UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                   FORM 10-QSB

              [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934

                       For the quarter ended June 30, 2005

                                       or

              [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934

                        Commission file number: 000-27773

                              SYSCAN IMAGING, INC.
        (Exact Name of Small Business Issuer as Specified in Its Charter)

--------------------------------------------------------------------------------
DELAWARE                                                             59-3134518
--------------------------------------------------------------------------------
(State of incorporation)                    (I.R.S. Employer Identification No.)

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

                              1772 TECHNOLOGY DRIVE
                           SAN JOSE, CALIFORNIA 95110
          (Address of principal executive offices, including zip code)

                                 (408) 436-9888
                (Issuer's telephone number, including area code)

   (Name, Former Address and Former Fiscal Year, if Changed Since Last Report)

Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Securities Exchange Act of 1934 during the past 12 months,
and (2) has been subject to such filing requirements for the past 90 days.
Yes |X| No |_|

The number of shares outstanding of the issuer's Common Stock, $.001 Par Value,
on August 4, 2005, was 23,110,515 shares

Transitional Small Business Disclosure Format (check one):     Yes | |   No |X|


<PAGE>


                              SYSCAN IMAGING, INC.

                                TABLE OF CONTENTS


<TABLE>
<CAPTION>

PART I   FINANCIAL INFORMATION
                                                                                        Page Number

<S>    <C>                                                                               <C>
Item 1. Financial Statements....................................................................3
Item 2.  Management's Discussion and Analysis of Financial Condition and
            Results of Operations..............................................................13
Item 3. Controls and Procedures................................................................21


PART II  OTHER INFORMATION

Item 1. Legal Proceedings......................................................................21
Item 2. Changes in Securities and Small Business Issuer Purchases of Equity Securities;
        Unregistered Sales of Equity Securities and Use of Proceeds............................21
Item 3. Defaults Upon Senior Securities........................................................21
Item 4. Submission of Matters to a Vote of Security Holders....................................22
Item 5. Other Information......................................................................22
Item 6. Exhibits ..............................................................................22

Signatures.....................................................................................22

</TABLE>



<PAGE>


PART I - FINANCIAL INFORMATION

ITEM 1.                 FINANCIAL STATEMENTS

<TABLE>
<CAPTION>

                      SYSCAN IMAGING, INC. AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEET
                                  JUNE 30, 2005
                                   (UNAUDITED)

                                     ASSETS
-------------------------------------------------------------------------------
<S>                                                                                  <C>
Current assets
   Cash and cash equivalents                                                             $        2,167,425
   Trade receivables, net                                                                           732,023
   Inventories                                                                                      482,481
   Prepayments, deposits and other current assets                                                   219,095
   Due from related parties                                                                       2,500,529
                                                                                           -----------------
Total current assets                                                                              6,101,553

Fixed assets, net                                                                                   158,053
Intangible assets                                                                                    13,493
Long-term investment                                                                                997,692
                                                                                           -----------------

TOTAL ASSETS                                                                            $         7,270,791
                                                                                           =================


                         LIABILITIES AND STOCKHOLDERS' EQUITY
--------------------------------------------------------------------------------
Current liabilities
   Bank line of credit                                                                  $           933,036
   Trade payables and accruals                                                                       45,910
                                                                                           -----------------
Total current liabilities                                                                           978,946

Commitments and contingencies                                                                             -

Stockholders' equity
   Preferred stock: $0.001 par value; 2,000,000 shares authorized and 18,650 shares
      outstanding, Series A Convertible (stated value $100)                                              19
   Common stock: $0.001 par value; 50,000,000 shares authorized and 23,110,515 shares
      issued and outstanding                                                                         23,110
   Additional paid in capital                                                                    29,946,344
   Accumulated deficit                                                                          (23,677,628)
                                                                                           -----------------
Total stockholders' equity                                                                        6,291,845
                                                                                           -----------------

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                                               $        7,270,791
                                                                                           =================


</TABLE>




            SEE CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.




<PAGE>

<TABLE>
<CAPTION>


                      SYSCAN IMAGING, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                       THREE AND SIX MONTHS ENDED JUNE 30
                                   (UNAUDITED)

                                                   THREE MONTHS ENDED      THREE MONTHS ENDED     SIX MONTHS ENDED  SIX MONTHS ENDED
                                                     JUNE 30, 2005          JUNE 30, 2004          JUNE 30, 2005       JUNE 30, 2004
                                              -------------------------------------------------------------------------------------

<S>                                             <C>                      <C>              <C>                         <C>
NET SALES                                          $     1,487,216          $     974,831       $     3,195,223       $  2,480,948


COSTS OF SALES                                             883,262                617,089             1,986,926          1,655,298
                                              -------------------------------------------------------------------------------------

GROSS PROFIT                                               603,954                357,742             1,208,297            825,650

OPERATING EXPENSES
   Selling and marketing expenses                          198,753                172,163               350,861            366,437
   General and administrative expenses                     351,115                193,407               648,447            341,957
   Stock-based compensation cost                         2,812,000                      -             2,812,000                  -
   Research and development expenses                       162,576                117,352               338,573            230,697
                                              -------------------------------------------------------------------------------------
Total operating expenses                                 3,524,444                482,922             4,149,881            939,091
                                              -------------------------------------------------------------------------------------

OPERATING LOSS                                         (2,920,490)              (125,180)           (2,941,584)          (113,441)

Other income (expense), net                                 12,308                  1,206                10,237              3,147
                                              -------------------------------------------------------------------------------------

NET LOSS BEFORE TAXES                                  (2,908,182)              (123,974)           (2,931,347)          (110,294)

PROVISION FOR INCOME TAXES                                       -                      -                     -                  -
                                              -------------------------------------------------------------------------------------

NET LOSS                                         $     (2,908,182)         $    (123,974)       $   (2,931,347)       $  (110,294)


Deemed dividend on preferred stock                        (27,600)                      -              (27,600)                  -
                                              -------------------------------------------------------------------------------------

NET LOSS AVAILABLE TO COMMON STOCKHOLDERS        $     (2,935,782)         $    (123,974)       $   (2,958,947)       $  (110,294)
                                              =====================================================================================

BASIC AND DILUTED LOSS PER SHARE                 $          (0.13)                      -       $        (0.13)                -
                                              =====================================================================================

</TABLE>











            SEE CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.





<PAGE>

<TABLE>
<CAPTION>

                      SYSCAN IMAGING, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                            SIX MONTHS ENDED JUNE 30
                                   (UNAUDITED)

                                                                                  2005                  2004
                                                                            ------------------    -----------------
CASH FLOWS FROM OPERATING ACTIVITIES
<S>                                                                     <C>                   <C>
   Net loss                                                               $       (2,931,347)   $        (110,294)
                                                                            ------------------    -----------------
   Adjustments to reconcile net loss to net cash flows provided by
      operating activities
   Depreciation                                                                        10,446                4,109
   Stock based compensation cost                                                    2,812,000                    -
   Changes in assets and liabilities
      (Increase) decrease trade receivables                                           395,850            1,150,159
      (Increase) decrease in inventories                                               14,199                8,823
      (Increase) decrease in other current assets                                       (954)            (469,539)
       Increase (decrease) in trade payables and accruals                            (73,048)            (254,359)
                                                                            ------------------    -----------------
Net cash flows provided by operating activities                                       227,146              328,899

CASH FLOWS FROM INVESTING ACTIVITIES
   Cash acquired in reverse acquisition                                                     -               28,288
   Capital expenditures                                                             (144,515)             (11,288)
                                                                            ------------------    -----------------
Net cash flows provided by (used in) investing activities                           (144,515)               17,000

CASH FLOWS FROM FINANCING ACTIVITIES
    Proceeds from issuance of preferred stock, net of offering costs                1,628,500                   -
    Net advances / repayments - related parties                                     (231,109)            (906,831)
                                                                            ------------------    -----------------
Net cash flows provided by (used in) financing activities                           1,397,391            (906,831)
                                                                            ------------------    -----------------

Increase (decrease) in cash and cash equivalents                                    1,480,022            (560,932)

Cash and cash equivalents, beginning of period                                        687,403            1,019,822
                                                                            ------------------    -----------------

Cash and cash equivalents, end of period                                    $       2,167,425           $  458,890
                                                                            ==================    =================

Cash paid for:
   Interest                                                                 $          26,841                   -
                                                                            ==================    =================
   Income taxes                                                             $              -                    -
                                                                            ==================    =================


</TABLE>



            SEE CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.



<PAGE>


                      SYSCAN IMAGING, INC. AND SUBSIDIARIES
            CONDENSED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                                  JUNE 30, 2005
                                   (UNAUDITED)
================================================================================


1 - STATEMENT OF INFORMATION FURNISHED

The accompanying unaudited condensed consolidated financial statements of Syscan
Imaging, Inc. ("Syscan", "the Company", "we" or "our") have been prepared in
accordance with accounting principles generally accepted in the United States
for interim financial information and the instructions to Form 10-QSB and
Article 10 of Regulation S-X. Accordingly, they do not include all information
and disclosures necessary for a presentation of our financial position, results
of operations, and cash flows in conformity with accounting principles generally
accepted in the United States.

In the opinion of management, all adjustments (which include only normal
recurring adjustments) necessary to present fairly the financial position,
results of operations and cash flows for all periods presented have been made.
Preparing financial statements requires management to make estimates and
assumptions that affect the reported amounts of assets, liabilities, revenue and
expenses. Actual results may differ from these estimates. The results of
operations for the period ended June 30, 2005 are not necessarily indicative of
the operating results that may be expected for the entire year ending December
31, 2005. These financial statements should be read in conjunction with the
Management's Discussion and Analysis included in the Company's financial
statements and accompanying notes thereto as of and for the year ended December
31, 2004, filed with the Company's Annual Report on Form 10-KSB. Certain amounts
from prior periods have been reclassified to conform to the current period's
presentation.

The Company does not have any off-balance sheet arrangements that have, or are
reasonably likely to have, a current or future effect on our financial
condition, changes in financial condition, revenue or expenses, results of
operations, liquidity, capital expenditures or capital resources that is
expected to be material.


2 - RECENT ACCOUNTING PRONOUNCEMENTS

In December 2004, the FASB issued SFAS No. 123 (Revised 2004) "Share-Based
Payment" ("SFAS No. 123R"). SFAS No. 123R addresses all forms of share-based
payment ("SBP") awards, including shares issued under employee stock purchase
plans, stock options, restricted stock and stock appreciation rights. SFAS No.
123R will require the Company to expense SBP awards with compensation cost for
SBP transactions measured at fair value. On March 29, 2005, the SEC issued Staff
Accounting Bulletin (SAB) 107 which expresses the views of the SEC regarding the
interaction between SFAS No. 123R and certain SEC rules and regulations and
provides the SEC's views regarding the valuation of share-based payment
arrangements for public companies. In April 2005, the SEC issued a release which
amends the compliance dates for SFAS No. 123R. We expect the adoption of SFAS
No. 123R and SAB 107 to have a material impact on the Company's financial
statements.

In May 2005, the FASB issued SFAS No. 154, "Accounting Changes and Error
Corrections". SFAS No. 154 replaces APB Opinion No. 20 "Accounting Changes" and
SFAS No. 3, "Reporting Accounting Changes in Interim Financial Statements". SFAS
No. 154 requires retrospective application to prior periods' financial
statements of changes in accounting principle, unless it is impracticable to
determine either the period-specific effects or the cumulative effect of the
change. We do not expect the adoption of SFAS No. 154 to have any impact on the
Company's financial statements.


3 - SIGNIFICANT ACCOUNTING POLICIES

CONCENTRATION OF CREDIT RISK

Financial instruments that potentially expose the Company to a concentration of
credit risk are as follows:



<PAGE>



CASH HELD AT BANKS. We maintain cash balances at several banks. Accounts at each
institution are insured by the Federal Deposit Insurance Corporation up to
$100,000.

DUE TO GEOGRAPHIC SALES AND SIGNIFICANT CUSTOMERS. We operate in a single
industry segment - scanner and fax modules. We market our products in the United
States, Europe and the Asia Pacific region through our sales personnel and
independent sales representatives.

Our geographic sales as a percent of total revenue were as follows for the
quarter ended June 30:

                                               2005                2004
                                          --------------      -------------
United States                                  73.0%              96.5%
Asia Pacific                                   18.4%               0.1%
Europe and others                               8.6%               3.4%




Our geographic sales as a percent of total revenue were as follows for the six
month period ended June 30:

                                               2005                2004
                                          ----------------    --------------
United States                                  86.4%              97.1%
Asia Pacific                                    8.8%               0.1%
Europe and others                               4.8%               2.8%





Sales to major customers as a percentage of total revenues were as follows for
the quarters ended June 30:
                                               2005               2004
                                           ---------------    --------------
Customer A                                      42%                54%
Customer B                                      15%                14%
Customer C                                       7%                10%
Customer D                                       7%                 6%






Sales to major customers as a percentage of total revenues for the six month
period ended June 30:

                                               2005               2004
                                           --------------    --------------
Customer A                                     34%                33%
Customer B                                     15%                20%
Customer C                                     15%                13%
Customer D                                     12%                 8%






DUE TO ACCOUNTS RECEIVABLE. Financial instruments that potentially subject the
Company to a concentration of credit risk consist primarily of trade
receivables. Our customers are concentrated in the industrial/consumer
electronics channels and with major original equipment manufacturers. As of June
30, 2005, the concentration was approximately 75% (3 customers). The loss of any
of these customers could have a material adverse effect on our results of
operations, financial position and cash flows.

DUE TO SIGNIFICANT VENDORS. For each of the periods ended June 30, 2005 and
2004, our purchases have primarily been concentrated with the wholly-owned
subsidiary of our majority stockholder. If this vendor was unable to provide
materials in a timely manner and we were unable to find alternative vendors, our
business, operating results and financial condition would be materially
adversely affected.

DUE TO PRODUCT SALES. We had 5 different product categories in the second
quarter of 2005 (2004: 5 products) and 3 different products during the six
months ended June 30, 2005 (2004: 5 products) that each accounted for more than
10% of sales. We have made positive efforts to mitigate the impact of loss of
any single category, however if any of these products were to become obsolete or
unmarketable and we were unable to successfully develop and market alternative
products, our business, operating results and financial condition could be
adversely affected.



<PAGE>



RELATED PARTY TRANSACTIONS

A related party is generally defined as (i) any person that holds 10% or more of
the Company's securities and their immediate families, (ii) the Company's
management, (iii) someone that directly or indirectly controls, is controlled by
or is under common control with the Company, or (iv) anyone who can
significantly influence the financial and operating decisions of the Company. A
transaction is considered to be a related party transaction when there is a
transfer of resources or obligations between related parties.

The Company purchases significantly all of its finished scanner imaging products
from the parent company of its majority stockholder, Syscan Technology Holdings
Limited ("STH"). Our Chairman and CEO, Darwin Hu, was formerly the CEO of STH,
and beneficially owns approximately 5.33% of the issued and outstanding capital
stock of STH.

The following is a summary of significant related party purchases from entities
that are wholly-owned subsidiaries of STH. The transactions were carried out in
the normal course of our business.

<TABLE>
<CAPTION>

                                                            THREE MONTHS ENDED        THREE MONTHS ENDED
                                                              JUNE 30, 2005             JUNE 30, 2004
                                                           ---------------------     ---------------------
SYSCAN Optoelectronics Technology Co. Ltd., a
wholly-owned subsidiary of STH (purchases)                                                        $0.286M
SYSCAN Intervision Limited, a wholly-owned subsidiary of
<S>                                                        <C>                       <C>
STH (purchases)                                                               -                   $0.240M
                                                           =====================     =====================

SYSCAN  Lab Limited Company Limited, a wholly-owned
subsidiary of STH (purchases)                                           $0.713M                         -
                                                           =====================     =====================

Amounts due from related parties are unsecured, interest-free and repayable on
demand and consisted of the following:


Due from STH                                               $            445,998

Due from Majority Stockholder                                           100,000

Due from various subsidiaries wholly-owned by STH                     1,954,531

                                                              ------------------
                                                           $          2,500,529
                                                              ==================



</TABLE>






EARNINGS PER SHARE

Earnings (loss) per share ("EPS") is computed in accordance with SFAS No. 128
"Earnings Per Share." Basic EPS is computed using weighted average shares
outstanding. Diluted EPS is computed using weighted average shares outstanding
plus dilutive common stock equivalents. Convertible securities that could
potentially dilute basic EPS in the future, such as convertible preferred stock,
options and warrants are not included in the computation of diluted EPS because
to do so would be antidilutive. All per share and per share information are
adjusted retroactively to reflect stock splits and changes in par value. Diluted
EPS per share does not differ from basic EPS for all periods presented. As of
June 30, 2005 and 2004, the total number of outstanding common stock equivalent
shares excluded from the loss per share computation was 2,225,833 and 60,000,
respectively.


The following table represents the computation of weighted average shares
outstanding:



<PAGE>

<TABLE>
<CAPTION>


                                                         THREE MONTHS     THREE MONTHS      SIX MONTHS       SIX MONTHS
                                                             ENDED            ENDED            ENDED            ENDED
                                                            6/30/05          6/30/04          6/30/05          6/30/04
                                                     -------------------------------------------------------------------

<S>                                                 <C>               <C>             <C>               <C>
Numerator-net loss available to common stockholders      $  2,935,782    $    123,974    $   2,958,947     $    110,294
                                                     ===================================================================

Denominator:
  Weighted average shares used in computing basic          23,110,515      23,065,953       23,110,515       22,080,103
EPS
  Net effect of dilutive common shares                              -               -                -                -
                                                     -------------------------------------------------------------------
  Weighted average shares used in computed diluted         23,110,515      23,065,953       23,110,515       22,080,103
EPS
                                                     ===================================================================

Basic Earnings Per Share                                        $0.13               -            $0.13                -

Diluted Earnings Per Share                                      $0.13               -            $0.13                -

</TABLE>


STOCK-BASED COMPENSATION

The Company accounts for stock-based compensation using the intrinsic value
method prescribed in Accounting Principles Board ("APB") Opinion No. 25,
"Accounting for Stock Issued to Employees." Compensation cost for stock options,
if any, is measured as the excess of the quoted market price of the Company's
stock at the date of grant over the amount an employee must pay to acquire the
stock. SFAS No.123, "Accounting for Stock-Based Compensation," established
accounting and disclosure requirements using a fair-value-based method of
accounting for stock-based employee compensation plans. The Company has elected
to remain on its current method of accounting as described above, and has
adopted the disclosure requirements of SFAS No. 123. In December 2002, the FASB
issued SFAS No. 148, "Accounting for Stock-Based Compensation - Transition and
Disclosure, amending FASB No. 123, and "Accounting for Stock-Based
Compensation". This statement amends Statement No. 123 to provide alternative
methods of transition for an entity that voluntarily changes to the fair value
based method of accounting for stock-based employee compensation.

Had compensation expense for the Company's stock-based compensation plans been
determined under SFAS No. 123, based on the fair market value at the grant
dates, the Company's pro forma net earnings and pro forma net earnings per share
would have been reflected for the six months ended June 30:

<TABLE>
<CAPTION>


                                                       THREE MONTHS       THREE MONTHS    SIX MONTHS     SIX MONTHS
                                                          ENDED              ENDED          ENDED          ENDED
                                                         6/30/05            6/30/04        6/30/05        6/30/04
                                                   -----------------------------------------------------------------
<S>                                               <C>               <C>            <C>              <C>
Net loss  available  to  common  stockholders,  as   $ 2,935,782       $  123,974     $  2,958,947       $  110,294
reported
Less: stock-based compensation cost, net of tax        2,847,045            3,824        2,847,045            3,824
                                                   -----------------------------------------------------------------
Pro forma net loss                                   $ 5,782,827       $  127,798     $  5,805,992       $  114,118
                                                   =================================================================

Basic and diluted net loss per share
     As reported                                            $0.13                -           $0.13               -
     Pro forma                                              $0.25                -           $0.25               -


</TABLE>

The weighted average fair value on the date of grant was $0.7695 for those
options granted in 2005. The fair value of each option grant is estimated on the
date of grant using the Black-Scholes Option pricing model with the following
weighted-average assumptions: dividend yield of 0%, expected volatility of 144%,
risk-free interest rate of 5%, and expected life of two years.




<PAGE>

4 - STOCK OPTIONS

STOCK OPTIONS OUTSTANDING

The Company has a stock option plan, the objectives of which include attracting
and retaining the best personnel, providing for additional performance
incentives, and promoting the success of the Company by providing directors,
consultants, and key employees the opportunity to acquire common stock. The plan
is administrated by the Board of Directors, which determine among other things,
those individuals who shall receive options, the time period during which the
options may be partially or fully exercised, the number of common stock to be
issued upon the exercise of the options and the option exercise price.

The maximum term of the plan is ten years and options may be granted to
officers, directors, consultants, employees, and similar parties who provide
their skills and expertise to the Company.

Options granted under the plans have a maximum term of ten years and shall be at
an exercise price that may not be less than 85% of the fair market value of the
common stock on the date of the grant. Options are non-transferable and if a
participant ceases affiliation with the company for a reason other than death or
permanent and total disability, the participant will have 90 days to exercise
the option subject to certain extensions. In the event of death or permanent and
total disability, the option holder or their representative may exercise the
option within one (1) year. Any unexercised options that expire or that
terminate upon an employee's ceasing to be employed by the Company become
available again for issuance under the plan, subject to applicable securities
regulation. The plan may be terminated or amended at any time by the Board of
Directors. No options were forfeited, canceled or exercised during the six
months ended June 30, 20005. Information about options outstanding and
exercisable at June 30, 2005 is summarized below:


<TABLE>
<CAPTION>

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

                                        WEIGHTED-AVERAGE    WEIGHTED-AVERAGE             WEIGHTED-AVERAGE
  RANGE OF EXERCISE        NUMBER           REMAINING         EXERCISE        NUMBER       REMAINING      WEIGHTED-AVERAGE
        PRICES           OUTSTANDING    CONTRACTUAL LIFE       PRICE       EXERCISABLE    CONTRACTUAL        EXERCISE
                                             (YEARS)                                      LIFE (YEARS)        PRICE

----------------------- -------------- -------------------- ------------- --------------- -------------- --------------
<S>                   <C>                 <C>              <C>          <C>               <C>            <C>
        $0.01             3,700,000           1.75             $0.01        1,293,333         1.75           $0.01
----------------------- -------------- -------------------- ------------- --------------- -------------- --------------
     $0.90-$2.50           60,000             1.50             $1.17          60,000          1.50           $1.17

</TABLE>

BOARD OF DIRECTOR APPROVED STOCK OPTIONS SUBJECT TO SHAREHOLDER APPROVAL

On April 2, 2004, the Company's Board of Directors authorized the increase in
the number of stock options available under the 2002 Stock Option Plan (the
"Plan") from 200,000 to 2,200,000. On July 21, 2004, the Company's Board of
Directors further authorized the increase in the number of stock options
available under the 2002 Stock Option Plan from 2,200,000 to 3,200,000. The
subject increases are subject to stockholder ratification at the next annual or
special meeting of stockholders, which has not been obtained as of the date this
filing.

On April 13, 2004, the Company's Board of Directors authorized an aggregate of
1,700,000 options under the Plan to certain individuals at $1.50 per share, and
expiring through April 2014. These options were canceled by the Board of
Directors on May 7, 2004. On July 21, 2004, the Company's Board of Directors
further authorized an aggregate of 2,200,000 options under the 2002 Stock Option
Plan to be issued to certain individuals at $2.00 per share and expiring through
July 2014, of which 165,000 have been canceled as a result of an employment
termination subsequent to year end and 55,000 options exercisable through May 4,
2005. The grant of the above options are subject to stockholder ratification of
the Company's increase in the number of stock options available for grant under
the Plan. The Company plans to obtain stockholder approval at its annual or
special meeting of stockholders, which has not yet been scheduled as of the date
of this filing.



<PAGE>

On April 26, 2005, the Company entered into employment agreements with its
executive officers, the terms of which were previously approved by the
independent members of the Company's board of directors. The employment
agreements extend through 2008 and provide for a base salary, annual bonus to be
determined by the Board of Directors, termination payments, stock options,
non-competition provisions, and other terms and conditions of employment. In
addition, the Company maintains employment agreements with other key employees
with similar terms and conditions.

Total options granted under the agreements with the Company's executive officers
were 3,300,000, exercisable at $0.01 per share. One-third of the options vest on
the date of execution of the employment agreement, one-third vest on April 3,
2006 and one-third vest on April 2, 2007.

Additionally, the Company issued an aggregate of 400,000 options exercisable at
$0.01 per share to two of its key employees in connection with the execution of
employment agreements with such individuals. One-third of such options vest on
April 26, 2005, one-third vest on April 3, 2006 and one-third vest on April 2,
2007.


5 - PREFERRED STOCK

The Company has authorized 2,000,000 shares of preferred stock, of which an
aggregate of 60,000 have been designated Series A Preferred Stock and of which
18,650 shares are outstanding.

On March 15, 2005, the Company sold $1,865,000 of its Series A Convertible
Preferred Stock to institutional and accredited retail investors in a private
offering pursuant to exemption from registration under Section 4(2) of the
Securities Act of 1933, as amended (the "Securities Act"). Starboard Capital
Markets, LLC, an NASD member firm, acted as placement agent in the sale of the
Preferred Stock, for which it received $186,500 in commissions and 186,500
warrants to purchase shares of the Company's common stock at an exercise price
equal to $1.00 per share. The net proceeds of this offering to the Company after
the payment of commissions, legal fees and other expenses of the offering were
approximately $1,628,500.

In connection with the financing, the Company also issued to the purchasers
common stock purchase warrants to purchase up to an aggregate of 932,500 shares
of the Company's common stock at an exercise price of $2.00 per share. The
warrants are exercisable for a period of five years from the date of issuance.
Pursuant to a registration rights agreement, the Company has registered the
shares of common stock issuable upon conversion of the Preferred Stock and upon
exercise of the warrants with the Securities and Exchange Commission on Form
SB-2.

The warrants must be exercised by the payment of cash, except if there is no
effective registration statement covering the resale of the shares of Common
stock underlying the warrants, a holder may exercise their warrants on a
cashless basis. Holders of the warrants are entitled to full ratchet
anti-dilution protection for issuances of common stock or common stock
equivalents, prior to the effective date of the registration statement covering
the resale of the shares of common stock underlying the Preferred Stock, at less
than the exercise price of such warrants. Holders of warrants also have standard
anti-dilution protection for splits, dividends, subdivisions, distributions,
reclassifications and combinations of our common stock. None of the individual
holders of the Warrants are entitled to exercise any such Warrant held by them,
if such exercise would cause such holder to be deemed to beneficially own in
excess of 4.999% of the outstanding shares of our Common stock on the date of
issuance of such shares.

PREFERRED STOCK CONVERSION RIGHTS. All or any portion of the stated value of
Preferred Stock outstanding may be converted into common stock at anytime by the
purchasers. The initial fixed conversion price of the preferred stock is $1.00
per share ("Conversion Price"). The Conversion Price is subject to anti-dilution
protection adjustments, on a full ratchet basis, at anytime that the preferred
stock is outstanding and prior to the effective date of the registration
statement required to be filed pursuant to the Registration Rights Agreement,
upon our issuance of additional shares of common stock, or securities
convertible into common stock, at a price that is less than the then Conversion
Price.

DIVIDENDS. The Preferred Stock accrues dividends at a rate of 5% per annum,
payable semiannually on July 1 and January 1 in cash, by accretion of the stated
value or in shares of common stock. Subject to certain terms and conditions, the
decision whether to accrete dividends to the stated value of the Preferred Stock
or to pay for dividends in cash or in shares of common stock, shall be at our
discretion.



<PAGE>


REDEMPTION. On March 15, 2008 (the "Redemption Date"), all of the outstanding
Preferred Stock shall be redeemed for a per share redemption price equal to the
stated value on the Redemption Date (the "Redemption Price"). The Redemption
Price is payable by us in cash or in shares of common stock at our discretion
and shall be paid within five trading days after the Redemption Date. In the
event we elect to pay all or some of the Redemption Price in shares of common
stock, the shares of common stock to be delivered to the purchasers shall be
valued at 85% of the fifteen-day volume weighted average price of the common
stock on the Redemption Date.

RIGHT TO COMPEL CONVERSION. If, on any date after March 15, 2006, (A) the
closing market price per share of our common stock for ten (10) consecutive
trading days equals at least $4.00 (subject to adjustment for certain events),
and (B) the average reported daily trading volume during such ten-day period
equals or exceeds 100,000 shares, then we shall have the right, at our option,
to convert, all, but not less than all, of the outstanding shares of Preferred
Stock at the Conversion Price; provided that there shall be an effective
registration statement covering the resale of the shares of common stock
underlying the preferred stock at all times during such 10-day period and during
the 30-day notice period to the holders thereof.

RESTRICTIONS ON CONVERSION OF PREFERRED STOCK. No holder of our Preferred Stock
is entitled to receive shares upon payment of dividends on the Preferred Stock,
or upon conversion of the Preferred Stock held by such holder if such receipt
would cause such holder to be deemed to beneficially own in excess of 4.999% of
the outstanding shares of our common stock on the date of issuance of such
shares (such provision may be waived by such holder upon 61 days prior written
notice to us). In addition, no individual holder is entitled to receive shares
upon payment of dividends on the Preferred Stock, or upon conversion of the
Preferred Stock held by such holder if such receipt would cause such holder to
be deemed to beneficially own in excess of 9.999% of the outstanding shares of
our common stock on the date of issuance of such shares (such provision may be
waived by such holder upon 61 days prior written notice to us).

REGISTRATION RIGHTS. Pursuant to the terms of a Registration Rights Agreement
between us and the holders of the preferred stock, we are obligated to file a
registration statement on Form SB-2 registering the resale of shares of our
common stock issuable upon conversion of the preferred stock and exercise of the
warrants. We are required to file the registration statement on or before April
24, 2005 and have the registration statement declared effective on or before
July 13, 2005. If the registration statement is not declared effective within
the timeframe described, or if the registration is suspended other than as
permitted in the Registration Rights Agreement, we will be obligated to pay each
holder a fee equal to 1.0% of such holders purchase price of the Preferred Stock
during the first 90 days, and 2.0% for each 30 day period thereafter (pro rated
for partial periods), that such registration conditions are not satisfied.

RIGHT OF FIRST REFUSAL. Subject to certain conditions, we have granted the
holders a right of first refusal, for a period until one (1) year from the
effective date of the registration statement required to be filed in connection
with the purchase of the Preferred Stock, to participate in any subsequent
financing that we conduct.

VOTING RIGHTS. Holders of the Preferred Stock shall have no voting rights.
However, so long as any shares of Preferred Stock are outstanding, we shall not,
without the affirmative vote of the holders of a majority of the shares of the
Preferred Stock then outstanding, (a) alter or change adversely the powers,
preferences or rights given to the Preferred Stock or alter or amend the Series
A Certificate of Designation, (b) authorize or create any class of stock ranking
as to dividends or distribution of assets upon a liquidation senior to or
otherwise pari passu with the Preferred Stock, (c) amend our certificate or
articles of incorporation or other charter documents so as to affect adversely
any rights of the holders of the Preferred Stock, (d) increase the authorized
number of shares of Preferred Stock, or (e) enter into any agreement with
respect to the foregoing.

LIQUIDATION PREFERENCE. Upon our liquidation, dissolution or winding up, whether
voluntary or involuntary (a "Liquidation"), the holders of the Preferred Stock
shall be entitled to receive out of our assets, whether such assets are capital
or surplus, for each share of Preferred Stock an amount equal to the stated
value per share before any distribution or payment shall be made to the holders
of any of our securities with rights junior to the Preferred Stock, and if our
assets shall be insufficient to pay in full such amounts, then the entire assets
to be distributed to the holders of the Preferred Stock shall be distributed
among such holders ratably in accordance with the respective amounts that would
be payable on such shares if all amounts payable thereon were paid in full.



<PAGE>

ANTI-DILUTION. Holders of the Preferred Stock are entitled to full ratchet
anti-dilution protection for issuances of common stock or common stock
equivalents, prior to the effective date of the registration statement covering
the resale of the shares of common stock underlying the Preferred Stock, at less
than the Conversion Price. Holders of Preferred Stock also have standard
anti-dilution protection for splits, dividends, subdivisions, distributions,
reclassifications and combinations of our common stock.


6 - COMMITMENTS AND CONTINGENCIES

OPERATING LEASES - The Company is committed under various non-cancelable
operating leases which expire through November 2006. Future minimum rental
commitments are as follows: 2005-$53,000 and 2006-$101,000. Rent expense charged
to operations was approximately $61,000 for the six months ended June 30, 2005
(2004: $59,000).

LINE OF CREDIT - The Company has a line of credit to borrow up to $1,000,000,
bearing interest at the rate of prime plus 1% and secured by all of the assets
of the Company. Interest payments are due monthly and all unpaid interest and
principal is due in full on August 24, 2005. Upon certain events of default as
more fully described in the agreement, the default variable interest rate
increases to prime plus 3%. The Company had $66,964 available for use at June
30, 2005.

LETTERS OF CREDIT - The Company issues letters of credit in the normal course of
business. Syscan had no outstanding letters of credit as of June 30, 2005.

EMPLOYMENT AGREEMENTS - The Company maintains employment agreements with its
executive officers which extend through 2008. The agreements provide for a base
salary, annual bonus to be determined by the Board of Directors, termination
payments, stock options, non-competition provisions, and other terms and
conditions of employment. In addition, the Company maintains employment
agreements with other key employees with similar terms and conditions.

LITIGATION, CLAIMS AND ASSESSMENTS - On May 20, 2003, Syscan, Inc., the
Company's wholly-owned subsidiary, filed a lawsuit named SYSCAN, INC. V.
PORTABLE PERIPHERAL CO., LTD. ("PPL"), IMAGING RECOGNITION INTEGRATED SYSTEMS,
INC., CARDREADER INC. AND TARGUS INC. (Case No. C03-02367 VRW) in United States
District Court, Northern District of California. Syscan alleges claims against
the above-mentioned parties for patent infringement of patent nos. 6,054,707,
6,275,309 and 6,459,506, and unfair competition. Syscan expects to continue the
case unless a reasonable settlement amount from the defendants or a licensing
agreement to the satisfaction of Syscan is entered.

Syscan is seeking: (1) a temporary restraining order, preliminary injunction and
permanent injunction against defendants, restraining defendants from patent
infringement and unfair competition; (2) treble damages due to defendants'
willful infringement; (3) punitive damages; (4) accounting of unjust enrichment
by defendants, resulting from defendants' unfair competition; and (5) attorney's
fees and costs.

The defendants are jointly represented by PPL's counsel. PPL has initiated
counterclaims against Syscan for patent invalidity. Syscan has not yet been able
to quantify its damage claim against PPL. Syscan intends to vigorously pursue
this claim and denies PPL's counterclaim of patent invalidity.

The Company experiences routine litigation in the normal course of its business
and does not believe that any pending litigation will have a material adverse
effect on the Company's financial condition, results of operations or cash
flows.




<PAGE>


ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS


     Management's discussion and analysis of financial condition and results of
operations (MD&A) is provided as a supplement to the accompanying consolidated
financial statements and footnotes to help provide an understanding of our
financial condition, changes in financial condition and results of operations.

The MD&A is organized as follows:

     o   OVERVIEW. This section provides a general description of our business,
         as well as recent developments that we believe are important in
         understanding the results of operations and to anticipate future trends
         in those operations.

     o   CRITICAL ACCOUNTING POLICIES. This section provides an analysis of the
         significant estimates and judgments that affect the reported amounts of
         assets, liabilities, revenues and expenses, and related disclosure of
         contingent assets and liabilities.

     o   RECENT ACCOUNTING PRONOUNCEMENTS. This section provides an overview of
         recent accounting pronouncements and their expected impact on our
         financial condition and results of operations.

     o   RESULTS OF OPERATIONS. This section provides an analysis of our results
         of operations for the periods ended June 30, 2005 compared to the same
         periods in 2004. A brief description is provided of transactions and
         events, including related party transactions that impact the
         comparability of the results being analyzed.

     o   LIQUIDITY AND CAPITAL RESOURCES. This section provides an analysis of
         our financial condition and cash flows as of and for the quarter ended
         June 30, 2005.


     The following management's discussion and analysis should be read in
conjunction with our consolidated unaudited financial statements for the three
and six month periods ended June 30, 2005 and 2004 and related condensed notes
to those financial statements.

OVERVIEW

         Management's Discussion and Analysis (MD&A) contains statements that
are forward-looking. These statements are based on current expectations and
assumptions that are subject to risks and uncertainties. Actual results could
differ materially because of factors discussed in our Form 10-KSB as filed with
the Securities and Exchange Commission on March 31, 2005, as well as other
factors which we cannot predict and that are not within our control. We
undertake no duty to update any forward-looking statement to conform the
statement to actual results or changes in our expectations.

         We are in the business of developing, designing and delivering imaging
technology solutions. Our approach to research and development (R&D) is focused
on creating new deliverable and marketable technologies. We sell our products to
clients' throughout the world, including the United States, Canada, Europe,
South America, Australia and Asia. We intend to expand our business and product
offerings into the much larger image display market where we intend to leverage
our experience and expertise. We also believe that we may benefit from a level
of transfer of technologies from image capture to image display.

         We design and manufacture imaging technology solutions for a worldwide
customer base. Our core business is currently focused on the manufacturing and
worldwide delivery of 20 plus mobile image-scanning products, which has allowed
us to become the largest OEM - private label manufacturer of USB driven mobile
scanning systems for a large number of major brands. Our strong intellectual
property portfolio in the imaging area consists of 19 patents with an additional
3 patents pending. We have 3 patent applications currently pending with the US
Patent & Trademark Office, 2 of which relate to image display technology and one
of which relates to image scanning.



<PAGE>


         In 2003, we began developing new technologies targeted towards the flat
panel LCD display market. A natural extension of their patented image scanning
technologies multiple products are in development with the first expected to
reach the marketplace in the second half of 2006. The products are designed to
significantly enhance picture quality, decrease power consumption, extend
product life and greatly reduce the manufacturing costs associated with
flat-panel televisions.

         Our strategy continues to be to expand our image capture product line
and technology while leveraging our assets in other areas of the imaging
industry. We are actively shipping five categories of image capture products
under the Travel Scan marquee or their OEM counterparts. These categories
include A4 format document scanners which represented approximately 23% of our
sales during the three month period ended June 30, 2005 and 28% of our sales
during the six month period ended June 30, 2005. The A6 format scanners that are
ideal for ID cards & checks, is our best selling product and represented
approximately 40% and 46%, respectively, of our sales during each of the three
and six month periods ended June 30, 2005. The A8 format that is primarily sold
for use as a business card reader represented approximately 17% and 12%,
respectively, of our sales during each of the three and six month periods ended
June 30, 2005. The A5 format scanner also used for ID cards and security
documents represented approximately 11% and 7%, respectively, of our sales
during each of the three and six month periods ended June 30, 2005. We also
manufacture and sell the Contact Image Sensor (CIS) Modules that we use in our
products and separately as a component to other manufacturers which represented
11% of our three month sales and 5% of our six month sales for the period ended
June 30, 2005.

         For the remainder of this year, we will expand our image capture
product line with three new products. The first product is a true-duplex
high-speed A4 scanner in which we have strong market interest. The second
product is an A6 scanner that follows in the footsteps of the current 662 but is
high speed and will have the expanded ability of duplex scanning. The third
product is a specialized security document scanner that utilizes infrared light
sources to help in the process of identifying fraudulent or tampered with
documents.

         While we continue to grow our presence in image capture technology, we
have begun creating, through research and development, new technology solutions
for the substantially larger, image display market. More specifically we are
creating products and technologies to accent and enhance the Liquid Crystal
Display (LCD) and Plasma Display Panel (PDP) television market. Our first image
display products are expected to be available for delivery during the second
half of 2006 under the SysView brand name. These SysView display products will
include highly integrated, high performance video processors that combine
state-of-the-art scaling and video processing techniques for displaying analog
and digital video/graphics on our LCD-PDP TV products. We believe that these
products will provide advanced image processing, including High-Definition (HD)
products, that will greatly enhance display quality. The next product/technology
that we are developing is a Light Emitting Diode (LED) backlighting solution to
replace the industries current standard Cold Cathode Fluorescent Lamp (CCFL).
The principal behind this technology is related to the proprietary technology
used in our image capture products. The benefits are substantial, including
longer life, higher dimming ratio, sharper contrast, and near high definition
resolution without filters, all at a performance value.

         In addition to future products and technologies in various stages of
research and development, one of our objectives is to acquire companies in the
image capture and display industry that could compliment our business model,
improve our competitive positioning and expand our offerings to the marketplace,
of which there can be no assurance. In identifying potential acquisition
candidates we will seek to acquire companies with varied distribution channels,
rich intellectual property (IP) and high caliber engineering personnel.

CRITICAL ACCOUNTING POLICIES

         Our discussion and analysis is based upon our consolidated financial
statements, which have been prepared in accordance with accounting principles
generally accepted in the United States. The preparation of these financial
statements requires us to make estimates and judgments that affect the reported
amounts of assets, liabilities, revenues and expenses, and related disclosure of
contingent assets and liabilities. On an on-going basis, we evaluate our
estimates, including those related to revenue recognition, accounts receivable
and allowance for doubtful accounts, inventories, intangible and long-lived



<PAGE>


assets, and income taxes. We base our estimates on historical experience and on
various other assumptions that are believed to be reasonable under the
circumstances, the results of which form the basis for making judgments about
the carrying values of assets and liabilities that are not readily apparent from
other sources. Actual results may differ from these estimates under different
assumptions or conditions.

         An accounting policy is deemed to be critical if it requires an
accounting estimate to be made based on assumptions about matters that are
highly uncertain at the time the estimate is made, and if different estimates
that reasonably could have been used or changes in the accounting estimate that
are reasonably likely to occur could materially change the financial statements.

         We believe the following critical accounting policies reflect our more
significant estimates and assumptions used in the preparation of our
consolidated financial statements:

REVENUE RECOGNITION

         Revenues consist of sales of merchandise, including optical image
capturing devices, modules of optical image capturing devices, and chips and
other optoelectronic products. Revenue is recognized when the product is shipped
and the risks and rewards of ownership have transferred to the customer. We
recognize shipping and handling fees as revenue, and the related expenses as a
component of cost of sales. All internal handling charges are charged to
selling, general and administrative expenses.

ACCOUNTS RECEIVABLE AND ALLOWANCE FOR DOUBTFUL ACCOUNTS

         We present accounts receivable, net of allowances for doubtful
accounts, to ensure accounts receivable are not overstated due to
uncollectibility. The allowances are calculated based on detailed review of
certain individual customer accounts, historical rates and an estimation of the
overall economic conditions affecting our customer base. We review a customer's
credit history before extending credit. If the financial condition of our
customers were to deteriorate, resulting in an impairment of their ability to
make payments, additional allowances may be required. In the event that our
trade receivables became uncollectible after exhausting all available means of
collection, we would be forced to record additional adjustments to receivables
to reflect the amounts at net realizable value. The effect of this entry would
be a charge to income, thereby reducing our net profit. Although we consider the
likelihood of this occurrence to be remote based on past history and the current
status of our accounts, there is a possibility of this occurrence.

INVENTORIES

             Inventories consist of finished goods, which are stated at the
lower of cost or net realizable value, with cost computed on a first in,
first-out basis. Provision is made for obsolete, slow-moving or defective items
where appropriate. The amount of any provision of inventories is recognized as
an expense in the period the provision occurs. The amount of any reversal of any
provision is recognized as other income in the period the reversal occurs. Our
inventory purchases and commitments are made in order to build inventory to meet
future shipment schedules based on forecasted demand for our products. We
perform a detailed assessment of inventory for each period, which includes a
review of, among other factors, demand requirements, product life cycle and
development plans, component cost trends, product pricing and quality issues.
Based on this analysis, we record adjustments to inventory for excess,
obsolescence or impairment, when appropriate, to reflect inventory at net
realizable value. Revisions to our inventory adjustments may be required if
actual demand, component costs or product life cycles differ from our estimates.
In the event we were unable to sell our products, the demand for our products
diminished, other competitors offered similar or better technology, and/or the
product life cycles deteriorated causing quality issues, we would be forced to
record an adjustment to inventory for impairment or obsolescence to reflect
inventory at net realizable value. The effect of this entry would be a charge to
income, thereby reducing our net profit. Although we consider the likelihood of
this occurrence to be remote based on our forecasted demand for our products,
there is a possibility of this occurrence.



<PAGE>


INTANGIBLE AND LONG-LIVED ASSETS

         We evaluate our intangible assets and long-lived assets, which
represent goodwill, long-term investments, and fixed assets, for impairment
annually and when circumstances indicate the carrying value of an asset may not
be recoverable. If impairment exists, an adjustment is made to write the asset
down to its fair value, and a loss is recorded as the difference between the
carrying value and fair value would be charged to operations. We do not believe
any impairment exists for any of these types of assets as of June 30, 2005.

INCOME TAXES

         We account for income taxes under the provisions of Statement of
Financial Accounting Standards ("SFAS" No. 109), "Accounting for Income Taxes,"
whereby deferred income tax assets and liabilities are computed for differences
between the financial statements and tax bases of assets and liabilities that
will result in taxable or deductible amounts in the future, based on enacted tax
laws and rates applicable to the periods in which the differences are expected
to affect taxable income. Valuation allowances are established when necessary to
reduce deferred income tax assets to the amount expected to be realized.

CONTINGENCIES

         Currently, there are no outstanding legal proceedings or claims, other
than that disclosed in Note 6 of the Consolidated Financial Statements. The
outcomes of potential legal proceedings and claims brought against us are
subject to significant uncertainty. SFAS 5, ACCOUNTING FOR CONTINGENCIES,
requires that an estimated loss from a loss contingency such as a legal
proceeding or claim should be accrued by a charge to income if it is probable
that an asset has been impaired or a liability has been incurred and the amount
of the loss can be reasonably estimated. Disclosure of a contingency is required
if there is at least a reasonable possibility that a loss has been incurred. In
determining whether a loss should be accrued we evaluate, among other factors,
the degree of probability of an unfavorable outcome and the ability to make a
reasonable estimate of the amount of loss. Changes in these factors could
materially impact our financial position or results of operations.

RECENT ACCOUNTING PRONOUNCEMENTS

         In December 2004, the FASB issued SFAS No. 123 (Revised 2004)
"Share-Based Payment" ("SFAS No. 123R"). SFAS No. 123R addresses all forms of
share-based payment ("SBP") awards, including shares issued under employee stock
purchase plans, stock options, restricted stock and stock appreciation rights.
SFAS No. 123R will require the Company to expense SBP awards with compensation
cost for SBP transactions measured at fair value. On March 29, 2005, the SEC
issued Staff Accounting Bulletin (SAB) 107 which expresses the views of the SEC
regarding the interaction between SFAS No. 123R and certain SEC rules and
regulations and provides the SEC's views regarding the valuation of share-based
payment arrangements for public companies. In April 2005, the SEC issued a
release which amends the compliance dates for SFAS No. 123R. We expect the
adoption of SFAS No. 123R and SAB 107 to have a material impact on the Company's
financial statements.

         In May 2005, the FASB issued SFAS No. 154, "Accounting Changes and
Error Corrections". SFAS No. 154 replaces APB Opinion No. 20 "Accounting
Changes" and SFAS No. 3, "Reporting Accounting Changes in Interim Financial
Statements". SFAS No. 154 requires retrospective application to prior periods'
financial statements of changes in accounting principle, unless it is
impracticable to determine either the period-specific effects or the cumulative
effect of the change. We do not expect the adoption of SFAS No. 154 to have any
impact on the Company's financial statements.


RESULTS OF OPERATIONS - THREE MONTHS AND SIX MONTHS ENDED JUNE 30, 2005 COMPARED
TO THREE MONTHS AND SIX MONTHS ENDED JUNE 30, 2004




<PAGE>


REVENUE

         Product revenues increased to $1.49 million for the quarter ended June
30, 2005 from $0.975 million for the same period in fiscal 2004, an increase of
approximately $512,000 or 52.5%. For the six month period ended June 30, 2005
revenues were $3.195 million, an increase of $0.714 million, or 28.7%, from the
first six month period of 2004. This increase in revenues for the period is
primarily the result of improved product sales and marketing efforts to shift
our business emphasis to less seasonal sensitive channels. Once again, scanner
and sensor imaging products represented over 98% of our revenues for the quarter
ended and year-to-date. During the quarter ended June 30, 2005, our top four
customers accounted for approximately 71% of total revenues. During the same
period ended June 30, 2004, our top four customers accounted for approximately
84% of total revenues. For the six months ended June 30, 2005, our top four
customers accounted for approximately 76% of total revenues versus 74% for the
same six month period in 2004. The loss of any of these larger clients could
have a material adverse effect on our business.

COST OF SALES AND GROSS PROFIT

         Cost of goods sold (COGS) includes all direct costs related to the
transfer of scanners, imaging modules and services related to the delivery of
those items manufactured in China. COGS was approximately 59.3% and 62.1% for
the three and six months ended June 30, 2005, respectively, compared to 63.3%
and 66.7%, respectively, for the same period in 2004. Our COGS decreased as a
percentage of revenues primarily as a result of slightly higher gross margins
and better price elasticity, particularly with the A6 format products. We expect
that our COGS will remain the same or slightly higher during 2005 as a result of
higher fuel costs and currency exchange rates in Mainland China. Accordingly,
gross profit increased for all periods presented compared to the same periods in
the prior period as a direct result of increased higher sales revenue and better
margins on specialty scanning products related to unique or proprietary design
of our products. We anticipate that our gross profit margins may continue to
increase as we gain better control over our source parts cost and logistics.

SELLING AND MARKETING

         Selling and marketing expenses include payroll, employee benefits and
other costs associated with sales, marketing and account management personnel.
Other direct selling and marketing costs include market development funds and
promotions (retail channels only), tradeshows, website support costs,
warehousing, logistics and certain sales representative fees. Selling and
marketing expenses increased to $198,753 for the quarter ended June 30, 2005
from $172,163 in the comparable period in 2004 and to $350,861 for the six
months ended June 30, 2005 from $366,437 in the comparable period in 2004. This
represents an increase of $26,590 or approximately 15% for the quarter ended
June 30, 2005 over the same period in 2004, however the six month expenditures
actually decreased by $15,576, or 4%, from the comparable period in 2004. The
moderate increase during the quarter ended June 30, 2005 is primarily due a
major trade show campaign in April and May 2005 that included exhibitions in
Philadelphia (AIIM Show), Boston (SID show) and Taipei (Computex show). The
timing on these industry keynote shows happened to occur during the quarter
ended June 30, 2005 and significantly contributed to the increased expenditures.
In 2004 we only attended the Computex show during the comparable period.

GENERAL AND ADMINISTRATIVE

         General and administrative (G&A) costs include payroll, employee
benefits, and other headcount-related costs associated with the finance, legal,
facilities and certain human resources, as well as legal and other professional
and administrative fees. General and administrative expenses increased to
$351,115 for the quarter ended June 30, 2005 and $648,447 for the six months
ended June 30, 2005 from $193,407 and $341,957, respectively, for the comparable
three and six month periods in fiscal 2004, an increase of $157,708 and
$306,490, respectively, for the three and six month periods ended June 30, 2005


<PAGE>



or approximately an 82% and 89% increase for three and six month periods ended
June 30, 2005. The increase for each of the three and six month periods ended
June 30, 2005 is primarily attributable to additional personnel costs and
outside fees incurred in connection with our public listing compliance expense.
We see our costs in this area continuing to increase over the remainder of this
year, possibly in excess of $1.2M for FY 2005

STOCK-BASED COMPENSATION COST

         Stock-based compensation cost of $2,812,000 represents a non-cash
charge to our statement of operations as a result of granting certain options to
certain executive officers and key employees at less than the fair market value
on the date of grant.

RESEARCH AND DEVELOPMENT

         Research and Development (R&D) costs include payroll, employee
benefits, and other headcount-related costs associated with the product design,
development, compliance testing, documentation and transition to production. R&D
expenses increased to $162,576 for the quarter ended June 30, 2005 from $117,352
for the same period in fiscal 2004, an increase of $45,224 or approximately 39%.
The increase for the quarter ended June 30, 2005 is primarily attributable to a
greater emphasis on the development of new products such as the planned line of
duplex scanners and advanced display systems. These were products that we were
not directly expending R&D dollars to develop during the same period in the
previous year. For the six months ended June 30, 2005, R&D expenses increased by
$107,876, or 47%, to $338,573 from $230,697 for the same comparable in fiscal
2004.

OTHER INCOME (EXPENSE)

         Our other income (expense) for the quarters and six months ended June
30, 2005 and 2004 was immaterial to the overall financial statements for both
periods presented.

NET LOSS

         Net loss for the quarter ended June 30, 2005 was approximately
($2,908,182) compared to net loss of approximately ($2,931,347) during the same
period in 2004. The decrease in net loss was primarily the result of the growth
in revenues during the current quarter versus the same period last year. The
substantial increase in G&A and R&D expenses in the recent quarter ended,
continues to impair our profitability. We see these increased expenses as
important as we prepare our financial strength and product innovation to meet
future revenue growth.

PREFERRED DEEMED DIVIDENDS

Preferred deemed dividends represents a non-cash item to the statement of
operations to accrue the 5% dividends due per annum on our convertible preferred
stock.

RELATED PARTY TRANSACTIONS

         We purchase significantly all of our finished scanner imaging products
from the parent company of our majority stockholder, Syscan Technology Holdings
Limited ("STH"). Our Chairman and CEO, Darwin Hu, was formerly the CEO of STH,
and beneficially owns approximately 5.33% of the issued and outstanding capital
stock of STH.

         The following is a summary of significant related party transactions,
which were carried out in the normal course of our business, during the six
months ended June 30, 2005 and 2004:

<TABLE>
<CAPTION>


                                                                 Q2 2005               Q2 2004
                                                           -----------------     -----------------
<S>                                                     <C>                   <C>
SYSCAN Optoelectronics Technology Co. Ltd., a
wholly-owned subsidiary of STH (purchases)                                -               $0.286M
SYSCAN Intervision Limited, a wholly-owned subsidiary of
STH (purchases)                                                           -               $0.240M
                                                           =================     =================

SYSCAN  Lab Limited Company Limited, a wholly-owned
subsidiary of STH (purchases)                                       $0.713M                   $--
                                                           =================     =================
</TABLE>


         Amounts due to/from related parties are unsecured, interest-free and
repayable on demand and consisted of the following:



Due from STH                                             $       445,998

Due from Majority Stockholder                                    100,000

Due from various subsidiaries wholly-owned by STH              1,954,531
                                                               ---------

                                                         $     2,500,529
                                                         ----------------










LIQUIDITY AND CAPITAL RESOURCES

         Cash and cash equivalents were approximately $2,200,000 as of June 30,
2005 and working capital on June 30, 2005 was approximately $5,123,000. Cash and
working capital increased from year end primarily attributable to the cash
proceeds of approximately $1,630,000 received from our convertible preferred
stock offering completed in March 2005.

OPERATING ACTIVITIES. Net cash flows provided by operating activities was
$227,146 and $328,899 for the six months ended June 30, 2005 and 2004,
respectively. Net cash provided by operating activities for both periods
presented is primarily explained by decreases in accounts receivable
representing cash collections from the prior year's fourth quarter and decreases
in inventory levels as sales increased.

INVESTING ACTIVITIES. Net cash flows from investing activities during the six
months ended June 30, 2005 and 2004 consisted primarily of cash paid for capital
expenditures.

FINANCING ACTIVITIES. Net cash flows provided by (used in) financing activities
for the six months ended June 30, 2005 and 2004 was $1,397,391 and ($906,831),
respectively. For 2005, we raised net cash of approximately $1,630,000 from the
sale of our convertible preferred stock offering completed in March 2005. For
both periods presented, advances to and/or repayments from related party
receivables and payables were made in the ordinary course of business.

         We have financed our activities primarily with cash flows from
operations, the sale of our equity securities and borrowings under our credit
facilities. We have a $1,000,000 bank line of credit, which bears interest at
prime plus one percent, which is secured by all of our general business assets.
The subject bank line of credit had $933,036 outstanding as of June 30, 2005. We
are currently negotiating with two insured banks to increase our line of credit
or other financing arrangements. We believe the existing working capital and
anticipated cash flows from operations are expected to be adequate to satisfy
our operating and capital requirements for the next 12 months at our current run
rate and our anticipated expansion.

         Our plans for the next twelve months include continuing to increase our
presence in the image capture market, heavily investing our resources into the
image display market and adding future products and technologies to our current
product offerings. Additionally, we intend to seek to identify acquisition
candidates in the image capture and display industry that we believe could
compliment our business model, improve our competitive positioning and expand
our offerings to the marketplace, of which there can be no assurance. In
identifying potential acquisition candidates, we will seek to acquire companies
with varied distribution channels, rich intellectual property (IP) and high
caliber engineering personnel.

         To finance our business expansion plans, we plan to aggressively pursue
additional sources of funds, the form of which will vary depending on the
prevailing market and other conditions, and may include the issuance and sale of
debt or equity securities. However, there is no assurance that such additional
funds will be available for us to finance our expansion plans. Furthermore,
there is no assurance the net proceeds from any successful financing arrangement
will be sufficient to cover cash requirements as we expand our business
operations.

CONCENTRATION OF CREDIT RISK

CONCENTRATION OF CREDIT RISK FOR CASH HELD AT BANKS. We maintain cash balances
at several banks. Accounts at each institution are insured by the Federal
Deposit Insurance Corporation up to $100,000.

CONCENTRATION OF CREDIT RISK DUE TO GEOGRAPHIC SALES AND SIGNIFICANT CUSTOMERS.
We operate in a single industry segment - scanner and fax modules. We market our
products in the United States, Europe and the Asia Pacific region through our
sales personnel and independent sales representatives.

Our geographic sales as a percent of total revenue were as follows for the
quarters ended June 30:

                                         2005               2004
                                    ----------------    --------------
United States                            73.0%              96.5%
Asia Pacific                             18.4%              0.1%
Europe and others                        8.6%               3.4%




Our geographic sales as a percent of total revenue were as follows for the six
month period ended June 30:

                                        2005               2004
                                    ---------------    --------------
United States                           86.4%              97.1%
Asia Pacific                            8.8%               0.1%
Europe and others                       4.8%               2.8%





Sales to major customers as a percentage of total revenues were as follows for
the quarters ended June 30:

                                        2005               2004
                                    ---------------    --------------
Customer A                               42%                54%
Customer B                               15%                14%
Customer C                               7%                 10%
Customer D                               7%                 6%






Sales to major customers as a percentage of total revenues for the six month
period ended June 30::

                                        2005               2004
                                    ---------------    --------------
Customer A                               34%                33%
Customer B                               15%                20%
Customer C                               15%                13%
Customer D                               12%                8%






CONCENTRATION OF CREDIT RISK DUE TO ACCOUNTS RECEIVABLE. Financial instruments
that potentially subject us to a concentration of credit risk consist primarily
of trade receivables. Our customers are concentrated in the industrial/consumer
electronics channels and with major original equipment manufacturers. As of June
30, 2005, the concentration was approximately 75% (3 customers). The loss of any
of these customers could have a material adverse effect on our results of
operations, financial position and cash flows.

CONCENTRATION OF CREDIT RISK DUE TO SIGNIFICANT VENDORS. For each of the periods
ended June 30, 2005 and 2004, our purchases have primarily been concentrated
with the wholly-owned subsidiary of our majority stockholder. If this vendor was


<PAGE>



unable to provide materials in a timely manner and we were unable to find
alternative vendors, our business, operating results and financial condition
would be materially adversely affected.

DUE TO PRODUCT SALES. We had 5 different product categories in the second
quarter of 2005 (2004: 5 products) and 3 different products during the six
months ended June 30, 2005 (2004: 5 products) that each accounted for more than
10% of sales. We have made positive efforts to mitigate the impact of loss of
any single category, however if any of these products were to become obsolete or
unmarketable and we were unable to successfully develop and market alternative
products, our business, operating results and financial condition could be
adversely affected.

ITEM 3.     CONTROLS AND PROCEDURES

         Based on an evaluation as of the date of the end of the period covered
by this report, our Chief Executive Officer and Chief Financial Officer,
conducted an evaluation of the effectiveness of the design and operation of our
disclosure controls and procedures, as required by Exchange Act Rule 13a-15.
Based on that evaluation, our Chief Executive Officer and Chief Financial
Officer concluded that our disclosure controls and procedures were effective as
of the end of the period covered by this report.

         There were no changes in our internal controls over financial reporting
that occurred during the quarter ended June 30, 2005 that have materially
affected, or are reasonably likely to materially affect, our internal control
over financial reporting.




<PAGE>


                           PART II - OTHER INFORMATION

ITEM 1.  LEGAL PROCEEDINGS.

We from time to time experience routine litigation in the normal course of our
business. Other than as previously reported in our Form 10-KSB for the year
ended December 31, 2004, as filed with the SEC on March 31, 2005, we are not a
party to any material legal proceedings and we do not believe that any pending
litigation will have a material adverse effect on our financial condition,
results of operations or cash flows.

ITEM 2.  UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.

During the quarter ended June 30, 2005, we did not repurchase any of our equity
securities. We do not currently have in place a repurchase program for the
repurchase of our common stock, nor do we have any plans to implement a common
stock repurchase program in the near future, if at all.

ITEM 3.  DEFAULTS IN SENIOR SECURITIES.

            None.

ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

            None.

ITEM 5.  OTHER INFORMATION.

            None.

ITEM 6.  EXHIBITS AND REPORTS

31       Rule 13a-14(a)/15d-14(a) Certifications.

32.1     Certification by the Chief Executive Officer Relating to a Periodic
         Report Containing Financial Statements.*

32.2     Certification by the Chief Financial Officer Relating to a Periodic
         Report Containing Financial Statements.*


* The Exhibit attached to this Form 10-QSB shall not be deemed "filed" for
purposes of Section 18 of the Securities Exchange Act of 1934 (the "Exchange
Act") or otherwise subject to liability under that section, nor shall it be
deemed incorporated by reference in any filing under the Securities Act of 1933,
as amended, or the Exchange Act, except as expressly set forth by specific
reference in such filing.





<PAGE>


                                   SIGNATURES

            In accordance with Section 13 or 15(d) of the Exchange Act, the
Registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.



Dated: August 15, 2005                By:    /S/ DARWIN HU
                                             ---------------------------------
                                      Name:  Darwin Hu
                                      Title: Chief Executive Officer

Dated: August 15, 2005                By:   /S/ WILLIAM HAWKINS
                                            ----------------------------------
                                      Name:  William Hawkins
                                      Title: Acting Chief Financial Officer



<PAGE>