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                     U.S. SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                   FORM 10-KSB

                     ANNUAL REPORT UNDER SECTION 13 OR 15(d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934

                   For the fiscal year ended December 31, 2002

                         Commission file number: 0-6428

                           ASI Technology Corporation
                 (Name of Small Business Issuer in its charter)

            Nevada                                           88-0105586
(State or other jurisdiction of                           (I.R.S. Employer
incorporation or organization)                         Identification Number)

                     980 American Pacific Drive, Suite #111
                             Henderson, Nevada 89014
                                 (702) 734-1888
          (Address and telephone number of principal executive offices)

    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, par value $0.02

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. Yes |X| 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|

State issuer's revenues for its most recent fiscal year. $375,677

The aggregate  market value of the issuer's common stock held by  non-affiliates
as of March 3, 2003 (assuming for this purpose that only directors, officers and
10% or more  shareholders of registrant are affiliates of registrant),  based on
the average of the closing bid and asked prices on that date, was  approximately
$1,004,500.

As of March 3, 2003 there were 3,412,522  shares of ASI  Technology  Corporation
common stock, par value $0.02, outstanding.

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

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<PAGE>

                                TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                                                                Page
                                     PART I
<S>           <C>                                                                                                <C>
ITEM 1.       Description of Business                                                                             3
ITEM 2.       Description of Property                                                                            13
ITEM 3.       Legal Proceedings                                                                                  13
ITEM 4.       Submission of Matters to a Vote of Security Holders                                                13

                                     PART II
ITEM 5.       Market for Common Equity and Related Stockholder Matters                                           14
ITEM 6.       Management's Discussion and Analysis or Plan of Operation                                          14
ITEM 7.       Financial Statements                                                                               23
ITEM 8.       Changes in and Disagreements with Accountants on Accounting and Financial Disclosure               23

                                    PART III
ITEM 9.       Directors, Executive Officers, Promoters and Control Persons;
              Compliance With Section 16(a) of the Exchange Act                                                  23
ITEM 10.      Executive Compensation                                                                             24
ITEM 11.      Security Ownership of Certain Beneficial Owners and Management and
              Related Stockholder Matters                                                                        25
ITEM 12.      Certain Relationships and Related Transactions                                                     26
ITEM 13.      Exhibits and Reports on Form 8-K                                                                   27
ITEM 14.      Controls and Procedures                                                                            27
FINANCIAL STATEMENTS                                                                                             28
SIGNATURES                                                                                                       44
CERTIFICATIONS                                                                                                   45
</TABLE>

                           FORWARD-LOOKING STATEMENTS

IN  ADDITION  TO   HISTORICAL   INFORMATION,   THIS   ANNUAL   REPORT   CONTAINS
FORWARD-LOOKING   STATEMENTS  WITHIN  THE  MEANING  OF  THE  PRIVATE  SECURITIES
LITIGATION  REFORM ACT OF 1995 AND THE COMPANY  DESIRES TO TAKE ADVANTAGE OF THE
"SAFE  HARBOR"  PROVISIONS  THEREOF.  THEREFORE,  THE COMPANY IS INCLUDING  THIS
STATEMENT FOR THE EXPRESS  PURPOSE OF AVAILING ITSELF OF THE PROTECTIONS OF SUCH
SAFE  HARBOR  WITH  RESPECT  TO  ALL OF  SUCH  FORWARD-LOOKING  STATEMENTS.  THE
FORWARD-LOOKING  STATEMENTS IN THIS REPORT  REFLECT THE COMPANY'S  CURRENT VIEWS
WITH RESPECT TO FUTURE  EVENTS AND  FINANCIAL  PERFORMANCE.  EXAMPLES OF FORWARD
LOOKING  STATEMENTS  INCLUDE THE EXPECTATIONS OF THE COMPANY WITH RESPECT TO ITS
STRATEGY.  THERE CAN BE NO ASSURANCES THAT THE COMPANY'S FINANCIAL GOALS WILL BE
REALIZED.  THESE  FORWARD-LOOKING  STATEMENTS  ARE SUBJECT TO CERTAIN  RISKS AND
UNCERTAINTIES, INCLUDING THOSE DISCUSSED HEREIN, THAT COULD CAUSE ACTUAL RESULTS
TO DIFFER  MATERIALLY  FROM  HISTORICAL  RESULTS OR THOSE  ANTICIPATED.  IN THIS
REPORT, THE WORDS "ANTICIPATES,"  "ESTIMATES," "BELIEVES," "EXPECTS," "INTENDS,"
"FUTURE,"  "GOAL,"  "OBJECTIVE"  AND  SIMILAR  EXPRESSIONS   GENERALLY  IDENTIFY
FORWARD-LOOKING STATEMENTS.  READERS ARE CAUTIONED TO CONSIDER THE SPECIFIC RISK
FACTORS  DESCRIBED BELOW AND NOT TO PLACE UNDUE RELIANCE ON THE  FORWARD-LOOKING
STATEMENTS CONTAINED HEREIN, WHICH SPEAK ONLY AS OF THE DATE HEREOF. THE COMPANY
UNDERTAKES NO OBLIGATION TO PUBLICLY REVISE THESE FORWARD-LOOKING  STATEMENTS TO
REFLECT EVENTS OR CIRCUMSTANCES THAT MAY ARISE AFTER THE DATE HEREOF.

In this report,  the terms "ASI," "the Company,"  "we," "us," and "our" refer to
ASI Technology Corporation.


                                       2
<PAGE>

                                     Part I

ITEM 1. DESCRIPTION OF BUSINESS.

Introduction

ASI Technology  Corporation is a development stage company,  incorporated  under
the laws of the State of  Nevada.  We own the  rights to three  patented  plasma
technologies,  each in an early stage of development.  We purchased our patented
plasma antenna technology in August 1999 and purchased our patented plasma sound
reduction  technology for jet engines in December 2000. We acquired an exclusive
license to a third plasma technology for sterilization  and  decontamination  in
January  2003. We are engaged in developing  our  technologies  with the goal to
commercialize through sale or licensing.

     o   Plasma  Antenna  Technology  - When  gas is  electrically  charged,  or
         ionized  to a  plasma  state  it  becomes  conductive,  allowing  radio
         frequency (RF) signals to be transmitted or received. We employ ionized
         gas as the  conducting  element  of an  antenna.  When  the  gas is not
         ionized,  the antenna  element  ceases to exist.  This is a fundamental
         change from  traditional  antenna design that  generally  employs solid
         metal  wires or  surfaces  as the  conducting  element.  We believe our
         plasma  antenna  offers  numerous  advantages   including  stealth  and
         reconfigurability   for  military   applications   and  higher  digital
         performance in commercial applications.  We also believe our technology
         can  compete in many metal  antenna  applications  with less weight and
         antenna  interference.  Our initial  efforts  have  focused on military
         applications.

     o   Plasma Sound Reduction  Technology - This technology employs techniques
         to modulate  the plasma in jet engines to reduce noise  emissions.  Jet
         engine noise  emissions  are highly  regulated  and airlines and engine
         manufacturers  incur significant  costs to meet increasingly  stringent
         regulations.  Although our basic technology  concept has been tested in
         laboratory tests using hot plasma-type  flames, our goal is to validate
         this technology on reduced scale jet engines and thereafter develop and
         sell or license the technology for use in reducing the noise  emissions
         of jet engines.

     o   Plasma  Sterilization  and  Decontamination  - This technology  employs
         resistive electrodes to efficiently produce high volumes of atmospheric
         pressure plasma also known as cold plasma.  Our cold plasma  generation
         method uses low voltage to produce high volumes of cold plasma that has
         been demonstrated to be useful for sterilization,  decontamination  and
         in certain industrial processing. We have acquired an exclusive license
         from the inventor for this method of cold plasma  generation.  Our goal
         is to  develop  prototype  devices to  validate  and  demonstrate  this
         technology for government  and commercial  applications  and thereafter
         license the technology.

Our plasma technologies are each in the early stage of development and there can
be no assurance that commercial viability will be achieved.  Further development
is necessary in order to verify and document the advantages and to commercialize
our technologies.

Prior to the purchase of the plasma  antenna  technology  ASI had no significant
assets or  liabilities.  During the period from 1995 until 1999 ASI was inactive
and engaged only in collecting  proceeds from prior asset sales,  reducing debts
and paying  corporate  costs.  At the beginning of 1999 we commenced our current
strategy of acquiring and developing new technologies for sale or licensing.

ASI was incorporated on January 9, 1931 and has evolved through a number of name
changes and equity reorganizations. Our President, Jerry E. Polis, was appointed
President and a director in 1973. Prior to the acquisition of our plasma antenna
technology  in August  1999,  ASI was  essentially  inactive.  ASI had not filed
Exchange Act reports from about 1982 until March 2001.  On September 1, 2000 the
Company  changed  its  name  from  "ASI"  to  "ASI  Technology  Corporation"  in
connection with a capital reorganization which included a 1 for 10 reverse stock
split.  All share and per share data  included in this  annual  report have been
adjusted  to  retroactively  reflect the reverse  stock  split.  The Company has
11,000,000  shares  authorized,  $0.02 par value, of which 10,000,000 shares are
designated common stock and 1,000,000 shares are designated  preferred stock. As
of the date of this annual  report there were  3,412,522  shares of common stock
issued  and  outstanding.  There  are no  shares of  preferred  stock  issued or
outstanding.

Our principal executive offices are located at 980 American Pacific Drive, Suite
#111,  Henderson,  Nevada 89014.  Our telephone number is (702) 734-1888 and our
Internet Web site is  www.asiplasma.com.  The information on our Web site is not
part of this annual report.


                                       3
<PAGE>

Key Business Developments

Beginning  in early 1999 we  developed  a strategy  focusing  on  acquiring  and
exploiting technology. In August 1999 we purchased our plasma antenna technology
and commenced  development.  We have paid for research and prototype development
and also obtained  sponsored  development from General  Dynamics'  Electric Boat
Corporation  and the U.S.  Government.  In December 2000 we purchased our plasma
sound  reduction  technology  for jet  engines.  In January  2003 we acquired an
exclusive   license  on  the  patent  and   technology   underlying  the  plasma
sterilization and decontamination  technology that we began developing in August
2002. We believe these plasma technologies are compatible,  all employing plasma
physics  as an  underlying  concept  and each  having  military  and  commercial
applications.

Management efforts have focused on the following activities:

o  We have developed and currently have working relationships with:

     -   University of  Tennessee's  Electrical  Engineering  and Plasma Physics
         Department - We have teamed with the University of Tennessee to develop
         and evaluate new plasma  prototypes.  We are paying the University on a
         project-by-project  basis  for  facilities  and  personnel.  We have no
         written agreement and there can be no assurance that we can continue to
         avail use of their facilities, equipment or personnel in the future.

     -   Malibu  Research,  Inc.  - In May  2001 we  entered  into a  partnering
         agreement  identifying  areas of mutual interest with Malibu  Research,
         Inc.,  a company  engaged in  producing  military  antennas and related
         equipment.  Malibu Research  provides radar and antenna related support
         to us and we provide plasma expertise and development support to Malibu
         Research,  on a project  basis.  Terms are  negotiated on each project,
         generally by purchase order.  Our strategy is to develop  opportunities
         utilizing  the  combined  expertise  and we  intend  to  employ  Malibu
         Research on future projects to build and test more sophisticated plasma
         antennas.  During 2002 Malibu  Research and the University of Tennessee
         developed a more sophisticated  plasma antenna  demonstration system to
         our design. Malibu Research is a subcontractor on our Phase II contract
         with the U.S.  Missile Defense Agency ("MDA") and our recently  awarded
         Phase I contract (January 2003) with the U.S. Navy.

     -   Eastern Virginia Medical School ("EVMS") - In June 2002 we entered into
         an allocation of intellectual property rights agreement and in November
         2002 a subcontract  to have EVMS support our plasma  sterilization  and
         decontamination  contract with the Air Force, discussed below. EVMS has
         particular expertise in the field of Electro-Medicine, a growing branch
         of medicine  focused on  electrical  and magnetic  effects on cells and
         medical  treatment.  Electro-Medicine  includes the field of electrical
         sterilization and decontamination.

     -   University of Mississippi - In September 2002 we engaged the University
         of  Mississippi's  National  Center of Physical  Acoustics  ("NCPA") to
         perform validating  experimental  confirmation of our plasma active jet
         noise control methodology.  NCPA has a Jet Noise Facility and has model
         jet equipment and an anechoic  chamber for testing  various  acoustical
         models.

o  In January 2000 we obtained our first sponsored  development for $89,710 from
   General  Dynamics'  Electric Boat Corporation to develop an inflatable plasma
   antenna prototype for satellite  communications.  This contract was completed
   in August  2000 and a second  phase was  awarded  for  $78,696  to develop an
   advanced prototype. This phase was completed in early 2001, demonstrating the
   ability of our  plasma  antenna to  perform  satellite  communications  while
   having  favorable  mechanical  and material  advantages  in certain  military
   applications.

o  In May 2001 we obtained a fixed fee government  Phase I contract from MDA for
   $62,756 to fund further  development of our plasma antenna  technology.  This
   contract was  completed in November  2001. In December 2001 we were granted a
   three-month  interim  contract  continuation  for  $34,876.  In this  work we
   employed a plasma blanket around an antenna to demonstrate  the advantages of
   plasma to contain, steer and direct electromagnetic energy.


                                       4
<PAGE>

o  In  April  2002 we were  awarded  a  two-year  Phase II  contract  by MDA for
   $595,609.   This  contract  effort,   with  Malibu  Research,   Inc.  as  our
   subcontractor,  includes the design of a high power plasma  antenna array and
   plasma phase shifters as a means of antenna steering.

o  In  April  2002 we were  awarded  a six  month  Phase I  contract  by MDA for
   $65,892.  This  contract was  completed  in October  2002.  We evaluated  the
   feasibility of using plasma surfaces to filter electromagnetic waves and as a
   barrier to protect systems from electronic jamming.

o  In August  2002 we were  awarded a twelve  month Phase I contract by the U.S.
   Air Force for  $99,333  to  evaluate  our  method of  generating  atmospheric
   pressure plasmas and their use in  decontamination in forward deployed bases.
   EVMS is our subcontractor on this effort.

o  In January  2003 we were  awarded a six month Phase I contract for $68,587 to
   design a plasma based antenna architecture for the U.S. Navy.

o  We have four  patents  issued  and five  additional  provisional  or  pending
   applications in the United States on our plasma antenna technology.  There is
   one U.S. patent issued on our plasma noise reduction and we have an exclusive
   patent   license  from  the  inventor  for  our  plasma   sterilization   and
   decontamination  technology.  We have  also  elected  foreign  protection  of
   certain patents in selected jurisdictions.

We  continue to pursue and apply for  additional  government  contracts  through
various military  agencies.  There can be no assurance that we can obtain future
development  funds from these or other sources or that existing  contracts  will
continue for the full amounts awarded.

Terms of Technology Agreements

Plasma Antenna

On August  20,  1999,  we signed a purchase  agreement  (the  "Antenna  Purchase
Agreement")  for  the  plasma  antenna   technology   with  Patriot   Scientific
Corporation  ("Patriot"),  an unaffiliated  company. The original plasma antenna
patent # 5,594,456  (Gas Tube RF Antenna)  was issued in 1997.  We acquired  the
patent, pending patents,  related trade secrets and proprietary  information and
results of prior research.

We purchased the plasma antenna  technology for an aggregate cash purchase price
of $250,000.  The Antenna  Purchase  Agreement  further provides that during the
five year period  ending on August 20,  2004,  we will pay to Patriot  royalties
equal to 5% of gross revenues  actually received by us from the sale of products
incorporating the technology or from the license or sublicense of the technology
to third parties, up to a maximum of $250,000 in future royalties. If we sell or
assign the  technology  during such five year  period,  we have agreed to pay to
Patriot  an  amount  equal to 5% of the  purchase  price  received  by us or the
balance of the $250,000 maximum royalty that remains unpaid,  whichever is less.
Thereafter no additional  payments are due or payable to Patriot  related to the
technology. There are no minimum future royalties.

The $250,000 purchase price was expensed as acquired technology as there were no
other identifiable tangible assets acquired and since technological  feasibility
has not been  established  and no  future  alternative  uses of the  patents  or
technology existed at the time of purchase.

Plasma Sound Reduction

On December  30,  2000,  we signed a purchase  agreement  (the "Sound  Reduction
Purchase  Agreement")  for the plasma sound  reduction  technology with American
Technology  Corporation  ("ATC"),  an unaffiliated  company.  The patent on this
technology was issued in 1999 and expires in 2017.

We purchased the sound reduction  technology for $200,000,  which has been fully
paid. We are obligated to pay  royalties  starting at 6% of product  revenues in
the first year of the agreement, 5% in the second year and 4% thereafter for the
term of the patent. A royalty of 15% is due on license revenues and a fee of 10%
of sale proceeds is due on the further sale of the technology.


                                       5
<PAGE>

The $200,000 purchase price was expensed as acquired technology as there were no
other identifiable tangible assets acquired and since technological  feasibility
has not been  established  and no  future  alternative  uses of the  patents  or
technology existed at the time of purchase.

Plasma Sterilization and Decontamination

Effective on January 1, 2003 we entered into an exclusive license agreement with
the inventor of U.S. Patent #6,232,723 granting us worldwide exclusive rights to
the  patent  and  related  technology  for  sterilization,  decontamination  and
industrial  processing  for a  minimum  term of 15  years,  subject  to  certain
commercialization  performance requirements after the third year. This agreement
also provides for future royalty payments to the inventor based on product sales
or  sublicense  fees.  The  inventor  is  a  consultant  to  us  on  our  plasma
technologies.  The licensed  technology was developed prior to the  consultant's
work with us.

Description of our Technology

Plasma

The different states of matter generally found on earth are solid,  liquid,  and
gas. Sir William  Crookes,  an English  physicist,  identified a fourth state of
matter,  now called  plasma,  in 1879.  Plasma is by far the most common form of
matter.  Plasma in the stars and in the tenuous space between them makes up over
99% of the  visible  universe  and  perhaps  most of that which is not  visible.
Plasmas are created each time a  fluorescent  light is turned on. Jets of plasma
spin and maneuver orbiting  satellites.  Important to our technologies,  plasmas
are  conductive  assemblies  of charged  and neutral  particles  and fields that
exhibit  collective  effects.  Plasmas  carry  electrical  currents and generate
magnetic  fields.  Plasmas have also  demonstrated  effectiveness  in destroying
toxic molecules.

Plasma Antenna Technology

Since the discovery of radio frequency ("RF")  transmission,  antenna design has
been an integral part of virtually every  communication  and radar  application.
Technology  has  advanced to provide  unique  antenna  designs for  applications
ranging from  general  broadcast  of radio  frequency  signals for public use to
complex weapon radar systems.  In its most common form, an antenna  represents a
conducting  metal  surface that is sized to emit or receive  radiation at one or
more selected  frequencies.  Antennas must be efficient so the maximum amount of
signal  strength is expended  in the  propagated  wave and not wasted in antenna
reflection.

Our plasma antenna  technology  employs ionized gas enclosed in a tube (or other
enclosure)  as the  conducting  element of an antenna.  Since the gas is ionized
only for the time of transmission or reception,  our designs allow for extremely
short pulses,  important to many forms of digital  communication  and radar. Our
design  further  provides  the  opportunity  to construct an antenna that can be
compact and dynamically reconfigured for frequency,  direction,  bandwidth, gain
and  beamwidth.  We believe our plasma  antenna  technology  will enable  future
antennas to be designed  that are  efficient,  low in weight and smaller in size
than traditional solid wire or metal antennas.

One distinguishing  feature of a plasma antenna is that the gas ionizing process
can manipulate resistance.  When deionized,  the gas has infinite resistance and
does not interact  with RF  radiation.  When  deionized the gas antenna will not
backscatter  radar  waves  (providing  stealth)  and will not absorb  high-power
microwave radiation (reducing the effect of electronic warfare countermeasures).

A second distinguishing feature is that after sending a pulse the plasma antenna
can be deionized,  eliminating  the ringing  associated with  traditional  metal
elements.  Ringing  and the  associated  noise  of a  metal  antenna  can  limit
capabilities in high frequency short pulse transmissions. In these applications,
metal  antennas  are  often   accompanied  by   sophisticated   computer  signal
processing.  By  reducing  ringing  and  noise,  we believe  our plasma  antenna
provides increased accuracy and reduces computer signal processing requirements.
These advantages may become  important in cutting edge  applications for impulse
radar, increasing high power devices and high-speed digital communications.

Based on the results of research and  development to date, we believe our plasma
antenna technology has the following major attributes:

     o   No antenna ringing provides an improved signal and reduces distortion.

     o   Since a plasma  antenna is composed of  non-metallic  elements it has a
         reduced radar cross section providing stealth.

     o   Changes in plasma density can change bandwidth over wide ranges.


                                       6
<PAGE>

     o   After the gas is ionized,  a plasma  antenna has a low noise floor,  an
         important attribute to many transmission and reception applications.

     o   A circular radar or reception scan can be performed electronically with
         no moving parts at a high speed.

     o   Plasma antenna elements can be constructed and configured into an array
         that is dynamically  reconfigurable  for frequency,  beamwidth,  power,
         gain, polarization and directionality.

     o   With a  reconfigurable  plasma antenna many RF subsystems can share one
         antenna  resource  reducing  the  number,  size and  clutter of antenna
         structures.

     o   Mathematical  illustrations  indicate  that by selecting  the gases and
         changing ion density,  the electrical  aperture (or apparent footprint)
         of a  plasma  antenna  may be  made  to  perform  on par  with a  metal
         counterpart having a larger physical size.

     o   Plasma  can  be  used  as  a  tunable  frequency  selected  surface  to
         selectively  filter  signals  and to  shield  radar  and  communication
         systems.

In addition  to the work under  government  contracts  outlined  above,  we have
funded prototypes developed for us by the University of Tennessee demonstrating:

     o   The  operation of a plasma  antenna up to 2.5 GHz (a hertz is a unit of
         frequency of one cycle per second,  one gigahertz is one billion cycles
         per second), other experiments have been to 10 GHz

     o   Use of a series of plasma tubes as a reflector

     o   Use of plasma as a medium in a non-metallic wave guide (wave guides are
         hollow  structures  to carry  high  power  electromagnetic  waves to an
         antenna  element  similar in function to a coaxial cable in lower power
         applications)

     o   Operation of flexible tube plasma antennas

     o   Embedding of plasma antennas in shipboard composite structures

In June  2002  we  completed  the  direct  comparison  of a  conventional  metal
parabolic  reflector antenna with a comparable sized plasma parabolic  reflector
antenna. This work was performed for us by Malibu Research,  Inc. and used their
antenna test range to generate  data.  The two antennas were compared at 3.0 GHz
and even  though  the  plasma  antenna  was not  optimized  it  performed  quite
comparable to the metal antenna. Just as important,  when the plasma antenna was
not energized it was 99% transparent,  demonstrating  its stealth and resistance
to outside interference.

In addition we have generated analytical and mathematical support and models for
various plasma antenna designs and measurements.

Our results  indicate  that a plasma  antenna can be used for many  transmission
and/or  modulation  techniques,  such  as  continuous  wave,  phase  modulation,
impulse, AM, FM, chirp, spread spectrum or other digital techniques. And we have
determined  that plasma  antennas can be used over a large frequency range up to
20GHz and employ a variety of gases (for example neon, argon,  helium,  krypton,
mercury  vapor  and  zenon).  The same  appears  to be true as to its value as a
receive  antenna and as a reflector.  Whether and to what extent the development
of our technology will result in a commercial  plasma antenna  exhibiting any of
these attributes is presently unknown.  Plasma antenna technology is still in an
early stage of  development  and  additional  testing and  commercial  prototype
demonstrations will be required to determine commercial viability. We are unable
to predict the timing and cost of determining commercial viability.

Plasma Sound Reduction Technology

Jet engines and more  specifically  the gas turbine jet engines employed in most
aircraft are notorious for their excessive noise level whether in aircraft or in
industry or on ships. The noise pollution can be uncomfortable and possibly even
dangerous to humans.  As a result there are a variety of government  regulations
imposed  requiring  aircraft to adhere to certain maximum noise levels and limit
the number of takeoff and landings of certain  aircraft  based on their level of
overall noise  output.  The military is also  responding  to noise  pollution by
studying methods to reduce military jet engine noise.

In  the  mid  1980's  the  International  Civil  Aviation   Organization  (ICAO)
established  the  Committee on Aviation  Environmental  Protection  (CAEP) which
developed  international  aircraft  noise  certification  and phaseout rules for
certain  aircraft.  Most airports  have noise limits and budgets.  In the United
States,  the  Department  of  Transportation  ("DOT") and the  Federal  Aviation
Authority  ("FAA") have authority  under the Aviation Safety and Noise Abatement


                                       7
<PAGE>

Act of 1979, as amended and recodified, and under the Airport Noise and Capacity
Act of 1990, to monitor and regulate  aircraft engine noise.  Noise standards in
the U.S.  have been  codified  most  recently in 1999 by FAR  (Federal  Aviation
Regulation)  Part  36  -  Noise  Standards:   Aircraft  Type  and  Airworthiness
Certification.  A mandate went into effect  January 1, 2000,  requiring that all
operations  into and out of U.S.  airports  must be made with  Stage 3 (the most
strict regulated so far) noise level compliant  airplanes.  Stage 3 aircraft are
required to be about 12% quieter  than phased out Stage 2 aircraft.  The CAEP is
continuing to evaluate  further noise  reductions and  regulations and has begun
work on future Stage 4 standards.

Numerous airports have imposed additional restrictions on airplane noise levels,
noise budgets,  mandatory flight paths and runway restrictions,  which limit the
ability  of  carriers  to  increase  services  or  operate  as  desired at these
airports.

Traditional noise reduction methods are typically passive consisting of mufflers
and baffling techniques. More active techniques may employ mixing inlet air with
exhaust  gases to reduce  exhaust  velocity.  These  various  methods  generally
provide  limited  noise  reduction  and  may add  weight  and  reduce  operating
efficiency  of engines.  Many older Stage 2 aircraft are flying today because of
inefficient  "hush-kits"  used to quiet the aircraft to meet Stage 3 compliance.
The cost to hush-kit an aircraft such as a Boeing 737 can approach $2 million.

The  science of noise  cancellation  and the  ability to create a sound wave 180
degrees out of phase with the  original  sound wave to  interfere  and cancel is
well known. Noise cancellation  algorithms and systems have been developed for a
variety of uses ranging from headphones to industrial  machinery.  These methods
generally use a speaker to produce the interfering and canceling wave.

Use of  active  electronic  noise  cancellation  technology  in jet and  turbine
engines has not been practical,  although  various methods have been proposed by
others,  due to the  difficulty  in  getting a timely  wave to the source of the
sound. The patent we purchased  describes a method of using the internal hot gas
plasma as the speaker  element to create a phase inverted wave to interfere with
the acoustic noise wave inside a jet engine.  The patent also discusses  methods
of possibly  seeding the fuel with chemicals to enhance the  conductivity in the
jet engine.  It is uncertain whether fuel seeding is required for performance of
this technology and will have to be determined in actual testing.

Our method has to date only been  tested by  creating  a  plasma-type  flame and
reducing the  perceptible  level of noise.  There can be no assurance  that this
method will function in a jet engine, which is inherently more complex.  Further
there may also be practical  limitations to  implementing  the technology due to
the need to sense noise  waves and couple the  generated  canceling  wave in the
appropriate section or sections of a multi-stage jet engine.

While it is not  practical  to eliminate  the noise of a jet engine,  even small
reductions of several  decibels may provide  benefits  sufficient to justify the
cost of this form of noise reduction if it can be successfully commercialized. A
decibel (dB) is a logarithmic  unit of measure for sound pressure levels. A 3 dB
change  typically  relates to a doubling  of the level.  Typical  conversational
speech at one foot is about 60  decibels,  the average  pain level is 130 dB and
jet engine noise levels can approach 160 dB at close range.  On takeoff  typical
Stage 2 aircraft projected noise at 97 dB and the newer Stage 3 aircraft project
sound at about 87 dB.

Theory suggests,  but we have no experimental or other support,  that our method
of sound  reduction may smooth the  turbulence  exiting a jet engine and thereby
possibly provide  improvement in operating  efficiency or performance that could
reduce operating costs.

Our development  strategy is to test this method of noise reduction in a reduced
scale jet engine. These tests would be designed to seek solutions to some of the
implementation issues and measure the noise reduction,  if any. Additional tests
would  also  determine  the level of  seeding,  if any,  necessary  for  optimal
reduction.  It may also be possible in these tests to  determine if there is any
measurable operating performance improvement.  Jet engine nozzles and exit flows
are particularly important to engine performance.

In September  2002 we entered into a contract with the University of Mississippi
to  perform  the first  phase of  experimental  work on our method of jet engine
noise reduction. We are committed to $103,140 in the first phase. We expect this
initial phase of work to be completed in March of 2003. We are also working with
the university to seek future funding from government or industry.  There can be
no assurance  that we will be  successful in this effort.  We currently  have no
established  timetable for the  development of this technology nor do we have an
estimate of the necessary costs.


                                       8
<PAGE>

Plasma Sterilization and Decontamination

Atmospheric pressure plasmas or room temperature plasmas generated at relatively
low energy  levels are known as cold  plasmas.  Cold plasmas  have  demonstrated
effectiveness in rapid sterilization, decontamination and industrial processing.
When generated, cold plasma is a bluish substance that resembles a fog like gas.
Cold plasma can destroy deadly  microbes  lodged on the skin,  weapons,  medical
instruments  or clothing.  Research has shown that plasma can rapidly break down
complex chemicals found in nerve gas and deadly biological agents like anthrax.

The plasma process produces a sterilization effect using lower concentrations of
sterilant but with a higher  reactivity  than  possible  with normal gases.  The
activity  disappears  quickly  when power is  removed  thereby  dissipating  the
toxicity of the sterilant rapidly.  Atmospheric pressure plasmas allow for rapid
decontamination  of clothing,  equipment and personal gear in military settings,
for  sterilization  of  medical  equipment,  food and  packaging  in  commercial
settings.  Present methods of  decontamination  and sterilization  often require
hours and generate  damaging heat or other toxic side  effects;  cold plasma can
sanitize often in mere minutes without toxic byproducts.

Cold plasmas are also employed in industry,  in semiconductor  manufacturing and
new flat screen  televisions.  During the last five years the U.S. Air Force and
other agencies have focused research dollars on biological cold plasma research.
Historically  such plasmas have been generated in vacuum  conditions  with other
gases or  chemicals  or with very high power  making them cost,  weight and size
prohibitive for broader applications.

Our  consultant,  Dr. Igor Alexeff,  developed,  tested and patented a low power
plasma  discharge  apparatus  that  operates  at  atmospheric  pressure.  We are
developing this technology under contract for the U.S. Air Force targeting a use
to  decontaminate  forward  deployed  equipment  and  facilities.  We  are  also
evaluating commercial applications.  The important distinguishing feature of our
method is the use of ceramic  discharge  electrodes that produce an even diffuse
discharge in the intended area whereas traditional materials often resulted in a
small arc greatly  minimizing the discharge  area. Our discharge also results in
large  quantities of ozone.  Ozone is also known as a powerful  sterilizing  and
decontamination  agent. As an example,  ozone is used frequently to purify water
that has too much bacteria to be treated with chlorine.

Electro  medicine   involves   research,   development,   and  applications  for
bioelectric  technology  on living cells,  tissues,  organisms,  and spores.  It
encompasses  medical  professionals,   molecular  biologists,   microbiologists,
physicists,   electrical  engineers,  biomedical  engineers,  and  environmental
engineers.  Our plasma  sterilization and decontamination  method is designed to
provide the electro medicine field a convenient,  inexpensive, safe and reliable
source of  atmospheric  pressure  plasma.  Experts in these  fields will help us
determine the  effectiveness  of our method on various forms of harmful  agents.
Dr. Stephen J. Beebe, an Associate Professor at Eastern Virginia Medical School,
and the principal researcher  performing  subcontract work on our U.S. Air Force
contract, is a leading researcher in electro medicine and biolectrics.

There  can  be  no  assurance  we  can  develop  the  plasma  sterilization  and
decontamination   technology   successfully  or  that  this  technology  can  be
commercialized.

Market Opportunities and Strategy

Plasma Antenna

We believe our plasma antenna  technology  offers  distinct  advantages  and, if
successfully  developed,  will  be able  to  compete  with  many  metal  antenna
applications, although there can be no assurance that this will be the case. The
plasma antenna's advantages over conventional metal elements are most obvious in
military applications where stealth and electronic warfare are primary concerns.
Other important military factors are weight, size and the ability to reconfigure
and reduce  the number of  antennas  required  on a vehicle or craft.  Potential
military applications include:

     o   Shipboard/submarine antenna replacements.
     o   Unmanned air vehicle sensor antennas.
     o   IFF ("identification friend or foe") land-based vehicle antennas.
     o   Stealth aircraft antenna replacements.
     o   Broadband jamming equipment including for spread-spectrum emitters.
     o   ECM (electronic counter-measure) antennas.
     o   Phased array element replacements.


                                       9
<PAGE>

     o   EMI  (Electromagnetic  Interference)  / ECI  (Electronic  Compatibility
         Interference) mitigation.
     o   Detection and tracking of ballistic missiles.
     o   Frequency selective surface filters and reflectors.
     o   High power waveguides.

Military antenna  installations can be quite  sophisticated and just the antenna
portion of a  communications  or radar  installation  on a ship or submarine can
cost in the  millions of dollars.  We believe  that we have the  opportunity  to
replace certain  existing  military  antennas with stealth  antennas and also to
create new applications.

We believe, based primarily on discussion with technical  consultants,  that our
plasma antenna  technology has commercial  applications in telemetry,  broadband
communications,  ground penetrating radar, navigation, weather radar, wind shear
detection  and  collision  avoidance,  high-speed  data (for  example  Internet)
communication  and  spread  spectrum  communication.  A part of our  development
strategy  is to  identify  the most  promising  commercial  markets  and  target
development efforts to provide solutions to prospective customers.

We  are  focusing  our  development  and  marketing  strategy  initially  on the
following major activities:

     o   Establish and expand development strategic relationships.
     o   Seek industry and military financial support.
     o   Identify primary market opportunities.
     o   Develop prototype antenna targeted at selected opportunities.
     o   Identify prospective licensing partners.

We have invested resources to review the overall patent and propriety aspects of
our  technology.  We continue to review areas where patent  applications  may be
appropriate.

Our goal is to sell or license this technology to companies engaged in producing
antenna  systems.   We  do  not  presently  intend  to  produce  or  manufacture
communication or antenna systems.

There can be no assurance  our plasma  antenna  technology  can be  successfully
developed or commercialized.

Plasma Sound Reduction

We believe that our plasma sound reduction  technology,  if successfully proven,
may have  applications in most jet and gas turbine engine  applications  whether
for aircraft,  industry or ships.  We may have the  opportunity  to make certain
non-conforming  jet  engines or aircraft  become  conforming  to existing  noise
regulations  thereby  increasing the value of older engines.  This could have an
impact on existing aircraft.  We also believe there are military applications of
this technology.

Our  goal  is to  prove  the  technology  and  thereafter  sell or  license  the
technology  to either  engine  producers  or others  engaged in the  business of
servicing or providing  technology for jet engines. It is not our present intent
to produce or manufacture systems.

Plasma Sterilization and Decontamination

Cold plasma has been used in semiconductor manufacturing for more than 15 years.
It is an expensive part of the semiconductor  manufacturing  process. We have no
present plans to address this market.

We are  targeting our method of cold plasma  generation to military  markets for
decontamination  of  facilities,  clothing and weapons.  The ability to generate
cold plasma on site in a portable and  efficient  manner is expected to be a key
advantage.  We  expect to  explore  commercial  markets  focusing  primarily  on
medical, food and package sterilization.  Again,  portability and efficiency are
key  advantages  but the  lack of heat or steam or  toxic  side  effects  offers
additional   advantages  over  some  existing  methods  of   sterilization   and
decontamination.  We also believe our methods could be adapted to  decontaminate
buildings, homes, cruise ships and other facilities.


                                       10
<PAGE>

We  are  in  the  very  early  stages  of  testing  our  method  and  evaluating
opportunities.  Our goal is to prove  our  method  in  military  and  commercial
applications and our strategy is to license others to manufacture devices. There
can be no assurance, however, that we will be successful in these efforts.

Competition and Alternatives

The market for communication technology is extremely competitive. Many companies
produce antenna products that are generally competitive to the technology we are
developing. These companies are larger and have substantially greater financial,
research  and  marketing  resources  than we do.  We may not be able to  compete
successfully in this market.  Antenna  products are normally sold as a part of a
communication or radar system.  Accordingly, an antenna must be selected by such
a  supplier  and  incorporated  into a  system  prior to the  system  sale to an
end-user  of the  technology.  Communication  and radar  systems  are  generally
supplied by large companies many of whom have their own antenna products or have
existing  relationships  with  antenna  product  suppliers.  Accordingly,  to be
successful,  we will have to  demonstrate  to such  customers the  advantages of
using a plasma antenna in existing  systems or the ability of the plasma antenna
to be a key element in a new  communication or radar system.  For these reasons,
our  strategy  is to  attempt  to  develop  strategic  relationships  within the
communications and radar industries,  although there can be no assurance that we
will succeed in doing so.

Our proposed antenna  solutions will compete with existing metal and other types
of antenna products.

While our original  patent has caused others to experiment  with plasma antennas
thus  creating  potential  competitors,  it has  also  resulted  in  independent
confirmation of many of the advantages of a plasma antenna.  The Plasma Research
Laboratory of the Research  School of Physical  Sciences and  Engineering at the
Australian  National  University  (ANU) in Australia has been conducting  plasma
antenna research as a result of Patriot's initial work. Several technical papers
have  been  produced  and at  least  one  patent  application  has  been  filed.
Similarly,  while employed by the Naval Undersea Warfare Center,  our consultant
Dr. Ted Anderson,  performed analytical and mathematical work on plasma antennas
and filed patents on certain applications of plasma technologies.

Although  there are no existing  suppliers of plasma  antennas to our knowledge,
there is no assurance  that there will not be direct  competitors in the future.
The work of ANU, and Dr. Anderson,  while working for the Navy, is indicative of
the ongoing  interest and work being  performed in this field.  We believe,  but
there can be no  assurance,  that our  patents  will be an  important  factor in
establishing our position in the marketplace.

The market for jet engine  noise  reduction  systems  both passive and active is
highly  competitive.  Many companies  produce noise  reduction  systems that are
competitive to the system we intend to develop.  Engine  manufacturers  are also
focused on noise  reduction  in the  design and  production  of  engines.  These
organizations are larger and have substantially greater resources than we do. We
may not be able to compete  successfully  in this  market.  In  addition,  these
companies  expend  significant  funds  on  research  and  development.  The U.S.
Government  is also  conducting  research  on  methods  to  reduce  noise in jet
engines.  They or  others  may  have  developed  or may  succeed  in  developing
technology  and systems that are more effective than those proposed by us. There
can be no  assurance  that we will be able to  compete  successfully  with  such
competitors  or that  additional  competition  will not have a material  adverse
effect on our business.

The market for decontamination and sterilization is highly competitive with many
companies supplying equipment for food and facility  decontamination and medical
sterilization.  Steam,  chemicals and acids, radiation and ultraviolet light are
just some of the methods employed for  decontamination  and  sterilization.  One
example is a plasma  system  using  hydrogen  peroxide  that has been used for a
number  of years by a  division  of  Johnson & Johnson  Medical,  Inc.  The many
companies engaged in these activities are larger and have substantially  greater
resources than we do. We may not be able to compete successfully in this market.
The U.S.  government is also sponsoring cold plasma research by universities and
others. It is possible that such  organizations have developed or may develop in
the future plasma generation methods and systems superior to those envisioned by
us.

Government Regulation

The  transmission  of RF energy is highly  regulated  throughout the world.  Our
antenna solutions will have to meet the regulatory  requirements associated with
the systems in which they are  employed.  We do not believe the  generation of a
plasma in an enclosed  structure will face any new regulatory  hurdles but there
can be no assurance that this will be the case.  There is currently a high level
of concern  about the  possible  health  effects of RF and other  transmissions.


                                       11
<PAGE>

Although we do not believe that there are any special  risk  factors  associated
with plasma  technology,  this  atmosphere  of public  concern  could  create an
adverse marketing environment.

Jet engines and jet engine noise are regulated domestically and internationally.
Since our  technology is designed to reduce this noise we do not believe we will
be subject to any  regulations not presently part of the jet engine and aircraft
regulatory  scheme.  If we should require some form of seeding of fuel as a part
of our system, this may be subject to additional regulation.

Medical  facilities,  medical equipment and food processing and distribution are
all  highly   regulated.   It  is  likely  that  any  equipment   developed  for
sterilization  or  decontamination   will  be  subject  to  existing  government
regulations  and  require  advance  approval  prior to sale or use.  This  could
increase the costs of development and  commercialization  and extend the time to
market   for  any   devices   developed   with  our  plasma   sterilization   or
decontamination technology.

Intellectual Property Rights

We  purchased  one issued U.S.  patent in November  1999 and we were  granted an
additional  U.S.  patent on the plasma  antenna  technology  work  performed  by
Patriot.  We have filed to protect the key claims of these patents in Australia,
Europe and  Canada.  Although  we  believe we will be able to obtain  additional
foreign  rights on these two issued U.S.  patents in Canada and Europe there can
be no assurance that such foreign  patents can be obtained.  Two additional U.S.
patents  have  issued on our  plasma  antenna  technology.  We have  filed  five
additional U.S. patent  applications or provisional  patent  applications on the
plasma  antenna  technology.  We expect to elect  foreign  protection on some of
these  pending  claims  as we  continue  to work to  broaden  our  portfolio  of
intellectual property.

We purchased one U.S. patent on our plasma sound reduction  technology.  Foreign
rights have been applied for and we are currently  pursuing patent  applications
in Canada,  Europe,  Brazil,  China,  Japan and the Russian  Federation.  We may
consider additional patents in the future.

Dr. Alexeff owns one U.S. patent on the plasma sterilization and decontamination
technology we have licensed.  We may seek to file and obtain under our exclusive
license  additional  patents on this technology as we progress with development.
No foreign rights have been applied for to date.

We have an ongoing policy of filing patent  applications  to seek protection for
novel features of our technologies. Prior to the filing and granting of patents,
our policy is to disclose  key  features to patent  counsel and  maintain  these
features as trade secrets. There can be no assurance that any additional patents
on our technology will be granted.

In  addition  to  such  factors  as  innovation,   technological  expertise  and
experienced  personnel,  we  believe  that a  strong  patent  position  will  be
important to compete  effectively  through licensing in our proposed markets. We
are investing significant  management,  legal and financial resources toward our
technology  patents.  The new technology  industry is  characterized by frequent
litigation  regarding patent and other  intellectual  property  rights.  Others,
including academic  institutions and competitors,  may hold patents in competing
areas.  Patents  filed by the Navy and by ANU or by others may limit our ability
to license our plasma technologies in certain areas.  Although we do not believe
any existing patents would inhibit our ability to license our technology,  there
can be no assurance that others will not assert claims in the future.  There can
be no  assurance  that such  claims,  with or  without  merit,  would not have a
material adverse effect on our financial condition or results of operations.

The  validity of our  existing  patents has not been  adjudicated  by any court.
Competitors  may bring legal action to challenge the validity of our existing or
future  patents or may attempt to  circumvent  the  protection  provided by such
patents. There can be no assurance that either of such activities by competitors
would not be successful.  The failure to obtain patent protection or the loss of
patent  protection on our technologies or the  circumvention of our patents,  by
competitors  could  have a  material  adverse  effect on our  ability to compete
successfully.

We generally  take  advantage of the Patent  Convention  Treaty  procedures  for
patent protection in foreign  countries.  This procedure is more cost efficient,
but  results in a delay in the  application  and  issuance  of foreign  patents;
however,  any  resulting  foreign  patents,  if and when issued,  enjoy the same
priority date as U.S. counterparts.

Our policy is to enter into  nondisclosure  agreements  with each  employee  and
consultant  or  third  party  to  whom  any of our  proprietary  information  is
disclosed.  These agreements prohibit the disclosure of confidential information
to others,  both during and  subsequent  to  employment  or the  duration of the
working  relationship.  They also provide for


                                       12
<PAGE>

assignment of inventions to us. There can be no assurance,  however,  that these
agreements  will not be breached,  that we will have  adequate  remedies for any
breach  or that  our  trade  secrets  will  not  otherwise  become  known  or be
independently developed by competitors.

Research and Development

For the years ended  December  31,  2002,  2001 and 2000 we  invested  $441,469,
$157,709 and $422,107, respectively, on research and development,  including the
acquired technology. In 2000 we recognized $160,536 of revenue from one customer
for sponsored  research and development,  in 2001 we recognized $78,026 from two
customers  for  sponsored  research and  development  and in 2002 we  recognized
$375,677  from two  customers for  sponsored  research and  development.  Future
levels of research  and  development  expenditures  will vary  depending  on the
timing of further technology  development and the availability of funds to carry
on additional  research and  development on currently  owned  technologies or in
other areas.

Employees

We have no employees  other than our two  executive  officers  that provide only
part-time services to the Company. We employ technical  consultants or others on
a  contract  or  project-by-project  basis.  We have  not  experienced  any work
stoppages and are not a party to a collective bargaining agreement.

ITEM 2. DESCRIPTION OF PROPERTY

Our principal executive offices are located at 980 American Pacific Drive, Suite
#111,  Henderson,  Nevada 89014,  which is the principal  business office of our
President,  Jerry E. Polis, who has other business  operations at this location.
We share approximately  2,600 square feet with other businesses  affiliated with
Mr.  Polis.  Commencing in September  1999 we began paying a company  affiliated
with Mr. Polis an  aggregate  of $500 per month for office rent and  bookkeeping
and  administrative  services.  This was  increased to $750 per month in January
2002 and to $1,000  per  month in July  2002  reflecting  increased  office  and
administrative  activity. We believe these terms are no less favorable than what
could be obtained from outside providers.

ITEM 3. LEGAL PROCEEDINGS

We are not involved in any threatened or pending legal proceedings.

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

No matter was submitted to a vote of security  holders during the fourth quarter
of the fiscal year covered by this report.


                                       13
<PAGE>

                                     PART II

ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

Market Information

On April 4, 2002 our  shares  of common  stock  commenced  quotation  on the OTC
Electronic Bulletin Board (OTCBB) under the symbol ASIT. Prior to that there had
been no public trading market for our securities since  approximately  1982. The
market for our common stock has been sporadic and very limited.

The following  table sets forth the high and low bid  quotations  for our common
stock for the year ended December 31, 2002:
                                                             Bid Quotations
                                                         High             Low
                                                         ----             ---
Year Ending December 31, 2002
           First Quarter                                     No public market
           Second Quarter (commencing April 4, 2002)     $0.71            $0.25
           Third Quarter                                 $0.71            $0.26
           Fourth Quarter                                $0.26            $0.12

We had  1,052  holders  of  record of our  3,412,522  shares of common  stock at
December  31,  2002,  which we believe  approximates  the  number of  beneficial
owners. We have never paid a cash dividend on our common stock and do not expect
to pay cash dividends in the foreseeable future.

At December  31,  2002,  we had one equity  incentive  plan under  which  equity
securities  are  or  have  been   authorized  for  issuance  to  our  employees,
consultants  or directors:  the 2000 Equity  Incentive  Plan which plan has been
approved  by our  stockholders.  The  following  table gives  information  as of
December 31, 2002:

<TABLE>
<CAPTION>
                                                                                             Number of securities
                                                                                            remaining available for
                                Number of securities to be    Weighted-average exercise      future issuance under
                                  issued upon exercise of       price of outstanding       equity compensation plans
                                   outstanding options,         options, warrants and        (excluding securities
        Plan Category               warrants and rights                rights              reflected in column (a))
                                            (a)                          (b)                          (c)
                                            ---                          ---                          ---
<S>                                       <C>                           <C>                         <C>
Equity compensation plans
approved by security holders
                                          100,000                       $0.50                       150,000
Equity compensation plans not
approved by security holders
                                            --                           --                           --
------------------------------  --------------------------- --------------------------- ---------------------------
Total                                     100,000                       $0.50                       150,000
==============================  =========================== =========================== ===========================
</TABLE>

Other than the 2000 Equity Incentive Plan, we do not have any stock appreciation
rights  plans in effect,  outstanding  warrants or rights and have no  long-term
incentive  plans,  as  those  terms  are  defined  in  Securities  and  Exchange
Commission regulations.

Recent Sales of Unregistered Securities

No  securities  were sold within the past three  years that were not  registered
under the Securities Act that were not previously reported in prior quarterly or
annual filings.

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

Except  for  the  historical  information,  the  following  discussion  contains
forward-looking  statements that are subject to risks and uncertainties.  Actual
results may differ  substantially  from those referred to herein due to a number
of factors, including but not limited to risks described in the section entitled
Risk Factors and elsewhere in this Annual Report.


                                       14
<PAGE>

Overview

We acquired two plasma technologies in August 1999 and December 2000, each in an
early stage of development.  We have devoted most of our expenditures to develop
and  commercialize our plasma antenna  technology.  In December 2000 we acquired
our jet engine noise reduction technology.  In August 2002 we began developing a
third plasma technology for sterilization and decontamination invented by one of
our  consultants.  We exclusively  licensed this technology in January 2003. Our
principal business activity is to:

     o   Develop  for future  sale or  licensing  our  patented  plasma  antenna
         technology for military and commercial applications.

     o   Test,  validate  and  develop  our  patented  plasma jet  engine  noise
         reduction  technology  for sale or licensing for use in the  commercial
         and military  markets for aircraft  engines and  industrial gas turbine
         engines.

     o   Validate our cold plasma  decontamination and sterilization  method and
         develop military and commercial prototypes. Our goal is to license this
         technology for production of sterilization and decontamination devices.

At the  beginning  of 1999 we  commenced  our  strategy  seeking to acquire  and
develop  new  technologies  for  licensing.  Because  no  significant  operating
revenues  have  occurred and because we have  devoted most of our efforts  since
1999 to developing new  technology,  we are considered to be in the  development
stage.  Our financial  statements are presented on the basis that we are able to
continue as a going concern,  which  contemplates  the realization of assets and
the satisfaction of liabilities in the normal course of business.  Our continued
existence is dependent upon our ability to obtain working  capital and financing
to meet our  obligations  on a timely  basis  and to fund  the  development  and
commercialization of our technologies.  The accompanying financial statements do
not  include  any  adjustments  that would be  necessary  should we be unable to
continue as a going  concern and therefore be required to realize our assets and
discharge  our  liabilities  in other than the normal  course of business and at
amounts different from those reflected in the accompanying financial statements.

Critical Accounting Policies and Estimates

We describe our  significant  accounting  policies in the notes to our financial
statements  included in this Annual Report on Form 10-KSB.  However, in response
to the SEC's Release No. FR-60,  "Cautionary  Advice Regarding  Disclosure About
Critical  Accounting  Policy,"  issued December 12, 2001, we have identified the
policies  we believe  are most  critical to an  understanding  of our  financial
statements.  The most critical  accounting policies are related to the following
areas: contract revenue recognition, patents and research and development costs.
Since application of these accounting policies involves the exercise of judgment
and use of estimates,  actual results could differ from those  estimates.  There
have been no material changes in our critical  accounting policies that impacted
our financial condition or results of operations for 2002.

Revenue Recognition - Revenue resulting from development contracts is recognized
under the percentage of completion  method based upon costs incurred relative to
total  contract  costs or when the  related  contractual  obligations  have been
fulfilled and fees are billable. Costs associated with development contracts are
included in research and  development.  We do not anticipate that costs of these
contracts will exceed revenues.

Patents - Patent  costs  related to our  acquired  technology  are  expensed  as
incurred  because the technology  being developed has not reached  technological
feasibility and requires further development, refinement and testing.

Research  and  Development  Costs - These costs are  expensed  as  incurred  and
consist primarily of personnel costs, subcontractor fees and patent costs.

We  do  not  have  off-balance   sheet   arrangements,   financings,   or  other
relationships  with  unconsolidated  entities  or other  persons,  also known as
"special purpose entities" (SPEs).


                                       15
<PAGE>

Results of Operations - 2002 vs. 2001

Revenues

Our revenues for 2002 consisted of $375,677 of research contract revenue,  which
was a $297,651  increase from contract  revenues of $78,026  recognized in 2001.
The increase is due to new and larger government contracts in 2002. Our revenues
are subject to significant  variability  due to the nature of contract  research
work.

The research  revenue of $375,677  consisted of $27,475  recognized under a U.S.
Government  Missile Defense Agency ("MDA") contract started in 2001. The balance
relates to a $65,892 Phase I Small Business  Innovation Research (SBIR) contract
with MDA that was completed in October 2002,  $250,828  recognized on a 24 month
MDA Phase II contract awarded in April 2002 and $31,482 recognized on a 12-month
Phase I Air Force Small Business  Technology  Transfer ("STTR") contract awarded
in August 2002.  In January  2003 we were awarded a U.S.  Navy Phase I six-month
contract for $68,587.

Although we have applied for additional  government and industry  sponsored work
for 2003, and will as part of our strategy  continue to seek such support in the
future,  there can be no assurance of any additional research revenues in future
periods.

Research and Development

Research and development  costs in 2002 totaled $441,469 an increase of $283,760
from the 2001 total of $157,709.  The increase resulted from increased technical
consultant  costs and  subcontract  work on a greater  volume of  contracts.  We
expended  approximately  $50,000  in the first  half of 2002 on our  self-funded
project comparing a metal parabolic  reflector with a plasma parabolic reflector
to demonstrate commercial applicability of a plasma antenna.

Research and development costs in 2002 included $172,987 of labor and consultant
costs,  $172,834  of  subcontract  costs,  $61,572 of patent  costs,  $28,725 of
contract  related  travel  costs and $5,351 of  equipment  costs.  Research  and
development  costs in 2001  included  $100,900 of  technical  consultant  costs,
$47,809 of patent costs and $9,000 paid for subcontract work.

Patent costs related to acquired technology are expensed as incurred because the
technology  being  developed  has  not  reached  technological  feasibility  and
requires further development, refinement and testing.

Research and  development  costs will vary  significantly  from year to year and
quarter to quarter.  Our technical labor costs are on month to month  agreements
and we expect  future  payments  will vary  depending on  elections  made on the
amount of company funded  research and  development and depending on the amount,
if any, of future awarded sponsored  development.  Future expenditures will also
depend  on  the  availability  of  financial  resources  to  fund  research  and
development.

Marketing and Promotion Costs

Marketing and promotion costs in 2002 were $94,816,  an increase of $34,278 from
the $60,538 in 2001.  These costs relate  primarily to travel and  personnel and
consulting costs related to visits with  prospective  development  sponsors.  In
2002 we expended $57,672 in marketing consulting costs and $37,144 in travel and
entertainment  costs. In 2001 we expended $29,800 in marketing  consultant costs
and $30,738 in travel costs.

Marketing and promotion costs will vary from year to year and quarter to quarter
depending on elections  regarding the use of personnel and  consultants  and the
elections made on travel to visit prospective sponsors.

General and Administrative Costs

General and administrative  costs in 2002 were $116,097,  a slight increase from
the 2001 total of  $92,473.  The 2002  costs  included  $51,000  in officer  and
consulting  costs,  $24,852 of accounting and audit services,  $19,107 of office
costs, $8,572 of legal fees and $10,500 of rent and administrative expenses paid
to a  company  affiliated  with our  President.  These  costs in 2001  consisted
primarily of $26,000 in officer and consultant  services,  $37,056 of accounting
and audit services,  $6,725 of office costs, $14,432 of legal fees and $6,000 of
rent and administrative expenses.

General  and  administrative  costs  will vary from year to year and  quarter to
quarter  depending on elections  regarding changes in personnel and consultants,
legal and accounting costs and other expenses.


                                       16
<PAGE>

Net Loss

We had a net loss of  $281,640  in 2002  compared  to a net loss of  $232,697 in
2001.  The  increased  loss  was  due  to  increased  research  and  development
expenditures and increased  marketing focused on new contracts.  The net loss in
2002 included $6,031 of interest expense on demand notes.

We anticipate  continued losses until we are able to  commercialize  and license
our  technologies.  The level of future losses will be dependent on our expenses
and  future  revenues,  if  any,  and  elections  made  regarding  research  and
development, marketing and administrative costs.

The loss for the period from  inception  of the  development  stage  (January 1,
1999) to December 31, 2002 was  $1,236,292 and consisted of the losses for 1999,
2000, 2001 and 2002.

Results of Operations - 2001 vs. 2000

Revenues

Our revenues for 2001 consisted of $78,026 of research contract  revenue,  which
was an $82,510 decrease from contract  revenues of $160,536  recognized in 2000.
The decrease is due to the  completion of 2000  contracts and receipt of smaller
contracts in 2001 as we moved to  government  contract  support with  associated
longer award lead times.

The  development  revenue of $78,026  consisted of $7,870  recognized  under the
final  portion  of a General  Dynamics  contract  started in 2000.  The  balance
related primarily to a $62,756 Phase I SBIR contract with MDA that was completed
in November 2001. In December 2001 we were granted an additional three-month MDA
contract of $34,876.

Research and Development

Research  and  development  costs in 2001  totaled  $157,709  or a  decrease  of
$264,398  for the 2000 total of $422,107.  Included in research and  development
costs for 2000 was $200,000  related to the purchase of technology.  The balance
of the decrease of $64,398 resulted from reduced technical  consultant costs and
lesser  amounts paid to the  University  of Tennessee  for  subcontract  work on
contracts.

Research and development costs in 2001 included $100,900 of technical consultant
costs,  $47,809 of patent costs and $9,000 paid to the  University  of Tennessee
for work under our contracts.  Research and  development  costs in 2000 included
$132,000 of technical  consultant  costs and $60,261 paid to the  University  of
Tennessee  for  prototypes   and  work  under  the  Electric  Boat   Corporation
arrangement.

Marketing and Promotion Costs

Marketing and promotion costs in 2001 were $60,538  comparable to the $67,585 in
2000.  These costs relate primarily to travel and personnel and consulting costs
related to visits with  prospective  development  sponsors.  In 2001 we expended
$30,738 in travel costs and $29,800 in marketing  consultant  costs.  In 2000 we
expended  $46,737  in travel  costs  and  $20,000  of  contributed  services  of
officers.

General and Administrative Costs

General and  administrative  costs in 2001 were $92,473,  an increase of $30,444
from the $62,029  reported in 2000.  These costs in 2001 consisted  primarily of
$26,000 in officer and  consultant  services,  $37,056 of  accounting  and audit
services,  $6,725 of office costs,  $14,432 of legal fees and $6,000 of rent and
administrative  expenses paid to a company affiliated with our President.  These
costs in 2000 consisted primarily of $20,000 in officer and consultant services,
$13,614  of  office  costs,  $17,554  of  legal  fees  and  $6,000  of rent  and
administrative  expenses paid to a company  affiliated  with our President.  The
increase in 2001 resulted primarily from the incurrence of $37,056 of accounting
and audit costs related to bringing our financial  statements current and filing
and preparing an annual report on Form 10-KSB.

Net Loss

We had a net loss of  $232,697  in 2001  compared  to a net loss of  $372,743 in
2000.  The  decreased  loss was due in major part to the fact that  $200,000 was
expensed in 2000 as purchased  technology.  The net loss in 2001 included $7,521
of interest  expense on demand  notes.  There was no  interest  expense in 2000.
Interest  income in 2001 was  $7,518,  which was a decrease  from the $18,442 in
2000 due to reduced investment balances and lower interest rates.


                                       17
<PAGE>

Liquidity and Capital Resources

In October 1999 we completed a private  placement of 1,500,000  shares of common
stock at $0.50 per share for gross  proceeds of $750,000 and net proceeds  after
legal fees of $735,000.  Prior to this  transaction and the August 1999 purchase
of our plasma antenna technology, we had no significant assets or operations. In
December  2001 we obtained  $293,800  of cash  funding  through the  issuance of
common stock of which  $110,000  represented  demand notes  previously  advanced
earlier in 2001.  In January  2002 we received  $19,400  from the sale of common
stock to an officer/director.

As of  December  31,  2002  and  2001  we had  cash  of  $83,926  and  $180,674,
respectively.  Net  cash  used in  operating  activities  was  $345,557  in 2002
consisting  primarily of a $281,640 net loss and a $167,242 increase in accounts
receivable.  These amounts were offset by $24,000 in non-cash services,  $33,000
of  services  paid in stock and  $46,325  provided  by an  increase  in accounts
payable and accrued expenses. We obtained $225,000 from demand notes and $19,400
from the sale of common  stock as described  above.  The net decrease in cash in
2002 was $96,748.

Net cash used in operating  activities was $171,857 in 2001 consisting primarily
of a $232,697 net loss and a $38,016 decrease in accounts payable. These amounts
were offset by $29,500 in non-cash  services,  $4,229 of interest  paid in stock
and $59,952 provided by a decrease in accounts  receivable.  We expended $95,237
on investing  activities,  primarily  the final  payments on the purchase of our
plasma  sound  reduction   technology.   We  obtained  $293,800  from  financing
activities. The net increase in cash in 2001 was $26,706.

Our  principal  source of liquidity  at December  31, 2002  consisted of cash of
$83,926 and accounts  receivable  of  $187,594.  Other than  anticipated  future
revenues  from our  outstanding  contracts,  we have no other unused  sources of
liquidity at this time.

At December 31, 2002 we had no outstanding commitments for capital expenditures.
We are  committed  to $102,140  for  self-funded  research  on our plasma  noise
reduction  technology  expected to be  expended  in the first half of 2003.  The
Phase II  contract  awarded in April 2002  includes  approximately  $124,000  in
additional  subcontract  costs to be performed under a purchase order consistent
with the  terms of our Phase II  government  contract  and the Phase I  contract
awarded in August  2002  includes  approximately  $30,000 in  additional  future
subcontract costs.

We do not believe  inflation had a significant  impact on our operations  during
2002 or 2001 or that it will have a significant  impact on operations during the
next twelve months.

Based on current  backlog  of  government  contracts  and our  expectations  and
business  conditions,  research  commitments and anticipated  working capital to
carry  government   contract   receivables,   we  expect  that  we  may  require
approximately  $150,000 of additional  funding to meet our cash requirements for
the next twelve months. We may also require additional funds to pay or refinance
the  demand  notes  or  finance  operations  should  our  expectations  on  cash
requirements  change. These additional funds may be available from new contracts
or from other sources.

We may be required  to reduce  expenditures  for  personnel  and  subcontractors
should we not retain  existing or obtain new contract  support.  Management  has
flexibility to adjust the level of research and marketing  expenditures based on
the  availability of resources.  However  reductions in research and development
could delay  development  progress and adversely  affect our ability to generate
future revenues from our  technologies.  Our business,  expansion or contraction
thereof,  is subject to many  factors,  some  outside our control or that we are
unable  to  anticipate.  Business  opportunities  may  arise or we may  elect to
increase our investments in research and development or marketing in the future.
Accordingly,  there can be no assurance that our current expectations  regarding
required financial resources will prove to be accurate.

We believe that any  required  funding will be available to us, but there can be
no guarantee  that we will be able to raise funds on terms  acceptable to us, or
at all. Failure to obtain  additional  funding or maintain or replace the demand
note financing could have a material adverse effect on our operations. Potential
sources of funds include debt  financing or  additional  equity  offerings.  Any
equity  issuances could be dilutive to existing  shareholders  and such dilution
could be material.


                                       18
<PAGE>

New Accounting Pronouncements and Issues

In June 2001,  the FASB  finalized  FASB  Statement No. 142;  Goodwill and Other
Intangible  Assets  (SFAS  142).  SFAS 142  requires  among other  things,  that
companies no longer  amortize  goodwill but instead test goodwill for impairment
at least  annually.  In addition,  SFAS 142 requires  that the Company  identify
reporting units for the purposes of assessing  potential  future  impairments of
goodwill,  reassess the useful  lives of other  existing  recognized  intangible
assets and cease  amortization  of intangible  assets with an indefinite  useful
life.  An intangible  asset with an indefinite  useful life should be tested for
impairment in accordance  with the guidance in SFAS 142. SFAS 142 was adopted in
our fiscal year beginning  January 1, 2002. The Company has not entered into any
business  combinations  and has no recorded  goodwill or intangible  assets and,
accordingly,  the adoption of this  statement did not have a material  effect on
the Company's financial statements.

In August 2001, the FASB issued SFAS No. 143,  "Accounting for Asset  Retirement
Obligations."  SFAS No. 143 requires the fair value of a liability  for an asset
retirement  obligation to be recognized in the period in which it is incurred if
a reasonable estimate of fair value can be made. The associated asset retirement
costs are  capitalized as part of the carrying  amount of the long-lived  asset.
SFAS No. 143 is  effective  for the Company for the fiscal year ending  December
31,  2003.  The Company  believes the  adoption of this  statement  will have no
material impact on its financial statements.

In October 2001, the SFAS issued SFAS No. 144, "Accounting for the Impairment or
Disposal of Long-Lives  Assets".  SFAS 144 requires that those long-lived assets
be measured at the lower of  carrying  amount or fair value,  less cost to sell,
whether  reported  in  continuing  operations  or  in  discontinued  operations.
Therefore,  discontinued operations will no longer be measured at net realizable
value or include  amounts for operating  losses that have not yet  occurred.  We
adopted SFAS 144  effective  for our  financial  statements  for our fiscal year
beginning  January  1,  2002.  The  adoption  of this  statement  did not have a
material impact on the financial statements.

In April 2002,  the FASB issued SFAS No. 145,  "Rescission of FASB No. 4, 44 and
64, Amendment of FASB No. 13, and Technical Corrections".  SFAS No. 145 rescinds
FASB No. 4  "Reporting  Gains and Losses  from  Extinguishments  of Debt Made to
Satisfy  Sinking-Fund  Requirements",  rescinds  SFAS  No.  44  "Accounting  for
Intangible  Assets of Motor  Carriers" and amends SFAS No. 13,  "Accounting  for
Leases". This Statement also amends other existing authoritative  pronouncements
to make various  technical  corrections,  clarify  meanings,  or describe  their
applicability  under  changed  conditions.  This  statement is effective for our
financial  statements for our fiscal year beginning January 1, 2003. The Company
does not expect the adoption of this statement to have a material  effect on the
Company's financial statements.

In June 2002,  the FASB issued SFAS No. 146,  "Accounting  for Costs  Associated
with  Exit or  Disposal  Activities".  SFAS No.  146  addresses  accounting  and
reporting for costs  associated  with exit or disposal  activities and nullifies
Emerging  Issues Task Force Issue No. 94-3,  Liability  Recognition  for Certain
Employee  Termination  Benefits  and Other Costs to Exit an Activity  (Including
Certain  Costs  Incurred  in a  Restructuring).  SFAS No.  146  requires  that a
liability for a cost associated with an exit or disposal  activity be recognized
and measured  initially at fair value when the  liability is incurred.  SFAS No.
146 is  effective  for exit or  disposal  activities  that are  initiated  after
December  31,  2002,  with early  application  encouraged.  The Company does not
expect the adoption of this statement to have a material effect on the Company's
financial statements.

In December 2002, the Financial Accounting Standards Board issued FASB Statement
No. 148,  Accounting for  Stock-Based  Compensation - Transition and Disclosure.
This  statement  amends FASB  Statement  No.  123,  Accounting  for  Stock-Based
Compensation,  to provide  alternative  methods of  transition  for a  voluntary
change to the fair value based method of  accounting  for  stock-based  employee
compensation.  This  statement  does not  require  any  change  from the  method
currently used by the Company to account for stock-based compensation,  but does
require more prominent  disclosure in the annual financial  statements about the
method of accounting for such  compensation and the effect of the method used on
reported  results.  This statement was effective for years ending after December
15, 2002. The Company has adopted the  disclosure  provisions of SFAS No. 148 in
the accompanying financial statements

Tax Loss Carryforwards

As of  December  31,  2002,  we had  approximately  $963,000 of federal tax loss
carryforwards.  These  losses  create a deferred tax asset.  We have  recorded a
valuation allowance to reduce the net deferred tax asset to zero because, in our
assessment,  it is more likely than not that the  deferred tax asset will not be
realized.  There  may  also  be  limitations  on the  utilization  of  tax  loss
carryforwards to offset any future taxes.


                                       19
<PAGE>

Business Risks

This report  contains a number of  forward-looking  statements  that reflect our
current  views with respect to future events and  financial  performance.  These
forward-looking  statements  are  subject  to certain  risks and  uncertainties,
including  those  discussed  below,  that could cause  actual  results to differ
materially from historical  results or those  anticipated.  In this report,  the
words  "anticipates,"   "believes,"   "expects,"  "intends,"  "future,"  "goal,"
"objective" and similar expressions identify forward-looking statements. Readers
are cautioned to consider the specific risk factors  described  below and not to
place undue reliance on the forward-looking  statements  contained herein, which
speak only as of the date hereof.  We undertake no obligation to publicly revise
these  forward-looking  statements,  to reflect events or circumstances that may
arise after the date hereof.

         We are a  start-up  company  and our lack of  operating  history  makes
evaluating our business difficult. Until we acquired the first plasma technology
in August 1999 we were inactive. As a result, we have limited relevant operating
history with which you may evaluate  our  business.  Our business is in the very
early stage of  development,  and our proposed  operations are subject to all of
the risks inherent in a start-up or early stage business  enterprise,  including
the likelihood of continued operating losses. The likelihood of our success must
be considered in light of the problems,  expenses,  difficulties,  complications
and delays  frequently  encountered in connection  with the growth of a start-up
business,  the  development  of new  technologies  and  products and channels of
licensing,  and current and future  development in several key technical fields,
as well as the competitive and regulatory environments in which we will operate.
You must consider the numerous  risks and  uncertainties  an early stage company
like  ours  faces in  attempting  to  develop  and  establish  a market  for new
technology. These risks include our ability to:

     o   Develop our technology to commercial viability;
     o   Establish new development and strategic relationships;
     o   Create a commercialization strategy, and
     o   Respond to highly competitive markets for our technology.

         If we are  unsuccessful  in  addressing  these  risks,  we  will in all
likelihood be unable to generate future revenues. There can be no assurance that
we will achieve profitability in the future, or that profitability, if achieved,
can be sustained.

         Our  technologies  are in early  stages of  development  and may not be
successful.  Our business  plan  contemplates  that  virtually all of our future
revenues,  if any, will be  attributable to our plasma  technologies,  which are
still  in the  early  stage of  development.  In  order  to  attract  commercial
interest, we believe we must develop additional prototypes for both military and
private sector user applications in order to demonstrate commercial viability of
our  technologies.  Our  objective  is to sell or license  our  technologies  to
companies that then must incorporate our  technologies  into products (we do not
intend  to  manufacture  products  ourselves).  Even if more  prototypes  can be
developed successfully, we cannot provide any assurance that commercially viable
technology or products incorporating our technology can be completed, developed,
manufactured  or sold  due to the  inherent  risks  of  technology  development,
limitations on financing,  competition,  obsolescence, loss of key personnel and
other  factors.  We have  generated  limited  revenues  from our plasma  antenna
technology,  limited revenues from our plasma  decontamination and sterilization
technology,  and no  revenues  from our plasma  sound  technology  and we cannot
assure that there will be future revenues.  The development of new technology is
also subject to significant  delays and cost overruns from unforeseen  technical
hurdles and other  factors.  In addition,  as discussed  below,  we will rely on
outside  consultants  to provide us with the necessary  expertise to develop our
technology  rather  than an in-house  staff of  technology  developers,  thereby
possibly increasing the costs and risks of technology development.

         We expect to sustain losses during  development of our  technology.  We
expect to incur  research,  development and marketing  expenditures  without the
prospect of significant  revenues for the foreseeable future. We may not be able
to generate  revenue from our  technology in the future.  Even if we do generate
revenues,  we cannot assure that we will be able to generate  sufficient revenue
to offset operating costs or to achieve or sustain profitability.

         We may not be able to obtain  sufficient  funds to continue or grow our
business.  Based on, among other things,  our proposed  plan of  operations  and
certain  assumptions  regarding  expected  contract  revenues  and our  expected
expenditures, we believe we may require $150,000 of additional financing to fund
our  operations  during  the  next  twelve  months.  If our  plans  change,  our
assumptions  change  or  prove  to be  inaccurate,  we may be  required  to seek
additional  financing to fund the costs of operations.  Although  management has
been  successful  in obtaining  required  funds in the past,  we have no current
commitments  or  arrangements  for  additional  financing  and  there  can be


                                       20
<PAGE>

no assurance that additional financing will be available on acceptable terms, or
at all. The failure to have adequate  financial  resources could require that we
curtail  or  terminate   development  of  our  technology  and  our  operations.
Consequently,  investors could lose their entire  investment if we are unable to
generate  positive cash flow or raise the additional  capital  necessary to fund
our operations. Even if additional financing is available to us, using equity or
convertible  debt  securities  will  result  in a  reduction  of the  percentage
ownership of our  stockholders  and they may experience  additional  dilution of
their investment.

         If  we  fail  to  establish   and  maintain   personnel  and  strategic
relationships  our ability to develop our technology  will suffer.  We currently
have month-to-month agreements with Dr. Ted Anderson and Dr. Igor Alexeff. These
individuals  have  been  involved  in  the  development  and  marketing  of  our
technology.  We do not have any  full-time  technical  employees or staff at our
facilities and will depend on these or other personnel relationships to continue
the development of our technology, implement intellectual protection strategies,
identify  and manage the  execution  of  technical  development,  and market and
license our technology. Each of these individuals,  however, may terminate their
relationship with us at any time. There can be no assurance, therefore, that any
of these  individuals  will continue  their  relationships  with us for the time
necessary to complete  development of our  technology.  Although we believe that
there are other  personnel or consultants  capable of working on our technology,
the loss or  unavailability of these individuals could result in delays or added
costs of  development,  materially  impede  development or adversely  affect our
ability to continue in business.

         We also believe that our success will depend,  in part,  on our ability
to establish additional personnel or strategic relationships to develop, produce
and  market our  technology.  Our  success  will also  depend on our  ability to
develop and maintain  strategic  development  and marketing  relationships  with
producers,  distributors,  end-users and  manufacturers  or entities  engaged in
supplying  or  servicing  targeted  markets.  If we are unable to  develop  such
relationships our chances for future success will be substantially diminished.

         Our ability to protect our  intellectual  property  and  technology  is
uncertain.  Our success depends, and will continue to depend, to a great extent,
on our ability to maintain patent  protection for our technology and to preserve
our trade secrets and to operate without infringing the property rights of third
parties.  We cannot  guarantee  that  existing  or  pending  patents  will be of
sufficient  scope or  strength  to give us  competitive  advantages  or that any
patents that may be issued to us will not be challenged or invalidated.  We have
not performed any analysis of patents of others that may limit our ability to do
business.  We are aware of other parties that are currently  conducting research
in the area of gas  plasma  antennas  and they have  filed at least one  patent.
Further,  we have not  obtained any foreign  patents to date  although we may be
granted  foreign  patents  in the  future.  Consequently,  we may not be able to
protect our technology or products that are sold outside of the United States.

         Despite  our efforts to protect our  proprietary  rights,  unauthorized
parties may attempt to copy aspects of our technology or proposed products or to
obtain and use information that we consider proprietary.  The available means of
protecting our  proprietary  rights may not be adequate and our  competitors may
independently  develop  similar  technology,  duplicate  our  products or design
around  patents  issued  to us or our  other  intellectual  property.  We cannot
guarantee our intellectual property will provide us meaningful protection or any
commercial advantage.

         Defending against  intellectual  property claims could be expensive and
could disrupt our business.  The high technology  industry is  characterized  by
vigorous  protection  and  pursuit of  intellectual  property  rights  that have
resulted in significant and often protracted and expensive litigation.  There is
currently  no pending  intellectual  property  litigation  against us. We cannot
guarantee,  however,  that  our  technologies  or  products  do not and will not
infringe the patents or proprietary  rights of third  parties.  The risk of such
claims may  increase as the number of products and  competitors  in our industry
segment grows and the  functionality of products in different  industry segments
overlaps.  Any such  claims,  with or without  merit,  could be  time-consuming,
result in costly litigation,  cause product shipment delays,  preclude or hinder
new  product  development  or  require us to enter  into  royalty  or  licensing
agreements.  Such  agreements,  if  required,  may  not be  available  on  terms
acceptable to us or at all. A successful challenge to our plasma antenna patents
or our plasma sound reduction  patent or the cold plasma patent we have licensed
would  have a  materially  adverse  effect  on our  business  prospects.  We are
required to pay certain  royalties to the companies that sold or licensed us our
technology.  Any  dispute  that may arise  between  such  entities  and us could
adversely affect our business.

         Competition and obsolescence could preclude us from realizing revenues.
The  markets  for  our  plasma  technologies  are  extremely  competitive.  Many
companies produce antenna products,  decontamination and sterilization


                                       21
<PAGE>

equipment and noise  reduction  systems that are  competitive to the products or
systems we intend to develop.  These companies are larger and have substantially
greater resources than we do. We may not be able to compete  successfully in any
of these markets.  In addition,  these  companies  expend  significant  funds on
research and  development.  They or others may have  developed or may succeed in
developing  technology  and products that are more effective than those proposed
by us.  There can be no assurance  that we will be able to compete  successfully
with such  competitors or that additional  competition  will not have a material
adverse effect on our business.

         Our markets are highly regulated and we may be subject to environmental
regulations.  The transmission of radio frequency signals,  the sterilization of
medical  devices and food,  the  decontamination  of items and jet engine  noise
emissions are highly  regulated and controlled in most major markets  throughout
the world.  Communications equipment,  decontamination and sterilization devices
and jet engine equipment,  including our proposed products, must be manufactured
and tested to meet strict  standards and often must be certified for use.  These
factors increase the time and risk of introducing new technology.  We may not be
able to obtain timely regulatory  approvals for future products.  The failure to
obtain any necessary  approvals would adversely impact our business.  Our plasma
antenna  technology was at one time  classified  secret by the U.S.  government.
There can be no  assurance  that future  improvements,  patent  applications  or
embodiments of the technology will not be classified secret and limit the market
available to us to approved government entities.

         Federal,  state and local  regulations  impose various  controls on the
storage, handling, discharge and disposal of certain substances that may be used
in  anticipated  antenna  manufacturing  processes  or  used as  ingredients  in
decontamination or sterilization  equipment. We intend to conform and expect any
contractors or licensees to conform to  governmental  regulations  applicable to
operations and facilities,  including those related to environmental,  land use,
public utility utilization and fire code matters. There can be no assurance that
such  governmental  regulations will not impose the need for additional  capital
equipment or other process  requirements  or restrict our ability to continue or
expand our operations.

         We may be subject to product  liability and recall claims exceeding any
future insurance coverage.  Although we intend to rely on strategic partners for
the manufacture and sale of products or systems incorporating our technology, we
may become subject to product  liability  claims and lawsuits from time to time.
We face risk of  product  liability  claims  in the  event  that the use of such
products results in personal  injury.  We also face the possibility that defects
in the design or manufacture of products or systems might  necessitate a recall.
There can be no  assurance  that we will not  experience  losses  due to product
liability,  claims or  recalls in the  future.  There can be no  assurance  that
insurance  coverage will be available on acceptable terms or at all, or that any
insurance coverage will be adequate to cover such losses. A product liability or
other  judgment  against us in excess of future  insurance  coverage,  if any is
obtained, or a product recall could adversely affect our business.

         Our officers,  directors and consulting personnel devote only part-time
to our business  resulting in possible  conflicts.  Our officers,  directors and
consulting  personnel  devote  only  part-time  services to our company and have
other employment and business  interests to which they devote attention and will
continue to do so, resulting in potential conflicts of interest. There can be no
assurance these conflicts or the unavailability of full-time management will not
adversely impact our operations and chances for success.

         We may issue  additional  shares of authorized  common stock and future
preferred stock. Our Articles of Incorporation authorize up to 11,000,000 shares
of  stock,  par  value of  $0.02  per  share,  of which  10,000,000  shares  are
designated common stock and 1,000,000 shares are designated preferred stock. The
Board of Directors  has the power without  prior  stockholder  approval to issue
additional shares of previously  authorized and unissued common stock and one or
more  series  of  preferred  stock  with  such  rates of  dividends,  redemption
provisions,  liquidation preferences,  voting rights,  conversion privileges and
any other  characteristics  as the Board may deem  necessary.  This power  would
include the right to issue  preferred  stock with  rights to receive  dividends,
liquidating  distributions and other benefits that may be superior to the rights
of holders of common stock.  If any  subsequent  issuance of preferred  stock is
approved, such preferred stock could adversely affect the holders of outstanding
common stock. In addition,  the authority to issue  additional  shares of common
stock and preferred  stock could  discourage,  delay or prevent a takeover of us
and could have a depressive effect on the market price for our securities.

         There is a very limited public market for our common stock.  There is a
very limited public market for our common stock as trading has been sporadic and
of low volume.  There is no assurance that there will be any market liquidity or
that we can maintain a trading market in the future.


                                       22
<PAGE>

Item 7. Financial Statements

Our financial statements required to be included in this Item 7 are set forth in
a separate  section of this report and commence  immediately  following page 27.
The financial statements include for this filing two years of balance sheets and
three years of statements of  operations,  cash flows and  stockholders'  equity
since inception of the development stage.

Item  8.  Changes  In and  Disagreements  With  Accountants  on  Accounting  and
Financial Disclosure

We engaged McGladrey & Pullen, LLP in December 2000 and during the two preceding
years the Company had no  independent  accountant.  There were no  disagreements
with accountants or reportable events under this item.

                                    PART III

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

Directors and Officers

The  following  table sets forth  information  with respect to each director and
executive officer of ASI as of March 3, 2003:

         Name                     Age       Position
         ----                     ---       --------
         Jerry E. Polis           70        President and Director since 1973
         Phil Carlino             76        Director since 1973
         Eric M. Polis            32        Secretary, Treasurer and Director
                                            since August 2000
         Dawayne R. Jacobs        60        Director since August 2000

There is no arrangement  between any of the directors or executive  officers and
any other person or persons,  pursuant to which he was or is to be selected as a
director or  executive  officer.  Jerry E. Polis is the father of Eric M. Polis.
There is no other blood relationship between or among the directors or executive
officers of ASI.

Each director  serves until the next annual meeting or until their  successor is
elected or appointed.

         Jerry E. Polis has been President and a director since 1973. Since 1963
         he has been self-employed primarily in real estate investment, and from
         1964 to 2002 he owned and operated Polis Realty.  From 1968 to the sale
         of his  ownership in January  1997,  he was active as a co-owner of the
         Taco Bell franchises for the State of Nevada  (operated under privately
         owned Las Cal  Corporation).  In 1994 he co-founded  Commercial Bank of
         Nevada, an unlisted  publicly owned bank located in Las Vegas,  Nevada,
         which was sold  through a merger to a NYSE bank group in June 1998.  He
         was a director of Commercial  Bank from 1994 and Chairman from May 1996
         until its sale.  Mr. Polis was a director of ValueStar  Corporation,  a
         publicly traded corporation, from July 1995 to November 2000. Mr. Polis
         graduated from Penn State  University with a B.A. Degree in Commerce in
         1953.

         Phil  Carlino  has been a  Director  since 1973 and until  August  2000
         served as  Treasurer.  Since 1963 he has served as President of Fremont
         Coin Company,  a wholesale  coin business in Las Vegas,  Nevada;  since
         1974 he has been President of Carlino & Carlino, an advertising agency,
         and since 1958 he has served as  President of Carlino  Silver  Company,
         which  buys and sells  gold and  silver  bullion.  Mr.  Carlino is also
         active in Nevada state health agency charities.

         Eric M. Polis has been  Secretary of the Company  since July 2000. As a
         Nevada  licensed real estate agent,  he served as property  manager and
         leasing  agent  for Polis  Realty  from  1993 to 2002.  Mr.  Polis is a
         private  investor  and  serves  on  the  board  of  several  Las  Vegas
         non-profit organizations. He obtained a B.S. in Business Administration
         from the University of Arizona in 1993.

         Dawayne R. Jacobs founded Jacobs Marketing Inc., a general  merchandise
         manufacturing  representative  firm located in  Plymouth,  Minnesota in
         1982.  He has  served  as its  President  and CEO since  1982.  He also


                                       23
<PAGE>

         founded The Accessory Group, Henderson,  Nevada in 1995, a manufacturer
         and national  distributor  of proprietary  products,  and serves as its
         Chief  Executive  Officer.  In 1993 he founded  International  Rainwear
         Inc.,  Henderson,  Nevada, a national  distributor of rainwear that was
         sold in 1997.

Other Significant Personnel

We utilize the  following  personnel  who are key  consulting  personnel  to our
business:

         Dr. Igor Alexeff is past  President of the Nuclear and Plasma  Sciences
         Society  of  the  Institute  of  Electrical  and  Electronic  Engineers
         ("IEEE")  and a past  chairman of the Plasma  Science and  Applications
         Committee  ("PSAC").  He is a Professor  Emeritus at the  University of
         Tennessee  Electrical  and  Computer  Engineering  department.  He is a
         plasma  scientist,  inventor,  publisher and researcher and has led the
         prototyping  work on our plasma  antennas  and is the  inventor  of our
         plasma decontamination and sterilization method.

         Dr. Ted Anderson has a Ph.D in physics  from New York  University  with
         his  education  emphasizing  electrodynamics,  optoelectronics,  atomic
         physics  and fluid  dynamics.  He was  formerly  a  professor  at Union
         College and the  Rensselaer  Polytechnic  Institute.  Dr.  Anderson has
         significant  antenna  experience  from his work with the Naval Undersea
         Warfare  Center  and  Norden  Systems.  He has  developed  many  of our
         mathematical models and has published on plasma antenna applications.

These personnel have been engaged pursuant to written agreements, those of which
had an  original  term,  such  term  has  expired  and the  engagement  of these
consultants is effectively on a month to month basis.

Conflicts of Interest

Certain  conflicts of interest now exist and will  continue to exist  between us
and certain of our officers, directors and consultants due to the fact that they
have other employment or business  interests to which they devote some attention
and they are expected to continue to do so. We have not established  policies or
procedures  for the  resolution  of current or  potential  conflicts of interest
between us and management,  consultants or affiliated entities.  There can be no
assurance  that members of management  will resolve all conflicts of interest in
our favor.  Our officers and directors  are  accountable  to us as  fiduciaries,
which means that they are legally obligated to exercise good faith and integrity
in handling  our  affairs.  Failure by them to conduct our  business in our best
interests may result in liability to them.

It is  conceivable  that our areas of interest  could  overlap or conflict  with
other business  interests of our management or our consultants.  We believe that
our areas of focus,  products and technology  directions are unique and distinct
from other  businesses in which our management and  consultants  may be involved
such that no conflict in business  lines or loyalties  will  result.  Because of
this unlikelihood,  no steps have been taken to resolve possible conflicts,  and
any such  conflicts,  should they arise,  will be addressed  at the  appropriate
time.

Section 16(a) Beneficial Ownership Reporting Compliance

Section 16(a) of the  Securities  Exchange Act of 1934 (the "Act")  requires the
Company's  officers,  directors  and persons who own more than 10% of a class of
the  Company's  securities  registered  under  Section  12(g) of the Act to file
reports of ownership and changes in ownership  with the  Securities and Exchange
Commission  ("SEC").  Officers,  directors and greater than 10% stockholders are
required by SEC  regulation  to furnish  the Company  with copies of all Section
16(a) forms they file.

During the three years prior to March 2001,  none of the  officers or  directors
filed Form 3s,  Form 4s or Form 5s as the  Company  was not an active  reporting
company.  In March 2001 the officers and directors filed initial reports on Form
3.

Based solely on a review of copies of such reports  furnished to the Company and
written  representations  that no other  reports were  required  during the year
ended  December 31, 2002, the Company  believes that all persons  subject to the
reporting requirements pursuant to Section 16(a) filed the required reports on a
timely basis with the SEC.

Item 10. Executive Compensation

There is shown below information  concerning the compensation of Jerry E. Polis,
our chief executive officer (the "Named Executive Officer"), for the years ended
December 31, 2002, 2001 and 2000. No other executive  officer's salary and bonus
exceeded $100,000 during the fiscal year ended December 31, 2002.


                                       24
<PAGE>

                           Summary Compensation Table

<TABLE>
<CAPTION>
                                                                                              Long Term
                                            Annual Compensation                              Compensation
                                            -------------------                              ------------
                                                                                         Securities Underlying
Name and                        Fiscal                             Other Annual                 Options
Principal Position              Year        Salary        Bonus    Compensation              (# of Shares)
------------------              ----        ------        -----    ------------              -------------
<S>                              <C>        <C>            <C>        <C>                       <C>
Jerry E. Polis, President        2002       $-0- (1)       $-0-       $  -0-                        -0-
                                 2001       $-0- (1)       $-0-        $200 (1)                 10,000
                                 2000       $-0- (1)       $-0-        $200 (1)                     -0-
</TABLE>

(1)           Director fees. Mr. Polis received no compensation as an officer of
              the Company for any period.  The Company recorded $20,000 in 2000,
              $24,000 in 2001 and $24,000 in 2002 as  contributed  services  for
              Mr. Polis.

Option Grants

There  were no grants of stock  options  in fiscal  2002 to the Named  Executive
Officer reflected in the Summary  Compensation  Table shown above. There were no
options exercised by the named officer or any other person during 2002.

             Aggregated Option Exercises and Fiscal Year-End Values

<TABLE>
<CAPTION>
                                                       Number of Unexercised          Value of Unexercised
                                                           Options Held At          In-The-Money Options At
                             Shares                       December 31, 2002             December 31,2002(1)
                           Acquired      Value            -----------------             -------------------
       Name              On Exercise    Realized     Exercisable  Unexercisable     Exercisable    Unexercisable
       ----              -----------    --------     -----------  -------------     -----------    -------------
<S>                          <C>          <C>           <C>             <C>             <C>             <C>
       Jerry E. Polis       -0-          -0-            10,000         -0-             -0-             -0-
</TABLE>

    (1) Based on the closing bid price on December 31, 2002 of $0.15 per share.

On August 16, 2000 the  shareholders  approved  the 2000 Equity  Incentive  Plan
reserving an aggregate of 250,000  shares of common stock for issuance under the
plan. At December 31, 2002 there were 100,000  options granted by the directors,
which were  documented  by  agreements  provided to  optionees  in January  2002
pursuant to this plan.

Other than the 2000 Equity Incentive Plan, we do not have any stock appreciation
rights  plans in effect,  outstanding  warrants or rights and have no  long-term
incentive  plans,  as  those  terms  are  defined  in  Securities  and  Exchange
Commission regulations.

Director Compensation

The directors  receive  compensation  of $100 per meeting for their  services as
directors and Mr. Jerry E. Polis,  Chairman of the Board, receives $200 for each
meeting.  None of the  officers  currently  receive any  compensation  for their
services as officers of the Company.  We may begin compensating  management at a
future  date.  There are no  employment  contracts  with any of our  officers or
directors.

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

The following  table sets forth, as of March 3, 2003, the Common Stock ownership
of each of our directors and officers,  all our executive officers and directors
as a group,  and each person known by us to be a beneficial  owner of 5% or more
of our common stock.  Except as otherwise noted, each person listed below is the
sole beneficial  owner of the shares and has sole investment and voting power as
to such shares.


                                       25
<PAGE>

<TABLE>
<CAPTION>
                  Name and Address                                Amount & Nature
                  of Beneficial                                   of Beneficial                Percent
                  Owner                                           Ownership                    of Class
                  -----                                           ---------                    --------
<S>                                                                  <C>                         <C>
                  Jerry E. Polis                                     814,911 (1)                 23.8%
                  President and Director
                  980 American Pacific Drive, #111
                  Henderson, Nevada 89014

                  Phil Carlino,                                       40,000 (3)                  1.2%
                  Director
                  3375 Glen Avenue, Suite 6
                  Las Vegas, Nevada 89121

                  Eric M. Polis                                       60,000 (3)                  1.8%
                  Secretary, Treasurer and Director
                  980 American Pacific Drive, #111
                  Henderson, Nevada 89014

                  Dawayne R. Jacobs                                  110,000 (2)                  3.2%
                  Director
                  980 American Pacific Drive, #111
                  Henderson, Nevada 89014

                  Newport Pacific Ltd.                               200,000                      5.9%
                  1005A Lippo Center, Tower 1
                  89 Queensway
                  Hong Kong

                  James A. Barnes                                    428,614 (4)                 12.5%
                  8617 Canyon View Drive
                  Las Vegas, NV 89117

                  All directors and officers as a group            1,024,911                     29.7%
                    (4 persons)
</TABLE>

----------------------------
(1)      Includes  611,614  shares  held by the Polis  Family  Trust and  63,000
         shares by Davric  Corporation,  a company controlled by Mr. Polis. Also
         includes  currently  exercisable  options  on  10,000  shares of common
         stock.

(2)      Shares  held by  family  trust.  Also  includes  currently  exercisable
         options on 10,000 shares of common stock.

(3)      Includes  currently  exercisable  options  on  10,000  shares of common
         stock.

(4)      Includes  318,614  shares  held by  Sunrise  Capital,  Inc.,  a company
         controlled by Mr.  Barnes,  and 100,000  shares held by a family trust.
         Also includes currently  exercisable options on 10,000 shares of common
         stock.

See Item 5 above for information regarding our 2000 Equity Incentive Plan.

Item 12. Certain Relationships and Related Transactions

During 2001 Mr. Jerry E. Polis  advanced  $185,000 to the Company as  short-term
advances of which  $150,000  was repaid.  The  balance of $35,000  plus  accrued
interest of $1,407 and an additional cash investment of $50,000 was converted to
172,814 shares of common stock in December 2001.

In January 2002 Mr. Jerry E. Polis  purchased  38,800 shares of common stock for
$19,400. During 2002 he also advanced the company $75,000 pursuant to 10% demand
notes.

We currently share office space with Davric Corporation, an entity controlled by
Mr. Jerry E. Polis. We are paying Davric Corporation $1,000 per month for use of
this space and associated administrative costs.


                                       26
<PAGE>

Item 13. Exhibits and Reports on Form 8-K

(a) Exhibits

<TABLE>
<CAPTION>
Exhibit
Number                     Description of Exhibit
------                     ----------------------
<S>                   <C>

3.1*           Restated Articles of Incorporation of ASI Technology  Corporation
               as filed with the  Secretary  of State of Nevada on  September 1,
               2000.

3.2*           Bylaws of the Company.

4.1*           Form of Certificate evidencing common stock of the Company.

10.1*          2000 Equity Incentive Plan ratified by the shareholders on August
               1, 2000.

10.1.1*        Standard  form of stock  option  agreement  under the 2000 Equity
               Incentive Plan.

10.2*          Purchase  Agreement dated August 20, 1999 between the Company and
               Patriot Scientific Corporation.

10.3*          Purchase  Agreement  dated  December 29, 2000 between the Company
               and American Technology Corporation.

10.4**         Patent License  Agreement  effective  January 1, 2003 between the
               Company and Igor Alexeff.  Portions of this exhibit (indicated by
               asterisks)   have  been   omitted   pursuant  to  a  request  for
               confidential  treatment  pursuant to Rule 24b-2 of the Securities
               Exchange Act of 1934.

99.1           Certification of Chief Executive  Officer pursuant to section 906
               of the Sarbanes-Oxley Act of 2002.

99.2           Certification of Chief Financial  Officer pursuant to section 906
               of the Sarbanes-Oxley Act of 2002.
</TABLE>

* Exhibit incorporated by reference to the exhibit of the same number previously
filed by us in our 2000 Annual Report on Form 10-KSB filed on March 23, 2001.

**  Exhibit  incorporated  by  reference  to  the  exhibit  of the  same  number
previously filed by us on Form 8-K dated February 11, 2003.

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

 (b) Reports on Form 8-K.

None

Item 14. Controls and Procedures

         (a)  Evaluation of Disclosure  Controls and  Procedures.  The Company's
Chief Executive  Officer and its Chief Financial  Officer,  after evaluating the
effectiveness of the Company's disclosure controls and procedures (as defined in
Securities  Exchange  Act of 1934 Rules  13a-14(c)  and  15d-14(c)  as of a date
within 90 days of the filing  date of this  annual  report on Form  10-KSB  (the
"Evaluation  Date")),  have  concluded  that  as of  the  Evaluation  Date,  the
Company's  disclosure  controls and  procedures  were  adequate and effective to
ensure that material  information relating to the Company would be made known to
them by others within the Company,  particularly during the period in which this
annual report on Form 10-KSB was being prepared.

         (b) Changes in Internal Controls.  There were no significant changes in
the Company's  internal  controls or in other  factors that could  significantly
affect the  Company's  disclosure  controls  and  procedures  subsequent  to the
Evaluation Date, nor any significant deficiencies or material weaknesses in such
disclosure controls and procedures requiring corrective actions. As a result, no
corrective actions were taken.


                                       27
<PAGE>

                          INDEPENDENT AUDITOR'S REPORT

To the Board of Directors
ASI Technology Corporation
Las Vegas, Nevada

We have audited the accompanying balance sheets of ASI Technology Corporation (a
development  stage  company)  as of  December  31, 2002 and 2001 and the related
statements  of  operations,  stockholders'  equity  and cash flows for the years
ended December 31, 2002, 2001, and 2000 and for the period from inception of the
development  stage on January 1, 1999 to  December  31,  2002.  These  financial
statements   are  the   responsibility   of  the   Company's   management.   Our
responsibility  is to express an opinion on these financial  statements based on
our audits.

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

In our opinion,  the financial  statements  referred to above present fairly, in
all material respects,  the financial position of ASI Technology  Corporation as
of December 31, 2002 and 2001,  and the results of its  operations  and its cash
flows for the years ended  December 31, 2002,  2001, and 2000 and for the period
from inception of the development  stage on January 1, 1999 to December 31, 2002
in conformity with accounting principles generally accepted in the United States
of America.

The accompanying  financial  statements have been prepared  assuming the Company
will  continue as a going  concern.  As  discussed  in Note 12 to the  financial
statements,  the Company has suffered  recurring  losses from  operations and is
likely to require  additional  capital in order to fund the  development  of its
technologies.  This  raises  substantial  doubt about the  Company's  ability to
continue as a going concern.  Management's  plans in regard to these matters are
also  described  in  Note  12.  The  financial  statements  do not  include  any
adjustments that might result from the outcome of this uncertainty.


/s/ McGladrey & Pullen, LLP

Las Vegas, Nevada
January 31, 2003


                                      F-1
<PAGE>

ASI TECHNOLOGY CORPORATION
(A Development Stage Company)

<TABLE>
<CAPTION>
BALANCE SHEETS
December 31, 2002 and 2001
                                                                                                2002                2001
---------------------------------------------------------------------------------------------------------------------------
<S>                                                                                           <C>                <C>
ASSETS
Current Assets
Cash  and cash equivalents                                                                    $ 83,926           $ 180,674
Accounts receivable (Note 4)                                                                   187,594              20,352
Note receivable - current (Note 5)                                                               5,255               4,805
                                                                                   ----------------------------------------
Total current assets                                                                           276,775             205,831

Note receivable - less current portion (Note 5)                                                  5,541              10,400
                                                                                   ----------------------------------------

                                                                                             $ 282,316           $ 216,231
                                                                                   ========================================

LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts payable                                                                              $ 36,807             $ 5,514
Accrued liabilities                                                                             15,032                  --
Related party demand notes payable (Note 8)                                                    225,000                  --
                                                                                   ----------------------------------------
Total current liabilities                                                                      276,839               5,514
                                                                                   ----------------------------------------

Commitments (Note 9 and 13)

Stockholders' Equity (Notes 6 and 7)
Common stock, $.02 par value; 10,000,000 shares authorized,
issued and outstanding 2002, 3,412,522; 2001, 3,307,722                                         68,250              66,154
Additional paid-in capital                                                                   3,415,204           3,340,900
Accumulated deficit                                                                         (3,477,977)         (3,196,337)
                                                                                   ----------------------------------------
                                                                                                 5,477             210,717
                                                                                   ----------------------------------------

                                                                                             $ 282,316           $ 216,231
                                                                                   ========================================
</TABLE>

See Notes to Financial Statements.


                                      F-2
<PAGE>

ASI TECHNOLOGY CORPORATION
(A Development Stage Company)

STATEMENTS OF OPERATIONS
For the Years Ended  December  31,  2002,  2001 and 2000 and For the Period from
Inception of Development Stage on January 1, 1999 to December 31, 2002

<TABLE>
<CAPTION>
                                                                                                            From Inception
                                                                                                            of Development
                                                                                                               Stage on
                                                                                                           January 1, 1999
                                                                                                           to December 31,
                                                    2002                2001                2000                 2002
------------------------------------------------------------------------------------------------------------------------------
<S>                      <C>                           <C>                  <C>                <C>               <C>
Revenues
Research contracts (Note 4)                            $ 375,677            $ 78,026           $ 160,536         $ 614,239

Operating Expenses
Research and development (Note 3)                        441,469             157,709             422,107         1,325,231
Marketing and promotion                                   94,816              60,538              67,585           253,177
General and administrative (Note 11)                     116,097              92,473              62,029           291,040
                                             ------------------------------------------------------------------------------
                                                         652,382             310,720             551,721         1,869,448
                                             ------------------------------------------------------------------------------

Loss from Operations                                    (276,705)           (232,694)           (391,185)       (1,255,209)

Nonoperating Income (Expense)
Interest income                                            1,096               7,518              18,442            34,077
Interest expense (Note 11)                                (6,031)             (7,521)                  -           (15,160)
                                             ------------------------------------------------------------------------------

Net Loss                                              $ (281,640)         $ (232,697)         $ (372,743)     $ (1,236,292)
                                             ==============================================================================

Basic and Diluted Loss per Common Share                  $ (0.08)            $ (0.09)            $ (0.14)
                                             ============================================================

Weighted Average Number of Common
Shares Outstanding                                     3,384,700           2,727,927           2,711,664
                                             ============================================================
</TABLE>

See Notes to Financial Statements.


                                      F-3
<PAGE>

ASI TECHNOLOGY CORPORATION
(A Development Stage Company)

STATEMENTS OF STOCKHOLDERS' EQUITY
For the Years Ended December 31, 2002, 2001 and 2000 and For the Period from
Inception of Development Stage on January 1, 1999 to December 31, 2002

<TABLE>
<CAPTION>
                                                                                                                           Deficit
                                                                                                                         Accumulated
                                                     Common Stock                                                        During the
                                                -----------------------     Additional       Accumulated                 Development
                                                 Shares        Amount     Paid-In Capital       Deficit       Total         Stage
------------------------------------------------------------------------------------------------------------------------------------
<S>                                             <C>         <C>             <C>             <C>              <C>        <C>
Balance, December 31, 1998                      1,181,664   $ 1,181,664     $ 1,087,861     $ (2,241,685)    $ 27,840   $         -

Sale of stock, net of offering costs of
$15,000 (Note 6)                                1,500,000       300,000         435,000                -      735,000             -

Stock issued for services (Note 6)                 30,000         6,000           9,000               --       15,000            --

Contributed services (Note 6)                          --            --          20,000               --       20,000            --

Net loss                                               --            --              --         (349,212)    (349,212)     (349,212)
                                               -------------------------------------------------------------------------------------

Balance, December 31, 1999                      2,711,664     1,487,664       1,551,861       (2,590,897)     448,628      (349,212)

Contributed services (Note 6)                          --            --          40,000               --       40,000            --

Net loss                                               --            --              --         (372,743)    (372,743)     (372,743)

1 for 10 reverse stock split                           --    (1,433,431)      1,433,431               --           --            --
                                               -------------------------------------------------------------------------------------

Balance, December 31, 2000                      2,711,664        54,233       3,025,292       (2,963,640)     115,885      (721,955)

Contributed services (Note 6)                          --            --          24,000               --       24,000            --

Stock options issued for services (Note 7)             --            --           5,500               --        5,500            --

Related party demand notes
converted to stock
at $0.50 per share (Note 6)                       228,458         4,569         109,660               --      114,229            --

Sale of stock at $0.50 per share (Note 6)         367,600         7,352         176,448               --      183,800            --

Net loss                                               --            --              --         (232,697)    (232,697)     (232,697)
                                               -------------------------------------------------------------------------------------

Balance, December 31, 2001                      3,307,722      $ 66,154     $ 3,340,900     $ (3,196,337)   $ 210,717   $  (954,652)


Contributed services (Note 6)                          --            --          24,000               --       24,000            --

Sale of stock at $0.50 per share (Note 6)          38,800           776          18,624               --       19,400            --

    Stock issued for services at $0.50 per         66,000         1,320          31,680               --       33,000            --
    share (Note 6)
Net loss                                               --            --              --         (281,640)    (281,640)     (281,640)
                                               -------------------------------------------------------------------------------------

Balance, December 31, 2002                      3,412,522      $ 68,250     $ 3,415,204     $ (3,477,977)     $ 5,477   $(1,236,292)
                                               =====================================================================================
</TABLE>

See Notes to Financial Statements.


                                      F-4
<PAGE>
ASI TECHNOLOGY CORPORATION
(A Development Stage Company)

STATEMENTS OF CASH FLOWS
For the Years Ended  December 31, 2002,  2001,  and 2000 and For the Period from
Inception of Development Stage on January 1, 1999 to December 31, 2002

<TABLE>
<CAPTION>
                                                                                                                    From Inception
                                                                                                                    of Development
                                                                                                                       Stage on
                                                                                                                    January 1, 1999
                                                                                                                    to December 31,
                                                                 2002                2001             2000               2002
----------------------------------------------------------------------------------------------------------------------------------
<S>                                                           <C>                 <C>              <C>               <C>
Cash Flows from Operating Activities
Net loss                                                      $ (281,640)         $ (232,697)      $ (372,743)       $ (1,236,292)
Adjustments to reconcile net loss to net
cash used in operating activities:
Contributed services                                              24,000              24,000           40,000             108,000
Common stock and options issued for services                      33,000               5,500               --              53,500
Interest paid in common stock (Note 6)                                --               4,229               --               4,229
Acquired in-process research and development                          --                  --          200,000             450,000
Changes in working capital components:
(Increase) decrease in accounts receivable                      (167,242)             59,952          (80,304)           (187,594)
(Increase) decrease in prepaid expenses                               --              13,045           (4,050)                 --
Increase (decrease) in unearned revenue                               --              (7,870)           7,870                  --
Increase (decrease) in accounts payable                           31,293             (38,016)          36,959              36,807
Increase (decrease) in accrued liabilities                        15,032                                                   15,032
(Decrease) in due to related party                                    --                  --               --              (5,895)
                                                              --------------------------------------------------------------------
Net cash used in operating activities                           (345,557)           (171,857)        (172,268)           (762,213)
                                                              --------------------------------------------------------------------

Cash Flows from Investing Activities
Increase in notes receivable                                          --            (150,000)              --            (150,000)
Payments on note receivable                                        4,409             154,763            3,685             166,543
Purchase of in-process research and development                       --            (100,000)        (100,000)           (450,000)
                                                              --------------------------------------------------------------------
Net cash provided by (used) in investing
activities                                                         4,409             (95,237)         (96,315)           (433,457)
                                                              --------------------------------------------------------------------

Cash Flows from Financing Activities
Proceeds from related party loans                                225,000             110,000               --             435,000
Net proceeds from sale of common stock                            19,400             183,800               --             838,200
                                                              --------------------------------------------------------------------
Net cash provided by financing activities                        244,400             293,800               --           1,273,200
                                                              --------------------------------------------------------------------

Net increase (decrease) in cash
and cash equivalents                                             (96,748)             26,706         (268,583)             77,530

Cash and cash equivalents, beginning of year                     180,674             153,968          422,551               6,396
                                                              --------------------------------------------------------------------

Cash and cash equivalents, end of year                          $ 83,926           $ 180,674        $ 153,968            $ 83,926
                                                              ====================================================================

Supplemental Cash Flow Information Cash
paid during the year for:
Interest                                                        $     --           $   3,292        $      --

Supplemental Schedule of Noncash Investing and
Financing Activities
Purchased technology financed by seller obligation              $     --           $      --        $ 100,000
Contributed services                                            $ 24,000           $  24,000        $  40,000
Common stock and stock options issued for services              $ 33,000           $   5,500        $      --
Demand notes and accrued interest converted to
common stock                                                    $     --           $ 114,229        $      --
</TABLE>

See Notes to Financial Statements.


                                      F-5
<PAGE>

ASI Technology Corporation
(A Development Stage Company)

Notes to Financial Statements
--------------------------------------------------------------------------------

Note 1. Nature of Business

ASI Technology Corporation, a Nevada Corporation ("Company") acquired two plasma
technologies  in August 1999  (plasma  antenna  technology)  and  December  2000
(plasma sound reduction technology),  each in an early stage of development. The
Company  is  engaged  in the  development  and  commercialization  of the plasma
technologies.  The Company is also  developing  a third  plasma  technology  for
decontamination and sterilization invented by one of its consultants.  From 1995
until  December  1998,  the Company was  inactive,  engaged  only in  collecting
proceeds from prior asset sales,  reducing debts and paying  corporate costs. At
the beginning of 1999 the Company commenced its strategy, seeking to acquire and
develop  new  technologies  for  licensing.  The  deficit  incurred  during  the
development stage represents the accumulated  deficit since January 1, 1999, the
inception of the Company's current activities.

Because the Company has  devoted  most of its efforts  since  January 1, 1999 to
research  and  development,  and  its  planned  principal  operations  have  not
commenced and no significant licensing revenues have been earned, the Company is
considered to be in the development stage.

Formerly  ASI,  the  Company  changed  its  name to ASI  Technology  Corporation
effective on September 1, 2000 in connection with a capital reorganization which
included  a 1 for 10  reverse  stock  split.  The  effect of the stock  split is
presented within the statement of stockholders' equity by transferring an amount
equal to the par  value  for the  reduction  in  shares  to  additional  paid in
capital. All references in the financial statements to shares, share prices, per
share amounts and stock plans have been adjusted retroactively for the split.

Note 2. Summary of Significant Accounting Policies

The  following  is a summary  of  significant  accounting  policies  used in the
preparation of these financial statements:

Use of estimates

The preparation of financial  statements  requires  management to make estimates
and assumptions  that affect the reported  amounts of assets and liabilities and
disclosure of  contingent  assets and  liabilities  at the date of the financial
statements  and the  reported  amounts  of  revenues  and  expenses  during  the
reporting period. Actual results could differ from those estimates.

Financial instruments and concentration of credit risk

The Company's financial instruments that are exposed to concentrations of credit
risk consist primarily of cash.

The Company's cash is maintained in bank deposit  accounts which, at times,  may
exceed federally  insured limits.  The Company has not experienced any losses in
such accounts.  The Company believes it is not exposed to any significant credit
risk on cash and cash equivalents.


                                      F-6
<PAGE>

ASI Technology Corporation
(A Development Stage Company)

Notes to Financial Statements
--------------------------------------------------------------------------------

Note 2. Summary of Significant Accounting Policies (continued)

Financial instruments and concentration of credit risk (continued)

The carrying values of financial  instruments including cash, accounts and notes
receivable,  accounts payable,  accrued expenses and contract obligation payable
approximated  fair market value because of the immediate or short-term  maturity
of  these  instruments.  Management  believes  the  carrying  value  of the note
receivable is not materially different from its fair value.

Revenue recognition

Revenue resulting from development  contracts is recognized under the percentage
of completion  method based upon costs incurred relative to total contract costs
or when the related  contractual  obligations  have been  fulfilled and fees are
billable.  Costs associated with development  contracts are included in research
and development.

Patents

Patent  costs  related to the  acquired  technology  were  expensed  as incurred
because the technology being developed has not reached technological feasibility
and requires further development, refinement and testing.

Research and development costs

Research and development costs are expensed as incurred.

Income taxes

The Company  accounts for income taxes under  Statement of Financial  Accounting
Standards  ("SFAS") No. 109. Temporary  differences are differences  between the
tax basis of assets and liabilities and their reported  amounts in the financial
statements that will result in taxable or deductible  amounts in future years. A
valuation  allowance  is recorded by the Company to the extent it is more likely
than not that a deferred tax asset will not be realized.

Stock options

The Company applies APB Opinion 25,  "Accounting for Stock Issued to Employees,"
and related  Interpretations in accounting for stock options issued to employees
which  requires  recognition  of expense  when the option price is less than the
fair value of the underlying common stock at the date of grant.

The Company has adopted the  disclosure-only  provisions  of SFAS  Statement No.
123,  "Accounting  for  Stock-Based  Compensation".  To provide the required pro
forma  information for employees,  the Company  estimates the fair value of each
stock option at the grant date by using the Black-Scholes  option-pricing model.
Had  compensation  cost for the Company's  stock-based  compensation  plans been
recorded  based on the fair value at the grant dates for awards  under the plans
consistent  with the method


                                      F-7
<PAGE>

ASI Technology Corporation
(A Development Stage Company)

Notes to Financial Statements
--------------------------------------------------------------------------------

of SFAS No. 123,  the  Company's  net loss would have been  increased to the pro
forma amounts indicated below:


                                      F-8
<PAGE>

ASI Technology Corporation
(A Development Stage Company)

Notes to Financial Statements
--------------------------------------------------------------------------------

Note 2. Summary of Significant Accounting Policies (continued)

Stock options (continued)

                                                           2002         2001
                                                        ----------   ----------
Net loss
     As reported                                        $ (281,640)  $ (232,697)
         Deduct total employee stock-based
         compensation expense determined under
         fair value based method for all awards net
         of related tax effects                               --         (5,500)
                                                        ----------   ----------
     Pro forma                                          $ (281,640)  $ (238,197)
                                                        ==========   ==========

Basic and diluted loss per share:
     As reported                                        $    (0.08)  $    (0.09)
                                                        ==========   ==========
     Pro forma                                          $    (0.08)  $    (0.09)
                                                        ==========   ==========

Statement of cash flows

For purposes of the  statement of cash flows,  the Company  considers all highly
liquid  investments  purchased with an original maturity of three months or less
to be cash equivalents.

Loss per common share

Basic  loss  per  share  is  computed  by  dividing  loss  available  to  common
stockholders,  by the weighted  average number of common shares  outstanding for
the year.  Diluted loss per share reflects the potential  dilution of securities
that could  share in the loss of an entity.  There were no  dilutive  securities
outstanding during any of the years presented.

Comprehensive loss

The Company follows SFAS No. 130, "Reporting Comprehensive Income." SFAS No. 130
establishes  standards for reporting and display of comprehensive income and its
components in a full set of general-purpose  financial statements.  There was no
difference  between the  Company's net loss and its  comprehensive  loss for the
period presented in the accompanying consolidated statements of operations.


                                      F-9
<PAGE>
ASI Technology Corporation
(A Development Stage Company)

Notes to Financial Statements
--------------------------------------------------------------------------------

Note 2. Summary of Significant Accounting Policies (continued)

Recent accounting pronouncements

In June 2001,  the FASB  finalized  FASB  Statement No. 142;  Goodwill and Other
Intangible  Assets  (SFAS  142).  SFAS 142  requires  among other  things,  that
companies no longer  amortize  goodwill but instead test goodwill for impairment
at least  annually.  In addition,  SFAS 142 requires  that the Company  identify
reporting units for the purposes of assessing  potential  future  impairments of
goodwill,  reassess the useful  lives of other  existing  recognized  intangible
assets and cease  amortization  of intangible  assets with an indefinite  useful
life.  An intangible  asset with an indefinite  useful life should be tested for
impairment in accordance  with the guidance in SFAS 142. SFAS 142 was adopted in
our fiscal year beginning  January 1, 2002. The Company has not entered into any
business  combinations  and has no recorded  goodwill or intangible  assets and,
accordingly,  the adoption of this  statement did not have a material  effect on
the Company's financial statements.

In August 2001, the FASB issued SFAS No. 143,  "Accounting for Asset  Retirement
Obligations."  SFAS No. 143 requires the fair value of a liability  for an asset
retirement  obligation to be recognized in the period in which it is incurred if
a reasonable estimate of fair value can be made. The associated asset retirement
costs are  capitalized as part of the carrying  amount of the long-lived  asset.
SFAS No. 143 is  effective  for the Company for the fiscal year ending  December
31,  2003.  The Company  believes the  adoption of this  statement  will have no
material impact on its financial statements.

In October 2001, the SFAS issued SFAS No. 144, "Accounting for the Impairment or
Disposal of Long-Lives  Assets".  SFAS 144 requires that those long-lived assets
be measured at the lower of  carrying  amount or fair value,  less cost to sell,
whether  reported  in  continuing  operations  or  in  discontinued  operations.
Therefore,  discontinued operations will no longer be measured at net realizable
value or include  amounts for operating  losses that have not yet  occurred.  We
adopted SFAS 144  effective  for our  financial  statements  for our fiscal year
beginning  January  1,  2002.  The  adoption  of this  statement  did not have a
material impact on the financial statements.

In April 2002,  the FASB issued SFAS No. 145,  "Rescission of FASB No. 4, 44 and
64, Amendment of FASB No. 13, and Technical Corrections".  SFAS No. 145 rescinds
FASB No. 4  "Reporting  Gains and Losses  from  Extinguishments  of Debt Made to
Satisfy  Sinking-Fund  Requirements",  rescinds  SFAS  No.  44  "Accounting  for
Intangible  Assets of Motor  Carriers" and amends SFAS No. 13,  "Accounting  for
Leases". This Statement also amends other existing authoritative  pronouncements
to make various  technical  corrections,  clarify  meanings,  or describe  their
applicability  under  changed  conditions.  This  statement is effective for our
financial  statements for our fiscal year beginning January 1, 2003. The Company
does not expect the adoption of this statement to have a material  effect on the
Company's financial statements.

In June 2002,  the FASB issued SFAS No. 146,  "Accounting  for Costs  Associated
with  Exit or  Disposal  Activities".  SFAS No.  146  addresses  accounting  and
reporting for costs  associated  with exit or disposal  activities and nullifies
Emerging  Issues Task Force Issue No. 94-3,  Liability  Recognition  for Certain
Employee  Termination  Benefits  and Other Costs to Exit an Activity  (Including
Certain  Costs  Incurred  in a  Restructuring).  SFAS No.  146  requires  that a
liability for a cost associated with an exit or disposal  activity be recognized
and measured  initially at fair value when the  liability is incurred.  SFAS No.
146 is  effective  for exit or  disposal  activities  that are  initiated  after
December  31,  2002,  with early  application  encouraged.  The Company does not
expect the adoption of this statement to have a material effect on the Company's
financial statements.


                                      F-10
<PAGE>
ASI Technology Corporation
(A Development Stage Company)

Notes to Financial Statements
--------------------------------------------------------------------------------

Note 2. Summary of Significant Accounting Policies (continued)

Recent accounting pronouncements (continued)

In December 2002, the Financial Accounting Standards Board issued FASB Statement
No. 148, "Accounting for Stock-Based  Compensation - Transition and Disclosure".
This  statement  amends FASB  Statement  No.  123,  Accounting  for  Stock-Based
Compensation,  to provide  alternative  methods of  transition  for a  voluntary
change to the fair value based method of  accounting  for  stock-based  employee
compensation.  This  statement  does not  require  any  change  from the  method
currently used by the Company to account for stock-based compensation,  but does
require more prominent  disclosure in the annual financial  statements about the
method of accounting for such  compensation and the effect of the method used on
reported  results.  This statement was effective for years ending after December
15, 2002. The Company has adopted the  disclosure  provisions of SFAS No. 148 in
the  accompanying   financial  statements  and,   accordingly,   the  disclosure
requirements are set forth in Note 7 in the Stock Option Plan section.

Note 3. Purchase of Technology

Plasma antenna technology

On August 20,  1999 the Company  entered  into a purchase  agreement  to acquire
plasma antenna technology.  This technology purchase included one issued and one
pending  patent  (subsequently  issued)  and the results of prior  research  and
development  by the seller.  The cash purchase price of $250,000 was expensed as
there were no other identifiable assets acquired, commercial feasibility had not
been  established,  there  were  no  current  cash  flows  generated  from  this
technology and no future alternative uses of the patents or technology  existed.
Management  is  unable  to  determine  the  fair  value  of the  plasma  antenna
technology.  There is no ready  market for the patents or  technology,  which is
still in the early stages of development. Management believes this technology is
unique and no  alternative  future uses of the  technology  exist.  Furthermore,
management does not have an estimate of the cost of developing the technology to
the point of commercial  viability or how long such  development  may take. As a
result,  future  earnings  and cash  flows  are  highly  uncertain.  Traditional
valuation methods rely on the market values of similar assets, replacement costs
or projections of future earnings and cash flows.

The Company is also  obligated  to pay the seller a royalty of 5% of ASI's gross
revenues (as  defined)  from the  technology  for a period of five years up to a
maximum of $250,000 in royalties. There are no minimum royalties.

The plasma  antenna  technology  is still in an early stage of  development  and
there  can be no  assurance  that  the  planned  commercial  viability  will  be
achieved.  The revenues  generated were related to development grants to explore
commercial uses of the technology.


                                      F-11
<PAGE>

ASI Technology Corporation
(A Development Stage Company)

Notes to Financial Statements
--------------------------------------------------------------------------------

Note 3. Purchase of Technology (continued)

Sound reduction technology

In December 2000, the Company entered into a purchase agreement to acquire sound
reduction  technology for jet engines.  This  technology  employs  techniques to
modulate the plasma in a jet engine to reduce noise.  This  technology  purchase
included one issued U.S. patent and multiple foreign patent applications and the
results of prior research and  development by the seller.  Of the aggregate cash
purchase  price of  $200,000,  a total of $100,000  was paid at closing with the
balance due in ten equal monthly  installments of $10,000 commencing February 1,
2001.  The  $200,000  purchase  price  was  expensed  as  there  were  no  other
identifiable assets acquired,  commercial  feasibility had not been established,
there were no current cash flows  generated  from this  technology and no future
alternative uses of the patents or technology  existed.  Management is unable to
determine the fair value of the sound  reduction  technology.  There is no ready
market for these  patents or  technology,  which is still in the early stages of
development.  Management  believes this  technology is unique and no alternative
future uses of the technology  exist.  Furthermore,  management does not have an
estimate of the cost of  developing  the  technology  to the point of commercial
viability or how long such  development  may take. As a result,  future earnings
and cash flows are highly uncertain.  Traditional  valuation methods rely on the
market values of similar  assets,  replacement  costs or  projections  of future
earnings and cash flows.

The  Company  is also  obligated  to pay  royalties  starting  at 6% of  product
revenues in the first year, 5% in the second year and 4% thereafter for the term
of the initial patent. A royalty of 15% is due on license  revenues  received by
the Company and a fee of 10% of sale  proceeds is due on the further sale of the
technology. There are no minimum royalties.

The Company's sound reduction technology will require further development before
it can be commercialized into products or licensed to others and there can be no
assurance that commercial viability will be achieved.

Note 4. Research Contracts

Government  research  contracts  accounted for 100%, 90% and -0-% of revenues in
2002,  2001 and 2000,  respectively.  One other  customer  accounted  for 10% of
revenues in 2001 and 100% of revenues in 2000.

In January  2000 and August 2000 the  Company  obtained  two fixed fee  research
contracts  as  subcontracts  with a prime  government  contractor  which  funded
further development of the Company's  technology.  The first contract was for an
aggregate of $89,710 which was completed in August 2000. In May 2001 the Company
obtained a fixed fee  government  contract  for an  aggregate of $62,756 to fund
further research on the Company's plasma antenna  technology.  This contract was
completed  in  November  2001.  In  December  2001 the  Company  was  granted  a
three-month  interim contract  continuation for $34,876.  Accounts receivable of
$20,352  represented  $12,952  billed  and  $7,400  earned and not yet billed at
December 31, 2001.


                                      F-12
<PAGE>

ASI Technology Corporation
(A Development Stage Company)

Notes to Financial Statements
--------------------------------------------------------------------------------

Note 4. Research Contracts (continued)

In April 2002 the Company was awarded a Phase II fixed fee  government  contract
for an aggregate of $595,609 to be performed over a 24-month period. The Company
also  received  a  Phase I fixed  fee  government  contract  for  $65,892  to be
performed  over a 6-month  period and this  contract  was  completed in November
2002.  On August 1, 2002 the Company was awarded a Phase I fixed fee  government
contract for $99,333 to be performed  over a 12 month period.  These  government
contracts  contain  certain  termination  provisions  and the Phase II  contract
requires one additional fiscal year funding allotment. There is no assurance all
amounts will be earned and billable.  Accounts receivable of $187,594 represents
$180,946  billed and earned and $6,648 earned but not yet billed at December 31,
2002.

Subsequent  to December  31,  2002,  the Company was awarded a Phase I fixed fee
government contract for an aggregate of $68,587 to be performed over a six month
period commencing January 31, 2003.

Note 5. Note Receivable

The Company has an unsecured note receivable from the prior sale of assets. This
9% note is due in monthly  installments  of  principal  and interest of $500 and
matures in November 2004.

Note 6. Stockholders' Equity

On August 23, 2000 the Company's  shareholders  approved a reorganization of the
Company's  share  capital,  whereby each ten shares of common stock were reverse
split into one share of common stock of $0.02 par value. This reorganization was
effected  on  September  1,  2000  with  the  filing  of  restated  articles  of
incorporation  in the  State  of  Nevada.  As a  result  of this  share  capital
reorganization the Company has 11,000,000 shares authorized, $0.02 par value, of
which 10,000,000 are designated common stock and 1,000,000 shares are designated
preferred stock.  There were no issued or outstanding  shares of preferred stock
at December 31, 2002.

All share and per share data included in these  financial  statements  have been
retroactively adjusted to reflect the abovementioned reverse stock split.

In October 1999,  the Company  completed the sale of 1,500,000  shares of common
stock at $0.50 per share for gross proceeds of $750,000.  Officers and directors
of the Company purchased an aggregate of 275,000 of these shares.

In December  1999,  the Company  issued  30,000  shares of common stock to three
consultants for services. These shares were valued at $15,000.

In December  2001,  the Company  completed the sale of 367,600  shares of common
stock at $0.50 per share for gross proceeds of $183,800.  Officers and directors
of the Company purchased an aggregate of 100,000 of these shares.

The Company also  completed a conversion  of debt to equity in December 2001 for
228,458  shares of common  stock at $0.50 per share for total debt of  $114,229,
including $4,229 of interest.  An officer/director of the Company converted debt
of $36,407 for an aggregate of 72,814 of these shares.


                                      F-13
<PAGE>

ASI Technology Corporation
(A Development Stage Company)

Notes to Financial Statements
--------------------------------------------------------------------------------

Note 6. Stockholders' Equity (continued)

During 2002 and 2001, one officer  contributed  services to the Company  without
compensation. During 2000 two shareholders,  including one officer and director,
contributed services to the Company without compensation. These services, valued
at $24,000 in 2002 and 2001 and $40,000 in 2000,  have been expensed and treated
as capital contributions.

In January 2002 one officer and director purchased 38,800 shares of common stock
at $0.50 per share for total  proceeds  of  $19,400.  In April 2002 the  Company
issued 66,000 shares of common stock at $0.50 per share for services.

Note 7. Stock Option Plan

The Company's  shareholders approved the 2000 Equity Incentive Plan (the "Plan")
on August 23, 2000 under which the Company is authorized to grant  incentive and
nonstatutory  stock  options to acquire  up to 250,000  shares of the  Company's
common stock to employees and consultants. The term of the Plan is ten years and
the term of  options  granted  may not  exceed ten years from the date of grant.
Options may be granted at a price no less than 100% of the fair market value.

During 2001 the Company granted options on 100,000 common shares  exercisable at
$0.50 per share until  November  19, 2006.  At December  31,  2002,  all 100,000
options are outstanding and exercisable. The Company recorded $5,500 as the fair
value of 50,000  options  granted  to five  consultants  who are not  directors,
officers,  or employees of the Company for services rendered in 2001. The amount
recorded was  determined  using the fair value  method  under the  Black-Scholes
Option-pricing  model  assuming a 5% risk free interest  rate, a 5 year expected
life, a volatility  rate of 1% and a 0% dividend  rate.  At the grant date,  the
fair value per option  granted was $.11.  There were no options  granted  during
2002.

At December  31, 2002 and 2001 the options on 100,000  shares were fully  vested
and had a  weighted  average  life of 3.9 and 4.9 years and a  weighted  average
exercise price of $0.50 per common share.

At December 31, 2002 and 2001, 150,000 options remain available to be granted.

Note 8. Related Party Demand Notes Payable

At December 31, 2002 stockholders  (including one  officer/director for $75,000)
had advanced $225,000 on 10% unsecured demand notes.

Note 9. Commitments

During August 2002 the Company entered into a $102,140 fixed price contract with
the  University  of  Mississippi  to perform  certain  contract  research on the
Company's plasma sound reduction technology. At December 31, 2002 no amounts had
been billed and work had not commenced.


                                      F-14
<PAGE>

ASI Technology Corporation
(A Development Stage Company)

Notes to Financial Statements
--------------------------------------------------------------------------------

Note 10. Income Taxes

Deferred  tax assets at December  31, 2002 and 2001 of  $337,000  and  $248,000,
respectively,  were a result of net operating  loss  carryforwards.  A valuation
allowance  is required  for those  deferred tax assets that are not likely to be
realized.  Realization is dependent upon future  earnings during the period loss
carryforwards  are expected to be available.  Because of the uncertain nature of
the  ultimate  realization  of tax losses,  a complete  valuation  allowance  is
recorded against the deferred tax asset arising from net operating losses.

For tax purposes,  the Company has loss carryforwards of approximately  $963,000
as of December 31, 2002 that expire  between  December 31, 2010 and December 31,
2022.

The income tax  provision  differs from the amount of income tax  determined  by
applying  the U.S.  federal  income  tax rate to  pretax  loss  from  continuing
operations for the years ended December 31, 2002, 2001 and 2000.

                                            2002          2001          2000
                                          --------      --------      ---------
Computed "expected" tax (credit)          $(99,000)     $(81,000)     $(130,000)

Increase (decrease) in income taxes
 resulting from:
 Expiration of loss carryforward             2,000          --
 Increase in valuation allowance            89,000        77,000        130,000
 Other                                       8,000         4,000           --
                                          -------------------------------------
                                          $   --        $   --        $    --
                                          -------------------------------------

Note 11. Related Party Transactions

Commencing in September 1999, the Company began paying a company affiliated with
its  President an aggregate of $500 per month for office rent,  bookkeeping  and
administrative  services with such payments aggregating $6,000 in 2001 and 2000.
This  payment was  increased to $750 per month in January 2002 and to $1,000 per
month  beginning July 2002.  Such payments  aggregated  $10,500 in 2002.  During
2002,  2001 and 2000,  the  Company  also  paid  companies  affiliated  with its
President  a  total  of  $15,828,   $5,148,   and   $15,283,   respectively   as
reimbursements for travel and related costs.

During  2002 and 2001,  the  Company  incurred  interest  of $2,022 and  $3,292,
respectively in connection with short-term loans from related parties.


                                      F-15
<PAGE>

ASI Technology Corporation
(A Development Stage Company)

Notes to Financial Statements
--------------------------------------------------------------------------------

Note 12. Ability to Continue as a Going Concern

The Company's  financial  statements have been presented on the basis that it is
able to continue as a going  concern,  which  contemplates  the  realization  of
assets and the satisfaction of liabilities in the normal course of business.

The Company has incurred  significant  losses in connection with the acquisition
and  development  of its technology and has limited funds with which to operate.
Management anticipates receiving additional contracts for further development of
it  technology;  however,  there can be no assurance that such contracts will be
obtained.  Consequently,  additional capital resources are likely to be required
to  further  develop  the  Company's   technology  to  the  point  where  it  is
commercially  viable.  The Company also plans to use resources to strengthen and
expand its  patents,  establish  certain  strategic  relationships  and identify
primary market opportunities.  Shortly thereafter,  the Company expects to begin
licensing its technology,  which  management  believes will generate  sufficient
revenue to continue the  Company's  operations.  However,  there is no assurance
that the Company will be able to successfully commercialize its technology or be
able to generate  sufficient  revenue through the licensing of its technology to
provide sufficient working capital.

Management  does not have an estimate of the  additional  capital  necessary  to
develop the technology to the point of commercial viability.

The accompanying financial statements do not include any adjustments which would
be  necessary  should the Company be unable to  continue as a going  concern and
therefore be required to realize its assets and  discharge  its  liabilities  in
other than the normal  course of business  and at amounts  different  from those
reflected in the accompanying financial statements.

Note 13. Subsequent Event

On January 31, 2003 the Company entered into a license  agreement with a minimum
term of 15 years subject to certain  commercialization  performance requirements
after the third year.  This agreement  granted the Company  worldwide  exclusive
rights to one patent and related  technology for a certain plasma  sterilization
and decontamination  method. This method is the subject of a contract awarded to
the Company in August 2002. The agreement  provides for future royalty  payments
to the licensor  based on product  sales or sublicense  fees.  The licensor is a
consultant to the Company on its plasma technologies.


                                      F-16
<PAGE>

                                   SIGNATURES

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

                                          ASI TECHNOLOGY CORPORATION


                                          By: /s/ JERRY E. POLIS
                                              ------------------
                                              Jerry E. Polis
                                              President

Date:  March 12, 2003

In  accordance  with the Exchange  Act, this report has been signed below by the
following  persons on behalf of the  registrant and in the capacities and on the
dates indicated.

         Name                       Position                           Date
         ----                       --------                           ----


/s/ JERRY E. POLIS          President                            March 12, 2003
    --------------          and Director
    Jerry E. Polis          (principal executive officer)


/s/ ERIC M. POLIS           Secretary, Treasurer and Director    March 12, 2003
    -------------           (principal financial and
    Eric M. Polis           accounting officer)


/s/ PHIL CARLINO            Director                             March 12, 2003
    ------------
    Phil Carlino


/s/ DAWAYNE R. JACOBS       Director                             March 12, 2003
    -----------------
    Dawayne R. Jacobs


                                       44
<PAGE>

                                 CERTIFICATIONS

Chief Executive Officer

Pursuant to the  requirements  of Rule 13a-14 of the Securities  Exchange Act of
1934, as amended, Jerry E. Polis provides the following certification.

I, Jerry E. Polis, President and Chief Executive Officer certify that:

1. I  have  reviewed  this  annual  report  on  Form  10-KSB  of ASI  Technology
Corporation;

2.  Based on my  knowledge,  this  annual  report  does not  contain  any untrue
statement of a material fact or omit to state a material fact  necessary to make
the statements made, in light of the  circumstances  under which such statements
were made, not misleading with respect the period covered by this annual report;

3.  Based  on my  knowledge,  the  financial  statements,  and  other  financial
information  included  in this annual  report,  fairly  present in all  material
respects the financial  condition,  results of operations  and cash flows of the
registrant as of, and for, the periods presented in this annual report;

4.  The  registrant's  other  certifying  officers  and  I are  responsible  for
establishing and maintaining  disclosure  controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:

         (a) designed  such  disclosure  controls and  procedures to ensure that
material  information  relating to the  registrant,  including its  consolidated
subsidiaries, is made known to us by others within those entities,  particularly
during the period in which this annual report is being prepared;

         (b) evaluated the effectiveness of the registrant's disclosure controls
and  procedures  as of a date  within 90 days prior to the  filing  date of this
annual report ("Evaluation Date"); and

         (c)  presented  in  this  annual  report  our  conclusions   about  the
effectiveness of the disclosure  controls and procedures based on our evaluation
as of the Evaluation Date;

5. The registrant's other certifying officers and I have disclosed, based on our
most recent evaluation,  to the registrant's auditors and the audit committee of
registrant's board of directors (or persons performing the equivalent function):

         (a) all significant deficiencies in the design or operation of internal
controls  which  could  adversely  affect  the  registrant's  ability to record,
process,  summarize  and  report  financial  data  and have  identified  for the
registrant's auditors any material weaknesses in internal controls; and

         (b) any fraud,  whether or not material,  that  involves  management or
other  employees  who  have a  significant  role  in the  registrant's  internal
controls; and

6. The  registrant's  other  certifying  officers  and I have  indicated in this
annual  report  whether or not there were any  significant  changes in  internal
controls or in other factors that could  significantly  affect internal controls
subsequent to the date of our most recent  evaluation,  including any corrective
actions with regard to significant deficiencies and material weaknesses.

Date:  March 12, 2003


                                 /s/ JERRY E. POLIS
                                 ------------------
                                 Jerry E. Polis
                                 President and Chief Executive Officer


                                       45
<PAGE>

Chief Financial Officer

Pursuant to the  requirements  of Rule 13a-14 of the Securities  Exchange Act of
1934, as amended, Eric M. Polis provides the following certification.

I, Eric M. Polis, Treasurer, Secretary and Chief Financial Officer certify that:

1. I  have  reviewed  this  annual  report  on  Form  10-KSB  of ASI  Technology
Corporation;

2.  Based on my  knowledge,  this  annual  report  does not  contain  any untrue
statement of a material fact or omit to state a material fact  necessary to make
the statements made, in light of the  circumstances  under which such statements
were made, not misleading with respect the period covered by this annual report;

3.  Based  on my  knowledge,  the  financial  statements,  and  other  financial
information  included  in this annual  report,  fairly  present in all  material
respects the financial  condition,  results of operations  and cash flows of the
registrant as of, and for, the periods presented in this annual report;

4.  The  registrant's  other  certifying  officers  and  I are  responsible  for
establishing and maintaining  disclosure  controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:

         (a) designed  such  disclosure  controls and  procedures to ensure that
material  information  relating to the  registrant,  including its  consolidated
subsidiaries, is made known to us by others within those entities,  particularly
during the period in which this annual report is being prepared;

         (b) evaluated the effectiveness of the registrant's disclosure controls
and  procedures  as of a date  within 90 days prior to the  filing  date of this
annual report ("Evaluation Date"); and

         (c)  presented  in  this  annual  report  our  conclusions   about  the
effectiveness of the disclosure  controls and procedures based on our evaluation
as of the Evaluation Date;

5. The registrant's other certifying officers and I have disclosed, based on our
most recent evaluation,  to the registrant's auditors and the audit committee of
registrant's board of directors (or persons performing the equivalent function):

         (a) all significant deficiencies in the design or operation of internal
controls  which  could  adversely  affect  the  registrant's  ability to record,
process,  summarize  and  report  financial  data  and have  identified  for the
registrant's auditors any material weaknesses in internal controls; and

         (b) any fraud,  whether or not material,  that  involves  management or
other  employees  who  have a  significant  role  in the  registrant's  internal
controls; and

6. The  registrant's  other  certifying  officers  and I have  indicated in this
annual  report  whether or not there were any  significant  changes in  internal
controls or in other factors that could  significantly  affect internal controls
subsequent to the date of our most recent  evaluation,  including any corrective
actions with regard to significant deficiencies and material weaknesses.

Date:  March 12, 2003


                               /s/ ERIC M. POLIS
                               -----------------
                               Eric M. Polis
                               Treasurer, Secretary and Chief Financial Officer


                                    46