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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, 2003

                         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. $25,000

State the aggregate market value of the voting and non-voting common equity held
by non-affiliates  computed by reference to the price at which the common equity
was sold, or the average bid and asked price of such common equity,  as of March
10, 2004  (assuming  for this purpose that only  directors,  officers and 10% or
more  shareholders of registrant are affiliates of registrant) was approximately
$522,300.

As of March 10, 2004 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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                                       1
<PAGE>

                                TABLE OF CONTENTS
<TABLE>
<CAPTION>
                                                                                                                 Page
                                     PART I
<S>           <C>                                                                                                <C>
ITEM 1.       Description of Business                                                                             2
ITEM 2.       Description of Property                                                                            10
ITEM 3.       Legal Proceedings                                                                                  10
ITEM 4.       Submission of Matters to a Vote of Security Holders                                                10

                                     PART II
ITEM 5.       Market for Common Equity and Related Stockholder Matters                                           11
ITEM 6.       Management's Discussion and Analysis or Plan of Operation                                          12
ITEM 7.       Financial Statements                                                                               19
ITEM 8.       Changes in and Disagreements with Accountants on Accounting and Financial Disclosure               19
ITEM 8A.      Controls and Procedures                                                                            19

                                    PART III
ITEM 9.       Directors, Executive Officers, Promoters and Control Persons;
              Compliance With Section 16(a) of the Exchange Act                                                  20
ITEM 10.      Executive Compensation                                                                             21
ITEM 11.      Security Ownership of Certain Beneficial Owners and Management and
              Related Stockholder Matters                                                                        22
ITEM 12.      Certain Relationships and Related Transactions                                                     23
ITEM 13.      Exhibits and Reports on Form 8-K                                                                   24
ITEM 14.      Principal Accountant Fees and Services                                                             24
SIGNATURES                                                                                                       25
FINANCIAL STATEMENTS                                                                                            F-1
EXHIBIT INDEX                                                                                                    24
</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
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                                     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 purchased patented plasma antenna technology
in August 1999 and purchased patented plasma sound reduction  technology for jet
engines  in  December  2000.  We  acquired  an  exclusive  license  to a  plasma
technology for sterilization and  decontamination  in January 2003. After making
pioneering  developments in plasma antenna  technology between 1999 and 2003, we
sold our plasma  antenna  business in 2003 to focus  resources  on our two other
patented plasma technologies,  each in an early stage of development.  We had no
significant  assets or  liabilities  prior to the purchase of the plasma antenna
technology  when we  commenced  our  strategy of acquiring  and  developing  new
technologies  for licensing or sale.  During the period from 1995 until 1999, we
were  inactive,  engaged  only in  collecting  proceeds  from prior asset sales,
reducing debts and paying corporate costs.

We are currently engaged in developing two plasma  technologies with the goal to
commercialize through licensing or sale:

     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.  Cold
         plasma has been  demonstrated by us and more so by other researchers to
         be useful for sterilization,  decontamination and in certain industrial
         processing. We have acquired an exclusive license from the inventor for
         this patented method of cold plasma generation.  Our goal is to develop
         prototype  devices to validate  and  demonstrate  this  technology  for
         government and commercial  applications and license the technology.  In
         August 2003, we completed a Phase I fixed fee government  contract with
         the  U.S.  Air  Force   studying  the  use  of  this   technology   for
         decontamination of forward-deployed equipment and facilities exposed to
         biological  warfare  agents.  Eastern  Virginia  Medical  School  was a
         subcontractor on this government  contract.  Our experiments  indicated
         that effective decontamination can be achieved with this method.

     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.  During 2003, we paid for a research study performed by
         the  National  Center  for  Physical  Acoustics  at the  University  of
         Mississippi.  We believe  this study  provided  important  experimental
         validation of our method of active jet noise control. We are evaluating
         the next development steps.

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
the technologies.

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.  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.

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<PAGE>

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.

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 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 had  begun
developing in August 2002.

Management efforts have focused on the following activities:

     o   We have developed 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
                  pay  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
                  ourselves  of  the  use  of  their  facilities,  equipment  or
                  personnel in the future.

         -        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,  which was completed in August 2003.  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.  Although  we have no  current  contract,  we
                  believe  EVMS is available  to support  future  testing on our
                  plasma sterilization and decontamination technology.

         -        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.  Although the  contract  was  completed in
                  August 2003,  we believe  NCPA is available to support  future
                  research in this area.

     o   On March 19,  2003,  we entered  into an agreement to sell the patents,
         patent  applications,  equipment,  government contract rights and other
         intellectual  property rights comprising our plasma antenna business to
         Markland Technologies,  Inc., a Florida corporation  ("Markland").  The
         closing of the transaction was completed in September 2003, We received
         sale  proceeds  consisting of $150,000 of cash and $850,000 of Markland
         common stock.  We incurred  patent and license royalty fees to the 1999
         seller and one other  inventor which we paid $9,000 in cash and $51,000
         in Markland  common stock.  We currently  hold 266,333 shares of common
         stock of Markland.

     o   Markland began managing our government  contracts  commencing  April 1,
         2003.  Markland is responsible  for contract and plasma antenna related
         costs  and pays to us a fee of  $2,500  per  month  for  administrative
         support.  We are responsible to pay a contract  management fee equal to
         contract revenues. The one remaining government contract is expected to
         be completed by April 2004.

     o   In  August  2003,  we  completed  a STTR  ("Small  Business  Technology
         Transfer")   contract   with   the  U.S.   Air   Force   studying   the
         decontamination of forward-deployed equipment and facilities exposed to
         biological  warfare  agents.  Eastern  Virginia  Medical  School  was a
         subcontractor on this government  contract.  Our experiments  indicated
         that effective  decontamination can be achieved with our method of cold
         plasma generation.

                                       4
<PAGE>

     o   We entered into a sublicense agreement pursuant to which we sublicensed
         to  Markland  the  right  to  develop  and  sell  products  to  certain
         government,  military  and  homeland  security  customers in the United
         States and Canada using our plasma  sterilization  and  decontamination
         technology.  We  recognized  sublicense  fees of  $5,000  per  month as
         collected.   This  sublicense  was  terminated  in  February  2004  for
         nonpayment of license fees.

There can be no assurance that we can develop our plasma technologies and become
commercially successful.

Terms of Technology Agreements

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.

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.

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

Plasma Antenna Technology

On August 20,  1999,  we 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.

During  the  period  from 1999 to 2003,  we  pioneered  development  of  various
applications of this technology for use in  applications,  including as a plasma
antenna, a plasma reflector and shield, a plasma wave guide, frequency selective
surfaces and phased array antennas.  This development was paid for using our own
resources and by the following Department of Defense or related contracts:

     o   In January  2000,  we obtained a purchase  order  contract  for $89,710
         granted by General Dynamics' Electric Boat Division to conduct a design
         study to  determine  the  suitability  of a fluid or ionized gas plasma
         antenna to perform the necessary functions of an  inflatable/deflatable
         mast mounted  antenna  system to be used for satellite  communications.
         This contract demonstrated the steerability of a plasma antenna and the
         inflatability/deflatability  of an antenna system.  We were provided an
         additional   $78,696  in  August  2000  to  further   demonstrate   the
         transmission  capabilities  of the prototype.  Antenna  characteristics
         were  demonstrated and packet  switching  transmission was successfully
         accomplished.

     o   In May 2001, we were awarded a Phase I SBIR ("Small Business Innovation
         Research)  contract  for  $62,756  to show the  feasibility  to design,
         develop  and  implement  a gas plasma  phased  array  radar  capable of
         operation  in both S and  X-band.  Our Phase I effort was to  determine
         viability of a windowing

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<PAGE>

         concept to enhance  directivity  and reduce or eliminate  back and side
         lobes. In December 2001, we were provided  additional  funds of $34,876
         through the interim Phase I process to continuing  experimentation  and
         testing  and to develop a  non-linear  model of our  approach.  Through
         laboratory  experimentation,  we  demonstrated  the  windowing  concept
         compared favorably with mathematical predictions.

     o   We were awarded a Phase II SBIR contract for $595,609 in April 2002 for
         further  development of a phased array antenna  capable of operation in
         the S and X  bands.  Our  major  area  of  study  is to  determine  the
         feasibility of the windowing  concept under high power  considerations,
         develop  plasma  phase  shifters  to reduce size and weight of existing
         radar  antennas  and  develop  prototype  plasma  antennas  for various
         applications. This contract is expected to be completed in April 2004.

     o   On  April  2002,  we  were  awarded  a  Phase  I SBIR  for  $68,587  to
         demonstrate  the  feasibility of plasma  Frequency  Selective  Surfaces
         (FSS's) to replace existing metal FSS's in antenna  designs.  The major
         objective  was to determine the  shielding  that could be  accomplished
         with FSS's.  Experimentally,  we determined  reconfigurability  and the
         types and amounts of filtering that could be obtained.

To focus  resources on our other  plasma  technologies,  on March 19,  2003,  we
entered into a Technology  Purchase  Agreement (the  "Agreement")  with Markland
Technologies,  Inc.,  a Florida  corporation  ("Markland")  pursuant to which we
agreed  to  sell,   and  Markland   agreed  to  purchase  our  patents,   patent
applications,  equipment,  government  contract  rights  and other  intellectual
property  rights  comprising  our plasma  antenna  business.  The closing of the
transaction  was  completed in September  2003.  We have  received sale proceeds
consisting  of $150,000 of cash and  $850,000 of  Markland's  common  stock.  We
incurred  patent  and  license  royalty  fees to the 1999  seller  and one other
inventor which we paid $9,000 in cash and $51,000 in Markland common stock.

Markland  began  managing our  government  contracts  commencing  April 1, 2003.
Markland is responsible for contract and plasma antenna related costs and to pay
us a fee of $2,500 per month for administrative  support.  We are responsible to
pay a  contract  management  fee  equal  to  contract  revenues.  Our  remaining
government contract is expected to be completed by April 2004.

Delmar Kintner, who was a part-time plasma antenna technology  consultant to the
Company from 1999 to March 2003, served as CEO of Markland from December 2002 to
November 2003.

The sale of the plasma antenna  technology and government  contracts  along with
the licensing to Markland of the government  rights to the plasma  sterilization
and decontamination technology resulted in the discontinuation of our government
contracting  business that accounted for  substantially  all revenues during the
last three years. We may seek additional  government or commercial  contracts or
joint  ventures to support the  development  of our plasma  technologies  in the
future.

Description of our Plasma 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 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.

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The plasma process produces a sterilization effect using lower concentrations of
sterilant but with a higher  reactivity than is possible with normal gases. This
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,
and 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 tested 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 result in a small arc
greatly  minimizing  the discharge  area.  Our  discharge  also results in large
quantities   of  ozone.   Ozone  is  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 are expected to
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.

We  are   currently   focusing  our   development   on  the  areas  of  building
decontamination  and purification and medical  decontamination.  There can be no
assurance we can develop the plasma sterilization and decontamination technology
successfully or that this technology can be commercialized.

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
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 ICAO and
CAEP is continuing to evaluate  further noise reductions and regulations and has
recently adopted Stage 4 standards. The recommended  implementation is for 2006,
with provisions for  re-certifying  existing aircraft to meet the more stringent
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.

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<PAGE>

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  project noise at 97 dB and the newer Stage 3 aircraft  project
sound at about 87 dB.

Theory suggests, but we have no experimental evidence 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's  National  Center of  Physical  Acoustics  ("NCPA") to perform the
first phase of experimental work on our method of jet engine noise reduction. We
paid  $103,140 for the first phase of work. We received the final report on this
phase in August  2003.  This report  concluded  that the control of internal jet
engine noise  sources  using a method  described in our patent could lead to jet
noise reduction in existing modern jet aircraft.

We are also working with the  University of  Mississippi  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.

Market Opportunities and Strategy

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.

                                       8
<PAGE>

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.

In March 2003, we  sublicensed  this  technology  to Markland to government  and
military  customers  in the  United  States  and  Canada.  In  February  2004 we
cancelled this sublicense for nonpayment of license fees.

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

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.

Competition and Alternatives

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.

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.  The  National   Aeronautics  and  Space   Administration   (NASA)  has
established the Advanced  Subsonic  Technology  (AST) program and the AST Noised
Reduction  Program  to  research  noise  reduction  technology.  U.S.  aerospace
companies,  universities  and others have been active in this field of research.
These  entities  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.

Government Regulation

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.

                                       9
<PAGE>

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 U.S.  patent on our plasma sound reduction  technology.  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 and we may  therefore be unable
to protect any rights outside of the United States.

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  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. 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  have 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.

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  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,  2003,  2002 and 2001,  we invested  $511,944,
$441,469 and $157,709, respectively, on research and development,  including the
acquired  technology.  In 2001,  we  obtained  $78,026  from two  customers  for
sponsored  research  and  development  in 2002,  we obtained  $375,677  from two
customers for sponsored  research and development.  In 2003 we obtained $445,355
from three 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 one  full-time  employee and 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.

                                       10
<PAGE>

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.

                                       11
<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 date
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 years ended December 31, 2002 and 2003:

                                                              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

Year Ending December 31, 2003
           First Quarter                                      $ 0.32  $ 0.11
           Second Quarter                                     $ 0.30  $ 0.21
           Third Quarter                                      $ 0.21  $ 0.11
           Fourth Quarter                                     $ 0.25  $ 0.20


These quotations reflect inter-dealer prices, without retail mark-up,  mark-down
or commission, and may not represent actual transactions.

We had  1,050  holders  of  record of our  3,412,522  shares of common  stock at
December  31,  2003,  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, 2003 we had an
accumulated  deficit of  approximately  $2.8  million and until this  deficit is
eliminated,  we will be  prohibited  from  paying  dividends  except  out of net
profits.

At December  31,  2003,  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, 2003:

<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              90,000                        $0.50                       160,000

Equity compensation plans not
approved by security holders                --                           --                           --
                                          ------                        -----                       -------
Total                                     90,000                        $0.50                       160,000
                                          ======                        =====                       =======
</TABLE>

                                       12
<PAGE>

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.

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 historical expenditures
to develop and commercialize our plasma antenna business which was sold in 2003.
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   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 2003.

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.

                                       13
<PAGE>

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).

Discontinued Operations

We have segregated  continuing  operations from discontinued  operations for the
periods  presented and  discontinued  operations have been presented as a single
line item as discussed in the notes to our financial statements. We anticipate a
substantial reduction in revenues,  research and development costs and marketing
and  promotion  costs in future  periods  as a result of the sale of our  plasma
antenna  and  government   contracting  business.   The  following  details  the
components of discontinued operations for the periods presented:

<TABLE>
<CAPTION>
                                                                                            From Inception
                                                                                            of Development
                                                                                               Stage on
                                                           Year Ended December 31,         January 1, 1999
                                                  ----------------------------------------  to December 31,
                                                     2003          2002            2001           2003
                                                  -----------   -----------    -----------    -----------
<S>                                               <C>           <C>            <C>            <C>
Contract revenues                                 $   467,855   $   375,677    $    78,026    $ 1,082,094
Proceeds received from sale of antenna business       940,000          --             --          940,000
                                                  -----------   -----------    -----------    -----------
                                                    1,407,855       375,677         78,026      2,022,094
                                                  -----------   -----------    -----------    -----------
Research and development                              405,429       441,469        157,709      1,530,660
Marketing and promotion                                74,847        71,981         46,338        270,989
                                                  -----------   -----------    -----------    -----------
                                                      480,276       513,450        204,047      1,801,649
                                                  -----------   -----------    -----------    -----------
Income (loss) from discontinued operations        $   927,579   $  (137,773)   $  (126,021)   $   220,445
                                                  ===========   ===========    ===========    ===========
</TABLE>

Results of Operations - 2003 vs. 2002

Revenues

Revenues  from  continuing  operations  for 2003  were  $25,000,  consisting  of
pre-commercialization licensing revenue on our sterilization and decontamination
technology. We incurred $19,375 of license fees for this technology during 2003.
We are recognizing monthly licensing fees as collected due to the uncertainty of
collection. There were no continuing operation revenues for 2002.

Contract  revenues  included  in  discontinued  operations  for the  year  ended
December 31, 2003 were $445,355. This included $308,917 recognized on a 24 month
U.S.  Government  Missile  Defense Agency  ("MDA") Phase II contract  awarded in
April 2002,  $67,851  recognized on a 12-month  Phase I Air Force Small Business
Technology  Transfer  ("STTR")  contract  awarded  in  August  2002 and  $68,587
recognized  on a U.S. Navy Phase I six-month  contract  awarded in January 2003.
Revenues for 2002  consisted of $375,677 of revenue from  government  contracts.
The  increase  in  revenues  in the  current  period  is due to  additional  new
contracts.  Contract revenues are subject to significant  variability due to the
nature of contract research work.

Certain provisions of government contracts provide for early termination with or
without cause. We expect a significant reduction in revenues and operating costs
in  future  periods  as a result  of the  sale to  Markland  of our  contracting
business.

Research and Development

Research  and  development  costs from  continuing  operations  in 2003  totaled
$106,515 of company sponsored  research on our plasma noise reduction and plasma
sterilization  and  decontamination  technology.  The  primary  expenditure  was
$103,140 for contract work  performed by the  University of  Mississippi  on our
plasma noise reduction  technology.  We incurred no comparable costs in 2002 for
continued technologies.

Total research and development costs from discontinued  operations were $405,429
for 2003 and $441,469 for the comparable  2002 year. The decrease  resulted from
reduced  subcontract costs and patent costs.  Costs in 2003 included

                                       14
<PAGE>

$180,784 of technical personnel costs, $7,797 more than the $172,987 in 2002 due
to increased work on new contracts.  We recognized $136,164 of subcontract costs
in 2003  compared  to  $172,834  in 2002,  which  included  $50,300  of  company
sponsored research on the plasma antenna technology.

Patent costs related to the acquired technology are expensed as incurred because
the technology  being  developed has not reached  technological  feasibility and
requires  further  development,  refinement and testing.  We incurred $11,384 of
patent costs in 2003 compared to $61,572 of patent costs in 2002.  The reduction
results from the sale of the plasma technology and related patents.

Research  and  development  costs vary  significantly  from  quarter to quarter.
Future  expenditures will also depend on the availability of financial resources
to fund research and development.

Marketing and Promotion Costs

Marketing and promotion  costs for  continuing  operations in 2003 were $23,241,
comparable to the $22,835 incurred in 2002. These costs include $9,823 of travel
in 2003 and $12,000 of contributed services.

Marketing and promotion costs included in  discontinued  operations were $74,847
in 2003,  comparable to the $71,981  incurred for the same period of 2002. These
costs in 2003 included $49,200 of consulting costs, with the balance  consisting
primarily of travel costs to prospective customers.

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

General and Administrative Costs

General  and  administrative  costs in 2003 were  $104,230  compared to $116,097
reported  for  2002.  These  costs in 2003  consisted  primarily  of  legal  and
accounting fees of $47,877,  personnel costs of $24,248,  $12,000 in contributed
services,   $7,036  of  shareholder  related  costs  and  $12,000  of  rent  and
administrative expenses paid to a company affiliated with our President. General
and administrative expenses for 2002 included $33,000 of non-cash services.

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

Net Loss

We had a net  loss  from  continuing  operations  of  $228,361  and a gain  from
discontinued  operations  of $927,579 for 2003.  We  recognized  net proceeds of
$940,000  from  the  sale  of our  antenna  business  included  in  discontinued
operations.  We incurred  interest expense of $22,500.  We recorded an aggregate
net gain of $677,409 in 2003. We anticipate future operating losses until we are
able to commercialize and license our remaining plasma  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, 2003 was $558,883.

Results of Operations - 2002 vs. 2001

Revenues

We had no revenues from continuing operations in 2002 or 2001. Our revenues from
discontinued  operations  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.

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.

                                       15
<PAGE>

Research and Development

Research and development costs in 2002 were all for discontinued  operations and
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.

Marketing and Promotion Costs

Marketing and promotion costs in 2002 were $94,816,  an increase of $34,278 from
the  $60,538 in 2001.  A total of  $22,835 of the 2002 costs and  $14,200 of the
2001 costs were for  continued  operations,  with the balance  for  discontinued
operations.  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.

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.

Net Loss

We had a net loss of  $281,640  in 2002  compared  to a net loss of  $232,697 in
2001.  The net loss for  2002  included  a loss of  $137,773  from  discontinued
operations  and  2001  included  a net  loss  from  discontinued  operations  of
$126,021.  The  increased  net loss in 2002 was due to  increased  research  and
development expenditures and increased marketing focused on new contracts.

The loss for the period from  inception  of the  development  stage  (January 1,
1999) to December 31, 2003 was $558,883.

Liquidity and Capital Resources

As of December  31,  2003 and  December  31,  2002 we had cash of  $179,172  and
$83,926,  respectively. Net cash used in operating activities was $50,063 during
2003,  consisting  primarily  of a $262,591  net loss (after  adjusting  for the
antenna  business  sale) reduced by noncash costs of $24,000,  reduced also by a
$67,426  increase in accounts  payable and accrued  liabilities and reduced by a
$121,102  decrease  in  accounts  receivable.  The net  cash  used in  operating
activities in 2002 was $345,537.

Our  principal  source of liquidity  at December  31, 2003  consisted of cash of
$179,172 and  accounts  receivable  of $66,492.  Other than  anticipated  future
revenues  from  license  agreements  or  from  the  sale of our  plasma  antenna
technology  or from the sale of investment  securities,  we have no other unused
sources of liquidity at this time.

At  December  31,  2003,  we  had  no   outstanding   commitments   for  capital
expenditures. The Phase II contract awarded in April 2002 includes approximately
$34,600 in additional  subcontract  costs to be performed under a purchase order
consistent with the terms of our Phase II government  contract.  These contracts
and the related  subcontract costs are the responsibility of Markland but we may
be contingently liable for any unpaid amounts.

Based on  current  expectations  and  business  conditions,  we  believe we have
sufficient financial resources to meet our cash requirements for the next twelve
months. We may 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 licensing or from other sources.

                                       16
<PAGE>

Management  has  flexibility  to adjust  the  level of  research  and  marketing
expenditures based on the availability of resources. Management believes that if
the research  and  marketing  expenditures  are  reduced,  there are  sufficient
resources to cover the remaining administrative expenses of the Company. 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 on our  existing  technologies  or new
technologies.   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.

We do not believe  inflation had a significant  impact on our operations  during
2003 or 2002 or that it will have a significant  impact on operations during the
next twelve months.

New Accounting Pronouncements and Issues

In January  2003,  FASB issued FASB  Interpretation  No. 46,  "Consolidation  of
Variable  Interest  Entities"  ("FIN 46").  This  interpretation  clarifies  the
application  of Accounting  Research  Bulletin No. 51,  "Consolidated  Financial
Statements," relating to consolidation of certain entities.  FIN 46 will require
identification  of the Company's  participation in variable  interests  entities
("VIEs"),  which are defined as entities with a level of invested equity that is
not  sufficient  to fund  future  activities  to  permit  them to  operate  on a
stand-alone  basis,  or whose equity holders lack certain  characteristics  of a
controlling  financial  interest.  For entities  identified as VIEs, FIN 46 sets
forth a model to evaluate  potential  consolidation  based on an  assessment  of
which party to the VIE, if any, bears a majority of the exposure to its expected
losses, or stands to gain from a majority of its expected  returns.  FIN 46 also
sets  forth  certain  disclosures  regarding  interests  in VIEs that are deemed
significant,  even if consolidation is not required.  The adoption of FIN 46 did
not have a  material  impact on the  Company's  financial  position,  results of
operations  or cash flows.  The Company does not believe they have any VIEs that
they would be required to be consolidated.

Tax Loss Carryforwards

As of  December  31,  2003,  we had  approximately  $261,000 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.

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 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

                                       17
<PAGE>

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
decontamination  and  sterilization  technology  and no revenues from our plasma
sound  technology.  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 have  sufficient  financing to fund our  operations
during the next twelve months.  We may be able to obtain  additional  funds from
the sale of Markland stock. 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 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.

         Our  contracts  that are funded by the U.S.  government  are subject to
government  regulations and audits and other requirements.  Government contracts
require compliance with various contract provisions and procurement regulations.
The adoption of new or modified  procurement  regulations  could have a material
adverse effect on our business,  financial condition or results of operations or
increase the costs of competing for or performing  government  contracts.  If we
violate  any of these  regulations,  then we may be  subject to  termination  of
contracts,  imposition of fines or exclusion  from  government  contracting  and
government-approved  subcontracting  for some specific time period. In addition,
our contract and subcontract  costs and revenues may be subject to adjustment as
a result of audits by government auditors.

                                       18
<PAGE>

         If  we  fail  to  establish   and  maintain   personnel  and  strategic
relationships,  our ability to develop our technology will suffer.  We currently
have a month-to-month  arrangement with Dr. Igor Alexeff. He is a key individual
involved in the  development  and  marketing of our plasma  decontamination  and
sterilization  technology.  After the  conclusion  of our  existing  contract in
April,  we do not expect to have any full-time  technical  employees or staff at
our facilities and will depend on Dr. Alexeff 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.  These  individuals,  however,  may terminate
their  relationship  with us at any time. There can be no assurance,  therefore,
that any  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, 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  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 plasma
decontamination and sterilization.

         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 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 sterilization of medical devices and food, the decontamination
of items and jet engine noise  emissions are highly

                                       19
<PAGE>

regulated  and   controlled  in  most  major  markets   throughout   the  world.
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.

         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.


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 25.
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 one preceding
year the Company had no independent accountant. There were no disagreements with
accountants or reportable events under this item.

                                       20
<PAGE>

Item 8A. Controls and Procedures

(a) Evaluation of disclosure controls and procedures.

In accordance  with Rule 13a-15(b) of the  Securities  Exchange Act of 1934 (the
"Exchange  Act"), an evaluation was carried out by the Company's Chief Executive
Officer and Chief  Financial  Officer,  of the  effectiveness  of the design and
operation of the Company's  disclosure  controls and  procedures  (as defined in
Rule 13a-14(c) and 15d-14(c) under the Exchange Act) as of the end of the period
covered by this report.  Based upon that evaluation of these disclosure controls
and  procedures,  the  Chief  Executive  Officer  and  Chief  Financial  Officer
concluded that the disclosure  controls and procedures  were effective as of the
end of the period  covered by this report,  to ensure that material  information
relating to the Company  was made known to them  particularly  during the period
for which this annual report on Form 10KSB was being prepared.

(b) Changes in internal controls over financial reporting.

There was not any  change in the  Company's  internal  controls  over  financial
reporting that occurred during the fiscal year to which this report relates that
has  materially  affected,  or is reasonably  likely to materially  affect,  the
Company's internal control over financial reporting.

                                       21
<PAGE>

                                    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 January 31, 2004:

Name                  Age        Position
----                  ---        --------
Jerry E. Polis        71         President and Director since 1973
Phil Carlino          77         Director since 1973
Eric M. Polis         33         Secretary, Treasurer and Director since
                                  August 2000
Dawayne R. Jacobs     61         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. The Company does not have an audit or any other committees
of the board of directors.

         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  of the  Company.  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
         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

During 2003 we used the following key personnel in 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

                                       22
<PAGE>

         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 are employed or engaged 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 and
are required to adhere to our Code of Business  Conduct and Ethics,  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.

Code of Ethics

We have  adopted  a "Code of Ethics  for  Senior  Officers."  A copy of the Code
Ethics for Senior Officers is posted on our Internet site at  www.asiplasma.com.
In the event we make any  amendments to, or grant any waivers of, a provision of
the Code Ethics for Senior  Officers  that  applies to the  principal  executive
officer,  principal  financial  officer,  or principal  accounting  officer that
requires  disclosure  under  applicable  SEC rules,  we intend to disclose  such
amendment  or  waiver  and the  reasons  therefor  on a Form  8-K or on our next
periodic report.

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, 2003, 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, 2003, 2002 and 2001. No other executive  officer's salary and bonus
exceeded $100,000 during the fiscal year ended December 31, 2003.

                                       23
<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>                      <C>
Jerry E. Polis, President        2003       $-0- (1)       $-0-       $ -0-                       -0-
                                 2002       $-0- (1)       $-0-       $ -0-                       -0-
                                 2001       $-0- (1)       $-0-        $200 (1)                10,000
</TABLE>

     (1) Director fees. Mr. Polis received no  compensation as an officer of the
         Company for any period.  The Company recorded $24,000 in 2001, 2002 and
         2003 as contributed services for Mr. Polis.

Option Grants

There  were no grants of stock  options  in fiscal  2003 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 2003.

             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, 2003             December 31,2003(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, 2003 of $0.24 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, 2003,  there were 90,000  options  outstanding  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 10, 2004, the Common Stock ownership
of each  of our  directors  and  officers,  all of 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.

                                       24
<PAGE>

 Name and Address                            Amount & Nature
 of Beneficial                               of Beneficial             Percent
     Owner                                     Ownership              of Class
     -----                                     ---------              --------

 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)
----------------------------
(1)      Includes  611,614  shares  held by the Polis  Family  Trust and  63,000
         shares held 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

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.

                                       25
<PAGE>

Item 13. Exhibits and Reports on Form 8-K

(a) Exhibits

         Exhibit
         Number                     Description of Exhibit
         ------                     ----------------------
         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.
        10.5***       Technology Purchase Agreement dated March 19, 2003 between
                      the Company and Markland Technologies, Inc.
        31.1          Certification of Principal Executive Officer,  Pursuant to
                      Exchange  Act  Rule  13a-14(a),  as  Adopted  Pursuant  to
                      Section 302 of the Sarbanes-Oxley Act of 2002.
        31.2          Certification of Principal Financial Officer,  Pursuant to
                      Exchange  Act  Rule  13a-14(a),  as  Adopted  Pursuant  to
                      Section 302 of the Sarbanes-Oxley Act of 2002.
        32.1          Certification of Principal Executive Officer,  Pursuant to
                      18 U.S.C. Section 1350, as Adopted Pursuant to Section 906
                      of the Sarbanes-Oxley Act of 2002.
        32.2          Certification of Principal Financial Officer,  Pursuant to
                      18 U.S.C. Section 1350, as Adopted Pursuant to Section 906
                      of the Sarbanes-Oxley Act of 2002.

* 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.

*** Exhibit incorporated by reference to the Exhibit 2.1 filed by us on Form 8-K
dated March 25, 2003.

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

(b) Reports on Form 8-K.

None

Item 14. Principal Accountant Fees and Services

The  Company  does  not have an  Audit  Committee  and  therefore  the  Board of
Directors  reviews  and  approves  audit  and  permissible   non-audit  services
performed by McGladrey & Pullen, LLP, as well as the fees charged by McGladrey &
Pullen,  LLP for such services.  In its review of non-audit service fees and its
appointment of McGladrey & Pullen, LLP as the Company's independent accountants,
the Board of Directors  considered  whether the  provision  of such  services is
compatible with maintaining McGladrey & Pullen, LLP's independence.

AUDIT  FEES.  The  aggregate  fees  billed  by  McGladrey  &  Pullen,   LLP  for
professional  services for the audit of the annual  financial  statements of the
Company and the reviews of the  financial  statements  included in the Company's
quarterly  reports on Form 10-QSB for 2003 and 2002 were  $29,682  and  $26,000,
respectively, net of expenses.

                                       26
<PAGE>

AUDIT-RELATED  FEES. There were no other fees billed by McGladrey & Pullen,  LLP
during the last two fiscal years for  assurance  and related  services that were
reasonably  related to the  performance  of the audit or review of the Company's
financial statements and not reported under "Audit Fees" above.

TAX FEES.  There were no fees billed by McGladrey & Pullen,  LLP during the last
two fiscal years for professional  services rendered by McGladrey & Pullen,  LLP
for tax compliance, tax advice and tax planning.

ALL OTHER FEES FOR  PRODUCTS  AND  SERVICES.  There were no other fees billed by
McGladrey  & Pullen,  LLP  during  the last two  fiscal  years for  professional
services rendered by McGladrey & Pullen, LLP for other products or services.


                                   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 24, 2004


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.

<TABLE>
<CAPTION>
         Name                                     Position                           Date
         ----                                     --------                           ----
<S>                              <C>                                            <C>
/s/ JERRY E. POLIS               President                                      March 24, 2004
    --------------               and Director
    Jerry E. Polis               (principal executive officer)

/s/ ERIC M. POLIS                Secretary, Treasurer and Director              March 24, 2004
    -------------                (principal financial and accounting officer)
    Eric M. Polis

/s/ PHIL CARLINO                 Director                                       March 24, 2004
    ------------
    Phil Carlino

/s/ DAWAYNE R. JACOBS            Director                                       March 24, 2004
    -----------------
    Dawayne R. Jacobs
</TABLE>

                                       27
<PAGE>

                          INDEPENDENT AUDITOR'S REPORT

To the Stockholders and 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, 2003 and 2002 and the related
statements  of  operations,  stockholders'  equity  and cash flows for the years
ended December 31, 2003, 2002, and 2001 and for the period from inception of the
development  stage on January 1, 1999 to  December  31,  2003.  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, 2003 and 2002,  and the results of its  operations  and its cash
flows for the years ended  December 31, 2003,  2002, and 2001 and for the period
from inception of the development  stage on January 1, 1999 to December 31, 2003
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 23, 2004

                                      F-1
<PAGE>

ASI TECHNOLOGY CORPORATION
(A Development Stage Company)

BALANCE SHEETS
December 31, 2003 and 2002
<TABLE>
<CAPTION>
                                                                                                    2003               2002
------------------------------------------------------------------------------------------------------------------------------
<S>                                                                                              <C>               <C>
ASSETS
Current Assets
  Cash  and cash equivalents                                                                     $   179,172       $    83,926
  Accounts receivable                                                                                 66,492           187,594
  Investment securities                                                                              655,179                --
  Note receivable - current                                                                            6,487             5,255
                                                                                                 -----------       -----------
    Total current assets                                                                             907,330           276,775

Note receivable - less current portion                                                                    --             5,541
                                                                                                 -----------       -----------
                                                                                                 $   907,330       $   282,316
                                                                                                 ===========       ===========

LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
  Accounts payable                                                                               $    99,396       $    36,807
  Accrued liabilities                                                                                 19,869            15,032
  Related party demand notes payable                                                                 225,000           225,000
                                                                                                 -----------       -----------
    Total current liabilities                                                                        344,265           276,839
                                                                                                 -----------       -----------

Commitments

Stockholders' Equity
  Common stock, $.02 par value; 10,000,000 shares authorized,
    issued and outstanding 3,412,522 each period                                                      68,250            68,250
  Additional paid-in capital                                                                       3,439,204         3,415,204
  Accumulated other comprehensive loss                                                              (143,821)               --
  Accumulated deficit                                                                             (2,800,568)       (3,477,977)
                                                                                                 -----------       -----------
    Total stockholders' equity                                                                       563,065             5,477
                                                                                                 -----------       -----------

                                                                                                 $   907,330       $   282,316
                                                                                                 ===========       ===========
</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, 2003, 2002 and 2001 and For the Period from
Inception of Development Stage on January 1, 1999 to December 31, 2003

<TABLE>
<CAPTION>
                                                                                                                    From Inception
                                                                                                                    of Development
                                                                                                                       Stage on
                                                                                                                    January 1, 1999
                                                                                                                    to December 31,
                                                                 2003               2002               2001               2003
----------------------------------------------------------------------------------------------------------------------------------
<S>                                                           <C>                <C>                <C>                <C>
Contract and License Revenues                                 $    25,000        $        --        $        --        $    25,000

Operating Expenses
  License fees paid                                                19,375                 --                 --             19,375
  Research and development                                        106,515                 --                 --            306,515
  Marketing and promotion                                          23,241             22,835             14,200             80,276
  General and administrative                                      104,230            116,097             92,473            395,270
                                                              -----------        -----------        -----------        -----------
                                                                  253,361            138,932            106,673            801,436
                                                              -----------        -----------        -----------        -----------

Loss from Continuing Operations                                  (228,361)          (138,932)          (106,673)          (776,436)

Income (Loss) from Discontinued Operations
  Discontinued operations                                         (12,421)          (137,773)          (126,021)          (719,555)
  Gain on sale of discontinued operations                         940,000                 --                 --            940,000
                                                              -----------        -----------        -----------        -----------
                                                                  927,579           (137,773)          (126,021)           220,445
Nonoperating Income (Expense)
  Interest income                                                     691              1,096              7,518             34,768
  Interest expense                                                (22,500)            (6,031)            (7,521)           (37,660)
                                                              -----------        -----------        -----------        -----------

Net Income (Loss) Before Taxes                                $   677,409        $  (281,640)       $  (232,697)       $  (558,883)
Income Taxes                                                           --                 --                 --                 --
                                                              -----------        -----------        -----------        -----------
Net Income (Loss)                                             $   677,409        $  (281,640)       $  (232,697)       $  (558,883)
                                                              ===========        ===========        ===========        ===========

Basic and Diluted Income (Loss)
  per Common Share
    Continuing Operations                                     $     (0.07)       $     (0.04)       $     (0.04)
                                                              ===========        ===========        ===========
    Discontinued Operations                                   $      0.27        $     (0.04)       $     (0.05)
                                                              ===========        ===========        ===========
    Net                                                       $      0.20        $     (0.08)       $     (0.09)
                                                              ===========        ===========        ===========

Weighted Average Number of Common
  Shares Outstanding                                            3,412,522          3,384,700          2,727,927
                                                              ===========        ===========        ===========
</TABLE>

See Notes to Financial Statements.

                                       F-3
<PAGE>

ASI TECHNOLOGY CORPORATION
(A Development Stage Company)

STATEMENTS OF COMPREHENSIVE INCOME AND STOCKHOLDERS' EQUITY
For the Years Ended December 31, 2003, 2002 and 2001 and For the Period from
Inception of Development Stage on January 1, 1999 to December 31, 2003

<TABLE>
<CAPTION>
                                                                                                                        Accumulated
                                                                             Common Stock                                  Other
                                                   Comprehensive    -----------------------------      Additional      Comprehensive
                                                      Income           Shares           Amount      Paid-In Capital      Gain (Loss)
                                                   --------------------------------------------------------------------------------
<S>                                                  <C>              <C>                <C>               <C>          <C>
Balance, Inception of Development Stage                               1,181,664      $ 1,181,664       $ 1,087,861               --
  Sale of stock, net of offering costs of $15,000                     1,500,000          300,000           435,000               --
  Stock issued for services                                              30,000            6,000             9,000               --
  Contributed services                                                       --               --            20,000               --
  Contributed services                                                       --               --            40,000               --
  Net loss                                                                   --               --                --               --
  1 for 10 reverse stock split                                               --       (1,433,431)        1,433,431               --
                                                                    -----------      -----------       -----------      -----------
Balance, December 31, 2000                                            2,711,664           54,233         3,025,292               --
  Contributed services                                                       --               --            24,000               --
  Stock options issued for services                                          --               --             5,500               --
  Related party demand notes converted to stock
    at $0.50 per share                                                  228,458            4,569           109,660               --
  Sale of stock at $0.50 per share                                      367,600            7,352           176,448               --
  Net loss                                                                   --               --                --               --
                                                                    -----------      -----------       -----------      -----------
Balance, December 31, 2001                                            3,307,722           66,154         3,340,900               --
  Contributed services                                                       --               --            24,000               --
  Sale of stock at $0.50 per share                                       38,800              776            18,624               --
  Stock issued for services at $0.50 per share                           66,000            1,320            31,680               --
  Net loss                                                                   --               --                --               --
                                                                    -----------      -----------       -----------      -----------
Balance, December 31, 2002                                            3,412,522           68,250         3,415,204               --
Contributed services                                                         --               --            24,000               --
Comprehensive income
   Net income                                        $  677,409              --               --                --               --
   Change in unrealized loss on available-for-sale
     securities                                        (143,821)             --               --                --         (143,821)
                                                     -----------
   Other comprehensive income                          (143,821)
                                                     -----------
   Comprehensive income                              $  533,588
                                                     ===========    -----------      -----------       -----------      -----------
Balance, December 31, 2003                                            3,412,522      $    68,250       $ 3,439,204      $  (143,821)
                                                                    ===========      ===========       ===========      ===========
</TABLE>

<TABLE>
<CAPTION>
                                                                                                                         Deficit
                                                                                                                       Accumulated
                                                                                                                        During the
                                                                              Accumulated                               Development
                                                                                Deficit               Total                Stage
                                                                              -----------------------------------------------------
<S>                                                                           <C>                  <C>                  <C>
Balance, Inception of Development Stage                                       $(2,241,685)         $    27,840          $        --
  Sale of stock, net of offering costs of $15,000                                      --              735,000                   --
  Stock issued for services                                                            --               15,000                   --
  Contributed services                                                                 --               20,000                   --
  Contributed services                                                                 --               40,000                   --
  Net loss                                                                       (721,955)            (721,955)            (721,955)
  1 for 10 reverse stock split                                                         --                   --                   --
                                                                              -----------          -----------          -----------
Balance, December 31, 2000                                                     (2,963,640)             115,885            (721,955)
  Contributed services                                                                 --               24,000                   --
  Stock options issued for services                                                    --                5,500                   --
  Related party demand notes converted to stock
    at $0.50 per share                                                                 --              114,229                   --
  Sale of stock at $0.50 per share                                                     --              183,800                   --
  Net loss                                                                       (232,697)            (232,697)            (232,697)
                                                                              -----------          -----------          -----------
Balance, December 31, 2001                                                     (3,196,337)             210,717             (954,652)
  Contributed services                                                                 --               24,000                   --
  Sale of stock at $0.50 per share                                                     --               19,400                   --
  Stock issued for services at $0.50 per share                                         --               33,000                   --
  Net loss                                                                       (281,640)            (281,640)            (281,640)
                                                                              -----------          -----------          -----------
Balance, December 31, 2002                                                     (3,477,977)               5,477           (1,236,292)
  Contributed services                                                                 --               24,000                   --
  Comprehensive income
       Net income                                                                 677,409              677,409              677,409
       Change in unrealized loss on available-for-sale
         securities                                                                    --             (143,821)                  --
       Other comprehensive income
       Comprehensive income
                                                                              -----------          -----------          -----------
Balance, December 31, 2003                                                    $(2,800,568)         $   563,065          $  (558,883)
                                                                              ===========          ===========          ===========
</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, 2003, 2002, and 2001 and For the Period from
Inception of Development Stage on January 1, 1999 to December 31, 2003

<TABLE>
<CAPTION>
                                                                                                                     From Inception
                                                                                                                     of Development
                                                                                                                        Stage on
                                                                                                                     January 1, 1999
                                                                                                                     to December 31,
                                                                     2003               2002              2001              2003
                                                                  -----------       -----------       -----------       -----------
<S>                                                               <C>               <C>               <C>               <C>
Cash Flows from Operating Activities
  Net income (loss)                                               $   677,409       $  (281,640)      $  (232,697)      $  (558,883)
  Adjustments to reconcile net income (loss) to net
    cash used in operating activities:
    Contributed services                                               24,000            24,000            24,000           132,000
    Gain from antenna business sale                                  (940,000)               --                --          (940,000)
    Common stock and options issued for services                           --            33,000             5,500            53,500
    Interest paid in common stock                                          --                --             4,229             4,229
    Acquired in-process research and development                           --                --                --           450,000
    Changes in working capital components:
      (Increase) decrease in accounts receivable                      121,102          (167,242)           59,952           (66,492)
      (Increase) decrease in prepaid expenses                              --                --            13,045                --
      Increase (decrease) in unearned revenue                              --                --            (7,870)               --
      Increase (decrease) in accounts payable                          62,589            31,293           (38,016)           99,396
      Increase (decrease) in accrued liabilities                        4,837            15,032                --            19,869
      (Decrease) in due to related party                                   --                --                --            (5,895)
                                                                  -----------       -----------       -----------       -----------
        Net cash used in operating activities                         (50,063)         (345,557)         (171,857)         (812,276)
                                                                  -----------       -----------       -----------       -----------

Cash Flows from Investing Activities
  Increase in notes receivable                                             --                --          (150,000)         (150,000)
  Payments on note receivable                                           4,309             4,409           154,763           170,852
  Cash proceeds from antenna business sale                            141,000                --                --           141,000
  Purchase of in-process research and development                          --                --          (100,000)         (450,000)
                                                                  -----------       -----------       -----------       -----------
        Net cash provided by (used) in investing
          activities                                                  145,309             4,409           (95,237)         (288,148)
                                                                  -----------       -----------       -----------       -----------

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                                         95,246           (96,748)           26,706           172,776

Cash and cash equivalents, beginning of year                           83,926           180,674           153,968             6,396
                                                                  -----------       -----------       -----------       -----------
Cash and cash equivalents, end of year                            $   179,172       $    83,926       $   180,674       $   179,172
                                                                  ===========       ===========       ===========       ===========

Supplemental Cash Flow Information
  Cash paid during the year for:
  Interest                                                        $    17,190       $        --       $     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              $        --       $     5,500       $        --
  Demand notes and accrued interest converted to
    common stock                                                  $        --       $   114,229       $        --
  Common stock received for antenna business sale                 $   799,000       $        --       $        --
</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 plasma
antenna technology (August 1999),  plasma sound reduction  technology  (December
2000) and licensed  plasma  technology  for  decontamination  and  sterilization
invented by one of its consultants  (January 2003). Each plasma technology is in
an early stage of  development.  The Company has been engaged in the development
and commercialization of the plasma technologies. 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.  In September  2003 the Company  completed the sale of its plasma
antenna technology and related government contracts. 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.  Revenues from plasma  decontamination  and  sterilization  technology
sublicensing  is  recognized as collected  due to  uncertainty  of collection of
amounts  billed.  Costs  associated with  development  contracts are included in
research and development.

Patents

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

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.

                                      F-7
<PAGE>

ASI Technology Corporation
(A Development Stage Company)

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

Note 2.       Summary of Significant Accounting Policies (continued)

Stock options (continued)

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

<TABLE>
<CAPTION>
                                                     2003          2002          2001
                                                  ----------   -----------    ---------
<S>                                               <C>          <C>            <C>
Net income (loss)
      As reported                                 $  677,409   $  (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                                   $  677,409   $  (281,640)   $(238,197)
                                                  ==========   ===========    =========
Basic and diluted income (loss) per share:
      As reported                                 $     0.20   $     (0.08)   $   (0.09)
                                                  ==========   ===========    =========
      Pro forma                                   $     0.20   $     (0.08)   $   (0.09)
                                                  ==========   ===========    =========
</TABLE>

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.

Income (Loss) per common share

Basic income (loss) per share is computed by dividing income (loss) available to
common stockholders, by the weighted average number of common shares outstanding
for the year. Diluted income (loss) per share reflects the potential dilution of
securities  that could share in the income (loss) of an entity.  The Company has
no  dilutive  securities  other than stock  options  that do not have a dilutive
effect for the years ended December 31, 2003, 2002 or 2001.

Investment securities

Investment  securities represents investment in an entity where the Company owns
less than five  percent  and does not  exercise  influence  over  operating  and
financial  policies.  These securities are expected to be marketable  within the
next twelve months. The Company accounts for marketable securities in accordance
with Statement of Financial Accounting Standards No. 115 "Accounting for Certain
Investments in Debt and Equity  Securities"  ("SFAS 115").  SFAS 115 establishes
the  accounting  and  reporting  requirements  for all debt  securities  and for
investments in equity securities that have readily determinable fair values. The
Company classifies its marketable securities as available-for-sale and, as

                                      F-8
<PAGE>

ASI Technology Corporation
(A Development Stage Company)

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

such,  carries the investments at fair value, with unrealized  holding gains and
losses reported in stockholders'  equity as a separate  component of accumulated
other comprehensive income (loss).


Note 2. Summary of Significant Accounting Policies (continued)

Recent accounting pronouncements

In January  2003,  FASB issued FASB  Interpretation  No. 46,  "Consolidation  of
Variable  Interest  Entities"  ("FIN 46").  This  interpretation  clarifies  the
application  of Accounting  Research  Bulletin No. 51,  "Consolidated  Financial
Statements," relating to consolidation of certain entities.  FIN 46 will require
identification  of the Company's  participation in variable  interests  entities
("VIEs"),  which are defined as entities with a level of invested equity that is
not  sufficient  to fund  future  activities  to  permit  them to  operate  on a
stand-alone  basis,  or whose equity holders lack certain  characteristics  of a
controlling  financial  interest.  For entities  identified as VIEs, FIN 46 sets
forth a model to evaluate  potential  consolidation  based on an  assessment  of
which party to the VIE, if any, bears a majority of the exposure to its expected
losses, or stands to gain from a majority of its expected  returns.  FIN 46 also
sets  forth  certain  disclosures  regarding  interests  in VIEs that are deemed
significant,  even if consolidation is not required.  The adoption of FIN 46 did
not have a  material  impact on the  Company's  financial  position,  results of
operations  or cash flows.  The Company does not believe they have any VIEs that
they would be required to be consolidated.

Guarantees and indemnifications

In November 2002, the Financial  Accounting Standards Board ("FASB") issued FASB
Interpretation   ("FIN")  No.  45   "Guarantor's   Accounting   and   Disclosure
Requirements for Guarantees,  including  Indirect  Guarantees of Indebtedness of
Others -- an  interpretation of FASB Statements No. 5, 57 and 107 and rescission
of FIN 34." The  following  is a summary of the  Company's  agreements  that the
Company has determined are within the scope of FIN No. 45:

The Company's  government contracts require compliance with various and detailed
contract provisions and procurement regulations.  If the Company violates any of
these  provisions or regulations,  it may be subject to termination of contracts
or  imposition  of fines.  The  Company's  contract  and  subcontract  costs and
revenues  may be  subject  to  adjustment  as a result of  audits by  government
auditors.  The Company  does not believe it will be liable for any such  charges
and has no  liabilities  recorded  for such  charges  related to its  government
contracts at December 31, 2003.

Under its bylaws, the Company has agreed to indemnify its officers and directors
for  certain  events  or  occurrences  arising  as a result  of the  officer  or
director's serving in such capacity.  The term of the indemnification  period is
for the officer's or director's lifetime. The maximum potential amount of future
payments  the Company  could be  required  to make under  these  indemnification
agreements is unlimited.  The Company believes the estimated fair value of these
indemnification  agreements is minimal and has no liabilities recorded for these
agreements as of December 31, 2003.

The Company enters into  indemnification  provisions under agreements with other
companies in its ordinary course of business. Under these provisions the Company
generally  indemnifies  and holds  harmless  the  indemnified  party for  losses
suffered  or  incurred  by the  indemnified  party as a result of the  Company's
activities or, in some cases, as a result of the indemnified  party's activities
under the

                                      F-9
<PAGE>

ASI Technology Corporation
(A Development Stage Company)

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

agreement.  The maximum potential amount of future payments the Company could be
required  to make under  these  indemnification  provisions  is  unlimited.  The
Company has not  incurred  material  costs to defend  lawsuits or settle  claims
related to  indemnification  agreements.  As a result,  the Company believes the
estimated fair value of these  agreements is minimal.  Accordingly,  the Company
has no liabilities recorded for these agreements as of December 31, 2003.

                                      F-10
<PAGE>

ASI Technology Corporation
(A Development Stage Company)

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

Note 3. Purchase and Sale of Technologies

Plasma antenna technology

On August 20,  1999 the Company  entered  into a purchase  agreement  to acquire
plasma antenna technology ("1999 Purchase Agreement").  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.

On March 19,  2003,  the  Company and  Markland  Technologies,  Inc.,  a Florida
corporation  ("Markland"),  entered into a Technology  Purchase  Agreement  (the
"Agreement") pursuant to which the Company agreed to sell and Markland agreed to
purchase the  Company's  patents,  patent  applications,  equipment,  government
contract rights and other intellectual  property rights comprising the Company's
plasma  antenna  business.  The  closing of the  transaction  was  completed  in
September  2003 and the Company has received  all sale  proceeds  consisting  of
$150,000 of cash and $850,000 of Markland's common stock. In connection with the
sale,  the  Company  incurred  patent and  license  royalty  fees under the 1999
Purchase  Agreement of $7,500 in cash and $42,500 of the Markland  common stock.
The Company  also paid one  inventor  $1,500 in cash and $8,500 of the  Markland
common stock.

Markland began managing the Company's  government  contracts commencing April 1,
2003.  Markland is responsible for contract and plasma antenna related costs and
to pay the  Company a fee of $2,500 per month for  administrative  support.  The
Company  is  responsible  to pay a  contract  management  fee equal to  contract
revenues. As the contracts have not been assigned to Markland by the government,
all revenues and expenses related to the contracts are recognized by the Company
with the difference  between contract revenues and reimbursable costs payable or
receivable  from  Markland.  The  Company's  remaining  government  contract  is
expected to be completed by April 2004. At December 31, 2003 the Company accrued
$44,554  as a net  fee  (excess  of  contract  revenues  owed to  Markland  over
reimbursable  costs) to  Markland  and  recorded  administrative  fees earned of
$22,500.  The actual amounts to be settled under this arrangement may be more or
less depending on contract costs and revenues for the period through April 2004.

Delmar Kintner, who was a part-time plasma antenna technology  consultant to the
Company  from 1999 to March 2003,  was CEO of  Markland  from  December  2002 to
November 2003.

Separately the Company and Markland entered into a sublicense agreement pursuant
to which the Company has  sublicensed  to Markland the right to develop and sell
products to certain government,  military and homeland security customers in the
United  States  and  Canada  using  the  Company's  plasma   sterilization   and
decontamination  technology (see below). The Company is recognizing license fees
of $5,000 per month as collected.

                                      F-11
<PAGE>

ASI Technology Corporation
(A Development Stage Company)

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

Note 3. Purchase and Sale of Technologies (continued)

Plasma antenna technology (continued)

The sale of the plasma antenna  technology and government  contracts  along with
the licensing to Markland of the government  rights to the plasma  sterilization
and decontamination technology has resulted in the discontinuation of government
contracting  business by the  Company  which  accounted  for  substantially  all
revenues  during the last three  years.  The Company has  segregated  continuing
operations (commercial  sterilization and decontamination  technology and plasma
noise  cancellation  technology) from  discontinued  operations  (plasma antenna
technology and government  contracts) for the periods presented and discontinued
operations  have been  presented as a single line item.  The  components of this
line  item  for the  years  ended  December  31,  2003,  2002  and 2001 and from
inception  of the  development  stage on January 1, 1999 to December  31,  2003,
including contract revenues and research and development  expenses  attributable
to Markland, are as follows:


<TABLE>
<CAPTION>
                                                                                             From Inception
                                                                                             of Development
                                                                                                Stage on
                                                            Year Ended December 31,          January 1, 1999
                                                  ----------------------------------------   to December 31,
                                                      2003          2002           2001           2003
                                                  -----------   -----------    -----------    -----------
<S>                                               <C>           <C>            <C>            <C>
Contract revenues                                 $   467,855   $   375,677    $    78,026    $ 1,082,094
Proceeds received from sale of antenna business       940,000            --             --        940,000
                                                  -----------   -----------    -----------    -----------
                                                    1,407,855       375,677         78,026      2,022,094
                                                  -----------   -----------    -----------    -----------
Research and development                              405,429       441,469        157,709      1,530,660
Marketing and promotion                                74,847        71,981         46,338        270,989
                                                  -----------   -----------    -----------    -----------
                                                      480,276       513,450        204,047      1,801,649
                                                  -----------   -----------    -----------    -----------
Income (loss) from discontinued operations        $   927,579   $  (137,773)   $  (126,021)   $   220,445
                                                  ===========   ===========    ===========    ===========
</TABLE>

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 paid in ten 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.

                                      F-12
<PAGE>

ASI Technology Corporation
(A Development Stage Company)

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

Note 3. Purchase and Sale of Technologies (continued)

Sound reduction technology (continued)

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.

In 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. This work was completed and expensed in 2003.
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.

Plasma Sterilization and Decontamination Technology

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 was the subject of a government contract
awarded  to the  Company  in  August  2002 and  completed  in August  2003.  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.

As  described  above the Company has  sublicensed  the right to develop and sell
products to certain government,  military and homeland security customers in the
United States and Canada. The Company retains rights to develop, license or sell
products  using this  technology  to other  parties,  including  all  commercial
customers.


Note 4. Investment Securities

The  Company  holds  266,333  (post  reverse  split)  common  shares of Markland
Technologies,  Inc. a public company traded over the counter.  These  securities
may not be sold in the  over  the  counter  market  until  July  2004 or until a
registration  statement  is  effective.  They are  carried at fair  value,  with
unrealized  gains and  losses  reported  in  stockholders'  equity as a separate
component  of  accumulated  other  comprehensive  loss.  The  cost  basis of the
securities is $799,000.  At December 31, 2003 the unrealized  loss was $143,821.
The  Company  believes  the  decline in value is  temporary.  The Company may be
entitled to receive  additional  shares of Markland common stock if registration
of the shares is delayed beyond  February 2004.  Markland's  shares are volatile
and thinly traded.

                                      F-13
<PAGE>

ASI Technology Corporation
(A Development Stage Company)

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

Note 5. Research Contracts

Government  research  contracts  accounted  for 90%,  100%  and 90% of  revenues
(aggregating  continued and discontinued  operating  revenues) in 2003, 2002 and
2001, respectively. One other customer accounted for 10% of revenues in 2001.

In January  2000 and August 2000 the  Company  obtained  two fixed fee  research
contracts as subcontracts with a prime government contractor that 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.

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  completed  in July 2003.  In January 2003 the Company was
awarded a six month Phase I fixed fee  government  contract  for an aggregate of
$68,587 completed in June 2003.

At December 31, 2003 the Company was committed to one  subcontractor for $34,600
pursuant  to a  purchaser  order  for work to be  performed  under  the Phase II
contract.

These contracts contain certain provisions  allowing the government to terminate
the contract  prior to  completion.  There is no  assurance  all amounts will be
earned and  billable.  Accounts  receivable  of $187,594  at  December  31, 2002
represented  $180,946  billed and earned and $6,648  earned but not yet  billed.
Accounts  receivable at December 31, 2003 included  $43,991 of billed and earned
revenues on the Phase II contract.


Note 6. 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 7. 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, 2003.

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

                                      F-14
<PAGE>

ASI Technology Corporation
(A Development Stage Company)

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

Note 7. Stockholders' Equity (continued)

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.

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.

During  2003,  2002 and 2001,  one officer  contributed  services to the Company
without compensation.  These services, valued at $24,000 in each year, have been
expensed and treated as capital contributions.


Note 8. 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. 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 or 2003.

During 2003  options on 10,000  shares were  cancelled.  At December  31,  2003,
90,000 options were  outstanding  and  exercisable and options on 160,000 shares
remain  available  to be granted.  At December  31, 2003 and 2002 the options on
90,000  shares and 100,000  shares,  respectively,  were fully  vested and

                                      F-15
<PAGE>

ASI Technology Corporation
(A Development Stage Company)

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

had a weighted average life of 2.9 and 3.9 years and a weighted average exercise
price of $0.50 per common share.

                                      F-16
<PAGE>

ASI Technology Corporation
(A Development Stage Company)

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

Note 9. Income Taxes

Deferred  tax assets at  December  31,  2003 and 2002 of $92,000  and  $337,000,
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  $261,000
as of December 31, 2003 that expire  between  December 31, 2021 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, 2003, 2002 and 2001.

                                               2003         2002        2001
                                            ---------    ---------    ---------
Computed "expected" tax (credit)            $ 237,000    $ (99,000)   $ (81,000)
Increase (decrease) in income taxes
 resulting from:
  Expiration of loss carryforward                  --        2,000
  Increase in valuation allowance            (245,000)      89,000       77,000
  Other                                         8,000        8,000        4,000
                                            ---------    ---------    ---------
                                            $      --    $      --    $      --
                                            =========    =========    =========


Note 10. 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.  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 and $12,000 in
2003. In addition  during 2003,  2002 and 2001,  the Company also paid companies
affiliated with its President a total of $8,532, $15,828,  $5,148,  respectively
as reimbursements for travel and related costs.

At December 31, 2003 stockholders  (including one  officer/director for $75,000)
had advanced $225,000 on 10% unsecured demand notes. During 2003, 2002 and 2001,
the Company  incurred  interest of $22,500,  $2,022 and $3,292,  respectively in
connection with short-term loans from related parties.

                                      F-17
<PAGE>

ASI Technology Corporation
(A Development Stage Company)

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

Note 11. 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  losses  in  connection  with  the  acquisition  and
development  of its  technology  and has  limited  funds with which to  operate.
Management  anticipates  receiving  additional  funds  from the  future  sale of
investment  securities;  however,  there can be no assurance that any such funds
will be obtained.  Consequently,  additional  capital resources are likely to be
required to further  develop the Company's  technologies to the point where they
are commercially  viable.  The Company also plans to use resources to strengthen
and expand its patents,  establish certain  strategic  relationships and develop
market  opportunities.  Shortly  thereafter,  the Company expects to license its
technologies,  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 technologies or be able
to generate  sufficient  revenue  through the licensing of its  technologies  to
provide sufficient working capital.

Management  does not have an estimate of the  additional  capital  necessary  to
develop its technologies 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.

                                      F-18