Optimal Group Inc – ‘424B1’ on 3/29/00

On:  Wednesday, 3/29/00   ·   As of:  3/30/00   ·   Accession #:  940180-0-359   ·   File #:  333-31044

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Prospectus   —   Rule 424(b)(1)
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Document/Exhibit                   Description                      Pages   Size 

 1: 424B1       Prospectus                                            78    360K 

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                                                Filed pursuant to Rule 424(B)(1)
                                          Registration No. 333-31044

PROSPECTUS                                                                      

2,000,000 Class "A" Shares  

Common Shares 

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

We are offering for sale 1,325,000 of our common shares and the shareholders
named in this prospectus are offering an aggregate of 675,000 of our common     
shares that trade on the Nasdaq National Market under the symbol "OPMR." On     
March 28, 2000, the last reported sale price of our common shares was $40.25    
per share.                                                                      

Investing in our common shares involves certain risks. See "Risk Factors"   
beginning on page 6.                                                            

Neither the Securities and Exchange Commission nor any state securities     
commission has approved or disapproved of these securities, or determined if    
this prospectus is truthful or complete. Any representation to the contrary is  
a criminal offense.                                                             

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

                                                                [Download Table]

                                                     Per Share        Total   
                                                     ---------        -----   
                                                                              
Public offering price............................     $39.000      $78,000,000
Underwriting discount............................     $ 2.145      $ 4,290,000
Proceeds to us...................................     $36.855      $48,832,875
Proceeds to the selling shareholders.............     $36.855      $24,877,125

We have granted the underwriters a 30-day option to purchase up to 300,000  
additional common shares to cover over-allotments.                              

The underwriters are offering the shares subject to various conditions. The 
underwriters expect to deliver the shares to purchasers on or about April 3,    
2000.                                                                           

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

GERARD KLAUER MATTISON & CO., INC.                                              

THE ROBINSON-HUMPHREY COMPANY 

                                              RAYMOND JAMES & ASSOCIATES, INC.

Prospectus dated March 28, 2000 

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TABLE OF CONTENTS 

                                                                [Download Table]

                                                                          Page
                                                                          ----
                                                                              
Prospectus Summary.......................................................   1 
Risk Factors.............................................................   6 
Forward-Looking Statements...............................................  10 
Use of Proceeds..........................................................  11 
Capitalization...........................................................  12 
Selected Financial and Other Data........................................  13 
Management's Discussion and Analysis of Financial Condition and Results       
 of Operations ..........................................................  15 
Business.................................................................  20 
Management...............................................................  33 
Principal and Selling Shareholders.......................................  38 
Description of Share Capital.............................................  40 
Certain Canadian and United States Income Tax Considerations.............  42 
Shares Eligible for Future Sale..........................................  45 
Underwriting.............................................................  46 
Legal Matters............................................................  47 
Experts..................................................................  47 
Financial Statements..................................................... F-1 

You may rely only on the information contained in this prospectus. We have  
not authorized anyone to provide information different from that contained in   
this prospectus. Neither the delivery of this prospectus nor the sale of common 
shares means that information contained in this prospectus is correct after the 
date of this prospectus. This prospectus is not an offer to sell or             
solicitation of an offer to buy these common shares in any circumstances under  
which the offer or solicitation is unlawful.                                    

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OUTSIDE FRONT GATE                                                              

[The outside front gate will have a dark background.]           

 [At the top of the page, the words "Is this your idea of customer
     service?" will appear in red, below which a yellow sign reading "LANE
 CLOSED" will appear. Below this, the words "Then it's time for U-
   Scan/(R)/ Express." will appear in white, followed by, from left to
     right, the stylized version of the U-Scan Express/(R)/ with the words
        "The right answer. Right now." below it, a picture of the U-Scan Express
and our Logo.]                                                  

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INSIDE FRONT GATE                                                               

        [The background is blue. At the top right corner, carrying over onto the
     inside front cover, is the stylized version of the U-Scan Express. In
    the upper left is a picture of the U-Scan Express system. Below this
picture, to the left is the stylized version of the U-Scan Solo 
       trademark. Below the U-Scan Solo trademark is our Logo. To the right of
     the logo is a picture of the U-Scan Solo. Above the picture of the U-
     Scan Solo are concentric circles, with the words "The Leader in North
America" on the outside and containing our stylized Logo.]      

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INSIDE FRONT COVER                                                              

      [The background is blue. Pictures, clockwise from the top left corner,
    are of a woman and child using our U-Scan Express, a woman and child
       approaching the U-Scan Express with a shopping cart, a stylized version
        of the U-Scan Carousel trademark, and a picture of the U-Scan Carousel.]

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PROSPECTUS SUMMARY

 The summary highlights information contained elsewhere in this prospectus. It
does not contain all of the information that you should consider before         
investing in our common shares. We encourage you to read the entire prospectus  
carefully, including the section entitled "Risk Factors" and the financial      
statements and the notes to those financial statements. Unless otherwise        
stated, all information in this prospectus assumes that the underwriters will   
not exercise their over-allotment option.                                       

References contained in this prospectus to "Optimal," "us," "we," and "our" 
are to Optimal Robotics Corp.                                                   

Our Company 

We are the leading provider of self-checkout systems to retailers in the    
United States. Our principal product is the U-Scan Express, an automated self-  
checkout system which enables shoppers to scan, bag and pay for their purchases 
with little or no assistance from store personnel. We estimate that in 1999 U-  
Scan Express systems processed over 45 million customer transactions. The U-    
Scan Express can be operated quickly and easily by shoppers and makes the       
checkout process more convenient for them. The U-Scan Express also reduces the  
cost of checkout transactions to retailers and addresses labor shortage         
problems by replacing manned checkout counters with our automated self-checkout 
stations.                                                                       

As of December 31, 1999, we had installed 375 U-Scan Express systems,       
consisting of 1,498 checkout stations, in 328 stores of leading retailers       
across 29 states. Each U-Scan Express system typically includes four checkout   
stations and one manned supervisor terminal.                                    

As of January 31, 2000, we had purchase commitments for a minimum of 457 U- 
Scan Express systems. See "Business--Company Overview." The following chart     
provides information regarding the U-Scan Express systems we have installed     
during the last five years:                                                     

                                                                [Download Table]

                            1995 1996 1997 1998 1999 
                            ---- ---- ---- ---- -----
                                                     
U-Scan Express system                                
 installations:                                      
  Systems installed during                           
   year...................    2    6   22   57    288
  Systems installed at                               
   year-end...............    2    8   30   87    375
U-Scan checkout stations                             
 installed at year-end....    8   32  120  346  1,498
Customer transactions                                
 (millions) (1)...........                  12     45

--------                                                                        
(1) Estimated, based on reports provided by our customers. Prior to 1998, we    
did not track this data.                                                

Our Industry                                                                    

We currently target supermarket and supercenter chains in the United States 
with average annual sales per store in excess of $12 million. According to      
industry sources, there are over 11,500 of these stores in the United States.   
Based on information received from various supermarkets and supercenters, we    
believe that approximately half of all transactions at those stores are made by 
shoppers who purchase 15 or fewer items and who check out through express       
lanes.                                                                          

We believe that the demand for self-checkout systems will continue to grow, 
in part because they help alleviate the significant labor shortages confronting 
retailers in certain markets. The U.S. Bureau of Labor Statistics has estimated 
that, from 1998 to 2008, the U.S. economy will require over 550,000 additional  
cashiers.                                                                       

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Our Customers                                                                   

Our main customers have been supermarkets and supercenters. Our customers   
include The Kroger Company, Meijer, Inc., Ahold NV, The Great Atlantic and      
Pacific Tea Co., Inc. (A&P), Wal-Mart Stores, Inc., Harris Teeter, Inc. and     
Fleming Companies, Inc. (through its Rainbow Foods division). The following     
table outlines the installed base in our customers' stores as of January 31,    
2000:                                                                           

                                                                [Download Table]

                                                                Systems 
Customer                      Description                      Installed
--------                      -----------                      ---------
                                                                        
Kroger   Largest supermarket retailer in the United States...     235   
Meijer   Second largest U.S. supercenter operator............      94   
         Operates BI-LO, Stop & Shop, Tops and certain Giant            
Ahold    stores..............................................      13   
A&P      A leading U.S. supermarket retailer.................      24   
Wal-Mart World's largest retailer............................      18   
Other    ....................................................      21   

These leading retailers figure prominently in the establishment of market   
standards, and we believe that our relationships with them and the increasing   
presence and use of our systems in their stores contribute to the market's      
growing acceptance of U-Scan Express. We also believe that shoppers' increasing 
familiarity with our systems at these retailers will facilitate future sales    
efforts, particularly with retailers who have not yet installed our systems in  
their stores.                                                                   

 We believe that these customers have chosen to install U-Scan Express because
it:                                                                             

. increases convenience for their shoppers, while accommodating typical     
 shopping patterns and allowing shoppers to check out as if they were at a
manned checkout counter,                                                

. provides the shopper with more control over the checkout process, similar 
to an ATM transaction,                                                  

. builds loyalty by making shopping easier and more convenient,             

. addresses labor shortages in certain markets by replacing manned checkout 
counters with automated self-checkout stations, and                     

. provides labor cost savings by allowing one employee to supervise four    
unmanned stations.                                                      

Our Competitive Advantages                                                      

We believe that the following competitive advantages have helped us become  
the leading provider of self-checkout systems to retailers in the United        
States:                                                                         

. the largest installed base of self-checkout systems in the United States  
and well-established relationships with leading retailers,                

. an established brand name and corporate identity,                         

. six years' experience and expertise in designing self-checkout solutions  
for retailers,                                                            

. a focused business strategy targeting the rapidly developing self-        
checkout market,                                                            

.a senior management team and experienced sales force familiar with the     
needs of retailers, and                                                     

. superior customer service through a 24-hour, 365-day on-line helpdesk     
supported by a dedicated network of service personnel.                  

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Our Business Strategy                                                           

Our primary objectives are to install more U-Scan Express systems in        
additional supermarkets and supercenters, to begin installing U-Scan Express    
and other self-checkout systems in other kinds of stores, and to initiate sales 
and installations of our systems in Europe.                                     

The key elements of our business strategy are to:                           

. Increase Installations in Existing and New Supermarket and Supercenter    
Accounts. We plan to increase our penetration of existing customer      
 accounts and increase the size of our direct sales force in order to sell
to new customers in North America. We are continuing to develop         
opportunities in Europe.                                                

. Extend Retail Applications of Our Products and Services. In addition to   
our focus on transactions for supermarkets and supercenters, we have    
begun to extend the retail applications of our U-Scan self-checkout     
 technology into larger order transactions and into other kinds of stores.
We have recently introduced the U-Scan Carousel, a large-order system,  
and the U-Scan Solo, a small-order system for use in drug stores,       
convenience stores and specialized departments within big-box retailers.
See "Business--Our Business Strategy."                                  

. Capitalize on e-Commerce Opportunities. We are developing strategies that 
will enable us to take advantage of our large and growing installed base
of self-checkout systems and the amount of time shoppers spend at our   
 stations. These strategies, which may include Internet-enabled, on-screen
interactive advertising and order fulfillment, would allow us to        
capitalize on the integration of the Internet with our self-checkout    
systems as consumers transition from traditional shopping experiences to
Internet-enabled models.                                                

. Assume Assembly of U-Scan Express. Upon the termination of PSC, Inc.'s    
exclusive assembly rights on December 31, 2000, we will assume the      
assembly of the U-Scan Express in our Plattsburgh, New York facility (in
addition to the final software configuration and the quality assurance  
tasks we already perform in Plattsburgh). We believe that assuming the  
assembly of our systems will result in a material increase in our gross 
and operating margins.                                                  

Our Corporate Information                                                       

Optimal was formed in 1984 and is incorporated under the federal laws of    
Canada. We commenced our current business in 1991. Our principal office is      
located at 4700 de la Savane, Montreal, Quebec, H4P 1T7, and our telephone      
number is (514) 738-8885. We have one subsidiary, Optimal Robotics, Inc., a     
wholly-owned Delaware corporation.                                              

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The Offering

                                                                [Download Table]
                                                                             
Common shares offered:                                                       
   By Optimal.......................................  1,325,000 shares(1)    
   By the selling shareholders......................    675,000 shares       
                                                     -----------------       
                                                      2,000,000 shares(1)    
Common shares to be outstanding after the offering.. 13,345,933 shares(1)(2) 

Use of proceeds..................................... To fund product research
                                                     and development; to     
                                                     expand into Europe; to  
                                                     expand sales and        
                                                     marketing operations; to
                                                     expand our assembly     
                                                     facility; to increase   
                                                     support services; and to
                                                     provide for general     
                                                     corporate purposes,     
                                                     including working       
                                                     capital, potential      
                                                     acquisitions and        
                                                     strategic partnerships. 
Nasdaq National Market Symbol....................... OPMR                    

--------                                                                        
(1) Does not include up to 300,000 common shares issuable upon the exercise of  
the underwriters' over-allotment option.                                
(2) Does not include 2,299,882 common shares issuable upon the exercise of      
   options (including reload options) and warrants to be outstanding after the
offering. See footnote (3) to "Principal and Selling Shareholders."     

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Summary Financial Data

The following summary financial data as of December 31, 1999 and for the    
years ended December 31, 1999, 1998 and 1997 are derived from our audited       
financial statements included elsewhere in this prospectus. Effective December  
31, 1998, we adopted the U.S. dollar as the reporting currency for our          
financial statements. The financial statements for all periods prior to 1999,   
for Canadian GAAP purposes, are presented in U.S. dollars in accordance with a  
translation of convenience--See note 2 of the notes to the financial            
statements, included elsewhere in this prospectus.                              

The summary financial data are prepared on the basis of Canadian GAAP, which
is different in some regards from U.S. GAAP. For a description of the material  
differences between Canadian GAAP and U.S. GAAP in regard to our financial      
statements, see note 16 of the notes to the financial statements, included      
elsewhere in this prospectus.                                                   

                                                                [Download Table]

                                                  Year ended December 31,  
                                                  ------------------------ 
                                                   1999    1998     1997   
                                                  ------- -------  ------- 
                                                     (U.S. dollars, in     
                                                   thousands except per    
                                                        share data)        
                                                                           
Income Statement Data:                                                     
Revenues......................................... $29,634 $ 5,618  $ 3,397 
Gross margin.....................................   6,177     483      688 
Earnings (loss) before income taxes..............     120  (3,911)  (1,381)
Income tax recovery(1)...........................   3,532     --       --  
Net earnings (loss).............................. $ 3,652 $(3,911) $(1,381)
Basic net earnings (loss) per common share....... $  0.38 $ (0.52) $ (0.19)
Fully diluted net earnings (loss) per common                               
 share........................................... $  0.35 $ (0.52) $ (0.19)

                                                                [Download Table]

                                                        December 31, 1999   
                                                      --------------------- 
                                                      Actual  As Adjusted(2)
                                                      ------- ------------- 
                                                               (unaudited)  
                                                         (U.S. dollars,     
                                                          in thousands)     
                                                                            
Balance Sheet Data:                                                         
Cash, cash equivalents and short-term investments.... $29,136    $78,631    
Working capital......................................  36,032     85,527    
Total assets.........................................  44,206     93,701    
Shareholders' equity.................................  39,705     89,200    

--------                                                                        
(1) We received purchase commitments for a large number of systems in the       
fourth quarter of 1999, which cover a substantial portion of our fiscal 
   2000 budgeted sales target. In addition, there has been a positive trend in
our profitability and sales levels in recent quarters. Based on these   
factors, we have determined that it is now more likely than not that we 
will earn sufficient taxable income during the allowable carry-forward  
period to realize all of our future income tax assets. Therefore, during
  the fourth quarter of 1999, we recognized the future benefit of all of our
future income tax assets, which relate principally to previously        
unrecognized non-capital losses and undeducted research and development 
  expenses. See "Management's Discussion and Analysis of Financial Condition
   and Results of Operations--Results of Operations--1999 Compared with 1998."
(2) Adjusted to give effect to the sale of the 1,325,000 common shares offered  
by Optimal hereby and the application of the estimated net proceeds     
therefrom and from the exercise of options and warrants by the selling  
shareholders. See "Use of Proceeds."                                    

 In this prospectus, except where otherwise indicated, references to "dollars"
or "$" are to United States dollars, and references to "Cdn.$" are to Canadian  
dollars.                                                                        

 Information contained on our website does not form a part of this prospectus.

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RISK FACTORS

You should carefully consider the following factors and other information in
this prospectus before deciding to purchase our common shares.                  

We have a history of losses. Prior to the second quarter of 1999, our       
operations generated losses. As of December 31, 1999, our accumulated deficit   
from inception was $5,625,622. There is no guarantee that we will be profitable 
in the future.                                                                  

We principally depend on one product. We believe that our near-term success 
depends principally on the sales volume of one product, the U-Scan Express. Our 
future success depends upon the continued acceptance of and demand for this one 
product, as well as new products that we may bring to market. If U-Scan Express 
experiences significant problems, competition from superior technology, or      
customer resistance, we could be harmed significantly. Sales growth will depend 
on our generating additional orders from existing U-Scan Express customers as   
well as finding new customers for the system. We believe that our customers     
will only purchase the U-Scan Express if they conclude that shoppers will use   
it and that there are benefits to the store from its installation. We believe   
that shoppers will use the U-Scan Express only if it is convenient, easy to use 
and reliable.                                                                   

We rely on a few customers for most of our revenues. We have 15 major       
retailers as customers, nearly all of which are supermarket chains, and we rely 
on these customers' continued willingness to install the U-Scan Express. We may 
not be able to generate new customers for the U-Scan Express.                   

We may not be able to manage our growth. During the past several years, we  
have experienced significant growth in sales. As a result, we have had to hire  
and train additional skilled personnel. Should sales continue to increase, we   
will have to hire and train even more personnel to customize, install and       
support U-Scan Express. There is no assurance that we will be able to hire the  
skilled personnel we will need to meet increased demand should it develop. This 
is particularly true for installation and support personnel, for whom there is  
significant competition. If we are unable to hire such personnel, our sales may 
be adversely affected. Despite our recent growth, we are still a small company, 
and should demand for our products be unexpectedly strong, we may be unable to  
fill our orders.                                                                

We rely on third party assembly. We currently depend upon PSC to assemble U-
Scan Express. PSC has the exclusive right to assemble U-Scan Express for us     
through December 31, 2000 (after which date PSC will cease assembly and we will 
commence assembling our systems). Prior to December 31, 2000, should PSC fail   
for any reason to produce enough systems to meet demand, we may be materially   
adversely affected. Furthermore, the inability to control the assembly of our   
primary product during this period could adversely affect us.                   

We rely on third party suppliers. The U-Scan Express is assembled from      
components that are readily available from numerous suppliers. Although we may  
utilize a single supplier for particular components, given the open             
architecture of our system, we are not dependent on any single supplier for any 
particular component. Nevertheless, should any of our suppliers fail to deliver 
components to us in a timely manner, it could disrupt our business.             

 The U-Scan Express is assembled in a single facility. PSC currently assembles
the U-Scan Express in a single facility in Rochester, New York. Beginning       
January 1, 2001, we will assemble our systems in a single facility in           
Plattsburgh, New York. A disruption of operations at either facility for any    
reason, including labor unrest or natural disaster, may adversely affect our    
business and results of operations.                                             

We have limited experience assembling the U-Scan Express. We will assume    
assembly of our systems in our Plattsburgh, New York facility on January 1,     
2001. Because we have not performed this function before, we may experience     
difficulties in assembling our systems or encounter logistical problems.        

We have pending patent infringement claims against us. In each of 1995 and  
1996, we received a demand letter from the same claimant alleging that U-Scan   
Express infringes upon the claimant's patent. In July 1999, this claimant filed 
a civil action in the United States District Court for the District of Utah     
against us and PSC, the current assembler of U-Scan Express, alleging patent    
infringement. A second party also sent a                                        

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demand letter to us alleging a different patent infringement. After             
consultation with counsel, we believe that the former claimant should not       
prevail in its lawsuit and that the latter claimant should not prevail if a     
lawsuit is brought to assert its claim, and that these claims will not have a   
material adverse effect on our business or prospects. However, no assurance can 
be given that a court will not ultimately determine that the system infringes   
upon one or both of such claimants' rights. A determination by a court that the 
system infringes upon either of the claimants' rights would have a material     
adverse effect on our business and results of operations.                       

 We may not be able to keep pace with changes in technology. The self-checkout
industry is rapidly developing. The technology utilized by the U-Scan Express   
is changing rapidly, in part due to the evolving demands of our customers. To   
be successful, we will have to anticipate the demands of our customers and      
improve our existing products and develop new ones to satisfy them. If we fail  
to improve and develop products by the times and at the prices demanded by our  
customers, our business and prospects may be adversely affected. Our            
competitors may introduce new technology that is better than ours. If so, we    
will have to improve our technology in order to remain competitive. If we are   
unable to do so, there might be an adverse impact on us.                        

 We depend upon key personnel. Our future success depends to a great extent on
the continued services of our senior management and other key personnel,        
including sales people. Our success will also depend upon our ability to hire   
and retain qualified personnel to assemble, install and support our systems, to 
improve our existing products and to develop new ones. These people will        
include:                                                                        

.programmers and other software engineers,                                  

.project managers,                                                          

.installers, and                                                            

.hardware and software support personnel.                                   

The competition for these people may be significant. Should we have difficulty  
hiring or retaining qualified personnel, it could adversely affect our business 
and prospects.                                                                  

Competition could reduce revenue from the U-Scan Express. The market for    
checkout systems is very competitive. The chief rival for the U-Scan Express is 
the traditional manned checkout counter. Although the use of automated self-    
checkout systems such as the U-Scan Express is relatively new, we expect        
increasing competition for sales of this product. The barriers to entering this 
market may be low. Most of our competitors are larger and have greater          
financial and other resources. Competitors include NCR Corporation, Symbol      
Technologies, Inc. and Productivity Solutions, Inc. Additionally, PSC has       
announced its intention to enter this market after December 31, 2000. We may    
not be able to compete successfully against these and other companies with      
greater financial and other resources.                                          

 Our products may contain defects. Our products, including the U-Scan Express,
are complex and, despite extensive testing, may contain undetected flaws when   
first installed for a new customer. This is particularly true of the software   
in our products, which must be adapted to each customer's information systems.  
If serious, any such flaws could prevent or delay market acceptance of our      
products and cause us to incur substantial re-engineering expenses.             

Our directors and officers can influence shareholder actions through their  
share ownership. After this offering, our officers and directors will have the  
right to vote (if they were to exercise all vested options, including "reload"  
options, and warrants held by them) an aggregate of 1,851,000 common shares,    
which will amount to 12.5% of the then total outstanding shares (after giving   
effect to such exercises). See footnotes (3) and (10) to "Principal and Selling 
Shareholders." This percentage of outstanding shares may permit these persons   
to determine the outcome of any matter submitted to a vote of our shareholders, 
including the election of directors, any amalgamation or consolidation, or the  
sale of all or substantially all of our assets.                                 

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Share prices in technology stocks have been volatile. Recently, there have  
been substantial price and volume fluctuations in stock markets, and the prices 
of technology company shares have been particularly volatile. The price of our  
common shares in the stock market may move in ways that are unrelated or        
disproportionate to our operating performance. In addition to our performance,  
the following factors may cause the price of our common shares to fluctuate in  
the stock market:                                                               

.the introduction of new products by us or by competitors,                  

.business conditions in our markets,                                        

.earnings forecasts by market analysts,                                     

.sales of our common shares in the market,                                  

.low trading volume of our common shares, and                               

.general economic conditions.                                               

Other factors, both related and unrelated to us, may also cause fluctuations in 
our share price.                                                                

We are at risk from foreign currency exchange rate fluctuations. A          
significant portion of our expenses is paid in Canadian dollars, while          
substantially all of our revenues are earned in U.S. dollars. If the Canadian   
dollar becomes stronger, the effective cost of our expenses (as reported in     
U.S. dollars) will increase. We have never tried to hedge our exchange rate     
risk, do not plan to begin to do so and may not be successful should we attempt 
to do so in the future.                                                         

Future sales of common shares could depress the price of the common         
shares. Sales of significant numbers of common shares in the public market      
after this offering, or the perception that these sales will occur, may         
materially depress the market price of the common shares as well as restrict    
our ability to raise capital through future sales of common shares. Of the      
13,345,933 common shares that will be outstanding upon the closing of this      
offering, 12,563,665 shares, which include the 2,000,000 shares being sold in   
this offering, will be eligible for immediate resale in the public market       
without restriction. All of our directors and officers have agreed to certain   
lock-up arrangements prohibiting the sale of shares owned by them for specified 
periods. Lock-up arrangements with the selling shareholders expire on February  
24, 2001 and lock-up arrangements with our other officers and directors expire  
90 days after the date of this prospectus. Following the expiration of all      
lock-up periods, an aggregate of 2,354,750 additional shares (including shares  
underlying currently unvested options) may be sold by our affiliates into the   
public market, subject to certain volume and other limitations.                 

Additionally, we have registered on behalf of Gerard Klauer Mattison & Co., 
Inc., the lead underwriter in this offering, 253,420 common shares underlying   
presently exercisable stock purchase warrants held by Gerard Klauer. Gerard     
Klauer has agreed to delay any sales of these common shares until 90 days after 
the date of this prospectus, at which time they may be sold in the public       
market.                                                                         

We have an effective Registration Statement covering up to 2,528,000 common 
shares issuable upon the exercise of outstanding options (including reload      
options) and warrants held by directors, officers, employees and consultants.   
Those common shares, when issued, will be eligible for immediate resale in the  
public market.                                                                  

Our quarterly operating results may vary. Our operating results have varied 
from quarter to quarter. In November and December, retailers focus on holiday   
season sales and not on installing checkout systems. As a result, sales in      
those months are generally less than sales in the rest of the year. We          
recognize revenue from the sale of a system when installation is completed and  
the customer has accepted it.                                                   

 We do not anticipate paying dividends in the near future. We intend to retain
all of our earnings, if any, to finance operations and expand our business and  
do not anticipate paying any cash dividends in the foreseeable future.          

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 It may be difficult to enforce judgments against us or our affiliates. We are
incorporated under the federal laws of Canada. Most of our directors and        
officers and the experts named herein are residents of Canada and all or a      
substantial portion of their assets and substantially all of our assets are     
located outside the United States. As a result, it may not be possible for      
shareholders to effect service of process within the United States upon such    
persons or to enforce against them judgments of U.S. courts under any U.S.      
securities laws. There is doubt as to the enforceability in Canada, in original 
actions or in actions for the enforcement of judgments of U.S. courts, of civil 
liabilities predicated upon the U.S. securities laws.                           

Organized labor may resist U-Scan Express. The U-Scan Express displaces     
cashiers. For this reason, organized labor may seek provisions in collective    
bargaining agreements that prevent stores from installing U-Scan Express.       

Management has broad discretion to disburse proceeds. While the net proceeds
of this offering will be dedicated generally to the uses set forth under "Use   
of Proceeds," specific expenditures within each of these categories will be at  
the discretion of management. Additionally, management has broad discretion in  
determining how to utilize the approximately $28.5 million of proceeds that     
have been earmarked for general corporate purposes. Pending their use, the      
offering proceeds will be invested in short-term, investment grade, interest-   
bearing securities. The return on these investments may be less than what we    
would earn if the proceeds were put to use immediately.                         

We may require additional financing. We believe that our present cash and   
cash equivalents along with our net proceeds from this offering will be         
sufficient to meet our working capital and capital expenditure needs for at     
least the next 12 months. If, however, we need to raise additional funds for    
reasons that we currently do not anticipate, any securities that we issue in    
connection therewith may diminish the percentage ownership or voting rights of  
the holders of our common shares. Securities may be issued that have rights or  
preferences superior to the common shares that are being sold in this offering. 
Should we need to raise additional funds in the future, we may not be able to   
do so on any terms, or we may be unwilling to agree to the terms necessary to   
do so, and we would be adversely affected as a result of the failure to raise   
additional funds.                                                               

We may be vulnerable to technological problems. We are a technology-oriented
company and depend to a significant degree upon our ability to communicate on-  
line or by telephone with the systems that we have installed. If we are unable  
to access these systems due to technological problems beyond our control, it    
will have a material adverse effect on our ability to assist our customers.     
Additionally, if our customers are unable to reach us by telephone or via the   
Internet, we will also be unable to respond to questions or address serious     
problems faced by these customers. If our ability to communicate with our       
systems or our customers is impaired, our business may be adversely affected.   
We are also developing strategies to capitalize on e-commerce opportunities.    
The Internet is subject to security and privacy breaches which may impact us or 
our customers.                                                                  

 Year 2000 remediation may involve significant time and expense and may reduce
our future sales. All major and most minor third party providers of goods and   
services to us completed questionnaires that allowed us to assess their Year    
2000 readiness prior to January 1, 2000. However, there is no assurance that we 
properly evaluated each third party's readiness through our review of the       
respective response. If a potential customer were to suffer Year 2000 related   
problems or set aside funds for Year 2000 expenditures while considering the    
purchase of a U-Scan Express, it is likely that any such purchase would be      
delayed. Additionally, we may face claims based on Year 2000 issues arising     
from the integration of multiple products within an overall system at a         
customer. To date, we have not been alerted to any difficulties on the part of  
our customers relating to Year 2000 issues, nor are we aware of any such delays 
in purchasing the system or claims resulting from its integration with a        
customer's store systems.                                                       

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FORWARD-LOOKING STATEMENTS

Some of the statements contained in this prospectus contain forward-looking 
information. These statements are found in the sections entitled "Prospectus    
Summary," "Risk Factors," "Use of Proceeds," "Management's Discussion and       
Analysis of Financial Condition and Results of Operations" and "Business." They 
include information concerning:                                                 

.growth and operating strategy,                                             

.liquidity and capital expenditures,                                        

.use of proceeds of the offering,                                           

.financing plans,                                                           

.industry trends, and                                                       

.payment of dividends.                                                      

You can identify these statements by forward-looking words such as "expect,"
"believe," "goal," "plan," "intend," "estimate," "may," and "will" or similar   
words. These forward-looking statements involve known and unknown risks,        
uncertainties and other factors, including those described in the "Risk         
Factors" section and elsewhere in this prospectus, that could cause our actual  
results to differ materially from those anticipated in these forward-looking    
statements.                                                                     

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USE OF PROCEEDS 

The net proceeds to be received by us from our sale of 1,325,000 common     
shares and the proceeds from the exercise of options and warrants by the        
selling shareholders, after deducting underwriting discounts and commissions    
and offering expenses of approximately $925,000, will be approximately          
$49,500,000. We intend to use the net proceeds of the offering as follows:      

                                                                [Download Table]

Use                                                                    Amount   
---                                                                  -----------
                                                                                
To fund product research and development...........................  $ 6,000,000
To expand into Europe..............................................    6,000,000
To expand sales and marketing operations...........................    4,000,000
To expand our Plattsburgh assembly facility........................    3,000,000
To increase support services (and the number of support hubs) in                
 the United States.................................................    2,000,000
To provide for general corporate purposes, including working                    
 capital, potential acquisitions and strategic partnerships(1)(2)..   28,500,000
                                                                     -----------
  Total(1).........................................................  $49,500,000
                                                                     ===========

--------                                                                        
(1) Includes an aggregate of approximately $1,586,800 (assuming the January 31, 
2000 conversion rate of US$1.00=Cdn.$1.45 on Canadian dollar-denominated
   options and warrants) in proceeds from the exercise of options and warrants
   by the selling shareholders to acquire 560,000 of the 675,000 common shares
 being sold by them in this offering. We will receive none of the proceeds
from the sale by the selling shareholders of their common shares.       
(2) Although we have allocated a portion of the net proceeds for potential      
acquisitions, we are not in negotiations regarding, nor do we have any  
agreements or understandings with respect to, any acquisitions.         

Although we have allocated the net proceeds of this offering among these    
various uses, the amounts actually expended for any of the above purposes may   
vary if our needs or strategies change after the offering. Pending such use, we 
intend to invest the net proceeds in short-term, investment grade, interest-    
bearing securities.                                                             

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CAPITALIZATION

The following table sets forth the actual capitalization of Optimal as of   
December 31, 1999 and as adjusted to give effect to the issuance and sale by    
Optimal of the 1,325,000 common shares that it is offering hereby, and the      
exercise of common share purchase options and warrants by the selling           
shareholders for this offering, after deducting underwriting discounts and      
commissions and estimated offering expenses payable by Optimal, and the         
application of the estimated net proceeds to Optimal of this offering. This     
table should be read in conjunction with our consolidated financial statements  
and notes thereto included elsewhere in this prospectus.                        

                                                                [Download Table]

                                                            December 31, 1999  
                                                           --------------------
                                                                         As    
                                                           Actual   Adjusted(2)
                                                           -------  -----------
                                                                    (unaudited)
                                                             (U.S. dollars,    
                                                              in thousands)    
                                                                               
Shareholders' equity:                                                          
  Share capital: 11,437,241 common shares issued and                           
   outstanding; 13,322,241 shares issued and outstanding                       
   as adjusted(1)......................................... $44,658    $94,153  
  Other capital...........................................      21         21  
  Cumulative translation adjustment.......................     652        652  
  Deficit.................................................  (5,626)    (5,626) 
                                                           -------    -------  
    Total capitalization.................................. $39,705    $89,200  
                                                           =======    =======  

--------                                                                        
(1) Excludes 2,883,574 common shares issuable upon exercise of outstanding      
 options (including reload options) and warrants outstanding at December 31,
  1999, of which 23,692 common shares have been issued since December 31, 1999
upon the exercise of outstanding options and warrants.                    
(2) Adjusted to give effect to the sale of the 1,325,000 common shares being    
 offered by Optimal, the exercise by the selling shareholders of options and
  warrants to purchase 560,000 of the 675,000 common shares being sold by them
in this offering, and the application of the estimated net proceeds       
therefrom. See "Use of Proceeds."                                         

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SELECTED FINANCIAL AND OTHER DATA 

The following selected financial data as of December 31, 1999 and 1998 and  
for the years ended December 31, 1999, 1998 and 1997 are derived from and are   
qualified by reference to our audited financial statements that are included    
elsewhere in this prospectus. The following selected financial data as of       
December 31, 1997, 1996 and 1995 and for the years ended December 31, 1996 and  
1995 are derived from our audited financial statements, as restated for a       
change in reporting currency, that are not included herein. Effective December  
31, 1998, we adopted the U.S. dollar as the reporting currency for our          
financial statements. The financial data for all periods prior to 1999, for     
Canadian GAAP purposes, are presented in U.S. dollars in accordance with a      
translation of convenience method using the representative exchange rate at     
December 31, 1998 of US$1.00=Cdn.$1.5333--see note 2 of the notes to the        
financial statements, included elsewhere in this prospectus.                    

The data should be read in conjunction with "Management's Discussion and    
Analysis of Financial Condition and Results of Operations," the financial       
statements, related notes and the other financial information included          
elsewhere in this prospectus.                                                   

 The selected financial data are prepared on the basis of Canadian GAAP, which
is different in some regards from U.S. GAAP. For a description of the material  
differences between Canadian GAAP and U.S. GAAP in regard to our financial      
statements, see note 16 of the notes to the financial statements, included      
elsewhere in this prospectus.                                                   

                                                                [Download Table]

                                           Year ended December 31,              
                                  --------------------------------------------- 
                                    1999     1998      1997      1996     1995  
                                  --------  -------  --------  --------  ------ 
                                   (U.S. dollars, in thousands except per       
                                                 share data)                    
                                                                                
Income Statement Data:                                                          
Revenues........................  $ 29,634  $ 5,618  $  3,397  $    894  $  498 
Cost of sales...................    23,457    5,135     2,709       837     171 
                                  --------  -------  --------  --------  ------ 
Gross margin....................     6,177      483       688        57     327 

Research and development                                                        
 expenses, net of tax credits...       220      210       294       506     153 
Selling, general, administrative                                                
 and other expenses.............     6,022    5,265     2,780     1,047     807 
Write-down of inventory.........       604      --        --                    
Other...........................      (789)  (1,081)   (1,005)     (429)    (15)
                                  --------  -------  --------  --------  ------ 
Earnings (loss) before income                                                   
 taxes..........................       120   (3,911)   (1,381)   (1,067)   (618)
Income tax recovery(1)..........     3,532      --        --        --      --  
                                  --------  -------  --------  --------  ------ 
Net earnings (loss).............  $  3,652  $(3,911) $ (1,381) $ (1,067) $ (618)
                                  ========  =======  ========  ========  ====== 
Weighted average number of                                                      
 common shares outstanding                                                      
 (thousands)....................     9,699    7,464     7,410     4,918   3,624 
Weighted average fully diluted                                                  
 number of common shares                                                        
 outstanding (thousands)........    12,709      --        --        --      --  
Basic net earnings (loss) per                                                   
 common share...................  $   0.38  $ (0.52) $  (0.19) $  (0.22) $(0.17)
                                  ========  =======  ========  ========  ====== 
Fully diluted net earnings                                                      
 (loss) per common share........  $   0.35  $ (0.52) $  (0.19) $  (0.22) $(0.17)
                                  ========  =======  ========  ========  ====== 
Other data:                                                                     
U-Scan Express system                                                           
 installations:                                                                 
  Systems installed during                                                      
   year.........................       288       57        22         6       2 
  Systems installed at year-                                                    
   end..........................       375       87        30         8       2 
U-Scan checkout stations                                                        
 installed at year-end..........     1,498      346       120        32       8 
Customer transactions                                                           
 (millions)(2)..................        45       12                             


                                                December 31,                    
                                  --------------------------------------------- 
                                    1999     1998      1997      1996     1995  
                                  --------  -------  --------  --------  ------ 
                                        (U.S. dollars, in thousands)            
                                                                                
Balance Sheet Data:                                                             
Cash, cash equivalents and                                                      
 short-term investments.........  $ 29,136  $ 6,063  $ 10,354  $ 12,868  $  612 
Working capital.................    36,032    7,319    10,783    12,855     832 
Total assets....................    44,206    9,329    11,848    13,741   1,260 
Shareholders' equity............    39,705    7,596    11,072    12,453     435 

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                                                                [Download Table]

                                          Year ended December 31,             
U.S. GAAP:                        ------------------------------------------- 
                                   1999      1998     1997     1996     1995  
                                  -------  --------  -------  -------  ------ 
                                  (U.S. dollars, in thousands except per      
                                                share data)                   
                                                                              
Revenues......................... $29,634  $  5,721  $ 3,749  $ 1,006  $  561 
Net loss......................... $(5,575) $(16,403) $(6,806) $(1,362) $ (715)
Basic and fully diluted net loss                                              
 per common share................ $ (0.57) $  (2.20) $ (0.92) $ (0.28) $(0.20)

                                               December 31,                   
                                  ------------------------------------------- 
                                   1999      1998     1997     1996     1995  
                                  -------  --------  -------  -------  ------ 
                                       (U.S. dollars, in thousands)           
                                                                              
Total assets..................... $44,191  $  9,312  $12,679  $15,348  $1,391 

--------                                                                        
(1) We received purchase commitments for a large number of systems in the       
fourth quarter of 1999, which cover a substantial portion of our fiscal 
   2000 budgeted sales target. In addition, there has been a positive trend in
our profitability and sales levels in recent quarters. Based on these   
factors, we have determined that it is now more likely than not that we 
will earn sufficient taxable income during the allowable carry-forward  
period to realize all of our future income tax assets. Therefore, during
  the fourth quarter of 1999, we recognized the future benefit of all of our
future income tax assets, which relate principally to previously        
unrecognized non-capital losses and undeducted research and development 
  expenses. See "Management's Discussion and Analysis of Financial Condition
   and Results of Operations--Results of Operations--1999 Compared with 1998."
(2) Estimated, based on reports provided by our customers. Prior to 1998, we    
did not track this data.                                                

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

Overview                                                                        

We are the leading provider of self-checkout systems to retailers in the    
United States. Our principal product is the U-Scan Express, an automated self-  
checkout system which enables shoppers to scan, bag and pay for their purchases 
with little or no assistance from store personnel. As of December 31, 1999, we  
had installed 375 U-Scan Express systems, consisting of 1,498 checkout          
stations, in 328 stores of leading retailers across 29 states. We estimate that 
in 1999 U-Scan Express systems processed over 45 million customer transactions. 
The U-Scan Express can be operated quickly and easily by shoppers and makes the 
checkout process more convenient for them. The U-Scan Express also reduces the  
cost of checkout transactions to retailers and addresses labor shortage         
problems by replacing manned checkout counters with our automated self-checkout 
stations. We believe that the market for the U-Scan Express extends beyond      
supermarkets and supercenters and we now sell to general merchandise stores and 
other big-box retailers. The U-Scan Express is currently assembled by PSC under 
contract. IBM and PSC also market the U-Scan Express.                           

Agreement with PSC                                                          

In 1995, we entered into a strategic relationship agreement whereby we      
granted to Spectra-Physics Scanning Systems, Inc. an exclusive worldwide        
license to distribute, sell, assemble and install U-Scan Express systems. PSC   
acquired Spectra-Physics in 1996 and assumed this agreement. The agreement      
obligated PSC to service and maintain the hardware in the systems after         
installation. Our role was to develop the product, provide and service the      
software for it and assist in selling it. We shared the gross margin relating   
to sales of systems with PSC. As our resources expanded, we negotiated to       
reduce PSC's role. Beginning April 1, 1998, we assumed primary responsibility   
for the sale and all responsibilities for distributing, installing and          
servicing our U-Scan Express systems and became entitled to all the revenue     
from their sale. We currently pay PSC to act as the exclusive assembler of the  
systems. In October 1999, we notified PSC that we will not renew its exclusive  
assembly rights beyond December 31, 2000, the date specified in our agreement.  
Starting in January 2001, PSC will cease assembling and we will assume assembly 
of the U-Scan Express in our Plattsburgh, New York facility. Through December   
2000, the purchase price that we pay to PSC for each system is equal to the     
cost of the system plus a margin that fluctuates with its ultimate sales price. 
PSC continues to market the U-Scan Express, but we are now the primary seller   
of our systems. Furthermore, we control PSC's purchasing process for raw        
materials and influence its direct labor costs as they relate to U-Scan         
Express.                                                                        

Trends in our costs                                                         

We continue to focus on taking advantage of economies of scale and reducing 
the costs of installing and servicing our product. In late 1998, we created a   
department having a primary responsibility of sourcing new suppliers and        
obtaining the best possible prices for our raw materials. As a result of this   
cost-cutting initiative, during 1999 we experienced a reduction in some of our  
raw material costs. In 1999, the decrease in the overall cost per system was a  
direct result of the increase in the number of U-Scan Express systems sold and  
the benefits of this cost cutting initiative. Furthermore, we believe that as   
the number of firm commitments we have to purchase the U-Scan Express           
increases, we will be able to leverage our increased component requirements     
into lower prices from suppliers. We continue to make significant investments   
in our infrastructure to support the rapid growth of our business.              

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Quarterly Results                                                               

The following table sets forth certain summarized unaudited quarterly       
financial and other data for the periods presented. The financial data has been 
derived from unaudited financial statements that, in the opinion of management, 
reflect all adjustments, consisting only of normal recurring adjustments,       
necessary for a fair presentation of such quarterly data. The financial data    
for all periods prior to 1999, for Canadian GAAP purposes, are presented in     
U.S. dollars in accordance with a translation of convenience method using the   
representative exchange rate at December 31, 1998 of US$1.00=Cdn.$1.5333--see   
note 2 of the notes to the financial statements, included elsewhere in this     
prospectus. The operating results for any quarter are not necessarily           
indicative of the results to be expected for any future period.                 

The summary financial data are prepared on the basis of Canadian GAAP, which
is different in some regards from U.S. GAAP. For a description of the material  
differences between Canadian GAAP and U.S. GAAP in regard to our financial      
statements, see note 16 of the notes to the financial statements, included      
elsewhere in this prospectus.                                                   

                                                        [Enlarge/Download Table]

                                                    For the quarter ended                              
                         ------------------------------------------------------------------------------
                         Dec. 31,  Sept. 30, June 30, March 31, Dec. 31,  Sept. 30, June 30,  March 31,
                           1999      1999      1999     1999      1998      1998      1998      1998   
                         --------  --------- -------- --------- --------  --------- --------  ---------
                                     (U.S. dollars, in thousands except per share data)                
                                                         (unaudited)                                   
                                                                                                       
Revenues................ $ 6,835    $10,686   $7,023   $ 5,090  $ 1,674    $ 2,722  $   696    $   525 
Cost of sales...........  5,449       8,128    5,536     4,344    1,715      2,464      582        373 
                         -------    -------   ------   -------  -------    -------  -------    ------- 
Gross margin............   1,386      2,558    1,487       746      (41)       258      114        152 
Earnings (loss) before                                                                                 
 income taxes...........  (1,153)     1,420      428      (575)  (1,142)    (1,021)    (949)      (799)
Income tax recovery.....   3,532        --       --        --       --         --       --         --  
                         -------    -------   ------   -------  -------    -------  -------    ------- 
Net earnings (loss)..... $ 2,379    $ 1,420   $  428   $  (575) $(1,142)   $(1,021) $  (949)   $  (799)
Basic net earnings                                                                                     
 (loss) per common                                                                                     
 share.................. $  0.21    $  0.13   $ 0.05   $ (0.08) $ (0.15)   $ (0.14) $ (0.13)   $ (0.11)
Fully diluted net                                                                                      
 earnings (loss) per                                                                                   
 common share........... $  0.18    $  0.12   $ 0.05   $ (0.08) $ (0.15)   $ (0.14) $ (0.13)   $ (0.11)
Other data:                                                                                            
U-Scan Express systems                                                                                 
 installed during                                                                                      
 quarter................      64        105       68        51       17         24        9          7 

The following table sets forth, for the periods indicated, income statement 
data expressed as a percentage of total revenues:                               

                                                        [Enlarge/Download Table]

                                                    For the quarter ended                             
                         -----------------------------------------------------------------------------
                         Dec. 31, Sept. 30, June 30, March 31, Dec. 31,  Sept. 30, June 30,  March 31,
                           1999     1999      1999     1999      1998      1998      1998      1998   
                         -------- --------- -------- --------- --------  --------- --------  ---------
                                                         (unaudited)                                  
                                                                                                      
Revenues................  100.0%    100.0%   100.0%    100.0%   100.0%     100.0%    100.0%    100.0% 
Cost of sales...........   79.7      76.1     78.8      85.3    102.4       90.5      83.6      71.0  
                          -----     -----    -----     -----    -----      -----    ------    ------  
Gross margin............   20.3      23.9     21.2      14.7     (2.4)       9.5      16.4      29.0  
Earnings (loss) before                                                                                
 income taxes...........  (16.9)     13.3      6.1     (11.3)   (68.2)     (37.5)   (136.4)   (152.2) 
Income tax recovery.....   51.7       --       --        --       --         --        --        --   
                          -----     -----    -----     -----    -----      -----    ------    ------  
Net earnings (loss).....   34.8%     13.3%     6.1%    (11.3)%  (68.2)%    (37.5)%  (136.4)%  (152.2)%

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Results of Operations                                                           

The following discussion and analysis of our results of operations and      
liquidity and capital resources should be read in conjunction with the          
financial information and our financial statements and their related notes,     
included elsewhere in this prospectus.                                          

1999 Compared with 1998                                                     

 Total revenues increased by $24,016,233, or 427%, from 1998 to 1999. Sales of
U-Scan Express grew from 57 systems in 1998 to 288 systems in 1999, producing   
$23,146,629 of additional systems revenues, an increase of 449%. The growth in  
sales was due to a significant increase in orders from existing customers.      
Service contract revenue recognized for hardware and software maintenance       
increased by $854,707, or 600%, because of the increased number of customers    
that entered into service contracts with us after purchasing U-Scan Express.    

Total cost of sales increased by $18,322,336, or 357%, from 1998 to 1999.   
Overall gross margin increased as a percentage of sales from 9% in 1998 to 21%  
in 1999, primarily representing the increase in gross margin on system sales.   
This increase resulted primarily from taking advantage of economies of scale    
and reducing the costs of installing and servicing our products.                

Gross research and development expenses increased by $635,572, or 196%, from
1998 to 1999. As a percentage of total revenues, gross research and development 
expenses decreased from 6% in 1998 to 3% in 1999. This percentage decrease      
resulted from the substantial increase in the number of systems sold in 1999 as 
compared to 1998. Research and development expenses during the year included    
the cost of the development of two new product lines.                           

We may, for Canadian federal income tax purposes, defer and deduct in future
years certain scientific research and experimental development expenditures     
incurred to date. As of December 31, 1999, the amount of such deferred          
deductions is Cdn.$2,420,000 (approximately $1,669,000) for Canadian federal    
income tax purposes and Cdn.$4,010,000 (approximately $2,766,000) for Quebec    
provincial income tax purposes. These deductions may be carried forward         
indefinitely. In addition, we have non-refundable investment tax credits of     
approximately Cdn.$729,000 (approximately $503,000), which can be carried       
forward to reduce Canadian federal income taxes payable and which expire in     
various years through 2009.                                                     

Selling, general, administrative and other expenses (including operating    
lease expenses) increased by $618,099, or 12%, in 1999 compared to 1998. As a   
percentage of total revenues, these expenses decreased from 90% in 1998 to 19%  
in 1999. This percentage decrease resulted from the substantial increase in the 
number of systems sold in 1999 compared to 1998. During the last quarter of     
1999, we continued to expand sales and marketing efforts and hire additional    
personnel, as our backlog continued to increase. In addition, we incurred       
increased costs in engineering follow-through during the early phases of        
commercial production for U-Scan Solo and U-Scan Carousel. We also incurred     
increased costs adapting the capabilities of our existing U-Scan system to new  
customers' needs and for the start-up of the Plattsburgh facility.              

A write-down of inventory of $604,364 in the fourth quarter of 1999 was     
required due to upgrades in some hardware components, to recognize the          
declining replacement costs for many components as a result of stronger         
purchasing power with our suppliers, and due to parts obsolescence.             

Our 1999 net earnings of $3,651,768 reflect an income tax recovery of       
$3,531,583, which represents the future benefit of non-capital loss             
carryforwards and undeducted scientific research and experimental development   
expenditures which may be used to reduce taxable income, for Canadian federal   
and Quebec provincial income tax purposes, in future years. We may utilize      
these loss carryforwards and undeducted expenditures only to the extent that we 
generate taxable income for Canadian federal and Quebec provincial income tax   
purposes, in the future.                                                        

During 1999, we retroactively adopted the revised recommendations of the    
Canadian Institute of Chartered Accountants regarding accounting for income     
taxes, which are consistent with U.S. GAAP. During the fourth quarter of the    
year, we received purchase commitments for a large number of systems which      
cover a substantial                                                             

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portion of our fiscal 2000 budgeted sales target. In addition, there has been a 
positive trend in our profitability and sales levels in recent quarters. Based  
on these factors, we have determined that it is now more likely than not that   
we will earn sufficient taxable income during the allowable carry-forward       
period to fully realize all of our future income tax assets. Therefore, as a    
result of this determination, we were required to record, during the fourth     
quarter of the year, an income tax recovery with respect to these future income 
tax assets.                                                                     

Our ability to ultimately realize these future income tax assets will be    
dependent upon our realizing certain sales levels within the allowable carry-   
forward period, thus creating sufficient taxable income to realize the benefit  
of these assets. We believe that our revenues for fiscal 2000 and 2001 will     
grow annually based on our current order backlog and expected additional        
purchase commitments from new and existing customers. Our ability to realize    
these assets is also dependent on effective control over our selling, general   
and administrative expenses. In addition, we expect our gross and operating     
margins to materially increase as a result of our assumption of the assembly    
responsibility for our systems commencing in January 2001, when PSC ceases to   
assemble our systems. Based on our earnings estimates for fiscal 2000,          
$3,012,997 of these future income tax assets have been classified as a current  
asset.                                                                          

1998 Compared with 1997                                                     

Total revenues increased by $2,221,296, or 65%, from 1997 to 1998. Sales of 
U-Scan Express grew from 22 systems in 1997 to 57 systems in 1998, producing    
$3,483,994 of additional systems revenue, an increase of 209%. The growth in    
sales was due to our greater marketing efforts and the change in our            
relationship with PSC. Under the arrangement with PSC before April 1, 1998, we  
recorded as revenue only our portion of the gross margin on system sales.       
Beginning April 1, 1998, we recorded the entire sales proceeds for the system   
sales (as well as the corresponding cost of sales). See "Overview." The average 
selling price for U-Scan Express decreased from 1997 to 1998. From time to      
time, we retrofit already-installed systems by changing their casings. In 1998, 
we completed 12 retrofits, compared to five in 1997. The price of retrofits     
remained constant from year to year. Between May and December 1997, we had      
hardware sales of $1,472,559 related to our Optimal 6300 POS ("POS") system.    
Prior to January 1, 1998, we discontinued these hardware sales. In 1998,        
development and customization revenues, which predominantly related to the POS  
business, declined by $16,713, or 8%, because the demand of our POS customer    
for development of that product was less. In 1999, we entered into a contract   
with that customer for a greater sum than we received in 1998. Service contract 
revenue recognized for hardware and software maintenance increased by $119,123, 
or 508%, from 1997 to 1998, because of the increased number of customers that   
entered into contracts with us after purchasing U-Scan Express systems and      
because we began receiving hardware maintenance payments in accordance with the 
new agreement with PSC.                                                         

 Total cost of sales increased by $2,426,288, or 90%, from 1997 to 1998. Gross
margin decreased as a percentage of sales from 20% in 1997 to 9% in 1998. This  
decrease resulted primarily from the change in our relationship with PSC. The   
costs that we assumed from PSC more than offset the additional revenue that we  
realized due to the change. As a result, gross margin on sales of systems       
decreased from 29% in 1997 to 7% in 1998. In 1997, we realized a gross margin   
of $25,202, or 2%, on revenues of $1,472,559 related to sales of hardware,      
which were discontinued prior to 1998. In 1998, a negative gross margin of 26%  
was realized on hardware and software maintenance revenue because hardware      
maintenance costs, which are recognized as incurred, exceeded hardware          
maintenance revenues, which are fixed by contract and recognized evenly over    
the term thereof. The gross margin on development and customization revenues    
decreased from 68% in 1997 to 58% in 1998. This amount represents only a        
$13,100 increase in the cost of sales. In 1998, we realized a gross margin of   
$26,019, or 22%, on the sale of third-party software licenses in a single, non- 
recurring transaction.                                                          

Gross research and development expenses in 1998 remained relatively constant
as compared to 1997. As a percentage of sales, they fell from 12% in 1997 to 6% 
in 1998. This change reflects our growing focus in 1998 on selling and          
installing U-Scan Express systems and expanding our general and administrative  
resources.                                                                      

Selling, general and administrative expenses (including operating lease     
expense) increased by $2,403,056, or 90%, from 1997 to 1998. As a percentage of 
sales, selling, general and administrative expenses increased from 75% in 1997  
to 86% in 1998. Both increases resulted in part from our expanding our sales    
and marketing efforts and hiring additional personnel, including engineers and  
technicians, as our backlog increased and we anticipated future sales. Expenses 
for adapting software for potential new customers, quality control and          
redesigning software and hardware also increased from 1997 to 1998.             

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Liquidity and Capital Resources                                                 

As of December 31, 1999, we had cash, cash equivalents and short-term       
investments of $29,135,690 and working capital of $36,032,273.                  

Operating activities used $2,918,423 of cash and cash equivalents in 1999 as
compared to $4,379,534 in 1998. In 1999, we issued 3,000,000 common shares      
pursuant to a public offering and 961,963 common shares pursuant to the         
exercise of options and warrants, which resulted in net cash proceeds of        
$24,206,566 and $2,467,094, respectively.                                       

 In 1999, we had capital expenditures of $1,012,586, which principally related
to computer equipment and testing units and leasehold improvements related to   
the expansion of our head office premises. In 1998, we had capital expenditures 
of $234,207, which were principally related to testing units and computer       
equipment.                                                                      

We also maintain an operating line of credit in the amount of Cdn.$500,000  
with a Canadian chartered bank, in connection with which we have pledged a U.S. 
treasury bill. We do not have any amounts outstanding under this line of        
credit. We believe that our cash, cash equivalents and short-term investments,  
combined with the net proceeds of this offering and our operating line will be  
adequate to meet our needs for at least the next 12 months.                     

Year 2000 Issues                                                                

 To date, none of our customers has informed us of any Year 2000 problems with
their systems and hardware, although some uncertainty remains in the software   
industry and other industries concerning the scope and magnitude of problems    
associated with the century change. Furthermore, we received no indications     
that any material third party providers were not ready for the Year 2000, and   
we believe that any such unpreparedness discovered after January 2000 will not  
have a material effect on our business, results of operations or financial      
condition.                                                                      

We took steps during 1999 to ensure that our operations would not be        
adversely affected by Year 2000 software problems. We determined that the       
consequences of the Year 2000 for our products and the software contained in    
our internal systems would not have a material effect on our business, results  
of operations or financial condition. Upgrades required to make current         
internal systems Year 2000 ready were installed and tested by June 30, 1999, at 
a cost that was not material to us. All internal systems installed thereafter   
were tested and verified for Year 2000 readiness at the time of installation at 
no additional cost. No alteration to the software contained in our products was 
necessary. Nevertheless, customers generally integrate our products into a      
store's information systems, which the customer might not have been able to     
adequately evaluate for Year 2000 readiness. If in the future we are required   
to defend our products or services in court proceedings, or to negotiate        
resolutions of claims based on Year 2000 issues, the costs of defending and     
resolving Year 2000 related disputes, regardless of the merits of such          
disputes, and any liability we may have for Year 2000 related damages,          
including consequential damages, could materially adversely affect our          
business, financial condition and operating results.                            

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BUSINESS

Company Overview                                                                

We are the leading provider of self-checkout systems to retailers in the    
United States. Our principal product is the U-Scan Express, an automated self-  
checkout system which enables shoppers to scan, bag and pay for their purchases 
with little or no assistance from store personnel. We estimate that in 1999 U-  
Scan Express systems processed over 45 million customer transactions. The U-    
Scan Express can be operated quickly and easily by shoppers and makes the       
checkout process more convenient for them. The U-Scan Express also reduces the  
cost of checkout transactions to retailers and addresses labor shortage         
problems by replacing manned checkout counters with our automated self-checkout 
stations.                                                                       

As of December 31, 1999, we had installed 375 U-Scan Express systems,       
consisting of 1,498 checkout stations, in 328 stores of leading retailers       
across 29 states. Each U-Scan Express system typically includes four checkout   
stations and one manned supervisor terminal.                                    

As of January 31, 2000, we had purchase commitments for a minimum of 457 U- 
Scan Express systems. Purchase commitments represent general purchase orders,   
blanket purchase commitments or purchase contracts from customers for a         
designated number of U-Scan Express systems over a specified period of time.    
The following chart provides information regarding the U-Scan Express systems   
we have installed during the last five years:                                   

                                                                [Download Table]

                                                   1995 1996 1997 1998 1999 
                                                   ---- ---- ---- ---- -----
                                                                            
U-Scan Express system installations:                                        
  Systems installed during year...................   2    6   22   57    288
  Systems installed at year-end...................   2    8   30   87    375
U-Scan checkout stations installed at year-end....   8   32  120  346  1,498
Customer transactions (millions)(1)...............                 12     45

--------                                                                        
(1) Estimated, based on reports provided by our customers. Prior to 1998, we    
did not track this data.                                                

Our Industry                                                                    

We currently target supermarket and supercenter chains in the United States 
with average annual sales per store in excess of $12 million. According to      
industry sources, there are over 11,500 of these stores in the United States.   
Based on information received from various supermarkets and supercenters, we    
believe that approximately half of all transactions at those stores are made by 
shoppers who purchase 15 or fewer items and who check out through express       
lanes. U-Scan Express, which can be quickly and easily operated, addresses      
these shoppers' needs by providing them with more control over the checkout     
process.                                                                        

 The potential market for self-checkout solutions includes applications beyond
supermarkets and supercenters. General merchandise stores and other big-box     
retailers have begun to install self-checkout systems. Other types of stores    
that we have identified where self-checkout systems could be used include drug  
stores, warehouse stores, office superstores, toy stores and home improvement   
centers. We recently introduced one new product for use in small retail         
establishments and small departments in larger stores and a second new product  
for use in high volume retail outlets. See "--Our Business Strategy."           
Additionally, we believe that a large market for self-checkout systems exists   
in Europe.                                                                      

We believe that the demand for self-checkout systems will continue to grow, 
in part because they help alleviate the significant labor shortage confronting  
retailers in certain markets. The U.S. Bureau of Labor Statistics has estimated 
that, from 1998 to 2008, the U.S. economy will require over 550,000 additional  
cashiers. In addition to providing stores with a dependable and economical      
alternative to maintaining cashiers in express checkout lanes, we believe that  
self-checkout systems allow large retailers to offer shoppers the speed of a    
small convenience store while maintaining the greater selection and lower       
prices of a supermarket.                                                        

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We also believe that the acceptance of self-checkout systems will increase  
over time much like the increase in acceptance of automated teller machines     
(ATMs) and pay-at-the-pump credit/debit card machines. Banking industry sources 
estimate that the number of ATMs in the United States grew from 18,500 in 1980  
to over 200,000 in 1999, and that the number of ATMs in use worldwide was over  
700,000 at the end of 1999. According to the National Association of            
Convenience Stores' 1999 State of the Industry report, the percentage of        
convenience stores with pay-at-the-pump technology increased from less than 5%  
in 1990 to 50% in 1998. In the same way that many people have become more       
accustomed to using ATMs to conduct their banking and to paying at the pump     
when fueling their cars, rather than interacting with a bank teller or store    
attendant, we believe that consumers seeking convenience and "control" when     
shopping will choose to use a self-checkout system instead of paying at a       
traditional manned checkout counter.                                            

Our Customers                                                                   

Our main customers have been supermarkets and supercenters, including the   
following retailers:                                                            

. Kroger. Kroger is the largest supermarket retailer in the United States,  
and owns and operates approximately 2,200 supermarkets and 794          
convenience stores. Kroger is our largest customer and recently ordered 
an additional 200 U-Scan Express systems, of which 43 have been         
 installed. We presently have a total of 235 systems installed in Kroger's
stores.                                                                 

. Meijer. Meijer is the second largest U.S. supercenter operator with       
approximately 130 stores. Its typical store size is over 175,000 square 
feet. We presently have 94 U-Scan Express systems installed in Meijer's 
stores. In January 2000, Meijer agreed to purchase up to 150 (with a    
minimum of 100) additional systems through June 2001, of which 10 have  
been installed.                                                         

. Ahold. Ahold operates over 3,600 stores of various types in the United    
States, Europe, Asia and Latin America under various banners, including 
 over 1,000 BI-LO, Stop & Shop, Tops, Giant and other stores in the United
States. In December 1999, Ahold agreed to purchase 100 U-Scan Express   
systems for installation in its U.S. stores, of which five have been    
installed.                                                              

. A&P. A&P operates over 700 food stores in North America. In October 1999, 
A&P informed us that it intends to purchase and install 100 U-Scan      
Express systems, of which 24 have been installed.                       

. Wal-Mart. Wal-Mart is the world's largest retailer with over 2,850        
 general merchandise discount stores and supercenters in the United States
alone. We presently have 18 U-Scan Express systems installed in Wal-Mart
supercenters and general merchandise discount stores. Wal-Mart is       
continuing to work with us as they evaluate the use of U-Scan Express in
their stores.                                                           

These leading retailers figure prominently in the establishment of market   
standards, and we believe that our relationships with them and the increasing   
presence and use of our systems in their stores contribute to the market's      
growing acceptance of U-Scan Express. We also believe that shoppers' increasing 
familiarity with our systems at these retailers will facilitate future sales    
efforts, particularly with retailers who have not yet installed our systems in  
their stores.                                                                   

 We believe that these customers have chosen to install U-Scan Express because
it:                                                                             

. increases convenience for their shoppers, while accommodating typical     
 shopping patterns and allowing shoppers to check out as if they were at a
manned checkout counter,                                                

. provides the shopper with more control over the checkout process, similar 
to an ATM transaction,                                                  

. builds loyalty by making shopping easier and more convenient,             

. addresses labor shortages in certain markets by replacing manned checkout 
counters with automated self-checkout stations, and                     

. provides labor cost savings by allowing one employee to supervise four    
unmanned stations.                                                      

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Our Competitive Advantages                                                      

We believe that the following competitive advantages have helped us become  
the leading provider of self-checkout systems to retailers in the United        
States:                                                                         

. the largest installed base of self-checkout systems in the United States  
and well-established relationships with leading retailers,                

. an established brand name and corporate identity,                         

. six years' experience and expertise in designing self-checkout solutions  
for retailers,                                                            

. a focused business strategy targeting the rapidly developing self-        
checkout market,                                                            

.a senior management team and experienced sales force familiar with the     
needs of retailers, and                                                     

. superior customer service through a 24-hour, 365-day on-line helpdesk     
supported by a dedicated network of service personnel.                  

Our Business Strategy                                                           

Our primary objectives are to install more U-Scan Express systems in        
additional supermarkets and supercenters, to begin installing U-Scan Express    
and other self-checkout systems in other kinds of stores, and to initiate sales 
and installations of our systems in Europe.                                     

Key elements of our business strategy are to:                               

Increase Installations in Existing and New Supermarket and Supercenter      
Accounts. We plan to increase our penetration of existing customer accounts and 
increase the size of our direct sales force in order to sell to new customers   
in North America. We are continuing to develop opportunities in Europe.         

Extend Retail Applications of Our Products and Services. In addition to our 
focus on transactions for supermarkets and supercenters, we have recently       
introduced two new products, U-Scan Carousel and U-Scan Solo, that have been    
designed to extend the retail applications of our U-Scan self-checkout          
technology. Much like the U-Scan Express, each of these new applications        
enables customers to scan, bag and pay for their purchases with limited or no   
assistance from store personnel.                                                

U-Scan Carousel                                                           

To meet the demands of existing and new customers, U-Scan Carousel has been 
configured as a six-bag self-checkout system which can accommodate large order  
purchases. The U-Scan Carousel utilizes U-Scan technology that has been         
specifically adapted to handle large orders in the following high volume retail 
outlets:                                                                        

. warehouse stores,                                                         

. general merchandise stores,                                               

. home improvement centers, and                                             

. other big-box retailers.                                                  

This larger configuration enables these retailers to address the labor      
shortage found in many markets while providing a more convenient shopping       
experience.                                                                     

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U-Scan Solo                                                               

 U-Scan Solo is a one-bag self-checkout station in which our U-Scan technology
has been adapted to meet the needs of small footprint retail establishments     
such as drug stores, convenience stores and general merchandise stores, as well 
as for satellite areas, such as floral and video departments, in supermarkets   
and supercenters.                                                               

The U-Scan Carousel and the U-Scan Solo are the direct results of our       
research and development efforts. We remain committed to developing other new   
products like U-Scan Carousel and U-Scan Solo on a timely and cost-effective    
basis and continuing to improve our current products.                           

Capitalize on e-Commerce Opportunities. We are exploring various e-commerce 
opportunities as a means of generating additional revenue from U-Scan stations. 
Among these are the following:                                                  

. We estimate that with over 45 million customer transactions through U-    
Scan Express systems in 1999, U-Scan touchscreens received over two     
million hours of "eyeball" time. U-Scan touchscreens can act as portals 
for interactive marketing and advertising solutions. Because we are on- 
line to all of our systems, we can deliver targeted interactive         
 advertising and promotions to the customer on U-Scan touchscreens as well
as relational advertising for other products or services.               

. Our self-checkout solutions can be integrated with and used to help       
enhance a retailer's e-commerce strategy. A U-Scan system can act as an 
e-commerce accelerator because it automates the order fulfillment       
process. As shoppers transition to "clicks and mortar" shopping         
experiences, we believe our systems will enable shoppers to physically  
complete their on-line transactions faster and easier.                  

Assume Assembly of U-Scan Express. Upon the termination of PSC's exclusive  
assembly rights on December 31, 2000, we will assume the assembly of the U-Scan 
Express in our Plattsburgh, New York facility (in addition to the final         
software configuration and the quality assurance tasks we already perform in    
Plattsburgh). We believe that assuming the assembly of our systems will result  
in a material increase in our gross and operating margins.                      

Products and Systems                                                            

U-Scan Express System                                                         

A U-Scan Express system, in a typical configuration for a supermarket or    
supercenter application, consists of four self-checkout stations and one manned 
supervisor terminal. Each checkout station consists of the following components 
linked by a PC platform:                                                        

. a bar code scanner with a scale,                                          

. a bagging station equipped with a scale,                                  

. a touchscreen monitor,                                                    

. an overhead video camera,                                                 

. a credit/debit terminal (with available support for signature capture     
devices),                                                               

. bill and coin acceptors and dispensers, and                               

. a receipt printer.                                                        

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[Picture of U-Scan Express(R) Checkout Station Showing Bag & Weight Platform, 
Bill & Coin Acceptors, Receipt Printer, Bill & Coins Dispensers Credit Debit
Card Keypad, Overhead Video Camera, Touchscreen Monitor and Bar Code Scanner &
Scale 

The supervisor terminal consists of:                                        

. a monitor that allows the supervisor to observe the activity at each      
checkout station,                                                       

. a hand-held scanner, either wired or wireless, that enables the           
supervisor to assist shoppers with large items,                         

. an easy-to-use touchscreen that makes it simple for the supervisor to     
interact with the system, and                                           

. a receipt printer for credit/debit transactions.                          

In a typical configuration, the U-Scan Express occupies the same floor space
as would three manned checkout lanes. As a result, shoppers are provided with   
one additional checkout station. Because one supervisor can oversee four self-  
checkout stations, we believe that the store's costs per checkout lane are      
lowered. We believe that labor cost savings associated with a U-Scan Express in 
a typical supermarket yield a positive return on investment.                    

[Schematic Diagram Showing Typical Configuration and Floor Space Occupied]

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Operation                                                                   

The U-Scan Express system is equipped with a convenient, intuitive          
touchscreen interface and provides automated voice instructions that guide the  
shopper through the entire checkout process, from scanning the first item to    
removing the receipt after payment.                                             

To commence the checkout process, a shopper presses an icon on the          
touchscreen of a U-Scan station. An automated voice greets the shopper and      
instructs him or her to begin scanning items using the station's easy-to-use,   
multi-directional scanner. As each item is scanned by the shopper, the          
touchscreen acknowledges the scanned item and displays its price.               
Simultaneously, the shopper is instructed by the automated voice to place the   
scanned item in the shopping bag located on the station's scale. In this        
manner, not only are purchased items bagged, but the station also               
simultaneously weighs each item and makes sure that its weight is correct for   
the item scanned.                                                               

The U-Scan Express easily handles bar-coded items and has been designed to  
accommodate non-bar-coded items and items requiring compliance with specific    
procedures. The U-Scan Express has the capacity to learn the weight of bar-     
coded items that it has not previously encountered. For non-bar-coded items     
such as produce or other items sold by weight, the shopper places the item on a 
separate scale that is part of the scanner and presses a specific icon on the   
touchscreen that alerts the system supervisor. Each U-Scan station is equipped  
with an overhead video camera that transmits an image of the item placed on the 
scale to the color video monitor located at the supervisor terminal. This       
enables the supervisor to identify the item for the system, which, in turn,     
computes the correct price for the item. At the request of some customers, the  
system is configured to allow shoppers to identify the non-bar-coded items      
being purchased, thereby eliminating the need for supervisor attention.         
Additionally, alcohol and tobacco product purchases automatically prompt the    
system supervisor to verify the purchaser's age. The system supervisor terminal 
is equipped with a hand-held scanner that is used to read bar codes on heavy,   
oversized items. Both wired and wireless models are available.                  

The U-Scan Express is able to handle variations on the normal bar-coded     
purchase. For example, it can process transactions involving products that are  
sold on a "per unit" basis. The system can identify multiple-unit items such as 
six-packs of canned beverages and partial purchases of multiple-unit items      
(such as five cans of a six-pack). The system also has the capability to adjust 
its tolerance level for deviations in an item's weight, such as where the       
inclusion of a prize in a cereal box would increase the weight of that box      
beyond the preset or previously "learned" tolerance level.                      

Once a shopper has scanned all the items he or she wishes to purchase, the  
shopper notifies the system by pressing the appropriate icon on the             
touchscreen. The U-Scan Express then prompts the shopper to select the form of  
payment. The U-Scan Express can accept any form of payment, either at the self- 
checkout station or at the supervisor's terminal, that is accepted by cashiers, 
including cash, checks, credit cards, debit cards, coupons, food stamps and     
gift certificates. The U-Scan station can make change and dispense additional   
cash should the shopper choose to withdraw additional money using a credit or   
debit card. U-Scan Express also identifies and can handle "mix and match"       
payments, such as a combination of cash and coupons. Those shoppers who choose  
to pay with checks, food stamps or gift certificates are directed to the system 
supervisor to complete their transactions.                                      

Once the shopper has made payment and received change from the U-Scan       
station's bill and coin dispenser, a receipt is printed at the U-Scan station.  
At all times, a system supervisor is located nearby to provide prompt           
assistance should it be required by the shopper.                                

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Security                                                                    

The close proximity of the system supervisor to the U-Scan stations helps to
deter theft. Moreover, the U-Scan Express provides an additional level of       
protection with a built-in, three-tier security system designed to guard        
against loss due to theft or human error. The security system at each U-Scan    
station consists of:                                                            

. a bagging station equipped with a scale that detects any unscanned or     
substituted items,                                                      

. an overhead video camera that discourages non-scanning or substitution,   
and                                                                     

. an integrated payment mechanism that substantially reduces the            
opportunity for cashier fraud or error.                                 

The U-Scan Express weighs each item scanned. If the weight detected for the 
scanned item is different from the item's weight contained in the system's      
database, the shopper will be asked to try again and the cashier will be        
alerted. Should a shopper fail to scan an item that is placed on the weighing   
platform, the system will prompt the shopper to remove the item and scan it.    
Should a shopper mistakenly scan an item more than once before placing it on    
the weighing platform, the U-Scan station will only charge the shopper once for 
such item. The U-Scan Express can also be customized to support a retailer's    
electronic anti-theft system.                                                   

Customization and Flexible Technology                                       

 The U-Scan Express can be customized to meet the individual requirements of a
particular store by changing features such as the user graphics on the          
touchscreen and automated voice prompts. It can be programmed to include        
frequent shopper and other loyalty and marketing programs and is available with 
a multilingual touchscreen. To ensure compliance with governmental regulations, 
the U-Scan Express can be programmed to comply with local weights and measures  
and federal and local laws regarding proof-of-age verification for purchases of 
alcohol and tobacco products.                                                   

The U-Scan Express operates on an industry-standard, PC-based platform with 
the Windows NT operating system, and uses readily available, off-the-shelf      
components. Its open architecture enables it to be integrated with most         
existing information systems. It can be upgraded to take advantage of new       
features and can generate custom management reports. The U-Scan Express obtains 
most of the information it needs to operate from the store's information        
systems, just as cashier-operated terminals do. A local area network links the  
four checkout stations to the supervisor terminal.                              

 We have developed software that allows the U-Scan Express system to form part
of and communicate with a store's information systems in the same way           
conventional cashier-operated terminals do. In doing so, the system uses the    
store's network and communications protocol, enabling it to interact easily and 
completely with the information systems. Our technology allows information to   
be communicated between the U-Scan Express system and a store's information     
systems on a real-time basis, including such information as:                    

. product movement data,                                                    

. inventory management data,                                                

. cash balance information, and                                             

. transaction summaries.                                                    

 The U-Scan Express system's software is customized for the first installation
at each chain so it can communicate with that chain's information systems and   
is modified as necessary to address the needs of each retailer.                 

Optimal 6300 POS System                                                       

The Optimal 6300 POS system is an open-architecture, PC-based point-of-sale 
cash register system utilizing Windows NT/95 or Novel SFTIII mirrored servers.  
We offer only the system software for the Optimal                               

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6300 POS. The customer is responsible for purchasing the system hardware. The   
Optimal 6300 POS system communicates with a store's information systems and has 
been designed for use as a conventional cash register checkout system in high-  
volume retailers such as supermarkets, department stores and warehouse stores.  

We were engaged by Price Chopper Supermarkets of Schenectady, New York, to  
develop and install the Optimal 6300 POS system. We receive a monthly fee for   
the continuing development of the system. The Optimal 6300 POS system is        
presently installed in all 96 Price Chopper supermarkets. The system is also    
installed at Atlantic Food Mart in Reading, Massachusetts.                      

Sales and Marketing                                                             

We primarily market U-Scan Express directly to customers through our own    
sales personnel. We also market the system through IBM under a non-exclusive    
cooperative marketing agreement under which IBM receives a commission on sales  
of systems to customers that it has registered with us. In addition, PSC has    
non-exclusive marketing rights under our agreement with it. Consistent with our 
strategy of increasing distribution of the U-Scan Express, we will continue to  
actively review and evaluate other marketing relationships.                     

We have five employees dedicated to sales and marketing. We plan to hire    
additional sales and marketing employees to expand our direct sales force and   
to support IBM and PSC. Should PSC choose to promote or market a competing      
product it would no longer have any rights to market our system.                

To date, we have focused our marketing efforts almost exclusively on        
supermarket and supercenter chains in the United States. We intend to begin     
marketing our products in Europe in the near term. With the introduction of U-  
Scan Carousel and U-Scan Solo, we are marketing our products to drug stores,    
convenience stores and general merchandise stores, and for use in satellite     
areas, such as floral and video departments, in supermarkets and supercenters.  

Sales to a retail chain typically follow a three-step process, in which the 
customer takes delivery of a single U-Scan Express station and a supervisor     
terminal in a testing facility, then places a full system in a store for        
evaluation, and finally decides whether to commit to a volume order.            

Before installing a U-Scan Express system in the first store of a chain, we 
customize the system, which typically takes two months. This process may        
include modifying user graphics, voice instructions, functions for specific     
pricing, couponing methods and software to meet the store's specifications.     
This process also includes integrating the U-Scan Express with the store's      
information systems so that data compiled at each U-Scan station is             
automatically transmitted to the store's information systems in the same way    
data would be compiled and transmitted by a manned cashier station.             

Once we have completed the customization and integration process, the U-Scan
Express system is installed. Typically, the store will monitor the performance  
of the system for a period of one to two months and request certain software    
modifications. Upon the completion of a successful first installation, the U-   
Scan Express system generally requires only minor customization to accommodate  
additional installations within the chain.                                      

Research and Development                                                        

Our research and development efforts are focused on improving our existing  
products and developing new products. To date, most of the software relating to 
our products has been developed internally by our employees.                    

We will use a portion of the proceeds of this offering to increase research 
and development efforts in the following areas:                                 

. Developing new products and extending our existing products into          
additional retail applications.                                         

. Adapting U-Scan self-checkout solutions for use in Europe and other       
international markets.                                                  

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. Displaying targeted and relational interactive advertising on a U-Scan    
station's touchscreen when it is not in use and printing advertising on 
receipts.                                                               

. Expanding the use of radio frequency technology so that the U-Scan        
Express supervisor can perform more of his or her functions using a     
wireless hand-held device, which would allow the supervisor to move     
freely from station to station to assist shoppers. Radio frequency      
technology would also simplify installation because it would eliminate  
the need to install wiring to connect the U-Scan Express to the store's 
information systems.                                                    

. Improving the receipt-of-payment function by making the U-Scan Express    
system more efficient and easier to use. For example, incorporating     
technology that enables the system to verify customers' signatures and  
confirm bank balances will allow the system to accept checks without the
intervention of a supervisor.                                           

Product Assembly                                                                

Upon the termination of PSC's exclusive assembly rights on December 31,     
2000, we will assemble all of our systems at our Plattsburgh, New York          
facility. We currently perform final software configuration and quality         
assurance at the Plattsburgh facility, where all systems assembled by PSC are   
checked before delivery to a customer. See "--Facilities."                      

PSC will continue to act as the exclusive contract assembler of U-Scan      
Express through December 2000. PSC currently assembles U-Scan Express to our    
designs and specifications in ISO 9001 certified conditions in its Rochester,   
New York plant. We believe that PSC will be able to meet the expected demand    
for U-Scan Express systems through December 2000.                               

Suppliers                                                                       

The U-Scan Express is assembled from components that are readily available  
from numerous suppliers. Given the open architecture of our system, we are not  
dependent on any single supplier for any particular component. The U-Scan       
Express casing is specially manufactured for us by two suppliers.               

Service and Field Support                                                       

It is essential to retailers that providers offer timely and efficient      
software and hardware service and support. We provide both software and         
hardware service and support for the U-Scan Express for a fee.                  

Software support is provided to all customers via our helpdesk on a 24 hours
a day, 365 days a year basis. Our helpdesk and support personnel are trained    
to diagnose software and hardware problems that may arise in the field.         
Software problems are typically solved on-line, as the U-Scan Express can be    
accessed on-line from our premises.                                             

U-Scan Express customers can choose between a number of options for hardware
support. Customers may elect to have their own facility engineering group       
perform hardware maintenance on the system, in which case we train such         
personnel. Customers may also purchase hardware support service from us or an   
authorized subcontractor.                                                       

We maintain certified technicians at our headquarters, at our central hubs  
near Cincinnati, Ohio and in Lansing, Michigan, and at various other strategic  
locations. We are generally able to remotely diagnose and solve software-       
related problems from our head office in Montreal. If there is a problem        
caused by a hardware malfunction or another matter requiring personnel to be    
on-site, we dispatch technicians to assist the customer.                        
To assist with such problems, we have contracted with and certified four        
independent service companies that provide hardware support for our system.     
Furthermore, we maintain regional facilities for parts storage in Nashville,    
Memphis and Knoxville, Tennessee; Indianapolis, Indiana; Denver, Colorado;      
Atlanta, Georgia; Boise, Idaho; Des Moines, Iowa; Charlotte, North Carolina;    
Houston, Texas; Roanoke, Virginia; Grand Rapids, Michigan; Plattsburgh, New     
York; and Springfield, Missouri.                                                

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Installation Personnel                                                          

It is important that we are able to perform large-scale installations of our
systems quickly and reliably with minimal impact on store operations. For a     
typical installation, a project manager or one of our other experienced         
employees visits the store before the delivery of the system to coordinate all  
aspects of the installation. Site requirements are generally limited. Our goal  
is to ensure that our systems can be installed and fully operational within six 
hours.                                                                          

Government Regulation                                                           

 We and certain of the components that are used in our products are subject to
regulation by various agencies in the United States and in other countries in   
which our products are sold. Laser safety is regulated in the United States by  
the Food and Drug Administration's Center for Devices and Radiological Health   
and in Canada by the Radiation Protection Bureau of Health Canada. In addition, 
the U.S. Occupational Safety and Health Administration and various states and   
U.S. cities have promulgated regulations concerning working condition safety    
standards in connection with the use of lasers in the workplace. Radio          
emissions are the subject of governmental regulation in all countries in which  
we expect to sell our products. We (and/or PSC) also voluntarily submit our     
products for certification for product safety in the United States and in       
Canada by the nationally recognized testing laboratories, the Underwriters      
Laboratories, Inc. and the Canadian Standards Association, respectively.        

Competition                                                                     

 We compete against manufacturers of traditional cashier-operated terminals as
well as developers of portable hand-held devices and other partially automated  
self-scanning devices, including NCR, Symbol Technologies and Productivity      
Solutions. Several of our competitors are substantially larger and have greater 
financial, technical, and marketing resources. We believe, however, that the U- 
Scan Express performs more functions than any other self-checkout system for    
retail use currently available on the market. PSC has also announced its        
intention to enter the self-checkout market after December 31, 2000.            

We believe that the principal criteria for competition within the self-     
checkout system market are the following:                                       

. technological capability,                                                 

. product features,                                                         

. price,                                                                    

. product support,                                                          

. ease of use,                                                              

. name recognition,                                                         

. distribution channel capability, and                                      

. financial strength of the provider.                                       

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Intellectual Property                                                           

We have registered the following trademarks in the United States:           

. Optimal Robotics Corporation(R),                                          

. U-Scan(R),                                                                

. a stylized version of Optimal Robotics Corporation(R),                    

. U-Scan Express(R), and                                                    

. a stylized version of U-Scan Express(R).                                  

Additionally, we have filed trademark applications for the following marks: 

. Optimal Robotics,                                                         

. a second stylized version of Optimal Robotics Corporation, which is used  
for different purposes than the registered mark noted above,            

. Scan Pay Go,                                                              

. U-Scan Solo,                                                              

. U-Scan Carousel, and                                                      

. It's That Simple.                                                         

We have six patents in the United States for various components of our      
system. We have two German patents, one United Kingdom patent and one European  
patent.                                                                         

As a general policy, we file domestic and foreign patent applications to    
protect our technological position and new product development. We intend to    
continue to apply wherever necessary to protect our patents in all countries in 
which we operate. Although we believe that our patents provide some competitive 
advantage and market protection, we rely for our success primarily upon our     
proprietary know-how, innovative skills, technical competence and marketing     
abilities. Furthermore, there is no assurance that these patents will not be    
challenged, invalidated or circumvented in the future. We plan to apply for     
additional patents on our products, but our applications may not be granted and 
any new products developed by us may not be patentable.                         

We regard our software as proprietary and attempt to protect it with        
copyrights, trade secret measures and nondisclosure agreements. Despite these   
restrictions, it may be possible for competitors or users to copy aspects of    
our products or to obtain information which we regard as trade secrets.         
Existing copyright laws afford only limited practical protection for computer   
software. The laws of foreign countries generally do not protect our            
proprietary rights in our products to the same extent as the laws of the United 
States and Canada. In addition, we may experience more difficulty in enforcing  
our proprietary rights in certain foreign jurisdictions.                        

Employees                                                                       

As of January 31, 2000, we employed 187 full-time employees, of whom three  
were executive officers, 39 were actively engaged in software customization and 
programming, as well as research and development, and the remainder were        
engaged in sales, marketing, project management, installation and technical     
support, finance and administrative functions.                                  

Our employees are not represented by any collective bargaining unit and we  
have never experienced a work stoppage. We believe that our employee relations  
are good.                                                                       

Facilities                                                                      

Our headquarters are located in approximately 32,000 square feet of leased  
space at 4700 de la Savane, Montreal, Quebec, under a lease that expires on     
October 1, 2001, subject to our right to renew the lease for an additional      
five-year period. We also operate technical support hubs in approximately 5,000 
square feet of leased space in the Cincinnati, Ohio metropolitan area,          
approximately 2,700 square feet of leased space in Lansing, Michigan and        
approximately 10,500 square feet of leased space in Plattsburgh, New York. We   
currently perform final software configuration and quality assurance at, and    
ship our systems from our Plattsburgh facility. We intend to lease              
approximately 30,000 additional square feet at our Plattsburgh facility this    
year in preparation for the termination of PSC's exclusive assembly rights in   
December 2000. As of January 1, 2001, we will assemble our systems at the       
Plattsburgh facility.                                                           

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We also maintain parts storage facilities in 14 states. We intend to use a  
portion of the net proceeds of this offering to expand or to open additional    
hub facilities in the United States to support current and future               
installations.                                                                  

The following is a summary of our facilities:                               

                                                                [Download Table]

        Facility                  Location                                
--------------------------------------------------------------------------
                                                                          
  Headquarters            4700 de la Savane, Montreal, Quebec             
--------------------------------------------------------------------------
  Technical Support Hubs  Cincinnati, Ohio; Lansing, Michigan;            
                          Plattsburgh, New York (used for final software  
                          configuration, quality assurance and, beginning 
                          2001, system assembly)                          
--------------------------------------------------------------------------
  Regional Facilities/    Denver, Colorado          Atlanta, Georgia      
  Parts Storage Hubs      Boise, Idaho              Indianapolis, Indiana 
                          Charlotte, North Carolina Des Moines, Iowa      
                          Nashville, Memphis        Grand Rapids, Michigan
                           and Knoxville, Tennessee Springfield, Missouri 
                          Roanoke, Virginia         Houston, Texas        

Legal Proceedings                                                               

In each of 1995 and 1996, we received a demand letter from the same claimant
alleging that U-Scan Express infringes upon the claimant's patent. In July      
1999, this claimant filed a civil action in the United States District Court    
for the District of Utah against us and PSC, the current assembler of U-Scan    
Express, alleging patent infringement. A second party also sent a demand letter 
to us alleging a different patent infringement. Although after consultation     
with counsel, we believe that the former claimant should not prevail in its     
lawsuit and that the latter claimant should not prevail if a lawsuit is brought 
to assert its claim, and that these claims will not have a material adverse     
effect on our business or prospects, no assurance can be given that a court     
will not find that the system infringes upon one or both of such claimants'     
rights.                                                                         

Kroger has also been sued by the same claimant in the State of Utah based   
upon the same issues underlying the suit filed against us in July. At our       
expense, our counsel is also defending Kroger in such action. Furthermore, we   
are contractually bound to indemnify Kroger for any damages that it may incur   
in connection with such suit.                                                   

Enforceability of Civil Liabilities                                             

It may not be possible for shareholders to effect service of process within 
the United States upon our directors and officers and the experts named herein, 
who are residents of Canada, or upon all or a substantial portion of their      
assets and substantially all of our assets, which are located in Canada. It may 
also not be possible to enforce against them judgments of U.S. courts under any 
U.S. securities laws. There is doubt as to the enforceability in Canada of      
civil liabilities predicated upon the U.S. securities laws. See "Risk Factors." 

Where You Can Find Additional Information                                       

We file reports and other information with the Securities and Exchange      
Commission. We have filed a registration statement on Form F-3 with the         
Commission to register the common shares offered hereby. This prospectus, which 
constitutes part of such registration statement, does not contain all of the    
information contained in the registration statement and such exhibits and       
schedules. You may review the registration statement without charge at the      
Commission's Public Reference Room, 450 Fifth Street, N.W., Washington, D.C.    
20549. The public may obtain information on the operation of the Public         
Reference Room by calling the SEC at 1-800-SEC-0330. The SEC maintains an       
Internet site that contains reports, proxy and information statements, and      
other information regarding issuers that file electronically with the SEC,      
which Internet site is located at http://www.sec.gov.                           

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Our statements in this prospectus about contracts, agreements and other     
documents are not necessarily complete, and you are encouraged to review the    
schedules and exhibits to the registration statement for a more complete        
description of the matter involved. Each such statement is qualified in its     
entirety by reference to the schedule or exhibit.                               

We are required to furnish to our shareholders annual reports containing    
audited financial statements certified by our chartered accountants in Canada   
and quarterly reports containing unaudited financial data for the first three   
quarters of each fiscal year following the end of the respective fiscal         
quarter.                                                                        

The SEC allows us to "incorporate by reference" certain information that we 
file with them, which means that we can disclose important information to you   
by referring you to those documents. The information incorporated by reference  
is an important part of this prospectus, and information which we incorporate   
by reference to our future SEC filings will automatically update and supersede  
this information. We incorporate by reference our Annual Report on Form 10-K    
for the year ended December 31, 1999, filed with the SEC on February 24, 2000   
and any future filings we will make with the SEC under Section 13(a), 13(c), 14 
or 15(d) of the Securities Exchange Act of 1934 and the description of the      
common shares being offered hereby contained in our Form 8-A filed with the SEC 
on July 14, 1996. We may also incorporate in this prospectus any Form 6-K which 
we file with the Securities and Exchange Commission by identifying in such Form 
that it is being incorporated by reference into this prospectus.                

 You may request a copy of these filings at no cost, by writing or telephoning
us at the following address or telephone number:                                

Optimal Robotics Corp.    
4700 de la Savane         
Suite 101                 
Montreal, Quebec H4P 1T7  
   Attention: O. Bradley McKenna
(514) 738-8885            

We are a foreign private issuer under the rules and regulations of the      
Commission.                                                                     

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MANAGEMENT

The names, ages and positions of our directors and officers at March 28,    
2000, are as follows:                                                           

                                                                [Download Table]

Name                        Age Position                                
----                        --- --------                                
                                                                        
                                Co-Chairman, Chief Executive Officer and
Neil S. Wechsler...........  33 Director                                
Holden L. Ostrin...........  40 Co-Chairman and Director                
                                President, Chief Operating Officer and  
Henry M. Karp..............  45 Director                                
                                Secretary, Treasurer and Chief Financial
Gary S. Wechsler, C.A. ....  42 Officer                                 
                                Vice President, Administration and Human
O. Bradley McKenna, C.A. ..  50 Resources                               
Ike Tamigian...............  40 Vice President, Software Development    
                                Vice President, Operations and Product  
Elliot Brenhouse...........  46 Management                              
Leon P. Garfinkle..........  39 Director                                
James S. Gertler...........  33 Director                                

Neil S. Wechsler has been a director since June 1995, the Chief Executive   
Officer since October 1994 and was Chairman of Optimal from June 1996 through   
June 1999, at which time Mr. Wechsler and Mr. Holden L. Ostrin each became Co-  
Chairman. From May 1994 to October 1994, Mr. Wechsler was the Vice              
President/Marketing and Operations of Optimal. Mr. Wechsler earned a Bachelor   
of Arts degree from McGill University in 1988 and a Bachelor of Civil Law       
degree and a Bachelor of Common Law degree from McGill University in 1992.      

Holden L. Ostrin has been a director of Optimal since June 1996. Mr. Ostrin 
was Vice Chairman from June 1996 through June 1999, at which time Mr. Ostrin    
and Mr. N. Wechsler each became Co-Chairman. From May 1995 to May 1996, Mr.     
Ostrin was an independent business consultant. Prior to April 1995, Mr. Ostrin  
was Vice President and Director of CIBC Wood Gundy Securities Inc., a Canadian  
investment dealer. Mr. Ostrin earned a Bachelor of Arts degree in 1982 from     
Boston University and a Juris Doctor degree from Boston University School of    
Law in 1985.                                                                    

Henry M. Karp has been a director and the Chief Operating Officer of Optimal
since June 1996. Since June 1999, Mr. Karp has been Optimal's President. From   
June 1996 through June 1999, Mr. Karp was the Executive Vice President of       
Optimal, and from December 1994 to May 1996, Mr. Karp was Vice President,       
Business Development of Optimal. Mr. Karp earned a Bachelor of Arts degree in   
Economics from McGill University in 1976 and a Masters of Business              
Administration degree from McGill University in 1978.                           

Gary S. Wechsler, C.A. has been the Secretary, Treasurer and Chief Financial
Officer of Optimal since May 1994. For over five years until May 1999, Mr.      
Wechsler was a partner of Victor & Gold, a Montreal-based accounting firm. Mr.  
Wechsler continues to act as a consulting partner for Victor & Gold. Mr.        
Wechsler earned a Bachelor of Commerce degree from McGill University in 1980.   
Mr. Wechsler obtained his Chartered Accountant designation in 1983. Neil S.     
Wechsler and Gary S. Wechsler are brothers.                                     

O. Bradley McKenna, C.A. has been the Vice President, Administration and    
Human Resources of Optimal since June 1999. From March 1994 until June 1999,    
Mr. McKenna was the Controller of Optimal. Mr. McKenna earned a Bachelor of     
Commerce degree from Loyola College in 1973 and a Masters of Business           
Administration degree from McGill University in 1975. Mr. McKenna obtained his  
Chartered Accountant designation in 1978.                                       

Ike Tamigian has been the Vice President, Software Development of Optimal   
since June 1998. From June 1995 to June 1998, Mr. Tamigian was Director of      
Software Development of Optimal. Prior to June 1995, Mr. Tamigian was the       
Senior Design Engineer/Microprocessors and Microcontroller-Based Systems at     
Centrodyne Inc. for more than four years. Mr. Tamigian earned a Bachelor of     
Electrical Engineering degree from McGill University in 1987.                   

Elliot Brenhouse has been a Vice President of Optimal since June 1998. Prior
to June 1998, Mr. Brenhouse held various managerial positions with the          
aerospace division of AlliedSignal Canada Inc. for more than five years. Mr.    
Brenhouse earned a Bachelor of Electrical Engineering degree from McGill        
University in 1976.                                                             

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Leon P. Garfinkle has been a director of Optimal since June 1996. For over  
the past five years, Mr. Garfinkle has been a practicing lawyer and is a        
partner with the law firm of Goodman Phillips & Vineberg, in Montreal, Quebec.  
Mr. Garfinkle earned a Bachelor of Commerce degree from McGill University in    
1982, a Bachelor of Laws degree from the University of Toronto in 1985 and a    
Bachelor of Laws degree from the University of Montreal in 1986.                

James S. Gertler has been a director of Optimal since November 1997. Since  
January 1996, Mr. Gertler has been Vice President of Corporate Development of   
Applied Graphics Technologies, Inc. Since May 1993, he has also been the Vice   
President of Corporate Development for Daily News, L.P. and U.S. News & World   
Report, L.P. Mr. Gertler earned a Bachelor of Science degree in Economics from  
the Wharton School of the University of Pennsylvania in 1988 and a Masters of   
Business Administration degree from Harvard University in 1992.                 

The Board of Directors of Optimal has set the number of directors at five,  
divided into three classes, the first class consisting of one director and the  
second and third classes consisting of two directors each. At the annual and    
special meeting of our shareholders held on June 26, 1997, Mr. N. Wechsler, as  
sole member of the first class of directors, was elected to hold office until   
the close of the 2000 annual meeting of shareholders; at the 1998 annual        
meeting of shareholders, Messrs. Karp and Garfinkle, as members of the second   
class of directors, were elected to hold office until the close of the 2001     
annual meeting of shareholders; and at the 1999 annual meeting of shareholders, 
Messrs. Ostrin and Gertler, as members of the third class of directors, were    
elected to hold office until the close of the 2002 annual meeting of            
shareholders.                                                                   

Pursuant to their employment agreements, each of Messrs. N. Wechsler, Karp  
and Ostrin must be nominated by Optimal for election as a director. See "--     
Executive Employment Agreements."                                               

Executive officers of Optimal are appointed annually by the Board of        
Directors and serve until their successors are duly appointed and qualified.    

Audit Committee                                                                 

The Audit Committee of the Board of Directors performs services related to  
the completion of the audit of our financial statements. The Audit Committee    
has responsibility for, among other things, (i) reviewing the scope and results 
of the audit with the independent auditors, (ii) reviewing with management and  
the independent auditors our financial statements, (iii) considering the        
adequacy of our internal accounting, bookkeeping and control procedures, and    
(iv) reviewing any non-audit services and special engagements to be performed   
by the independent auditors and considering the effects of such performance on  
the auditors' independence. The members of the Audit Committee are Messrs.      
Ostrin, Garfinkle and Gertler.                                                  

Compensation                                                                    

The compensation paid to the Chief Executive Officer and the two other most 
highly compensated executive officers (collectively, the "Named Executive       
Officers"), for each of the three most recently completed fiscal years is set   
forth in the following table. Other than these three individuals, no executive  
officer received salary and bonus in excess of $100,000 during 1999.            

                                                                [Download Table]

                                                 Annual           Long Term    
                                            Compensation ($)    Compensation   
                                           ------------------ -----------------
                                                              Shares Underlying
          Name and Position           Year Salary(1) Bonus(1)      Options     
          -----------------           ---- --------- -------- -----------------
                                                                               
Neil S. Wechsler..................... 1999  123,166   30,791       284,000(2)  
 Co-Chairman and                      1998  123,348   30,837           --      
 Chief Executive Officer              1997  132,149      --        494,000(3)  

Holden L. Ostrin..................... 1999  123,166   30,791       284,000(2)  
 Co-Chairman                          1998  123,348   30,837           --      
                                      1997  132,149      --        494,000(3)  

Henry M. Karp........................ 1999  123,166   30,791       284,000(2)  
 President and                        1998  123,348   30,837           --      
 Chief Operating Officer              1997  132,149      --        494,000(3)  

--------                                                                        
(1) The Company pays salaries and bonuses in Canadian dollars. The respective   
 average exchange rates for 1997, 1998 and 1999 were used to convert these
salaries into dollars: US$1.00=Cdn.$1.3848 (1997); US$1.00=Cdn.$1.4836  
(1998) and US$1.00=Cdn.$1.4858 (1999).                                  
(2)  Includes 94,000 common shares issuable pursuant to the automatic           
   replacement ("reload") feature of an option granted in 1997 and exercised
in 1999. See footnote (3) below, and footnote (3) under "Principal and
Selling Shareholders."                                                
(3) Does not include an additional 188,000 common shares issuable pursuant to   
the reload feature of an option to purchase 94,000 common shares. See   
footnote (3) under "Principal and Selling Shareholders."                

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Option Grants in 1999                                                       

The following table provides information regarding options granted to the   
Named Executive Officers during 1999:                                           

                                                        [Enlarge/Download Table]

                                                                           Potential Realizable 
                                                                             Value at Assumed   
                                                                           Annual Rates of Stock
                                                                                   Price        
                                        Individual Grants                  Appreciation ($) (2) 
                         ------------------------------------------------- ---------------------
                                      Percent of Total                                          
                           Shares     Options Granted  Exercise                                 
                         Underlying   to Employees in   Price   Expiration                      
Name                      Options           1999         ($)       Date       5%         10%    
----                     ----------   ---------------- -------- ---------- ---------------------
                                                                                                
Neil S. Wechsler........  100,000           9.7         12.875    1/5/04     355,713     786,032
                           94,000(1)        9.1         16.125    5/5/02     200,117     415,480
                           90,000           8.8         31.250   12/3/04     777,042   1,717,059
Holden L. Ostrin........  100,000           9.7         12.875    1/5/04     355,713     786,032
                           94,000(1)        9.1         16.125    5/5/02     200,117     415,480
                           90,000           8.8         31.250   12/3/04     777,042   1,717,059
Henry M. Karp...........  100,000           9.7         12.875    1/5/04     355,713     786,032
                           94,000(1)        9.1         16.125    5/5/02     200,117     415,480
                           90,000           8.8         31.250   12/3/04     777,042   1,717,059

--------                                                                        
(1) This option was issued upon the exercise of an option granted in 1997,      
pursuant to the reload feature of such option. See footnote (3) under   
"Principal and Selling Shareholders."                                   
(2) The dollar amounts under these columns represent the potential realizable   
 value of each option granted assuming that the market price of the common
   shares appreciates in value from the date of grant at the 5% and 10% annual
rates prescribed by the SEC and therefore are not intended to forecast  
possible future appreciation, if any, of the price of the common shares.

Aggregated Option and Warrant Exercises in 1999 and Year-end Option and     
Warrant Values                                                                  

The following table provides information regarding option exercises by the  
Named Executive Officers in 1999 and the amount and value of the Named          
Executive Officers' exercised and unexercised options and warrants as of        
December 31, 1999. Between January 1, 1999 and December 31, 1999, each of the   
Named Executive Officers exercised options and sold 194,000 shares at an        
average price per share of $27.16.                                              

                                                        [Enlarge/Download Table]

                                                       Number of Shares            Value of Unexercised   
                                                    Underlying Unexercised         in-the-Money Options   
                             Option Exercises        Options and Warrants            and Warrants ($)     
                         ------------------------- ----------------------------- -------------------------
                            Common                                                                        
                            Shares       Value                                                            
Name                     Acquired (1) Realized ($) Exercisable     Unexercisable Exercisable Unexercisable
----                     ------------ ------------ -----------     ------------- ----------- -------------
                                                                                                          
Neil S. Wechsler........   344,000     5,978,839     394,000(2)       190,000    12,260,750    2,977,500  
Holden L. Ostrin........   194,000     4,833,750     494,000(2)       190,000    15,640,922    2,977,500  
Henry M. Karp...........   194,000     4,833,750     494,000(2)(3)    190,000    15,778,853    2,977,500  

--------                                                                        
(1)  With the exception of 150,000 of the shares acquired by Mr. Wechsler, all  
of these shares were sold during 1999.                                
(2) Does not include an additional 94,000 common shares issuable pursuant to    
the reload feature of an option granted in 1997. See footnote (3) under 
"Principal and Selling Shareholders."                                   
(3) Includes warrants to purchase 40,000 common shares owned by a personal      
holding company of Mr. Karp.                                            

Executive Employment Agreements                                             

The Company has entered into employment agreements with each of the Named   
Executive Officers. The agreements, the terms of which are identical, were      
entered into as of May 5, 1997 and amended as of January 5, 1999. They were     
designed to assure the Company of the continued employment of each officer in   
his respective executive positions with the Company.                            

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Under the terms of these agreements, each officer receives a minimum annual 
salary and an annual bonus in an amount not less than 25% of the salary then in 
effect. Additional bonuses may also be paid in whatever amounts and at whatever 
times as determined by the Board of Directors of the Company.                   

Each of these agreements provided for an option grant. The option grant was 
designed to provide incentive in a manner similar to and commensurate with the  
incentive arrangements for senior executives of other high technology companies 
of comparable size and scope. The option grants took into account that no       
options had been granted in 1996 and none were going to be granted in 1998.     
Each officer was granted an option to acquire 400,000 common shares at an       
exercise price of $3.00 per share (collectively the "Executive Options"). The   
last sale price of the common shares prior to May 4, 1997 was $2.75 per share.  
The Executive Options are presently exercisable in full and were exercised in   
1999 as to 100,000 of the underlying shares by each of the Named Executive      
Officers.                                                                       

 The agreements provide that the Company will pay or reimburse the officer for
the premiums for a life and disability term insurance policy with a minimum     
coverage of $1,000,000. The agreements also provide for the forgiveness of      
indebtedness of the officer if he leaves the employment of the Company for any  
reason. See "--Indebtedness of Directors and Employees."                        

In the event of the sale of all or substantially all of the assets of the   
Company or the acquisition by any person of outstanding shares of the Company   
representing more than 50% of the votes attached to all outstanding voting      
shares of the Company at any time during the term of the agreement or within 12 
months thereafter (unless the officer has had his employment terminated for     
cause), the officer will be entitled to a bonus in an amount not less than the  
aggregate of his then-current salary and bonus, and the term insurance, for     
which the Company has been reimbursing premiums will be converted to a whole    
life insurance policy and the Company will pay the entire cost of the premium   
for that whole life insurance policy. In addition, in each such circumstance,   
the exercise price of all options, warrants and rights to purchase common       
shares which are held by the officer shall, subject to regulatory approval, be  
reduced to Cdn.$1.00 in the aggregate. Upon any exercise following the          
reduction of such exercise price, the Company will record, for U.S. GAAP        
reconciliation purposes, and an acquiror reporting in accordance with U.S. GAAP 
may be required to present as compensation expense, an amount which includes    
the aggregate dollar value of such reduction. Furthermore, upon any exercise of 
options, warrants or rights held by the officer, the Company will record, for   
U.S. GAAP reconciliation purposes, and an acquiror reporting in accordance with 
U.S. GAAP may be required to present as compensation expense, the amount by     
which the then-prevailing market price exceeds the exercise price (except with  
regard to the Executive Options and the options to acquire 94,000 common shares 
granted to each officer on May 5, 1997, in respect of which a portion of the    
compensation expense has already been recorded by the Company for U.S. GAAP     
reconciliation purposes).                                                       

If the officer's services are terminated other than for cause or death or   
disability, or in the event that the officer terminates his employment with the 
Company for good reason (as defined in the agreements) within six months of a   
change of control (as defined in the agreements), (i) the Company will pay to   
the officer an amount equal to five times the sum of (a) the highest salary     
paid to him during the term and (b) the highest aggregate bonuses paid to him   
during any year during the term, and (ii) the exercise price of all options,    
warrants and rights held by the officer to purchase common shares shall be      
reduced to Cdn.$1.00 in the aggregate and all of such options shall become      
immediately exercisable and will expire within 90 days of the termination of    
the covered officer's employment with the Company.                              

The agreements each contain a covenant on the part of the officer not to    
compete with the Company for a period of 24 months following the date upon      
which he ceases to be an employee of the Company.                               

Compensation of Directors                                                       

In January 1999, options to purchase 10,000 common shares at an exercise    
price of $12.875 per share were granted to each of Messrs. Garfinkle and        
Gertler, being the two non-executive directors of the Company. These options    
became exercisable as to 50% of the underlying shares on January 25, 2000 and   
will become exercisable as to the remaining 50% of the underlying shares on     
January 25, 2001. These options expire on January 25, 2004.                     

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During the first quarter of 1998, it was determined to discontinue the      
payment of fees to the Company's non-executive directors.                       

Indebtedness of Directors and Employees                                         

The aggregate indebtedness to the Company of all employees, officers and    
directors and former employees, officers and directors is $169,235. Of such     
indebtedness, $152,414 relates to an unsecured home-loan agreement with Holden  
L. Ostrin, the Co-Chairman of the Company. This loan, in the original principal 
amount of $175,862, is non-interest bearing and is repayable in annual          
installments of $11,724 through and including July 1, 2012. The foregoing       
indebtedness is denominated in Canadian dollars, and has been converted at a    
rate of US$1.00=Cdn.$1.45.                                                      

Options to Purchase Securities                                                  

On February 7, 1997, the Board of Directors of the Company adopted a share  
option plan known as the 1997 Stock Option Plan (as amended, the "1997 Plan").  

 Pursuant to the provisions of the 1997 Plan, the Company may grant options to
purchase common shares to full-time employees or directors of the Company.      
Options may be granted for a term of up to 10 years and the term during which   
such options may be exercised will be determined by the Board of Directors at   
the time of each grant of options. The conditions of vesting and exercise of    
the options and the option price will be established by the Board of Directors  
when such options are granted and the option price shall not involve a discount 
greater than that permitted by law and by the regulations, rules and policies   
of the securities regulatory authorities to which the Company may then be       
subject.                                                                        

 Options granted under the 1997 Plan cannot be assigned or transferred, except
by will or by the laws of descent and distribution of the domicile of the       
deceased optionee. Upon an optionee's employment with the Company being         
terminated for cause or upon an optionee being removed from office as a         
director or becoming disqualified from being a director by law, any option or   
the unexercised portion thereof shall terminate forthwith. If an optionee's     
employment with the Company is terminated otherwise than by reason of death or  
termination for cause, or if any optionee ceases to be a director other than by 
reason of death, removal or disqualification by law, any option or the          
unexercised portion thereof may be exercised by the optionee for that number of 
shares only which he was entitled to acquire under the option at the time of    
such termination or cessation, provided that such option shall only be          
exercisable within 90 days after such termination or cessation or prior to the  
expiration of the term of the option, whichever occurs earlier. If an optionee  
dies while employed by the Company or while serving as a director, any option   
or the unexercised portion thereof may be exercised by the person to whom the   
option is transferred by will or the laws of descent and distribution for that  
number of shares only which the optionee was entitled to acquire under the      
option at the time of death, provided that such option shall only be            
exercisable within 180 days following the date of death or prior to the         
expiration of the term of the option, whichever occurs earlier.                 

An aggregate of 3,000,000 common shares may be issued pursuant to the 1997  
Plan. As of February 23, 2000, an aggregate of 651,271 common shares have been  
issued pursuant to the 1997 Plan and options to acquire an additional 2,348,000 
common shares (including reload options) under the 1997 Plan are issued and     
outstanding. In addition, an option to acquire 60,000 common shares granted to  
Henry M. Karp, our President and Chief Operating Officer, on May 4, 1995, and   
an option to acquire 20,000 common shares granted to a consultant in 1997, are  
outstanding.                                                                    

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PRINCIPAL AND SELLING SHAREHOLDERS

The following table sets forth, as of March 28, 2000, and as adjusted to    
reflect the sales of shares offered by this prospectus, certain information     
regarding the ownership of the common shares by (i) each person known to us to  
be a beneficial owner of more than 5% of the common shares of Optimal, (ii) the 
four selling shareholders, (iii) each director and Named Executive Officer of   
Optimal and (iv) all directors and officers of Optimal as a group.              

                                                        [Enlarge/Download Table]

                                           Common Shares Owned                           Common Shares Owned        
                                          Prior to this Offering                         After this Offering        
                                       -------------------------------               -------------------------------
                                                                       Common Shares                                
                                       Number and Nature                 Being Sold  Number and Nature              
                                         of Beneficial                    in this      of Beneficial                
Name of Beneficial Owner                   Ownership        Percent(1)   Offering        Ownership        Percent(1)
------------------------               -----------------    ---------- ------------- -----------------    ----------
                                                                                                                    
Neil S. Wechsler.....................        713,000(2)(3)      6.0%      200,000(2)       513,000(2)(3)      3.7%  
Holden L. Ostrin.....................        694,000(3)(4)      5.7%      200,000(4)       494,000(3)(4)      3.6%  
Henry M. Karp........................        698,000(3)(5)      5.8%      200,000(5)       498,000(3)(5)      3.6%  
Gary S. Wechsler, C.A. ..............        305,500(3)(6)      2.6%       75,000(6)       230,500(3)(6)      1.7%  
St. Denis J. Villere & Company(7)....        826,000            7.2%                       826,000            6.2%  
Vanguard Horizon Funds--                                                                                            
 Vanguard Capital Opportunity                                                                                       
 Fund(11)............................        580,000            5.1%                       580,000            4.3%  
Leon P. Garfinkle....................         50,000(3)(8)        *                         50,000(3)(8)        *   
James S. Gertler.....................         30,000(9)           *                         30,000(9)           *   
All directors and officers as a group                                                                               
 (9 people)..........................      2,526,000(3)(10)    18.8%                     1,851,000(3)(10)    12.5%  

--------                                                                        
* less than one percent (1%)                                                
(1) Assumes no issuance of common shares reserved for issuance under          
    outstanding options and warrants, except for those held by the director or
officer.                                                              

(2) Excludes unvested options to purchase 140,000 common shares. Mr. Wechsler 
    holds vested options to purchase 538,000 common shares and will obtain the
200,000 shares to be sold by him by exercising options.               

(3) On May 5, 1997, an option to purchase 94,000 common shares granted to each
of Messrs. N. Wechsler, Ostrin and Karp, an option to purchase 20,000 
  common shares granted to Mr. G. Wechsler and an option to purchase 5,000
    common shares granted to Mr. Garfinkle, were each granted upon terms which
    provide that upon its exercise, the option shall be automatically replaced
  with an option for an equal number of shares, at an exercise price equal
 to the then current market value of the common shares. This replacement
mechanism can operate twice during the term of the option. The common 
  shares currently underlying these replacement options have been included
in the number of common shares beneficially owned by these optionees. 

(4) Excludes unvested options to purchase 140,000 common shares. Mr. Ostrin   
    holds vested warrants to purchase 100,000 common shares and vested options
to purchase 538,000 common shares. Mr. Ostrin will obtain the 200,000 
shares to be sold by him by exercising options.                       

(5) Excludes unvested options to purchase 140,000 common shares. Mr. Karp     
holds vested options to purchase 598,000 common shares and, through a 
personal holding company, vested warrants to purchase 40,000 common   
  shares. Mr. Karp will obtain 140,000 of the 200,000 shares to be sold by
   him by exercising options to acquire 100,000 shares and by exercising the
warrants.                                                             

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(6) Excludes unvested options to purchase 42,500 common shares. Mr. Wechsler  
    holds vested options and options vesting within 60 days to purchase 92,500
 common shares and will obtain 20,000 of the 75,000 shares to be sold by
him by exercising options.                                            

(7) Based upon a Schedule 13G/A dated February 15, 2000 filed by St. Denis J. 
Villere & Company ("Villere & Company"). The Schedule 13G states that 
 Villere & Company has sole voting and dispositive power with respect to
75,800 shares and shared voting and dispositive power with respect to 
750,200 shares. We make no representation as to the accuracy or       
   completeness of the information reported. The business address of Villere
   & Company is 210 Baronne Street, Suite 808, New Orleans, Louisiana 70112-
1727.                                                                 

(8) Includes vested options to purchase 50,000 common shares. Excludes        
unvested options to purchase 5,000 common shares.                     

(9) Includes vested options to purchase 30,000 common shares. Excludes        
unvested options to purchase 5,000 common shares.                     

(10) Includes vested options and warrants, and options vesting within 60 days,  
to purchase an aggregate of 2,004,000 common shares (1,444,000 common 
    shares after this offering). Excludes unvested options to purchase 503,750
common shares.                                                        
(11) Based upon a Schedule 13G dated February 8, 2000 filed by Vanguard Horizon 
 Funds--Vanguard Capital Opportunity Fund ("Vanguard"). The Schedule 13G
   states that Vanguard has sole voting power with respect to 580,000 shares
 and shared dispositive power with respect to 580,000 shares. We make no
representation as to the accuracy or completeness of the information  
    reported. The business address of Vanguard is P.O. Box 2600, Valley Forge,
Pennsylvania 19482.                                                   

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DESCRIPTION OF SHARE CAPITAL

Our authorized capital stock consists of an unlimited number of Class "A"   
shares without par value (being referred to throughout this prospectus as the   
"common shares"), an unlimited number of Class "B" shares without par value     
(the "Class B Preferred Stock") and an unlimited number of Class "C" shares     
without par value (the "Class C Preferred Stock"), of which 11,460,933 common   
shares were issued and outstanding as of February 23, 2000.                     

The following is a description of the material rights of our authorized     
capital stock. This description does not purport to be complete and is          
qualified in its entirety by reference to our Articles of Incorporation, a copy 
of which has been previously filed with the Commission.                         

Common shares                                                                   

Dividend Rights                                                             

Holders of common shares shall be entitled to receive, as and when declared 
by Optimal's Board of Directors, but subject to the prior rights of the Class C 
Preferred Stock and any other class of shares ranking prior to the common       
shares, dividends in such amounts to be determined by Optimal's Board of        
Directors in its sole discretion.                                               

Voting Rights                                                               

Holders of common shares are entitled to cast one vote for each common share
held of record on all matters acted upon at any shareholders' meeting (except   
meetings at which only the holders of another specified class or series of      
shares are entitled to vote pursuant to the Canada Business Corporations Act    
(the "CBCA")).                                                                  

Liquidation Rights                                                          

The holders of common shares are entitled to receive the remaining property 
of Optimal in the event of its liquidation, dissolution or winding up or other  
distribution of its assets for the purpose of winding up its affairs, subject   
to the prior rights of any other class of shares ranking prior to the common    
shares in such circumstances.                                                   

Class B Preferred Stock                                                         

Dividend Rights                                                             

The holders of the Class B Preferred Stock are not entitled to receive any  
dividends thereon.                                                              

Voting Rights                                                               

 Holders of the Class B Preferred Stock are entitled to cast one vote for each
such share held of record on all matters acted upon at any shareholders'        
meeting (except meetings at which only the holders of another specified class   
or series of shares are entitled to vote pursuant to the CBCA).                 

Redemption                                                                  

The Class B Preferred Stock at any time outstanding is redeemable at our    
option, in whole or in part, at any time or from time to time, upon payment to  
the holders of the shares to be redeemed of a sum equal to the amount paid-up   
thereon.                                                                        

Liquidation Rights                                                          

The Class B Preferred Stock shall rank, with respect to the return of the   
amount paid-up thereon, in priority to the common shares, Class C Preferred     
Stock and all shares ranking junior to the Class B Preferred Stock in the event 
of the liquidation, dissolution or winding up of Optimal or other distribution  
of Optimal's assets for the purpose of winding up its affairs.                  

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Class C Preferred Stock                                                         

The Class C Preferred Stock may be issued from time to time in one or more  
series, the terms of each series including the number of shares, designation,   
rights, privileges, restrictions and conditions to be determined at the time of 
creation of each such series by Optimal's Board of Directors without            
shareholder approval, provided that all Class C Preferred Stock will rank, with 
respect to dividends and return of capital in the event of liquidation,         
dissolution or winding up of Optimal or other distribution of assets of Optimal 
for the purpose of winding up its affairs, pari passu among themselves and in   
priority to all common shares or shares of any class ranking junior to the      
Class C Preferred Stock.                                                        

Transfer Agent and Registrar                                                    

The co-transfer agents and co-registrars for the common shares are Montreal 
Trust Company of Canada and The Bank of Nova Scotia Trust Company of New York.  

Indemnification                                                                 

Our By-laws provide the following:                                          

Subject to the provisions of the CBCA, every director and officer of Optimal
(including those who have acted at Optimal's request as an officer or director  
of a body corporate of which Optimal is or was a shareholder or creditor) and   
his heirs and legal representatives shall from time to time be indemnified and  
saved harmless by Optimal from and against all costs, charges and expenses      
reasonably incurred by him in respect of any civil, criminal or administrative  
action or proceeding to which he is made a party by reason of being or having   
been a director or officer of Optimal or such body corporate (including without 
limitation all losses, liabilities, costs, charges and expenses incurred by him 
in respect of any act or proceeding for the recovery of claims of employees or  
former employees of Optimal or such body corporate or in respect of any claim   
based upon the failure of Optimal to deduct, withhold, remit or pay any amount  
for taxes, assessments and other charges of any nature whatsoever as required   
by law), if                                                                     

(a) he acted honestly and in good faith with a view to the best interests   
of Optimal; and                                                       

(b) in the case of a criminal or administrative action or proceeding that   
is enforced by a monetary penalty, he had reasonable grounds for        
believing that his conduct was lawful.                                  

The By-laws also contain a provision eliminating the liability of directors 
or officers for losses, damages or other misfortunes of Optimal arising out of  
the execution of the duties of his office or in relation thereto, unless        
occasioned by his own wilful neglect or default (subject to compliance with the 
mandatory obligations and duties imposed by the CBCA and the regulations        
thereunder and the liability imposed for any breach thereof).                   

Optimal shall also indemnify such person in such other circumstances as the 
CBCA may require.                                                               

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CERTAIN CANADIAN AND UNITED STATES INCOME TAX CONSIDERATIONS

Canadian Federal Income Tax Considerations                                      

The following is a general summary prepared by Goodman Phillips & Vineberg, 
Montreal, Quebec, of the material Canadian federal income tax considerations    
under the Income Tax Act (Canada) (the "Canadian Tax Act") to holders of common 
shares who are not resident nor deemed to be resident in Canada, who deal at    
arm's length with Optimal, who are not affiliated with Optimal within the       
meaning of the Canadian Tax Act, who hold the common shares as capital property 
and who do not use or hold, and are not deemed to use or hold, the common       
shares in connection with a trade or business carried on, or deemed to be       
carried on in Canada at any time ("Non-Resident Holders"). In general, common   
shares will be considered to be capital property of a holder unless the holder  
holds the common shares as part of an adventure or concern in the nature of     
trade. This summary does not apply to any Non-Resident Holder who formerly      
resided in Canada and owned common shares upon ceasing to reside in Canada. Nor 
does this summary discuss special rules which may apply to a Non-Resident       
Holder that is an insurer, a "financial institution" or a "specified financial  
institution" within the meaning of the Canadian Tax Act, and accordingly, such  
persons should consult their own tax advisors.                                  

This summary is based upon the current provisions of the Canadian Tax Act,  
the regulations thereunder, proposed amendments thereto publicly announced by   
the Department of Finance, Canada prior to the date hereof, the provisions of   
the Canada-U.S. Income Tax Convention (1980) (the "Convention") and the current 
administrative practices of the Canada Customs and Revenue Agency (the "CCRA"). 
It has been assumed that the proposed amendments to the Canadian Tax Act and    
the regulations thereunder will be enacted and that there will be no other      
relevant amendments thereto. However, no assurance can be given in this         
respect. This summary does not otherwise take into account or anticipate any    
changes in law, whether by legislative, governmental or judicial action or      
changes in administrative practice of the CCRA.                                 

This summary is of a general nature only and is not intended to be, and     
should not be construed to be, legal or tax advice to any prospective investor  
and no representation with respect to the tax consequence to any particular     
investor is made. The summary does not address any aspect of any provincial or  
local tax laws or the tax laws of jurisdictions outside Canada or the tax       
considerations applicable to persons other than Non-Resident Holders.           
Accordingly, prospective investors should consult with their own tax advisors   
for advice with respect to the income tax consequences of an investment in      
common shares arising under any provincial or local tax laws or the tax laws of 
jurisdictions outside Canada. This summary assumes the common shares are listed 
and will continue to be listed on a prescribed stock exchange (which is         
currently contemplated to include the National Association of Securities        
Dealers Automated Quotation System (commonly known as "Nasdaq")).               

For purposes of the Canadian Tax Act, all amounts must be expressed in      
Canadian dollars, including dividends, adjusted cost base and proceeds of       
disposition; amounts denominated in U.S. dollars must be converted into         
Canadian dollars based on the currency exchange rate generally prevailing at    
the time such amounts arise.                                                    

Dividends                                                                   

Amounts in respect of common shares paid or credited or deemed to be paid or
credited as, on account or in lieu of payment of, or in satisfaction of,        
dividends to a Non-Resident Holder will generally be subject to Canadian non-   
resident withholding tax. Such withholding tax is levied at a basic rate of     
25%, which may be reduced pursuant to the terms of an applicable tax treaty     
between Canada and the country of residence of the Non-Resident Holder.         
Currently, under the Convention, the rate of Canadian non-resident withholding  
tax is 15% on the gross amount of dividends beneficially owned by a Non-        
Resident Holder who is a resident of the United States for the purpose of the   
Convention and whose common shares in respect of which the dividends are paid   
are not effectively connected to a "permanent establishment" or "fixed base" in 
Canada. However, under the Convention, where such a beneficial owner is a       
company which owns at least 10% of the voting stock of Optimal, the rate of     
such withholding is reduced to 5%. In the case of certain tax exempt entities   
which are residents of the United States for purposes of the Convention, the    
withholding tax on dividends may be eliminated in those circumstances           
prescribed by the Convention.                                                   

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A purchase of common shares by Optimal (other than a purchase of common     
shares by Optimal on the open market in the manner in which shares are normally 
purchased by a member of the public) will give rise to a deemed dividend under  
the Canadian Tax Act equal to the difference between the amount paid by Optimal 
on the purchase and the paid-up capital of such shares determined in accordance 
with the Canadian Tax Act. The paid-up capital of such shares may be less than  
the Non-Resident Holder's cost of such shares. Any such dividend deemed to have 
been received by a Non-Resident Holder will be subject to non-resident          
withholding tax as described above. The amount of any such deemed dividend will 
reduce the proceeds of disposition of the common shares to the Non-Resident     
Holder for purposes of computing the amount of the Non-Resident Holder's        
capital gain or loss under the Canadian Tax Act. However, as described below, a 
loss on the disposition of the common shares may not be available to be used to 
offset capital gains arising from the disposition of other property.            

Disposition of Shares                                                       

A Non-Resident Holder will not be subject to tax under the Canadian Tax Act 
in respect of any capital gain on a disposition or deemed disposition of common 
shares (including the death of the Non-Resident Holder) unless at the time of   
such disposition such shares constitute taxable Canadian property of the Non-   
Resident Holder for purposes of the Canadian Tax Act and such Non-Resident      
Holder is not entitled to relief under an applicable tax treaty. Provided the   
common shares are listed on a prescribed stock exchange at the time of          
disposition, such shares will generally not constitute taxable Canadian         
property of a Non-Resident Holder at the time of a disposition of such shares   
unless the Non-Resident Holder uses or holds or is deemed to use or hold such   
shares in or in the course of carrying on business in Canada or, at any time    
during the five-year period immediately preceding the disposition of such       
shares, not less than 25% of the issued shares of any class or series of the    
capital of Optimal belonged to the Non-Resident Holder, to persons with whom    
the Non-Resident Holder did not deal at arm's length, or to the Non-Resident    
Holder and persons with whom the Non-Resident Holder did not deal at arm's      
length (taking into account any interest in or option in respect of such        
shares). In any event, under the Convention, gains derived by a Non-Resident    
Holder who is a resident of the United States (within the meaning of the        
Convention) from the disposition of common shares will generally not be taxable 
in Canada unless the value of the common shares is derived principally from     
real property situated in Canada. If the common shares held by a Non-Resident   
Holder do not constitute taxable Canadian property or if a capital gain in      
respect of the common shares would because of a tax treaty be exempt from tax   
under the Canadian Tax Act, any capital loss arising upon the disposition of    
the common shares will not be available to be used to offset a capital gain     
realized in respect of another property, which may be subject to tax under the  
Canadian Tax Act. To the extent the common shares disposed of constitute        
taxable Canadian property, the Non-Resident Holder will be required to file a   
Canadian tax return, even if the gain arising from such a disposition is exempt 
from tax because of a tax treaty.                                               

U.S. Federal Income Tax Considerations                                          

The following is a general summary prepared by Goodman Phillips & Vineberg, 
New York of the material U.S. federal income tax considerations applicable to   
an investment in common shares by U.S. Holders. This summary is based on the    
U.S. Internal Revenue Code of 1986, as amended (the "Code"), Treasury           
Regulations promulgated thereunder, and judicial and administrative             
interpretations thereof, all as in effect on the date hereof and all of which   
are subject to change (possibly on a retroactive basis) and to differing        
interpretations. The summary does not address all aspects of U.S. federal       
income taxation that may be relevant to a particular U.S. investor based on     
such investor's particular circumstances. In particular, the following summary  
does not address the tax treatment of U.S. investors who are broker-dealers or  
who own, directly, indirectly or constructively, 10% or more of Optimal's       
outstanding voting stock, and certain U.S. investors (including without         
limitation, insurance companies, tax-exempt organizations, financial            
institutions, qualified retirement plans, real estate investment trusts,        
regulated investment companies and persons subject to the alternative minimum   
tax) who may be subject to special rules not discussed below. For purposes of   
this discussion, "U.S. Holder" means an individual citizen or resident of the   
United States, a corporation organized under the laws of the United States or   
any political subdivision thereof, an estate the income of which is includable  
in gross income for U.S. federal income tax purposes regardless of its source,  
a trust if a court within the United States is able to exercise supervision     
over the administration of the trust and one or more                            

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U.S. persons have the authority to control all substantial decisions of the     
trust, or any other U.S. person as defined under the Code or that is otherwise  
subject to U.S. federal income tax on a net income basis in respect of the      
common shares.                                                                  

This summary is of a general nature only and is not intended to be, and     
should not be construed to be, legal or tax advice to any prospective investor  
and no representation with respect to the U.S. federal income tax consequences  
to any particular investor is made. The summary does not address any aspect of  
any state or local tax laws or the tax laws of jurisdictions outside the United 
States or the tax considerations applicable to non-U.S. Holders. Accordingly,   
prospective investors should consult with their own tax advisers for advice     
with respect to the income tax consequences to them having regard to their own  
particular circumstances, including any consequences of an investment in common 
shares arising under any state or local tax laws or the tax laws of             
jurisdictions outside the United States.                                        

For U.S. federal income tax purposes, a U.S. Holder of common shares        
generally will realize, to the extent of Optimal's current and accumulated      
earnings and profits, ordinary income on the receipt of cash dividends on the   
common shares equal to the dollar value of such dividends on the date of        
receipt (based on the exchange rate on such date) without reduction for any     
Canadian withholding tax. To the extent, if any, that distributions made by     
Optimal to a U.S. Holder exceed the current and accumulated earnings and        
profits of Optimal, such distribution will be treated as a tax-free return of   
capital to the extent of such U.S. Holder's adjusted basis for such shares, and 
to the extent in excess of adjusted basis, as capital gain. Dividends paid on   
the common shares will not be eligible for the dividends received deduction     
available in certain cases to U.S. corporations. Generally, in the case of      
foreign currency received as a dividend that is not converted by the recipient  
into dollars on the date of receipt, a U.S. Holder will have a tax basis in the 
foreign currency equal to its dollar value on the date of receipt. Any gain or  
loss recognized upon a subsequent sale or other disposition of the foreign      
currency, including an exchange for dollars, will be ordinary income or loss.   

Subject to certain requirements and limitations imposed by the Code, a U.S. 
Holder may elect to claim the Canadian tax withheld or paid with respect to     
dividends on the common shares either as a deduction or as a foreign tax credit 
against the U.S. federal income tax liability of such U.S. Holder. In general,  
a U.S. Holder may utilize foreign tax credits only to the extent its tax        
liability results from including in taxable income its foreign source income,   
which would include any dividends paid by Optimal but generally would not       
include any gain realized upon a disposition of common shares. The requirements 
and limitations imposed by the Code with respect to the foreign tax credit are  
complex and beyond the scope of this summary, and consequently, prospective     
purchasers of common shares should consult with their own advisers to determine 
whether and to what extent they would be entitled to such credit.               

For U.S. federal income tax purposes, upon a sale or exchange of common     
shares, a U.S. Holder will recognize gain or loss equal to the difference       
between the amount realized on such sale or exchange (or its U.S. dollar        
equivalent, determined by reference to the spot rate of exchange on the date of 
disposition, if the amount realized is denominated in a foreign currency) and   
the tax basis of such common shares. Subject to the passive foreign investment  
company rules discussed below, if the common shares are held as a capital       
asset, any such gain or loss will be capital gain or loss, and will be long-    
term capital gain or loss if the U.S. Holder has held such common shares for    
more than one year. Moreover, any such gain or loss will generally be treated   
as U.S. source income.                                                          

If, for any taxable year of Optimal, 75% or more of Optimal's gross income  
consists of certain types of "passive" income or the average value during a     
taxable year of "passive assets" (generally assets that produce or are held to  
produce passive income) is 50% or more of the average value of all Optimal's    
assets, Optimal would be treated as a "passive foreign investment company"      
("PFIC") for such year and succeeding years with respect to such U.S. Holders   
who were shareholders of Optimal during any taxable year in which Optimal was a 
PFIC. If Optimal is treated as a PFIC, U.S. Holders who do not make a special   
election to be taxed currently on their pro rata share of Optimal's income and  
gains, whether or not distributed, will be subject to increased tax liability   
upon the receipt of certain dividends or upon the sale or other disposition of  
their common shares.                                                            

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Moreover, any gain upon the disposition by U.S. Holders of their common shares  
will be characterized as ordinary income and taxed at ordinary income rates.    
Although Optimal does not anticipate being classified as a PFIC for U.S.        
federal income tax purposes, no assurance can be given as to its current or     
future PFIC status. Accordingly, U.S. Holders are urged to consult with their   
own tax advisers concerning the impact, if any, of the PFIC rules on their      
investment in Optimal's common shares.                                          

SHARES ELIGIBLE FOR FUTURE SALE 

Upon completion of this offering, Optimal will have outstanding 13,345,933  
common shares, assuming no exercise of the underwriters' over-allotment option  
or any other options or warrants. Of these shares, only 224,268 are restricted  
securities and all the rest (including the 2,000,000 common shares being sold   
in this offering) will be freely tradeable by persons other than "affiliates"   
of Optimal without restriction or further registration under the Act. Of these  
freely tradeable common shares, 407,000 will be subject to "lock-up"            
arrangements. Lock-up arrangements with respect to the selling shareholders     
expire on February 24, 2001 and lock-up arrangements with respect to our other  
directors and officers expire 90 days after the date of this prospectus. In     
addition, Gerard Klauer holds warrants with respect to 253,420 common shares.   
Gerard Klauer has agreed to delay the sale of any shares underlying these       
warrants until 90 days after the effective date of the registration statement   
of which this prospectus forms a part. See "Risk Factors--Future sales of       
common shares could depress the price of the common shares" and "Underwriting." 
Upon completion of this offering, we will also have 2,299,882 common shares     
available for issuance upon the exercise of outstanding options and warrants,   
not including the 300,000 common shares subject to the underwriters' over-      
allotment option.                                                               

The "restricted securities" as defined in Rule 144 under the Act, in the    
absence of an effective registration statement, may only be sold pursuant to an 
exemption from registration, including Rule 144 or Regulation S. In general,    
under Rule 144 as currently in effect, a stockholder, including an affiliate of 
Optimal, who has beneficially owned restricted securities for at least one year 
from the later of the date such securities were acquired from either Optimal or 
an affiliate of Optimal, as applicable, is entitled to sell, within any three-  
month period, a number of common shares that does not exceed the greater of one 
percent of the then outstanding common shares (approximately 133,000 after the  
offering) or the average weekly trading volume of the common shares during the  
four calendar weeks preceding the date on which notice of such sale was filed   
under Rule 144, provided that certain procedural and information requirements   
are also met. In addition, if a period of at least two years has elapsed        
between the later of the date that the restricted securities were acquired from 
Optimal or an affiliate of Optimal, a stockholder who is not an affiliate of    
Optimal and has not been an affiliate of Optimal for at least three months      
prior to the sale of the securities is entitled to sell the securities          
immediately without compliance with the foregoing requirements under Rule 144.  

We have filed a registration statement on Form S-8 with respect to our 1997 
Stock Option Plan and other plans. Common shares issued upon the exercise of    
stock options contemplated by the Form S-8 are eligible for resale in the       
public market without restriction, except that sales by affiliates of Optimal   
will be subject to the Rule 144 limitations described above and the             
aforementioned lock-up agreements.                                              

No prediction can be made as to the effect, if any, that market sales of    
common shares, or the availability of the common shares for sale, will have on  
the market price of the common shares prevailing from time to time.             
Nevertheless, sales of significant numbers of common shares in the public       
market, or the perception that such sales could occur, could adversely affect   
the market price of the common shares and impair our future ability to raise    
capital through an offering of our equity securities. See "Risk Factors--Future 
sales of common shares could depress the price of the common shares."           

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UNDERWRITING

Under the terms and subject to the conditions contained in an underwriting  
agreement dated the date of this prospectus, the underwriters named below, for  
whom Gerard Klauer Mattison & Co., Inc., The Robinson-Humphrey Company, LLC and 
Raymond James & Associates, Inc. are acting as representatives, have severally, 
but not jointly, agreed to purchase from us and the selling shareholders the    
following respective numbers of common shares:                                  

                                                                [Download Table]

                                                                       Number Of
Name                                                                    Shares  
----                                                                   ---------
                                                                                
Gerard Klauer Mattison & Co., Inc. ...................................   830,000
The Robinson-Humphrey Company, LLC....................................   448,200
Raymond James & Associates, Inc. .....................................   381,800
Bear, Stearns & Co. Inc. .............................................    40,000
Chase H&Q.............................................................    40,000
ING Barings...........................................................    40,000
RBC Dominion Securities Corporation...................................    40,000
Wasserstein Perella Securities, Inc. .................................    40,000
William Blair & Company, L.L.C. ......................................    20,000
Dain Rauscher Wessels.................................................    20,000
FAC/Equities..........................................................    20,000
Janney Montgomery Scott LLC ..........................................    20,000
McDonald Investments Inc., a KeyCorp Company..........................    20,000
Pacific Crest Securities..............................................    20,000
C.E. Unterberg, Towbin................................................    20,000
                                                                       ---------
  Total............................................................... 2,000,000
                                                                       =========

The underwriting agreement provides that the obligations of the underwriters
are subject to some conditions precedent, and that the underwriters will be     
obligated to purchase all of the common shares offered in this prospectus       
(other than those shares covered by the over-allotment option described below)  
if any are taken. The underwriting agreement provides that in the event of a    
default by an underwriter, in some circumstances the purchase commitments of    
non-defaulting underwriters may be increased.                                   

The underwriters propose to offer the common shares to the public initially 
at the public offering price set forth on the cover page of this prospectus and 
to some dealers at a price that represents a concession not in excess of $1.28  
per share. The underwriters may allow and some dealers may reallow a concession 
not in excess of $.10 per share to some other dealers. After the initial        
offering of the common shares, the offering price and concession and discount   
to dealers may be changed by the representatives of the underwriters.           

We have granted to the underwriters an option exercisable by the            
representatives of the underwriters, expiring at the close of business on the   
30th day after the date of this prospectus, to purchase up to                   
300,000 additional common shares at the offering price, less underwriting       
discounts and commissions, all as set forth on the cover page of this           
prospectus. This option may be exercised only to cover over-allotments in the   
sale of the common shares. To the extent that the option is exercised, each     
underwriter will become obligated, subject to some conditions, to purchase a    
number of additional common shares proportionate to each underwriter's initial  
amount reflected in the foregoing table.                                        

The following table summarizes the compensation to be paid to the           
underwriters by us.                                                             

                                                                [Download Table]

                                                    Without          With     
                                                 Over-Allotment Over-Allotment
                                                 -------------- --------------
                                                                              
Underwriting discounts and commissions paid by                                
 us.............................................   $2,842,125     $3,485,625  
Underwriting discounts and commissions paid by                                
 the selling shareholders.......................   $1,447,875     $1,447,875  

We estimate that the total expenses of this offering, excluding underwriting
discounts and commissions, will be approximately $925,000, all of which will be 
paid by Optimal.                                                                

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Optimal and its directors and officers other than the selling shareholders  
have agreed that they will not offer, sell, contract to sell, announce their    
intention to sell, pledge or otherwise dispose of, directly or indirectly, any  
common shares or securities convertible into or exchangeable or exercisable for 
any common shares, without the prior written consent of Gerard Klauer for the   
90-day period commencing with the date of this prospectus. The selling          
shareholders have agreed that they will refrain from any such activities until  
February 24, 2001.                                                              

The representatives of the underwriters on behalf of the underwriters may   
engage in over-allotment, stabilizing transactions, syndicate covering          
transactions, penalty bids and "passive" market making in accordance with       
Regulation M under the Securities Exchange Act of 1934. Over-allotment involves 
syndicate sales in excess of the offering size, which creates a syndicate short 
position. Stabilizing transactions permit bids to purchase the underlying       
security so long as the stabilizing bids do not exceed a specified maximum.     
Syndicate covering transactions involve purchases of the common shares in the   
open market after the distribution has been completed in order to cover         
syndicate short positions. Penalty bids permit the representatives of the       
underwriters to reclaim a selling concession from a syndicate member when the   
common shares originally sold by these syndicate members are purchased in a     
syndicate covering transaction to cover syndicate short positions. In "passive" 
market making, market makers in the securities offered hereby who are           
underwriters or prospective underwriters may, subject to some limitations, make 
bids for or purchases of such securities until the time, if any, at which a     
stabilizing bid is made. These stabilizing transactions, syndicate covering     
transactions, penalty bids, and other permissible purchases of common shares by 
or on behalf of the underwriters may cause the price of the common shares to be 
higher than it would otherwise be in the absence of these transaction. These    
transactions may be effected on the Nasdaq National Market or otherwise and, if 
commenced, may be discontinued at any time.                                     

We have agreed to indemnify the underwriters against some liabilities,      
including civil liabilities under the Securities Act.                           

The common shares are listed on the Nasdaq National Market under the symbol 
"OPMR".                                                                         

Gerard Klauer acted as lead underwriter to Optimal in connection with its   
initial U.S. public offering in 1996 and received a customary fee in connection 
therewith, as well as warrants to purchase up to 240,600 common shares. The     
shares underlying these warrants and other warrants issued by Optimal to third  
parties since transferred to Gerard Klauer are registered on a registration     
statement filed by Optimal in January 2000, which registration statement has    
not yet become effective. Gerard Klauer has agreed to waive its rights to sell  
any common shares pursuant to such registration statement or otherwise for the  
90-day period commencing with the effectiveness of the registration statement   
of which this prospectus forms a part. The Robinson-Humphrey Company and Gerard 
Klauer acted as lead underwriters in Optimal's 1999 public offering and         
received a customary fee in connection therewith.                               

LEGAL MATTERS 

Certain legal matters in connection with the common shares have been passed 
upon for us by Goodman Phillips & Vineberg, Montreal, Quebec. Leon P.           
Garfinkle, a partner in Goodman Phillips & Vineberg, is a director of Optimal.  
Certain matters in connection with the common shares have been passed upon for  
the underwriters by Smith, Gambrell & Russell, LLP, Atlanta, Georgia.           

EXPERTS 

The financial statements included in this prospectus as of December 31, 1999
and 1998 and for each of the years ended December 31, 1999, 1998 and 1997 have  
been audited by PricewaterhouseCoopers LLP, Chartered Accountants in Canada,    
and are included in reliance upon such reports given upon the authority of      
PricewaterhouseCoopers LLP as experts in auditing and accounting.               

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INDEX TO FINANCIAL STATEMENTS 

                                                                [Download Table]
                                                                                
Report of PricewaterhouseCoopers LLP........................................ F-1

Consolidated Balance Sheets................................................. F-2

Consolidated Statements of Operations....................................... F-3

Consolidated Statements of Deficit.......................................... F-4

Consolidated Statements of Cash Flows....................................... F-5

Notes to Consolidated Financial Statements.................................. F-6

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AUDITORS' REPORT

To the Directors of                                                             
Optimal Robotics Corp.                                                          

We have audited the consolidated balance sheets of Optimal Robotics Corp. as
at December 31, 1999 and 1998 and the consolidated statements of operations,    
deficit and cash flows for each of the years in the three-year period ended     
December 31, 1999. These financial statements are the responsibility of the     
Company's management. Our responsibility is to express an opinion on these      
financial statements based on our audits.                                       

We conducted our audits in accordance with Canadian generally accepted      
auditing standards. Those standards require that we plan and perform an audit   
to obtain reasonable assurance 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.                                                         

In our opinion, these consolidated financial statements present fairly, in  
all material respects, the financial position of the Company as at December 31, 
1999 and 1998 and the results of its operations and its cash flows for each of  
the years in the three-year period ended December 31, 1999 in accordance with   
Canadian generally accepted accounting principles.                              

/s/ PricewaterhouseCoopers LLP                                                  
Chartered Accountants                                                           
Montreal, Quebec, Canada                                                        
February 4, 2000                                                                

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OPTIMAL ROBOTICS CORP.

CONSOLIDATED BALANCE SHEETS 

As at December 31, 1999 and 1998
(expressed in U.S. dollars) 

                                                                [Download Table]

                                                          1999        1998    
                                                       ----------  ---------- 
                                                           $           $      
                                                       ----------  ---------- 
                        ASSETS                                                
                        ------                                                
Current assets                                                                
                                                                              
Cash..................................................  3,934,243         --  
U.S. Treasury bill, at cost...........................    564,841     538,490 
Short-term investments (note 15)...................... 24,636,606   5,524,819 
Accounts receivable, net of allowance for doubtful                            
 accounts of nil (note 4).............................  4,641,566   1,219,716 
Inventory (note 5)....................................  3,363,943   1,401,049 
Tax credits receivable................................    252,520     114,494 
Future income taxes (note 13).........................  3,012,997         --  
Prepaid expenses......................................    127,017       2,935 
                                                       ----------  ---------- 
                                                       40,533,733   8,801,503 
Loans receivable (note 6).............................    155,643     161,807 
Deferred share issue costs............................     56,985         --  
Future income taxes (note 13).........................  2,112,028         --  
Capital assets (note 7)...............................  1,347,903     365,869 
                                                       ----------  ---------- 
                                                       44,206,292   9,329,179 
                                                       ==========  ========== 
                     LIABILITIES                                              
                     -----------                                              
Current liabilities                                                           
Accounts payable and accrued liabilities (note 8).....  3,659,189   1,233,014 
Deferred revenue......................................    592,271     124,784 
Current portion of contract advance (note 9)..........    250,000     125,000 
                                                       ----------  ---------- 
                                                        4,501,460   1,482,798 
Contract advance (note 9).............................        --      250,000 
                                                       ----------  ---------- 
                                                        4,501,460   1,732,798 
                                                       ----------  ---------- 
Commitments and contingency (note 12)                                         
Shareholders' Equity                                                          
Share capital (note 10)............................... 44,657,833  16,850,531 
Other capital.........................................     20,559      23,240 
Cumulative translation adjustment.....................    652,062         --  
Deficit............................................... (5,625,622) (9,277,390)
                                                       ----------  ---------- 
                                                       39,704,832   7,596,381 
                                                       ----------  ---------- 
                                                       44,206,292   9,329,179 
                                                       ==========  ========== 

The accompanying notes are an integral part of the consolidated financial 
statements. 

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OPTIMAL ROBOTICS CORP.

CONSOLIDATED STATEMENTS OF OPERATIONS 

For each of the years in the three-year period ended December 31, 1999
(expressed in U.S. dollars) 

                                                                [Download Table]

                                               1999        1998        1997    
                                            ----------  ----------  ---------- 
                                                $           $           $      
                                            ----------  ----------  ---------- 
                                                         (note 2)    (note 2)  
                                                                               
Revenues                                                                       
  Systems.................................  28,301,590   5,154,961   1,670,967 
  Hardware................................         --          --    1,472,559 
  Development and customization...........     335,387     202,204     218,917 
  Hardware and software maintenance.......     997,269     142,562      23,439 
  Other...................................         --      118,286      10,835 
                                            ----------  ----------  ---------- 
                                            29,634,246   5,618,013   3,396,717 
                                            ----------  ----------  ---------- 
Cost of sales                                                                  
  Systems.................................  22,343,753   4,778,815   1,190,450 
  Hardware................................         --          --    1,447,357 
  Development and customization...........     116,861      84,082      70,982 
  Hardware and software maintenance.......     996,799     179,913         --  
  Other...................................         --       92,267         --  
                                            ----------  ----------  ---------- 
                                            23,457,413   5,135,077   2,708,789 
                                            ----------  ----------  ---------- 
Gross margin..............................   6,176,833     482,936     687,928 
                                            ----------  ----------  ---------- 
Gross research and development expenses...     960,440     324,868     393,501 
Research and development tax credits (note                                     
 12)......................................    (740,484)   (114,494)    (99,600)
Selling, general and administrative                                            
 expenses.................................   5,444,831   4,847,804   2,542,336 
Operating lease expense...................     232,471     211,399     113,811 
Write-down of inventory...................     604,364         --          --  
Amortization of capital assets............     344,718     205,684     123,818 
Investment income.........................    (893,694)   (449,244)   (584,285)
Foreign exchange loss (gain)..............     104,002    (632,317)   (420,516)
                                            ----------  ----------  ---------- 
                                             6,056,648   4,393,700   2,069,065 
                                            ----------  ----------  ---------- 
Earnings (loss) before income taxes.......     120,185  (3,910,764) (1,381,137)
Income tax recovery (note 13).............   3,531,583         --          --  
                                            ----------  ----------  ---------- 
Net earnings (loss) for the year..........   3,651,768  (3,910,764) (1,381,137)
                                            ==========  ==========  ========== 
Weighted average number of common shares                                       
 outstanding..............................   9,699,385   7,463,984   7,409,522 
                                            ==========  ==========  ========== 
Net earnings (loss) per common share                                           
  Basic...................................        0.38       (0.52)      (0.19)
                                            ==========  ==========  ========== 
  Fully diluted...........................        0.35       (0.52)      (0.19)
                                            ==========  ==========  ========== 

The accompanying notes are an integral part of the consolidated financial 
statements. 

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OPTIMAL ROBOTICS CORP.

CONSOLIDATED STATEMENTS OF DEFICIT

For each of the years in the three-year period ended December 31, 1999
(expressed in U.S. dollars) 

                                                                [Download Table]

                                                1999        1998        1997    
                                             ----------  ----------  ---------- 
                                                 $           $           $      
                                             ----------  ----------  ---------- 
                                                          (note 2)    (note 2)  
                                                                                
Deficit--Beginning of year.................. (9,277,390) (5,366,626) (3,985,489)
Net earnings (loss) for the year............  3,651,768  (3,910,764) (1,381,137)
                                             ----------  ----------  ---------- 
Deficit--End of year........................ (5,625,622) (9,277,390) (5,366,626)
                                             ==========  ==========  ========== 

The accompanying notes are an integral part of the consolidated financial 
statements. 

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OPTIMAL ROBOTICS CORP.

CONSOLIDATED STATEMENTS OF CASH FLOWS 

For each of the years in the three-year period ended December 31, 1999
(expressed in U.S. dollars) 

                                                                [Download Table]

                                             1999         1998        1997     
                                          -----------  ----------  ----------- 
                                               $           $            $      
                                          -----------  ----------  ----------- 
                                                        (note 2)     (note 2)  
                                                                               
Cash provided by (used for)                                                    
Operating activities                                                           
 Net earnings (loss) for the year........   3,651,768  (3,910,764)  (1,381,137)
 Items not affecting cash                                                      
  Write-down of inventory................     604,364         --           --  
  Amortization of capital assets.........     344,718     205,684      123,818 
  Unrealized foreign exchange loss (gain)                                      
   on contract advance...................     (14,016)     53,414          --  
  Non-refundable tax credits.............    (490,438)        --           --  
  Future income taxes....................  (3,531,583)        --           --  
 Change in non-cash operating working                                          
  capital items                                                                
  Increase in accounts receivable........  (3,271,239)   (380,271)    (506,860)
  Decrease (increase) in inventory.......  (2,441,539) (1,376,724)     112,279 
  Decrease (increase) in tax credits                                           
   receivable............................    (128,289)    (14,894)      90,952 
  Decrease (increase) in prepaid                                               
   expenses..............................    (120,936)     16,265      (10,984)
  Decrease in unrealized foreign exchange                                      
   gain on forward contract..............         --          --       171,592 
  Increase (decrease) in accounts payable                                      
   and accrued liabilities...............   2,029,510     902,972     (493,927)
  Increase (decrease) in deferred                                              
   revenue...............................     449,257     124,784      (17,609)
                                          -----------  ----------  ----------- 
                                           (2,918,423) (4,379,534)  (1,911,876)
                                          -----------  ----------  ----------- 
Financing activities                                                           
 Issuance of common shares...............  29,467,094     435,596          --  
 Share issue costs.......................  (2,793,434)        --           --  
 Deferred share issue costs..............     (55,616)        --           --  
 Repayment of loans under Employee Stock                                       
  Purchase Arrangement...................     141,348         --           --  
 Decrease in contract advance............    (125,000)   (125,000)         --  
                                          -----------  ----------  ----------- 
                                           26,634,392     310,596          --  
                                          -----------  ----------  ----------- 
Investing activities                                                           
 Purchase of capital assets..............  (1,012,586)   (234,207)    (437,732)
 Decrease (increase) in short-term                                             
  investments............................ (18,460,828)  4,558,988  (10,083,807)
 Issuance of loan receivable.............         --          --      (166,308)
 Repayment of loans receivable...........      15,088      12,854        1,766 
                                          -----------  ----------  ----------- 
                                          (19,458,326)  4,337,635  (10,686,081)
                                          -----------  ----------  ----------- 
Increase (decrease) in cash and cash                                           
 equivalents during the year.............   4,257,643     268,697  (12,597,957)
Effect of exchange rate changes on cash                                        
 and cash equivalents....................    (297,049)        --           --  
Cash and cash equivalents--Beginning of                                        
 year....................................     538,490     269,793   12,867,750 
                                          -----------  ----------  ----------- 
Cash and cash equivalents--End of year...   4,499,084     538,490      269,793 
                                          ===========  ==========  =========== 
Cash and cash equivalents is comprised                                         
 of:                                                                           
 Cash....................................   3,934,243         --       269,793 
 U.S. Treasury bill......................     564,841     538,490          --  
                                          -----------  ----------  ----------- 
                                            4,499,084     538,490      269,793 
                                          ===========  ==========  =========== 
Supplementary information                                                      
 Cash paid during the year for interest..      38,786       1,182        1,163 
                                          ===========  ==========  =========== 

The accompanying notes are an integral part of the consolidated financial 
statements. 

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OPTIMAL ROBOTICS CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For each of the years in the three-year period ended December 31, 1999
(expressed in U.S. dollars, unless otherwise noted) 

1Nature of operations                                                         

The Company is engaged in the development, marketing, installation and      
servicing of automated transaction software and systems designed for use in the 
retail sector. The Company's principal product focus is its U-Scan(R) Express   
system, a self-service checkout system for the retail industry. The Company     
also develops, markets and services its 6300 POS for the supermarket industry.  

The U-Scan(R) Express system allows shoppers to scan, bag and pay for their 
purchases with limited or no assistance from store personnel. The 6300 POS is   
an open architecture, PC-based point-of-sale system designed to replace         
proprietary cash registers at high volume retailers.                            

 The U-Scan(R) Express system is currently assembled under contract by a third
party which is a full-line manufacturer of bar code reading equipment. The U-   
Scan(R) Express system is marketed by the Company and sold both directly by the 
Company and indirectly by two third parties under contract.                     

2Summary of significant accounting policies                                   

Basis of presentation                                                         

These financial statements have been prepared in accordance with accounting 
principles generally accepted in Canada. These principles conform, in all       
material respects, with accounting principles generally accepted in the United  
States, except as described in note 16. The principal accounting policies of    
the Company, which have been consistently applied, are summarized as follows:   

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   
revenues and expenses during the reporting period. Actual results could differ  
from those estimates.                                                           

Principles of consolidation                                                   

These consolidated financial statements include the accounts of the Company 
and its wholly owned U.S. subsidiary, Optimal Robotics, Inc., which was         
incorporated on October 7, 1999. The subsidiary had no active operations during 
1999.                                                                           

Cash and cash equivalents                                                     

 Cash and cash equivalents consist of cash on hand and balances with banks and
all highly liquid debt instruments with original maturities of three months or  
less.                                                                           

Short-term investments                                                        

Short-term investments are carried at the lower of cost and market value.   

Revenue recognition                                                           

Sales of systems are recognized upon completion of installation and customer
acceptance. Post-installation maintenance and service revenue (hardware and     
software) is recognized over the term of the related agreements. Hardware sales 
are recognized upon shipment of the product. Development fees related to the    
Company's 6300 POS system are recognized as the services are rendered.          

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OPTIMAL ROBOTICS CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) 

For each of the years in the three-year period ended December 31, 1999
(expressed in U.S. dollars, unless otherwise noted) 

Deferred share issue costs                                                    

Deferred share issue costs relate to the proposed public offering of common 
shares pursuant to a registration statement which the Company expects to file   
with the Securities and Exchange Commission in fiscal 2000. These costs will be 
recorded as a reduction of the gross proceeds of the offering during the period 
in which the common shares are issued.                                          

Capital assets                                                                

Capital assets are recorded at cost. Amortization is provided for over the  
estimated useful lives of the capital assets on a straight-line basis as        
follows:                                                                        

                                                                [Download Table]
                                                                             
Test units and computer equipment............................             33%
Equipment....................................................             10%
Leasehold improvements....................................... over lease term
Patents......................................................              5%

Foreign currency translation                                                  

Reporting currency                                                          

The functional currency of the Company is the Canadian dollar. Accordingly, 
the Company's consolidated financial statements for the year ended December 31, 
1999 have been translated into the reporting currency as follows: assets and    
liabilities have been translated at the exchange rate in effect at the end of   
the year and revenues and expenses have been translated at the average exchange 
rate for the year. All gains or losses from translation of the consolidated     
financial statements into the reporting currency have been included in the      
cumulative translation adjustment in shareholders' equity. Changes in the       
cumulative translation adjustment during the year result solely from the        
application of this translation method.                                         

 The financial statements of the Company were presented in Canadian dollars up
to December 31, 1997. Effective December 31, 1998, the U.S. dollar was adopted  
as the reporting currency. Comparative financial information for 1998 and 1997  
has been presented in U.S. dollars in accordance with a translation of          
convenience method using the representative exchange rate at December 31, 1998  
of US$1.00 = Cdn$1.5333. The translated amount for non-monetary items as at     
December 31, 1998 became the historical basis for those items in subsequent     
years.                                                                          

Foreign subsidiary                                                          

The Company's wholly owned subsidiary is considered to be integrated. As a  
result, the subsidiary's accounts are translated into Canadian dollars using    
the temporal method. Under this method, monetary assets and liabilities are     
translated at the exchange rates in effect at the balance sheet date. Non-      
monetary assets and liabilities are translated at historical rates. Revenue and 
expenses are translated at the average rate for the period. Gains and losses    
resulting from translation are reflected in the statement of operations.        

Foreign currency transactions                                               

Transactions denominated in foreign currencies are translated into the      
functional currency using the temporal method.                                  

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OPTIMAL ROBOTICS CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) 

For each of the years in the three-year period ended December 31, 1999
(expressed in U.S. dollars, unless otherwise noted) 

Tax credits                                                                   

The Company is entitled to scientific research and experimental development 
("SRED") tax credits granted by the Canadian federal government ("Federal") and 
the government of the Province of Quebec ("Provincial"). Federal SRED tax       
credits are earned on qualified Canadian SRED expenditures at a rate of 20%     
which can only be used to offset Federal income taxes otherwise payable.        
Provincial SRED tax credits are earned on qualified SRED salaries in the        
Province of Quebec at a rate of 20%. These tax credits are refundable.          

SRED tax credits are accounted for as a reduction of the related            
expenditures. The refundable portion of SRED tax credits is recorded in the     
year in which they are earned. The non-refundable portion of SRED tax credits   
is recorded at such time as the Company has reasonable assurance that the       
credits will be realized.                                                       

Income taxes                                                                  

The Company provides for income taxes using the liability method of tax     
allocation. Under this method, future income tax assets and liabilities are     
determined based on deductible or taxable temporary differences between         
financial statement values and tax values of assets and liabilities using       
enacted income tax rates expected to be in effect for the year in which the     
differences are expected to reverse.                                            

The Company establishes a valuation allowance against future income tax     
assets if, based on available information, it is more likely than not that some 
or all of the future income tax assets will not be realized.                    

Research and development expenses                                             

Research costs, which include all costs incurred to establish technological 
feasibility, are charged to operations in the year in which they are incurred.  
Technological feasibility has been defined as the completion of the product     
design for the computer software.                                               

Once technological feasibility has been established, development costs are  
evaluated for deferral and subsequent amortization. As at December 31, 1999,    
the Company has not deferred any development costs.                             

Inventory                                                                     

Replacement parts inventory is stated at the lower of landed cost and       
replacement cost. U-Scan(R) Express systems inventory is stated at the lower of 
cost and net realizable value. Cost is determined on the basis of actual costs. 

Stock-based compensation plan                                                 

The Company maintains a stock-based compensation plan, which is described in
note 11. Under accounting principles generally accepted in Canada, no           
compensation expense is recognized for this plan when stock options or shares   
are issued to employees. Any consideration received from plan participants upon 
exercise of stock options is credited to capital stock.                         

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OPTIMAL ROBOTICS CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) 

For each of the years in the three-year period ended December 31, 1999
(expressed in U.S. dollars, unless otherwise noted) 

Earnings per share                                                            

Basic earnings (loss) per share is determined using the weighted average    
number of common shares outstanding during the period.                          

Fully diluted earnings (loss) per share is determined using the weighted    
average number of common shares and dilutive common share equivalents, such as  
stock options and warrants, outstanding during the period. Earnings for the     
period are increased by the estimated additional earnings, net of applicable    
income taxes, on the proceeds from the exercise of dilutive common share        
equivalents.                                                                    

3Change in accounting policy                                                  

 During 1999, the Company retroactively adopted the revised recommendations of
the Canadian Institute of Chartered Accountants regarding accounting for income 
taxes. Under these revised recommendations, income taxes are now accounted for  
using the liability method. These new recommendations are consistent with those 
of SFAS 109 under accounting principles generally accepted in the United        
States.                                                                         

The adoption of these revised recommendations did not result in any changes 
to prior years' earnings, shareholders' equity or cash flows. However, certain  
additional disclosures have been provided. The effect of these recommendations  
on the current year is the recognition of tax assets of $4,824,824 of which     
approximately $3.5 million was recorded as an income tax recovery in the        
consolidated statement of operations.                                           

4Accounts receivable                                                          

                                                                [Download Table]

                                                              1999      1998   
                                                            --------- ---------
                                                                $         $    
                                                            --------- ---------
                                                                               
  Trade accounts receivable................................ 4,305,188 1,095,819
  Accrued interest.........................................   176,019    35,956
  Current portion of loan receivable.......................    13,592    12,853
  Other....................................................   146,767    75,088
                                                            --------- ---------
                                                            4,641,566 1,219,716
                                                            ========= =========

5Inventory                                                                     


                                                              1999      1998   
                                                            --------- ---------
                                                                $         $    
                                                            --------- ---------
                                                                               
  Replacement parts........................................ 2,763,261   910,234
  U-Scan(R) Express systems................................   600,682   490,815
                                                            --------- ---------
                                                            3,363,943 1,401,049
                                                            ========= =========

6Loans receivable                                                             

These loans are as follows:                                                 

a) To an employee to purchase common shares of the Company in the       
 amount of Cdn$24,391 (1998 - Cdn$27,099). This loan is non-interest
bearing and is repayable in annual instalments of Cdn$2,708 until 
June 30, 2008; and                                                

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OPTIMAL ROBOTICS CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) 

For each of the years in the three-year period ended December 31, 1999
(expressed in U.S. dollars, unless otherwise noted) 

b) To an officer/director to purchase a home in the amount of           
 Cdn$221,000 (1998 - Cdn$238,000). This loan is non-interest bearing
and is repayable in annual instalments of Cdn$17,000 until July 1,
2012. This loan is forgivable if the officer/director leaves the  
employment of the Company for any reason.                         

7Capital assets                                                               

                                                                [Download Table]

                                                              1999      1998   
                                                            --------- ---------
                                                                $         $    
                                                            --------- ---------
                                                                               
  Cost                                                                         
    Test units.............................................   443,931   242,317
    Equipment..............................................   331,775    41,105
    Leasehold improvements.................................   499,105   265,391
    Leasehold improvements under construction..............   275,862       -- 
    Computer equipment.....................................   516,286   163,828
    Patents................................................    13,686    12,942
                                                            --------- ---------
                                                            2,080,645   725,583
                                                            --------- ---------
  Accumulated amortization                                                     
    Test units.............................................   268,670   143,954
    Equipment..............................................    33,322    18,314
    Leasehold improvements.................................   253,756   131,242
    Leasehold improvements under construction..............       --        -- 
    Computer equipment.....................................   164,050    54,609
    Patents................................................    12,944    11,595
                                                            --------- ---------
                                                              732,742   359,714
                                                            --------- ---------
  Net carrying amount...................................... 1,347,903   365,869
                                                            ========= =========

8Accounts payable and accrued liabilities                                      

                                                              1999      1998   
                                                            --------- ---------
                                                                $         $    
                                                            --------- ---------
                                                                               
  Trade accounts payable................................... 2,923,123   802,653
  Accrued salaries, vacation pay and benefits..............   100,632   121,089
  Outstanding cheques......................................   635,434   309,272
                                                            --------- ---------
                                                            3,659,189 1,233,014
                                                            ========= =========

9Contract advance                                                             

Pursuant to an exclusive, worldwide assembly and marketing agreement, the   
Company received a non-interest-bearing advance of $500,000. On April 1, 1998,  
the agreement was replaced with an exclusive assembly agreement which           
terminates on December 31, 2000. The remaining balance of the advance of        
$250,000 is repayable on December 31, 2000.                                     

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OPTIMAL ROBOTICS CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) 

For each of the years in the three-year period ended December 31, 1999
(expressed in U.S. dollars, unless otherwise noted) 

10Share capital                                                                 

The Company's authorized share capital consists of an unlimited number of   
Class "A" shares, and Class "B" and Class "C" preference shares.                

The Class "A" shares are designated as common shares.                       

The Class "B" preference shares are voting, non-participating and redeemable
for the amount paid up thereon. In the event of the liquidation, dissolution or 
wind-up of the Company, the Class "B" preference shares rank in priority to all 
other classes.                                                                  

The Class "C" preference shares are issuable in series with rights,         
privileges, restrictions and conditions designated by the directors. In the     
event of the liquidation, dissolution or wind-up of the Company, the Class "C"  
preference shares rank in priority to the common shares.                        

                                                                [Download Table]

Issued                                                                         
                                                          Common               
                                                          Shares        $      
                                                        ----------  ---------- 
                                                                               
Balance - December 31, 1996............................  7,417,022  16,411,360 
 Cancellation of shares under Employee Stock Purchase                          
  Arrangement..........................................     (9,000)    (51,360)
 Cancellation of loan receivable under Employee Stock                          
  Purchase Arrangement.................................         --      51,360 
                                                        ----------  ---------- 

Balance - December 31, 1997............................  7,408,022  16,411,360 
 Issued for cash pursuant to exercise of stock                                 
  options..............................................      1,000       2,998 
 Issued pursuant to exercise of warrants...............     70,256             
  Ascribed value from other capital....................                  3,575 
  Cash.................................................                432,598 
 Cancellation of shares under Employee Stock Purchase                          
  Arrangement..........................................     (4,000)    (22,827)
 Cancellation of loan receivable under Employee Stock                          
  Purchase Arrangement.................................        --       22,827 
                                                        ----------  ---------- 

Balance - December 31, 1998............................  7,475,278  16,850,531 
 Issued for cash pursuant to exercise of stock                                 
  options..............................................    934,271   2,393,538 
 Issued pursuant to exercise of warrants...............     27,692         --  
  Ascribed value from other capital....................        --        2,681 
  Cash.................................................        --       73,556 
 Issued for cash pursuant to public offering...........  3,000,000  27,000,000 
 Share issue costs, net of related future income                               
  taxes................................................        --   (1,803,821)
 Repayment of loans under Employee Stock Purchase                              
  Arrangement..........................................        --      141,348 
                                                        ----------  ---------- 
Balance - December 31, 1999............................ 11,437,241  44,657,833 
                                                        ==========  ========== 

During 1999, the Company filed a registration statement with the Securities 
and Exchange Commission qualifying the issuance of 3,000,000 common shares for  
gross proceeds of $9.00 per share. The net proceeds from this offering amounted 
to $25,196,179, after deducting underwriting commissions and other expenses of  
$1,803,821 (net of future income taxes of $989,613).                            

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OPTIMAL ROBOTICS CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) 

For each of the years in the three-year period ended December 31, 1999
(expressed in U.S. dollars, unless otherwise noted) 

 On February 26, 1996, regulatory approval was received to issue 42,000 common
shares under an Employee Stock Purchase Arrangement pursuant to which certain   
employees of the Company were entitled to purchase common shares of the Company 
at a price of Cdn$8.75 per share. Under the Arrangement the Company provided    
interest-free non-recourse loans payable according to various occurrences, but  
no later than the 10th anniversary of the issuance of the shares, which loans   
were secured by a pledge of the shares. These loans receivable have been        
presented as a deduction from share capital. At December 31, 1999, 24,000       
common shares are issued and outstanding under this Arrangement and all loans   
under the Arrangement have been repaid.                                         

11Stock option plan/warrants                                                    

 The Company has a stock option plan that provides for the granting of options
to employees and directors for the purchase of the Company's common shares.     
Options may be granted by the Board of Directors for terms of up to ten years.  
The Board of Directors establishes the exercise period, vesting terms and other 
conditions for each grant at the grant date. Options may be granted with        
exercise prices as permitted by securities regulatory authorities. A maximum of 
3,000,000 common shares may be issued pursuant to options granted under this    
plan. Options outstanding under the plan generally expire five years after the  
date of grant and vest either immediately or over a period of up to two years.  

In addition, the Company has granted options under certain employment       
agreements and established certain terms for some options granted under the     
1997 Stock Option Plan as follows:                                              

a) In 1997, options to purchase 1,200,000 common shares were granted to     
  three senior officers. These options have an exercise price of $3.00 per
share and expire in 2002. As at December 31, 1999, options to purchase
900,000 common shares are outstanding, all of which are exercisable   
(1998 - 1,200,000 outstanding, 900,000 exercisable). The employment   
agreements contained the following provisions:                        

i) The holder was permitted to exercise the above options without       
paying cash by accepting the number of shares having a value equal
  to the in-the-money value of the options. This right was irrevocably
waived by the holders in 1998.                                    

ii) If a change of control or substantial asset disposal occurred, the  
 unexercised options would no longer be exercisable and the holder
would have the right to acquire 4.04% of the then outstanding   
shares of the Company reduced by a specified number of shares if
any of the options had been exercised. Such shares could be     
acquired for nominal consideration. If the shares could not be  
issued, the holders would be entitled to a cash payment based on
  certain specified criteria. In January 1999, the change of control
and substantial asset disposal provisions were deleted and a new
 change of control provision was inserted in the agreements. Under
  the new change of control provision, if a change of control should
 occur, the exercise price of all options, warrants or rights held
by these senior officers would be amended to a nominal value. If
   shares cannot be issued under this change of control provision, the
   Company is required to pay the holders the fair value of the shares
that would have been issued.                                    

iii) In the event of termination by the Company without cause, the      
    exercise price on the options would be amended to a nominal value.

b) The 1997 employment agreements provide that in the event of termination  
without cause, the exercise price of all options, warrants or rights  
would be amended to a nominal value. At December 31, 1999, options to 
purchase 1,812,000 (1998 - 1,692,000) common shares with a weighted   
average exercise                                                      

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OPTIMAL ROBOTICS CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) 

For each of the years in the three-year period ended December 31, 1999
(expressed in U.S. dollars, unless otherwise noted) 

price of $10.84 (1998 - $2.80) and 140,000 (1998 - 140,000) warrants  
with a weighted average exercise price of Cdn$4.64 (1998 - $4.64) were
subject to this provision of which 1,182,000 options and 140,000      
warrants were exercisable (1998 - 1,392,000 options and 140,000       
warrants).                                                            

c) In 1997, options to purchase 312,000 common shares were granted,         
including 282,000 which were granted to three senior officers, with a 
reload feature whereby upon exercise of the option, a new option is   
issued with an exercise price equal to the then current market price. 
Two consecutive reloads are permitted. The holder was permitted to    
exercise the options without paying cash by accepting the number of   
shares having a value equal to the in-the-money value of the options. 
This right was irrevocably waived by the holders of options to acquire
307,000 common shares in 1998.                                        

During 1999, 287,000 of these options were exercised and immediately
reloaded at the then current market price. As at December 31, 1999,     
options subject to this provision, all of which are exercisable, are as 
follows:                                                                

                                                                [Download Table]

Exercise                                                       Number of  
prices                                                          options   
   $                                                          outstanding 
--------                                                      ----------- 
                                                                          
 3.00........................................................    20,000   
16.13........................................................   282,000(1)
24.56........................................................     5,000(1)
                                                                -------   
                                                                307,000   
                                                                =======   

--------                                                                
(1) These options may be reloaded one more time.                        

d) In 1997, options to purchase 20,000 common shares were granted to an     
outside consultant at an exercise price of $3.00.                     

Details of stock options are as follows:                            

                                                        [Enlarge/Download Table]

                         United States dollar exercise price            Canadian dollar exercise price 
                         -------------------------------------------   --------------------------------
                                                      Weighted                            Weighted     
                                                      average                             average      
                                                   exercise price                      exercise price  
                            Number of                per share           Number of       per share     
                             options                     $                options           Cdn$       
                          -------------         --------------------   ------------- ------------------
                                                                                                       
Balance - December 31,                                                                                 
 1996                                      --                     --      360,000           2.08       
Granted.................             1,571,000                   3.00         --             --        
                           -------------------        ---------------    --------           ----       
Balance - December 31,                                                                                 
 1997                                1,571,000                   3.00     360,000           2.08       
Granted.................               105,000                   5.78         --             --        
Expired.................               (10,000)                  3.00         --             --        
                           -------------------        ---------------    --------           ----       
Balance - December 31,                                                                                 
 1998                                1,666,000                   3.18     360,000           2.08       
Granted.................             1,028,000                  19.81         --             --        
Expired.................                (1,000)                  3.00         --             --        
Exercised...............              (636,000)                  3.13    (300,000)          2.00       
                           -------------------        ---------------    --------           ----       
Balance - December 31,                                                                                 
 1999                                2,057,000                  11.49      60,000           2.50       
                           ===================        ===============    ========           ====       

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OPTIMAL ROBOTICS CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) 

For each of the years in the three-year period ended December 31, 1999
(expressed in U.S. dollars, unless otherwise noted) 

The following table summarizes information concerning currently outstanding 
options:                                                                        

                                                                [Download Table]

                                           Weighted  
                                            average  
                 Number of    Number of    remaining 
Exercise price    options      options    contractual
      $         outstanding  exercisable     life    
--------------  -----------  -----------  -----------
                                                     
CDN  2.50           60,000       60,000    0.3 years 
     3.00          954,000      954,000    2.3 years 
     5.56           75,000       25,000    3.2 years 
     9.75           65,000          --     4.3 years 
    12.88          330,000          --     4.0 years 
    16.13          282,000      282,000    2.3 years 
    24.56            5,000        5,000    2.3 years 
    31.25          346,000          --     4.9 years 
                 ---------    ---------              
                 2,117,000    1,326,000              
                 =========    =========              

 The following table summarizes the weighted average grant-date fair value per
share for options granted.

                                                                [Download Table]

                                                                  Weighted 
                                                                  average  
                                                                 grant-date
                                                                 fair value
                                                       Number of per share 
                                                        options      $     
                                                       --------- ----------
                                                                           
1997                                                                       
 Exercise price per share less than market price per                       
  share (1)........................................... 1,220,000    3.58   
 Exercise price per share equal to market price per                        
  share...............................................   351,000    1.47   

1998                                                                       
 Exercise price per share less than market price per                       
  share...............................................   100,000    5.22   
 Exercise price per share equal to market price per                        
  share...............................................     5,000    5.60   

1999                                                                       
 Exercise price per share equal to market price per                        
  share............................................... 1,028,000   11.60   

--------                                                                        
(1) Of these 1,220,000 options, (i) an aggregate of 1.2 million options was     
granted at an exercise price of $3.00 per share pursuant to employment  
agreements made as of May 5, 1997 (the substance of which was agreed to 
prior to May 5, 1997) with three senior executives of the Company (the  
market price per share was $2.75 per share on May 4, 1997), which       
 agreements were formally ratified and confirmed by the Board of Directors
of the Company on September 24, 1997 (on which date the market price per
   share was $5.75); and (ii) 20,000 options were granted at an exercise price
  of $3.00 per share to a consultant to the Company pursuant to a consulting
arrangement agreed to as of June 26, 1997 (the market price per share on
June 25, 1997 was $4.25), which options were formally ratified and      
  confirmed by the Board of Directors of the Company on October 31, 1997 (on
which date the market price per share was $5.50).                       

The fair value of each option grant is estimated on the date of grant using 
the Black-Scholes pricing model with the following weighted-average assumptions 
used for grants in 1999, 1998 and 1997: dividend yield of nil, risk-free        
interest rate of 5.58%, 4.85% and 5.70% to 6.57% respectively, expected         
volatility of 80%, 77% to 85% and 80% to 87% respectively, and expected lives   
of 3.44, 5.0 and 5.0 years respectively.                                        

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) 

For each of the years in the three-year period ended December 31, 1999
(expressed in U.S. dollars, unless otherwise noted) 

Details of warrants are as follows:                                         

                                                                [Download Table]

                                       United States                      
                                      dollar exercise    Canadian dollar  
                                           price         exercise price   
                                     ------------------ ------------------
                                               Weighted           Weighted
                                               average            average 
                                               exercise           exercise
                                                price              price  
                                      Number     per     Number     per   
                                        of      share      of      share  
                                     warrants     $     warrants    Cdn$  
                                     --------  -------- --------  --------
                                                                          
Balance - December 31, 1996 and                                           
 1997............................... 331,023     6.58   220,000     5.69  
  Exercised......................... (10,256)    6.50   (60,000)    9.46  
  Expired........................... (13,500)    6.60       --       --   
                                     -------     ----   -------     ----  
Balance - December 31, 1998......... 307,267     6.58   160,000     4.28  
  Exercised.........................  (7,692)    6.50   (20,000)    1.75  
                                     -------     ----   -------     ----  
Balance - December 31, 1999......... 299,575     6.58   140,000     4.64  
                                     =======     ====   =======     ====  

During 1997, no warrants were granted or exercised, and none expired.       

The following table summarizes information concerning currently outstanding 
warrants:                                                                       

                                                                [Download Table]

           Number of    Weighted  
           warrants      average  
Exercise  outstanding   remaining 
 price        and      contractual
   $      exercisable     life    
--------  -----------  -----------
                                  
CDN 3.75     40,000     0.8 years 
    5.00    100,000     1.7 years 
    6.50     58,975     2.8 years 
    6.60    240,600     1.8 years 
            -------               
            439,575               
            =======               

The warrants expire at various dates to October 24, 2002.                   

12Other disclosures                                                             

Research and development tax credits                                          

Research and development tax credits include:                               

                                                                [Download Table]

                                                       1999    1998    1997 
                                                      ------- ------- ------
                                                         $       $      $   
                                                      ------- ------- ------
                                                               (note   (note
                                                                2)      2)  
                                                                            
Refundable tax credits..............................  250,046 114,494 99,600
Non-refundable tax credits realizable against future                        
 income taxes related to                                                    
  Current year expenditures.........................  171,473     --     -- 
  Prior years' expenditures not previously                                  
   recognized.......................................  318,965     --     -- 
                                                      ------- ------- ------
                                                      740,484 114,494 99,600
                                                      ======= ======= ======

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) 

For each of the years in the three-year period ended December 31, 1999
(expressed in U.S. dollars, unless otherwise noted) 

Commitments                                                                   

a) The Company has entered into operating leases for its premises and       
certain office equipment. The minimum amounts payable for each of the 
next four years, excluding the Company's proportionate share of common
operating costs, are as follows:                                      

                                                                [Download Table]

                                                                      $   
                                                                   -------
                                                                          
2000.............................................................. 192,218
2001.............................................................. 123,086
2002..............................................................  49,582
2003..............................................................  27,096
                                                                   -------
                                                                   391,982
                                                                   =======

b) The U.S. Treasury bill in the amount of $564,841 has been pledged in     
  respect of corporate credit card facilities and an unused line of credit
in the amount of Cdn$500,000.                                         

Uncertainty due to the Year 2000 Issue                                        

The Year 2000 Issue arises because many computerized systems use two digits 
rather than four to identify a year. Date-sensitive systems may recognize the   
year 2000 as 1900 or some other date, resulting in errors when information      
using year 2000 dates is processed. In addition, similar problems may arise in  
some systems which use certain dates in 1999 to represent something other than  
a date. Although the change in date has occurred, it is not possible to         
conclude that all aspects of the Year 2000 Issue that may affect the Company,   
including those related to the efforts of customers, suppliers, or other third  
parties, will be fully resolved.                                                

Contingency                                                                   

In each of 1995 and 1996, the Company received demand letters from the same 
claimant alleging patent infringement. In June 1999, this same claimant filed a 
civil action alleging patent infringement in the United States District Court   
for the District of Utah against the Company and PSC. In addition, a similar    
suit has been filed in the State of Utah against one of the Company's           
customers. At the Company's expense, the Company's counsel is defending this    
suit. The Company is also contractually bound to indemnify the customer for any 
damages it incurs in connection with such suit. The Company also received a     
lawyer's letter from another party alleging infringement of another patent. The 
Company believes these claims to be without merit and intends to vigorously     
defend its position. Consequently, no provision has been made in these          
financial statements with respect to the above claims.                          

13Income taxes                                                                  

The income tax recovery is composed of the following:                       

                                                                [Download Table]

                                                    1999       1998     1997  
                                                 ----------  -------- --------
                                                     $          $        $    
                                                 ----------  -------- --------
                                                             (note 2) (note 2)
                                                                              
Current.........................................        --       --       --  
Future, before undernoted item..................     65,758      --       --  
 Benefit of prior years' non-capital                                          
    losses not previously recognized............ (3,597,341)     --       --  
                                                 ----------   ------   ------ 
                                                 (3,531,583)     --       --  
                                                 ==========   ======   ====== 

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) 

For each of the years in the three-year period ended December 31, 1999
(expressed in U.S. dollars, unless otherwise noted) 

The reconciliation of the combined Canadian federal and Quebec provincial   
income tax rate to the income tax recovery is as follows:                       

                                                                [Download Table]

                                           1999        1998        1997    
                                        ----------  ----------  ---------- 
                                            $           $           $      
                                        ----------  ----------  ---------- 
                                                     (note 2)    (note 2)  
                                                                           
Earnings (loss) before income taxes....    120,185  (3,910,764) (1,381,137)
                                        ----------  ----------  ---------- 
Combined Canadian federal and Quebec                                       
   provincial income taxes at 38%......     45,670  (1,486,090)   (524,832)
Unrecorded benefit of non-capital                                          
 losses................................        --    1,475,785     515,868 
Future benefit of previously                                               
   unrecognized non-capital losses of                                      
   prior years......................... (3,597,341)        --          --  
Other..................................     20,088      10,305       8,964 
                                        ----------  ----------  ---------- 
                                        (3,531,583)        --          --  
                                        ==========  ==========  ========== 

The future income tax balances are summarized as follows:                   

                                                                [Download Table]

                                                        1999       1998    
                                                      --------- ---------- 
                                                          $         $      
                                                      --------- ---------- 
                                                                           
Current future income tax assets                                           
Non-refundable research and development tax credits                        
 (net of related income taxes).......................   310,201        --  
Non-capital losses................................... 2,500,000        --  
Share issue costs....................................   202,796        --  
                                                      --------- ---------- 
Current future income tax assets..................... 3,012,997        --  
                                                      --------- ---------- 
Long-term future income tax assets                                         
Research and development expenses....................   739,146    503,489 
Non-refundable research and development tax credits                        
 (net of related income taxes).......................       --     188,482 
Non-capital losses...................................   678,481  2,831,800 
Share issue costs....................................   608,388        --  
Capital assets.......................................    96,013        --  
                                                      --------- ---------- 
                                                      2,122,028  3,523,771 
Valuation allowance..................................       --  (3,523,771)
                                                      --------- ---------- 
Long-term future income tax assets................... 2,122,028        --  
                                                      --------- ---------- 
Total future income tax assets....................... 5,135,025        --  
                                                      ========= ========== 

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) 

For each of the years in the three-year period ended December 31, 1999
(expressed in U.S. dollars, unless otherwise noted) 

As at December 31, 1999, for Canadian federal and Quebec provincial income  
tax purposes, the Company has non-capital loss carryforwards of approximately   
Cdn$12,417,000 which can be carried forward to reduce future taxable income and 
which expire as follows:                                                        

                                                                [Download Table]

                                                                      CDN$   
                                                                    ---------
                                                                             
2000...............................................................     2,000
2001...............................................................    63,000
2002...............................................................   895,000
2003............................................................... 2,177,000
2004............................................................... 2,190,000
2005............................................................... 6,100,000
2006...............................................................   990,000

 Certain eligible scientific research and development expenditures incurred by
the Company may be deferred and deducted in future years. These unclaimed       
deductions, which can be carried forward indefinitely, amounted to              
Cdn$2,420,000 for Canadian federal purposes and Cdn$4,010,000 for Quebec        
provincial purposes as at December 31, 1999.                                    

As at December 31, 1999, the Company has non-refundable research and        
development tax credits of Cdn$728,644 which can be carried forward to reduce   
Canadian federal income taxes payable and expire in various years until 2009.   

The future tax benefits of these carryforwards and tax credits have been    
recognized in the financial statements.                                         

The carryforwards and the tax credits claimed are subject to review and     
possible adjustment by the Canadian federal and Quebec provincial government    
authorities.                                                                    

14Segmented information                                                         

Substantially all of the Company's revenue is derived from export sales to  
supermarket retailers in the United States and is denominated in U.S. dollars.  
Substantially all of the Company's operations and assets are located in Canada. 

Major customers                                                               

Sales to major customers (customers from which 10% or more of total revenue 
is derived during the specified period) are summarized as follows:              

                                                                [Download Table]

                                                  1998      1998      1997   
                                               ---------- --------- ---------
                                                   $          $         $    
                                               ---------- --------- ---------
                                                          (note 2)  (note 2) 
                                                                             
Customer 1.................................... 15,909,477 4,035,080 1,277,239
Customer 2....................................  8,267,126   725,420       N/A
Customer 3....................................        N/A       N/A 1,094,966

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) 

For each of the years in the three-year period ended December 31, 1999
(expressed in U.S. dollars, unless otherwise noted) 

15Financial instruments                                                         

Credit risk                                                                   

Financial instruments that potentially subject the Company to concentrations
of credit risk consist primarily of cash, the U.S. Treasury bill, short-term    
investments and accounts receivable. Cash is maintained with a high-credit      
quality financial institution. Short-term investments consist of short-term     
discounted notes issued by high-credit quality corporations. For accounts       
receivable, the Company performs periodic credit evaluations and typically does 
not require collateral. Allowances are maintained for potential credit losses   
consistent with the credit risk, historical trends and other information.       

Interest rate risk                                                            

The Company's exposure to interest rate risk is as follows:                 

                                                                [Download Table]
                                                                        
Cash                                                Non-interest bearing
U.S. Treasury bill                                   Fixed interest rate
Short-term investments                               Fixed interest rate
Accounts receivable                                 Non-interest bearing
Unused line of credit                     Interest rate of prime plus 1%
Accounts payable and accrued liabilities            Non-interest bearing
Contract advance                                    Non-interest bearing

Short-term investments                                                        

Short-term investments consist of the following:                            

                                                                [Download Table]

                                                            1999      1998   
                                                         ---------- ---------
                                                             $          $    
                                                         ---------- ---------
                                                                             
Short-term discounted notes denominated in U.S. dollars                      
 with an effective yield of 5.8% (1998 - 7.625%),                            
 maturing on April 3, 2000                                                   
 (1998 - December 1, 1999).............................   4,354,219 5,524,819
Short-term discounted notes denominated in Canadian                          
 dollars with an effective yield of 5.1%, maturing on                        
 March 7 and 14, 2000..................................  20,282,387       -- 
                                                         ---------- ---------
                                                         24,636,606 5,524,819
                                                         ========== =========

Fair value                                                                    

Due to their short-term maturities, the carrying values of cash, the U.S.   
Treasury bill, short-term investments, accounts receivable, and accounts        
payable and accrued liabilities are reasonable estimates of their fair values.  

The fair value of the contract advance at December 31, 1999 is approximately
$227,000 (1998 - $332,000) based on discounted cash flows.                      

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) 

For each of the years in the three-year period ended December 31, 1999
(expressed in U.S. dollars, unless otherwise noted) 

16 Additional disclosures required by U.S. GAAP and differences between         
Canadian GAAP and U.S. GAAP                                               

These financial statements have been prepared in accordance with Canadian   
generally accepted accounting principles ("Canadian GAAP") that conform, in all 
material respects, with generally accepted accounting principles in the United  
States ("U.S. GAAP") during the periods presented, except with respect to the   
following:                                                                      

New accounting standards                                                      

In 1998, the Financial Accounting Standards Board issued Statement of       
Financial Accounting Standard No. 133, "Accounting for Derivative Instruments   
and Hedging Activities". The Standard, which is effective for all fiscal        
quarters of all fiscal years beginning after June 15, 1999, is not expected to  
have a material impact on the Company's disclosure or accounting.               

Accounting for stock-based compensation                                       

For stock-based compensation plans with employees (including directors), the
Company has chosen to use the intrinsic value method (APB Opinion No. 25),      
which requires compensation costs to be recognized on the difference, if any,   
between the quoted market price of the stock as at the grant date and the       
amount the individual must pay to acquire the stock. Variable stock option      
plans require subsequent increases in the fair value of the underlying stock to 
be recorded as additional compensation costs. The options issued by the Company 
in 1997 have a cashless exercise option, as described in note 11, and           
accordingly, they are accounted for as variable stock option plans. On April    
22, 1998, certain option holders irrevocably waived the cashless exercise       
option; therefore, subsequent changes in the fair value of the underlying stock 
are no longer recorded as an increase or decrease of compensation costs, until  
these options are exercised.                                                    

 If the fair value-based accounting method under SFAS No. 123 had been used to
account for stock-based compensation costs relating to options and warrants     
issued to employees, the net income figures and related earnings per share      
figures under U.S. GAAP would be as follows for the years ended December 31,    
1999, 1998 and 1997:                                                            

                                                                [Download Table]

                                           1999        1998        1997    
                                        ----------  ----------  ---------- 
                                            $           $           $      
                                        ----------  ----------  ---------- 
                                                                           
Net loss for the year in accordance                                        
 with U.S. GAAP........................ (1,629,811) (5,685,587) (4,575,788)
Basic and fully diluted net loss per                                       
 common share in accordance with U.S.                                      
 GAAP..................................      (0.17)      (0.76)      (0.62)

Change in reporting currency                                                  

As mentioned in note 2, in 1998 the Company adopted the U.S. dollar as its  
reporting currency. Under U.S. GAAP, the financial statements, including prior  
years, are translated according to the current rate method. Under Canadian      
GAAP, at the time of change in reporting currency, the historical financial     
statements are presented using a translation of convenience.                    

 Under Canadian GAAP, the statement of operations for the years ended December
31, 1998 and 1997 were translated into U.S. dollars using an exchange rate of   
US$1.00 = Cdn$1.5333. Under U.S. GAAP, revenues and expenses would be           
translated at exchange rates prevailing at the respective transaction dates.    
Average exchange rates for the years ended December 31, 1998 and 1997 were      
US$1.00 = Cdn$1.4835 and Cdn$1.3844, respectively.                              

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) 

For each of the years in the three-year period ended December 31, 1999
(expressed in U.S. dollars, unless otherwise noted) 

Net earnings (loss) per share                                                 

Under U.S. GAAP, fully diluted net earnings (loss) per share is calculated  
based on the weighted average number of shares outstanding during the year,     
plus the effects of dilutive common share equivalents, such as options and      
warrants outstanding during the year. This method requires that fully diluted   
net earnings (loss) per share be calculated, using the treasury stock method,   
as if all common share equivalents had been exercised at the beginning of the   
reporting period, or period of issue, as the case may be, and that the funds    
obtained thereby were used to purchase common shares of the Company at the      
average trading price of the common shares during the period.                   

Reconciliation of net earnings (loss) to conform with U.S. GAAP               

The following summary sets out the material adjustments to the Company's    
reported net earnings (loss) and net earnings (loss) per common share which     
would be made to conform with U.S. GAAP.                                        

                                                                [Download Table]

                                          1999        1998         1997    
                                       ----------  -----------  ---------- 
                                           $            $           $      
                                       ----------  -----------  ---------- 
                                                                           
Net earnings (loss) for the year in                                        
 accordance with Canadian GAAP........  3,651,768   (3,910,764) (1,381,137)
Stock-based compensation costs........ (9,227,197) (12,371,637) (5,273,053)
Change in reporting currency..........        --      (120,255)   (151,603)
                                       ----------  -----------  ---------- 
Net loss for the year in accordance                                        
 with U.S. GAAP....................... (5,575,429) (16,402,656) (6,805,793)
Other comprehensive income (loss)                                          
Foreign currency translation                                               
 adjustments..........................    652,062     (690,003)   (530,984)
                                       ----------  -----------  ---------- 
Comprehensive loss.................... (4,923,367) (17,092,659) (7,336,777)
                                       ==========  ===========  ========== 
Basic and fully diluted net loss per                                       
 common share in accordance with U.S.                                      
 GAAP.................................      (0.57)       (2.20)      (0.92)
                                       ==========  ===========  ========== 

Balance sheet                                                                 

Loans receivable                                                            

 Under U.S. GAAP, loans provided in exchange for shares issued are required to
be reflected as an offset to shareholders' equity.                              

Share issue costs                                                             

 Under U.S. GAAP, SFAS No. 123, transactions in which an entity acquires goods
and services from non-employees in exchange for equity instruments are required 
to be recorded at fair value. On May 31, 1996, 45,000 warrants were granted to  
an outside consultant and on October 24, 1996, 240,600 warrants were granted to 
a non-related party. The fair values of these warrants were $205,472 and        
$628,447 respectively, which have been charged to deficit as share issue costs. 

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) 

For each of the years in the three-year period ended December 31, 1999
(expressed in U.S. dollars, unless otherwise noted) 

 As a result of the above adjustments to net earnings (loss), loans receivable
and share issue costs, differences with respect to the balance sheet under U.S. 
GAAP are as follows:                                                            

Share capital                                                                   

                                                                [Download Table]

                                                        1999        1998    
                                                     ----------  ---------- 
                                                         $           $      
                                                     ----------  ---------- 
                                                                            
Share capital in accordance with Canadian GAAP.....  44,657,833  16,850,531 
Stock-based compensation costs on options exercised                         
 during the year...................................  15,111,792         --  
Change in reporting currency                                                
 Current year......................................         --       15,048 
 Cumulative effect of prior years..................   2,587,999   2,572,951 
Loan receivable....................................     (14,953)    (17,674)
                                                     ----------  ---------- 
Share capital in accordance with U.S. GAAP.........  62,342,671  19,420,856 
                                                     ==========  ========== 

Other capital                                                                   

                                                                [Download Table]

                                                      1999         1998    
                                                   -----------  ---------- 
                                                        $           $      
                                                   -----------  ---------- 
                                                                           
Other capital in accordance with Canadian GAAP....      20,559      23,240 
Stock-based compensation costs                                             
 Current year.....................................   9,227,197  12,371,637 
 Cumulative effect of prior years.................  17,807,290   5,435,653 
 Stock-based compensation costs on options                                 
  exercised during the year....................... (15,111,792)        --  
Change in reporting currency                                               
 Current year.....................................         --         (425)
 Cumulative effect of prior years.................     968,350     968,775 
                                                   -----------  ---------- 
Other capital in accordance with U.S. GAAP........  12,911,604  18,798,880 
                                                   ===========  ========== 

Deficit                                                                         

                                                                [Download Table]

                                                       1999         1998     
                                                    -----------  ----------- 
                                                         $            $      
                                                    -----------  ----------- 
                                                                             
Deficit in accordance with Canadian GAAP...........  (5,625,622)  (9,277,390)
Share issue costs..................................    (833,919)    (833,919)
Stock-based compensation costs                                               
 Current year......................................  (9,227,197) (12,371,637)
 Cumulative effect of prior years.................. (17,807,290)  (5,435,653)
Change in reporting currency                                                 
 Current year......................................         --      (120,255)
 Cumulative effect of prior years..................  (1,188,668)  (1,068,413)
                                                    -----------  ----------- 
Deficit in accordance with U.S. GAAP............... (34,682,696) (29,107,267)
                                                    ===========  =========== 

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) 

For each of the years in the three-year period ended December 31, 1999
(expressed in U.S. dollars, unless otherwise noted) 

Accumulated other comprehensive income (loss)                                 

Accumulated other comprehensive income (loss), which results solely from the
translation of the financial statements in accordance with the current rate     
method, is summarized as follows:                                               

                                                                [Download Table]

                                                        1999        1998    
                                                     ----------  ---------- 
                                                         $           $      
                                                     ----------  ---------- 
                                                                            
Opening balance..................................... (1,533,762)   (843,759)
Change during the year..............................    652,062    (690,003)
                                                     ----------  ---------- 
Closing balance.....................................   (881,700) (1,533,762)
                                                     ==========  ========== 

Shareholders' equity                                                            

                                                                [Download Table]

                                                        1999       1998    
                                                     ----------  --------- 
                                                         $           $     
                                                     ----------  --------- 
                                                                           
Shareholders' equity in accordance with Canadian                           
 GAAP..............................................  39,704,832  7,596,381 
Loan receivable....................................     (14,953)   (17,674)
                                                     ----------  --------- 
Shareholders' equity in accordance with U.S. GAAP..  39,689,879  7,578,707 
                                                     ==========  ========= 

Statement of cash flows                                                       

 Under Canadian GAAP, the statement of cash flows for the years ended December
31, 1998 and 1997 was translated into U.S. dollars using an exchange rate of    
US$1.00 = Cdn$1.5333. Under U.S. GAAP, the historical exchange rates on the     
dates of the cash flow activities would be used. Following is a summary cash    
flow statement for each of 1998 and 1997 under U.S. GAAP.                       

                                                                [Download Table]

                                                      1998        1997     
                                                   ----------  ----------- 
                                                                           
Operating activities.............................. (5,130,768)  (2,651,258)
Financing activities..............................    325,219          --  
Investing activities..............................  5,054,858  (11,454,805)
                                                   ----------  ----------- 
Increase (decrease) in cash and cash equivalents                           
 during the year..................................    249,309  (14,106,063)
Cash and cash equivalents--Beginning of year......    289,181   14,395,244 
                                                   ----------  ----------- 
Cash and cash equivalents--End of year............    538,490      289,181 
                                                   ==========  =========== 

17Subsequent events                                                             

In January 2000, the Company issued 7,692 common shares pursuant to the     
exercise of warrants at an exercise price of $6.50, for total gross cash        
proceeds of $49,998. In addition, the Company issued 16,000 common shares       
pursuant to the exercise of options at a weighted average exercise price of     
$5.40 per share for gross cash proceeds of $86,438.                             

Also in January 2000, the Company filed a registration statement with the   
Securities and Exchange Commission in order to register common shares           
underlying 253,420 outstanding warrants with a weighted average exercise price  
of $6.59 per share.                                                             

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INSIDE BACK COVER                                                               

       [The background is blue. The graphs that appear, clockwise from the top
     left corner, are: bar graph showing Total U-Scan Systems Installed at
      year-end for 1997, 1998 and 1999; Revenue (in millions) for 1997, 1998
        and 1999; Total U-Scan/(R)/ Checkout Stations at year-end for 1997, 1998
     and 1999; and U-Scan/(R)/ Shopper Transactions (in millions) for 1998
        and 1999. In the center of the page and these four graphs is a schematic
      picture of the United States indicating, in dark blue, states in which
      we have installed U-Scan Express, with the remaining states in white.]

424B1
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BACK COVER                                                                      

      [Logo] [The back cover will have a blue background getting darker from
the top of the cover to the bottom.]                            

        [A picture of the U-Scan Express will appear, with the following phrases
 each with a line pointing to the relevant component in the system
        (clockwise, from the lower left corner): Security Weighing Platform, POS
Receipt Printer, Bill & Coin Dispenser, a Pinpad, Bill & Coin   
Acceptor, Video Surveillance Monitor, Touchscreen Monitor,      
Scanner/Scale]                                                  

Dates Referenced Herein   and   Documents Incorporated by Reference

				Referenced-On Page
This ‘424B1’ Filing		Date		First		Last			Other Filings
		7/1/12		42		63
		6/30/08		62
		1/25/04		41
		10/24/02		68
		10/1/01		35
		2/24/01		13		52
		1/25/01		41
		1/1/01		11		35
		12/31/00		8		63			10-K
		4/3/00		1		72
Filed as of:		3/30/00
Filed on:		3/29/00
		3/28/00		1		43
		2/24/00		37					10-K,  F-3
		2/23/00		42		45
		2/15/00		44					SC 13G/A
		2/8/00		44					SC 13G
		2/4/00		54
		1/31/00		6		35
		1/25/00		41
		1/1/00		14
		12/31/99		6		76			10-K,  4
		12/1/99		72
		10/7/99		59
		6/30/99		24					10-Q
		6/15/99		73
		1/5/99		40
		1/1/99		40
		12/31/98		10		76
		4/22/98		73
		4/1/98		20		63
		1/1/98		23
		12/31/97		10		76
		10/31/97		67
		9/24/97		67
		6/26/97		39		67
		6/25/97		67
		5/5/97		40		67
		5/4/97		41		67
		2/7/97		42
		12/31/96		18		68
		10/24/96		74
		7/14/96		37
		5/31/96		74
		2/26/96		65
		12/31/95		18
		5/4/95		42
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