# UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

# FORM 10-KSB

| | (Mark One)
| | ----------

|[x] |  | ANNUAL
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the
fiscal year ended December 31, 2004
|--- |  | --------------------------------------------------------------------------------------------------------------------------------

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

Commission File Number:   000-08149

SCANNER TECHNOLOGIES CORPORATION(Name of small business issuer in its charter)

|New Mexico                      |  | 85-0169650                        | 
|------------------------------- |  | --------------------------------- | 
|(State or other jurisdiction of |  | (IRS Employer Identification No.) | 
|incorporation or organization)  | 

14505 21st Avenue North, Suite 220, Minneapolis, MN 55447
(Address of principal executive offices, Zip code)

(763) 476-8271
(Issuers telephone number)

| | Securities registered pursuant to Section 12(b) of the Exchange Act: None
| | -------------------------------------------------------------------------

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

Common Stock, no par value
(Title of class)

Check whether the issuer
(1) filed all reports required to be filed by Section 13 or 15(d) of the
Exchange Act during the past 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.   [X]   Yes     [  ]   No

Check if there is no disclosure of
delinquent filers in response to Item 405 of Regulation S-B contained in this form, and no
disclosure will be contained, to the best of registrants knowledge, in definitive
proxy or information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB.   [X]

The issuers revenues
for its most recent fiscal year were $5,834,005.

The aggregate market value
of the voting stock held by non-affiliates of the Company at February 28, 2005, was
$15,132,762, assuming that all executive officers, directors and 10% shareholders
known to the registrant are affiliates.

The Registrant had
12,053,568 shares of Common Stock, no par value, outstanding as of February 28, 2005.

# DOCUMENTS INCORPORATED BY REFERENCE

Portions of the definitive Proxy or Information Statement
to be delivered to shareholders in connection with the 2005 Annual Meeting of Shareholders are incorporated by reference
into Part III.

Traditional Small Business Disclosure
Format (Check one)  [  ]  Yes     [X]  No

---

# SCANNER TECHNOLOGIES CORPORATION

# FORM 10-KSB

# Table of Contents

|                     |  | Page No.                                                      
|-------------------- |  | --------------------------------------------------------------
|PART I.              | 
|                    
|Item 1               |  | Description of Business.                                      
|                     | 
|Item 2               |  | Description of Property.                                      
|                     | 
|Item 3               |  | Legal Proceedings.                                            
|                     | 
|Item 4               |  | Submission of Matters to a Vote of Security Holders.          
|                     | 
|                    
|PART II              | 
|                     | 
|Item 5               |  | Market for Common Equity, Related Stockholder Matters and     
|                     |  | Small Business Issuer Purchases of Equity Securities.         
|                     | 
|Item 6               |  | Management's Discussion and Analysis or Plan of Operation.    
|                     | 
|Item 7               |  | Financial Statements.                                         
|                     | 
|Item 8               |  | Changes In and Disagreements With Accountants on Accounting   
|                     |  | and Financial Disclosure.                                     
|                     | 
|Item 8A              |  | Controls and Procedures.                                      
|                     | 
|Item 8B              |  | Other Information.                                            
|                     | 
|                    
|PART III             | 
|                     | 
|Item 9               |  | Directors and Executive Officers of Registrant.               
|                     | 
|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.                                                     
|                     | 
|Item 14              |  | Principal Accountant Fees and Services.                       
|                     | 
|SIGNATURES           |  | 17                                                            
|                     | 
|FINANCIAL STATEMENTS |  | F-1                                                           
|                     | 
|EXHIBITS             |  | E-1                                                           

2

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# Introductory Statement

This Annual Report on Form 10-KSB
includes forward-looking statements within the meaning of the Securities Exchange Act of
1934, as amended, or the Exchange Act. These statements are based on our beliefs and
assumptions and on information currently available to us. Forward-looking statements
include, among others, the information concerning possible or assumed future results of
operations of Scanner Technologies Corporation and its subsidiary (Scanner) set forth
under the heading Managements Discussion and Analysis or Plan of
Operation. Forward-looking statements also include statements in which words such as
may, will, should, could,
expect, anticipate, intend, plan,
believe, estimate, predict, potential, or
similar expressions are used. Forward-looking statements are not guarantees of future
performance. Our future results and shareholder values may differ materially from those
expressed in these forward-looking statements. We caution you not to put undue reliance on
any forward-looking statements included in this document.

# PART I

# ITEM 1. DESCRIPTION OF BUSINESS

# General Business Development

Scanner Technologies Corporation (the
Company) was formerly known as Southwest Capital Corporation (Southwest
Capital) and was incorporated in 1964 under the laws of New Mexico. Originally
formed to provide financial services to small businesses, the Company divested itself of
such operations in 1990 and did not operate any business from 1992 until July 2002 when it
merged with Scanner Technologies Corporation, a privately held Minnesota corporation
(Scanner Minnesota). Scanner Minnesota had been formed in 1990 for the purpose
of inventing, developing and marketing vision inspection solutions for the semiconductor
industry. The Company is the legal entity surviving such merger; it changed its name to
Scanner Technologies Corporation at the merger and has continued to operate
the business acquired from Scanner Minnesota.

The Companys principal offices
are located at 14505 21st Ave. N., #220, in Minneapolis, Minnesota. Outside of the U.S.,
the Company has an office in Singapore, which is primarily engaged in sales of Scanner
products. To comply with local laws, the office in Singapore is operated by Scanners
wholly-owned subsidiary, Scanner Technologies Corporation International, a Minnesota
corporation.

# Industry

Scanner invents, develops and markets
vision inspection products that are used in the semiconductor industry for the inspection
of integrated circuits.

Integrated circuits can be divided
into two general categories:

| | Leaded
devices: These are integrated circuits with fragile leads extending from the perimeter
of the package that provide the electrical interconnects between the integrated circuit
and the other components that constitute an electronic product.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Ball
array devices: These are integrated circuits that have an array of small conductive
spheres, or balls, mounted to the bottom of the integrated circuit package. These balls
serve the same function as the leads in the first category.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Integrated circuits are designed to
be assembled to circuit substrates or printed circuit boards that are key components of
familiar products such as personal computers, cell phones, TVs, automotive
electronics, games, toys, DVD and CD players, satellites and avionics to name a few. Each
and every lead or ball must be accurately placed as defined by the integrated circuit
package specification to insure a reliable

3

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interface between the lead/ball and
the circuit substrate. Any misalignment, due to bent leads, imperfectly placed or damaged
balls, or missing balls will result in a defective product.

The manufacture of integrated
circuits is a complex sequence of discrete steps that requires precise process controls
and verification through testing.

The last three steps prior to the
final Pack & Ship  1st Vision Inspection,
Electrical Test and 2nd Vision Inspection are the focus of
Scanners design efforts. During the final stages of the manufacturing process,
Singulation Trim & Form Ball Attach and Electrical Test, the
integrated circuits can be damaged requiring the 1st Vision Inspection and
2nd Vision Inspection.

# Scanner Products

Three-dimensional (3D) Inspection Modules

Many manufacturers of integrated circuit
devices use robotic inspection systems with a pick and place mechanism to automatically
inspect and sort integrated circuits in the manufacturing process. Such an inspection
system uses machine vision technology to inspect both leaded and ball array devices to
ensure that the devices conform to the specifications, then sorts them into pass or fail
categories. The inspection system can also perform other operations such as inspecting the
nomenclature printed on the package of the integrated circuit and sealing the good parts
into tape. The 3D inspection modules developed and manufactured by Scanner form the
machine-vision element of such inspection systems.

Customers purchasing Scanners
modules are generally included in the following two groups:

| | Original
Equipment Manufacturers (OEM) which integrate Scanners modules into robotic
inspection systems they produce for sale to end users; and
| | ------------------------------------------------------------------------------------------------------------------------------------------------

| | End
users themselves, i.e. the manufacturers and assemblers of integrated circuits.
| | -----------------------------------------------------------------------------------

Scanner has developed the following
core products as inspection modules:

| | UltraVim
Module, used for 3D inspections of leaded devices and 2D inspections of ball devices.
| | ----------------------------------------------------------------------------------------------

| | UltraVim
Plus Module, used for 3D inspections of leaded devices as well as of ball devices.
| | -------------------------------------------------------------------------------------------

4

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| | UltraMark,
used for the inspection of the nomenclature printed or etched on integrated circuits to
insure that the markings are correct and legible.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------

The UltraVim Module and the UltraVim
Plus Module incorporate technology covered by patents owned by the Company.

The Company believes that
Scanners inspection modules have the following competitive advantages when compared
with similar products offered by Scanners competitors:

| |  |  | Scanners
modules do not have to be adjusted for various users, thereby reducing the operator skill
required to operate the inspection system and, therefore, lowering the associated labor
rate to the end user.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  |  | Scanners
modules are easy to set up and do not require extensive training, thereby reducing device
changeover costs and lowering operator training and support costs to the end user.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  |  | Scanners
modules make the high speed inspection of integrated circuits possible, thereby
increasing the manufacturing efficiency while reducing the total number of machines
required, which results in increased profits to the end user.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  |  | The
automatic calibration of Scanners modules insures accurate inspections resulting in
increased yields and profits to the customer and lowers the operator skill required to
maintain the equipment and the associated labor rate to end user.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Three-dimensional (3D) Inspection Systems

In July 2002, Scanner introduced the
first in a series of products of three-dimensional inspection systems under the product
line name VisionFlex. Sales of these inspection systems commenced during the
year ended December 31, 2003.

# Markets for Scanners Products

According to the Semiconductor
Industry Association (SIA), global semiconductor sales rose to $213 billion in 2004, up
28% from the global revenue of $166.4 billion recorded in 2003. In January 2005, SIA
projected for 2005 essentially flat sales at the level of 2004. Industry performance
depends on consumer electronics because purchases by individual consumers now account for
more than half of all chip sales, according to SIA.

Sales of semiconductor equipment were
estimated to have reached $35.31 billion in 2004. According to a forecast published in
December of 2004 by Semiconductor Equipment and Materials International
(SEMI), a trade association of semiconductor equipment and material
manufacturers, sales of semiconductor equipment are expected to decline by 5.15% in 2005,
to a total of $33.49 billion. According to SEMI, electronics makers earmarked
chip-intensive consumer products such as flat-panel TVs for growth and increased
production, but a slower-than-expected demand led to increased inventories, which hurt the
chip demand and resulted in reduced capital investments by semiconductor makers. However,
SEMI expects the semiconductor equipment market to grow again in 2006, expanding by 3.07%
to $34.52 billion, before growing by 14.76% to $39.61 billion in 2007.

These predictions regarding both
semiconductor sales and sales of semiconductor equipment may prove to be incorrect,
however, and we can provide no assurances as to the performance of the worldwide
semiconductor equipment market.

As shown in the flow chart above,
the first vision inspection in a standard assembly process is followed by the electrical
test that is in turn followed by a second vision inspection. During the electrical test,
the leads/balls of the integrated circuit must make physical contact with the tester
which carries the risk of damaging the integrated circuit itself. This risk makes the
second vision inspection necessary to ensure

5

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that the integrated circuit complies
with the device specifications before shipment. A substantial portion of our sales are
derived from the integration of the UltraVim or the UltraVim Plus Module into existing
test handlers, thereby eliminating the need for the stand-alone second vision inspection.

# Sales and Marketing

Scanner sells its products through
direct sales offices in San Jose, California and Singapore and, in key geographical
markets, through sales representatives throughout the world. For Japan, Scanner has a
distributor agreement with Yamatake Honeywell.

# Manufacturing

Scanner designs its own products and
out-sources the manufacturing of parts. The Companys research and development,
engineering and designing operations, as well as the system assembly, are located at the
facility in Tempe, Arizona. The vision inspection modules that are sold to our OEM
customers or built into the systems the Company is currently manufacturing are assembled
at the Companys facility in Minneapolis, Minnesota.

# Competition

The market for the inspection of
integrated circuits is highly competitive. Numerous companies, several of them public
companies with greater financial resources and a longer operating history, compete with
Scanner for market share. Competitors are, among other companies, ICOS Vision Systems
Corp. N.V. and Robotic Vision Systems, Inc.

# Proprietary Rights

The Company holds nine U.S. patents
for Scanners innovative technologies and additional patents are pending in the
United States and strategic countries worldwide. The patents essential for the
Companys product development and manufacturing will expire from May 2017 through
January 2018.

# Dependence on Few Major Customers

Approximately 62% of the
Companys revenues in 2004 were from three customers. They included Manufacturing
Integration Technology Ltd. (32%), Yamatake & Co., Ltd. (17%) and Hon Technologies,
Inc. (13%).

# Employees

As of December 31, 2004, Scanner
employed six people at its manufacturing facility in Tempe, Arizona, seven people at its
facility in Minneapolis, Minnesota, and three people in its other offices in San Jose,
California, and Singapore. Five of these employees work in manufacturing, two work in
sales and marketing, two provide professional services such as training and general
product assistance, three work in product development and four provide general
administrative services. All of Scanners employees are working full-time.
Scanners relationships with its employees are good.

# ITEM 2. DESCRIPTION OF PROPERTY

The Company leases manufacturing and
administrative facilities in Minneapolis, Minnesota and Tempe, Arizona and also maintains
sales offices in San Jose, California and Singapore. The leases require monthly base rents
plus increases for operating expenses and/or property taxes. Approximate future minimum
lease payments are $113,400, $102,000 and $20,100 in 2005 through 2007, respectively. The
Company believes that its existing facilities are adequate to meet its current needs and
that suitable additional or alternative space will be available in the future on
commercially reasonable terms.

6

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# ITEM 3. LEGAL PROCEEDINGS

In 2000, the Company instituted a
lawsuit against ICOS Vision Systems Corp. N.V., a Belgian corporation (ICOS)
for infringement of two of its patents. The patents relate to three-dimensional ball array
inspection apparatus and method. In June 2003, the Company reached a settlement with ICOS
concerning one-illumination source inspection systems. Pursuant to the settlement
agreement, ICOS made a one-time payment of $400,000 to the Company to settle all issues
with regard to these one-light source inspections systems. The District Court found no
infringement with regard to the two-illumination source devices that ICOS sold. The
Company agreed to the settlement agreement with respect to one-light source devices in
order to allow it to immediately appeal the courts ruling concerning inspection
systems involving two-light sources, eliminating the need, delay and expense of a trial
with regard to these systems at this stage. In connection with the settlement, the Company
paid its President $160,000 pursuant to a prior agreement (See Executive
Compensation). The Company recorded the $400,000 settlement less the $160,000 paid
to its President in other income in its consolidated financial statements for the year
ended December 31, 2003. On April 23, 2004, the United States Court of Appeals ruled in
the Companys favor with regard to the two-illumination source devices, finding that
the claim terms  an illumination apparatus and illuminating in the
Companys patents encompass one or more illumination sources and overturned the
District Courts entry of summary judgment of no infringement. A trial date of March
14, 2005 has been set for the ongoing litigation with ICOS. The Company intends to
continue to vigorously enforce its patent rights and expects to incur significant
additional expenses in 2005 to pursue its claims. The Company believes that any
unfavorable decision will not have a material adverse effect on its consolidated financial
statements.

In 2002, the Company brought suit
against two law firms that previously represented the Company in the patent litigation
described above. The Company demanded a full and complete accounting for the fees and
expenses charged by these firms in connection with the patent litigation. The Company paid
the law firms the total amount of $558,652 in legal fees and costs. The law firms claimed
that the Company owed them an additional $402,984. The trial took place in December 2003.
In January 2004, the court decided that the number of hours billed by the law firms was
grossly excessive and, therefore, reduced the amount still payable to the law firms by
$322,432. At December 31, 2003, the entire amount requested by the law firms of $402,984
was included in accounts payable in the consolidated balance sheet. Scanner reflected the
reduction in accounts payable and recorded other income in its consolidated financial
statements for the year ended December 31, 2004.

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

No matters were submitted to a vote
of security holders during the fourth quarter of 2004.

# PART II

|ITEM 5. | MARKET FOR COMMON EQUITY, RELATED STOCKHOLDER MATTERSAND SMALL BUSINESS ISSUER PURCHASES
OF EQUITY SECURITIES
|------- | -------------------------------------------------------------------------------------------------------------

# Dividends

The Company has never paid cash
dividends on its Common Stock and does not intend to do so in the foreseeable future. The
Company currently intends to retain its earnings for the operation and expansion of its
business. The Companys continued need to retain earnings for operations and
expansion is likely to limit the Companys ability to pay future cash dividends.

7

---

# Market Information

The Companys Common Stock is
currently quoted on the National Association of Securities Dealers, Inc. Over-the-Counter
Bulletin Board (OTCBB) under the symbol SCNI. The following table
sets forth, for the period from January 1, 2003 through December 31, 2004, the range of
high and low bid information for the Companys Common Stock on the OTCBB. The prices
represent quotations between dealers without adjustment for retail markups, markdowns, or
commissions and may not represent actual transactions.

|               | 2004 |      | 2003
|-------------- | ---- | ---- | ----
|
|
|
|First Quarter  |      | 1.85 |     
|Second Quarter |      | 3.50 |     
|Third Quarter  |      | 3.05 |     
|Fourth Quarter |      | 2.94 |     

The shares of Common Stock are
subject to various governmental or regulatory body rules, including the Securities Act of
1933 and regulations thereto, the Securities Act of 1934 and regulations thereto, and
rules promulgated by NASD, which may affect the liquidity of the shares.

# Holders

There were approximately 900 holders
of record of the Companys Common Stock as of December 31, 2004.

# Issuance of Unregistered
Securities

The Company issued 6,870 shares of
common stock to one individual in October 2004, upon the exercise of warrants at $1.00 per
share. The Company relied upon Section 4(2) of the Securities Act for an exemption for
transactions not involving a public offering.

In December 2004, the Company issued
five-year warrants to purchase an aggregate of 40,000 shares of common stock at $2.94 per
share to the new Directors of the Company. The Company relied upon Section 4(2) of the
Securities Act for an exemption for transactions not involving a public offering.

# ITEM 6.
MANAGEMENTS DISCUSSION AND ANALYSIS OR PLAN OF OPERATION

# General

The Company generates revenues from
the sale of machine-vision inspection devices used in the semiconductor industry for the
inspection of integrated circuits. The devices include machine-vision modules sold to
original equipment manufacturers that use the modules as a component of inspection systems
they sell to end users, as well as complete machine-vision inspection systems that the
Company sells to end users. Because the Company sells relatively few of its devices each
year, the Companys business is characterized by uneven quarterly results that are
dependent on the timing of sales and revenue recognition.

During recent years, the Companys
operations were adversely affected by a lack of demand in the semiconductor marketplace,
which caused many of the Companys potential customers to cease or defer purchases
of capital equipment such as the inspection equipment offered by the Company. According
to information provided by Semiconductor Equipment and Materials International (SEMI),
a trade association of semiconductor equipment and material manufacturers, sales of
semiconductor equipment for 2004 are estimated at $35.31 billion, but are expected to
decline by 5.15% in 2005, to a total of $33.49 billion. SEMI expects the market for
semiconductor equipment to bounce back in 2006 and to increase by

8

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3.07% to $34.52 billion, before
growing 14.76% in 2007, to $39.61 billion. The Company believes the general improvement
in industry conditions contributed to the improvement in the Companys operations in
2004 and 2003. The Company will continue to be subject to the cyclical nature of the
semiconductor marketplace.

In addition to general trends in the
semiconductor marketplace, the Company must compete for sales with other providers of
machine-vision inspection equipment, most of whom are larger, better financed and offer a
broader selection of products. The Company must compete on the basis of price, product
performance including speed and size of defects detected, ease of use and technological
advancement. During 2003, the Company commenced sales of its VisionFlex inspection
systems, which were introduced in July 2002. The Company must continue research and
development to improve existing products and introduce new products in order to compete
effectively with other providers of inspection equipment.

The Companys working capital
position improved in 2004 primarily due to profitable operations and to the sale of common
stock and warrants in a private placement, the exercise of warrants and the payments of
notes receivable for common stock. The Company believes that its working capital at
December 31, 2004 is adequate for at least the next twelve months of operations and does
not currently anticipate a need for additional financing.

# Critical Accounting
Policies and Estimates

The discussion and analysis of
financial condition and results of operations is based upon the 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. The
Company evaluates, on an on-going basis, its estimates and judgments, including those
related to bad debts, excess inventories, warranty obligations, income taxes,
contingencies and litigation. Its estimates are based on historical experience and
assumptions that we believe 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.

The Company believes the following
critical accounting policies, among others, affect its more significant judgments and
estimates used in the preparation of its consolidated financial statements.

| |  | Revenue
recognition;
|- |  | --------------------

| |  | Allowances
for doubtful accounts and excess and obsolete inventories;
|- |  | ---------------------------------------------------------------------

| |  | Patent
rights;
|- |  | --------------

| |  | Accounting
for income taxes;
|- |  | ----------------------------

| |  | Accounting
and valuation of options and warrants.
|- |  | -------------------------------------------------

Revenue is earned primarily through
sales of vision inspection products to distributors and to third party customers. For
sales to distributors, revenue is recognized upon shipment as the distributors have no
acceptance provisions and title passes at shipment. For sales to third party customers,
title passes at shipment; however, the customer has certain acceptance provisions relating
to installation and training. These provisions require the Company to defer revenue
recognition until the equipment is installed and the customers personnel are
trained. As a result, revenue is recognized for third party customers once the product has
been shipped, installed and customer personnel are trained. This process typically is
completed within two weeks to a month after shipment.

Accounts receivable arise from the
normal course of selling products on credit to customers. An allowance for doubtful
accounts has been provided for estimated uncollectable accounts. Accounts

9

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receivable balances, historical bad
debts, customer concentrations, customer creditworthiness, current economic trends and
changes in customer payment terms and practices are analyzed when evaluating the adequacy
of the allowance for doubtful accounts. Individual accounts are charged against the
allowance when collection efforts have been exhausted.

Inventories are stated at the lower
of cost or market with cost determined on the first-in, first-out method. The Company has
provided an allowance for estimated excess and obsolete inventories equal to the
difference between the cost of inventories and the estimated fair value based on
assumptions about future demand and market conditions.

Patent rights are stated at cost less
accumulated amortization. Amortization is provided using the straight-line method over six
years. Patent rights are reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amounts of such assets may not be recoverable.
This evaluation is performed at least annually. An impairment loss is recognized when
estimated cash flows to be generated by those assets are less than the carrying value of
the assets. When impairment loss is recognized, the carrying amount is reduced to its
estimated fair value, based on appraisals or other reasonable methods to estimate value.

The Company is taxed as a domestic
U.S. corporation under the Internal Revenue Code. Deferred income tax assets and
liabilities are recognized for the expected future tax consequences of events that have
been included in the consolidated financial statements or tax returns. Deferred income tax
assets and liabilities are determined based on the differences between the financial
statement and tax bases of assets and liabilities using currently enacted tax rates in
effect for the years in which the differences are expected to reverse. Deferred tax assets
are evaluated and a valuation allowance is established if it is more likely than not that
all or a portion of the tax asset will not be utilized.

The Company accounts for employee
stock options under Accounting Principles Opinion No. 25, Accounting for Stock
Issued to Employees, and provides the disclosures required by Statement of Financial
Standards (SFAS) No. 123, Accounting for Stock-Based Compensation. Options and
warrants to non-employees are accounted for as required by SFAS No. 123.

The Company estimates the fair value
of warrants at the grant date using the Black-Scholes option pricing model. The model
takes into consideration weighted average assumptions related to the following: risk-free
interest rate; expected life years; expected volatility; and expected dividend rate. Since
the Companys stock is thinly traded, the Company is essentially a nonpublic entity.
Therefore, volatility is set at 0% as permitted by SFAS No. 123.

# Liquidity and Capital Resources

On August 17, 2004, the Company
issued 1,150,000 units (each consisting of one share of common stock and a five year
warrant to purchase one share of common stock at $2.90 per share) for $1.30 per unit to an
investor in a private placement. The common stock issued in this private placement was
valued at $917,830 and the warrants were valued at $577,170 using the Black-Scholes option
pricing model. In connection with the private placement, the Company also issued a
five-year warrant to purchase 46,000 shares of common stock at $2.90 per share to a
selling agent and incurred expenses of $126,655.

In 2004, the Company renewed its
previous bank line of credit through August 1, 2005. The line was decreased by $600,000
from $1,300,000 to $700,000 with an interest rate at prime (5.25% at December 31, 2004),
and the Company provided the bank with a security interest in its general business assets.
The Companys outstanding indebtedness under the line of credit at December 31, 2004
was $490,000. The line is guaranteed by five individuals who received three-year warrants
to purchase 175,000 shares of common stock at $3.50 per share for their financial support.

10

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In 2004, the Company received in
addition to the above mentioned sale of units, $584,458 from the exercise of warrants and
$275,000 in payments on notes receivable for common stock.

The Company believes that its working
capital at December 31, 2004 is adequate for at least the next twelve months of operations
and does not currently anticipate a need for additional financing.

At December 31, 2004, the
Companys obligations and commitments to make future payments under debt and lease
agreements are as follows:

|                 | Payments due by Year
|---------------- | --------------------
|
|
|
|Line of credit   |                     
|                
|Operating leases |                     
|                 |                     
|Total            |                     
|                 |                     

Net cash used by operating activities
totaled $592,856 and $426,392 in 2004 and 2003, respectively. Negative operating cashflows
in 2004 resulted primarily from the net income of $1,152,724 being offset by net non-cash
adjustments of $59,538 relating primarily to a lawsuit settlement and to depreciation and
amortization and by net changes in operating assets and liabilities of $1,686,042 relating
primarily to accounts receivable and inventory. Negative operating cashflows in 2003
resulted primarily from the net loss of $464,567 and net changes in operating assets and
liabilities of $461,784, relating primarily to receivables and accounts payable being
offset by net non-cash adjustments of $499,959 relating primarily to depreciation and
amortization.

Net cash used by investing activities
totaled $25,266 and $14,616 in 2004 and 2003, respectively. The funds were used to
purchase property and equipment.

Net cash provided by financing
activities totaled $1,903,463 and $580,053 in 2004 and 2003, respectively. Positive
financing cashflows related primarily to the net proceeds from the sale of common stock
and warrants, the exercise of warrants, and payments received on notes receivable for
common stock aggregating $2,227,803 and $625,477 in 2004 and 2003, respectively, offset by
the net of new borrowings, changes in borrowings under the line of credit and by payments
on notes payable aggregating ($324,340) and ($45,424) in 2004 and 2003, respectively.

# Results of Operations

Year Ended December 31,
2004 Compared to Year Ended December 31, 2003

Sales for the year ended December 31,
2004, were $5,834,005 compared to $2,833,338 for the year ended December 31, 2003. The
sales increase in 2004 relates primarily to increased sales of the Companys robotic
inspection systems to end users and an increase in the purchases of capital equipment by
customers in the semiconductor industry.

Cost of goods sold increased by
$924,650 to $1,752,335 in the year ended December 31, 2004, from $827,685 in 2003. Cost of
goods sold as a percentage of sales increased by 0.8% to 30.0% in 2004 compared to 29.2%
in 2003. In 2004, material cost increased 1.5% as a percent of sales. This increase was
offset by a decrease in manufacturing costs as a percentage of sales primarily because of
the large increase in sales.

11

---

Selling, general and administrative
expenses increased by $821,177 to $2,155,009 for the year ended December 31, 2004,
compared to $1,333,832 in the prior year. The increase in expenses related primarily to
increases of approximately $500,000 in salaries and related items, as a result of
increased personnel, and increases in marketing expenses, primarily commissions and
travel, of approximately $163,700.

Research and development expenses
were $504,962 in the year ended December 31, 2004 compared to $530,362 for the year ended
December 31, 2003. The research and development activities related to the Companys
development of its own line of robotic inspection systems for sale to end users was in its
early stages in 2003. The decrease related primarily to reduced personnel costs of
approximately $65,600. The development process is continuing.

Legal fees increased by $85,346 to
$475,861 in the year ended December 31, 2004, from $390,515 in 2003. A significant portion
of the legal fees in both periods related to the patent infringement claims brought by the
Company against a competitor and costs related to internally developed new patents.

Other income (expense) was $108,486
in the year ended December 31, 2004, compared to ($212,711) in 2003. In 2004, the Company
won a lawsuit relating to fees and expenses charged by two law firms previously handling
their patent infringement claim. The court ruled that the legal fees and expenses billed
by the firms were excessive in the amount of $322,432. This amount, which was included in
accounts payable at December 31, 2003, was recorded as other income in 2004. In 2003, the
Company settled a portion of its litigation relating to its patent infringement claim for
$400,000. In connection with the settlement and a prior agreement, the Company paid its
President $160,000. The net amount of $240,000 is included in other income in 2003.
Interest expense was $226,116 lower in 2004 than it was in 2003, due primarily to the
amortization of the warrant valuation related to the renewal of the line of credit in
2003.

The Company recognized no federal
income tax expense to offset the income before income taxes in the year ended December 31,
2004 because the income was offset by utilized operating loss carryforwards. The Company
recognized no income tax benefit to offset the loss before income taxes in the year ended
December 31, 2003, as no tax benefit was available to the Company. The $1,600 of taxes
provided in the year ended December 31, 2004 represented minimum state taxes.

The net income for the year ended
December 31, 2004 was $1,052,724 ($0.10 basic and $0.08 diluted per share), compared to a
net loss of $464,567 ($0.05 per share), in 2003. The change was primarily the result of an
increased gross profit of $2,076,017, increased nonoperating income of $321,197 and
reduced income taxes of $1,200, offset by increased expenses of $881,123.

Year Ended December 31,
2003 Compared to Year Ended December 31, 2002

Sales for the year ended December 31,
2003, were $2,833,338 compared to $1,241,215 for the year ended December 31, 2002. The
Companys revenues were adversely affected by the lack of demand in the semiconductor
industry which has caused reduced spending by semiconductor manufactures for capital
equipment such as that offered by the Company. The sales increase in 2003 related
primarily to the initial sales of the Companys robotic inspection systems to end
users and an increase in the purchases of capital equipment by customers in the
semiconductor industry.

Cost of goods sold increased by
$466,272 to $827,685 in the year ended December 31, 2003, from $361,413 in 2002. Cost of
goods sold as a percentage of sales increased by 0.1% to 29.2% in 2003 compared to 29.1%
in 2002. In 2003, manufacturing expenses decreased as a percent of sales primarily because
of the increase in sales. This decrease was offset by an increase in material cost as a
percent of sales.

12

---

Selling, general and administrative
expenses decreased by $269,150 to $1,333,832 for the year ended December 31, 2003,
compared to $1,602,982 in the prior year. Decreases in amortization of deferred stock
option compensation, professional costs, and license fees of approximately $284,000,
$76,000 and $39,000, respectively, were partially offset by increases of approximately
$73,000 in salaries and related items, as a result of increased personnel, and an increase
of approximately $36,000 in amortization of patent rights. The Companys 1991 Stock
Options and Award Plan was terminated in 2002. All outstanding options were exercised or
cancelled at that time, therefore there was no option activity in 2003. Professional costs
decreased primarily due to additional costs being incurred in 2002 related to the merger
with Southwest Capital Corporation in July 2002. Upon consummation of the merger, the
Company became the owner of the patent rights and its licensing agreement was terminated.

Research and development expenses
were $530,362 in the year ended December 31, 2003 compared to $798,650 for the year ended
December 31, 2002. The research and development activities related to the Companys
development of its own line of robotic inspection systems for sale to end users which
activities were in their early stages in 2002. The development process continued in 2003
with the first unit being sold in April 2003. The decrease in expenses related primarily
to reduced personnel costs of approximately $197,000.

Legal fees decreased by $157,096 to
$390,515 in the year ended December 31, 2003, from $547,611 in 2002. A significant portion
of the legal fees in both periods related to the patent infringement claim brought by the
Company against a competitor.

Other income (expense) was ($212,711)
in the year ended December 31, 2003, compared to ($22,608) in 2002. In 2003, the Company
settled a portion of its litigation relating to its patent infringement claim for
$400,000. In connection with the settlement and a prior agreement, the Company paid its
President $160,000. The net amount of $240,000 is included in other income in 2003.
Interest expense was $429,948 higher in 2003 than it was in 2002. The increase relates
primarily to the $397,849 amortization of the warrant valuation related to the renewal of
the line of credit and to additional debt outstanding.

The Company recognized no income tax
benefit to offset the loss before income taxes in the year ended December 31, 2003, as no
tax benefit is available to the Company. The $2,800 of taxes provided in the year ended
December 31, 2003 represented minimum state taxes. A benefit of $71,900 was recognized in
the year ended December 31, 2002.

The net loss for the year ended
December 31, 2003 was $464,567 ($0.05 per share) compared to a net loss of $2,020,149
($0.24 per share). The decrease in the net loss was the result of an increase in gross
margin of $1,125,851 and decreased operating expenses of $694,534, offset by increased net
nonoperating expenses of $190,103 and by increased income taxes of $74,700.

13

---

# ITEM 7. FINANCIAL STATEMENTS

The Companys financial
statements, and the report of Lurie Besikof Lapidus & Company, LLP, independent
auditors, referred to in the Index to Financial Statements, appear elsewhere in this Form
10-KSB on the pages set forth.

INDEX

|                                                        | Page
|------------------------------------------------------- | ----
|REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM |     
|                                                        |     
|CONSOLIDATED FINANCIAL STATEMENTS                       |     
|Consolidated balance sheets                             |     
|                                                        |     
|Consolidated statements of operations                   |     
|                                                        |     
|Consolidated statements of stockholders' equity         |     
|                                                        |     
|Consolidated statements of cash flows                   |     
|                                                        |     
|Notes to consolidated financial statements              |     

|ITEM 8. |  | CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ONACCOUNTING AND FINANCIAL DISCLOSURE
|------- |  | -----------------------------------------------------------------------------------

Not applicable.

# ITEM 8A. CONTROLS AND PROCEDURES

As of the end of the period covered
by this report, the Company carried out an evaluation, under the supervision and with
participation of the Companys management, including the Companys Chief
Executive Officer and Chief Financial Officer, regarding the effectiveness of the design
and operation of the Companys disclosure controls and procedures pursuant to Rules
13a-15(b) of the Securities Exchange Act of 1934 (the Exchange Act). Based
upon that evaluation, the Chief Executive Officer and Chief Financial Officer, concluded
that the Companys disclosure controls and procedures are effective to ensure that
information that is required to be disclosed by the Company in reports that it files under
the Exchange act is recorded, processed, summarized and reported within the time period
specified in the rules of the Securities Exchange Commission. There were no changes in the
Companys internal control over financial reporting that occurred during the period
covered by this report that have materially affected, or are reasonably likely to
materially affect, the Companys internal control over financial reporting.

The Companys management,
including the Companys Chief Executive Officer and Chief Financial Officer, does not
expect that the disclosure controls and procedures will prevent all error and all fraud. A
control system, no matter how well conceived and operated, can provide only reasonable,
not absolute, assurance that the objectives of the control system are met. Because of the
inherent limitations in all control systems, no evaluation of controls can provide
absolute assurance that all control issues and instances of fraud, if any, within the
Company have been detected. The design of any system of controls also is based in part
upon assurance that any design will succeed in achieving its stated goals under all
potential future conditions; over time, control may become inadequate because of changes
in conditions, or the degree of compliance with the policies or procedures may
deteriorate. Because of the inherent limitations in a cost-effective control system,
misstatements due to error or fraud may occur and not be detected.

14

---

# ITEM 8B. OTHER INFORMATION

None.

# PART III

# ITEM 9. DIRECTORS AND
EXECUTIVE OFFICERS OF REGISTRANT

The information required by Item 9
regarding the Companys directors and executive officers is incorporated by reference
to the Companys proxy or information statement for its 2005 Annual Meeting of
Shareholders under the captions Determination of Number and Election of
Directors, Corporate Governance and Executive Officers of the
Company.

The information relating to
compliance with Section 16(a) of the Exchange Act is incorporated by reference to the
Companys proxy or information statement for its 2005 Annual Meeting of Shareholders
under the caption Section 16(a) Beneficial Ownership Compliance.

# ITEM 10. EXECUTIVE COMPENSATION

The information required by Item 10
is incorporated by reference to the Companys proxy or information statement for its
2005 Annual Meeting of Shareholders under the caption Executive Compensation.

|ITEM 11. |  | SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS ANDMANAGEMENT AND RELATED STOCKHOLDER
MATTERS
|-------- |  | ---------------------------------------------------------------------------------------------

The information required by Item 11
with respect to security ownership of certain individuals is incorporated by reference to
the Companys proxy or information statement for its 2005 Annual Meeting of
Shareholders under the caption Security Ownership of Management and Certain
Beneficial Owners.

# Equity Compensation Plans

The
following table provides information concerning the Companys equity compensation
plans as of December 31, 2004.

|                          | 
|------------------------- | 
|
|                          | 
|
|                          | 
|Equity compensation plans | 
|approved by security      | 
|holders                   | 
|                          | 
|Equity compensation plans | 
|not approved by security  | 
|holders (1)               | 
|                          | 
|TOTAL                     | 
|                          | 

(1)    
          This plan consists of five-year warrants issued to two individuals in connection
          with their election as outside directors on December 27, 2004, which warrants
          were immediately exercisable.

15

---

# ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

The information required by Item 12
is incorporated by reference to the Companys proxy or information statement for its
2005 Annual Meeting of Shareholders under the caption Certain Relationships and
Related Transactions.

# ITEM 13. EXHIBITS

See Exhibit Index following the
financial pages of this report.

# ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES

The information required by Item 14
is incorporated by reference to the Companys proxy or information statement for its
2005 Annual Meeting of Shareholders under the caption Ratification of Appointment of
Auditors.

16

---

# SIGNATURES

Pursuant to the requirements of
Section 13 or 15 (d) of the Securities Exchange Act of 1934, the registrant has duly
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.

|                     | 
|-------------------- | 
|                     | 
|                     | 
|DATE: March 14, 2005 | 
|                     | 
|                     | 
|                     | 
|                     | 

(Power of Attorney)

Each person whose signature appears
below constitutes and appoints Elwin M. Beaty and David P. Mork as his or her true and
lawful attorneys-in-fact and agents, each acting alone, with full power of substitution
and resubstitution, for him and in his name, place and stead, in any and all capacities,
to sign any or all amendments to this Annual Report on Form 10-KSB and to file the same,
with all exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, each
acting alone, full power and authority to do and perform each and every act and thing
requisite and necessary to be done in and about the premises, as fully to all intents and
purposes as he might or could do in person, hereby ratifying and confirming all said
attorneys-in-fact and agents, each acting alone, or his substitute or substitutes, may
lawfully do or cause to be done by virtue thereof.

|DATE: March 14, 2005 |  | /s/ Elwin M Beaty                          | 
|-------------------- |  | ------------------------------------------ | 
|                     | 
|                     |  | Elwin M. Beaty                             | 
|                     |  | Chief Executive Officer,                   | 
|                     |  | Chief Financial Officer and Director       | 
|                     |  | (Principal executive officer and principal | 
|                     |  | financial and accounting officer)          | 
|                     | 
|DATE: March 14, 2005 |  | /s/ David P. Mork                          | 
|                     | 
|                     |  | David P. Mork                              | 
|                     |  | Senior Vice President and Director         | 
|                     | 
|DATE: March 14, 2005 |  | /s/ Betsy Brenden Radtke                   | 
|                     | 
|                     |  | Betsy Brenden Radtke                       | 
|                     |  | Director                                   | 
|                     | 
|DATE: March 14, 2005 |  | /s/ Michael A. Thorsland                   | 
|                     | 
|                     |  | Michael A. Thorsland                       | 
|                     |  | Director                                   | 

17

---

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Board of Directors and Stockholders
Scanner Technologies Corporation
Minneapolis, Minnesota

We have audited the accompanying
consolidated balance sheets of Scanner Technologies Corporation and Subsidiary as of
December 31, 2004 and 2003, and the related consolidated statements of operations,
stockholders equity and cash flows for the years then ended. These consolidated
financial statements are the responsibility of the Companys management. Our
responsibility is to express an opinion on these consolidated financial statements based
on our audits.

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

In our opinion, the consolidated
financial statements referred to above present fairly, in all material respects, the
financial position of Scanner Technologies Corporation and Subsidiary as of December 31,
2004 and 2003, and the results of their operations and their cash flows for the years
then ended in conformity with accounting principles generally accepted in the United
States of America.

|                       | /s/ | Lurie Besikof Lapidus & Company LLP | 
|---------------------- | --- | ----------------------------------- | 
|                       |     | Lurie Besikof Lapidus & Company LLP | 
|Minneapolis, Minnesota |    
|February 11, 2005      |    

F-1

---

SCANNER TECHNOLOGIES CORPORATION AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS

|                                                                     | December 31,
|-------------------------------------------------------------------- | ------------
|                                                                     |             
|
|                                                                     |             
|ASSETS                                                               |             
|CURRENT ASSETS                                                       |             
|Cash and cash equivalents                                            |             
|Accounts receivable, less allowances of $40,000                      |             
|Inventories, less allowances of $63,000 and $20,000                  |             
|Prepaid expenses                                                     |             
|                                                                     |             
|TOTAL CURRENT ASSETS                                                 |             
|                                                                     |             
|PROPERTY AND EQUIPMENT, net                                          |             
|PATENT RIGHTS, less accumulated amortization of $149,232 and $87,481 |             
|OTHER                                                                |             
|                                                                     |             
|                                                                     |             
|                                                                     |             
|                                                                     |             
|                                                                     |             
|LIABILITIES AND STOCKHOLDERS' EQUITY                                 |             
|CURRENT LIABILITIES                                                  |             
|Bank line of credit                                                  |             
|Notes payable                                                        |             
|Accounts payable                                                     |             
|Accrued expenses                                                     |             
|Customer deposits                                                    |             
|                                                                     |             
|TOTAL CURRENT LIABILITIES                                            |             
|                                                                     |             
|                                                                     |             
|COMMITMENTS AND CONTINGENCIES                                        |             
|                                                                     |             
|STOCKHOLDERS' EQUITY                                                 |             
|Preferred stock, no par value, 50,000,000 shares authorized;         |             
|no shares issued and outstanding                                     |             
|Common stock, no par value, 50,000,000 shares authorized;            |             
|11,991,068 and 10,426,459 shares issued and outstanding              |             
|Warrants                                                             |             
|Deferred financing costs, net                                        |             
|Notes receivable for common stock                                    |             
|Accumulated deficit                                                  |             
|                                                                     |             
|                                                                     |             
|                                                                     |             
|                                                                     |             
|                                                                     |             
|                                                                     |             
|                                                                     |             
|See notes to consolidated financial statements.                      |             

F-2

---

SCANNER TECHNOLOGIES CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS

|                                                | Year Ended December 31,
|----------------------------------------------- | -----------------------
|                                                |                        
|
|                                                |                        
|                                                |                        
|REVENUES                                        |                        
|                                                |                        
|COST OF GOODS SOLD                              |                        
|                                                |                        
|                                                |                        
|GROSS PROFIT                                    |                        
|                                                |                        
|                                                |                        
|OPERATING EXPENSES                              |                        
|Selling, general and administrative             |                        
|Research and development                        |                        
|Legal fees                                      |                        
|                                                |                        
|                                                |                        
|                                                |                        
|                                                |                        
|INCOME (LOSS) FROM OPERATIONS                   |                        
|                                                |                        
|OTHER INCOME (EXPENSE)                          |                        
|Other income                                    |                        
|Interest expense                                |                        
|                                                |                        
|                                                |                        
|INCOME (LOSS) BEFORE INCOME TAXES               |                        
|                                                |                        
|INCOME TAXES                                    |                        
|                                                |                        
|                                                |                        
|NET INCOME (LOSS)                               |                        
|                                                |                        
|                                                |                        
|NET INCOME (LOSS) PER SHARE - BASIC             |                        
|                                                |                        
|                                                |                        
|NET INCOME (LOSS) PER SHARE - DILUTED           |                        
|                                                |                        
|                                                |                        
|WEIGHTED AVERAGE SHARES OUTSTANDING - BASIC     |                        
|                                                |                        
|WEIGHTED AVERAGE SHARES OUTSTANDING - DILUTED   |                        
|                                                |                        
|                                                |                        
|                                                |                        
|See notes to consolidated financial statements. |                        

F-3

---

# SCANNER TECHNOLOGIES CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

|                                                | Common Stock
|----------------------------------------------- | ------------
|
|
|                                                |             
|                                                |             
|BALANCE AT DECEMBER 31, 2002                    |             
|                                                |             
|Net loss                                        |             
|                                                |             
|Common stock issued for cash                    |             
|                                                |             
|Warrants:                                       |             
|Issued                                          |             
|Exercised                                       |             
|                                                |             
|Cash received for notes receivable              |             
|                                                |             
|Amortization of deferred financing costs        |             
|                                                |             
|                                                |             
|BALANCE AT DECEMBER 31, 2003                    |             
|                                                |             
|Net income                                      |             
|                                                |             
|Common stock and warrants issued for            |             
|cash, net of $126,655 cash and                  |             
|$23,087 warrants offering costs                 |             
|                                                |             
|Warrants exercised                              |             
|                                                |             
|Cash received for notes receivable              |             
|                                                |             
|Amortization of deferred financing costs        |             
|                                                |             
|                                                |             
|BALANCE AT DECEMBER 31, 2004                    |             
|                                                |             
|                                                |             
|See notes to consolidated financial statements. |             

F-4

---

# SCANNER TECHNOLOGIES CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS

|                                                               | Year Ended December 31,
|-------------------------------------------------------------- | -----------------------
|                                                               |                        
|
|                                                               |                        
|OPERATING ACTIVITIES                                           |                        
|Net income (loss)                                              |                        
|Adjustments to reconcile net income (loss) to net cash used by |                        
|operating activities:                                          |                        
|Depreciation                                                   |                        
|Amortization of deferred financing costs                       |                        
|Amortization of patent rights                                  |                        
|Interest expense added to debt principal                       |                        
|Reduction of lawsuit settlement payable                        |                        
|Changes in operating assets and liabilities:                   |                        
|Accounts receivable                                            |                        
|Income taxes receivable                                        |                        
|Inventories                                                    |                        
|Prepaid expenses and other                                     |                        
|Accounts payable                                               |                        
|Accrued expenses                                               |                        
|Customer deposits                                              |                        
|                                                               |                        
|Net cash used by operating activities                          |                        
|                                                               |                        
|                                                               |                        
|INVESTING ACTIVITY                                             |                        
|Purchases of property and equipment                            |                        
|                                                               |                        
|                                                               |                        
|FINANCING ACTIVITIES                                           |                        
|Net proceeds (payments) on bank line of credit                 |                        
|Proceeds from notes payable                                    |                        
|Payments on notes payable                                      |                        
|Net proceeds from sale of common stock and warrants            |                        
|Proceeds from exercise of warrants                             |                        
|Proceeds from notes receivable for common stock                |                        
|                                                               |                        
|Net cash provided by financing activities                      |                        
|                                                               |                        
|                                                               |                        
|NET INCREASE IN CASH AND CASH EQUIVALENTS                      |                        
|                                                               |                        
|CASH AND CASH EQUIVALENTS                                      |                        
|Beginning of year                                              |                        
|                                                               |                        
|                                                               |                        
|End of year                                                    |                        
|                                                               |                        
|                                                               |                        
|SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:             |                        
|Cash paid for:                                                 |                        
|Interest                                                       |                        
|Income taxes                                                   |                        
|                                                               |                        
|Noncash operating, financing and investing activities:         |                        
|Notes receivable issued for purchase of common stock           |                        
|Warrants exercised                                             |                        
|Warrants issued in connection with sale of stock and warrants  |                        
|Warrants issued in connection with line of credit              |                        
|                                                               |                        
|                                                               |                        
|See notes to consolidated financial statements.                |                        

F-5

---

SCANNER TECHNOLOGIES CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

|1. | Basis
of Presentation and Significant Accounting Policies 
|-- | -----------------------------------------------------------

| | Nature of Business
| | ------------------

| | The
Company invents, develops and markets vision inspection products that are used in the
semiconductor industry for the inspection of integrated circuits. The Companys
customer base is small in numbers and global in location.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Principles
of Consolidation
| | ---------------------------

| | The
consolidated financial statements include the accounts of Scanner Technologies
Corporation and its wholly owned subsidiary, Scanner Technologies Corporation
International, incorporated in the United States and registered in Singapore. All
significant intercompany balances and transactions have been eliminated.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Revenue
Recognition
| | -------------------

| | Revenue
is earned primarily through sales of vision inspection products to distributors and to
third party customers. For sales to distributors, revenue is recognized upon shipment as
the distributors have no acceptance provisions and title passes at shipment. For sales to
third party customers, title passes at shipment; however, the customer has certain
acceptance provisions relating to installation and training. These provisions require the
Company to defer revenue recognition until the equipment is installed and the customers personnel
are trained. As a result, revenue is recognized for third party customers once the
product has been shipped, installed and customer personnel are trained. This process
typically is completed within two weeks to a month after shipment.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Estimates
| | ---------

| | The
preparation of these consolidated financial statements in conformity with accounting
principles generally accepted in the United States of America requires management to make
estimates and assumptions that affect the reported amounts and disclosures in the
consolidated financial statements and accompanying notes. Actual results could differ
from those estimates. Significant management estimates relate to the valuation allowance
on deferred tax assets.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Cash
Equivalents
| | ----------------

| | All
highly liquid investments purchased with an original maturity of three months or less are
considered to be cash equivalents.
| | --------------------------------------------------------------------------------------------------------------------------------

| | Accounts
Receivable
| | -------------------

| | Accounts
receivable arise from the normal course of selling products on credit to customers. An
allowance for doubtful accounts has been provided for estimated uncollectable accounts.
Accounts receivable balances, historical bad debts, customer concentrations, customer
creditworthiness, current economic trends and changes in customer payment terms and
practices are analyzed when evaluating the adequacy of the allowance for doubtful
accounts. Individual accounts are charged against the allowance when collection efforts
have been exhausted.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

F-6

---

| | Fair Value of Financial Instruments
| | -----------------------------------

| | The
carrying amounts of financial instruments consisting of cash and cash equivalents,
accounts receivable, bank line of credit, notes payable, accounts payable, accrued
expenses and customer deposits approximate their fair values.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Inventories
| | -----------

| | Inventories
are stated at the lower of cost or market with cost determined on the first-in, first-out
method. The Company has provided an allowance for estimated excess and obsolete
inventories equal to the difference between the cost of inventories and the estimated
fair value based on assumptions about future demand and market conditions.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Property
and Equipment
| | ----------------------

| | Property
and equipment are stated at cost less accumulated depreciation. Depreciation is provided
using accelerated methods. Leasehold improvements are amortized using the straight-line
method over the shorter of the useful life or lease term.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Patent
Rights
| | -------------

| | Patent
rights are stated at cost less accumulated amortization. Amortization is provided using
the straight-line method over six years, the deemed useful lives of the patents.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Long-Lived
Assets
| | -----------------

| | All
long-lived assets are reviewed for impairment when events or changes in circumstances
indicate that the carrying amounts of such assets may not be recoverable. This evaluation
is performed at least annually. An impairment loss is recognized when estimated cash
flows to be generated by those assets are less than the carrying value of the assets.
When an impairment loss is recognized, the carrying amount is reduced to its estimated
fair value, based on appraisals or other reasonable methods to estimate value.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Product
Warranty
| | ----------------

| | An
accrual is provided for estimated incurred but unidentified product warranty issues based
on historical activity. The warranty accrual and related expenses were not significant.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Accounting
for Stock-Compensation
| | ---------------------------------

| | The
Company has a stock-based employee compensation plan consisting of stock options and
warrants. The Company has not adopted Statement of Accounting Standards (SFAS) No. 123 to
expense stock options and continues to apply the intrinsic value method under Accounting
Principles Board (APB) Opinion No. 25, Accounting for Stock Issued to Employees, and
related interpretations in accounting for employee/director stock options and warrants.
Accordingly, any compensation cost for stock options and warrants is measured as the
excess, if any, of the fair market value of the Companys stock at the measurement
date over the employees/directors option and warrant exercise price. Any
resulting compensation expense is amortized ratably over the related vesting period.
Options and warrants to non-employees/directors are accounted for as required by SFAS No.
123.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | The
Company estimates the fair value of options and warrants at the grant date using the
Black-Scholes option pricing model. The model takes into consideration weighted average
assumptions related to the following: risk-free interest rate; expected life years;
expected volatility; and expected
dividend rate. Since the Companys stock is thinly traded, volatility is set at 0%
as permitted by SFAS 123.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

F-7

---

| | If
the Company recognized warrant and stock option compensation expense based on fair value
at date of grant, consistent with the methods prescribed by SFAS No. 123, the pro forma
net loss and per share disclosures for the year ended December 31, 2003 would remain the
same as reported. For the year ended December 31, 2004, net income and per share
disclosures would change to the pro forma amounts below:
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                                           | 
|------------------------------------------ | 
|Net income:                                | 
|As reported                                | 
|Warrant and stock option amortization cost | 
|                                           | 
|Pro forma                                  | 
|                                           | 
|                                          
|Net income per share  basic:              | 
|As reported                                | 
|Warrant and stock option amortization cost | 
|                                           | 
|Pro forma                                  | 
|                                           | 
|                                          
|Net income per share  diluted:            | 
|As reported                                | 
|Warrant and stock option amortization cost | 
|                                           | 
|Pro forma                                  | 
|                                           | 

| | Income Taxes
| | ------------

| | The Company is taxed as a domestic U.S. corporation under the
Internal Revenue Code. Deferred income tax assets and liabilities are recognized for the expected future tax consequences of
events that have been included in the consolidated financial statements or tax returns. Deferred income tax assets and liabilities
are determined based on the differences between the financial statement and tax bases of assets and liabilities using currently
enacted tax rates in effect for the years in which the differences are expected to reverse. Deferred tax assets are evaluated and
a valuation allowance is established if it is more likely than not that all or a portion of the tax asset will not be utilized.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Credit Risk
| | -----------

| | The Company maintains cash and cash equivalents in bank accounts
which may exceed federally insured limits. The Company has not experienced any losses on such accounts and believes it is not
exposed to any significant credit risk on cash and cash equivalents.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Significant concentrations of credit risk exist in accounts
receivable, which are due from customers located primarily in the Far East and the United States.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Reclassifications
| | -----------------

| | Certain reclassifications were made to the 2003 financial
statements to make them comparable with 2004. The reclassifications did not affect previously reported stockholders equity,
net loss, or net cash flows.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Net Income (Loss) Per Share
| | ---------------------------

| | Basic net income (loss) per share is computed by dividing the net
income (loss) by the weighted-average common shares outstanding during the year. Diluted net income (loss) per share reflects
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

F-8

---

| | the
potential dilution that could occur if holders of warrants and options that are not
antidulitive converted their holdings into common stock. The dilutive effect of warrants
and options included 1,518,256 additional shares for the year ended December 31, 2004.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Options
and warrants to purchase 1,259,569 and 3,015,289 shares of common stock with a weighted
average exercise price of $2.80 and $1.44 were excluded from the diluted computation for
the years ended December 31, 2004 and 2003, respectively, because they were antidulitive.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Recently
Issued Accounting Pronouncements
| | -----------------------------------------

| | In
December 2004, Financial Accounting Standards Board (FASB) Statement No. 123, Accounting
for Stock-Based Compensation, was revised, which revision superseded APB Opinion
No. 25, Accounting for Stock Issued to Employees and its related
implementation guidance. This revised Statement (SFAS No. 123(R)) eliminates the ability
to account for share-based compensation using the intrinsic value method under APB
Opinion No. 25. SFAS No. 123(R) focuses primarily on accounting for transactions in which
an entity obtains employee services in share-based payment transactions. SFAS No. 123(R)
requires a public entity to measure the cost of employee services received in exchange
for an award of equity instruments based on the grant date fair value of the award (with
limited exceptions). That cost will be recognized over the period during which an
employee is required to provide service in exchange for the award, known as the requisite
service period, which is usually the vesting period. SFAS No. 123(R) is effective for
companies filing under Regulation SB as of the beginning of the first interim or annual
period that begins after December 15, 2005, which for the Company will be its first
quarter of the year ending December 31, 2006. Accordingly, the provisions of SFAS No.
123(R) will apply to new awards and to awards modified, repurchased, or cancelled after
the required effective date and to awards for which the requisite service has not been
rendered that are outstanding as of the required effective date. These new accounting
rules will lead to a decrease in reported earnings and the Company has not yet determined
the exact impact SFAS No. 123(R) will have on its consolidated financial statements.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | In
December 2004, the FASB issued SFAS No. 153, Exchanges of Nonmonetary Assets,an
amendment of APB Opinion No. 29. This Statement amended APB Opinion 29 to eliminate the
exception for nonmonetary exchanges of similar productive assets and replaces it with a
general exception for exchanges of nonmonetary assets that do not have commercial
substance. A nonmonetary exchange has commercial substance if the future cash flows of
the entity are expected to change significantly as a result of the exchange. SFAS No. 153
is effective for fiscal years beginning after June 15, 2005. Earlier application is
permitted for nonmonetary asset exchanges occurring in fiscal periods beginning after the
date SFAS No. 153 was issued.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | In
November 2004, the FASB issued SFAS No. 151, Inventory Costs, an amendment of
ARB No. 43. The amendments clarify that abnormal amounts of idle facility expense,
freight, handling costs, and wasted material (spoilage) should be recognized as current
period charges and require the allocation of fixed production overheads to inventory
based on the normal capacity of the production facilities. SFAS No. 151 is effective for
inventory costs incurred during fiscal years beginning after June 15, 2005. Earlier
application is permitted for inventory costs incurred during fiscal years beginning after
the date SFAS No. 151 was issued.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | The
adoption of SFAS Nos. 153 and 151 is expected to have no material impact on the Companys
consolidated financial statements.
| | --------------------------------------------------------------------------------------------------------------------------------

| | The
adoption of the following standards did not impact the Companys consolidated
financial statements for the years presented.
| | -------------------------------------------------------------------------------------------------------------------------------

F-9

---

| | On
July 1, 2003, the Company adopted SFAS No. 150, Accounting for Certain Financial
Instruments with Characteristics of Both Liabilities and Equity. SFAS No. 150
requires issuers to classify as liabilities (or assets in some circumstances) three
classes of freestanding financial instruments that embody obligations of the issuer.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | On
July 1, 2003, the Company adopted SFAS No. 149, Amendment of Statement 133 on
Derivative Instruments and Hedging Activities. SFAS 149 amends and clarifies
financial accounting and reporting for derivative instruments, including certain
derivative instruments embedded in other contracts (collectively referred to as
derivatives) and for hedging activities under SFAS No. 133, Accounting for
Derivative Instruments and Hedging Activities.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | On
January 1, 2003, the Company adopted SFAS No. 146, Accounting for Costs Associated
with Exit or Disposal Activities. SFAS No. 146 requires the recognition of a
liability for a cost associated with an exit or disposal activity when the liability is
incurred versus the date the Company commits to an exit plan. In addition, SFAS No. 146
states the liability should be initially measured at fair value.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | In
January 2003, the FASB issued FASB Interpretation No. 46 (FIN No. 46), Consolidation
of Variable Interest Entities. FIN No. 46 requires the consolidation of variable
interest entities in which an enterprise absorbs a majority of the entitys expected
losses, receives a majority of the entitys expected residual returns, or both, as a
result of ownership, contractual or other financial interests in the entity. This
interpretation applies immediately to variable interest entities created after January
31, 2003, and to variable interest entities in which an enterprise obtains an interest
after that date. It applies in the first fiscal year or interim period beginning after
December 15, 2003 to variable interest entities in which an enterprise holds a variable
interest that it acquired before February 1, 2003. Since the Company does not have any
variable interest entities, this Interpretation did not impact the Companys
consolidated financial statements for the years presented.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | In
December 2003, the Securities and Exchange Commission released Staff Accounting Bulletin
No. 104 (SAB No. 104), Revenue Recognition. SAB No. 104 clarifies existing
guidance regarding revenue recognition. The Companys adoption of SAB No. 104 did
not have a material impact on the Companys consolidated financial statements for
the years presented.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|2. | Inventories

|-- | -------------

| | Inventories
consisted of the following:
| | ---------------------------------------

|                                                      | December 31,
|----------------------------------------------------- | ------------
|                                                      |             
|
|                                                      |             
|Finished goods                                        |             
|Subassemblies                                         |             
|Raw-materials, less allowances of $63,000 and $20,000 |             
|                                                      |             
|                                                      |             
|                                                      |             

F-10

---

|3. | Property
and Equipment 
|-- | ------------------------

| | Property
and equipment consisted of the following:
| | --------------------------------------------------

|                              |  |  |  
|----------------------------- |  |  | -
|
|
|Furniture and fixtures        |  |  | $
|Machinery and equipment       |  |  |  
|Leasehold improvements        |  |  |  
|                              |  |  |  
|                              |  |  |  
|Less accumulated depreciation |  |  |  
|                              |  |  |  
|                              |  |  | $
|                              |  |  |  

|4. | Bank
Line of Credit 
|-- | ---------------------

| | In
2004, the Company renewed its previous bank line of credit through August 1, 2005. The
line was decreased from $1,300,000 to $700,000 with an interest rate at prime (5.25% and
4.00% at December 31, 2004 and 2003, respectively), and the Company provided the bank
with a security interest in its general business assets. The line is guaranteed by five
individuals who received three-year warrants to purchase 175,000 shares of common stock
at $3.50 per share for their financial support. The warrants had no market value as
determined by the Black-Scholes option pricing model.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | The
former bank line of credit was guaranteed by nine individuals who received, in 2003, for
their financial support: (a) five-year warrants to purchase 325,000 shares of the Companys
common stock at $2.75 per share and (b) thirty-day warrants to purchase an additional
325,000 shares of the Companys common stock at $2.00 per share. Provided the
guarantor paid cash for at least one half of the shares subject to their thirty-day
warrant, such guarantor was permitted to purchase the remainder of the shares with a
promissory note, collateralized by the shares purchased, payable one year from date of
exercise. The guarantors exercised all such warrants in exchange for aggregate cash
payments to the Company of $350,000 and one year promissory notes issued to the Company
with an aggregate principal amount of $300,000. One of the promissory notes in the amount
of $25,000 was paid in 2003. The remaining notes were paid in 2004. In connection with
the exercise of their thirty-day warrants, the guarantors were granted two-year warrants
to purchase an additional 650,000 shares of the Companys common stock at $2.00 per
share. All of the warrants issued to the guarantors had a market value of $574,671 as
determined by the Black-Scholes option pricing model. The $574,671 was recorded as
deferred financing costs. These costs were amortized over the term of the line of credit,
and the net unamortized balance was offset against stockholders equity.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|5. | Notes
Payable 
|-- | ---------------

| | Notes
payable at December 31, 2003 consisted of the following:
| | --------------------------------------------------------------

|                                    | 
|----------------------------------- | 
|4.25%, due April 8, 2004            | 
|Non-interest bearing, due on demand | 
|                                    | 
|                                    | 
|                                    | 

| | In
connection with the $100,000 note payable issued in 2003, the Company also issued
three-year warrants to purchase 25,000 shares of common stock at $2.75 per share. The
warrants had no market value as determined by the Black-Scholes option pricing model.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

F-11

---

| | Interest
on a note payable to the President of the Company, which was paid in 2003, was $14,878
for 2003.
| | ---------------------------------------------------------------------------------------------------------

|6. | Stockholders Equity

|-- | ----------------------

| | Private Placement Offerings
| | ---------------------------

| | On
August 17, 2004, the Company issued 1,150,000 units (each consisting of one share of
common stock and a five year warrant to purchase one share of common stock at $2.90 per
share) for $1.30 per unit to an investor in a private placement. The common stock issued
in this private placement was valued at $917,830 and the warrants were valued at $577,170
using the Black-Scholes option pricing model. In connection with the private placement,
the Company also issued a five-year warrant to purchase 46,000 shares of common stock at
$2.90 per share to a selling agent and incurred expenses of $126,655. This warrant was
valued at $23,087 using the Black-Scholes option pricing model.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | During
2003, the Company sold 100,000 shares of common stock at $2.50 per share, for an
aggregate amount of $250,000, under a private placement offering. Warrants to purchase an
additional 25,000 shares of common stock at $3.00 per share were issued in connection
with these sales. The warrants expire three years after issuance and had no market value
as determined by the Black-Scholes option pricing model.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Stock Options
| | -------------

| | In
2004, the Companys Board of Directors adopted and the shareholders approved the
2004 Equity Incentive Plan. The Plan authorizes the granting of nonqualified or incentive
stock options and restricted stock to officers, directors, consultants, advisors and
employees for up to 1,000,000 shares of common stock. Vesting and award terms are at the
discretion of the Board of Directors or a committee appointed by the Board, but incentive
stock options cannot exceed ten years.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Stock
option activity for the year ended December 31, 2004 was as follows:
| | --------------------------------------------------------------------------

|                               | Options |  | Weighted-Average
Exercise Price
|------------------------------ | ------- |  | -------------------------------
|Outstanding, beginning of year |         |  |                                
|Granted                        |         |  |                                
|Forfeited                      |         |  |                                
|                               |         | 
|Outstanding, end of year       |         |  |                                
|                               |         | 

| | The
weighted-average grant date fair value for options granted was as follows:
| | ------------------------------------------------------------------------------

|                                      | Options |  | Fair Value
|------------------------------------- | ------- |  | ----------
|Option price equals stock price       |         |  |           
|Option price greater than stock price |         |  |           
|                                      |         | 
|                                      |         |  |           
|                                      |         | 

F-12

---

| | Stock
options outstanding and exercisable at December 31, 2004 are as follows:
| | ------------------------------------------------------------------------------

| | Outstanding
| | -----------
|
| | $1.20      
| | 1.32       
| | 1.50       
| | 2.00       
| |            
| |            
| |            

| | Stock
Warrants
| | --------------

| | The
Company issued warrants related to line of credit financing, services and issuances of
common stock.
| | --------------------------------------------------------------------------------------------------------

| | In
2004, the Company issued three-year warrants to purchase an aggregate of 202,250 shares
of common stock at $3.50 per share to eleven individuals as an incentive to exercise
warrants, which warrants were exercised between June 23 and August 17, 2004. The newly
issued warrants had no market value as determined by the Black-Scholes option pricing
model. The Company also issued five-year warrants to purchase an aggregate of 40,000
shares of common stock at $2.94 per share to the two new directors of the Company. The
warrants had a market value of $18,730 as determined by the Black-Scholes option pricing
model. Since the warrants were issued to directors, they are included in the Note 1 pro
forma disclosure along with the employee incentive stock options.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | In
August 2004, warrants to purchase 114,000 shares of common stock at $1.35 per share were
exercised in exchange for a 4.25% note receivable in the amount of $153,900. The note is
due in one year and is collateralized by the stock.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | In
2003, the Company issued five-year warrants to purchase 250,000 shares of common stock at
$1.35 per share in exchange for professional services related to financing arrangements.
The warrants had no market value as determined by the Black-Scholes option pricing model.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Warrant
activity was as follows:
| | --------------------------------

|                               | Warrants | Weighted-Average
Exercise Price
|------------------------------ | -------- | -------------------------------
|
|
|Outstanding, beginning of year |          |                                
|Issued                         |          |                                
|Exercised                      |          |                                
|                               |          |                                
|Outstanding, end of year       |          |                                
|                               |          |                                

F-13

---

| | The
weighted-average grant-date fair value for warrants issued was as follows:
| | ------------------------------------------------------------------------------

|                                       | 2004 |  | 2003
|-------------------------------------- | ---- |  | ----
|                                       |      |  |     
|
|                                       |      |  |     
|Warrant price less than stock price    |      |  |     
|Warrant price equals stock price       |      |  |     
|Warrant price greater than stock price |      |  |     
|                                       |      |  |     
|                                       |      |  |     
|                                       |      |  |     

| | Warrants
outstanding and exercisable at December 31, 2004 are as follows:
| | -------------------------------------------------------------------------

| | Outstanding
| | -----------
|
| | $1.00      
| | 1.35       
| | 2.00       
| | 2.70       
| | 2.75       
| | 2.90       
| | 2.94       
| | 3.00       
| | 3.50       
| |            
| |            
| |            

| | Assumptions
| | -----------

| | The
fair value of options and warrants is estimated at grant date using the Black-Scholes
option pricing model with the following weighted-average assumptions:
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------

|                        | 2004 |  | 2003
|----------------------- | ---- |  | ----
|                        |      |  |     
|Risk-free interest rate |      |  |     
|Expected life-years     |      |  |     
|Expected volatility     |      |  |     
|Expected dividend rate  |      |  |     

|7. | Income
Taxes 
|-- | --------------

| | The
income tax provisions of $1,600 and $2,800 for the years ended December 31, 2004 and
2003, respectively, represent taxes currently payable.
| | -----------------------------------------------------------------------------------------------------------------------------------------------

F-14

---

| | Income
tax computed at the U.S. federal statutory rate reconciled to the effective tax rate is
as follows:
| | ----------------------------------------------------------------------------------------------------------

|                                      | Year Ended December 31,
|------------------------------------- | -----------------------
|                                      |                        
|
|                                      |                        
|Taxes (benefit) at statutory tax rate |                        
|Effect of net operating loss          |                        
|Nondeductible interest expense        |                        
|Extraterritorial income exclusion     |                        
|Other                                 |                        
|                                      |                        
|                                      |                        
|                                      |                        

| | Significant
components of net deferred tax assets are as follows:
| | -----------------------------------------------------------------

|                            | December 31,
|--------------------------- | ------------
|                            |             
|
|                            |             
|Deferred tax assets:        |             
|Operating loss carryovers   |             
|Tax credit carryovers       |             
|Other temporary differences |             
|Valuation allowance         |             
|                            |             
|Net deferred tax            |             
|                            |             

| | The
valuation allowance was provided as it is probable the deferred tax assets will not be
realized. The valuation allowance increased (decreased) $(409,500) and $98,800 in 2004
and 2003, respectively, primarily because of the Companys inability (ability) to
utilize net operating losses.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | State
tax effects are immaterial and not separately disclosed.
| | --------------------------------------------------------------

|8. | Employee
Benefit Plan 
|-- | -----------------------

| | The
Company maintains a 401(k) plan for its employees. The employees are allowed to
contribute to the Plan as provided under the law. Any matching contributions by the
Company are at the discretion of the Board of Directors. There were no matching
contributions for the years ended December 31, 2004 and 2003.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|9. | Commitments

|-- | -------------

| | Operating Leases
| | ----------------

| | Facilities
are leased under operating leases expiring through 2007. The leases require monthly base
rents plus increases for operating expenses and/or property taxes as defined in the
leases. Rent expense for all leases was approximately $164,300 and $155,300 for 2004 and
2003, respectively.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Approximate
future minimum lease payments are as follows:
| | ---------------------------------------------------------

|Year | Amount
|---- | ------
|     |       
|2005 |       
|2006 |       
|2007 |       
|     |       
|     |       
|     |       

F-15

---

| | Employment Agreements
| | ---------------------

| | The
Company has an employment agreement with its President and Chief Executive Officer at an
annual salary of $280,000. The agreement also contains a provision that requires the
Company to pay an amount equal to the annual salary if he is terminated without cause.
The agreement can be terminated by either party with a 30-day written notice to the
other.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | The
Company has an employment agreement with its Senior Vice President at an annual salary of
$156,000. The agreement also contains a provision that requires the Company to pay an
amount equal to one half the annual salary if he is terminated without cause. The
agreement can be terminated by either party with a 30-day written notice to the other.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10. | Major
Customers and Geographic Information 
|--- | --------------------------------------------

| | The
following table shows by major customer and by country the percentage of revenues for the
respective years and the percentage of receivables at December 31 of the respective
years:
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Major
Customers
| | ---------------

| |      |      |  |  | 
| | ---- | ---- |  |  | 
| | 2004 | 2003
| |      |      | 

|Customer (Location) | Revenues | Receivables | Revenues | Receivables
|------------------- | -------- | ----------- | -------- | -----------
|A (Singapore)       | 32%      | 26%         | 33%      | 54%        
|B (Japan)           | 17       |            | 13       |           
|C (Taiwan)          | 13       | 27          |         |           
|D (Korea)           | 8        | 15          |         |           
|E (Taiwan)          | 5        |            | 20       | 16         
|F (Taiwan)          | 1        | 1           | 7        | 10         

| | Geographic
Information
| | ----------------------

|                                 | 2004 |  | 2003
|-------------------------------- | ---- |  | ----
|                                 |      |  |     
|Revenues                         |      |  |     
|Singapore                        |      |  | $   
|Taiwan                           |      |  |     
|Japan                            |      |  |     
|Korea                            |      |  |     
|Malaysia                         |      |  |     
|Others outside the United States |      |  |     
|United States                    |      |  |     
|                                 |      |  |     
|                                 |      |  | $   
|                                 |      |  |     
|Property and Equipment, net      |      | 
|United States                    |      |  | $   
|Outside the United States        |      |  |     
|                                 |      |  |     
|                                 |      |  | $   
|                                 |      |  |     

|11. | Contingencies and Uncertainty 
|--- | -------------------------------

| | In an agreement dated April 19, 2002, the Companys President
and Chief Executive Officer (President) forgave the payment of his accrued salary of $1,245,575 and released the Company, its
successors, its officers and directors from any liability in connection with the accrued salary. In exchange, the Company agreed
that its President will receive certain proceeds, if any, that Scanner may receive out of litigation involving patents that
Scanner had licensed. Under the agreement, the Company keeps 60% of any proceeds of the currently ongoing litigation and pays its
President 40% of such proceeds until the Company has been reimbursed for all attorney fees and other expenses incurred in
connection with the current litigation, and its President has received the total of $1,254,575. If one party receives all the
amounts owing to such party before
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

F-16

---

| | the other partys claim under this provision is satisfied,
the other party receives 100% of the proceeds until its claim is satisfied. If any proceeds remain after such payment, the
Companys President receives 50% of such remainder. He also has a right to receive part of the proceeds, if any, the Company
may receive out of any subsequent litigation involving the licensed patents. The Company keeps 60% of any such proceeds until its
attorney fees and other expenses incurred in connection with the current and any subsequent litigation have been reimbursed, and
its President receives 40% of any such proceeds until he has received a total of $1,254,575 of the proceeds of the currently
ongoing and any subsequent litigation. If any proceeds of the subsequent litigation remain after such distribution, the Company
will pay 25% of such remaining proceeds to its President.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | To provide the Companys Senior Vice President with an
incentive to continue his employment with the Company, and to compensate him for compensation in recent years which the Company
believes was less than he might have received in a comparable position elsewhere, the Senior Vice President was also a party to
the agreement regarding the distribution of litigation proceeds. The Company agreed to pay him 20% of the remaining proceeds, if
any, Scanner receives out of the current ongoing litigation, and 25% of the remaining proceeds, if any, that Scanner may receive
out of any future litigation involving the licensed patents, and that remain after the aforesaid payments to the Company and its
President have been made out of such proceeds.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | In 2000, the Company instituted a lawsuit against ICOS Vision
Systems Corp. N.V., a Belgian corporation (ICOS) for infringement of two of its patents. The patents relate to
three-dimensional ball array inspection apparatus and method. In June 2003, the Company reached a settlement with ICOS concerning
one-illumination source inspection systems. Pursuant to the settlement agreement, ICOS made a one-time payment of $400,000 to the
Company, in 2003, to settle all issues with regard to these one-light source inspections systems. The District Court found no
infringement with regard to the two-illumination source devices that ICOS sold. The Company agreed to the settlement agreement
with respect to one-light source devices in order to allow it to immediately appeal the courts ruling concerning inspection
systems involving two-light sources, eliminating the need, delay and expense of a trial with regard to these systems at this
stage. In connection with the settlement, the Company paid its President $160,000 pursuant to the agreement noted above. The
Company recorded the $400,000 settlement less the $160,000 paid to its President in other income in its consolidated financial
statements for the year ended December 31, 2003. On April 23, 2004, the United States Court of Appeals ruled in the Companys
favor with regard to the two-illumination source devices, finding that the claim terms an illumination apparatus and
illuminating in the Companys patents encompass one or more illumination sources and overturned the District
Courts entry of summary judgment of no infringement. A trial date of March 14, 2005 has been set for the ongoing litigation
with ICOS. The Company intends to continue to vigorously enforce its patent rights and expects to incur significant additional
expenses in 2005 to pursue its claims. The Company believes that any unfavorable decision will not have a material adverse effect
on its consolidated financial statements.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | In 2002, the Company brought suit against two law firms that
previously represented the Company in the patent litigation described above. The Company demanded a full and complete accounting
for the fees and expenses charged by these firms in connection with the patent litigation. The Company paid the law firms the
total amount of $558,652 in legal fees and costs. The law firms claimed that the Company owed them an additional $402,984. The
trial took place in December 2003. In January 2004, the court decided that the number of hours billed by the law firms was grossly
excessive and, therefore, reduced the amount still payable to the law firms by $322,432. At December 31, 2003, the entire amount
requested by the law firms of $402,984 was included in accounts payable in the consolidated balance sheet. Scanner reflected the
reduction in accounts payable and recorded other income in its consolidated financial statements for the year ended December 31,
2004.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

F-17

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# EXHIBIT INDEX

# SCANNER TECHNOLOGIES
CORPORATION

# FORM 10-KSB FOR THE
YEAR ENDED DECEMBER 31, 2004

| | ExhibitNumber |  | Description
| | ------------- |  | -----------

| | 3.1 |  | Amended
and Restated Articles of Incorporation of the Registrant  incorporated by reference
to Exhibit 2.3 to the Registrants Current Report on Form 8-K filed on August 15,
2002
| | --- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 3.2 |  | Amended
and Restated Bylaws of the Registrant  incorporated by reference to Exhibit 2.4 to
the Registrants Current Report on Form 8-K filed on August 15, 2002
| | --- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 10.1 |  | License
 Agreement  dated  November 16, 1990 between the  Registrant,  Elwin M. Beaty and Elaine E.Beaty  incorporated  by reference to Exhibit 10.2 to the Registrants
 Quarterly Report Form 10-QSB                  for quarter ended September 30, 2002
| | ---- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 10.2 |  | Agreement
dated April 19, 2002 among the Registrant, Elwin M. Beaty and David P. Mork relating to
forgiveness of salary  incorporated by reference to Exhibit 10.3 to the Registrants
Quarterly Report Form 10-QSB for quarter ended September 30, 2002
| | ---- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 10.3 |  | Lease
Agreement dated December 7, 2000 between Registrant and Carleton Investors, L.L.C.
relating to Registrants Arizona premises  incorporated by reference to
Exhibit 10.4 to the Registrants Quarterly Report Form 10-QSB for quarter ended
September 30, 2002
| | ---- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 10.4 |  | Amendment
to Lease dated December 15, 2003 and Second Amendment to Lease dated January 21, 2004
between Registrant and Carleton Investors, L.L.C. relating to Registrants Arizona
premises  incorporated by reference to Exhibit 10.5 to the Registrants Annual
Report Form 10-KSB for year ended December 31, 2003
| | ---- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 10.5 |  | Amendment
to Lease Agreement dated November 21, 2003 between Registrant and Parkers Lake II Realty
Corp. relating to Registrants Minnesota premises  incorporated by reference
to Exhibit 10.6 to the Registrants Annual Report Form 10-KSB for year ended
December 31, 2003
| | ---- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 10.6 |  | Employment
Agreement dated January 1, 2004 between the Company and Elwin M. Beaty  incorporated
by reference to Exhibit 10.1 to the Registrants Quarterly Report Form 10-QSB for
quarter ended June 30, 2004**
| | ---- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 10.7 |  | Employment
Agreement dated January 1, 2004 between the Company and David P. Mork  incorporated
by reference to Exhibit 10.2 to the Registrants Quarterly Report Form 10-QSB for
quarter ended June 30, 2004**
| | ---- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 10.8 |  | Business
Loan Agreement dated March 28, 2002 between the Company and Bremer Bank, N.A.  incorporated
by reference to Exhibit 10.1 to the Registrants Quarterly Report Form 10-QSB for
quarter ended September 30, 2004
| | ---- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

E-1

---

| | ExhibitNumber |  | Description
| | ------------- |  | -----------

| | 10.9 |  | Promissory
Note dated March 31, 2003 in favor of Bremer Bank, N.A., Commercial Security Agreement
dated March 31, 2003 between the Company and Bremer Bank, N.A. and Change in Terms
Agreement dated March 31, 2003 between the Company and Bremer Bank, N.A.  incorporated
by reference to Exhibit 10.3 to the Registrants Quarterly Report Form 10-QSB for
quarter ended June 30, 2004
| | ---- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 10.10 |  | Change
in Terms Agreements dated June 22, 2004 and October 22, 2004 between the Company and
Bremer Bank, N.A.  incorporated by reference to Exhibit 10.2 to the Registrants
Quarterly Report Form 10-QSB for quarter ended September 30, 2004
| | ----- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 10.11 |  | 2004
Equity Incentive Plan  incorporated by reference to Appendix to Registrants
Information Statement for its 2004 Annual Shareholders Meeting filed on June 2, 2004**
| | ----- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 10.12* |  | Form
of incentive stock option agreement and nonqualified stock option agreement currently
used under the 2004 Equity Incentive Plan**
| | ------ |  | --------------------------------------------------------------------------------------------------------------------------------------

| | 10.13* |  | Form
of restricted stock agreement currently used under the 2004 Equity Incentive Plan**
| | ------ |  | ----------------------------------------------------------------------------------------

| | 10.14* |  | Common
Stock  Purchase  Warrant  (20,000  shares)  dated  December 27, 2004 issued to Betsy
Brenden                  Radtke**
| | ------ |  | -----------------------------------------------------------------------------------------------------------------------------

| | 10.15* |  | Common
Stock Purchase Warrant (20,000 shares) dated December 27, 2004 issued to Michael A.  Thorsland**
| | ------ |  | -------------------------------------------------------------------------------------------------------

| | 21.1 |  | Subsidiary
 of  the  Registrant-incorporated  by  reference  to  Exhibit  21 to  the  Registrant's Quarterly
Report Form 10-QSB filed on November 14, 2002
| | ---- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------

| | 23.1* |  | Consent of Lurie Besikof Lapidus & Company, LLP
| | ----- |  | -----------------------------------------------

| | 31* |  | Certification
Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
| | --- |  | -----------------------------------------------------------------------

| | 32* |  | Certification
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
| | --- |  | -----------------------------------------------------------------------

| | *Filed
herewith.
| | ----------------

| | **
Management agreement or compensatory plan or arrangement.
| | ------------------------------------------------------------

E-2

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