjusting entries made in respect of transactions recorded
in United States dollars, but actually carried out in Canadian dollars. As at
the date of this Prospectus, we have not engaged in exchange rate hedging
activities. To the extent we implement such hedging activities in the future,
we cannot assure that we will be successful.

While we believe that inflation has not had a material adverse affect on our
results of operations, there can be no assurance that inflation will not have
a material adverse effect on our results of operations in the future.

BUSINESS

THE COMPANY

Our company was incorporated in Nevada on March 4, 1987 under the name Tome
Capital Inc. We changed our name to Nevada Manhattan Mining Inc. on August
15, 1988, then back to Tome Capital Inc. on July 5, 1990, to Offshore
Reliance Ltd. on February 19, 1993, to Cozy Financial Corporation on April
20, 1993 and to BrainTech, Inc. on January 3, 1994. We did not carry on
active business prior to the beginning of 1994.

We were registered as an extra-provincial company under the British Columbia
COMPANY ACT on January 17, 1996. Our executive offices are located at 930
West 1st Street #102, North Vancouver, British Columbia, Canada V7P 3N4. Our
telephone number is (604) 988-6440 and our Internet address is www.bnti.com.

<PAGE>

OUR SUBSIDIARIES

We have one wholly owned subsidiary, BrainWare Systems Inc., incorporated in
British Columbia, Canada on March 3, 1994. BrainWare Systems Inc. carries out
our research and development and product development activities, and employs
our technical personnel.

The description of our business in this Prospectus includes the business of
both BrainTech, Inc. and BrainWare Systems Inc.

TECHNICAL TERMS

Our business is technical, and as a result, we use technical terms in
describing it. We have included the following glossary to assist in
understanding our description.

- - "Algorithm" refers to the underlying logical method or sequence of
steps by which a given calculation or manipulation of data is
performed.

- - "Block" refers to a section of a computer processing board whose
components perform related functions, and which are conveniently
designed as a group.

- - "Driver" means a computer program which enables a computer to
communicate with a specific device (such as a printer or additional
processing unit).

- - "Fuzzy mathematics" is a branch of mathematical logic in which
propositions are not classified as absolutely true or absolutely
untrue, but rather as true to a degree, or untrue to a degree. Fuzzy
mathematics has been used in a number of engineering and control
applications.

- - "Fuzzy set" means a range of values used in calculations done through
fuzzy mathematics. If the object of a fuzzy mathematics operation is
to determine whether a measured quantity equals a certain specified
value, the two quantities will be considered equal if the measured
quantity falls within the fuzzy set constructed around the specified
value.

- - "Interface" means a convention by which two software systems or
programs communicate.

- - "Machine vision" refers to technology that collects and analyses
visual images in a digital electronic format, and which uses such data
to draw conclusions with little or no operator intervention.

- - "Module" refers to a part of computer system or program that performs
functions which are conveniently designed or performed as a group.
Designing computer systems in separate modules, which are then linked
together, can reduce development costs and make subsequent
modifications easier.

- - "Physical signature" means a vector of numbers representing an image
which a vision system has identified as an object or visual pattern of
interest, or a potential object or visual pattern of interest.

<PAGE>

- - "Routine" means a computer program, or a portion of a computer
program, which performs a specific task.

- - "Signature" means vector of numbers representing a specific object or
visual pattern which a vision system is attempting to identify or
recognize. Part of the function of a machine vision system is to
compare a physical signature to a signature, to determine how well
they match.

- - "Vector" refers to a set of numbers, with each number relating to a
specific physical quantity or measurement.

HISTORICAL DEVELOPMENT

We entered the technology field in the first quarter of 1994. Since then, the
majority of our efforts have been devoted to developing products to be used
in creating machine vision systems, and in developing machine vision systems.

In June 1995 we completed development of the first generation BrainTron
Processor, which employs the Olson Reticular Brainstem ("ORB") algorithm to
carry out functions relating to the identification, classification and
matching of visual images. Further information on ORB is given below, under
the headings "BrainTron Processor" and "Intellectual Property".

During 1998 we made our first attempts at securing contracts to develop
customized vision systems to perform quality control functions. We prepared
feasibility studies or prototype systems in the following fields: print
quality inspection, frost damage inspection for fruit, and quality inspection
for surgical stents (used to reinforce weak blood vessels following
angioplasty surgery). We were not able to secure contracts to sell or install
any of these systems.

During 1998 we also commenced development of:

(a) the Odysee Development Studio, a program designed to streamline the
design of customized visions systems;

(b) the second generation BrainTron processor, which employs more advanced
mathematical algorithms for identifying and classifying digital
images; and

During 1999 we obtained our first substantial contract for the installation
of a customized machine vision system, to inspect and sort brake shoes for
Satisfied Bake Products Inc. of Cornwall, Ontario. We completed development
of the Odysee Development Studio, and working prototypes for the IMPAC
accelerator board and the second generation BrainTron processor. We also
developed "Wizmaster", a program designed for incorporation into the Dr. Bean
Internet product of Sideware Systems Inc.

In January 2000 we completed installation of the brake shoe sorting system
for Satisified Brake Products Inc. Our plan of operation for the balance of
2000 is to develop our business in two principal directions.

<PAGE>

1. We plan to pursue additional contracts for the design and installation
of customised vision systems, including a system to sort and inspect
automobile wheels for Toyota Canada Inc., for which we have submitted a
feasibility study.

2. We plan to develop Internet-related computer applications both for the
IMPAC board and in cooperation with Sideware Systems Inc.

We have not at any time been able to generate sufficient revenue from sales
of our services or products to sustain ongoing operations, and we do not have
an established record of sales or established distribution channels for our
services or products. In order to continue as a going concern, we will have
to begin generating significant sales revenue.

SERVICES AND PRODUCTS

We are currently developing our business in two different directions. The
historical core of our business is the development of machine vision systems
and related hardware and software products. With the development of the IMPAC
accelerator board and the Wizmaster program, we also intend to develop
Internet-related computer products.

SERVICES AND PRODUCTS - MACHINE VISION SYSTEMS

Part of our business includes the development and supply of custom vision
systems. Systems like the ones we develop are often referred to as
application specific machine vision (ASMV) systems. ASMV systems are
generally custom designed to perform a specific function. In addition, we
have developed hardware and software products (the BrainTron processor and
the Odysee Development Studio) for use in the development of vision systems.

MACHINE VISION SYSTEMS - INDUSTRY BACKGROUND

The growth of the machine vision industry is dictated, on the one hand, by
the technical difficulty of achieving accurate "computerized vision", and on
the other hand, by the vast theoretical scope of the potential applications.
The principal technical difficulties include the problems of compensating for
background noise that masks or distorts objects, separating objects from
their backgrounds, determining how much "similarity" must exist before two
visual patterns are considered to represent the same object, and comparing
physical objects which are only approximately "similar" in the first place.

As the technical difficulties are solved, the potential benefits and
applications of computerized vision are large. In industrial quality control,
computerized vision can replace (and perform inspections more accurately
than) human inspectors. In industrial automation, computerized vision can be
used to control industrial machines or robots. In security systems,
computerized vision can be used to detect human visitors or intruders in
video camera images. In military applications, computerized vision can be
used in automated targeting systems. In medical applications, it can be used
to improve diagnostic reliability.

The Automated Imaging Association ("AIA") has published extensive statistics
on the market for machine vision systems. Principal statistics published by
the AIA include the following:

- - In 1998 the North American market for merchant machine vision systems
was approximately

<PAGE>

$1.25 billion (in revenue), or approximately 30,900 units. These
figures represented increases of approximately 1.5% (in revenue) or
22.7% (in units) over corresponding figures for 1997.

- - The principal industrial applications of machine vision systems are
inspection (e.g., inspection of products for quality control
purposes), location analysis (e.g., control of industrial machines
or robots, or control of fitting and assembly of products), and
pattern recognition (e.g., optical character recognition). In 1998,
inspection applications accounted for approximately 85% of the
market by revenue, and approximately 42% by units. Location analysis
applications accounted for approximately 11% of the market by
revenue, and approximately 45% by units. Pattern recognition
applications accounted for approximately 4% of the market by revenue
and 13% of the market by units.

- - The principal end users in the North American market for vision
systems during 1998 were the following industries:

INDUSTRY % BY REVENUE % BY UNITS
-------- ------------ ----------
<S> <C> <C>
Semiconductors 34% 23%
Electronics 16% 21%
Containers 3% 6%
Food 8% 4%
Wood 5% 1%
Transportation 7% 9%
Fabricated metals 2% 2%
Plastic 4% 5%
Printing 3% 6%
Medical / Pharmaceutical 3% 8%
</TABLE>

- - During 1998 suppliers of application specific machine vision (ASMV)
systems accounted for approximately 54% of the market by revenue and
10% by units. Suppliers of general purpose vision systems accounted
for 14% of the market by revenue and 35% by units. The remainder of
the market was split among various sectors, including 3D based
vision systems, web scanners, and x-ray vision based vision systems.

- - During 1998 approximately 58% (by revenue) of all machine vision
system sales were direct sales by suppliers. The remainder were
through distributors or manufacturers' representatives.

The AIA has projected that by the year 2003, the North American market for
vision systems is projected to increase to approximately $2.1 billion in
revenue, and approximately 55,000 units. These figures correspond to average
annual growth rates of approximately 11% for market revenue and 12% for units
during the period 1998 - 2003.

MACHINE VISION SYSTEMS - TECHNICAL DESCRIPTION

Machine vision involves analysing visual images in a digital electronic form.
To do so, a machine vision system must first express a visual image in
digital form. The system must then analyse the digital data to recognize
patterns or specific objects.

<PAGE>

We separate the development of a vision system into the following modules,
which correspond to the logical steps which must be followed in analysing an
electronic visual image.

ACQUISITION AND DIGITIZATION MODULE. The acquisition and digitization module
receives input such as the signal from a video monitor, and creates a
digitized version of that input.

PREPROCESSING MODULE. The preprocessing module receives digitized output from
the acquisition and digitization module and performs certain operations and
modifications on the digital data to facilitate pattern recognition. The
preprocessing module performs the following principal functions:

- - It filters out noise and other apparent anomalies in the digital
data.

- - It segments the data by identifying subsets of the digital data which
represent candidates for physical objects that the vision system is
intended to recognize.

- - It transforms data by deriving selected numerical characteristics of
the data subsets identified as potential objects. The numerical
characteristics may include such quantities as the length or width of
the object, or a series of numbers describing its colour or texture.
The numerical quantities thus derived are stored as a vector, referred
to as the "physical signature" of the object.

TRAINING AND MATCHING MODULE. The training and matching module performs two
essential functions.

- - It receives the physical signatures of potential objects and
attempts to match them to the signatures of specified objects
already stored in memory (the objects the system is trying to locate
or recognize). The training and matching module "classifies"
physical signatures by calculating how well they match the
signatures stored in memory. Since physical objects are unlikely to
be perfectly identical, or to be described perfectly by a digitized
version of visual input, classification necessarily involves the
comparison of approximate quantities. The classification of physical
signatures thus requires a mathematical algorithm for deciding how
closely a physical signature and a signature match. A variety of
mathematical models, including fuzzy mathematics and standard
probability error functions, can be used to fulfil this requirement.
While the technical details of the mathematical models differ, they
have the common object of producing a numerical measure of how
closely two mathematical data vectors match.

- - It refines the stored signatures to which future physical signatures
can be matched, that is it "trains" the system for more accurate
object recognition in the future. Depending on the mathematical
algorithm used to identify matching signatures, the training and
matching module can adjust the appropriate memory signatures, or the
mathematical parameters or functions used in matching physical
signatures to the signatures stored in memory.

CONTROL AND FEEDBACK MODULES. The control and feedback module controls input
to, and output from, the system. The control and feedback module determines
the extent to which the system is being trained and also permits direct
operator participation in certain steps of the process, such as the
identification of candidate objects or new objects. When a physical signature
does not match any of the signatures stored

<PAGE>

in memory, the control and feedback module can also initiate procedures to
create a "new" signature in memory, to be used in identify the "new" object
in the future.

MACHINE VISION SYSTEMS - CUSTOMER PROJECTS

In September 1999 we entered into a contract to develop a system for
inspecting and sorting brake shoes for Satisfied Brake Products Inc. of
Cornwall, Ontario. We agreed to develop the machine vision components of the
system. A company named Mercator Robotec Inc. agreed to provide system
integration services, to link our machine vision components with the
mechanical control systems of the customer's production line. The machine
vision components of the system were required to identify and separate
approximately 200 different types of brake shoes, and to inspect the brake
shoes visually for defects.

The price for the system was Cdn$100,000, or approximately US$68,000. We
received approximately half of that price, with the other half going to
Mercator Robotec Inc. The system was completed in January 2000, and is
currently in operation. Our contract with Satisfied Brake Products Inc.
represented our first major contract for the sale of a custom vision system.

In November 1999 we prepared a feasibility study for Toyota Canada Ltd. for
the development of a system for inspecting and sorting automobile wheels. The
proposed system will be required to identify and separate approximately 20
different types of automobile wheels, and to inspect the wheels visually for
defects. The proposed price for the system is approximately US$90,000
(Cdn$130,000). We are pursuing negotiations with Toyota Canada Ltd. to obtain
a contract.

We plan to pursue additional opportunities to supply machine visions systems
for industrial applications. Investors are cautioned that most machine vision
systems are designed for the specific needs of a particular customer, and
represent isolated purchases by the customers in question. Accordingly, we
have no assurance that we will be able to obtain additional contracts to
supply machine vision systems, or that any customers we secure will become
repeat customers.

MACHINE VISION SYSTEMS - BRAINTRON PROCESSOR

In 1995 the Company developed the first generation of the BrainTron
processor, which performs the functions of a training and matching module, as
described above. The first generation BrainTron processor exists in hardware
and software versions, both of which operate under the Windows NT operating
system. Both versions can be used in final applications, although the
software version was intended principally for initial testing. The hardware
version is a plug-in computer card with five chips performing the following
functions: communication with a host computer, control of data movement
within the processor, generation of addresses to move data in memory,
arithmetic operations, and random access memory (RAM).

The first generation BrainTron processor uses the principles of fuzzy
mathematics to match physical signatures to signatures stored in memory.
Training functions carried out by the BrainTron processor use the ORB
algorithm, which includes a set of rules for making fuzzy sets either larger
or smaller to reflect new data. Using the ORB algorithm, the first generation
BrainTron processor expands or contracts the fuzzy sets being used to compare
signatures and physical signatures. This process "trains" the system to
require a close match in circumstances where a close match can be expected,
and to accept a more approximate match where historical data shows that a
close match will not likely be found.

<PAGE>

During 1998 we commenced development of the second generation BrainTron
processor. The second generation BrainTron processor uses revised
mathematical algorithms to perform the classification and training functions.
In performing its classification function, the second generation BrainTron
processor uses a different mathematical formula for measuring how well two
vectors (representing a signature and a physical signature) match. In
performing its training function, the second generation BrainTron processor
adapts a system to new pieces of information in a way that is independent of
the order in which the new pieces of information are received. We believe
that the enhancements to the second generation BrainTron processor allow it
to carry out its classification and training functions more accurately and
quickly.

The software version of the second generation BrainTron processor has been
completed, and is undergoing testing. We expect to use the second generation
BrainTron processor in any machine vision systems which we install in the
near future. We have not yet commenced development of a hardware version of
the second generation BrainTron processor, and do not have definite plans as
to when, or whether, a hardware version will be built.

If suitable opportunities arise, we will license the BrainTron processor to
other companies. However, we expect that the BrainTron processor will be used
mainly as a component in customized vision systems which we develop for
customers.

MACHINE VISION SYSTEMS - ODYSEE DEVELOPMENT STUDIO

During 1999 we completed development of the Odysee Development Studio
("Odysee").

Odysee is designed to facilitate the expeditious and economical development
of customized vision systems. Odysee stores and manipulates libraries of
routines to perform the various functions which can be included within a
vision system. Odysee includes a standardized interface to which all of the
routines are adapted, so that the routines can be combined easily and
efficiently into an integrated system. Odysee permits the operator to "drag
and drop" individual routines from particular libraries to a window opened
for the system under development. Once added to the system window, the
routines are automatically linked together through the standardized Odysee
interface. Odysee thus eliminates the need to write specialized computer code
to link individual routines.

We initially developed Odysee for internal use, as an internal development
tool. We have tried briefly to market Odysee, through a limited marketing
program, as a development tool for use by other software companies and system
integrators. To that end, we modified Odysee to include additional routines
and functions, beyond those useful principally for vision systems. The
additional routines include numerical calculation and statistical routines,
to perform a variety of mathematical operations, and routines which can
manipulate large databases. Our attempts to market Odysee have thus far not
been successful, and we presently plan to use Odysee principally as an
internal development tool, as initially conceived.

Development of Odysee has been funded in part by a grant from the National
Research Council of Canada in the amount of $52,600.

The software by which Odysee links the various routines within its libraries
is proprietary. However, we do not have proprietary ownership of the majority
of the individual routines that can be used with

<PAGE>

Odysee, some of which are available in the public domain.

MACHINE VISION SYSTEMS - COMPETITIVE POSITION

The Automated Imaging Association ("AIA") has identified various categories
for companies operating in the vision systems industry. We believe that for
purposes of analysing our competitive position, we would be classified as a
merchant machine vision vendor.

According to data published by the AIA, over 250 merchant machine vision
companies were active in the vision systems market during 1998, with over 200
of those based in North America. The AIA reported that for 1998, of 214
companies operating in North America:

(a) 139 companies (vs. 109 in 1997) operated with revenues of less than $5
million;

(b) 35 companies (vs. 29 in 1997) operated with revenues in the range of
$5-10 million;

(d) 11 companies (vs. 9 in 1997) operated with revenues in the range of
$20-30 million;

(e) 6 companies (vs. 6 in 1997) operated with revenues in the range of
$30-40 million; and

(f) 5 companies (vs. 7 in 1997) operated with revenues in excess of $40
million.

We do not know of a reliable way to evaluate our future competitive position
within the industry. We believe that with the Standard Brake Products Inc.
project, we have demonstrated an ability to complete sales to major
industrial clients. However, we do not have an established track record of
sales or profits to provide any reliable indication of an ability to attract
significant market share or to operate profitably.

SERVICES AND PRODUCTS - INTERNET TECHNOLOGIES

With the development of the IMPAC accelerator board, we intend to develop
Internet-related products which utilize the data processing capabilities of
the IMPAC board. In addition, following development of the Wizmaster program,
we intend to pursue opportunities to develop additional products in
cooperation with Sideware Systems Inc.

INTERNET TECHNOLOGIES - DESCRIPTION OF THE IMPAC ACCELERATOR BOARD

On July 6, 1998 we entered into a Product Development Agreement with United
Technologies Microelectronic Systems Inc. ("UTMC"), now a subsidiary of
Aeroflex Inc. Under that agreement we agreed to cooperate with UTMC in the
development of an Image Processor Accelerator Card ("IMPAC").

We originally intended to use the IMPAC board to design vision systems with
increased computing speed and efficiency. IMPAC was designed to consist of
the following principal blocks:

THE COMMUNICATIONS BLOCK , to control communication between IMPAC and the
main computer in which

<PAGE>

IMPAC is installed, and between the individual blocks of IMPAC.

THE BRAINTRON BLOCK, to contain the second generation BrainTron processor and
associated memory.

THE CAM ENGINE BLOCK, to contain UTMC's proprietary CAM (Content Addressable
Memory) engine.

THE MICROPROCESSOR BLOCK, to contain a conventional microprocessor to perform
computing functions which are not performed by the communication block, the
BrainTron block or the CAM engine block.

The CAM (Content Addressable Memory) engine is an integrated circuit which
searches computer memory according to the content of the memory, as opposed
to the address of the memory. Rather than telling the user the contents of
memory at a specific address, the CAM engine can tell the user the address at
which the memory stores specific content (or the closest available match to
the specific content). The CAM engine thus creates the ability to identify
exact or close matches to specific data content at speeds which can not
currently be achieved with PC-based software applications.

In December 1999 we completed development and de-bugging of a prototype IMPAC
board. The prototype board includes a slot for later addition of the
BrainTron processor (as opposed to a completed BrainTron block) as we have
not yet developed a hardware version of the second generation BrainTron
processor. In addition, we have completed drivers enabling IMPAC to perform
basic input/output functions and to receive programming code from a host
computer (so that IMPAC can be programmed to perform specific functions).
These drivers are sufficient to permit us to begin testing IMPAC in specific
applications. These functions, and the operation of the CAM engine block and
microprocessor block, can be implemented without completing the BrainTron
block.

<PAGE>

INTERNET TECHNOLOGIES - POTENTIAL APPLICATIONS AND MARKETING FOR IMPAC

With the rapid growth in the market for Internet products, our current plan
is to investigate potential Internet-related applications for the IMPAC
board. We believe that the high speed data processing and matching
capabilities of the IMPAC board may be used in applications which screen or
filter data being transmitted over the Internet.

Examples of the potential applications which we intend to investigate
including the following.

VIRUS DETECTION APPLICATIONS. The transmission of computer viruses through
the Internet is a growing problem. We are investigating the possibility of
using the IMPAC accelerator board to develop a system which will screen
Internet data streams for viruses. We believe that the IMPAC board may be
well suited to this type of application, through its ability to compare a
sample data stream with a large number of known viruses. We expect that any
virus detection system which we develop using IMPAC will be suitable
principally for major Internet sites, as the system is likely to be too
expensive for individual PC users.

INTERNET LISTENING POSTS. We are also investigating the possibility of using
IMPAC to develop systems which detect specified types of information being
transmitted over the Internet. Systems of this nature could be used by firms
seeking to maintain the security of their Internet sites and computer systems
by detecting (and then preventing) the unauthorized transmission of certain
types of secure information, or seeking to gather generic information on
Internet traffic.

Investors are cautioned that our investigations into the use of the IMPAC
board in Internet applications are in their initial stages. We have not
materially advanced the development of any Internet-related application using
the IMPAC board. There is no assurance that we will identify or complete any
Internet-related application which can be profitably exploited. In addition,
any Internet-related application which we develop may be offered in markets
which are highly competitive. Until our product development plans are further
advanced, we have no means of evaluating our potential competitive position
in any markets we may attempt to exploit.

Simultaneously with the Product Development Agreement described above, we
entered into a Manufacturing and Sales Agreement with UTMC. Under the
Manufacturing and Sales Agreement, UTMC will have responsibility for
manufacturing IMPAC, which we will purchase from UTMC. We will have
responsibility for marketing and sales of IMPAC. UTMC will assist in the
marketing and sales of IMPAC by referring customers to us, by including IMPAC
on its website and in certain catalogues of UTMC, and by such other means as
UTMC considers appropriate. UTMC will receive a commission of 10% on all
business referred to us by UTMC, or 5% in cases where we also commenced an
independent sales initiative.

<PAGE>

INTERNET TECHNOLOGIES - WIZMASTER

Pursuant to a Software Development Agreement with Sideware Systems Inc. dated
September 20 1999, we have developed a computer program named Wizmaster.
Wizmaster was designed to be included in the Dr. Bean program developed and
marketed by Sideware Systems Inc.

Dr. Bean is designed for use by companies operating e-commerce web sites. Dr.
Bean allows the company's customer service representatives to communicate
directly with potential customers, through live chat over the Internet. Dr.
Bean also incorporates a feature named "AutoService". The AutoService feature
displays automated questions for customer response. Based on the response,
the AutoService feature can provide an automated response to the customer's
inquiry, display further questions, or route the customer to an appropriate
customer service representative.

"Wizmaster" will be used in conjunction with the AutoService feature.
Wizmaster will permit Dr. Bean users to create customized "knowledge trees"
which specify the questions and possible responses to be used by the
AutoService feature. Through a user friendly drag-and-drop procedure,
Wizmaster permits the user to add a new question or response to the
AutoService feature, and to link specified responses to specified questions.

Under the Software Development and License Agreement, Sideware Systems Inc.
agreed to pay for the cost of developing Wizmaster on a cost plus 10% basis.
Sideware Systems Inc. acquired, at no further charge, a perpetual worldwide
license to use Wizmaster as part of Dr. Bean. We are prohibited from
licensing Wizmaster to any other software developer (but not to systems
integrators) for a period of one year from the date Wizmaster became
generally available to purchasers of Dr. Bean (which occurred in December
1999).

If opportunities arise, we intend to market Wizmaster to systems integrators
and (beginning in December 2000) to software developers. At the present time,
we do not know whether any significant market for Wizmaster exists. We also
intend to pursue opportunities to develop additional products that can be
integrated with Dr. Bean.

PLAN OF OPERATION

As at February 1, 2000 we employ 6 full time and 10 part time officers or
employees. Our monthly salary costs are approximately $45,000 per month.

For the nine month period ended September 30, 1999 our average monthly
general, overhead, and administrative costs, exclusive of salary costs, were
approximately $45,000 per month. During the nine month period ended September
30, 1999 we also incurred capital expenditures of approximately $38,000 for
computer equipment and software.

During the nine month period ended September 30, 1999 we paid $114,000,
allocated to "research and

<PAGE>

development", to North Shore Circuit Design for work on the IMPAC accelerator
board. Most of the work of North Shore Circuit Design was complete by the end
of 1999. We expect that we will pay North Shore Circuit Design approximately
$50,000 for additional work during the first six months of 2000.

During the final quarter of 1999 and January 2000 we raised:

(a) approximately $750,000 through private placements; and
(b) approximately $500,000 through the exercise of incentive stock options.

Inclusive of the private placement and stock option proceeds described above,
our cash balance as at February 1, 2000 is approximately $1,000,000.
Accordingly, our present cash balance should be sufficient to pay our to
anticipated cash expenditures to June 30, 2000.

During the first six months of 2000 we will pursue the following projects and
objectives:

1. Obtaining additional contracts for custom vision systems, including
further negotiations with Toyota Canada Ltd..
2. Continued development of, and identifying applications for, the IMPAC
accelerator board.
3. Pursuing opportunities to develop additional products in cooperation
with Sideware Systems Inc.
4. Continued development of the second generation BrainTron processor.

If we do not have sufficient financial resources to pursue all of these
objectives, funds will be allocated in the order of priority set out above.

We have not at any time been able to generate sufficient revenue from sales
of our products or services to sustain ongoing operations, and do not have an
established record of sales or established distribution channels for our
products or services. In order to continue as a going concern, we will have
to begin generating significant sales revenue.

RESEARCH AND DEVELOPMENT

During the year ended December 31, 1998 we incurred research and development
expenses of $321,378, which included $116,204 paid to North Shore Circuit
Design for work on the IMPAC accelerator board. During the nine month period
ended September 30, 1999 we incurred research and development expenses of
$442,970, which included $141,400 paid to North Shore Circuit Design.

Other than payments to North Shore Circuit Design, substantially all of our
research and development expenses consist of internal personnel costs
allocated to research and development.

<PAGE>

During the first six months of 2000, we expect to pay approximately $50,000
to North Shore Circuit Design to complete its work on the IMPAC board.
Otherwise, we expect to complete substantially all of our research and
development work through our own employees.

INTELLECTUAL PROPERTY

We believe that software and related technical data which we have developed
constitute intellectual property belonging to us. The software and technical
data over which we assert intellectual property rights include principally
the following:

(a) software we have written and incorporated in the Odysee Development
Studio, including the software by which Odysee links the various
subroutines within its libraries;

(b) software and design specifications incorporated in the second
generation BrainTron processor;

(d) software written in developing the Wizmaster program.

We have also registered the trademarks "BrainTech" and "BrainTron" with the
United States Patent and Trademark office.

Under our Product Development Agreement with UTMC dated July 6, 1998, we and
UTMC own jointly all intellectual property created in the development of the
IMPAC accelerator board. The stipulations as to joint ownership do not apply
to pre-existing intellectual property owned by either us or UTMC, or to
improvements or modifications to such pre-existing intellectual property.

Pursuant to a License Agreement dated January 13, 1995 with Willard W. Olson,
we hold a non-exclusive license to use Olson Reticular Brainstem algorithm
("ORB"). The term of the license is for 10 years, expiring in January, 2005.

ORB is a method of pattern classification which includes the following
features:

(a) ORB measures the similarity of two visual patterns by developing a
mathematical measurement for the degree of similarity in various
features in the patterns.

(b) ORB uses fuzzy mathematics to measure the similarity in individual
features.

(c) ORB is adaptive, in the sense that the mathematical criteria which it
uses in comparing features can be modified to take account of new
data, as new patterns are observed. In this way, a system using ORB
can be "trained" over time to recognize and distinguish visual
patterns more accurately.

The first generation BrainTron processor was designed incorporating ORB. ORB
is not utilized in the second generation BrainTron processor. For further
information on the License Agreement relating to ORB, see "RISK FACTORS".

<PAGE>

Our ability to compete successfully will depend in part on our ability to
protect our proprietary technology and information. Apart from the BrainTech
and BrainTron trademarks, we have not applied for registration of
intellectual property rights in respect of any of our software (although
certain forms of legal protection, such as copyright ownership, are available
without registration). Although we attempt to prevent improper disclosure of
our proprietary technology, we can not assure that the measures we take will
be adequate, or that competitors will not be able to develop similar
technology independently. Further, we can not assure that claims allowed on
any patent we obtain will be broad enough to protect our technology, that any
patent applications will ultimately be successful, or that foreign
intellectual property laws will protect our intellectual property. We may
have to resort to litigation to enforce or determine the validity and scope
of our proprietary rights, and there can be no assurance that our
intellectual property rights, if challenged, will be upheld as valid. Such
litigation could result in substantial costs and diversion of resources and
could have a material adverse effect on our business, financial condition and
operating results, regardless of the outcome of the litigation. In addition,
we can not assure that any patents we obtain will not be challenged,
invalidated or circumvented or that the rights granted thereunder will
provide competitive advantages to us.

We have no pending claims against us for infringement of any patents or other
intellectual property rights of others. However, we may receive, in the
future, communications from third parties asserting intellectual property
claims against us. Such claims could include assertions that our products
infringe, or may infringe, the proprietary rights of third parties, requests
for indemnification against such infringement or suggestions that we may be
interested in acquiring a license from such third parties. We can not assure
that any such claim made in the future will not result in litigation, which
could involve significant expense and, if we are required or consider it
appropriate to obtain a license relating to one or more products or
technologies, we can not assure that we will be able to do so on commercially
reasonable terms, or at all.

DESCRIPTION OF PROPERTY

Our head office premises are located in North Vancouver, British Columbia,
Canada. Prior to September 1, 1998 the North Vancouver premises occupied
approximately 7,900 square feet. Effective September 1, 1998 additional space
was added to the premises, increasing the area to 14,867 square feet. We
share the North Vancouver premises with Sideware Systems Inc., a software
development company. The term of the lease expires August 31, 2003.

The lease provides for annual minimum rent of approximately $130,000 (equal
to approximately $8.84 per square foot) for the first year of the lease
commencing September 1, 1998 and ending August 31, 1999. Annual minimum rent
under the lease escalates to $9.01 per square foot in the second year, $9.18
per square foot in the third year, $9.35 per square foot in the fourth year,
and $9.52 per square foot in the fifth year. In addition, the lease requires
payment of additional costs relating to property taxes and common area
maintenance costs. Those costs are presently approximately $2.80 per square
foot.

We operate our head office premises under a Cost Sharing and Allocation
Agreement with Sideware Systems Inc. Prior to October 1999 we shared the
costs of the premises with Sideware Systems Inc. equally. In October 1999 we
agreed with Sideware Systems Inc. to re-allocate the premises costs 20% to us
and 80% to Sideware Systems Inc. effective from January 1, 1999, as Sideware
Systems Inc. employs substantially more personnel, and thus makes greater use
of the premises.

<PAGE>

The landlord under the lease is HOOPP Realty Inc., an arm's length company .
The tenant under the lease is Techwest Management Inc., a company of which
Owen Jones and Grant Sutherland are each directors, and in which Owen Jones
and Grant Sutherland are each one third shareholders. We are a co-covenantor
under the lease, along with Sideware Systems Inc. The costs of Techwest
Management Inc. under the lease are passed through to us and Sideware Systems
Inc. without any additional charges or mark-up.

Effective July 1, 1999 we have also occupied additional leasehold premises in
Vancouver, B.C. We have entered into:

(a) a lease covering the premises at Suite 1620, 777 Dunsmuir Street (the
"Original Premises") for the period July 1, 1999 to June 30, 2002, and
covering the premises at Suite 1600, 777 Dunsmuir Street (the "Extended
Premises") for the period December 1, 2000 to June 30, 2002; and

(b) an Assignment of Lease covering the Extended Premises for the period
July 1, 1999 to November 30, 2000.

The total space included in the Original and Extended Premises is 8,325
square feet. The landlord of the Original and Extended Premises is Pacific
Center Leaseholds Limited, an arm's length company.

The tenant under the lease described in (a) is Techwest Management Inc. We
are an indemnifier under the lease, along with Sideware Systems Inc. As an
indemnifier, we are liable to perform all of the obligations of the tenant
under the lease, including the payment of rent.

The assignor under the assignment described in (b) is SJM Management Ltd., a
private management company which holds a lease in respect of the Extended
Premises covering the period July 1, 1999 to November 30, 2000. Grant
Sutherland holds a one third beneficial interest in SJM Management Ltd. Prior
to July 1, 1999 the Extended Premises were occupied by the law firm
Sutherland Johnston MacLean, in which Mr. Sutherland was a partner. Under the
assignment, SJM Management Ltd. assigned its interest in respect of the
Extended Premises to Techwest Management Inc., which agreed to perform all of
the obligations of the tenant under the lease. We are an indemnifier under
the assignment, along with Sideware Systems Inc. As an indemnifier, we are
liable to perform all of the obligations of the assignee, including the
payment of rent.

Under the lease described in (a), the rent payable with respect to the
Original Premises for the period July 1, 1999 to June 30, 2002 is
approximately $43,860 per annum (approximately $11.22 per square foot)
payable in equal monthly installments of $3,655. The rent payable with
respect to the Extended Premises for the period December 1, 2000 to June 30,
2002 is approximately $49,500 per annum (approximately $11.22 per square
foot) payable in equal monthly installments of $4,130. In addition to rent,
monthly charges are payable for maintenance fees, utilities and taxes. We
anticipate that the additional monthly charges will be approximately $3,400,
based on initial invoices submitted by Pacific Centre Leaseholds Limited.

Under the assignment described in (b), the rent payable with respect to the
Extended Premises for the period July 1, 1999 to November 30, 2000 is
approximately $43,540 per annum (approximately $9.86 per square foot) payable
in equal monthly installments of $3,630. In addition, monthly charges of
approximately $3,400 per month are payable for maintenance fees, utilities,
and taxes.

<PAGE>

Sutherland Johnston, a law firm in which Grant Sutherland is a partner, will
continue to occupy a portion of the Extended Premises. Sideware Systems Inc.
and Sutherland Johnston will be responsible for a portion of the costs
relating to the Original and Extended Premises depending on the relative use
of those premises by those parties. We expect that for the foreseeable
future, we will:

(a) bear approximately 10% of the cost of the Extended Premises; and
(b) not use, and thus not bear any of the cost of, the Original Premises.

LEGAL PROCEEDINGS

We are involved in the following material court proceedings.

1. JMF MANAGEMENT INC. ET AL V. BRAINTECH, INC. ET AL, BRITISH COLUMBIA
SUPREME COURT ACTION NO. C990550

On February 1, 1999 JMF Management Inc. and Manfred Kurschner commenced legal
proceedings against us and TechWest Management Inc. Mr. Kurschner is our
former Manager of Investor Relations and JMF Management Inc. is Mr.
Kurschner's personal management company. The Plaintiffs claim approximately
$100,000 in damages for alleged breach of a stock option agreement and
approximately $7,500 alleged to be owing pursuant to a consulting agreement.
We have filed a defence and counterclaim. Our counterclaim claims damages for
breach of fiduciary duty and negligence. No depositions have been conducted
in the action and no trial date has been set. The outcome of the action is
uncertain.

2. CACTUS CONSULTANTS CO. LTD. V. BRAINTECH, INC. ET AL, BRITISH COLUMBIA
SUPREME COURT ACTION NO. C991377

On March 16, 1999 Cactus Consultants Co. Ltd., Crystal Securities Inc., and
Elmswell Investments Inc. commenced legal proceedings against us and certain
of our present and former directors. The Plaintiffs claim $606,000 as damages
for breach of contract and conversion of stock certificates. Our records show
that during the fiscal year ending December 31, 1995, a total of 3,000,000
shares of Common Stock were subscribed at a price of $0.25 per share, and
that we received $606,000 of the subscription amount. Prior to December 31,
1998 we recorded $606,000 as "subscriptions received" on our financial
statements. Subsequent to the commencement of court action, we have recorded
the same amount as "amounts in dispute". We have filed a defence and
counterclaim alleging that the plaintiffs and Jan Olivier, a former promoter
of our company, caused share certificates to be issued to the plaintiffs
improperly, and caused our funds to be used for unauthorized and improper
purposes. The action has been set for trial in April 2001. The outcome of the
action is uncertain.

<PAGE>

3. BRAINTECH, INC. V. JOHN KOSTIUK, DISTRICT COURT OF HARRIS COUNTY ACTION
96-55978; BRITISH COLUMBIA SUPREME COURT ACTION C972736; BRITISH
COLUMBIA COURT OF APPEAL ACTION CA024459

On May 7, 1997 we obtained judgment for damages in the amount of $300,000 in
legal proceedings commenced in the District Court of Harris County in the
State of Texas against John Kostiuk, a resident of British Columbia, for
defamatory and injurious statements which Mr. Kostiuk caused to be published
about us over the Internet. On April 2, 1998 we obtained a judgement of the
Supreme Court of British Columbia enforcing the Texas judgment.

Effective October 31, 1998 Sideware Systems Inc. purchased a 50% interest in
the judgment for a purchase price of $136,000. Our agreement with Sideware
Systems Inc. provided that the purchase price would be adjusted depending on
the benefit ultimately received by Sideware Systems Inc. On March 18, 1999
the British Columbia Court of Appeal reversed the judgment of the British
Columbia Supreme Court, rendering the judgment (subject to any further
appeal) unenforceable against any assets of John Kostiuk in British Columbia.
Subsequent to the decision of the British Columbia Court of Appeal, we
returned the $136,000 paid by Sideware Systems Inc. We have filed an
Application for Leave to Appeal to the Supreme Court of Canada. That
application is pending. Any recovery in the proceeding must be considered
speculative.

MANAGEMENT

DIRECTORS, EXECUTIVE OFFICERS AND KEY EMPLOYEES

The following table sets forth certain information, as of February 1, 2000,
with respect to our directors, executive officers and key employees.

<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Owen L.J. Jones 48 President, Chief Executive Officer and Director
W. Grant Sutherland 53 Chairman of the Board of Directors
James L. Speros 40 Director
</TABLE>

OWEN L.J. JONES has been our President, Chief Executive Officer and a
director since December 1993. Prior to joining our Board of Directors, Mr.
Jones was the V.P. Sales, Marketing and Technology of Evergreen International
Technology Inc. (now Sideware Systems Inc.), a software development company
whose shares trade on the Canadian Venture Exchange and the OTC Bulletin
Board. Mr. Jones resigned from his position with Evergreen International
Technology Inc. in December 1993. In May 1995 Mr. Jones was elected as a
director of Evergreen International Technology Inc., and shortly thereafter
assumed the responsibilities of President and Chief Executive Officer of that
company. Subsequent to May 1995 Mr. Jones has divided his time and effort
between our affairs and the affairs of Sideware Systems Inc. Mr. Jones is not
a director of any public companies other than the Company and Sideware
Systems Inc.

W. GRANT SUTHERLAND was appointed one of our directors, and Chairman of our
Board of Directors, in November 1995. Mr. Sutherland is a licensed lawyer in
the Province of British Columbia, and has been engaged in the private
practice of law for 26 years, currently as a partner in the Vancouver law
firm

<PAGE>

Sutherland Johnston. Mr. Sutherland has also been a director of Sideware
Systems Inc. since May 1993. Since November 1995, Mr. Sutherland has devoted
the majority of his time and effort to our affairs and those of Sideware
Systems Inc., and presently divides his time between our affairs and those of
Sideware Systems Inc. Mr. Sutherland is not a director of any public
companies other than the Company and Sideware Systems Inc.

JAMES L. SPEROS joined our Board of Directors on September 15, 1998. Mr.
Speros is also a director of Sideware Systems Inc., President and Chief
Operating Officer of Sidweware Corp., a wholly owned subsidiary of Sideware
Systems Inc. Mr. Speros was previously the President and owner of two
professional sports franchises, the Baltimore Stallions and Montreal
Alouettes of the Canadian Football League, and was the Vice Chairman and a
member of the Board of Governors of the Canadian Football League. Mr. Speros
is also a director of Consolidated Maymac Petroleum Corp., a public company
trading on the Canadian Venture Exchange.

Owen Jones and Grant Sutherland were directors of Sideware Systems Inc. at
times when two bankruptcy petitions under the BANKRUPTCY AND INSOLVENCY ACT
(Canada) were brought in the Supreme Court of British Columbia against that
company by former directors of that company or private corporations
controlled by them. Both bankruptcy petitions were dismissed in January 1998.

The Company's directors will hold office until they resign, or until the
Company's next Shareholders' Meeting.

EXECUTIVE COMPENSATION

Apart from incentive stock options, disclosed below, we do not presently
compensate our directors for services provided as directors. We provide
compensation to our directors, who are also officers, for services rendered
as officers.

We provide the following compensation to our officers:

OWEN JONES. Effective May 1, 1998 Mr. Jones receives payments totaling
Cdn$10,000 (US$6,800) per month. We currently pay 20% of those monthly
payments, with Sideware Systems Inc. paying the remaining 80%. Prior to June
1, 1998, Mr. Jones' monthly payments (then shared equally between us and
Sideware Systems Inc.) were Cdn$5,000 (US$3,400) per month. Mr. Jones also
holds incentive stock options to acquire 1,527,500 shares at $0.20 per share.
Mr. Jones receives no other compensation from us or any of our subsidiaries.

GRANT SUTHERLAND. Effective May 1, 1998 Mr. Sutherland receives payments
totaling Cdn$10,000 (US$6,800) per month. We currently pay 20% of those
monthly payments, with Sideware Systems Inc. paying the remaining 80%. Mr.
Sutherland also holds incentive stock options to acquire 107,500 shares at
$0.20 per share. Mr. Sutherland exercised options to acquire 300,000 shares
at $0.20 per share in August 1998 and 1,120,000 shares at $0.20 per share in
January 2000. Mr. Sutherland receives no other compensation from us or any of
our subsidiaries.

JAMES L. SPEROS. Mr. Speros holds options to acquire 300,000 shares at $0.20
per share, but does not receive any salary from us. Mr. Speros receives no
other compensation from us or any of our subsidiaries.

<PAGE>

The aggregate amount of cash remuneration which we paid to our directors and
officers as a group was approximately Cdn$ $48,000 (U$32,640) during the
fiscal ended December 31, 1999.

INCENTIVE STOCK OPTIONS

From time to time, we grant incentive stock options to directors, officers,
consultants, and employees.

The following table sets forth the incentive stock options held by our
directors and executive officers as at February 1, 2000.

<TABLE>
<CAPTION>
- ---------------- ------------ ---------------- ------------ --------------- ----------- ------------------- -----------
Percent of Market Value of
Options Total Options Number Number Exercise Underlying Shares Expiry
Name Granted Granted(1) Exercised Outstanding Price at Date of Grant Date
<S> <C> <C> <C> <C> <C> <C> <C>
- ---------------- ------------ ---------------- ------------ --------------- ----------- ------------------- -----------
1,500,000 19.4% Nil 1,500,000 $0.20 $0.23 01/12/02
Owen Jones 27,500 0.4% Nil 27,500 $0.20 $0.20 20/04/04
- ---------------- ------------ ---------------- ------------ --------------- ----------- ------------------- -----------
Grant 1,500,000 19.4% 1,420,000 80,000 $0.20 $0.23 01/12/02
Sutherland 27,500 0.4% Nil 27,500 $0.20 $0.20 20/04/04
- ---------------- ------------ ---------------- ------------ --------------- ----------- ------------------- -----------
James Speros 300,000 3.9% Nil 300,000 $0.20 $0.20 20/04/04
- ---------------- ------------ ---------------- ------------ --------------- ----------- ------------------- -----------
</TABLE>

(1) This column states the percentage of all incentive stock options which we
have granted.

The total number of incentive stock options held by our directors and
officers as at February 1, 2000 is 1,915,000. All of the options stated in
the table above are exercisable within 60 days of February 1, 2000.

Between September 30, 1999 and February 1, 2000, the following incentive
stock options were exercised by directors and officers:

Grant Sutherland 1,120,000 options

In December 1999 we filed a registration statement on Form S-8 with the
Securities and Exchange Commission registering our outstanding stock options.

<PAGE>

PRINCIPAL SHAREHOLDERS

The following table sets forth certain information regarding beneficial
ownership of common stock, as of February 1, 2000 by (i) each shareholder
whom we know to be the beneficial owner of more than 5% of our outstanding
shares, (ii) each of our Directors and executive officers, and (iii) all
Directors and executive officers as a group:

<TABLE>
<CAPTION>
- ---------------------------------------------- ----------------------------------- -----------------------------------
NAME AND ADDRESS NUMBER OF SHARES PERCENTAGE OF SHARES
OF BENEFICIAL OWNER BENEFICIALLY OWNED BENEFICIALLY OWNED
(1) (1)
<S> <C> <C>
- ---------------------------------------------- ----------------------------------- -----------------------------------

Owen L.J. Jones*(2) 3,808,500 8.4%
102 - 930 W. 1st North Vancouver,
B.C., Canada V7P 3N4

James L. Speros*(3) 300,000 0.7%
1111 Grand Hamptons Dr.
Herndon, Virginia
20170
W. Grant Sutherland*(4) 2,992,500 6.7%
1600 - 777 Dunsmuir St.
Vancouver B.C.
V7Y 1K4
Willard W. Olson 2,500,000 5.7%
6021 East Huntress Dr.
Paradise, Arizona
85253
All executive officers and directors as a 7,101,000 15.4%
group (3 Persons)(5)
- ---------------------------------------------- ----------------------------------- -----------------------------------
</TABLE>

* Denotes Director of the Company
- ---------

(1) Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission and generally includes voting or
investment power with respect to securities. Shares of common stock subject
to options or warrants currently exercisable or convertible, or exercisable
or convertible within 60 days of February 1, 2000 are deemed outstanding
for computing the percentage of the person holding such option or warrant
but are not deemed outstanding for computing the percentage of any other
person. Except as indicated in the footnotes to this table and pursuant to
applicable community property laws, the persons named in the table have
sole voting and investment power with respect to all shares of common stock
beneficially owned.

(2) Includes 1,527,500 shares issuable pursuant to stock options exercisable
within 60 days of February 1, 2000.

(3) Includes 300,000 shares issuable pursuant to stock options exercisable
within 60 days of February 1, 2000.

(4) Includes 107,500 shares issuable pursuant to stock options exercisable
within 60 days of February 1,

<PAGE>

2000.

(5) Includes 1,935,000 shares issuable pursuant to stock options exercisable
within 60 days of February 1, 2000.

We are unaware of any person who owns 10% or more of our voting securities.
We are unaware of any arrangements, the operation of which may at a
subsequent date result in a change of corporate control.

CERTAIN TRANSACTIONS

Within the last three fiscal years, we have entered into the transactions set
out below in which our current directors or officers were interested.

In October 1996 we entered into an agreement with Sideware Systems Inc.
effective November 1, 1995 pursuant to which certain costs associated with
our premises and operations were shared with Sideware Systems Inc. The
principal costs subject to the cost-sharing agreement included:

- - costs of the North Vancouver premises which we share with Sideware
Systems Inc.; and

- - personnel costs (billed through Techwest Management Inc. - see below)
including, inter alia, the salary costs of our President and accounting
personnel; and

Prior to October 1999 we shared the common costs equally with Sideware
Systems Inc. By a Cost Sharing and Allocation Agreement executed in October
1999, we agreed with Sideware Systems Inc. to re-allocate the common costs
20% to us and 80% to Sideware Systems Inc. effective from January 1, 1999.
The reason for the reallocation of costs was the substantially greater level
of business conducted by Sideware Systems Inc., and its corresponding greater
use of the common premises and personnel.

Sideware Systems Inc. is a software development company whose shares trade on
the Canadian Venture Exchange and the OTC Bulletin Board. The directors of
Sideware Systems Inc. include Owen Jones, Grant Sutherland and James Speros.

Shared costs under the Cost Sharing and Allocation Agreement are administered
by Techwest Management Inc., a private management company. In addition,
services of certain of our personnel are provided to us through Techwest
Management Inc. Techwest Management Inc. is a private management company in
which Owen Jones and Grant Sutherland each hold a one third interest. The
personnel whose services are provided through Techwest Management Inc.
include, inter alia, Owen Jones and our accounting personnel. Effective June
1, 1998, Mr. Jones receives an annual salary of Cdn$120,000 (approximately
US$81,600) from Techwest Management Inc. The cost of Mr. Jones' salary is
currently borne 20% by us and 80% by Sideware Systems Inc.

From time to time, either our payments or those of Sideware Systems Inc. have
exceeded the proportionate share required under the cost sharingarrangement,
giving rise to indebtedness as between us, Sideware Systems Inc. and Techwest
Management Inc. Through much of 1998 and 1999, we were indebted to Sideware
Systems Inc., as we did not have sufficient cash available to pay our
proportionate share of the common operating costs. As at February 1, 2000 we
have paid off this intercorporate indebtedness.

<PAGE>

Techwest Management Inc. passes shared costs (including personnel costs)
through to us and Sideware Systems Inc. at cost, without any markup.

During the fiscal year ended December 31, 1998 we purchased approximately
$26,000 worth of computer equipment from Sideware Systems Inc. During the
nine month period ended September 30, 1999 our purchases or computer
equipment from Sideware Systems Inc. were approximately $21,000. We purchase
most of our computer equipment through Sideware Systems Inc. owing to
favorable pricing on IBM equipment available to Sideware Systems Inc.
Sideware Systems Inc. charged a markup on the initial purchases, but its
current policy is to pass such equipment on to us at cost.

We entered into a Software Development and License Agreement dated September
20, 1999 with Sideware Systems Inc. Pursuant to the Software Development and
License Agreement, we developed a program named the "Wizmaster", for
incorporation into Sideware's "Dr. Bean" program. Dr. Bean is an electronic
Customer Relations Management ("eCRM") program which supports live chat over
the internet between companies and their customers. One of the features of
Dr. Bean, known as "AutoService", displays automated questions for customer
response, and then processes the customer's inquiry according to the response
he selects. Wizmaster permits Dr. Bean users to customize the questions and
answers used in the AutoService feature through a user friendly drop-and-drag
procedure.

Under the Software Development and License Agreement, Sideware Systems Inc.
agreed to pay the cost of developing Wizmaster on a cost plus 10% basis.
Sideware Systems Inc. acquired, at no further charge, a perpetual worldwide
license to use Wizmaster as part of Dr. Bean. We are prohibited from
licensing Wizmaster to any other software developer (but not to systems
integrators) for a period of one year starting from the date Wizmaster
becomes generally available to purchasers of Dr. Bean.

Effective October 31, 1998 Sideware Systems Inc. purchased an interest in the
proceeds of a judgment which we obtained on April 2, 1998 against John
Kosituk, in the amount of $300,000, in British Columbia Supreme Court Action
No. C972736. Sideware Systems Inc. paid $136,000 on account of the purchase
price, which was subject to adjustment depending on the benefit ultimately
received by Sideware Systems Inc. pursuant to the judgment. On March 18, 1999
the British Columbia Court of Appeal allowed an appeal from the judgment. As
a result, we repaid the $136,000.

In November 1995 we entered into a License Agreement with NetMedia Systems
Inc., a private company in which Owen Jones and Grant Sutherland hold
interests, and a Joint Venture Agreement with NetMedia Systems Inc. and
Sideware Systems Inc. None of the business contemplated by the agreements
proceeded, with the result that the agreements were terminated in October
1999.

We have entered into transactions regarding our Vancouver office premises in
which one of our directors, Grant Sutherland, is interested. See "Description
of Property"

We have acquired legal services from the law firm Sutherland Johnston, of
which Grant Sutherland is a partner. The amount of such legal services prior
to December 31, 1998 was not material. Subsequent to December 31, 1998
Sutherland Johnston have performed approximately $33,000 (exclusive of taxes
and disbursements) worth of legal services for us.

During our last three fiscal years and the nine month period ended September
30, 1999 Grant Sutherland

<PAGE>

has acquired the following shares in private placements:

- - 780,000 shares at a price of $0.25 per share pursuant to a private
placement conducted in May 1998;
- - 300,000 shares at a price of $0.20 per share pursuant to a private
placement conducted in September 1998;
- - 1,000,000 shares at a price of $0.15 per share pursuant to a private
placement conducted in March 1999;
- - 1,000,000 shares at a price of $0.15 per share pursuant to a private
placement conducted in September 1999;
- - 135,000 shares at a price of $0.15 per share pursuant to a private
placement conducted in October 1999; and
- - 150,000 shares at a price of $0.60 per share pursuant to a private
placement conducted in December 1999.

During our last three fiscal years and the nine month period ended September
30, 1999 Owen Jones has acquired the following shares in private placements:

- - 1,000,000 shares at a price of $0.15 per share pursuant to a private
placement conducted in March 1999.

DESCRIPTION OF CAPITAL STOCK

SHARE CAPITAL

The authorized capital of the Company is 50,000,000 shares of common stock,
$0.001 par value, of which 43,986,833 were issued and outstanding on February
1, 2000.

COMMON STOCK

The Shares to be registered are common shares in our capital stock. Holders
of common shares are entitled to one vote for each share held of record at
general meetings of our shareholders. Accordingly, holders of a majority of
the common shares voting in any election of directors will have the ability
to elect all the directors standing for election. All common shares
participate equally in dividends we pay, and in the proceeds of any
liquidation, dissolution or winding up. There are no pre-emption rights and
our articles of incorporation and by-laws contain no provisions that would
delay, defer, or prevent a change in control. Our articles of incorporation
and by-laws provide for the release and indemnification of our directors and
officers as to certain liabilities arising from their actions in such
capacities to the fullest extent permitted by law.

OPTIONS TO PURCHASE SECURITIES FROM THE COMPANY

INCENTIVE STOCK OPTIONS

From time to time, we grant incentive stock options to directors, officers,
consultants, and employees. We have granted a total of 7,730,000 incentive
stock options permitting optionees to acquire common shares at a price of
$0.20 per share. Of those stock options:

<PAGE>

(a) 230,000 have expired without being exercised;
(b) 3,473,500 have been exercised up to February 1, 2000; and
(c) 4,026,500 remain outstanding as at February 1, 2000.

948,000 incentive stock options were exercised prior to September 30, 1999.
Between September 30, 1999 and February 1, 2000 an additional 2,525,500
incentive stock options to acquire shares at $0.20 per share have been
exercised by directors, officers, consultants and employees. Of those, the
following incentive stock options were exercised by directors and executive
officers:

Grant Sutherland 1,120,000 options at $0.20 per share

The incentive stock options described above were granted pursuant to a Stock
Option Plan adopted in December 1997. In December 1999 we filed a
registration statement on Form S-8 with respect to the Stock Option Plan.

TRANSFER AGENT

The transfer agent for our common stock is Colonial Stock Transfer Company of
455 East 400 South, Suite 100, Salt Lake City, UT 84111.

<PAGE>

SELLING SHAREHOLDERS

The shares offered for sale pursuant to this Prospectus consist of 11,095,000
shares (the "Shares"). The Selling Shareholders acquired the Shares pursuant
to a private placements conducted during 1999. Selling Shareholders listed as
1, 3 and 5 acquired their Shares at a price of $0.15 per Share pursuant to a
private placement conducted in March 1999. Selling Shareholders listed as 6
to 11 below acquired their shares at a price of $0.15 per Share pursuant to a
private placement conducted in June 1999. Selling Shareholders listed as 12
to 15 below acquired their Shares at a price of $0.15 per Share pursuant to
private placements conducted in September and October 1999. Selling
Shareholders listed as 17 to 22 below acquired their Shares at a price of
$0.60 per Share pursuant to a private placement conducted in December 1999.
Welcome Opportunities Ltd. acquired 500,000 shares at $.15 per Share pursuant
to a private placement conducted in March 1999 and 500,00 Shares at $.15 per
Share pursuant to a private placement conducted in June 1999. Grant
Sutherland acquired 1,000,000 shares at $.15 per Share pursuant to a private
placement conducted in March 1999 and 150,000 Shares at $.60 per Share
pursuant to a private placement conducted in December 1999. Beau-J Holdings
Ltd., a private holding company owned by Grant Sutherland, acquired 1,135,000
Shares at $0.15 per Share pursuant to private placements conducted in
September and October 1999.

The following table sets forth, as of February 1, 2000, and upon completion
of the offering described in this Prospectus, information with regard to the
beneficial ownership of our common shares by the Selling Shareholders.
Information in the column "Total Shareholdings After Completion of Offering"
is based on information provided to us by the Selling Shareholders and is
accurate to the best of our knowledge. The Selling Shareholders may not have
a present intention of selling the Shares and may offer less than the number
of Shares indicated.

TOTAL SHAREHOLDINGS AFTER
SELLING SECURITY HOLDER NO. OF SHARES COMPLETION OF OFFERING(1)
<S> <C> <C>

1. Owen Jones (2) 1,000,000 2,080,500
2. Grant Sutherland (3) 1,150,000 707,500
3. 695183 B.C. Ltd. (4) 1,000,000 see note (4)
4. Welcome Opportunities Ltd. 1,000,000 Nil
5. Donald Anderson 900,000 170,000
6. Bolder Investment Partners 500,000 Nil
7. J.R. Sparling MD Incorporated 500,000 Nil
8. APL Securities Ltd. 500,000 Nil
9. Nottinghill Resources Ltd. 500,000 Nil
10. 9051 Investments Ltd. (5) 50,000 see note (5)
11. Daphne Thomas (5) 50,000 25,000
12. Melvin Earl Beaumont (4) 450,000 157,500
13. Marguerite Beaumont (4) 450,000 Nil
14. Rendeco Holdings Ltd. 450,000 Nil
15. Worldwide Mortgage Corp. Ltd. 450,000 Nil
16. Beau-J Holdings Ltd. (3) 1,135,000 see note (3)
17. Jeffrey W. Lubore (6) 150,000 100,000
18. David A. Robinson 150,000 Nil
</TABLE>

<PAGE>

48
<TABLE>
<CAPTION>

TOTAL SHAREHOLDINGS AFTER
SELLING SECURITY HOLDER NO. OF SHARES COMPLETION OF OFFERING(1)
<S> <C> <C>

19. Thomas M. Dunkenberger 150,000 5,000
20. Michael M. Hawes 150,000 12,000
21. Clive Forth 110,000 Nil
22. Michael Colen 300,000 15,000
</TABLE>

(1) Calculated on the assumption that all Shares offered by each Selling
Shareholder are sold. Total shareholdings stated include shares issuable
pursuant to incentive stock options exercisable within 60 days of February
1, 2000.
(2) Owen Jones is our President and a member of our Board of Directors. Total
shareholdings stated for Mr. Jones include 1,527,500 shares issuable
pursuant to incentive stock options.
(3) Grant Sutherland is the Chairman of our Board of Directors. Total
shareholdings stated for Mr. Sutherland include 107,500 shares issuable
pursuant to incentive stock options. Total shareholdings stated for Mr.
Sutherland also include shares owned by Beau-J Holdings Ltd., a private
holding company owned by Mr.
Sutherland.
(4) Total shareholdings stated for Melvin Beaumont include shares owned by
69518 Alberta Ltd., a private holding company owned by Melvin Beaumont.
Marguerite Beaumont is the wife of Melvin Beaumont.
(5) Daphne Thomas is a consultant to us. Total Shareholdings reported for Ms.
Thomas include 25,000 shares issuable pursuant to incentive stock options.
9051 Holdings Ltd. is a private holding company owned by Ms.
Thomas.
(6) Jeffrey W. Lubore is a consultant to us. Total Shareholdings reported for
Mr. Lubore include 100,000 shares issuable pursuant to incentive stock
options.

To the best of our knowledge, assuming that all of the Shares offered by each
Selling Shareholder are sold, no Selling Shareholder other than Owen Jones,
Grant Sutherland, or Melvin Beaumont will own or control in excess of 1% of
our voting securities.

PLAN OF DISTRIBUTION

The Shares offered hereby may be sold from time to time by the Selling
Shareholders. These sales may be made privately, through the OTC Bulletin
Board quotation service, or otherwise, at prices and at terms then prevailing
or at prices related to the then current market price, or in negotiated
transactions. The Shares may be sold by each of the Selling Shareholders
acting as principal for its own account or in ordinary brokerage transactions
and transactions in which the broker solicits purchasers. In effecting sales,
broker-dealers engaged by the Selling Shareholders may arrange for other
broker-dealers to participate in the re-sales.

Broker-dealers or agents may receive compensation in the form of commissions,
discounts or concessions from Selling Shareholders in amounts to be
negotiated in connection with the sale. These broker-dealers and any other
participating broker-dealers may be deemed to be "underwriters" within the
meaning of the Securities Act in connection with these sales, and any such
commission, discount or concession may be deemed to be underwriting discounts
or commission under the Securities Act. In addition, any securities covered
by this Prospectus which qualify for sale pursuant to Rule 144 may be sold
under Rule 144 rather than pursuant to this Prospectus.

It is not possible at the present time to determine the price to the public
in any sale of the Shares by the Selling Shareholders and each Selling
Shareholder reserves the right to accept or reject, in whole or in part, any
proposed purchaser of Shares. Accordingly, the public offering price and the
amount of any applicable sales or underwriting discounts or commissions will
be determined at the time of such sale by the Selling Shareholders. The
aggregate proceeds to the Selling Shareholders from the sale of the Shares
will be the purchase price of the Shares less all applicable commissions and
underwriters' discounts, if any. We will pay substantially all the expenses
incident to the registration, offering and sale of the Shares to the public
by the Selling Shareholders (currently estimated to be $130,000), other than
fees,

<PAGE>

discounts and commissions of underwriters, dealers or agents, if any, and
transfer taxes.

LEGAL MATTERS

Certain legal matters relating to the legality of the issuance of the Shares
offered by this Prospectus will be passed upon by William K. Ziering,
Attorney At Law, of Four Embarcadero Center, Suite 3400, San Francisco, CA
94111-4187.

EXPERTS

The consolidated balance sheets of the Company as at December 31, 1998 and
1997, and the consolidated statements of operations, stockholders' deficit
and cash flows for the years ended December 31, 1998, 1997, and 1996 have
been included herein and elsewhere in this Registration Statement in reliance
upon the report of KPMG LLP, independent chartered accountants, appearing
elsewhere herein, and upon the authority of said firm as experts in
accounting and auditing.

INDEX TO FINANCIAL STATEMENTS

Report of Independent Accountants
Consolidated Balance Sheet
Consolidated Statement of Income
Consolidated Statement of Change in Shareholders' Equity
Consolidated Statement of Cash Flows
Notes to Consolidated Financial Statements

<PAGE>

===============================================================
NO DEALER, SALES REPRESENTATIVE OR ANY OTHER PERSON HAS
BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS IN CONNECTION WITH THIS OFFERING OTHER THAN
THOSE CONTAINED IN THIS PROSPECTUS, AND, IF GIVEN OR MADE,
SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON
AS HAVING BEEN AUTHORIZED BY THE COMPANY. THIS PROSPECTUS
DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF ANY
OFFER TO BUY ANY SECURITIES OTHER THAN THE SECURITIES OFFERED
BY THIS PROSPECTUS, OR AN OFFER TO SELL OR A SOLICITATION OF
AN OFFER TO BUY ANY SECURITIES BY ANY PERSON IN ANY
JURISDICTION WHERE SUCH OFFER OR SOLICITATION IS NOT
AUTHORIZED OR IS UNLAWFUL. NEITHER THE DELIVERY OF THIS
PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY
CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO
CHANGE IN THE AFFAIRS OF THE COMPANY OR THAT INFORMATION
CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE
DATE OF THIS PROSPECTUS.
TABLE OF CONTENTS
PAGE
Additional Information....................................
Enforceability of Civil Liability.........................
Prospectus Summary........................................
Risk Factors..............................................
Cautionary Notice regarding Forward-Looking Statements....
Use of Proceeds...........................................
Nature of Trading Market..................................
Dividend Policy...........................................
Capitalization............................................
Selected Consolidated Financial Data......................
Management's Discussion and Analysis of Financial Condition
and Results of Operation................................
Business..................................................
Management................................................
Principal Shareholders....................................
Certain Transactions......................................
Description of Capital Stock..............................
Selling Shareholders......................................
Plan of Distribution......................................
Legal Matters.............................................
Experts...................................................
Index to Financial Statements..........................F-1
UNTIL -, 2000 (25 DAYS AFTER THE DATE OF THIS PROSPECTUS),
ALL DEALERS EFFECTING TRANSACTIONS IN THE REGISTERED SECURITIES,
WHETHER OR NOT PARTICIPATING IN THIS DISTRIBUTION, MAY BE
REQUIRED TO DELIVER A PROSPECTUS. THIS IS IN ADDITION TO THE
OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN ACTING AS
UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR
SUBSCRIPTIONS.
===============================================================

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

BRAINTECH, INC.

11,095,000 COMMON SHARES

----------
PROSPECTUS
----------

FEBRUARY, 2000

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

<PAGE>

PART II
INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION

We will not receive any proceeds from the sale of Shares by the Selling
Shareholders.

We will pay substantially all the expenses incident to the registration,
offering and sale of the Shares to the public by the Selling Shareholders
other than fees, discounts and commissions of underwriters, dealers or
agents, if any, and transfer taxes. Those expenses are estimated as follows:

AMOUNT(1)
------------------
(STATED IN US$)
<S> <C>
SEC Registrtion Fee.................................................. $10,000
Legal Fees and Expenses.............................................. 40,000
Accounting fees and expenses......................................... 20,000
Blue Sky Qualification fees and expenses............................. 5,000
Printing............................................................. 40,000
Transfer Agent and Registrar Fees.................................... 5,000
miscellaneous expenses and Qualification............................. 10,000
Total......................................................... $130,000
</TABLE>
-------------------
(1) All amounts have been estimated except the SEC registration fee.
All of the above expenses will be payable by us.

ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS

Under Article VIII of our By-Laws, any past or present director, officer, or
employee (or person serving as such for another corporation, at our request)
or a testator or intestate thereof, is entitled to be indemnified by us in
respect of any expenses (including without limitation attorneys' fees,
judgments, fines, and penalties) reasonably incurred by him in defending any
civil, criminal or administrative action, suit or proceeding to which he is
made a party by reason of his position with us (or other corporation at our
request). Indemnification is not available to the extent that it is adjudged
in such action, suit or proceedings that the officer, director or employee
was liable to us (or such other corporation) for negligence or misconduct in
the performance of duty.

A judgment or conviction (including a conviction based on a plea of guilty or
nolo contendere or its equivalent) shall not itself be deemed an adjudication
that the director, officer or employee was liable for negligence or
misconduct in the performance of his duties. A person claiming
indemnification may have his entitlement determined by:

(a) order of the Court or administrative body having jurisdiction in the
action, suit, or proceeding;

<PAGE>

(b) a resolution adopted by a majority of the quorum of our Board of
Directors (not counting any director who has incurred expenses in
connection with the action, suit or proceeding);

(c) a resolution of the majority of our stockholders (if there is no quorum
of directors available who have not incurred expenses in connection
with the action, suit or proceeding);

(d) a resolution of the majority of our directors entitled to vote at any
meeting; or

(e) any order of any Court having jurisdiction over us.

Any such determination that a payment by way of indemnification should be
made is binding on us.

The right of indemnification given under Article VIII of the By-Laws is not
exclusive of any such other right under any By-Law, agreement, shareholders'
resolution, provision of law, or otherwise. The provisions of Article VIII
also apply to any member of any committee appointed by our Board of Directors.

ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES

During the fiscal year ending December 31, 1996 we issued 4,683,333 shares in
private placements. These shares were issued pursuant to exemptions from
registration pursuant to Rule 504 of Regulation D under the Securities Act of
1933, as amended (the "Securities Act"). We received consideration of
$953,790, net of legal costs. 950,000 shares were issued January 4, 1996 at a
price of $0.1895 per share (equivalent to gross proceeds of $180,000).
733,333 shares were issued April 3, 1996 at a price of $0.2523 per share
(equivalent to gross proceeds of $185,000). 2,000,000 shares were issued June
5, 1996 at a price of $0.20 per share (equivalent to gross proceeds of
$400,000). 1,000,000 shares were issued September 23, 1996 at a price of
$0.20 per share.

During the fiscal year ending December 31, 1996 we issued 1,200,000 shares at
a deemed value of $240,000 to one of our former directors and a consultant in
payment of performance bonuses for technical services rendered to us. 400,000
shares were issued on December 26, 1996 to Paco Nathan, then one of our
directors, at a deemed value of $80,000. 800,000 shares were issued on
December 26, 1996 to Brad Martin at a deemed value of $160,000. Brad Martin
is a principal of North Shore Circuit Design, a software consulting firm
located in Austin, Texas. North Shore Circuit Design provided services to us
in relation to the development of the BrainTron processor. These shares were
issued pursuant to exemptions from registration under Section 4(2) of the
Securities Act.

During the fiscal year ending December 31, 1997 we issued 3,000,000 shares in
private placements. These shares were issued pursuant to exemptions from
registration pursuant to Rule 504 of Regulation D under the Securities Act.
We received consideration of $548,270.50, net of legal costs. 1,000,000
shares were issued March 20, 1997 at a price of $0.20 per share (equivalent
to gross proceeds of $200,000). 1,000,000 shares were issued May 29, 1997 at
a price of $0.20 per share (equivalent to gross proceeds of $200,000).
1,000,000 shares were issued December 24, 1997 at a price of $0.15 per share
(equivalent to gross proceeds of $150,000).

In May 1997 we issued 300,000 shares at a deemed value of $60,000 to Paragon
Communications in

<PAGE>

consideration for investor relations services. These shares were issued
pursuant to exemptions from registration Section 4(2) of the Securities Act.

During the first half of 1998 we issued 1,600,000 shares in a private
placement. These shares were issued pursuant to exemptions from registration
pursuant to Rule 504 of Regulation D under the Securities Act. We received
consideration of $396,870, net of legal costs. 1,200,000 shares were issued
on March 27, 1998 at a price of $0.25 (equivalent to gross proceeds of
$300,000). Grant Sutherland, one of our directors, was the beneficial
purchaser of 780,000 of the 1,200,000 shares. 400,000 shares were issued on
May 4, 1998 at a price of $0.25 (equivalent to gross proceeds of $100,000).

In July and August 1998 we issued 900,000 shares on the exercise of stock
options granted to our directors, officers, employees and consultants. We
received consideration of $180,000. Directors exercised 600,000 of the
2,200,000 options. These shares were issued pursuant to exemptions from
registration pursuant to Rule 504 of Regulation D under the Securities Act.

In September 1998 we conducted a private placement of 1,250,000 shares at
$0.20 per share. The shares were issued pursuant to exemptions from
registration pursuant to Rule 504 of Regulation D under the Securities Act.
We received consideration of $248,750, net of legal costs. Grant Sutherland,
one of our directors, was the beneficial purchaser of 300,000 of the shares.

In March 1999 we conducted a private placement of 4,400,000 shares at $0.15
per share. The shares were issued pursuant to exemptions from registration
pursuant to Rule 506 of Regulation D under the Securities Act. We received
gross proceeds of $660,000. Grant Sutherland and Owen Jones, members of our
Board of Directors, purchased 1,000,000 shares each.

In June 1999 we conducted a private placement of 2,600,000 shares at $0.15
per share. The shares were issued pursuant to exemptions from registration
pursuant to Rule 506 of Regulation D under the Securities Act. We received
gross proceeds of $390,000. None of our directors participated in this
private placement.

In September and October 1999 we conducted private placements of 2,935,000
shares at $0.15 per share. The shares were issued pursuant to exemptions from
registration pursuant to Rule 506 of Regulation D under the Securities Act.
We received gross proceeds of $440,250. Beau-J Holdings Ltd., a private
holding company owned by Grant Sutherland, one of our directors, purchased
1,135,000 shares. Owing to administrative delays, 450,000 of the shares were
issued in December 1999 and 285,000 of the shares were issued in February
2000.

In December 1999 we conducted a private placement of 1,160,000 shares at
$0.60 per share. The shares were issued pursuant to exemptions from
registration pursuant to Rule 506 of Regulation D under the Securities Act.
We received gross proceeds of $696,000. Grant Sutherland, one of our
directors, purchased 150,000 shares.

See "DESCRIPTION OF CAPITAL STOCK - Share Capital."

ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

<PAGE>

NUMBER EXHIBIT
------ -------

3.1(1) Articles of Incorporation, dated February 27, 1987
3.2(1) Articles of Amendment, dated July 14,1998
3.3(1) Articles of Amendment, dated June 28, 1990
3.4(1) Articles Of Amendment of the Company, dated February 8, 1993
3.5(1) Articles of Amendment of the Company, dated April 6, 1993
3.6(1) Articles of Amendment of the Company, dated December 6, 1993
3.7(1) By-Laws of the Company
4.1(1) Specimen Stock Certificate
5.1 Opinion of William K. Ziering, Attorney-at-Law
10.1(1) License Agreement between the Company and Willard W. Olson,
dated January 5, 1995.
10.2(1) Product Development Agreement between the Company and United
Technologies Microelectronic Systems Inc., dated July 6, 1998.
10.3(1) Manufacturing and Sales Agreement between the Company and
United Technologies Microelectronic Systems Inc., dated
July 6, 1998.
10.4(1) Operating Agreement between the Company and Sideware Systems
Inc., dated November 1, 1995
10.5(1) Cost Sharing and Allocation Agreement between the Company
and Sideware Systems Inc.
10.6(1) Assignment of Lease and Modification of Lease Agreement dated
August 17, 1998 between HOOPP Realty Inc., Techwest Management
Inc., Sideware Systems Inc., and BrainTech, Inc.
10.7(1) Software Development and License Agreement dated September
20, 1999 between the Company and Sideware Systems Inc.
10.8(1) Lease effective as of July 1, 1999 between the Company,
Techwest Management Inc., Sideware Systems Inc. and Pacific
Centre Leaseholds Ltd.
10.9(1) Assignment Agreement effective as of July 1, 1999 between the
Company, Techwest Management Inc., Sideware Systems Inc., and
SJM Management Ltd.
10.10(1) Agreement between the Company, Mercator Robotec Inc. and
Satisfied Brake Products Inc.
11.1(1) Computation of net loss per share
21.1(1) Subsidiaries of the Registrant
23.1 Consent of KPMG LLP
23.2 Consent of William K. Ziering (included in Exhibit 5.1)
24.1 Power of Attorney (included in the signature page to this
Registration Statement)
27.1(1) Summary Financial Data for the nine month period ended
September 30, 1999.

(1) Exhibit already on file.

ITEM 17. UNDERTAKINGS

(a) The undersigned Registrant hereby undertakes:

<PAGE>

(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this Registration Statement:

(i) To include any prospectus required by section 10(a)(3) of the
Securities Act of 1933;

(ii) To reflect in the prospectus any facts or events arising after
the effective date of the Registration Statement (or the most
recent post-effective amendment thereof) which, individually
or in the aggregate, represent a fundamental change in the
information set forth in the Registration Statement;

(iii) To include any material information with respect to the plan
of distribution not previously disclosed in the Registration
Statement or any material change to such information in the
Registration Statement.

(2) That, for the purpose of determining any liability under the Securities
Act of 1933, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial
bona fide offering thereof.

(3) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the termination of
the offering.

(4) To file a post-effective amendment to the Registration Statement to
include any financial statements required by section 10(a)(3) of the Act.

<PAGE>

SIGNATURES

In accordance with the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it meets
all of the requirements of filing on Form S-1 and has duly caused this
registration statement to be signed on its behalf by the undersigned,
thereunto duly authorized in Vancouver, British Columbia, on February 9, 2000.

BRAINTECH, INC.

By: "W. GRANT SUTHERLAND"
--------------------------------------
W. Grant Sutherland
Chairman of the Board of Directors

POWER OF ATTORNEY

Each person whose individual signature appears below hereby
authorizes W. Grant Sutherland, as attorney-in-fact, with full power of
substitution, to execute in the name and on behalf of such person,
individually and in each capacity stated below, and to file, any and all
amendments to this registration statement, including any and all
post-effective amendments.

Pursuant to the requirements of the Securities Act of 1934, this
registration statement has been signed by the following persons in the
capacities and on the dates indicated.

SIGNATURE TITLE DATE
- --------- ----- ----
<S> <C> <C>
"W. GRANT SUTHERLAND" Director, Chairman of February 9, 2000
- ------------------------------------ the Board of Directors,
W. Grant Sutherland Principal Financial Officer,
Principal Accounting Officer

"OWEN L.J. JONES" President, Chief Executive February 9, 2000
- ------------------------------------ Officer and Director (Principal
Owen L.J. Jones Executive Officer)
</TABLE>

<PAGE>

Consolidated Financial Statements of

BRAINTECH, INC.
(Expressed in U.S. Dollars)

(Unaudited - prepared by management)

Nine months ended September 30, 1999 and 1998

<PAGE>

BRAINTECH, INC.

Consolidated Balance Sheets
(Expressed in U.S. Dollars)

(Unaudited - prepared by management)
September 30, 1999 and 1998
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------
1999 1998
- ----------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS

Current assets:
Cash and cash equivalents $ 134,375 $ 89,572
Accounts receivable 15,225 14,966
Share subscriptions receivable - 120,000
Inventory 3,575 38,625
Prepaid expenses 16,596 26,904
------------------------------------------------------------------------------------------
169,771 290,067
Due from directors and officers (note 5(a)) 10,130 10,130
Capital assets (note 6) 92,982 26,082
- ----------------------------------------------------------------------------------------------
$ 272,883 $ 326,279
- ----------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------

LIABILITIES AND STOCKHOLDERS' DEFICIT

Current liabilities:
Accounts payable and accrued liabilities $ 61,855 $ 58,732
Due to related companies (note 5(b)) 134,708 158,756
------------------------------------------------------------------------------------------
196,563 217,488

Subscriptions received 20,270 -
Amounts in dispute (note 9(b)) 606,000 606,000
- ----------------------------------------------------------------------------------------------
822,833 823,488
Stockholders' deficit:
Common stock (note 7):
Authorized: 50,000,000 shares, with $0.001 par value
Issued 39,721,333 shares (1998 - 30,371,333) 39,721 30,371
Additional paid-in capital (note 7) 6,160,660 4,703,760
Accumulated deficit (58,800) (58,800)
Deficit accumulated during the development stage (6,691,531) (5,172,540)
------------------------------------------------------------------------------------------
(549,950) (497,209)
Future operations (note 2)
Contingencies (note 9)
Commitments (note 10)
- ----------------------------------------------------------------------------------------------
$ 272,883 $ 326,279
- ----------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------
</TABLE>

See accompanying notes to consolidated financial statements.

On behalf of the Board:

- -------------------- ------------------
Chairman President

<PAGE>

BRAINTECH, INC.

Consolidated Statements of Operations
(Expressed in U.S. Dollars)

Expenses:
Research and development 1,582,350 442,790 114,631
Consulting and contractors 740,771 4,210 32,900
Salaries and benefits (note 11) 1,942,019 92,083 1,040,317
Selling, general and administrative 2,299,140 396,879 362,351
Non-operating expenses:
Loss on disposal of capital assets 20,136 - -
Write-down of marketable securities 100,000 - 3,600
Write-down of intangible assets 17,189 - -
Write-down of organization costs 17,431 - -
- -----------------------------------------------------------------------------------------------------
(6,719,036) (935,962) (1,553,799)
- -----------------------------------------------------------------------------------------------------
Net loss $ (6,691,531) $ (935,962) $(1,527,527)
- -----------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------
Loss per share information:
Basic $ (0.30) $ (0.03) $ (0.05)
- -----------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------
Weighted average number of common
shares outstanding: 22,217,371 33,470,783 27,892,117
- -----------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------
</TABLE>

See accompanying notes to consolidated financial statements.

<PAGE>

BRAINTECH, INC.

Consolidated Statements of Stockholders' Deficit
(Expressed in U.S. Dollars)

(Unaudited - prepared by management)
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------
Deficit
accumulated
Additional during the
Common paid-in Accumulated development
Shares stock capital deficit stage
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Balance, January 3, 1994 17,400,000 $ 17,400 $ 1,039,271 $ (58,800) $ --
Loss for the period -- -- -- -- (1,006,716)
- ----------------------------------------------------------------------------------------------------------------------
Balance, December 31, 1994 17,400,000 17,400 1,039,271 (58,800) (1,006,716)
Loss for the period -- -- -- -- (748,310)
- ----------------------------------------------------------------------------------------------------------------------
Balance, December 31, 1995 17,400,000 17,400 1,039,271 (58,800) (1,755,026)

Common stock transactions
(net of issue costs):
Issued for cash at $.1895 per share 950,000 950 173,440 -- --
Issued for cash at $.25 per share 733,333 733 183,167 -- --
Issued for cash at $.20 per share 3,000,000 3,000 592,500 -- --
Shares issued for services rendered 1,200,000 1,200 238,800 -- --
Loss for the period -- -- -- -- (959,945)
- ----------------------------------------------------------------------------------------------------------------------
Balance, December 31, 1996 23,283,333 23,283 2,227,178 (58,800) (2,714,971)

Common stock transactions
(net of issue costs):
Issued for cash at $.25 per share 1,600,000 1,600 398,400 -- --
Issued for cash at $.20 per share 2,188,000 2,188 435,412 -- --
Compensatory benefit of employee
stock options -- -- 927,800 -- --
Loss for the period -- -- -- -- (2,110,556)
- ----------------------------------------------------------------------------------------------------------------------
Balance, December 31, 1998 30,371,333 30,371 4,793,760 (58,800) (5,755,569)

Common stock transactions
(net of issue costs):
Issued for cash at $0.15 per share 9,350,000 9,350 1,366,900 -- --
Loss for the period -- -- -- -- (935,962)
- ----------------------------------------------------------------------------------------------------------------------
Balance, September 30, 1999 39,721,333 $ 39,721 $ 6,160,660 $ (58,800) $(6,691,531)
- ----------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>

See accompanying notes to consolidated financial statements.

<PAGE>

BRAINTECH, INC.

Consolidated Statements of Cash Flows
(Expressed in U.S. Dollars)

(Unaudited - prepared by management)
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------
Period from inception on
January 3, 1994 Nine months ended September 30,
to September 30, -------------------------------
1999 1999 1998
- --------------------------------------------------------------------------------------------------------
(note 1)
<S> <C> <C> <C>
Cash flows from operating activities:
Loss for the period $(6,691,531) $ (935,962) $(1,527,527)
Items not involving cash:
Amortization 57,716 20,261 9,537
Bad debt 75,108 -- --
Write-down of marketable securities 100,000 -- 3,600
Write-down of intangible assets 17,189 -- --
Write-down of organization costs 17,431 -- --
Loss on disposal of capital assets 20,136 -- --
Shares issued for services rendered 300,000 -- --
Compensatory benefit of
employee stock options 1,127,800 -- 837,800
Change in operating assets and liabilities:
Share subscriptions receivable -- -- (120,000)
Inventory (3,575) (3,575) (38,625)
Accounts receivable (15,225) 7,208 6,496
Prepaid expenses (16,596) (4,252) (25,196)
Accounts payable and accrued liabilities 36,677 (22,146) 38,232
-----------------------------------------------------------------------------------------------------
Net cash used for operating activities (4,974,870) (938,466) (815,683)
-----------------------------------------------------------------------------------------------------
Cash flows from investing activities:
Purchase of marketable securities (100,000) -- --
Purchase of capital assets (169,775) (38,006) (22,347)
Proceeds from notes receivable (130,181) -- --
Proceeds from disposal of real estate 306,752 -- --
-----------------------------------------------------------------------------------------------------
Net cash provided by (used for) investing activities (93,204) (38,006) (22,347)
-----------------------------------------------------------------------------------------------------
Cash flows from financing activities:
Notes receivable 55,073 -- --
Borrowings from directors and officers (2,826) -- --
Due to (from) related companies 134,708 (308,152) (52,686)
Mortgages payable (207,739) -- --
Share subscriptions received 20,270 20,270 --
Common shares issued, net of issue costs 4,958,851 1,376,250 837,600
-----------------------------------------------------------------------------------------------------
Net cash provided by financing activities 4,958,337 1,088,368 784,914
- ---------------------------------------------------------------------------------------------------------
Increase (decrease) in cash and cash equivalents (109,737) 111,896 (53,116)
Cash and cash equivalents, beginning of period 244,112 22,479 142,688
- ---------------------------------------------------------------------------------------------------------
Cash and cash equivalents, end of period $ 134,375 $ 134,375 $ 89,572
- ---------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------
Supplemental information:
Interest paid $ 2,902 $ -- $ 2,155
Taxes paid $ -- $ -- $ --
Non-cash financing activities:
Shares issued for services rendered $ 300,000 $ -- $ --
- ---------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------
</TABLE>

See accompanying notes to consolidated financial statements.

<PAGE>

BRAINTECH, INC.

Notes to Consolidated Financial Statements
(Expressed in U.S. Dollars)
(Unaudited - prepared by management)
Nine months ended September 30, 1999 and 1998
- ------------------------------------------------------------------------------

1. ORGANIZATION:

The Company initially was in the business of real estate development. On
January 3, 1994 the Company changed its name to Braintech Inc. and began
operations as a high tech development Company, developing advanced video
recognition software. All sales of its product and services are made in this
industry segment.

2. FUTURE OPERATIONS:

During the nine months ended September 30, 1999, the Company incurred a loss
of $935,962 and used cash for operating activities of $938,466. From
inception of the business on January 3, 1994, the Company has incurred
cumulative losses of $6,691,531 and used cash for operating activities of
$4,974,870.

These consolidated financial statements have been prepared on the going
concern basis under which an entity is considered to be able to realize its
assets and satisfy its liabilities in the ordinary course of business.
Operations to date have been primarily financed by equity transactions. The
Company's future operations are dependent upon continued support by
shareholders, the achievement of profitable operations and the successful
completion of management's plan to obtain additional equity financing,
although there can be no assurances that the Company will be successful. The
consolidated financial statements do not include any adjustments relating to
the recoverability of assets and classification of assets and liabilities
that might be necessary should the Company be unable to continue as a going
concern.

3. SIGNIFICANT ACCOUNTING POLICIES:

(a) Basis of presentation:

These consolidated financial statements are prepared in accordance with
generally accepted accounting principles in the United States and
present the financial position, results of operations and cash flows of
the Company and its wholly owned subsidiary Brainware Systems Inc.,
incorporated under the Company Act of British Columbia on March 30,
1994. All material inter-company balances and transactions have been
eliminated.

Through December 31, 1997, the consolidated financial statements of the
Company issued to shareholders were presented in accordance with
generally accepted accounting principles in Canada. The application of
United States accounting principles to these consolidated financial
statements has been made on a retroactive basis. In addition, to
September 30, 1999, for United States accounting and reporting purposes
the Company was considered to be in the development stage as it was
devoting substantial efforts to developing its business operations.

<PAGE>

BRAINTECH, INC.

Notes to Consolidated Financial Statements, page 2
(Expressed in U.S. Dollars)
(Unaudited - prepared by management)
Nine months ended September 30, 1999 and 1998
- -------------------------------------------------------------------------------

3. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED):

(b) Cash and cash equivalents:

Cash and cash equivalents include highly liquid investments, such as
term deposits, having original maturities of six months or less at the
date of acquisition, that are readily convertible to contracted amounts
of cash.

Research and development costs are expensed as incurred.

(d) Revenue recognition:

The Company recognizes revenue when title has passed to the customer,
the collectibility of the consideration is reasonably assured and the
Company has no significant remaining performance obligations. An
allowance for estimated future returns is recorded at the time revenue
is recognized.

(e) Marketable securities:

Marketable securities are comprised of equity securities available for
sale and are stated at market value. Decreases in market value that are
considered to be other than temporary are charged to operations.

(f) Capital assets:

Capital assets are carried at cost less accumulated amortization.
Amortization is calculated annually as follows:

<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------
Asset Basis Rate
--------------------------------------------------------------------------------------
<S> <C> <C>
Furniture and fixtures declining-balance 20%
Computer equipment declining-balance 30%
Trade show assets declining-balance 20%
Computer software straight-line 50%
Leasehold improvements straight-line lease term
--------------------------------------------------------------------------------------
</TABLE>

(g) Use of estimates:

The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities
and disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amount of revenue and expenses
during the reporting period. Actual amounts may differ from these
estimates.

<PAGE>

BRAINTECH, INC.

Notes to Consolidated Financial Statements, page 3
(Expressed in U.S. Dollars)
(Unaudited - prepared by management)
Nine months ended September 30, 1999 and 1998
- --------------------------------------------------------------------------------

3. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED):

(h) Foreign currency:

Transactions denominated in foreign currencies are translated in U.S.
dollars at the rate prevailing at the time of the transactions.

At the balance sheet date, monetary assets and liabilities denominated
in a foreign currency are translated at the current rate of exchange.
Exchange gains and losses arising on translation or settlement of
foreign currency denominated monetary items are included in the
determination of net income for the current period.

(i) Stock-based compensation:

The Company has elected to apply Accounting Principles Board Opinion No.
25, "Accounting for Stock Issued to Employees" ("APB 25"), and related
interpretations in accounting for its stock options. Under APB 25,
compensation expense is only recorded to the extent that the exercise
price is less than fair value on the date of grant. The Company has
adopted the disclosure-only provisions of Statement of Financial
Accounting Standards 123, "Accounting for Stock-Based Compensation"
("SFAS 123").

(j) Income taxes:

The Company follows the asset and liability method of accounting for
income taxes. Deferred tax assets and liabilities are recognized based
on the estimated future tax consequences attributable to differences
between the financial statement carrying amounts of existing assets and
liabilities and their respective tax basis. Deferred tax assets and
liabilities are measured using enacted tax rates in effect for the year
in which those temporary differences are expected to be recovered or
settled. The effect on deferred tax assets and liabilities of a change
in tax rates is recognized in income in the period that includes the
enactment date.

(k) Concentration of credit risk:

Financial instruments that potentially subject the Company to
significant concentrations of credit risk consist principally of cash
equivalents.

The Company maintains cash equivalents with various financial
institutions located in Canada and the United States. The Company's
policy is to limit the exposure at any one financial institution and to
invest solely in highly liquid investments that are readily convertible
to contracted amounts of cash.

(l) Loss per share:

Loss per share is calculated based on the weighted average number of
shares outstanding. Fully diluted loss per share has not been presented
as outstanding options are anti-dilutive.

(m) Comprehensive income:

Net income for the Company is the same as comprehensive income.

<PAGE>

BRAINTECH, INC.

Notes to Consolidated Financial Statements, page 4
(Expressed in U.S. Dollars)
(Unaudited - prepared by management)
Nine months ended September 30, 1999 and 1998
- --------------------------------------------------------------------------------

4. MARKETABLE SECURITIES:

<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------
September 30, September 30,
1999 1998
--------------------------------------------------------------------------------------
<S> <C> <C>
1,600 shares of Beverage Stores Inc., at market $ - $ 3,600
--------------------------------------------------------------------------------------
</TABLE>

The Company has recorded losses in prior years for permanent decreases
in value

5. RELATED PARTY BALANCES AND TRANSACTIONS:

(a) Due from directors and officers:

The amounts due from directors and officers represent cash advances
provided to current directors and officers of the Company.

(b) Due to related companies:

The amount due to related companies under common control results from
inter-company expense allocations and cash advances. On October 29, 1999
the Company agreed with Sideware Systems Inc. to re-allocate certain
common costs effective January 1, 1999. The re-allocation has been
reflected in these financial statements.

During the nine month period ended September 30, 1999, the Company was
charged $24,542 (September 30, 1998 - $21,306) for management and
consulting services provided by directors and officers.

6. CAPITAL ASSETS:

<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------
September 30,
1999
--------------------------------------------------------------------------------------
Accumulated Net book
Cost amortization value
--------------------------------------------------------------------------------------
<S> <C> <C> <C>
Furniture and fixtures $ 17,031 $ 4,030 $ 13,001
Computer equipment 72,383 20,049 52,334
Trade show assets 13,337 2,349 10,988
Computer software 29,929 25,224 4,705
Leasehold improvements 14,733 2,779 11,954
--------------------------------------------------------------------------------------

$ 147,413 $ 54,431 $ 92,982
--------------------------------------------------------------------------------------
</TABLE>

<PAGE>

BRAINTECH, INC.

Notes to Consolidated Financial Statements, page 5
(Expressed in U.S. Dollars)
(Unaudited - prepared by management)
Nine months ended September 3, 1999 and 1998
- ------------------------------------------------------------------------------

6. CAPITAL ASSETS (CONTINUED):

<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------
September 30,
1998
--------------------------------------------------------------------------------------
Accumulated Net book
Cost amortization value
--------------------------------------------------------------------------------------
<S> <C> <C> <C>
Computer equipment $ 22,283 $ 2,183 $ 20,100
Computer software 23,623 17,641 5,982
--------------------------------------------------------------------------------------

$ 45,906 $ 19,824 $ 26,082
--------------------------------------------------------------------------------------
</TABLE>

7. COMMON STOCK:

(a) Of the shares outstanding at September 30, 1999, 14,630,000 shares
(September 30, 1998 - 6,830,000) are subject to trading restrictions.
These include the 1,500,000 shares retained by the Company, as described
in note 7(b). The Company believes that any hold periods relating to
3,780,000 shares have expired but the shareholders have not applied to
remove the restrictive designation.

(b) 5,500,000 shares were issued for technology in 1993 and recorded at par
value of $5,500. 1,500,000 shares have been retained by the Company
because the development of the technology had not been completed.

(d) As at September 30, 1999 the Company had received subscriptions for
shares of common stock for aggregate proceeds of $20,270

(e) Stock options:

The Company has reserved 7,500,000 common shares pursuant to a stock
option plan. Options to purchase common shares of the Company may be
granted by the Board of Directors and vest immediately.

Stock option activity during the nine month period ended September 30,
1999 is as follows:

<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------
Weighted
average Weighted Outstanding Outstanding
Expiry exercise average December 31, Forfeited September 30,
dates price fair value 1998 Granted Exercised /expired 1999
---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
November 28, 2002 $0.20 $0.19 4,097,000 - - - 4,097,000
November 28, 2002 $0.20 $0.76 1,210,000 - - 35,000 1,175,000
November 28, 2002 $0.20 $0.77 125,000 - - - 125,000
April 19, 2004 $0.20 $0.20 - 1,700,000 - - 1,700,000
---------------------------------------------------------------------------------------------------

5,432,000 1,700,000 - 35,000 7,097,000
---------------------------------------------------------------------------------------------------
</TABLE>

<PAGE>

BRAINTECH, INC.
Notes to Consolidated Financial Statements, page 6
(Expressed in U.S. Dollars)
(Unaudited - prepared by management)
Nine months ended Sepember 30, 1999 and 1998
- ------------------------------------------------------------------------------

7. COMMON STOCK (CONTINUED):

The Company has adopted the disclosure provisions of Statement of Financial
Accounting Standards No. 123, "Accounting for Stock-based Compensation"
("FAS 123") but has elected to continue measuring compensation costs using
the intrinsic value based method of accounting. Under the intrinsic value
based method, employee stock option compensation is the excess, if any, of
the quoted market value of the stock at the date of grant over the amount
an optionee must pay to acquire the stock. Included in expenses for the
nine month period ended September 30, 1999 is $Nil representing a
compensatory benefit (nine months ended September 30, 1998 $837,800)

8. INCOME TAXES:

To December 31, 1996, the Company has incurred losses for income tax
purposes in Canada and the United States of approximately $25,000, which are
available to reduce income for tax purposes through the year 2000.

The unrecorded benefit of these loss carry forwards is approximately
$12,500. Under the provisions of the Statement 109, the effect of this
benefit has been fully offset by a valuation allowance due to the
uncertainty of the realization of the benefits.

9. CONTINGENCIES:

The Company is engaged in the following legal disputes:

(a) On February 1, 1999 a former employee of the Company commenced legal
proceedings against the Company claiming approximately $100,000 in
damages for alleged breach of a stock option agreement and approximately
$7,500 alleged to be owing pursuant to a consulting agreement. The
Company has filed a defence and counterclaim alleging breach of
fiduciary duty and negligence. While the ultimate outcome is uncertain,
management of the Company believes it will be successful in defending
this action and accordingly no amount has been provided in these
financial statements.

(b) On March 16, 1999 three corporations commenced legal proceedings against
the Company and certain of its present and former directors are claiming
damages in the amount of $606,000 for breach of contract and conversion
of stock certificates. The plaintiffs have not sought recovery of any
shares of the Company. The Company has filed a defence and counterclaim
alleging that the plaintiffs and a former promoter of the Company caused
share certificates of the defendant to be issued to the plaintiffs
improperly, and caused funds of the Company to be used for unauthorized
and improper purposes. The Company has recorded the full amount of the
$606,000 contingent claim.

<PAGE>

BRAINTECH, INC.

Notes to Consolidated Financial Statements, page 7
(Expressed in U.S. Dollars)
(Unaudited - prepared by management)
Nine months ended September 30, 1999 and 1998
- ------------------------------------------------------------------------------

10. COMMITMENTS:

The Company has the following minimum lease payments under operating leases
for its premises:

<TABLE>
<S> <C>
Three month period to December 31, 1999 $ 16,000

Year ended December 31, 2000 64,500

Year ended December 31, 2001 67,000

Year ended December 31, 2002 61,500

YEAR ENDED DECEMBER 31, 2003 37,500
----------------------------------------------------------------

$ 246,500
----------------------------------------------------------------
</TABLE>

11. SALARIES AND BENEFITS:

Salaries and benefits are comprised of the following:

<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------
Period from
Inception on
January 3,
1994 Nine months ended September 30
to September 30, -------------------------------
1999 1999 1998
------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Payments and accrued liabilities $ 814,219 $ 92,083 $ 202,517
Compensatory benefit of employee
stock options 1,127,800 - 837,800
------------------------------------------------------------------------------------------

$ 1,942,019 $ 92,083 $ 1,040,317

------------------------------------------------------------------------------------------
</TABLE>

<PAGE>

INDEPENDENT AUDITORS' REPORT

The Board of Directors
Braintech, Inc.

We have audited the consolidated balance sheets of Braintech, Inc. and
subsidiary, a development stage enterprise, as at December 31, 1998 and 1997
and the related consolidated statements of operations, stockholders' deficit
and cash flows for each of the years in the three year period ended December
31, 1998 and for the period from inception on January 3, 1994 to December 31,
1998. These consolidated financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
consolidated financial statements based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards in the United States. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on
a test basis, evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of
Braintech, Inc. and subsidiary, a development stage enterprise, as at
December 31, 1998 and 1997 and the results of their operations and their cash
flows for each of the years in the three year period ended December 31, 1998
and for the period from inception on January 4, 1994 to December 31, 1998, in
conformity with generally accepted accounting principles in the United States.

The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in note 2 to the
financial statements, the Company has suffered recurring losses from
operations and has a net capital deficiency which raise substantial doubt
about its ability to continue as a going concern. Management's plans in
regard to these matters are also described in note 2. The financial
statements do not include any adjustments that might result from the outcome
of this uncertainty.

KPMG LLP (SIGNED)

Chartered Accountants

Vancouver, Canada

April 15, 1999, except
as to note 12 which is as of June 30, 1999

<PAGE>

BRAINTECH, INC.
Consolidated Balance Sheets
(Expressed in U.S. Dollars)

December 31, 1998 and 1997

<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------
1998 1997
- ------------------------------------------------------------------------------

<S> <C> <C>
Assets

Current assets:
Cash and cash equivalents $ 22,479 $ 142,688
Accounts receivable 22,433 21,462
Marketable securities (note 4) - 3,600
Prepaid expenses 12,344 1,708
---------------------------------------------------------------------------
57,256 169,458

Due from directors and officers (note 5(a)) 10,130 10,130

Capital assets (note 6) 75,237 13,272
- -----------------------------------------------------------------------------
$ 142,623 $ 192,860
- -----------------------------------------------------------------------------
- -----------------------------------------------------------------------------

Liabilities and Stockholders' Deficit

Current liabilities:
Accounts payable and accrued liabilities $ 84,001 $ 20,500
Due to related companies (note 5(b)) 442,860 211,442
---------------------------------------------------------------------------
526,861 231,942

Amounts in dispute (note 9(b)) 606,000 606,000
- -----------------------------------------------------------------------------
1,132,861 837,942

Stockholders' deficit:
Common stock (note 7):
Authorized: 50,000,000 shares, with
$0.001 par value
Issued: 30,371,333 shares (1997 - 26,583,333) 30,371 26,583
Additional paid-in capital (note 7) 4,793,760 3,032,148
Accumulated deficit (58,800) (58,800)
Deficit accumulated during the development
stage (5,755,569) (3,645,013)
----------------------------------------------------------------------------
(990,238) (645,082)

Future operations (note 2)
Contingencies (note 9)
Commitments (note 10)
Subsequent events (notes 9 and 12)
- -----------------------------------------------------------------------------
$ 142,623 $ 192,860
- -----------------------------------------------------------------------------
- -----------------------------------------------------------------------------
</TABLE>

See accompanying notes to consolidated financial statements.

On behalf of the Board:

Owen Jones (signed) President
- ----------------------------

Grant Sutherland (signed) Chairman
- ----------------------------

<PAGE>

BRAINTECH, INC.
Consolidated Statements of Operations
(Expressed in U.S. Dollars)

<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------
Period from
inception on
January 3, 1994
to December 31, Years ended December 31,
------------------------------------------
1998 1998 1997 1996
<S> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------
Sales $ 57,510 $ 57,510 $ - $ -
Cost of sales 30,005 30,005 - -
- ---------------------------------------------------------------------------------------------

Gross margin 27,505 27,505 - -

Expenses:
Research and development 1,139,560 321,378 148,527 260,384
Consulting and contractors 736,561 24,785 17,770 204,114
Salaries and benefits (note 11) 1,849,936 1,226,230 415,014 134,208
Selling, general and
administrative 1,902,261 560,180 348,731 314,839
Non-operating expenses:
Loss on disposal of capital
assets 20,136 1,888 - -
Write-down of investments 100,000 3,600 - 46,400
Write-down of intangible
assets 17,189 - - -
Write-down of organization
costs 17,431 - - -
-------------------------------------------------------------------------------------------
5,783,074 2,138,061 930,042 959,945
- ---------------------------------------------------------------------------------------------

Net loss $(5,755,569) $(2,110,556) $(930,042) $(959,945)
- ---------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------

Loss per share information:
Basic $ (0.26) $ (0.07) $ (0.04) $ (0.05)
- ---------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------

Weighted average number of
common shares outstanding 21,813,674 28,620,884 25,464,978 20,354,525
- ---------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------
</TABLE>

See accompanying notes to consolidated financial statements.

<PAGE>

BRAINTECH, INC.
Consolidated Statements of Stockholders' Deficit
(Expressed in U.S. Dollars)

<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------
Deficit
accumulated
Additional during the
Common paid-in Accumulated development
Shares stock Capital deficit stage
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Balance, January 3, 1994 17,400,000 $17,400 $1,039,271 $(58,800) $ --
Loss for the period -- -- -- -- (1,006,761)
- ----------------------------------------------------------------------------------------------------
Balance, December 31, 1994 17,400,000 17,400 1,039,271 (58,800) (1,006,716)
Loss for the period -- -- -- -- (748,310)
- ----------------------------------------------------------------------------------------------------
Balance, December 31, 1995 17,400,000 17,400 1,039,271 (58,800) (1,755,026)

Common stock transactions
(net of issue costs):
Issued for cash at $.1895 per share 950,000 950 173,440 -- --
Issued for cash at $.25 per share 733,333 733 183,167 -- --
Issued for cash at $.20 per share 3,000,000 3,000 592,500 -- --
Shares issued for services
rendered 1,200,000 1,200 238,800 -- --
Loss for the period -- -- -- -- (959,945)
- ----------------------------------------------------------------------------------------------------
Balance, December 31, 1996 23,283,333 23,283 2,227,178 (58,800) (2,714,971)

Common stock transactions
(net of issue costs):
Issued for cash at $.20 per share 2,000,000 2,000 396,991 -- --
Issued for cash at $.15 per share 1,000,000 1,000 148,279 -- --
Shares issued for services
rendered 300,000 300 59,700 -- --
Compensatory benefit of employee
stock options -- -- 200,000 -- --
Loss for the period -- -- -- -- (930,042)
- ----------------------------------------------------------------------------------------------------
Balance, December 31, 1997 26,583,333 26,583 3,032,148 (58,800) (3,645,013)
Common stock transactions
(net of issue costs):
Issued for cash at $.25 per share 1,600,000 1,600 398,400 -- --
Issued for cash at $.20 per share 2,188,000 2,188 435,412 -- --
Compensatory benefit of employee
stock options -- -- 927,800 -- --
Loss for the period -- -- -- -- (2,110,556)
- ----------------------------------------------------------------------------------------------------
Balance, December 31, 1998 30,371,333 $30,371 $4,793,760 $(58,800) $(5,755,569)
- ----------------------------------------------------------------------------------------------------
</TABLE>

See accompanying notes to consolidated financial statements.

<PAGE>

BRAINTECH, INC.
Consolidated Statements of Stockholders' Deficit
(Expressed in U.S. Dollars)

<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------
Period from
inception on
January 3, 1994 Years ended December 31,
to December 31, --------------------------------------
1998 1998 1997 1996
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Cash flows from operating activites:
Loss for the period $(5,755,569) $(2,110,556) $(930,042) $(959,945)
Items not involving cash:
Amortization 37,455 24,135 10,287 --
Bad debt 75,108 -- -- --
Write-down of investments 100,000 3,600 46,400
Write-down of intangible assets 17,189 -- -- --
Write-down of organization costs 17,431 -- -- --
Loss on disposal of capital assets 20,136 1,888 -- --
Shares issued for services rendered 300,000 -- 60,000 240,000
Compensatory benefit of employee
stock options 1,127,800 927,800 200,000 --
Change in operating assets and liabilities:
Accounts receivable (22,433) (971) (21,462) --
Prepaid expenses (12,344) (10,636) (1,708) --
Accounts payable and accrued liabilities 58,823 45,197 (36,942) (177,718)
- ---------------------------------------------------------------------------------------------------
Net cash used for operating activities (4,036,404) (1,119,543) (719,867) (851,263)
Cash flows from investing activites:
Purchase of marketable securities (100,000) -- -- --
Purchase of capital assets (131,769) (87,988) (23,559) --
Proceeds from notes receivable (130,181) -- -- --
Proceeds from disposal of real estate 360,752 -- -- --
- --------------------------------------------------------------------------------------------------
Net cash provided by (used for)
investing activites (55,198) (87,988) (23,559) --
Cash flows from financing actvities:
Notes receivable 55,073 -- -- 55,073
Borrowings from directors and officers (2,826) 18,304 (39,881) --
Due to (from) related companies 442,860 231,418 267,882 (58,144)
Mortgages payable (207,739) -- -- --
Common shares issued for cash 3,582,610 837,600 548,270 953,790
- --------------------------------------------------------------------------------------------------
Net cash provided by financing activities 3,869,969 1,087,322 776,271 950,719
- --------------------------------------------------------------------------------------------------
Increase (decrease) in cash and
cash equivalents (221,633) (120,209) 32,845 99,456
Cash and cash equivalents, beginning
of period 244,112 142,688 109,843 10,387
- --------------------------------------------------------------------------------------------------
Cash and cash equivalents, end of period $ 22,479 $ 22,479 $ 142,688 $ 109,843
- --------------------------------------------------------------------------------------------------
Supplemental information:
Interest paid $ 2,902 $ 2,155 $ 747 $ --
Taxes paid $ -- $ -- $ -- $ --
Non-cash financing activities:
Shares issued for services rendered $ 300,000 $ -- $ 60,000 $ 240,000
- --------------------------------------------------------------------------------------------------
</TABLE>

See accompanying notes to consolidated financial statements.

<PAGE>

BRAINTECH, INC.

Notes to Consolidated Financial Statements
(Expressed in U.S. Dollars)

Years ended December 31, 1998, 1997 and 1996

- ------------------------------------------------------
- ------------------------------------------------------

1. ORGANIZATION:

Braintech, Inc. (the "Company") was incorporated on March 4, 1987
under the laws of the State of Nevada as Tome Capital, Inc. The Company
sold 1,500,000 shares to the public on May 11, 1987, pursuant to Rule
504 of the Security Act of 1933, as amended. The Company initially was
in the business of real estate development. On January 3, 1994 the
Company changed its name to Braintech Inc. and began operations as a
high tech development company, developing advanced video recognition
software. All sales of its product and services are made in this
industry segment.

2. FUTURE OPERATIONS:

During the year ended December 31, 1998, the Company incurred a loss of
$2,110,556 and used cash for operating activities of $1,119,543. From
inception of the business on January 3, 1994, the Company has incurred
cumulative losses of $5,755,569 and used cash for operating activities
of $4,036,404.

These consolidated financial statements have been prepared on the going
concern basis under which an entity is considered to be able to realize
its assets and satisfy its liabilities in the ordinary course of
business. Operations to date have been primarily financed by equity
transactions. The Company's future operations are dependent upon
continued support by shareholders, the achievement of profitable
operations and the successful completion of management's plan to obtain
additional equity financing, although there can be no assurances that
the Company will be successful. As described in note 12, subsequent to
December 31, 1998 the Company issued common shares for net proceeds of
$1,083,750. The consolidated financial statements do not include any
adjustments relating to the recoverability of assets and classification
of assets and liabilities that might be necessary should the Company be
unable to continue as a going concern.

3. SIGNIFICANT ACCOUNTING POLICIES:

(a) Basis of presentation:

These consolidated financial statements are prepared in accordance
with generally accepted accounting principles in the United States
and present the financial position, results of operations and
cash flows of the Company and its wholly owned subsidiary
Brainware Systems Inc., incorporated under the Company Act of
British Columbia on March 30, 1994. All material intercompany
balances and transactions have been eliminated.

<PAGE>

BRAINTECH, INC.

Notes to Consolidated Financial Statements, page 2
(Expressed in U.S. Dollars)

Years ended December 31, 1998, 1997 and 1996

- ------------------------------------------------------
- ------------------------------------------------------

3. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED):

(a) Basis of presentation (continued):

Through December 31, 1997, the consolidated financial statements
of the Company issued to shareholders were presented in
accordance with generally accepted accounting principles in
Canada. The application of United States accounting principles to
these consolidated financial statements has been made on a
retroactive basis. In addition, to December 31, 1998, for United
States accounting and reporting purposes the Company was
considered to be in development stage as it was devoting
substantial efforts to developing its business operations.

(b) Cash and cash equivalents:

Cash and cash equivalents include highly liquid investments, such
as term deposits, having original maturities of three months or
less at the date of acquisition, that are readily convertible to
contracted amounts of cash.

Research and development costs are expensed as incurred.

(d) Revenue recognition:

The Company recognizes revenue when title has passed to the
customer, the collectibility of the consideration is reasonably
assured and the Company has no significant remaining performance
obligations. An allowance for estimated future returns is
recorded at the time revenue is recognized.

(e) Marketable securities:

Marketable securities are comprised of equity securities
available for sale and are stated at market value. Decreases in
market value that are considered to be other than temporary are
charged to operations.

(f) Capital assets:

Capital assets are carried at cost less accumulated amortization.
Amortization is calculated annually as follows:

<TABLE>
<CAPTION>
------------------------------------------------------------------
------------------------------------------------------------------
Asset Basis Rate
------------------------------------------------------------------
<S> <C> <C>
Furniture and fixtures declining-balance 20%
Computer equipment declining-balance 30%
Trade show assets declining-balance 20%
Computer software straight-line 50%
Leasehold improvements straight-line Lease term
------------------------------------------------------------------
------------------------------------------------------------------
</TABLE>

<PAGE>

BRAINTECH, INC.

Notes to Consolidated Financial Statements, page 3
(Expressed in U.S. Dollars)

Years ended December 31, 1998, 1997 and 1996

- -----------------------------------------------------------------------------
- -----------------------------------------------------------------------------

3. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED):

(g) Use of estimates:

The preparation of financial statements in conformity with
generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts
of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reporting
period. Actual amounts may differ from these estimates.

(h) Foreign currency:

Transactions denominated in foreign currencies are translated in
U.S. dollars at the rate prevailing at the time of the
transactions.

At the balance sheet date, monetary assets and liabilities
denominated in a foreign currency are translated at the current
rate of exchange. Exchange gains and losses arising on
translation or settlement of foreign currency denominated
monetary items are included in the determination of net income
for the current period.

(i) Stock-based compensation:

The Company has elected to apply Accounting Principles Board
Opinion No. 25, "Accounting for Stock Issued to Employees"
("APB 25"), and related interpretations in accounting for its
stock options. Under APB 25, compensation expense is only
recorded to the extent that the exercise price is less than fair
value on the date of grant. The Company has adopted the
disclosure-only provisions of Statement of Financial Accounting
Standards 123, "Accounting for Stock-Based Compensation"
("SFAS 123").

(j) Income taxes:

The Company follows the asset and liability method of accounting
for income taxes. Deferred tax assets and liabilities are
recognized based on the estimated future tax consequences
attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their
respective tax basis. Deferred tax assets and liabilities are
measured using enacted tax rates in effect for the year in which
those temporary differences are expected to be recovered or
settled. The effect on deferred tax assets and liabilities of a
change in tax rates is recognized in income in the period that
includes the enactment date.

(k) Concentration of credit risk:

Financial instruments that potentially subject the Company to
significant concentrations of credit risk consist principally of
cash equivalents.

The Company maintains cash equivalents with various financial
institutions located in Canada and the United States. The
Company's policy is to limit the exposure at any one financial
institution and to invest solely in highly liquid investments
that are readily convertible to contracted amounts of cash.

<PAGE>

BRAINTECH, INC.

Notes to Consolidated Financial Statements, page 4
(Expressed in U.S. Dollars)

Years ended December 31, 1998, 1997 and 1996

- -----------------------------------------------------------------------------
- -----------------------------------------------------------------------------

3. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED):

(l) Loss per share:

Loss per share is calculated based on the weighted average number
of shares outstanding.

Fully diluted loss per share has not been presented as
outstanding options are anti-dilutive.

(m) Comprehensive income:

Net income for the Company is the same as comprehensive income.

4. MARKETABLE SECURITIES:

</TABLE>

The Company has recorded losses in 1996, 1997 and 1998 of $46,400, $nil
and $3,600 respectively, for permanent decreases in value.

5. RELATED PARTY BALANCES AND TRANSACTIONS:

(a) Due from directors and officers:

The amounts due from directors and officers represent cash
advances provided to current directors and officers of the
Company.

(b) Due to related companies:

The amounts due to related companies under common control results
from intercompany expense allocations and cash advances.

During the year, the Company was charged $129,538 (1997 - $nil;
1996 - $138,705) for management and consulting services provided
by directors and officers.

<PAGE>

BRAINTECH, INC.
Notes to Consolidated Financial Statements, page 5
(Expressed in U.S. Dollars)

Years ended December 31, 1998, 1997 and 1996

- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------

6. CAPITAL ASSETS:

-------------------------------------------------------------------------
-------------------------------------------------------------------------
December 31,
1998
-------------------------------------------------------------------------
Accumulated Net book
Cost amortization value
-------------------------------------------------------------------------
<S> <C> <C> <C>
Furniture and fixtures $ 16,419 $ 1,790 $14,629
Computer equipment 47,046 8,612 38,434
Trade show assets 8,446 845 7,601
Computer software 23,740 21,648 2,092
Leasehold improvements 14,008 1,527 12,481
-------------------------------------------------------------------------
$109,659 $34,422 $75,237
-------------------------------------------------------------------------
-------------------------------------------------------------------------
</TABLE>

<TABLE>
<CAPTION>
-------------------------------------------------------------------------
-------------------------------------------------------------------------
December 31,
1997
-------------------------------------------------------------------------
Accumulated Net book
Cost amortization value
-------------------------------------------------------------------------
<S> <C> <C> <C>
Computer equipment $ 4,032 $ 1,961 $ 2,071
Computer software 19,527 8,326 11,201
-------------------------------------------------------------------------
$ 23,559 $10,287 $13,272
-------------------------------------------------------------------------
-------------------------------------------------------------------------
</TABLE>

7. COMMON STOCK:

(a) Of the shares outstanding at December 31, 1998, 5,280,000 shares
(1997 - 6,830,000) are subject to trading restrictions. These
include the 1,500,000 shares retained by the Company, as described
in note 7(b). The Company believes that any hold periods relating
to the remaining 3,780,000 shares have expired but the
shareholders have not applied to remove the restrictive
designation.

(b) 5,500,000 shares were issued for technology in 1993 and recorded
at par value of $5,500. 1,500,000 shares have been retained by the
Company because the development of the technology has not been
completed.

(d) Stock options:

The Company has reserved 7,500,000 common shares pursuant to a
stock option plan. Options to purchase common shares of the
Company may be granted by the Board of Directors and vest
immediately.

<PAGE>

BRAINTECH, INC.
Notes to Consolidated Financial Statements, page 6
(Expressed in U.S. Dollars)

Years ended December 31, 1998, 1997 and 1996

- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------

7. COMMON STOCK (CONTINUED):

(d) Stock options (continued):

Stock option activity during the year ended December 31, 1998 is
as follows:

<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------------
Weighted
average Weighted Outstanding Outstanding
Expiry exercise average December 31, Forfeited December 31,
dates price fair value 1997 Granted Exercised /expired 1998
-----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
November 28, 2002 $0.20 $0.19 5,000,000 - 803,000 100,000 4,097,000
November 28, 2002 $0.20 $0.76 - 1,420,000 110,000 100,000 1,210,000
November 28, 2002 $0.20 $0.77 - 100,000 25,000 - 125,000
-----------------------------------------------------------------------------------------------------------------------

5,000,000 1,570,000 938,000 200,000 5,432,000
-----------------------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------------
</TABLE>

The weighted average fair value of options was calculated using
the Black-Scholes option pricing formula.

The Company has adopted the disclosure provisions of Statement of
Financial Accounting Standards No. 123, "Accounting for
Stock-based Compensation" ("FAS 123") but has elected to continue
measuring compensation costs using the intrinsic value based
method of accounting. Under the intrinsic value based method,
employee stock option compensation is the excess, if any, of the
quoted market value of the stock at the date of grant over the
amount on optionee must pay to acquire stock. Included in expenses
for 1998 is $927,800 representing a compensatory benefit (1997 -
$200,000; 1996 - $nil).

Had compensation cost been determined based on fair value at the
grant dates of the stock options and charged to earnings
consistent with the measurement provision of FAS 123, the impact
would be as follows:

<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------

Period from
inception on
January 3,
1994 Years ended December 31
to December 31, ----------------------------------------
1998 1998 1997 1996
---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Loss for the year, as reported $(5,755,569) $(2,110,556) $ (930,042) $(959,945)
Estimated fair value of option
grants (2,185,223) (1,201,483) (983,740) -
Less compensatory benefit included
in salaries and benefits 1,127,800 927,800 200,000 -
---------------------------------------------------------------------------------------------
Pro forma loss $(6,812,992) $(2,384,239) $(1,713,782) $(959,945)
---------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------
Loss per share $ (0.31) $ (0.08) $ (0.07) $ (0.05)
---------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------
</TABLE>

The fair value of option grants has been estimated using the
Black-Scholes Option-Pricing model with the following assumptions:
dividend yield - 0% (1997 - 0%), risk-free interest rate - 6.0%
(1987 - 5.6%); expected option life - 5 years (1997 - 5 years);
expected volatility - 156% (1997 - 108%).

<PAGE>

BRAINTECH, INC.
Notes to Consolidated Financial Statements, page 7
(Expressed in U.S. Dollars)

Years ended December 31, 1998, 1997 and 1996

- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------

8. INCOME TAXES:

To December 31, 1996, the Company has incurred losses for income tax
purposes in Canada and the United States of approximately $25,000, which
are available to reduce income for tax purposes through the year 2000.

9. CONTINGENCIES:

The Company is engaged in the following legal disputes:

(a) On February 1, 1999 a former employee of the Company commenced
legal proceedings against the Company claiming approximately
$100,000 in damages for alleged breach of a stock option agreement
and approximately $7,500 alleged to be owing pursuant to a
consulting agreement. The Company has filed a defence and
counterclaim alleging breach of fiduciary duty and negligence.
While the ultimate outcome is uncertain, management of the Company
believes it will be successful in defending this action and
accordingly no amount has been provided in these financial
statements.

(b) On March 16, 1999 three corporations commenced legal proceeding
against the Company and certain of its present and former
directors are claiming damages in the amount of $606,000 for
breach of contract and conversion of stock certificates. The
plaintiffs have not sought recovery of any shares of the Company.
The Company has filed a defence and counterclaim alleging that the
plaintiffs and a former promoter of the Company caused share
certificates of the defendant to be issued to the plaintiffs
improperly, and caused funds of the Company to be used for
unauthorized and improper purposes. The Company has recorded the
full amount of the $606,000 contingent claim.

10. COMMITMENTS:

The Company has the following minimum lease payments under operating
leases for its premises:

<TABLE>
<S> <C>
1999 $194,000
2000 198,000
2001 202,000
2002 206,000
2003 139,000
-------------------------------------------------

$939,000
-------------------------------------------------
-------------------------------------------------
</TABLE>

Fifty percent of these amounts are recoverable pursuant to an agreement
with a company with certain common shareholders and directors of the
Company.

<PAGE>

BRAINTECH, INC.
Notes to Consolidated Financial Statements, page 8
(Expressed in U.S. Dollars)

Years ended December 31, 1998, 1997 and 1996

- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------

11. SALARIES AND BENEFITS:

Salaries and benefits are comprised of the following:

<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------

12. SUBSEQUENT EVENTS:

On March 26, 1999, the Board of Directors resolved to sell 7,000,000
shares of common stock at $0.15 per share, for aggregate proceeds of
$1,050,000 less estimated share issuance costs of $26,250 for net
proceeds of $1,083,750. At June 30, 1999 all proceeds have been received.

<PAGE>

Exhibit 5.1

William M. Ziering
Attorney At Law
Four Embarcadero Center
Suite 3400
San Francisco, CA 94111-4187
Tel: (415) 956-0161
Fax: (415) 398-3249

VIA COURIER AND FAX

BrainTech, Inc.
930 West 1st Street
Suite 102
North Vancouver, BC
V7P 3N4

ATTN: Grant Sutherland, Chairman

RE: REGISTRATION STATEMENT ON FORM S-1

Dear Sirs:

I have acted as special counsel to BrainTech, Inc., a Nevada corporation (the
"Company"), in connection with legal issues relating to the issue of
11,095,000 common shares in capital stock of the Company (the "Shares"). I
understand that the Company intends to file a Registration Statement pursuant
to the Securities Act of 1933 in respect of the Shares. The holders of the
Shares will be identified as Selling Shareholders in the Registration
Statement as follows.

Selling Shareholder No. of Shares
1. Owen Jones 1,000,000
2. Grant Sutherland 1,150,000
3. 695183 B.C. Ltd. 1,000,000
4. Welcome Opportunities Ltd. 1,000,000
5. Donald Anderson 900,000
6. Bolder Investment Partners 500,000
7. J.R. Sparling MD Incorporated 500,000
8. APL Securities Ltd. 500,000
9. Nottinghill Resources Ltd. 500,000
10. 9051 Investments Ltd. 50,000
11. Daphne Thomas 50,000
12. Melvin Earl Beaumont 450,000
13. Marguerite Beaumont 450,000
14. Rendeco Holdigs Ltd. 450,000
15. Worldwide Mortgage Corp. Ltd. 450,000
16. Beau-J Holdings Ltd. 1,135,000
17. Jeffrey W. Lubore 150,000
18. David A. Robinson 150,000

<PAGE>

19. Thomas M. Dunkenberger 150,000
20. Michael M. Hawes 150,000
21. Clive Forth 110,000
22. Michael Colen 300,000

You have advised me that the Company has received all of the consideration
required to be paid for the Shares. I have assumed that this information is
correct.

I have examined such records of the Company as I have deemed necessary for
the purpose of this opinion. In doing so, I have assumed the genuineness of
all signatures, the authenticity of all documents submitted to us as
originals, and the conformity of all documents submitted to us as copies to
the originals.

Based on and subject to the foregoing, I am of the opinion that the
Shares constitute duly authorized, validly issued, fully paid, and
non-assessable common shares in the capital of the Company.

I hereby consent to the filing of this opinion as an exhibit to the
Registration Statement. In giving such consent, I do not thereby admit that I
am in the category of persons whose consent is required under section 7 of
the Securities Act of 1933.

This opinion is based upon currently existing statutes, rules, regulations
and judicial decisions and we disclaim any obligation to advise you of any
change in these sources of law or subsequent legal or factual development
which might affect any matters or opinions set forth in this letter.

I am opining only as to the matters expressly stated in this letter, and no
opinion should be inferred as to any other matters.

Very truly yours.

"William M. Ziering"

William M. Ziering

<PAGE>

EXHIBIT 23.1

CONSENT OF INDEPENDENT CHARTERED ACCOUNTANTS

The Board of Directors
Braintech, Inc.

We consent to the use of our report dated April 15, 1999, except as to note
12 which is as of June 30, 1999, relating to the consolidated balance sheets
of Braintech, Inc. as at December 31, 1998 and 1997 and the related
consolidated statements of operations, stockholders's deficit and cash flows
for each of the years in the three year period ended December 31, 1998 and
for the period from inception on January 3, 1994 to December 31, 1998
included in the registration statement on Form S-1, of Braintech, Inc and to
the reference to our firm under the heading "Experts" in the prospectus.

KPMG LLP

Chartered Accountants

Vancouver, Canada
February 9, 2000