##### Table of Contents









UNITED STATES SECURITIES AND EXCHANGE COMMISSION


Washington, D.C. 20549





FORM 10-KSB


|  |  |                                                                                   
|- |  | ----------------------------------------------------------------------------------
|þ |  | ANNUAL REPORT UNDER SECTION 13 OR 15(d)
    OF THE SECURITIES EXCHANGE ACT OF 1934
|  |  | For fiscal year ended December 31, 2005                                           

Commission File Number 001-15069





InPlay Technologies, Inc.


(Exact Name of Registrant as Specified in Its Charter)


|                         |  |                                     
|------------------------ |  | ------------------------------------
|Nevada                   |  | 88-0308867                          
|(State of Incorporation) |  | (I.R.S. Employer Identification No.)

234 South Extension Road


Mesa, Arizona 85210


(480) 586-3300


(Address, including zip code, and telephone number, including
area code, of principal executive offices)


Securities registered pursuant to Section 12(b) of the
Exchange Act:


|                    |  |                                          
|------------------- |  | -----------------------------------------
|Title of Each Class |  | Name of Each Exchange on Which Registered
|                    |  |                                          
|None                |  | Not Applicable                           

Securities registered pursuant to Section 12(g) of the
Exchange Act:




(Title of Class)


o þ


þ o


S-B 10-KSB 10-KSB. þ


12b-2 o þ








DOCUMENTS INCORPORATED BY REFERENCE












---



##### 



INPLAY TECHNOLOGIES, INC.


ANNUAL REPORT ON
FORM 10-KSB


Fiscal Year Ended December 31, 2005


TABLE OF CONTENTS







|           |  |                                                                                                                         |    |      |    | 
|---------- |  | ----------------------------------------------------------------------------------------------------------------------- | -- | ---- | -- | 
|           |  |                                                                                                                         |    | Page |   
|           |  |                                                                                                                         |    |      |   
|PART I    
|ITEM 1.    |  | DESCRIPTION OF BUSINESS                                                                                                 |    |      | 3  | 
|ITEM 1A.   |  | RISK FACTORS                                                                                                            |    |      | 12 | 
|ITEM 1B.   |  | UNRESOLVED STAFF COMMENTS                                                                                               |    |      | 17 | 
|ITEM 2.    |  | DESCRIPTION OF PROPERTY                                                                                                 |    |      | 17 | 
|ITEM 3.    |  | LEGAL PROCEEDINGS                                                                                                       |    |      | 17 | 
|ITEM 4.    |  | SUBMISSION OF MATTERS TO A VOTE OF SECURITY
    HOLDERS                                                                 |    |      | 17 | 
|          
|PART II   
|ITEM 5.    |  | MARKET FOR COMMON EQUITY, RELATED
    STOCKHOLDER MATTERS AND SMALL BUSINESS ISSUER PURCHASES OF
    EQUITY SECURITIES  |    |      | 18 | 
|ITEM 6.    |  | MANAGEMENTS DISCUSSION AND
    ANALYSIS                                                                                |    |      | 19 | 
|ITEM 7.    |  | FINANCIAL STATEMENTS                                                                                                    |    |      | 27 | 
|ITEM 8.    |  | CHANGES IN AND DISAGREEMENTS WITH
    ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE                                |    |      | 47 | 
|ITEM 8A.   |  | CONTROLS AND PROCEDURES                                                                                                 |    |      | 47 | 
|ITEM 8B.   |  | OTHER INFORMATION                                                                                                       |    |      | 47 | 
|          
|PART III  
|ITEM 9.    |  | DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS
    AND CONTROL PERSONS; COMPLIANCE WITH SECTION 16(A) OF THE
    EXCHANGE ACT |    |      | 48 | 
|ITEM 10.   |  | EXECUTIVE COMPENSATION                                                                                                  |    |      | 48 | 
|ITEM 11.   |  | SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
    OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS                      |    |      | 48 | 
|ITEM 12.   |  | CERTAIN RELATIONSHIPS AND RELATED
    TRANSACTIONS                                                                      |    |      | 48 | 
|ITEM 13.   |  | EXHIBITS                                                                                                                |    |      | 48 | 
|ITEM 14.   |  | PRINCIPAL ACCOUNTANT FEES AND SERVICES                                                                                  |    |      | 50 | 
|SIGNATURES |  |                                                                                                                         | 51 |     
|EX-21     
|EX-23     
|EX-31     
|EX-32     



Statements Regarding Forward-Looking Statements


The statements contained in this report on
Form 10-KSB that
are not purely historical are forward-looking statements within
the meaning of applicable securities laws. Forward-looking
statements include statements regarding our
expectations, anticipations,
intentions, beliefs, or strategies
regarding the future. Forward-looking statements also include
statements regarding revenue, margins, and expenses for fiscal
year 2006 and thereafter; statements regarding our
licensees and customers ability to successfully
market and manufacture products using our technologies; the
potential for our patented technologies in key markets; our
estimation of potential revenue from and timing of production
using our technologies; our ability to successfully execute on
our corporate goal of leveraging our business model with
additional technologies; our ability to protect our intellectual
property; and liquidity and anticipated cash needs and
availability. All forward-looking statements included in this
report are based on information available to us as of the filing
date of this report, and we assume no liability to update any
such forward-looking statements. Our actual results could differ
materially from the forward-looking statements. Among the
factors that could cause actual results to differ materially are
the factors discussed in Item 1A, Risk
Factors.


2



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##### Table of Contents






PART I







|        |                        
|------- | -----------------------
|Item 1. | Description of Business

Overview


® ®


10-KSB, 10-QSB, 8-K,


Strategy








Duraswitch Electronic Switch Technologies






3



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Electronic Switch Industry Analysis. point-of


History of Electronic Switches.






Duraswitch Electronic Switch Competitive Advantages




Significantly Greater Durability and Reliability. ®


Inherent Feedback Response.


Ease of Integration in Slim Profile, Environmentally Sealed
Design.


4



---



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Value Engineering Alternative.


Increased Design Capabilities.


Duraswitch Electronic Switch Technology Strategies


Maintain and Further Our Patented Technologies
Competitive Advantages.


Increase Market Awareness of Our Patented Technological
Advantages.


License Switch Manufacturers and OEMs. percentage-of


Provide Training, Design Engineering, and Marketing
Support. e-mail


Target Key Industries with Potential for High-Volume
Applications.


5



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Duraswitch Electronic Switch Technologies


® ® tm


The Duraswitch
PushGate®








| |   |                                                                                                                                                                                                                                                                                                                
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | PushGate Island construction which reduces the number of
    material layers and allows for the switching element of the
    PushGate to be fabricated as a freestanding subassembly that can
    be easily inserted into a foam layer, thereby simplifying the
    manufacturing process and reduces cost;    
|
| |  | Unique constructions that provide distinct advantages in certain
    applications including the Large-Key PushGate, High-Impact
    PushGate, Tact Switch, Extreme Temperature/ Altitude PushGate,
    Peel-and-Place PushGate, and Normally Closed-Normally Open
    design incorporating PushGate technology.

The Duraswitch
thiNcoder ®


The Duraswitch
MagnaMousetm


6



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The Duraswitch PushFlex.


Customers


point-of




Competition








FinePoint
MagicPoint®
Computing Pen Technology




7



---



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point-of






Computing Pen and Digitizer Industry Analysis. point-of


History of Digitizer Technology.






| |   |                                                                            
| | - | ---------------------------------------------------------------------------
| |  | A pen, stylus or human finger to generate input data                       
|
| |  | A sensor device to generate x, y analog coordinates from the
    input data
|
| |  | A micro controller to convert the x, y coordinates into digital
    data   
|
| |  | Driver software                                                            











8



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FinePoint Technologies Competitive Advantages






| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Better Accuracy. Analog communications assign a specific
    frequency band to each function and measure the frequency to
    determine what information is being transmitted from the pen.
    Thus, added features in an analog system will reach a limit, or
    bandwidth limitation. Increasing the operational bandwidth will
    result in a noisier system which reports position information
    with less fidelity. For the user, this means lower accuracy and
    increased jitter. Digital communication is not limited by
    bandwidth, thus improving the position signal fidelity (better
    accuracy and less jitter). We believe our digital system offers
    the user a true pen-and-paper experience.
|
| |  | Lower Cost. With our digital technology, adding features
    does not require additional tuning or increase the cost of
    production.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|
| |  | Increased Feature-Enhancement Capability. Our digital
    technology inherently offers increased feature-enhancement
    capability that is not easily achieved with analog technology.
    For example, our MagicPoint pen can be configured for eraser,
    lasso, brush, air brush, calligraphy and highlighting
    capability. The technology also allows for unique pen IDs,
    enables the pen to act as a security key, or to store files in
    the pen and move to another device.                                                                                                                                                                                                                               

FinePoint Strategies


Maintain and Further Our Patented Technologies
Competitive Advantages.


Expand Awareness of Our Technologies Advantages. one-on


Leverage Customer Responsive Culture.


FinePoint Digital Computing Pen Technology




5-year


9



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Customers




Risk Factors  Our
FinePoint business currently depends on one significant
customer.


Competition






Intellectual Property








® ® ® ® ® tm


Research, Development, and Commercial Application
Engineering


on-site




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Sales and Marketing




Websites: www.inplaytechnologies.com,
www.duraswitch.com, and
www.finepointinnovations.com.




| |   |                                                                                             
| | - | --------------------------------------------------------------------------------------------
| |  | information about the advantages of our patented technologies;                              
|
| |  | white papers, press releases and articles published by third
    parties about our products;
|
| |  | virtual demonstrations of our technologies and products;                                    
|
| |  | technical data to assist design engineers in designing products
    using our technologies; 
|
| |  | information on products that currently use our
    technologies; and                        
|
| |  | benefits and the process for obtaining information to utilize
    our technologies.         

Duraswitch Licensee Support. one-on




| |   |                                                                                                                                                                               
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Click: an
    e-newsletter
    highlighting engineering, manufacturing and procurement updates;                                                                               
|
| |  | The Report: an
    e-newsletter with sales
    tips, licensee success stories, and technology updates;                                                                        
|
| |  | web cast training: interactive presentations on Duraswitch
    technologies given multiple times to accommodate various time
    zones, and also archived;                    
|
| |  | online training manuals: complete design and manufacturing
    manuals for our technologies available online to ensure updates
    and enhancements are available immediately;
|
| |  | sales presentations, marketing literature, images, and logos
    available for licensees to download and integrate with their own
    branded sales materials; and            
|
| |  | strategic technology partner contacts for procurement and
    support for complementary products that our licensees often use
    when manufacturing our technologies.        

11



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FinePoint One-on-One
Meetings. one-on


Public Relations. EE Times,
Control Engineering, Appliance Magazine, Electronicstalk, Tablet
PC Magazine and Tablet PC Talk.


Seminars and Trade Shows.





Item 1A. Risk Factors


We have experienced recent changes in our business in
connection with our acquisition of our FinePoint business and
the termination of our exclusive license agreement with Delphi
and we are not certain how these changes will effect our results
of operations or our financial condition.






Our FinePoint business currently depends on one significant
customer.




12



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We depend on our ability to identify and obtain additional
technologies for our patent portfolio.




Our technologies may not gain market acceptance.








Should we be unable to protect our proprietary technologies,
their value and our competitive position would be significantly
impaired.






| |   |                                                                                                                                                                                                                                                                                           
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | we may be unable to protect adequately our technologies;                                                                                                                                                                                                                                  
|
| |  | competitors may be able to develop similar or better
    technologies independently;                                                                                                                                                                                                      
|
| |  | any of our pending patent applications may not be issued; or                                                                                                                                                                                                                              
|
| |  | intellectual property laws may not continue to protect our
    intellectual property rights, particularly as we expand our
    business in foreign countries where the local laws do not
    provide strong protection of intellectual properties or
    recognize international treaties.

Claims that we infringe third-party intellectual property
rights could result in significant expenses or restrictions on
our ability to market and license technology.




13



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We may have difficulty protecting our intellectual property
rights overseas.




Acquisitions could divert managements time and
attention, dilute the voting power of existing stockholders, and
have a material adverse effect on our business.






| |   |                                                                                                                                                           
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | difficulties integrating the operations and personnel of
    acquired companies;                                                                          
|
| |  | additional financial resources required to fund the operations
    of acquired companies;                                                                 
|
| |  | potential disruption of our business;                                                                                                                     
|
| |  | our ability to maximize our financial and strategic position by
    the incorporation of acquired technology or businesses with our
    product offerings;
|
| |  | difficulty of maintaining uniform standards, controls,
    procedures, and policies;                                                                      
|
| |  | potential loss of key employees of acquired companies;                                                                                                    
|
| |  | impairment of employee and customer relationships as a result of
    changes in management;                                                               
|
| |  | significant expenditures to consummate acquisitions; and                                                                                                  
|
| |  | difficulties in meeting applicable regulatory requirements.                                                                                               

We depend on our management team.




We have a history of operating losses.




We face risks related to rapidly changing technology.




14



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Our growing international business activities subject us to
risks that could reduce the demand for our products and increase
our operating expenses.






| |   |                                                                                         
| | - | ----------------------------------------------------------------------------------------
| |  | different technology standards and design requirements;                                 
|
| |  | longer payment cycles for and greater difficulties collecting
    accounts receivable;  
|
| |  | fluctuations in currency exchange rates;                                                
|
| |  | nationalization, expropriation and limitations on repatriation
    of cash;             
|
| |  | social, economic, banking and political risks;                                          
|
| |  | taxation;                                                                               
|
| |  | changes in U.S. laws and policies affecting trade, foreign
    investment and loans; and
|
| |  | changes in enforcement of laws protecting intellectual property.                        

Our quarterly revenue and operating results may fluctuate.






| |   |                                                                                                                                                                                  
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | establishment, growth or loss of licensee or OEM customer
    relationships;                                                                                                     
|
| |  | timing of introductions, production, and sales cycles of new
    products by our licensees or OEM customers incorporating our
    technologies, which is at their discretion; and
|
| |  | market acceptance of our technologies.                                                                                                                                           

The price of our common stock may be volatile.






| |   |                                                                                                                                                                                             
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | actual or anticipated fluctuations in operating results;                                                                                                                                    
|
| |  | announcements regarding our technologies or our
    competitors technologies, new licensees, new customers, or
    other business developments; and                                        
|
| |  | sales or the perception in the market of possible sales by
    insiders or others which could have a disproportionate effect on
    our stock price due to our typically low trading volume.



15



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Rights to acquire shares of common stock could result in
dilution to other holders of common stock.




Certain provisions of our certificate of incorporation,
granting our board of directors broad discretion to issue
shares of preferred stock, may adversely affect your rights as a
common stockholder.


winding-up


Employees




Executive Officers




|                       |  |     |    |  |          |                                                                                                    
|---------------------- |  | --- | -- |  | -------- | ---------------------------------------------------------------------------------------------------
|Name                   |  | Age |    |  | Position
|                       |  |     |    |  |         
|Robert J. Brilon       |  |     | 45 |  |          | Chief Executive Officer, President, Chief Financial Officer,
    Secretary, Treasurer, and Director
|Anthony J. Van Zeeland |  |     | 64 |  |          | Chief Technology Officer and Director                                                              

Robert J. Brilon


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Anthony J. Van Zeeland







|         |                          
|-------- | -------------------------
|Item 1B. | Unresolved Staff Comments








|        |                        
|------- | -----------------------
|Item 2. | Description of Property








|        |                  
|------- | -----------------
|Item 3. | Legal Proceedings








|        |                                                    
|------- | ---------------------------------------------------
|Item 4. | Submission of Matters to a Vote of Security Holders



17



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PART II







|        |                                                                                                                   
|------- | ------------------------------------------------------------------------------------------------------------------
|Item 5. | Market for Common Equity, Related Stockholder Matters and
    Small Business Issuer Purchases of Equity Securities



|                             |                                        |      |   |      |     |  |   |      | 
|---------------------------- | -------------------------------------- | ---- | - | ---- | --- |  | - | ---- | 
|                             |                                        | High |   |      | Low | 
|                             |                                        |      |   |      |     | 
|Year Ended December 31, 2004 |                                        |      |   |      |     |  |   |     
|                             | First Quarter                          |      | $ | 2.75 |     |  | $ | 1.60 | 
|                             | Second Quarter                         |      |   | 4.70 |     |  |   | 2.05 | 
|                             | Third Quarter                          |      |   | 3.01 |     |  |   | 1.95 | 
|                             | Fourth Quarter                         |      |   | 2.92 |     |  |   | 1.80 | 
|Year Ended December 31, 2005 |                                        |      |   |      |     |  |   |     
|                             | First Quarter                          |      | $ | 2.60 |     |  | $ | 1.11 | 
|                             | Second Quarter                         |      |   | 3.10 |     |  |   | 1.25 | 
|                             | Third Quarter                          |      |   | 3.80 |     |  |   | 1.20 | 
|                             | Fourth Quarter                         |      |   | 4.15 |     |  |   | 0.80 | 
|Year Ended December 31, 2006 |                                        |      |   |      |     |  |   |     
|                             | First Quarter (through March 14, 2006) |      | $ | 3.82 |     |  | $ | 2.70 | 



Dividend Policy




Recent Sales of Unregistered Securities




18



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Equity Compensation Plan Information




|                                                       |  |                      |           |     |                    |     |                      |                         |  |  |         | 
|------------------------------------------------------ |  | -------------------- | --------- | --- | ------------------ | --- | -------------------- | ----------------------- |  |  | ------- | 
|                                                       |  |                      |           |     |                    | (c) |                     
|                                                       |  | (a)                  |           |     |                    |     | Number of Securities |                        
|                                                       |  | Number of Securities |           |     | (b)                |     |                      | Remaining Available for | 
|                                                       |  | to be Issued Upon    |           |     | Weighted Average   |     |                      | Future Issuance Under   | 
|                                                       |  | Exercise of          |           |     | Exercise Price of  |     |                      | Equity Compensation     | 
|                                                       |  | Outstanding Options, |           |     | Outstanding        |     |                      | Plans (Excluding        | 
|                                                       |  | Warrants, and        |           |     | Options, Warrants, |     |                      | Securities Reflected in | 
|Plan Category                                          |  | Rights               |           |     | and Rights         |     |                      | Column (a)              | 
|                                                       |  |                      |           |     |                    |     |                      |                         | 
|Equity Compensation Plans Approved by Stockholders     |  |                      | 1,351,056 |     |                    | $   | 7.16                 |                         |  |  | 201,687 | 
|Equity Compensation Plans Not Approved by Stockholders |  |                      | 509,091   | (1) |                    | $   | 3.64                 |                         |  |  |        | 
|                                                       |  |                      |           |     |                    |     |                      |                         | 
|Total                                                  |  |                      | 1,860,147 |     |                    | $   | 6.20                 |                         |  |  | 201,687 | 
|                                                       |  |                      |           |     |                    |     |                      |                         | 






|    |                                                                                                     
|--- | ----------------------------------------------------------------------------------------------------
|(1) | Issuance of warrants in connection with the December 2005
    private placement of 1,272,728 shares.




Item 6. Managements Discussion and
Analysis


Overview


® ®












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Application of Critical Accounting Policies






Revenue Recognition.






Inventory Valuation. first-in,


Impairment or Disposal of Long-Lived Assets.




20



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Goodwill and Other
Intangible Assets


Results of Operations for the Year Ended December 31,
2005 Compared to the Year Ended December 31, 2004


Net Revenue.


|           |                   |                         |           |           |      |   |           |           |  |   |            |           |  |  |    |     |  
|---------- | ----------------- | ----------------------- | --------- | --------- | ---- | - | --------- | --------- |  | - | ---------- | --------- |  |  | -- | --- | -
|           |                   | Year Ended December 31, |           |           |      |   |          
|           |                   |                         |           |           |      |   |          
|           |                   | 2005                    |           |           | 2004 |   |           | Increase  |  |   | Increase % |          
|           |                   |                         |           |           |      |   |           |           |  |   |            |          
|Duraswitch |                   | $                       | 3,424,429 |           |      | $ | 1,757,053 |           |  | $ | 1,667,376  |           |  |  | 95 | %  
|FinePoint  |                   |                         | 3,031,115 |           |      |   |          |           |  |   | 3,031,115  |           |  |  |   |    
|           |                   |                         |           |           |      |   |           |           |  |   |            |          
|           | Total Net Revenue |                         | $         | 6,455,544 |      |   | $         | 1,757,053 |  |   | $          | 4,698,491 |  |  |    | 267 | %
|           |                   |                         |           |           |      |   |           |           |  |   |            |          



Net Duraswitch Revenue.




Net FinePoint Revenue.


Cost of Goods Sold.


|           |            |                         |           |           |      |   |         |          |  |   |            |           |  |  |    |      |  
|---------- | ---------- | ----------------------- | --------- | --------- | ---- | - | ------- | -------- |  | - | ---------- | --------- |  |  | -- | ---- | -
|           |            | Year Ended December 31, |           |           |      |   |        
|           |            |                         |           |           |      |   |        
|           |            | 2005                    |           |           | 2004 |   |         | Increase |  |   | Increase % |          
|           |            |                         |           |           |      |   |         |          |  |   |            |          
|Duraswitch |            | $                       | 253,105   |           |      | $ | 187,547 |          |  | $ | 65,558     |           |  |  | 35 | %   
|FinePoint  |            |                         | 2,224,266 |           |      |   |        |          |  |   | 2,224,266  |           |  |  |   |     
|           |            |                         |           |           |      |   |         |          |  |   |            |          
|           | Total COGS |                         | $         | 2,477,371 |      |   | $       | 187,547  |  |   | $          | 2,289,824 |  |  |    | 1221 | %
|           |            |                         |           |           |      |   |         |          |  |   |            |          

21



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Duraswitch COGS.


FinePoint COGS.


Selling, General and Administrative Expenses.


|           |            |                         |           |           |      |   |           |           |  |   |            |         |  |  |    |    |  
|---------- | ---------- | ----------------------- | --------- | --------- | ---- | - | --------- | --------- |  | - | ---------- | ------- |  |  | -- | -- | -
|           |            | Year Ended December 31, |           |           |      |   |          
|           |            |                         |           |           |      |   |          
|           |            | 2005                    |           |           | 2004 |   |           | Increase  |  |   | Increase % |        
|           |            |                         |           |           |      |   |           |           |  |   |            |        
|Duraswitch |            | $                       | 710,610   |           |      | $ | 640,975   |           |  | $ | 69,635     |         |  |  | 11 | % 
|FinePoint  |            |                         | 326,475   |           |      |   |          |           |  |   | 326,475    |         |  |  |   |   
|Corporate  |            |                         | 1,683,815 |           |      |   | 1,266,059 |           |  |   | 417,756    |         |  |  | 33 | % 
|           |            |                         |           |           |      |   |           |           |  |   |            |        
|           | Total SG&A |                         | $         | 2,720,900 |      |   | $         | 1,907,034 |  |   | $          | 813,866 |  |  |    | 43 | %
|           |            |                         |           |           |      |   |           |           |  |   |            |        

Duraswitch SG&A.


FinePoint SG&A.


Corporate SG&A.


Research, Development and Commercial Application
Engineering Expenses.


|           |           |                         |         |         |          |   |         |            |  |   |             |         |  |  |    |    |  
|---------- | --------- | ----------------------- | ------- | ------- | -------- | - | ------- | ---------- |  | - | ----------- | ------- |  |  | -- | -- | -
|           |           | Year Ended December 31, |         |         |          |   |        
|           |           |                         |         |         | Increase |   |         | Increase   | 
|           |           | 2005                    |         |         | 2004     |   |         | (Decrease) |  |   | (Decrease)% |        
|           |           |                         |         |         |          |   |         |            |  |   |             |        
|Duraswitch |           | $                       | 431,265 |         |          | $ | 472,485 |            |  | $ | (41,220     | )       |  |  | (9 | )%
|FinePoint  |           |                         | 209,782 |         |          |   |        |            |  |   | 209,782     |         |  |  |   |   
|           |           |                         |         |         |          |   |         |            |  |   |             |        
|           | Total R&D |                         | $       | 641,047 |          |   | $       | 472,485    |  |   | $           | 168,562 |  |  |    | 36 | %
|           |           |                         |         |         |          |   |         |            |  |   |             |        

Duraswitch R&D.


FinePoint R&D.


Impairment Loss on Note Receivable.


22



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Interest and Other Income  Net.


Results of Operations for the Year Ended December 31,
2004 Compared to the Year Ended December 31, 2003


Net Revenue.






Cost of Goods Sold.


Selling, General and Administrative Expenses.


Research, Development and Commercial Application
Engineering Expenses.


23



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Loss from Operations.


Impairment Loss on Note Receivable.




Interest and Other Income-Net.


Net Loss.


Liquidity and Capital Resources










24



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New Accounting Pronouncements


Inventory Costs  An amendment of ARB 43,
Chapter 4.


Share-Based Payment. Accounting for Stock-Based Compensation,


Exchanges of Nonmonetary Assets-an amendment of APB Opinion
No. 29. Accounting for Nonmonetary Transactions,


Accounting Changes and Error Corrections, Accounting Changes, Reporting Accounting Changes in Interim Financial
Statements.


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|        |                     
|------- | --------------------
|Item 7. | Financial Statements

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM













| |                          
| | -------------------------
| | /s/ DELOITTE & TOUCHE LLP
| |                          
| | DELOITTE & TOUCHE LLP    




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INPLAY TECHNOLOGIES, INC.


CONSOLIDATED BALANCE SHEETS


December 31, 2005 and 2004


|                                               |                                                                                                                                                                                 |                             |            |             |           |   |           |             |           | 
|---------------------------------------------- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | --------------------------- | ---------- | ----------- | --------- | - | --------- | ----------- | --------- | 
|                                               |                                                                                                                                                                                 | 2005                        |            |             | 2004      |  
|                                               |                                                                                                                                                                                 |                             |            |             |           |  
|ASSETS                                        
|CURRENT ASSETS                                 |                                                                                                                                                                                 |                             |            |             |           |   |           |            
|                                               | Cash and cash equivalents                                                                                                                                                       |                             | $          | 4,022,734   |           |   | $         | 2,832,455   |          
|                                               | Restricted short-term investment                                                                                                                                                |                             |            | 400,000     |           |   |           |            |          
|                                               | Accounts receivable                                                                                                                                                             |                             |            | 1,460,169   |           |   |           | 48,601      |          
|                                               | Inventory (Note 5)                                                                                                                                                              |                             |            | 1,311,077   |           |   |           | 217,083     |          
|                                               | Prepaid expenses and other current assets                                                                                                                                       |                             |            | 87,071      |           |   |           | 83,470      |          
|                                               |                                                                                                                                                                                 |                             |            |             |           |  
|                                               |                                                                                                                                                                                 | Total current assets        |            |             | 7,281,051 |   |           |             | 3,181,609 | 
|PROPERTY AND EQUIPMENT  Net (Note 7)          |                                                                                                                                                                                 |                             | 557,145    |             |           |   | 198,589   |            
|GOODWILL                                       |                                                                                                                                                                                 |                             | 1,321,240  |             |           |   | 443,874   |            
|PATENTS  Net (Note 8)                         |                                                                                                                                                                                 |                             | 1,389,153  |             |           |   | 777,013   |            
|OTHER ASSETS (Note 6)                          |                                                                                                                                                                                 |                             | 19,299     |             |           |   | 66,297    |            
|                                               |                                                                                                                                                                                 |                             |            |             |           |  
|TOTAL                                          |                                                                                                                                                                                 | $                           | 10,567,888 |             |           | $ | 4,667,382 |            
|                                               |                                                                                                                                                                                 |                             |            |             |           |  
|                                              
|LIABILITIES AND STOCKHOLDERS EQUITY          
|CURRENT LIABILITIES                            |                                                                                                                                                                                 |                             |            |             |           |   |           |            
|                                               | Accounts payable                                                                                                                                                                |                             | $          | 1,496,780   |           |   | $         | 59,674      |          
|                                               | Accrued salaries and benefits                                                                                                                                                   |                             |            | 510,794     |           |   |           | 187,289     |          
|                                               | Other accrued expenses and other current liabilities
    (Note 6)                                                                                                               |                             |            | 539,786     |           |   |           | 242,045     |          
|                                               | Deferred licensing and other revenue (Note 9)                                                                                                                                   |                             |            | 82,879      |           |   |           | 485,254     |          
|                                               | Current portion of notes payable and capital leases payable
    (Note 10)                                                                                                       |                             |            | 165,914     |           |   |           |            |          
|                                               |                                                                                                                                                                                 |                             |            |             |           |  
|                                               |                                                                                                                                                                                 | Total current liabilities   |            |             | 2,796,153 |   |           |             | 974,262   | 
|                                               |                                                                                                                                                                                 |                             |            |             |           |  
|LONG-TERM LIABILITIES                          |                                                                                                                                                                                 |                             |            |             |           |   |           |            
|                                               | Other non-current liabilities                                                                                                                                                   |                             |            | 11,465      |           |   |           | 18,486      |          
|                                               | Deferred licensing  long-term (Note 9)                                                                                                                                         |                             |            |            |           |   |           | 546,257     |          
|                                               |                                                                                                                                                                                 |                             |            |             |           |  
|                                               |                                                                                                                                                                                 | Total long-term liabilities |            |             | 11,465    |   |           |             | 564,743   | 
|                                               |                                                                                                                                                                                 |                             |            |             |           |  
|                                               |                                                                                                                                                                                 | Total liabilities           |            |             | 2,807,618 |   |           |             | 1,539,005 | 
|                                               |                                                                                                                                                                                 |                             |            |             |           |  
|COMMITMENTS AND CONTINGENCIES (Notes 4 and 17) |                                                                                                                                                                                 |                             |            |             |           |   |           |            
|STOCKHOLDERS EQUITY (Notes 11 and 12)         |                                                                                                                                                                                 |                             |            |             |           |   |           |            
|                                               | Preferred stock, no par value, 10,000,000 shares
    authorized, no shares issued and outstanding in 2005 and 2004                                                              |                             |            |            |           |   |           |            |          
|                                               | Common stock, $.001 par value, 40,000,000 shares
    authorized in 2005 and 2004, 11,481,512 and
    9,614,673 shares issued and outstanding in 2005 and 2004,
    respectively |                             |            | 11,482      |           |   |           | 9,615       |          
|                                               | Additional paid-in capital                                                                                                                                                      |                             |            | 31,373,292  |           |   |           | 27,410,916  |          
|                                               | Accumulated deficit                                                                                                                                                             |                             |            | (23,624,504 | )         |   |           | (24,292,154 | )        
|                                               |                                                                                                                                                                                 |                             |            |             |           |  
|                                               |                                                                                                                                                                                 | Total stockholders equity  |            |             | 7,760,270 |   |           |             | 3,128,377 | 
|                                               |                                                                                                                                                                                 |                             |            |             |           |  
|TOTAL                                          |                                                                                                                                                                                 | $                           | 10,567,888 |             |           | $ | 4,667,382 |            
|                                               |                                                                                                                                                                                 |                             |            |             |           |  



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INPLAY TECHNOLOGIES, INC.


CONSOLIDATED STATEMENTS OF OPERATIONS


Years Ended December 31, 2005, 2004 and 2003


|                                             |                                                              |                          |              |           |           |           |            |           |           |           |            |           |           |         | 
|-------------------------------------------- | ------------------------------------------------------------ | ------------------------ | ------------ | --------- | --------- | --------- | ---------- | --------- | --------- | --------- | ---------- | --------- | --------- | ------- | 
|                                             |                                                              | 2005                     |              |           | 2004      |           |            | 2003      |          
|                                             |                                                              |                          |              |           |           |           |            |           |          
|NET REVENUE:                                 |                                                              |                          |              |           |           |           |            |           |           |           |            |          
|                                             | Duraswitch related party  Delphi (Note 9)                   |                          | $            | 2,955,118 |           |           | $          | 1,407,978 |           |           | $          | 409,753   |          
|                                             | Duraswitch non-related parties                               |                          |              | 469,311   |           |           |            | 349,075   |           |           |            | 350,159   |          
|                                             | FinePoint                                                    |                          |              | 3,031,115 |           |           |            |          |           |           |            |          |          
|                                             |                                                              |                          |              |           |           |           |            |           |          
|                                             |                                                              | Total net revenue        |              |           | 6,455,544 |           |            |           | 1,757,053 |           |            |           | 759,912   |        
|COST OF GOODS SOLD:                          |                                                              |                          |              |           |           |           |            |           |           |           |            |          
|                                             | Duraswitch                                                   |                          |              | 253,105   |           |           |            | 187,547   |           |           |            | 103,304   |          
|                                             | FinePoint                                                    |                          |              | 2,224,266 |           |           |            |          |           |           |            |          |          
|                                             |                                                              |                          |              |           |           |           |            |           |          
|                                             |                                                              | Total cost of goods sold |              |           | 2,477,371 |           |            |           | 187,547   |           |            |           | 103,304   |        
|                                             |                                                              |                          |              |           |           |           |            |           |          
|                                             |                                                              |                          | Gross profit |           |           | 3,978,173 |            |           |           | 1,569,506 |            |           |           | 656,608 | 
|                                             |                                                              |                          |              |           |           |           |            |           |          
|OPERATING EXPENSES:                          |                                                              |                          |              |           |           |           |            |           |           |           |            |          
|                                             | Selling, general and administrative                          |                          |              | 2,720,900 |           |           |            | 1,907,034 |           |           |            | 2,299,750 |          
|                                             | Research, development and commercial application engineering |                          |              | 641,047   |           |           |            | 472,485   |           |           |            | 917,610   |          
|                                             |                                                              |                          |              |           |           |           |            |           |          
|                                             |                                                              | Total operating expenses |              |           | 3,361,947 |           |            |           | 2,379,519 |           |            |           | 3,217,360 |        
|                                             |                                                              |                          |              |           |           |           |            |           |          
|INCOME (LOSS) FROM OPERATIONS                |                                                              |                          | 616,226      |           |           |           | (810,013   | )         |           |           | (2,560,752 | )        
|OTHER INCOME (EXPENSE):                      |                                                              |                          |              |           |           |           |            |           |           |           |            |          
|                                             | Impairment loss on note receivable (Note 6)                  |                          |              |          |           |           |            | (500,000  | )         |           |            |          |          
|                                             | Interest and other income  net                              |                          |              | 51,424    |           |           |            | 37,935    |           |           |            | 10,191    |          
|                                             |                                                              |                          |              |           |           |           |            |           |          
|NET INCOME (LOSS)                            |                                                              | $                        | 667,650      |           |           | $         | (1,272,078 | )         |           | $         | (2,550,561 | )        
|                                             |                                                              |                          |              |           |           |           |            |           |          
|NET INCOME (LOSS) PER COMMON SHARE,          |                                                              |                          |              |           |           |           |            |           |           |           |            |          
|                                             | BASIC                                                        |                          | $            | 0.07      |           |           | $          | (0.13     | )         |           | $          | (0.27     | )        
|                                             |                                                              |                          |              |           |           |           |            |           |          
|NET INCOME (LOSS) PER COMMON SHARE, DILUTED  |                                                              | $                        | 0.07         |           |           | $         | (0.13      | )         |           | $         | (0.27      | )        
|                                             |                                                              |                          |              |           |           |           |            |           |          
|WEIGHTED AVERAGE SHARES OUTSTANDING, BASIC   |                                                              |                          | 9,823,637    |           |           |           | 9,603,717  |           |           |           | 9,591,090  |          
|                                             |                                                              |                          |              |           |           |           |            |           |          
|WEIGHTED AVERAGE SHARES OUTSTANDING, DILUTED |                                                              |                          | 9,903,485    |           |           |           | 9,603,717  |           |           |           | 9,591,090  |          
|                                             |                                                              |                          |              |           |           |           |            |           |          



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INPLAY TECHNOLOGIES, INC.


CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY


Years Ended December 31, 2005, 2004 and 2003


|                           |                                                |              |            |           |            |   |        |             |  |   |            |           |  |       |             |            |   |   |           |            |  
|-------------------------- | ---------------------------------------------- | ------------ | ---------- | --------- | ---------- | - | ------ | ----------- |  | - | ---------- | --------- |  | ----- | ----------- | ---------- | - | - | --------- | ---------- | -
|                           |                                                | Common Stock |            |           | Additional |   |        |             |  |  
|                           |                                                |              |            |           | Paid-In    |   |        | Accumulated |  |   |           
|                           |                                                | Shares       |            |           | Amount     |   |        | Capital     |  |   | Deficit    |           |  | Total |            
|                           |                                                |              |            |           |            |   |        |             |  |   |            |           |  |       |            
|BALANCE, DECEMBER 31, 2002 |                                                |              | 9,534,195  |           |            | $ | 9,534  |             |  | $ | 27,317,314 |           |  | $     | (20,469,515 | )          |   | $ | 6,857,333 |           
|                           | Employee stock options exercised               |              |            | 22,696    |            |   |        | 23          |  |   |            | 26,200    |  |       |             |           |   |   |           | 26,223     |  
|                           | Issuance of stock for services                 |              |            | 34,782    |            |   |        | 35          |  |   |            | 39,965    |  |       |             |           |   |   |           | 40,000     |  
|                           | Net loss                                       |              |            |          |            |   |        |            |  |   |            |          |  |       |             | (2,550,561 | ) |   |           | (2,550,561 | )
|                           |                                                |              |            |           |            |   |        |             |  |   |            |           |  |       |            
|BALANCE, DECEMBER 31, 2003 |                                                |              | 9,591,673  |           |            |   | 9,592  |             |  |   | 27,383,479 |           |  |       | (23,020,076 | )          |   |   | 4,372,995 |           
|                           | Employee stock options exercised               |              |            | 23,000    |            |   |        | 23          |  |   |            | 27,437    |  |       |             |           |   |   |           | 27,460     |  
|                           | Net loss                                       |              |            |          |            |   |        |            |  |   |            |          |  |       |             | (1,272,078 | ) |   |           | (1,272,078 | )
|                           |                                                |              |            |           |            |   |        |             |  |   |            |           |  |       |            
|BALANCE, DECEMBER 31, 2004 |                                                |              | 9,614,673  |           |            |   | 9,615  |             |  |   | 27,410,916 |           |  |       | (24,292,154 | )          |   |   | 3,128,377 |           
|                           | Shares issued for acquisition of FinePoint     |              |            | 567,611   |            |   |        | 567         |  |   |            | 799,764   |  |       |             |           |   |   |           | 800,331    |  
|                           | Shares and warrants issued in private offering |              |            | 1,272,728 |            |   |        | 1,273       |  |   |            | 3,132,468 |  |       |             |           |   |   |           | 3,133,741  |  
|                           | Employee stock options exercised               |              |            | 26,500    |            |   |        | 27          |  |   |            | 30,144    |  |       |             |           |   |   |           | 30,171     |  
|                           | Net income                                     |              |            |          |            |   |        |            |  |   |            |          |  |       |             | 667,650    |   |   |           | 667,650    |  
|                           |                                                |              |            |           |            |   |        |             |  |   |            |           |  |       |            
|BALANCE, DECEMBER 31, 2005 |                                                |              | 11,481,512 |           |            | $ | 11,482 |             |  | $ | 31,373,292 |           |  | $     | (23,624,504 | )          |   | $ | 7,760,270 |           
|                           |                                                |              |            |           |            |   |        |             |  |   |            |           |  |       |            



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INPLAY TECHNOLOGIES, INC.


CONSOLIDATED STATEMENTS OF CASH FLOWS


Years Ended December 31, 2005, 2004 and 2003


|                                                 |                                                                                 |                                                                                             |                                                                                                  |                                                      |                                       |         |            |            |   |         |            |            |   |         |          |            |  
|------------------------------------------------ | ------------------------------------------------------------------------------- | ------------------------------------------------------------------------------------------- | ------------------------------------------------------------------------------------------------ | ---------------------------------------------------- | ------------------------------------- | ------- | ---------- | ---------- | - | ------- | ---------- | ---------- | - | ------- | -------- | ---------- | -
|                                                 |                                                                                 | 2005                                                                                        |                                                                                                  |                                                      | 2004                                  |         |            | 2003       |  
|                                                 |                                                                                 |                                                                                             |                                                                                                  |                                                      |                                       |         |            |            |  
|CASH FLOWS FROM OPERATING ACTIVITIES:            |                                                                                 |                                                                                             |                                                                                                  |                                                      |                                       |         |            |            |   |         |            |           
|                                                 | Net income (loss)                                                               |                                                                                             | $                                                                                                | 667,650                                              |                                       |         | $          | (1,272,078 | ) |         | $          | (2,550,561 | )
|                                                 | Adjustments to reconcile net loss to net cash used in operating
    activities: |                                                                                             |                                                                                                  |                                                      |                                       |         |            |            |   |         |            |            |  
|                                                 |                                                                                 |                                                                                             | Depreciation and amortization                                                                    |                                                      |                                       | 282,879 |            |            |   | 214,535 |            |            |   | 421,779 |         
|                                                 |                                                                                 |                                                                                             | Impairment loss on note receivable                                                               |                                                      |                                       |        |            |            |   | 500,000 |            |            |   |        |         
|                                                 |                                                                                 |                                                                                             | Issuance of stock for services                                                                   |                                                      |                                       |        |            |            |   |        |            |            |   | 40,000  |         
|                                                 |                                                                                 |                                                                                             | (Gain) loss on disposal of equipment                                                             |                                                      |                                       |        |            |            |   | (12,335 | )          |            |   | 8,932   |         
|                                                 |                                                                                 |                                                                                             | Write down of inventory                                                                          |                                                      |                                       | 31,000  |            |            |   |        |            |            |   | 22,000  |         
|                                                 |                                                                                 |                                                                                             | Changes in operating assets and liabilities; net of assets
    acquired and liabilities assumed: |                                                      |                                       |         |            |            |   |         |            |            |   |         |         
|                                                 |                                                                                 |                                                                                             |                                                                                                  | Accounts receivable                                  |                                       |         | (1,347,081 | )          |   |         | 1,162      |            |   |         | (38,572  | )         
|                                                 |                                                                                 |                                                                                             |                                                                                                  | Inventory                                            |                                       |         | (582,935   | )          |   |         | (45,561    | )          |   |         | (607     | )         
|                                                 |                                                                                 |                                                                                             |                                                                                                  | Prepaid expenses and other current assets            |                                       |         | 16,894     |            |   |         | 43,914     |            |   |         | 61,874   |           
|                                                 |                                                                                 |                                                                                             |                                                                                                  | Other assets                                         |                                       |         |           |            |   |         | (1,224     | )          |   |         |         |           
|                                                 |                                                                                 |                                                                                             |                                                                                                  | Accounts payable                                     |                                       |         | 1,016,187  |            |   |         | (13,778    | )          |   |         | 49,519   |           
|                                                 |                                                                                 |                                                                                             |                                                                                                  | Accrued salaries and benefits                        |                                       |         | 275,374    |            |   |         | 24,472     |            |   |         | (337,596 | )         
|                                                 |                                                                                 |                                                                                             |                                                                                                  | Other accrued expenses and other current liabilities |                                       |         | 55,635     |            |   |         | (32,424    | )          |   |         | (67,504  | )         
|                                                 |                                                                                 |                                                                                             |                                                                                                  | Other non-current liabilities                        |                                       |         | (7,021     | )          |   |         | (11,201    | )          |   |         | (7,063   | )         
|                                                 |                                                                                 |                                                                                             |                                                                                                  | Deferred licensing revenue                           |                                       |         | (993,212   | )          |   |         | (400,160   | )          |   |         | (393,733 | )         
|                                                 |                                                                                 |                                                                                             |                                                                                                  |                                                      |                                       |         |            |            |  
|                                                 |                                                                                 |                                                                                             |                                                                                                  |                                                      | Net cash used in operating activities |         |            | (584,630   | ) |         |            | (1,004,678 | ) |         |          | (2,791,532 | )
|                                                 |                                                                                 |                                                                                             |                                                                                                  |                                                      |                                       |         |            |            |  
|CASH FLOWS FROM INVESTING ACTIVITIES:            |                                                                                 |                                                                                             |                                                                                                  |                                                      |                                       |         |            |            |   |         |            |           
|                                                 | Acquisition of FinePoint                                                        |                                                                                             |                                                                                                  | (527,347                                             | )                                     |         |            |           |   |         |            |           |  
|                                                 | Purchase of restricted short-term investment                                    |                                                                                             |                                                                                                  | (400,000                                             | )                                     |         |            |           |   |         |            |           |  
|                                                 | Funding of note receivable                                                      |                                                                                             |                                                                                                  | (110,000                                             | )                                     |         |            | (390,000   | ) |         |            |           |  
|                                                 | Increase in patents                                                             |                                                                                             |                                                                                                  | (38,803                                              | )                                     |         |            | (35,619    | ) |         |            | (90,255    | )
|                                                 | Proceeds from sale of equipment                                                 |                                                                                             |                                                                                                  |                                                     |                                       |         |            | 17,549     |   |         |            | 137,230    |  
|                                                 | Purchases of property and equipment                                             |                                                                                             |                                                                                                  | (109,099                                             | )                                     |         |            | (31,022    | ) |         |            | (43,537    | )
|                                                 |                                                                                 |                                                                                             |                                                                                                  |                                                      |                                       |         |            |            |  
|                                                 |                                                                                 |                                                                                             |                                                                                                  | Net cash (used in) provided by investing activities  |                                       |         | (1,185,249 | )          |   |         | (439,092   | )          |   |         | 3,438    |           
|                                                 |                                                                                 |                                                                                             |                                                                                                  |                                                      |                                       |         |            |            |  
|CASH FLOWS FROM FINANCING ACTIVITIES:            |                                                                                 |                                                                                             |                                                                                                  |                                                      |                                       |         |            |            |   |         |            |           
|                                                 | Net proceeds from issuance of stock                                             |                                                                                             |                                                                                                  | 3,196,007                                            |                                       |         |            |           |   |         |            |           |  
|                                                 | Net proceeds from exercise of employee stock options                            |                                                                                             |                                                                                                  | 30,171                                               |                                       |         |            | 27,460     |   |         |            | 26,223     |  
|                                                 | Principal payments on capital leases and notes payable                          |                                                                                             |                                                                                                  | (266,020                                             | )                                     |         |            | (8,213     | ) |         |            | (18,110    | )
|                                                 |                                                                                 |                                                                                             |                                                                                                  |                                                      |                                       |         |            |            |  
|                                                 |                                                                                 |                                                                                             |                                                                                                  | Net cash provided by financing activities            |                                       |         | 2,960,158  |            |   |         | 19,247     |            |   |         | 8,113    |           
|                                                 |                                                                                 |                                                                                             |                                                                                                  |                                                      |                                       |         |            |            |  
|INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS |                                                                                 |                                                                                             | 1,190,279                                                                                        |                                                      |                                       |         | (1,424,523 | )          |   |         | (2,779,981 | )         
|CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR     |                                                                                 |                                                                                             | 2,832,455                                                                                        |                                                      |                                       |         | 4,256,978  |            |   |         | 7,036,959  |           
|                                                 |                                                                                 |                                                                                             |                                                                                                  |                                                      |                                       |         |            |            |  
|CASH AND CASH EQUIVALENTS, END OF YEAR           |                                                                                 | $                                                                                           | 4,022,734                                                                                        |                                                      |                                       | $       | 2,832,455  |            |   | $       | 4,256,978  |           
|                                                 |                                                                                 |                                                                                             |                                                                                                  |                                                      |                                       |         |            |            |  
|SUPPLEMENTAL DISCLOSURE OF NONCASH ACTIVITIES:   |                                                                                 |                                                                                             |                                                                                                  |                                                      |                                       |         |            |            |   |         |            |           
|                                                 | Fair value of FinePoint Innovations, Inc. assets acquired                       |                                                                                             | $                                                                                                | 2,824,282                                            |                                       |         |            |            |   |         |            |            |  
|                                                 | Less consideration given:                                                       |                                                                                             |                                                                                                  |                                                      |                                       |         |            |            |   |         |            |            |  
|                                                 |                                                                                 | Cash advances converted into FinePoint Innovations, Inc. equity                             |                                                                                                  |                                                      | 161,937                               |         |            |            |   |         |            |            |   |        
|                                                 |                                                                                 | Cash paid at closing in settlement of certain assumed
    liabilities, net of cash acquired |                                                                                                  |                                                      | 309,761                               |         |            |            |   |         |            |            |   |        
|                                                 |                                                                                 | Acquisition costs                                                                           |                                                                                                  |                                                      | 169,522                               |         |            |            |   |         |            |            |   |        
|                                                 |                                                                                 | Unregistered common stock issued                                                            |                                                                                                  |                                                      | 800,331                               |         |            |            |   |         |            |            |   |        
|                                                 |                                                                                 | Reversal of valuation allowance on the Companys deferred
    tax assets                    |                                                                                                  |                                                      | (81,072                               | )       |            |            |   |         |            |            |   |        
|                                                 |                                                                                 |                                                                                             |                                                                                                  |                                                      |                                       |         |            |            |  
|                                                 | Liabilities assumed, net of payments                                            |                                                                                             | $                                                                                                | 1,463,803                                            |                                       |         |            |            |   |         |            |            |  
|                                                 |                                                                                 |                                                                                             |                                                                                                  |                                                      |                                       |         |            |            |  
|                                                 | Cash paid for interest                                                          |                                                                                             | $                                                                                                | 11,651                                               |                                       |         | $          | 555        |   |         | $          | 2,714      |  
|                                                 | Fees accrued in connection with the issuance of stock                           |                                                                                             | $                                                                                                | 62,266                                               |                                       |         |            |            |   |         |            |            |  



31



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##### Table of Contents



INPLAY TECHNOLOGIES, INC.


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


For the Years Ended December 31,


2005, 2004, and 2003




|   |                   
|-- | ------------------
|1. | NATURE OF BUSINESS

® ®








|   |                                             
|-- | --------------------------------------------
|2. | SUMMARY OF SIGNIFICANT ACCOUNTING PRINCIPLES



Principles of Consolidation.


Cash Equivalents.


Inventory. (first-in,


Property and Equipment.


|                              |  |  |              | 
|----------------------------- |  |  | ------------ | 
|Computer software             |  |  | 3 years      | 
|Computer equipment            |  |  | 3 to 5 years | 
|Tooling                       |  |  | 5 to 7 years | 
|Other machinery and equipment |  |  | 5 years      | 
|Office furniture and fixtures |  |  | 7 years      | 



Patents.


32



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##### Table of Contents



INPLAY TECHNOLOGIES, INC.


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


For the Years Ended December 31,


2005, 2004, and 2003  (Continued)


Goodwill.


Revenue Recognition.






Stock-Based Compensation. Accounting for Stock-Based
Compensation, Accounting for Stock Issued to Employees,


33



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##### Table of Contents



INPLAY TECHNOLOGIES, INC.


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


For the Years Ended December 31,


2005, 2004, and 2003  (Continued)




|                                                                                                                    |                                |                         |          |      |      |   |            |       |   |   |            |       |  
|------------------------------------------------------------------------------------------------------------------- | ------------------------------ | ----------------------- | -------- | ---- | ---- | - | ---------- | ----- | - | - | ---------- | ----- | -
|                                                                                                                    |                                | Year Ended December 31, |         
|                                                                                                                    |                                |                         |         
|                                                                                                                    |                                | 2005                    |          |      | 2004 |   |            | 2003  |  
|                                                                                                                    |                                |                         |          |      |      |   |            |       |  
|Net income (loss), as reported                                                                                      |                                | $                       | 667,650  |      |      | $ | (1,272,078 | )     |   | $ | (2,550,561 | )    
|Less: Total stock-based employee expense determined under fair
    value based method for all awards, no tax effect |                                |                         | (463,690 | )    |      |   | (147,953   | )     |   |   | (234,265   | )    
|                                                                                                                    |                                |                         |          |      |      |   |            |       |  
|Pro forma net income (loss)                                                                                         |                                | $                       | 203,960  |      |      | $ | (1,420,031 | )     |   | $ | (2,784,826 | )    
|                                                                                                                    |                                |                         |          |      |      |   |            |       |  
|Income (loss) per share:                                                                                            |                                |                         |          |      |      |   |            |       |   |   |            |      
|                                                                                                                    | Basic and diluted, as reported |                         | $        | 0.07 |      |   | $          | (0.13 | ) |   | $          | (0.27 | )
|                                                                                                                    |                                |                         |          |      |      |   |            |       |  
|                                                                                                                    | Basic and diluted, pro forma   |                         | $        | 0.02 |      |   | $          | (0.15 | ) |   | $          | (0.29 | )
|                                                                                                                    |                                |                         |          |      |      |   |            |       |  

Income Taxes.


Income (Loss) Per Common Share.


|                                                    |  |      |           | 
|--------------------------------------------------- |  | ---- | --------- | 
|                                                    |  | 2005 |          
|                                                    |  |      |          
|Weighted average shares outstanding  Basic         |  |      | 9,823,637 | 
|Effect of dilutive stock options                    |  |      | 79,848    | 
|                                                    |  |      |          
|Weighted average shares outstanding  Fully diluted |  |      | 9,903,485 | 
|                                                    |  |      |          

Impairment of Long-Lived Assets and Long-Lived Assets to be
Disposed of.




34



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##### Table of Contents



INPLAY TECHNOLOGIES, INC.


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


For the Years Ended December 31,


2005, 2004, and 2003  (Continued)




New Accounting Pronouncements. Inventory Costs  An
amendment of ARB 43, Chapter 4.


Share-Based Payment. Accounting for Stock-Based
Compensation,


Exchanges of Nonmonetary Assets-an amendment of APB Opinion
No. 29. Accounting for Nonmonetary Transactions,


Accounting Changes and Error Corrections, Accounting Changes, Reporting Accounting Changes in Interim Financial
Statements.


Fair Value of Financial Instruments.


35



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##### Table of Contents



INPLAY TECHNOLOGIES, INC.


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


For the Years Ended December 31,


2005, 2004, and 2003  (Continued)


Use of Estimates.




|   |                                           
|-- | ------------------------------------------
|3. | ACQUISITION OF FINEPOINT INNOVATIONS, INC.







36



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##### Table of Contents



INPLAY TECHNOLOGIES, INC.


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


For the Years Ended December 31,


2005, 2004, and 2003  (Continued)




|                                   |                                            |                       |           |           | 
|---------------------------------- | ------------------------------------------ | --------------------- | --------- | --------- | 
|                                   |                                            | FinePoint Innovations |          
|                                   |                                            | at September 1, 2005  |          
|                                   |                                            |                       |          
|Current assets                     |                                            | $                     | 636,103   |          
|Deferred tax asset                 |                                            |                       | 261,200   |          
|Property, plant and equipment      |                                            |                       | 391,005   |          
|Patents                            |                                            |                       | 650,000   |          
|Goodwill                           |                                            |                       | 877,366   |          
|Other non current assets           |                                            |                       | 8,608     |          
|                                   |                                            |                       |          
|                                   | Total assets acquired                      |                       |           | 2,824,282 | 
|                                   |                                            |                       |          
|Current liabilities                |                                            |                       | 1,115,848 |          
|Deferred tax liability             |                                            |                       | 342,272   |          
|Long-term portion of capital lease |                                            |                       | 5,683     |          
|                                   |                                            |                       |          
|                                   | Total liabilities assumed, net of payments |                       |           | 1,463,803 | 
|                                   |                                            |                       |          
|                                   | Net assets acquired                        |                       | $         | 1,360,479 | 
|                                   |                                            |                       |          







|                                           |  |                     |           |  |                     |   |            |  
|------------------------------------------ |  | ------------------- | --------- |  | ------------------- | - | ---------- | -
|                                           |  | Twelve Months Ended |           |  | Twelve Months Ended |  
|                                           |  | December 31, 2005   |           |  | December 31, 2004   |  
|                                           |  |                     |           |  |                     |  
|Revenue                                    |  | $                   | 6,758,919 |  |                     | $ | 2,901,763  |  
|                                           |  |                     |           |  |                     |  
|Net income (loss)                          |  | $                   | 2,907     |  |                     | $ | (1,611,411 | )
|                                           |  |                     |           |  |                     |  
|Income (loss) per share, basic and diluted |  | $                   | 0.00      |  |                     | $ | (0.16      | )
|                                           |  |                     |           |  |                     |  



|   |               
|-- | --------------
|4. | CONCENTRATIONS



37



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##### Table of Contents



INPLAY TECHNOLOGIES, INC.


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


For the Years Ended December 31,


2005, 2004, and 2003  (Continued)








|   |          
|-- | ---------
|5. | INVENTORY





|               |  |      |           |  |      |   |         | 
|-------------- |  | ---- | --------- |  | ---- | - | ------- | 
|               |  | 2005 |           |  | 2004 |  
|               |  |      |           |  |      |  
|Raw materials  |  | $    | 705,602   |  |      | $ | 217,083 | 
|Finished goods |  |      | 605,475   |  |      |   |        | 
|               |  |      |           |  |      |  
|Inventory      |  | $    | 1,311,077 |  |      | $ | 217,083 | 
|               |  |      |           |  |      |  



|   |                                                           
|-- | ----------------------------------------------------------
|6. | NOTE RECEIVABLE FROM ACTIVE RECOGNITION TECHNOLOGIES, INC.









38



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##### Table of Contents



INPLAY TECHNOLOGIES, INC.


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


For the Years Ended December 31,


2005, 2004, and 2003  (Continued)




|   |                       
|-- | ----------------------
|7. | PROPERTY AND EQUIPMENT



|                                |  |      |           |   |      |   |          |  
|------------------------------- |  | ---- | --------- | - | ---- | - | -------- | -
|                                |  | 2005 |           |   | 2004 |  
|                                |  |      |           |   |      |  
|Computer equipment and software |  | $    | 720,978   |   |      | $ | 443,495  |  
|Tooling                         |  |      | 310,121   |   |      |   | 120,228  |  
|Other machinery and equipment   |  |      | 219,555   |   |      |   | 208,613  |  
|Leasehold improvements          |  |      | 133,743   |   |      |   | 133,743  |  
|Office furniture and fixtures   |  |      | 90,514    |   |      |   | 71,377   |  
|                                |  |      |           |   |      |  
|Total                           |  |      | 1,474,911 |   |      |   | 977,456  |  
|Accumulated depreciation        |  |      | (917,766  | ) |      |   | (778,867 | )
|                                |  |      |           |   |      |  
|Property and equipment  net    |  | $    | 557,145   |   |      | $ | 198,589  |  
|                                |  |      |           |   |      |  





|   |        
|-- | -------
|8. | PATENTS





|                         |  |      |           |   |      |   |           |  
|------------------------ |  | ---- | --------- | - | ---- | - | --------- | -
|                         |  | 2005 |           |   | 2004 |  
|                         |  |      |           |   |      |  
|Patents                  |  | $    | 1,699,474 |   |      | $ | 1,010,671 |  
|Accumulated amortization |  |      | (310,321  | ) |      |   | (233,658  | )
|                         |  |      |           |   |      |  
|Patents  net            |  | $    | 1,389,153 |   |      | $ | 777,013   |  
|                         |  |      |           |   |      |  



|   |                           
|-- | --------------------------
|9. | DEFERRED LICENSING REVENUE





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##### Table of Contents



INPLAY TECHNOLOGIES, INC.


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


For the Years Ended December 31,


2005, 2004, and 2003  (Continued)






|    |                                 
|--- | --------------------------------
|10. | NOTES PAYABLE AND CAPITAL LEASES



|                                                                                                                                                                              |  |                   |         | 
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ----------------- | ------- | 
|                                                                                                                                                                              |  | December 31, 2005 |        
|                                                                                                                                                                              |  |                   |        
|Note payable to former shareholder of FinePoint, interest at
    5% per annum, due and paid in January 2006                                                                   |  | $                 | 107,867 | 
|Note payable to former shareholder of FinePoint, interest at
    8% per annum, due on a quarterly quarterly basis from
    FinePoint cash flow, but no later than August 2009 |  |                   | 45,810  | 
|Note payable to bank, interest at 7.5% per annum, due
    January 2006                                                                                                        |  |                   | 3,131   | 
|                                                                                                                                                                              |  |                   |        
|Total                                                                                                                                                                         |  |                   | 156,808 | 
|Less current portion                                                                                                                                                          |  |                   | 156,808 | 
|                                                                                                                                                                              |  |                   |        
|Long-term notes payable                                                                                                                                                       |  | $                 |        | 
|                                                                                                                                                                              |  |                   |        



|                                                   |  |   |        | 
|-------------------------------------------------- |  | - | ------ | 
|Lease payments due in 2006                         |  | $ | 10,536 | 
|Less interest at 12.5%                             |  |   | 1,430  | 
|                                                   |  |   |       
|Present value of minimum capital lease obligations |  |   | 9,106  | 
|Less current portion of capital lease obligations  |  |   | 9,106  | 
|                                                   |  |   |       
|Long-term portion of capital lease obligations     |  | $ |       | 
|                                                   |  |   |       



|    |                     
|--- | --------------------
|11. | STOCKHOLDERS EQUITY

Common Stock.


Preferred Stock.


40



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##### Table of Contents



INPLAY TECHNOLOGIES, INC.


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


For the Years Ended December 31,


2005, 2004, and 2003  (Continued)


Warrants.








|                           |  |          |          |   |             |   |            | 
|-------------------------- |  | -------- | -------- | - | ----------- | - | ---------- | 
|                           |  | Warrants |          |   | Price Range |  
|                           |  |          |          |   |             |  
|Balance, December 31, 2002 |  |          | 472,059  |   |             | $ | 3.19-$8.25 | 
|Issued                     |  |          |         |   |             |   |            | 
|Exercised                  |  |          | (47,059  | ) |             | $ | 3.19       | 
|                           |  |          |          |   |             |  
|Balance, December 31, 2003 |  |          | 425,000  |   |             | $ | 7.00-$8.25 | 
|Issued                     |  |          |         |   |             |   |            | 
|Exercised                  |  |          |         |   |             |   |            | 
|Expired                    |  |          | (425,000 | ) |             | $ | 7.00-$8.25 | 
|                           |  |          |          |   |             |  
|Balance, December 31, 2004 |  |          |         |   |             |   |            | 
|Issued                     |  |          | 509,091  |   |             | $ | 3.44-$4.22 | 
|Exercised                  |  |          |         |   |             |   |            | 
|Expired                    |  |          |         |   |             |   |            | 
|                           |  |          |          |   |             |  
|Balance, December 31, 2005 |  |          | 509,091  |   |             | $ | 3.44-$4.22 | 
|                           |  |          |          |   |             |  



|    |                   
|--- | ------------------
|12. | STOCK OPTION PLANS







41



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##### Table of Contents



INPLAY TECHNOLOGIES, INC.


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


For the Years Ended December 31,


2005, 2004, and 2003  (Continued)






Accounting for Stock-Based Compensation.


Accounting for Stock Issued to Employees.








|                           |  |        |           |          |          |   |      | 
|-------------------------- |  | ------ | --------- | -------- | -------- | - | ---- | 
|                           |  |        |           | Weighted |         
|                           |  |        |           | Average  |         
|                           |  | Option |           |          | Exercise |  
|                           |  | Shares |           |          | Price    |  
|                           |  |        |           |          |          |  
|Balance, December 31, 2002 |  |        | 1,072,699 |          |          | $ | 9.61 | 
|Granted                    |  |        | 156,500   |          |          | $ | 1.86 | 
|Exercised                  |  |        | (22,696   | )        |          | $ | 1.16 | 
|Expired or terminated      |  |        | (164,063  | )        |          | $ | 7.19 | 
|                           |  |        |           |          |          |  
|Balance, December 31, 2003 |  |        | 1,042,440 |          |          | $ | 9.02 | 
|Granted                    |  |        | 85,000    |          |          | $ | 2.14 | 
|Exercised                  |  |        | (23,000   | )        |          | $ | 1.19 | 
|Expired or terminated      |  |        | (73,484   | )        |          | $ | 9.17 | 
|                           |  |        |           |          |          |  
|Balance, December 31, 2004 |  |        | 1,030,956 |          |          | $ | 8.61 | 
|Granted                    |  |        | 354,600   |          |          | $ | 2.36 | 
|Exercised                  |  |        | (26,500   | )        |          | $ | 1.14 | 
|Expired or terminated      |  |        | (8,000    | )        |          | $ | 1.60 | 
|                           |  |        |           |          |          |  
|Balance, December 31, 2005 |  |        | 1,351,056 |          |          | $ | 7.16 | 
|                           |  |        |           |          |          |  

42



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##### Table of Contents



INPLAY TECHNOLOGIES, INC.


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


For the Years Ended December 31,


2005, 2004, and 2003  (Continued)


|                                                               |  |      |           |  |      |   |           |      |  |   |         | 
|-------------------------------------------------------------- |  | ---- | --------- |  | ---- | - | --------- | ---- |  | - | ------- | 
|                                                               |  | 2005 |           |  | 2004 |   |           | 2003 | 
|                                                               |  |      |           |  |      |   |           |      | 
|Exercisable at the end of the year                             |  |      | 1,351,056 |  |      |   | 1,030,956 |      |  |   | 990,940 | 
|                                                               |  |      |           |  |      |   |           |      | 
|Weighted average fair value of options granted during the year |  | $    | 1.33      |  |      | $ | 1.18      |      |  | $ | 0.99    | 
|                                                               |  |      |           |  |      |   |           |      | 



|                        |  |                                     |           |           |             |  |          |          |  |   |       | 
|----------------------- |  | ----------------------------------- | --------- | --------- | ----------- |  | -------- | -------- |  | - | ----- | 
|                        |  | Options Outstanding and Exercisable |          
|                        |  |                                     |          
|                        |  |                                     |           | Weighted  |             |  |         
|                        |  |                                     |           | Average   |             |  | Weighted |         
|                        |  |                                     |           | Remaining |             |  | Average  |         
|                        |  | Options                             |           |           | Contractual |  |          | Exercise | 
|Range of Exercise Price |  | Outstanding                         |           |           | Life        |  |          | Price    | 
|                        |  |                                     |           |           |             |  |          |          | 
|$0.81- $1.58            |  |                                     | 297,300   |           |             |  | 8.3      |          |  | $ | 1.34  | 
|$1.83- $3.38            |  |                                     | 409,500   |           |             |  | 7.9      |          |  | $ | 2.57  | 
|$6.00-$10.85            |  |                                     | 397,901   |           |             |  | 4.2      |          |  | $ | 7.07  | 
|$13.01-$22.31           |  |                                     | 246,355   |           |             |  | 2.0      |          |  | $ | 21.94 | 
|                        |  |                                     |           |           |             |  |          |          | 
|$0.81-$22.31            |  |                                     | 1,351,056 |           |             |  | 5.8      |          |  | $ | 7.16  | 
|                        |  |                                     |           |           |             |  |          |          | 



|    |             
|--- | ------------
|13. | INCOME TAXES



|                          |                                      |      |             |           |      |   |             |           |  
|------------------------- | ------------------------------------ | ---- | ----------- | --------- | ---- | - | ----------- | --------- | -
|                          |                                      | 2005 |             |           | 2004 |  
|                          |                                      |      |             |           |      |  
|Deferred tax assets:      |                                      |      |             |           |      |   |             |          
|                          | Operating loss carryforwards         |      | $           | 8,418,625 |      |   | $           | 8,363,846 |  
|                          | Capitalized research and development |      |             | 1,190,958 |      |   |             | 1,193,917 |  
|                          | Research and development credits     |      |             | 1,605,265 |      |   |             | 1,566,156 |  
|                          | Deferred licensing revenue           |      |             | 33,152    |      |   |             | 412,604   |  
|                          | Note receivable                      |      |             | 200,000   |      |   |             | 200,000   |  
|Other                     |                                      |      | 189,318     |           |      |   | 135,919     |          
|                          |                                      |      |             |           |      |  
|Total                     |                                      |      | 11,637,318  |           |      |   | 11,872,442  |          
|Less valuation allowance  |                                      |      | (10,972,874 | )         |      |   | (11,542,360 | )        
|                          |                                      |      |             |           |      |  
|Total                     |                                      |      | 664,444     |           |      |   | 330,082     |          
|Deferred tax liabilities: |                                      |      |             |           |      |   |             |          
|                          | Patents                              |      |             | (555,662  | )    |   |             | (310,806  | )
|                          | Other                                |      |             | (108,782  | )    |   |             | (19,276   | )
|                          |                                      |      |             |           |      |  
|Total                     |                                      | $    |            |           |      | $ |            |          
|                          |                                      |      |             |           |      |  



43



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##### Table of Contents



INPLAY TECHNOLOGIES, INC.


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


For the Years Ended December 31,


2005, 2004, and 2003  (Continued)








|                                                |                                                      |      |          |          |      |   |         |            |   |   |         |            |  
|----------------------------------------------- | ---------------------------------------------------- | ---- | -------- | -------- | ---- | - | ------- | ---------- | - | - | ------- | ---------- | -
|                                                |                                                      | 2005 |          |          | 2004 |   |         | 2003       |  
|                                                |                                                      |      |          |          |      |   |         |            |  
|(Expense)/ benefit calculated at statutory rate |                                                      | $    | (227,001 | )        |      | $ | 432,507 |            |   | $ | 867,191 |           
|Increase (decrease) in income resulting from:   |                                                      |      |          |          |      |   |         |            |   |   |         |           
|                                                | Research and development and other tax credits       |      |          | 39,101   |      |   |         | 667,658    |   |   |         | 353,252    |  
|                                                | State income taxes, net                              |      |          | (38,143  | )    |   |         | 76,960     |   |   |         | 153,034    |  
|                                                | Permanent differences                                |      |          | (10,950  | )    |   |         | (8,562     | ) |   |         | (6,735     | )
|                                                | Expiration of state net operating loss carryforwards |      |          | (274,917 | )    |   |         |            |   |   |         |            |  
|                                                | Other, net                                           |      |          | 1,628    |      |   |         | 20,891     |   |   |         | (2,702     | )
|                                                | Valuation allowance                                  |      |          | 510,273  |      |   |         | (1,189,454 | ) |   |         | (1,364,040 | )
|                                                |                                                      |      |          |          |      |   |         |            |  
|Total                                           |                                                      | $    |         |          |      | $ |        |            |   | $ |        |           
|                                                |                                                      |      |          |          |      |   |         |            |  



|    |         
|--- | --------
|14. | SEGMENTS



44



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INPLAY TECHNOLOGIES, INC.


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


For the Years Ended December 31,


2005, 2004, and 2003  (Continued)




|                                                  |              |                              |           |           |           |   |           |           |  |   |            |   |  |   |           |           | 
|------------------------------------------------- | ------------ | ---------------------------- | --------- | --------- | --------- | - | --------- | --------- |  | - | ---------- | - |  | - | --------- | --------- | 
|                                                  |              | Year Ended December 31, 2005 |          
|                                                  |              |                              |          
|                                                  |              | Duraswitch                   |           |           | FinePoint |   |           | Corporate |  |   | Total      |  
|                                                  |              |                              |           |           |           |   |           |           |  |   |            |  
|Revenues                                          |              | $                            | 3,424,429 |           |           | $ | 3,031,115 |           |  | $ |           |   |  | $ | 6,455,544 |          
|Cost of goods sold                                |              |                              | 253,105   |           |           |   | 2,224,266 |           |  |   |           |   |  |   | 2,477,371 |          
|                                                  |              |                              |           |           |           |   |           |           |  |   |            |  
|                                                  | Gross profit |                              |           | 3,171,324 |           |   |           | 806,849   |  |   |            |  |  |   |           | 3,978,173 | 
|Selling, general and administrative               |              |                              | 710,610   |           |           |   | 326,475   |           |  |   | 1,683,815  |   |  |   | 2,720,900 |          
|Research, development and application engineering |              |                              | 431,265   |           |           |   | 209,782   |           |  |   |           |   |  |   | 641,047   |          
|                                                  |              |                              |           |           |           |   |           |           |  |   |            |  
|Income (loss) from operations                     |              | $                            | 2,029,449 |           |           | $ | 270,592   |           |  | $ | (1,683,815 | ) |  | $ | 616,226   |          
|                                                  |              |                              |           |           |           |   |           |           |  |   |            |  

|             |  |                   |           |  |           |   |           |           |  |   |           |  |  |   |            | 
|------------ |  | ----------------- | --------- |  | --------- | - | --------- | --------- |  | - | --------- |  |  | - | ---------- | 
|             |  | December 31, 2005 |          
|             |  |                   |          
|             |  | Duraswitch        |           |  | FinePoint |   |           | Corporate |  |   | Total     | 
|             |  |                   |           |  |           |   |           |           |  |   |           | 
|Goodwill     |  | $                 | 443,874   |  |           | $ | 877,366   |           |  | $ |          |  |  | $ | 1,321,240  | 
|             |  |                   |           |  |           |   |           |           |  |   |           | 
|Total assets |  | $                 | 1,600,954 |  |           | $ | 3,599,754 |           |  | $ | 5,367,180 |  |  | $ | 10,567,888 | 
|             |  |                   |           |  |           |   |           |           |  |   |           | 



|    |                                              
|--- | ---------------------------------------------
|15. | SELECTED QUARTERLY FINANCIAL DATA (Unaudited)



|                                                         |  |                       |           |  |              |   |          |         |  |   |           |  |  |   |          |  
|-------------------------------------------------------- |  | --------------------- | --------- |  | ------------ | - | -------- | ------- |  | - | --------- |  |  | - | -------- | -
|                                                         |  | 2005  Quarter Ended, |          
|                                                         |  |                       |          
|                                                         |  | December 31           |           |  | September 30 |   |          | June 30 |  |   | March 31  | 
|                                                         |  |                       |           |  |              |   |          |         |  |   |           | 
|Net revenue                                              |  | $                     | 3,193,179 |  |              | $ | 819,172  |         |  | $ | 2,236,544 |  |  | $ | 206,649  |  
|Gross profit                                             |  |                       | 1,361,445 |  |              |   | 282,389  |         |  |   | 2,173,387 |  |  |   | 160,952  |  
|Net income (loss)                                        |  |                       | 118,022   |  |              |   | (410,790 | )       |  |   | 1,372,193 |  |  |   | (411,775 | )
|Net income (loss) per common share, basic and diluted(1) |  | $                     | 0.01      |  |              | $ | (0.04    | )       |  | $ | 0.14      |  |  | $ | (0.04    | )

|                                                         |  |                       |          |   |              |   |          |         |  |   |           |  |  |   |          |  
|-------------------------------------------------------- |  | --------------------- | -------- | - | ------------ | - | -------- | ------- |  | - | --------- |  |  | - | -------- | -
|                                                         |  | 2004  Quarter Ended, |         
|                                                         |  |                       |         
|                                                         |  | December 31           |          |   | September 30 |   |          | June 30 |  |   | March 31  | 
|                                                         |  |                       |          |   |              |   |          |         |  |   |           | 
|Net revenue                                              |  | $                     | 198,380  |   |              | $ | 199,413  |         |  | $ | 1,179,615 |  |  | $ | 179,645  |  
|Gross profit                                             |  |                       | 148,613  |   |              |   | 149,417  |         |  |   | 1,130,544 |  |  |   | 140,932  |  
|Net income (loss)                                        |  |                       | (923,690 | ) |              |   | (375,047 | )       |  |   | 446,439   |  |  |   | (419,780 | )
|Net income (loss) per common share, basic and diluted(1) |  | $                     | (0.10    | ) |              | $ | (0.04    | )       |  | $ | 0.05      |  |  | $ | (0.04    | )



|    |                         
|--- | ------------------------
|16. | GEOGRAPHIC CONCENTRATION



45



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##### Table of Contents



INPLAY TECHNOLOGIES, INC.


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


For the Years Ended December 31,


2005, 2004, and 2003  (Continued)




|              |  |      |           |  |      |   |           |      |  |   |         | 
|------------- |  | ---- | --------- |  | ---- | - | --------- | ---- |  | - | ------- | 
|              |  | 2005 |           |  | 2004 |   |           | 2003 | 
|              |  |      |           |  |      |   |           |      | 
|United States |  | $    | 3,406,397 |  |      | $ | 1,569,578 |      |  | $ | 586,176 | 
|China         |  |      | 2,858,805 |  |      |   |          |      |  |   |        | 
|Europe        |  |      | 92,975    |  |      |   | 92,100    |      |  |   | 106,577 | 
|Other         |  |      | 97,367    |  |      |   | 95,375    |      |  |   | 67,159  | 
|              |  |      |           |  |      |   |           |      | 
|Total         |  | $    | 6,455,544 |  |      | $ | 1,757,053 |      |  | $ | 759,912 | 
|              |  |      |           |  |      |   |           |      | 



|    |            
|--- | -----------
|17. | COMMITMENTS

Management Services Agreement.


FinePoint Earn-Out.


Letter of Credit.


Employment Agreements.


Lease Agreements.


Tooling.


46



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##### Table of Contents








|        |                                                                                         
|------- | ----------------------------------------------------------------------------------------
|Item 8. | Changes in and Disagreements With Accountants on
    Accounting and Financial Disclosure








|         |                        
|-------- | -----------------------
|Item 8A. | Controls and Procedures










|         |                  
|-------- | -----------------
|Item 8B. | Other Information



47



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##### Table of Contents






PART III







|        |                                                                                                                        
|------- | -----------------------------------------------------------------------------------------------------------------------
|Item 9. | Directors, Executive Officers, Promoters and Control
    Persons; Compliance With Section 16(a) of the Exchange
    Act








|         |                       
|-------- | ----------------------
|Item 10. | Executive Compensation








|         |                                                                                                   
|-------- | --------------------------------------------------------------------------------------------------
|Item 11. | Security Ownership of Certain Beneficial Owners and
    Management and Related Stockholder Matters








|         |                                               
|-------- | ----------------------------------------------
|Item 12. | Certain Relationships and Related Transactions








|         |         
|-------- | --------
|Item 13. | Exhibits

|        |    |                        |  |                                                                                                                                                                                                     
|------- | -- | ---------------------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |    |                       
|No.     |    | Description of Exhibit
|        |    |                       
|        | 2  | .1                     |  | Stock Purchase Agreement dated as of April l, 2004 among
    Duraswitch Industries, Inc., Active Recognition Technologies,
    Arthur Lawida, Ole Sorensen, and Alex Parrish(1)                     
|        | 2  | .2                     |  | Agreement and Plan of Merger, dated as of July 27, 2005,
    among InPlay Technologies, Inc., FPI Acquisition, Inc.,
    FinePoint Innovations, Inc., and Stephen Caldwell(2)                       
|        | 2  | .3                     |  | Amendment No. 1 to Agreement and Plan of Merger, dated as
    of July 27, 2005, among InPlay Technologies, Inc., FPI
    Acquisition, Inc., FinePoint Innovations, Inc., and Stephen
    Caldwell(2)
|        | 3  | .1                     |  | Amended and Restated Articles of Incorporation(14)                                                                                                                                                  
|        | 3  | .2                     |  | Amended and Restated Bylaws(4)                                                                                                                                                                      
|        | 4  | .1                     |  | Specimen Common Stock Certificate(3)                                                                                                                                                                
|        | 10 | .1                     |  | Employment and Separation Agreement dated November 20, 1998
    by and between Duraswitch Industries, Inc. and Robert J.
    Brilon(3)                                                              
|        | 10 | .l.l                   |  | Addendum #1 to Employment and Separation Agreement dated
    November 20, 1998 by and between Duraswitch Industries,
    Inc. and Robert J. Brilon(5)                                               
|        | 10 | .1.2                   |  | Addendum #2 to Employment and Separation Agreement dated
    November 20, 1998 by and between Duraswitch Industries,
    Inc. and Robert J. Brilon(6)                                               
|        | 10 | .1.3                   |  | Addendum #3 to Employment and Separation Agreement dated
    November 20, 1998 by and between Duraswitch Industries,
    Inc. and Robert J. Brilon(14)                                              
|        | 10 | .1.4                   |  | Addendum #4 to Employment and Separation Agreement dated
    November 20, 1998 by and between Duraswitch Industries,
    Inc. and Robert J. Brilon(14)                                              
|        | 10 | .1.5                   |  | Addendum #5 to Employment and Separation Agreement dated
    November 20, 1998 by and between Duraswitch Industries,
    Inc. and Robert J. Brilon(14)                                              
|        | 10 | .2                     |  | 1997 Stock Option Plan(3)                                                                                                                                                                           

48



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##### Table of Contents



|        |    |                        |  |                                                                                                                                                                                                     
|------- | -- | ---------------------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |    |                       
|No.     |    | Description of Exhibit
|        |    |                       
|        | 10 | .3                     |  | 1999 Stock Option Plan(3)                                                                                                                                                                           
|        | 10 | .4                     |  | 2000 Stock Option Plan(6)                                                                                                                                                                           
|        | 10 | .5                     |  | 2000 Stock Option Plan Amendment(8)                                                                                                                                                                 
|        | 10 | .6                     |  | Management Services Agreement dated May 1, 1997 by and
    between Total Switch, Inc. and VanDun, LLC(3)                                                                                            
|        | 10 | .7                     |  | Agreement for Assignment of Present and Future Inventions in
    Certain Subject Matter, dated May 1, 1997, by and between
    Total Switch, Inc. and Anthony J. Van Zeeland(3)                     
|        | 10 | .8                     |  | Licensing Agreement, dated April 20, 2000, between Delphi
    Automotive Systems LLC and Duraswitch Industries, Inc.(9)                                                                             
|        | 10 | .9                     |  | Shareholders Agreement, dated June 19, 2000, among
    Duraswitch Industries, Inc., Delphi Automotive Systems
    Corporation, and the Primary Shareholders named therein(10)                      
|        | 10 | .10                    |  | Employment Agreement, dated July 1, 2003, by and between
    Duraswitch Industries, Inc. and Anthony J. Van Zeeland(11)                                                                             
|        | 10 | .11                    |  | Standard sublease, dated November 1, 2003, by and between
    234 South Extension, L.L.C. and Duraswitch Industries, Inc.(6)                                                                        
|        | 10 | .12                    |  | Form of Indemnification Agreement(17)                                                                                                                                                               
|        | 10 | .13(a)                 |  | Employment Agreement, dated October 1, 2005, by and between
    InPlay Technologies, Inc. and Robert J. Brilon(16)                                                                                  
|        | 10 | .13(b)                 |  | 2005 Stock Award Plan(12)                                                                                                                                                                           
|        | 10 | .14                    |  | FinePoint Innovations, Inc. convertible promissory note
    ($300,000), dated July 27, 2005, issued in favor of InPlay
    Technologies, Inc.(2)                                                    
|        | 10 | .15                    |  | Form of Credit Facility Note, dated July 27, 2005, issued
    by FinePoint Innovations, Inc. in favor of InPlay Technologies,
    Inc.(2)                                                           
|        | 10 | .19                    |  | Securities Purchase Agreement, dated December 27, 2005,
    among InPlay Technologies, Inc. and the investor parties
    thereto(13)                                                                
|        | 10 | .20                    |  | Registration Rights Agreement, dated December 27, 2005,
    among InPlay Technologies, Inc. and the investor parties
    thereto(13)                                                                
|        | 10 | .21                    |  | Form of Investor Warrant, dated December 27, 2005, issued
    by InPlay Technologies, Inc. to the investors in connection with
    the December 2005 private offering(13)                           
|        | 10 | .22                    |  | Form of Agent Warrant, dated December 27, 2005, issued by
    InPlay Technologies, Inc. to the placement agent in connection
    with the December 2005 private offering(13)                        
|        | 14 |                        |  | Code of Ethics(17)                                                                                                                                                                                  
|        | 21 |                        |  | List of Subsidiaries                                                                                                                                                                                
|        | 23 |                        |  | Consent of Deloitte & Touche LLP                                                                                                                                                                    
|        | 31 |                        |  | Certification of Chief Executive Officer and Chief Financial
    Officer pursuant to Rule 13a-14(a) and Rule 15d-14(a),
    promulgated under the Securities Exchange Action of 1934, as
    amended
|        | 32 |                        |  | Certification pursuant to 18 U.S.C. Section 1350, as
    adopted pursuant to Section 906 of the Sarbanes-Oxley Act
    of 2002                                                                      






|    |                                                                                                                                                                                                        
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Incorporated by reference to InPlay Technologies, Inc.s
    Quarterly Report on
    Form 10-QSB for
    the quarterly period ended March 31, 2004, as filed with
    the Commission on April 29, 2004.
|   
|(2) | Incorporated by reference to InPlay Technologies, Inc.s
    Form 8-K dated
    July 27, 2005, as filed with the Commission on
    August 2, 2005.                                                     
|   
|(3) | Incorporated by reference to InPlay Technologies, Inc.s
    Registration Statement on
    Form SB-2, as
    filed with the Commission on or about August 16, 1999.                                    
|   
|(4) | Incorporated by reference to InPlay Technologies, Inc.s
    Quarterly Report on
    Form 10-Q dated
    March 31, 2003, as filed with the Commission on or about
    May 9, 2003.                     

49



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##### Table of Contents





|    |                                                                                                                                                                                                   
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(5) | Incorporated by reference to InPlay Technologies, Inc.s
    Annual Report on
    Form 10-KSB for
    the year ended December 31, 1999, as filed with the
    Commission on March 30, 2000.       
|   
|(6) | Incorporated by reference to InPlay Technologies, Inc.s
    Annual Report on
    Form 10-K for the
    year ended December 31, 2003, as filed with the Commission
    on or about March 29, 2004.
|   
|(7) | Incorporated by reference to InPlay Technologies, Inc.s
    definitive Proxy Statement, as filed with the Commission on or
    about May 12, 2000.                                               
|   
|(8) | Incorporated by reference to InPlay Technologies, Inc.s
    Annual Report on
    Form 10-K for the
    year ended December 31, 2001, as filed with the Commission
    on or about March 23, 2002.
|   
|(9) | Incorporated by reference to InPlay Technologies, Inc.s
    Current Report on
    Form 8-K dated
    April 20, 2000, as filed with the Commission on or about
    April 26, 2000.                



|     |                                                                                                                                                                                                                
|---- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(10) | Incorporated by reference to InPlay Technologies, Inc.s
    Annual Report on
    Form 10-K for the
    year ended December 31, 2000, as filed with the Commission
    on or about March 30, 2001.             
|    
|(11) | Incorporated by reference to InPlay Technologies, Inc.s
    Quarterly Report on
    Form 10-Q for the
    quarterly period ended June 30, 2003, as filed with the
    Commission on or about August 5, 2003.  
|    
|(12) | Incorporated by reference to InPlay Technologies, Inc.s
    Current Report on
    Form 8-K dated
    May 20, 2005, as filed with the Commission on or about
    May 25, 2005.                                 
|    
|(13) | Incorporated by reference to InPlay Technologies, Inc.s
    Current Report on
    Form 8-K dated
    December 27, 2005, as filed with the Commission on or about
    December 29, 2005.                       
|    
|(14) | Incorporated by reference to InPlay Technologies, Inc.s
    Quarterly Report on
    Form 10-QSB for
    the quarterly period ended June 30, 2005, as filed with the
    Commission on or about August 5, 2005.
|    
|(15) | Incorporated by reference to InPlay Technologies, Inc.s
    Current Report on
    Form 8-K dated
    September 1, 2005, as filed with the Commission on or about
    September 8, 2005.                       
|    
|(16) | Incorporated by reference to InPlay Technologies, Inc.s
    Current Report on
    Form 8-K dated
    September 30, 2005, as filed with the Commission on or
    about September 30, 2005.                     
|    
|(17) | Incorporated by reference to InPlay Technologies, Inc.s
    Annual Report on
    Form 10-KSB for
    the year ended December 31, 2004, as filed with the
    Commission on or about March 29, 2005.           






|         |                                       
|-------- | --------------------------------------
|Item 14. | Principal Accountant Fees and Services



50



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##### Table of Contents






SIGNATURES






| |                              
| | -----------------------------
| | InPlay Technologies,
    Inc.
|
| | /s/ Robert J. Brilon         
| |                              
| | Robert J. Brilon             





|                                                     |  |                                                                                                    |  |                |  | 
|---------------------------------------------------- |  | -------------------------------------------------------------------------------------------------- |  | -------------- |  | 
|Signature                                            |  | Capacity                                                                                           |  | Date          
|                                                     |  |                                                                                                    |  |               
|                                                    
|/s/ Steven P. HansonSteven P. Hanson                 |  | Chairman of the Board                                                                              |  | March 15, 2006
|                                                    
|/s/ Robert J. BrilonRobert J. Brilon                 |  | President, Chief Executive Officer, Chief Financial Officer,
    Secretary, Treasurer and Director |  | March 15, 2006
|                                                    
|/s/ Anthony J. Van
    ZeelandAnthony J. Van Zeeland |  | Chief Technology Officer and Director                                                              |  | March 15, 2006
|                                                    
|/s/ John W. HailJohn W. Hail                         |  | Director                                                                                           |  | March 15, 2006
|                                                    
|/s/ P. Robert MoyaP. Robert Moya                     |  | Director                                                                                           |  | March 15, 2006
|                                                    
|/s/ William E. PeelleWilliam E. Peelle               |  | Director                                                                                           |  | March 15, 2006
|                                                    
|/s/ Michael A. Van
    ZeelandMichael A. Van Zeeland |  | Director                                                                                           |  | March 15, 2006

51



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##### Table of Contents



INDEX TO EXHIBITS


|        |    |                        |  |                                                                                                                                                                                                     
|------- | -- | ---------------------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |    |                       
|No.     |    | Description of Exhibit
|        |    |                       
|        | 2  | .1                     |  | Stock Purchase Agreement dated as of April l, 2004 among
    Duraswitch Industries, Inc., Active Recognition Technologies,
    Arthur Lawida, Ole Sorensen, and Alex Parrish(1)                     
|        | 2  | .2                     |  | Agreement and Plan of Merger, dated as of July 27, 2005,
    among InPlay Technologies, Inc., FPI Acquisition, Inc.,
    FinePoint Innovations, Inc., and Stephen Caldwell(2)                       
|        | 2  | .3                     |  | Amendment No. 1 to Agreement and Plan of Merger, dated as
    of July 27, 2005, among InPlay Technologies, Inc., FPI
    Acquisition, Inc., FinePoint Innovations, Inc., and Stephen
    Caldwell(2)
|        | 3  | .1                     |  | Amended and Restated Articles of Incorporation(14)                                                                                                                                                  
|        | 3  | .2                     |  | Amended and Restated Bylaws(4)                                                                                                                                                                      
|        | 4  | .1                     |  | Specimen Common Stock Certificate(3)                                                                                                                                                                
|        | 10 | .1                     |  | Employment and Separation Agreement dated November 20, 1998
    by and between Duraswitch Industries, Inc. and Robert J.
    Brilon(3)                                                              
|        | 10 | .l.l                   |  | Addendum #1 to Employment and Separation Agreement dated
    November 20, 1998 by and between Duraswitch Industries,
    Inc. and Robert J. Brilon(5)                                               
|        | 10 | .1.2                   |  | Addendum #2 to Employment and Separation Agreement dated
    November 20, 1998 by and between Duraswitch Industries,
    Inc. and Robert J. Brilon(6)                                               
|        | 10 | .1.3                   |  | Addendum #3 to Employment and Separation Agreement dated
    November 20, 1998 by and between Duraswitch Industries,
    Inc. and Robert J. Brilon(14)                                              
|        | 10 | .1.4                   |  | Addendum #4 to Employment and Separation Agreement dated
    November 20, 1998 by and between Duraswitch Industries,
    Inc. and Robert J. Brilon(14)                                              
|        | 10 | .1.5                   |  | Addendum #5 to Employment and Separation Agreement dated
    November 20, 1998 by and between Duraswitch Industries,
    Inc. and Robert J. Brilon(14)                                              
|        | 10 | .2                     |  | 1997 Stock Option Plan(3)                                                                                                                                                                           
|        | 10 | .3                     |  | 1999 Stock Option Plan(3)                                                                                                                                                                           
|        | 10 | .4                     |  | 2000 Stock Option Plan(6)                                                                                                                                                                           
|        | 10 | .5                     |  | 2000 Stock Option Plan Amendment(8)                                                                                                                                                                 
|        | 10 | .6                     |  | Management Services Agreement dated May 1, 1997 by and
    between Total Switch, Inc. and VanDun, LLC(3)                                                                                            
|        | 10 | .7                     |  | Agreement for Assignment of Present and Future Inventions in
    Certain Subject Matter, dated May 1, 1997, by and between
    Total Switch, Inc. and Anthony J. Van Zeeland(3)                     
|        | 10 | .8                     |  | Licensing Agreement, dated April 20, 2000, between Delphi
    Automotive Systems LLC and Duraswitch Industries, Inc.(9)                                                                             
|        | 10 | .9                     |  | Shareholders Agreement, dated June 19, 2000, among
    Duraswitch Industries, Inc., Delphi Automotive Systems
    Corporation, and the Primary Shareholders named therein(10)                      
|        | 10 | .10                    |  | Employment Agreement, dated July 1, 2003, by and between
    Duraswitch Industries, Inc. and Anthony J. Van Zeeland(11)                                                                             
|        | 10 | .11                    |  | Standard sublease, dated November 1, 2003, by and between
    234 South Extension, L.L.C. and Duraswitch Industries, Inc.(6)                                                                        
|        | 10 | .12                    |  | Form of Indemnification Agreement(17)                                                                                                                                                               
|        | 10 | .13(a)                 |  | Employment Agreement, dated October 1, 2005, by and between
    InPlay Technologies, Inc. and Robert J. Brilon(16)                                                                                  
|        | 10 | .13(b)                 |  | 2005 Stock Award Plan(12)                                                                                                                                                                           
|        | 10 | .14                    |  | FinePoint Innovations, Inc. convertible promissory note
    ($300,000), dated July 27, 2005, issued in favor of InPlay
    Technologies, Inc.(2)                                                    
|        | 10 | .15                    |  | Form of Credit Facility Note, dated July 27, 2005, issued
    by FinePoint Innovations, Inc. in favor of InPlay Technologies,
    Inc.(2)                                                           

52



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##### Table of Contents



|        |    |                        |  |                                                                                                                                                                                                     
|------- | -- | ---------------------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |    |                       
|No.     |    | Description of Exhibit
|        |    |                       
|        | 10 | .19                    |  | Securities Purchase Agreement, dated December 27, 2005,
    among InPlay Technologies, Inc. and the investor parties
    thereto(13)                                                                
|        | 10 | .20                    |  | Registration Rights Agreement, dated December 27, 2005,
    among InPlay Technologies, Inc. and the investor parties
    thereto(13)                                                                
|        | 10 | .21                    |  | Form of Investor Warrant, dated December 27, 2005, issued
    by InPlay Technologies, Inc. to the investors in connection with
    the December 2005 private offering(13)                           
|        | 10 | .22                    |  | Form of Agent Warrant, dated December 27, 2005, issued by
    InPlay Technologies, Inc. to the placement agent in connection
    with the December 2005 private offering(13)                        
|        | 14 |                        |  | Code of Ethics(17)                                                                                                                                                                                  
|        | 21 |                        |  | List of Subsidiaries                                                                                                                                                                                
|        | 23 |                        |  | Consent of Deloitte & Touche LLP                                                                                                                                                                    
|        | 31 |                        |  | Certification of Chief Executive Officer and Chief Financial
    Officer pursuant to Rule 13a-14(a) and Rule 15d-14(a),
    promulgated under the Securities Exchange Action of 1934, as
    amended
|        | 32 |                        |  | Certification pursuant to 18 U.S.C. Section 1350, as
    adopted pursuant to Section 906 of the Sarbanes-Oxley Act
    of 2002                                                                      






|    |                                                                                                                                                                                                        
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Incorporated by reference to InPlay Technologies, Inc.s
    Quarterly Report on
    Form 10-QSB for
    the quarterly period ended March 31, 2004, as filed with
    the Commission on April 29, 2004.
|   
|(2) | Incorporated by reference to InPlay Technologies, Inc.s
    Form 8-K dated
    July 27, 2005, as filed with the Commission on
    August 2, 2005.                                                     
|   
|(3) | Incorporated by reference to InPlay Technologies, Inc.s
    Registration Statement on
    Form SB-2, as
    filed with the Commission on or about August 16, 1999.                                    
|   
|(4) | Incorporated by reference to InPlay Technologies, Inc.s
    Quarterly Report on
    Form 10-Q dated
    March 31, 2003, as filed with the Commission on or about
    May 9, 2003.                     
|   
|(5) | Incorporated by reference to InPlay Technologies, Inc.s
    Annual Report on
    Form 10-KSB for
    the year ended December 31, 1999, as filed with the
    Commission on March 30, 2000.            
|   
|(6) | Incorporated by reference to InPlay Technologies, Inc.s
    Annual Report on
    Form 10-K for the
    year ended December 31, 2003, as filed with the Commission
    on or about March 29, 2004.     
|   
|(7) | Incorporated by reference to InPlay Technologies, Inc.s
    definitive Proxy Statement, as filed with the Commission on or
    about May 12, 2000.                                                    
|   
|(8) | Incorporated by reference to InPlay Technologies, Inc.s
    Annual Report on
    Form 10-K for the
    year ended December 31, 2001, as filed with the Commission
    on or about March 23, 2002.     
|   
|(9) | Incorporated by reference to InPlay Technologies, Inc.s
    Current Report on
    Form 8-K dated
    April 20, 2000, as filed with the Commission on or about
    April 26, 2000.                     



|     |                                                                                                                                                                                                                
|---- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(10) | Incorporated by reference to InPlay Technologies, Inc.s
    Annual Report on
    Form 10-K for the
    year ended December 31, 2000, as filed with the Commission
    on or about March 30, 2001.             
|    
|(11) | Incorporated by reference to InPlay Technologies, Inc.s
    Quarterly Report on
    Form 10-Q for the
    quarterly period ended June 30, 2003, as filed with the
    Commission on or about August 5, 2003.  
|    
|(12) | Incorporated by reference to InPlay Technologies, Inc.s
    Current Report on
    Form 8-K dated
    May 20, 2005, as filed with the Commission on or about
    May 25, 2005.                                 
|    
|(13) | Incorporated by reference to InPlay Technologies, Inc.s
    Current Report on
    Form 8-K dated
    December 27, 2005, as filed with the Commission on or about
    December 29, 2005.                       
|    
|(14) | Incorporated by reference to InPlay Technologies, Inc.s
    Quarterly Report on
    Form 10-QSB for
    the quarterly period ended June 30, 2005, as filed with the
    Commission on or about August 5, 2005.

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##### Table of Contents





|     |                                                                                                                                                                                                     
|---- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(15) | Incorporated by reference to InPlay Technologies, Inc.s
    Current Report on
    Form 8-K dated
    September 1, 2005, as filed with the Commission on or about
    September 8, 2005.            
|    
|(16) | Incorporated by reference to InPlay Technologies, Inc.s
    Current Report on
    Form 8-K dated
    September 30, 2005, as filed with the Commission on or
    about September 30, 2005.          
|    
|(17) | Incorporated by reference to InPlay Technologies, Inc.s
    Annual Report on
    Form 10-KSB for
    the year ended December 31, 2004, as filed with the
    Commission on or about March 29, 2005.

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