================================================================================

                                  UNITED STATES
                       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, 2004

                         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 is not  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. $-0-
                                                         ----

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
December 31, 2004 (assuming for this purpose that only  directors,  officers and
10% or more  shareholders  of  registrant  are  affiliates  of  registrant)  was
$407,800.

As of March 25, 2005 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_

================================================================================
<PAGE>

<TABLE>
                                                TABLE OF CONTENTS
<CAPTION>
                                                                                                                 Page
                                                                                                                 ----
<S>           <C>                                                                                                <C>
                                     PART I
ITEM 1.       Description of Business                                                                             3
ITEM 2.       Description of Property                                                                             8
ITEM 3.       Legal Proceedings                                                                                   8
ITEM 4.       Submission of Matters to a Vote of Security Holders                                                 9

                                     PART II
ITEM 5.       Market for Common Equity and Related Stockholder Matters                                            9
ITEM 6.       Management's Discussion and Analysis or Plan of Operation                                          10
ITEM 7.       Financial Statements                                                                               18
ITEM 8.       Changes in and Disagreements with Accountants on Accounting and Financial Disclosure               18
ITEM 8A.      Controls and Procedures                                                                            18
ITEM 8B.      Other Information                                                                                  18

                                    PART III
ITEM 9.       Directors and Executive Officers, Promoters of the Registrants                                     18
ITEM 10.      Executive Compensation                                                                             20
ITEM 11.      Security Ownership of Certain Beneficial Owners and Management and
              Related Stockholder Matters                                                                        21
ITEM 12.      Certain Relationships and Related Transactions                                                     22
ITEM 13.      Exhibits                                                                                           22
ITEM 14.      Principal Accountant Fees and Services                                                             22
SIGNATURES                                                                                                       23
FINANCIAL STATEMENTS                                                                                            F-1
EXHIBIT INDEX                                                                                                    22
</TABLE>

                           FORWARD-LOOKING STATEMENTS

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

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


                                       2
<PAGE>

                                     Part I

ITEM 1. DESCRIPTION OF BUSINESS.

Introduction
ASI Technology  Corporation is a development stage company,  incorporated  under
the laws of the State of Nevada. We 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  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  currently  own  two  plasma  technologies.   Our  plasma  sterilization  and
decontamination  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  in an initial  study by us, and in
published  research by Professor  Laroussi and other  scientists,  as useful for
sterilization,  decontamination and for use in certain industrial processing. We
have acquired an exclusive license from the inventor for this patented method of
cold plasma generation. Our plan 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  study  of the use of  this  technology  for
decontamination  of   forward-deployed   equipment  and  facilities  exposed  to
biological   warfare   agents.   Our   experiments   indicated   that  effective
decontamination  can be achieved  with this  method.  During 2004 we focused our
development  efforts on improving our plasma  sterilization and  decontamination
prototypes,  performing additional laboratory testing and sponsoring experiments
reported in scientific publications.

We also own patented 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.
While we are evaluating the next development steps, our focus in 2004 was and in
2005  is  expected  to   continue  to  be  on  our  plasma   sterilization   and
decontamination technology.

Our plasma  technologies  are 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.

                                       3
<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.


                                       4
<PAGE>

Key Business Developments

Beginning  in early 1999,  we  developed a strategy  focusing on  acquiring  and
exploiting  technology.  In August 1999, we purchased 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 U.S.  Government  agencies.  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.

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.  In  connection  with the sale, we
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.  The net
number of  Markland  common  shares  received  (post-reverse  split) was 266,333
shares.

In March 2004 we received  39,950  shares of  Markland  common  stock  valued at
$62,722 as additional  consideration for their failure to timely register shares
previously received.

Markland  began  managing our  government  contracts  commencing  April 1, 2003.
Markland was responsible for contract and plasma antenna related costs and for a
fee to us of $2,500 per month for administrative support. We were responsible to
pay a contract  management  fee equal to contract  revenues.  All such contracts
were  completed  by April  2004 and our  management  arrangement  with  Markland
terminated.  The sale of the plasma antenna technology and government  contracts
to Markland  resulted in the  discontinuation  of our plasma antenna  technology
business that  accounted for  substantially  all revenues  during the last three
years.

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.

In August  2003,  we  completed  a study of the use of this  technology  for the
decontamination  of   forward-deployed   equipment  and  facilities  exposed  to
biological   warfare   agents.   Our   experiments   indicated   that  effective
decontamination can be achieved with our method of cold plasma generation.

During 2004 we  continued  to test and  evaluate  our plasma  sterilization  and
decontamination  technology.  We developed a new and improved  prototype  device
replicating  the  experiments  conducted  by Dr.  Alexeff at his  University  of
Tennessee  laboratory.  During  2005 we intend  to  design,  develop  and test a
production  prototype in  anticipation  of future  production of our proprietary
cold plasma  generator by licensees or others.  We may also seek other  business
opportunities   including  investments,   new  research,   technology  or  other
acquisitions or other business development efforts.

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


                                       5
<PAGE>

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.

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.

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.

                                       6
<PAGE>

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.  Management's
efforts are at a preliminary  stage and management  does not have a timetable or
an  estimate  of the cost of  developing  these  applications.  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.  Numerous  airports have
imposed  additional  restrictions  on  airplane  noise  levels,  noise  budgets,
mandatory  flight  paths and runway  restrictions,  which  limit the  ability of
carriers to increase services or operate as desired at these airports.

Traditional  noise  reduction  methods  are  typically  passive,  consisting  of
mufflers and baffling techniques. More active techniques may employ mixing inlet
air with  exhaust  gases to  reduce  exhaust  velocity.  These  various  methods
generally  provide  limited  noise  reduction  and may  add  weight  and  reduce
operating efficiency of engines.

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.  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.  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.

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.

                                       7
<PAGE>

We are currently focusing our limited resources on our plasma  sterilization and
decontamination  technology and have no immediate plans to develop our method of
sound reduction for jet engines but continue to seek sponsorship to fund further
experimentation  or  development.  We  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.

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


                                       8
<PAGE>

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
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.

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.

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 is important to
compete  effectively  through licensing in our proposed markets.  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 plasma  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  patent,  or that  licensed by us, 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,  2004,  2003 and 2002,  we invested  $132,261,
$511,944 and $441,469, respectively, on research and development,  including the
acquired  technology.  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 and in 2004 we obtained $45,864
from one  customer 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. We currently have no sources of sponsored research and development.

                                       9
<PAGE>

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

ITEM 2. DESCRIPTION OF PROPERTY

Our principal executive offices are located at 980 American Pacific Drive, Suite
#111,  Henderson,  Nevada 89014,  which is the principal  business office of our
President,  Jerry E. Polis, who has other business  operations at this location.
We share approximately  2,600 square feet with other businesses  affiliated with
Mr. Polis.  Commencing in September  1999, we began paying a company  affiliated
with Mr. Polis an  aggregate  of $500 per month for office rent and  bookkeeping
and  administrative  services.  This was  increased to $750 per month in January
2002 and to $1,000 per month, on a month-to-month basis, 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.

                                     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  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, 2003 and 2004:

                                                              Bid Quotations
                                                          ----------------------
                                                          High             Low
                                                          ----             ---
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
Year Ending December 31, 2004
           First Quarter                                  $0.34            $0.11
           Second Quarter                                 $0.20            $0.16
           Third Quarter                                  $0.20            $0.16
           Fourth Quarter                                 $0.30            $0.16

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,  2004,  which we believe  approximates  the  number of  beneficial
owners. We have never paid a cash dividend on our common stock and do not expect


                                       10
<PAGE>

to pay cash dividends in the foreseeable  future. At December 31, 2004 we had an
accumulated  deficit of  approximately  $3.5  million and until this  deficit is
eliminated,  we will be  prohibited  from  paying  dividends  except  out of net
profits.

At December  31,  2004,  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, 2004:
<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              140,000                       $0.44                       110,000

Equity compensation plans not
approved by security holders                --                           --                           --
-----------------------------  ----------------------------   --------------------------   ------------------------
Total                                     140,000                       $0.44                       110,000
=============================  ============================   ==========================   ========================
</TABLE>

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

Recent Sales of Unregistered Securities
No  securities  were sold within the past three  years that were not  registered
under the Securities Act that were not previously  reported in prior  quarterly,
annual or 8-K 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 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.

Our  principal  business  activity  in 2004 and  expected in 2005 are efforts to
validate  our cold plasma  decontamination  and  sterilization  method,  develop
commercial and military  prototypes and source applications and partners for the
technology.   Our  goal  is  to  license  this   technology  for  production  of
sterilization  and  decontamination  devices.  We  are  not  currently  devoting
research  efforts on our patented plasma jet engine noise  reduction  technology
but may do so in the future.

Although  our  initial  experiments  with our cold  plasma  decontamination  and
sterilization  method have shown promise in the  laboratory  and during  initial
prototype development tasks, we do not have sufficient operating or test data to
validate the  technology or determine the  prospects for  successful  commercial
exploitation  of our method  compared  to  alternatives.  The  outlook  for this
technology  is  uncertain  but  management  believes  that  results  to date are
encouraging and warrant continued expenditures and efforts to commercialize this
technology  in 2005.  We may also seek other  business  opportunities  including
investments,  new research,  technology or other  acquisitions or other business
development efforts.

                                       11
<PAGE>

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 2004.  However,  due to a
substantial  decline in the value of investment  securities without assurance of
recovery, we recorded an unrealized loss on investment securities during 2004.

The methods, estimates and judgments we use in applying our accounting policies,
in  conformity  with  generally  accepted  accounting  principles  in the United
States,  have a  significant  impact on the  results we report in our  financial
statements.  We base our estimates on historical experience and on various other
assumptions  that we  believe  to be  reasonable  under the  circumstances.  The
estimates affect the carrying values of assets and  liabilities.  Actual results
may differ from these estimates under  different  assumptions or conditions.  We
believe that the following  discussion  addresses  our most critical  accounting
policies,  which are  those  that are most  important  to the  portrayal  of our
financial  condition and results of operations  and require our most  difficult,
subjective,  and  complex  judgments,  often  as a  result  of the  need to make
estimates about the effect of matters that are inherently uncertain.

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
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.

Investment  Securities - We account 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. Our
marketable  securities  relate to shares  of  common  stock of one  unaffiliated
company received in exchange for the sale of our plasma antenna  business.  They
are  valued  at the  quoted  market  price on the  over-the-counter  market.  We
classify  these  marketable  securities as  available-for-sale  and,  previously
carried 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). During the third quarter of 2004 we determined that
there had been a substantial  decline in the value of our investment  securities
and there was no assurance of future  recovery in value.  Management  determined
our investment  securities were impaired and an impairment loss was recorded and
the cumulative  unrealized loss previously  recorded as a comprehensive  loss in
stockholders' equity was reversed.

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

                                       12
<PAGE>

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,
                                                                        2004            2003             2002              2004
                                                                  ------------------------------------------------------------------
<S>                                                               <C>               <C>               <C>                <C>
Contract revenues                                                 $    45,864       $   467,855       $   375,677        $ 1,127,958
Proceeds received from sale of antenna business                        62,722           940,000              --            1,002,722
                                                                  ------------------------------------------------------------------
                                                                      108,586         1,407,855           375,677          2,130,680
                                                                  ------------------------------------------------------------------
Research and development                                               31,723           405,429           441,469          1,562,383
Marketing and promotion                                                25,197            74,847            71,981            296,186
                                                                  ------------------------------------------------------------------
                                                                       56,920           480,276           513,450          1,858,569
                                                                  ------------------------------------------------------------------
Income (loss) from discontinued operations                        $    51,666       $   927,579       $  (137,773)       $   272,111
                                                                  ==================================================================
</TABLE>

We do not expect further  discontinued  revenues or costs in 2005 resulting from
such discontinued segment.

Results of Operations - 2004 vs. 2003

Revenues
--------
Revenues  from  continuing  operations  for 2004 were nil compared to $25,000 of
license fee revenue during 2003. We terminated  our one outside  license for our
plasma  sterilization  and  decontamination  technology  in  February  2004  for
nonpayment  of monthly  license  fees and  obtained no other  sources of revenue
during 2004.

Contract  revenues  included  in  discontinued  operations  for the  year  ended
December 31, 2004 were $45,864.  This revenue was  recognized on a 24 month U.S.
Government  Missile  Defense Agency  ("MDA") Phase II contract  awarded in April
2002.  Revenues  for 2003  consisted  of  $467,855  of revenue  from  government
contracts.  The  decrease  in  revenues  in  the  current  year  is  due  to the
termination  of final  contracts and the fact that we did not seek new contracts
due to the  sale  of our  plasma  antenna  business.  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.

There can be no assurance of future revenues from our plasma technologies.

Research and Development
------------------------
Research  and  development  costs from  continuing  operations  in 2004  totaled
$17,160  on  company  sponsored   research  on  our  plasma   sterilization  and
decontamination  technology.  In 2003 such costs  totaled  $106,515 and included
$103,140 for contract work  performed by the  University of  Mississippi  on our
plasma noise reduction technology.

Total research and development costs from  discontinued  operations were $31,723
in 2004 and $405,429 for 2003.  The decrease  resulted  from the winding down of
our  government  contracting  business  resulting  from the  sale of the  plasma
antenna business.

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 $605 in patent
costs in 2004 compared to $11,384 of patent costs in 2003. The reduction results
from the sale of the plasma antenna 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.

                                       13
<PAGE>
Marketing and Promotion Costs
-----------------------------
Marketing and  promotion  costs for  continuing  operations in 2004 were $23,723
comparable  to 2003 that had  $23,241  of  similar  costs.  These  costs in 2004
included $11,131 of travel and $12,000 of contributed services.

Marketing and promotion costs included in  discontinued  operations were $25,197
in 2004 and $74,847 in 2003.  The reduction  results from the sale of the plasma
antenna business.

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 2004 were  $102,898,  comparable to 2003's
total  of  $104,230.  These  costs in 2004  consisted  primarily  of  legal  and
accounting fees of $46,408,  personnel costs of $26,668,  $12,000 in contributed
services,   $4,047  of  shareholder  related  costs  and  $12,000  of  rent  and
administrative expenses paid to a company affiliated with our President.

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 an operating loss of $143,781 and a gain from discontinued  operations of
$51,666 for 2004. We recognized additional net proceeds of $62,722 from the sale
of our antenna business  included in discontinued  operations.  During the third
quarter of 2004 we determined  that there had been a substantial  decline in the
value of our investment securities and there was no assurance of future recovery
in value and that such  impairment  was other than  temporary.  Accordingly,  we
incurred   an   unrealized    other   than   temporary    impairment   loss   on
available-for-sale  securities  of  $603,521  in 2004 and  interest  expense  of
$22,562.  As a  result  of these  items we  recorded  an  aggregate  net loss of
$716,043  in 2004  compared  to an  aggregate  net gain of $677,409 in 2003 that
included $940,000 of proceeds from the sale of the plasma antenna  business.  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, 2004 was $1,274,926.


                                       14
<PAGE>
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 2003 was due to additional new  contracts.  Contract
revenues are subject to  significant  variability  due to the nature of contract
research work.

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 $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.

                                       15
<PAGE>

Net Loss
--------
We had an operating loss 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.

Liquidity and Capital Resources
As of  December  31,  2004 and  December  31,  2003 we had cash of  $94,262  and
$179,172,  respectively.  Net cash used in  operating  activities  was  $169,291
during 2004,  consisting  primarily of a $104,036 net loss (after  adjusting for
the  antenna  business  gain of  $62,722,  the  non-cash  impairment  charge  on
investment  securities  of  $603,521  and other  noncash  costs of $71,208 or an
aggregate  of  $612,007)  reduced  further by a $108,906  decrease  in  accounts
payable and accrued  liabilities and increased by a $43,650 increase in accounts
receivable. The net cash used in operating activities in 2003 was $50,063.

Our  principal  source of liquidity  at December  31, 2004  consisted of cash of
$94,262 and investment  securities of $160,901.  We have no other unused sources
of liquidity at this time.

At December 31, 2004, we had no outstanding commitments for capital expenditures
and no remaining commitments on any government contracts.

Based on  current  expectations  and  business  conditions,  we  believe we have
sufficient financial resources to meet our cash requirements for the next twelve
months.  However  we intend to  perform  additional  development  on our  plasma
sterilization and decontamination technology and we may require additional funds
for this purpose.  We may also develop or acquire other  technologies  requiring
future expenditures. We may further 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.

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 for the
next twelve months.  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
2004 or 2003 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 requires
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


                                       16
<PAGE>

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 our financial  position,  results of operations or
cash flows. We do not believe we have any VIEs required to be consolidated.

The  Emerging  Issues  Task  Force  issued  EITF  No.  03-01,  "The  Meaning  of
Other-Than-Temporary  Impairment and Its  Application  to Certain  Investments."
which  provides   additional   guidance  regarding   accounting  for  marketable
securities  that may be  impaired.  Although  the  recognition  and  measurement
provisions  of EITF  03-01  have since  been  delayed  indefinitely,  management
believes our investment in the  securities are impaired and consistent  with the
provisions of FASB Statement No. 115 Accounting for Certain  Investments in Debt
and  Equity  Securities,  and SEC  Staff  Accounting  Bulletin  59,  Other  Than
Temporary  Impairment of Certain  Investments in Debt and Equity Securities,  an
impairment loss of $603,521 was recorded.

In December  2004,  the  Financial  Accounting  Standards  Board  (FASB)  issued
Financial  Accounting  Standard (FAS) 123(R),  "Share Based Payment."  Statement
123(R) is effective  for public  companies at the beginning of the first interim
or annual period after June 15, 2005.  This statement  eliminates the ability to
account for  share-based  compensation  using the intrinsic  value-based  method
under APB Opinion No. 25, "Accounting for Stock Issued to Employees."  Statement
123(R) would require the Company to calculate equity-based  compensation expense
for stock options and employee  stock  purchase plan rights granted to employees
based  on the  fair  value  of the  equity  instrument  at the  time  of  grant.
Currently, the Company discloses the pro forma net income (loss) and the related
pro forma income (loss) per share information in accordance with FAS 123 and FAS
148, "Accounting for Stock-Based Compensation  Costs-Transition and Disclosure."
The Company has not evaluated the impact that Statement  123(R) will have on its
financial position and results of operations.

Tax Loss Carryforwards
As of  December  31,  2004,  we had  approximately  $523,000 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  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.

                                       17
<PAGE>

         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  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 availability of proceeds from the sale of Markland
stock and our expected expenditures,  we believe we have sufficient financing to
fund our operations during the next twelve month assuming we are not required to
make payments on our demand notes payable.  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.

         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.   We  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 any individual 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.

                                       18
<PAGE>

         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 to 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   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  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 plasma sterilizer  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


                                       19
<PAGE>

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 23.
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.

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.

                                       20
<PAGE>

Item 8B. Other Information

None.

                                    PART III

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

Directors and Officers
----------------------
The  following  table sets forth  information  with respect to each director and
executive officer of ASI as of March 25, 2005:

         Name                    Age    Position
         ----                    ---    --------
         Jerry E. Polis          72     President and Director since 1973
         Eric M. Polis           34     Secretary, Treasurer and Director
                                        since August 2000
         Dawayne R. Jacobs       62     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.

         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 2004 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 our plasma  antennas  and is the  inventor  of our
         plasma decontamination and sterilization method.

Dr. Alexeff is employed or engaged on a month-to-month project basis.

                                       21
<PAGE>

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  that  applies  to our  principal  executive
officer, principal financial officer and principal accounting officer or persons
performing similar functions (as well as its other employees and directors). The
Company undertakes to provide any person without charge, upon request, a copy of
such code of ethics. Requests may be directed to Jerry E. Polis, President,  ASI
Technology  Corporation,  980 American  Pacific  Drive,  Suite #111,  Henderson,
Nevada 89014 or by calling Mr. Polis at 702-734-1888.

A copy of the Code Ethics for Senior  Officers  is also  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, 2004, 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.

Audit Committee
---------------
The Company has no formal audit committee with the board of directors serving in
such capacity. The board has determined that Jerry Polis would otherwise qualify
as a financial expert but he is not independent. Accordingly, the Company has no
independent audit committee  financial expert serving on its board of directors.
The Company has not attracted a qualifying candidate due to its size and limited
operations.

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, 2004, 2003 and 2002. No other executive  officer's salary and bonus
exceeded $100,000 during the fiscal year ended December 31, 2004.

                                       22
<PAGE>
<TABLE>
                           Summary Compensation Table
<CAPTION>
                                                                                         Long Term
                                            Annual Compensation                         Compensation
                                                                                    Securities Underlying
Name and                        Fiscal                             Other Annual           Options
Principal Position              Year        Salary        Bonus    Compensation         (# of Shares)
------------------              ----        ------        -----    ------------         -------------
<S>                              <C>        <C>            <C>        <C>                  <C>
Jerry E. Polis, President        2004       $-0- (1)       $-0-       $  200 (1)           10,000
                                 2003       $-0- (1)       $-0-       $  -0-                  -0-
                                 2002       $-0- (1)       $-0-       $  -0-                  -0-
<FN>
(1)  Director  fees.  Mr. Polis  received no  compensation  as an officer of the
     Company for any period. The Company recorded $24,000 in 2002, 2003 and 2004
     as contributed services for Mr. Polis.
</FN>
</TABLE>


Option Grants
Shown  below is  further  information  on grants of stock  options  to the Named
Executive  Officer reflected in the Summary  Compensation  Table shown above for
the year 2004.

<TABLE>
                            Option Grants for Year Ended December 31, 2004
<CAPTION>
                                                 Percent of Total
                             Number of           Options Granted
                        Securities Underlying    to Employees in       Exercise     Expiration
         Name              Options Granted          Fiscal Year          Price          Date
         ----              ---------------          -----------          -----          ----
<S>                             <C>                  <C>                 <C>         <C>
       Jerry E. Polis           10,000               16.7%               $0.35       12/6/09
</TABLE>

There were no options exercised by Mr. Polis or any other person during 2004.

                                       23
<PAGE>

<TABLE>
                              Aggregated Option Exercises and Fiscal Year-End Values
<CAPTION>

                                                       Number of Unexercised          Value of Unexercised
                                                          Options Held At            In-The-Money Options At
                             Shares                       December 31, 2004             December 31,2004(1)
                           Acquired      Value           -----------------             -------------------
       Name              On Exercise    Realized     Exercisable  Unexercisable     Exercisable    Unexercisable
       ----              -----------    --------     -----------  -------------     -----------    -------------
<S>                          <C>          <C>           <C>             <C>             <C>             <C>
       Jerry E. Polis       -0-          -0-            20,000         -0-             -0-             -0-
<FN>
    (1) Based on the closing bid price on December 31, 2004 of $0.20 per share.
</FN>
</TABLE>

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, 2004, there were 140,000 options outstanding.

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 25, 2005, 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.

   Name and Address                          Amount & Nature
   of Beneficial                              of Beneficial           Percent
   Owner                                         Ownership            of Class
   -----                                         ---------            --------
   Jerry E. Polis                               824,911 (1)             24.0%
   President and Director
   980 American Pacific Drive, #111
   Henderson, Nevada 89014

   Eric M. Polis                                 70,000 (3)              2.0%
   Secretary, Treasurer and Director
   980 American Pacific Drive, #111
   Henderson, Nevada 89014

   Dawayne R. Jacobs                            120,000 (2)              3.5%
   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                              438,614 (4)             12.8%
   8617 Canyon View Drive
   Las Vegas, NV 89117

                                       24
<PAGE>

   All directors and officers as a group      1,014,911                 29.2%
     (3 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 20,000 shares of common
        stock.
(2)     Shares  held by  family  trust.  Also  includes  currently  exercisable
        options on 20,000 shares of common stock.
(3)     Includes currently exercisable options on 20,000 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 20,000 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.

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.

                                       25
<PAGE>

*** 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.

On December 9, 2004 the Company  issued a Report on Form 8-K  reporting one item
under Item 5.02.

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 2004, 2003 and 2002 were $33,340,  $29,682
and $26,000, respectively, including expenses.

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 30, 2005

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 30, 2005
    --------------               and Director
    Jerry E. Polis               (principal executive officer)


/s/ ERIC M. POLIS                Secretary, Treasurer and Director                      March 30, 2005
    -------------                (principal financial and accounting officer)
    Eric M. Polis


/s/ DAWAYNE R. JACOBS            Director                                               March 30, 2005
    -----------------
    Dawayne R. Jacobs
</TABLE>

                                       26

<PAGE>

             REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

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, 2004 and 2003,  and the related
statements of operations,  comprehensive  income,  stockholders' equity and cash
flows for the years ended  December 31, 2004,  2003, and 2002 and for the period
from inception of the development stage on January 1, 1999 to December 31, 2004.
These financial statements and schedules 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 the standards of the Public  Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the 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
presentation of the financial  statements.  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, 2004 and 2003,  and the results of its  operations  and its cash
flows for the years ended  December 31, 2004,  2003, and 2002 and for the period
from inception of the development  stage on January 1, 1999 to December 31, 2004
in conformity with United States generally accepted accounting principles.

The accompanying  financial  statements have been prepared  assuming the Company
will  continue as a going  concern.  As  discussed  in Note 11 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  11.  The  financial  statements  do not  include  any
adjustments that might result from the outcome of this uncertainty.


/s/ McGladrey & Pullen, LLP

Las Vegas, Nevada
February 1, 2005




                                     F - 1
<PAGE>
<TABLE>
ASI TECHNOLOGY CORPORATION
(A Development Stage Company)

BALANCE SHEETS
<CAPTION>
                                                                                                            December 31,
                                                                                                            ------------
                                                                                                   2004                    2003
------------------------------------------------------------------------------------------------------------------------------------
<S>                                                                                             <C>                     <C>
ASSETS
Current Assets
Cash  and cash equivalents                                                                      $    94,262             $   179,172
Accounts receivable, less allowance of $22,842 in 2004
  and $-0- in 2003 for doubtful accounts                                                               --                    66,492
Investment securities                                                                               160,901                 655,179
Note receivable - current                                                                              --                     6,487
                                                                                                -----------             -----------
Total current assets                                                                                255,163                 907,330
                                                                                                -----------             -----------

                                                                                                $   255,163             $   907,330
                                                                                                ===========             ===========

LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts payable                                                                                $    10,360             $    99,396
Accrued liabilities                                                                                    --                    19,869
Related party demand notes payable                                                                  225,000                 225,000
                                                                                                -----------             -----------
Total current liabilities                                                                           235,360                 344,265
                                                                                                -----------             -----------


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                                                                        3,468,164               3,439,204
Accumulated other comprehensive loss                                                                   --                  (143,821)
Accumulated deficit                                                                              (3,568,277)             (2,800,568)
                                                                                                -----------             -----------
Total stockholders' equity                                                                          (31,863)                563,065
                                                                                                -----------             -----------

                                                                                                $   203,497             $   907,330
                                                                                                ===========             ===========
<FN>
See Notes to Financial Statements.
</FN>
</TABLE>

                                     F - 2
<PAGE>
<TABLE>
ASI TECHNOLOGY CORPORATION
(A Development Stage Company)

STATEMENTS OF OPERATIONS
For the Years Ended December 31, 2004, 2003 and 2002 and For the Period from
Inception of Development Stage on January 1, 1999 to December 31, 2004
<CAPTION>
                                                                                                                   From Inception
                                                                                                                   of Development
                                                                                                                      Stage on
                                                                                                                   January 1, 1999
                                                                                                                   to December 31,
                                                              2004               2003               2002               2004
                                                           -----------        -----------        -----------        -----------
<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                                        17,160            106,515               --              323,675
Marketing and promotion                                         23,723             23,241             22,835            103,999
General and administrative                                     102,898            104,230            116,097            498,168
                                                           -----------        -----------        -----------        -----------
                                                               143,781            253,361            138,932            945,217
                                                           -----------        -----------        -----------        -----------

Operating Loss                                                (143,781)          (228,361)          (138,932)          (920,217)

Nonoperating Income (Expense)
Interest and other income                                       21,561                691              1,096             56,329
Interest expense                                               (22,562)           (22,500)            (6,031)           (60,222)
Loss on security sales                                         (19,406)              --                 --              (19,406)
Unrealized impairment loss on available-
      for-sale securities                                     (603,521)              --                 --             (603,521)
                                                           -----------        -----------        -----------        -----------
Net Income (Loss) Before Taxes and
  Discontinued Operations                                     (767,709)          (250,170)          (143,867)        (1,547,037)
Income Taxes                                                      --                 --                 --                 --
                                                           -----------        -----------        -----------        -----------
Income (Loss) From Continuing Operations                      (767,709)          (250,170)          (143,867)        (1,547,037)
                                                           -----------        -----------        -----------        -----------
Income (Loss) from Discontinued Operations
Discontinued operations                                        (11,056)           (12,421)          (137,773)          (730,611)
Gain on sale of discontinued operations                         62,722            940,000               --            1,002,722
                                                           -----------        -----------        -----------        -----------
                                                                51,666            927,579           (137,773)           272,111
                                                           -----------        -----------        -----------        -----------
Net Income (Loss)                                          $  (716,043)       $   677,409        $  (281,640)       $(1,274,926)
                                                           ===========        ===========        ===========        ===========

Basic and Diluted Income (Loss)
  per Common Share
Continuing Operations                                      $     (0.23)       $     (0.07)       $     (0.04)
                                                           ===========        ===========        ===========
Discontinued Operations                                    $      0.02        $      0.27        $     (0.04)
                                                           ===========        ===========        ===========
Net Income (Loss)                                          $     (0.21)       $      0.20        $     (0.08)
                                                           ===========        ===========        ===========

Weighted Average Number of Common
Shares Outstanding                                           3,412,522          3,412,522          3,384,700
                                                           ===========        ===========        ===========
<FN>
See Notes to Financial Statements

</FN>
</TABLE>

                                     F - 3
<PAGE>



ASI TECHNOLOGY CORPORATION
(A Development Stage Company)

STATEMENTS OF COMPREHENSIVE INCOME AND STOCKHOLDERS' EQUITY
For the Years Ended December 31, 2004, 2003 and 2002 and For the Period from
Inception of Development Stage on January 1, 1999 to December 31, 2004

<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             -
  1 for 10 reverse stock split                                                    -      (1,433,431)      1,433,431             -
  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                                          406,400           8,128         195,072             -
  Contributed services                                                            -               -         108,000             -
    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)

Contributed services                                                              -               -          24,000             -
Stock options issued for services                                                 -               -           4,960             -
Comprehensive income
   Net loss                                            $ (767,709)                -               -               -             -
                                                     -------------
   Unrealized loss on available-for-sale securities      (459,700)
   Reclassification adjustment for impairment loss        603,521
                                                     -------------
   Other comprehensive income                             143,821                 -               -               -       143,821
                                                     -------------
   Comprehensive loss                                  $ (623,888)
                                                     =============------------------------------------------------------------------

Balance, December 31, 2004                                                3,412,522        $ 68,250     $ 3,468,164    $        -
                                                                      ==============================================================

</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                    -
  1 for 10 reverse stock split                                  -                   -                    -
  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                              -             203,200                    -
  Contributed services                                          -             108,000                    -
    Stock issued for services at $0.50 per share                -              33,000                    -
  Net loss                                             (1,236,292)         (1,236,292)          (1,236,292)
                                                     ------------------------------------------------------

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)

Contributed services                                            -              24,000                    -
Stock options issued for services                               -               4,960                    -
Comprehensive income
   Net loss                                              (767,709)           (767,709)            (767,709)

   Unrealized loss on available-for-sale securities
   Reclassification adjustment for impairment loss

   Other comprehensive income                                   -             143,821                    -

   Comprehensive loss
                                                     ------------------------------------------------------

Balance, December 31, 2004                           $ (3,568,277)         $  (31,863)        $ (1,326,592)
                                                     ======================================================

<FN>
See Notes to Financial Statements.
</FN>
</TABLE>

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

STATEMENTS OF CASH FLOWS
For the Years Ended December 31, 2004, 2003 and 2002 and For the Period from
Inception of Development Stage on January 1, 1999 to December 31, 2004
<CAPTION>
                                                                                                                    From Inception
                                                                                                                    of Development
                                                                                                                       Stage on
                                                                                                                    January 1, 1999
                                                                                                                    to December 31,
                                                                          2004            2003            2002            2004
------------------------------------------------------------------------------------------------------------------------------------
<S>                                                                   <C>             <C>             <C>             <C>
Cash Flows from Operating Activities
  Net income (loss)                                                   $  (716,043)    $   677,409     $  (281,640)    $(1,274,926)
Adjustments to reconcile net income (loss) to net
  cash used in operating activities:
  Contributed services                                                     24,000          24,000          24,000         156,000
  Gain from antenna business sale                                         (62,722)       (940,000)           --        (1,002,722)
  Loss  on security sales                                                  19,406            --              --            19,406
  Unrealized impairment loss on available-for-sale securities             603,521            --              --           603,521
  Reserve for bad debts                                                    22,842            --              --            22,842
  Common stock and options issued for services                              4,960            --            33,000          58,460
  Interest paid in common stock                                              --              --              --             4,229
  Acquired in-process research and development                               --              --              --           450,000
Changes in working capital components:
  (Increase) decrease in accounts receivable                               43,650         121,102        (167,242)        (22,842)
  Increase (decrease) in accounts payable                                 (89,036)         62,589          31,293          10,360
  Increase (decrease) in accrued liabilities                              (19,869)          4,837          15,032               0
  (Decrease) in due to related party                                         --              --              --            (5,895)
                                                                      -----------     -----------     -----------     -----------
Net cash used in operating activities                                    (169,291)        (50,063)       (345,557)       (981,567)
                                                                      -----------     -----------     -----------     -----------

Cash Flows from Investing Activities
  Increase in notes receivable                                               --              --              --          (150,000)
  Payments on note receivable                                               6,487           4,309           4,409         177,339
  Proceeds from security sales                                             77,894            --              --            77,894
  Cash proceeds from antenna business sale                                   --           141,000            --           141,000
  Purchase of in-process research and development                            --              --              --          (450,000)
                                                                      -----------     -----------     -----------     -----------
Net cash provided by (used in) investing
  activities                                                               84,381         145,309           4,409        (203,767)
                                                                      -----------     -----------     -----------     -----------

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

  Net increase (decrease) in cash
    and cash equivalents                                                  (84,910)         95,246         (96,748)         87,866

Cash and cash equivalents, beginning of year                              179,172          83,926         180,674           6,396
                                                                      -----------     -----------     -----------     -----------

Cash and cash equivalents, end of year                                $    94,262     $   179,172     $    83,926     $    94,262
                                                                      ===========     ===========     ===========     ===========

Supplemental Cash Flow Information
Cash paid during the year for:
  Interest                                                            $    33,904     $    17,190     $      --
  Supplemental Schedule of Noncash Investing and
Financing Activities:
  Contributed services                                                $    24,000     $    24,000     $    24,000
  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                     $    62,722     $   799,000     $      --

<FN>
See Notes to Financial Statements
</FN>
</TABLE>

                                      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).  Since 1999 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 in conformity  with generally  accepted
accounting principles 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 and investment securities.

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)
------------------------------------------------------------------

Investment  securities consist of common stock in one unaffiliated  company that
is traded in the  over-the-counter  stock market.  See  "Investment  Securities"
below.

The carrying values of financial  instruments including cash, accounts and notes
receivable,  investment  securities,  accounts  payable and accrued  liabilities
approximated  fair market value because of the immediate or short-term  maturity
of these instruments.

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>

                                                               2004             2003             2002
                                                         ----------------- ---------------- ----------------
Net income (loss)
<S>                                                            <C>               <C>              <C>
      As reported                                              $ (716,043)       $ 677,409        $(281,640)
                      Plus: Stock based employee
                      compensation expense included
                      in net income (loss)                            --               --               --


                      Less: Total employee
                      stock-based compensation
                      expense determined under fair
                      value based method                           (9,920)             --               --
                                                         ----------------- ---------------- ----------------
      Pro forma                                                $ (725,963)       $ 677,409        $(281,640)
                                                         ================= ================ ================

Basic and diluted income (loss) per share:
      As reported                                                 $ (0.21)          $ 0.20          $ (0.08)
                                                         ================= ================ ================
      Pro forma                                                   $ (0.21)          $ 0.20          $ (0.08)
                                                         ================= ================ ================
</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 have a potential  dilutive
effect for the years ended December 31, 2004, 2003 or 2002.


                                      F - 8
<PAGE>
ASI Technology Corporation
(A Development Stage Company)

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

Note 2.       Summary of Significant Accounting Policies (continued)

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. 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's  marketable  securities  relate  to  shares  of  common  stock  of one
unaffiliated  company  received in exchange  for the sale of the plasma  antenna
business.  They are valued at the quoted  market  price on the  over-the-counter
market. The Company classifies its marketable  securities as  available-for-sale
and,  previously  carried 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).  There has been a substantial
decline  in the value of the  Company's  investment  securities  and there is no
assurance of future  recovery in value.  The  Emerging  Issues Task Force issued
EITF  No.  03-01,  "The  Meaning  of  Other-Than-Temporary  Impairment  and  Its
Application  to  Certain   Investments."   which  provides  additional  guidance
regarding  accounting for marketable  securities that may be impaired.  Although
the recognition and measurement provisions of EITF 03-01 have since been delayed
indefinitely,  management  believes its  investment  securities are impaired and
consistent  with  the  provisions  of FASB  Statement  No.  115  and  SEC  Staff
Accounting Bulletin 59, "Other Than Temporary  Impairment of Certain Investments
in Debt and Equity  Securities,"  an  impairment  loss has been recorded and the
cumulative  unrealized  loss  previously  recorded  as a  comprehensive  loss in
stockholders' equity has been reversed.

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 requires
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 it has any VIEs that it
would be required to consolidate.

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

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

The  Emerging  Issues  Task  Force  issued  EITF  No.  03-01,  "The  Meaning  of
Other-Than-Temporary  Impairment and Its  Application  to Certain  Investments."
which  provides   additional   guidance  regarding   accounting  for  marketable
securities  that may be  impaired.  Although  the  recognition  and  measurement
provisions  of EITF  03-01  have since  been  delayed  indefinitely,  management
believes  its  investment  securities  are  impaired  and  consistent  with  the
provisions of FASB  Statement No. 115 and SEC Staff  Accounting  Bulletin 59, an
impairment loss of $622,821 was recorded.


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

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

Note 2.       Summary of Significant Accounting Policies (continued)

Recent accounting pronouncements (continued)
--------------------------------------------

In December  2004,  the  Financial  Accounting  Standards  Board  (FASB)  issued
Financial  Accounting  Standard (FAS) 123(R),  "Share Based Payment",  Statement
123(R) is effective for public  companies filing on Form SB in the first quarter
of 2006.  This  statement  eliminates  the  ability to account  for  share-based
compensation  using the intrinsic  value-based  method under APB Opinion No. 25,
"Accounting for Stock Issued to Employees."  Statement  123(R) would require the
Company to calculate  equity-based  compensation  expense for stock  options and
employee stock purchase plan rights granted to employees based on the fair value
of the equity instrument at the time of grant. Currently,  the Company discloses
the pro forma net income  (loss) and the  related  pro forma  income  (loss) per
share  information  in  accordance  with  FAS 123 and FAS 148,  "Accounting  for
Stock-Based  Compensation  Costs-Transition and Disclosure." The Company has not
evaluated the impact that Statement  123(R) will have on its financial  position
and results of operations.




                                     F - 11
<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.  The net number of Markland common shares  received  (post-reverse
split) was 266,333  shares based on a value of $3.00 per share as agreed between
the unaffiliated  parties and that also  approximated the quoted market price at
the time of the settlement of the transaction.

In March 2004 the Company received 39,950 shares of Markland common stock valued
at $62,722 as additional  consideration  for a failure to timely register shares
previously received.

Markland began managing the Company's  government  contracts commencing April 1,
2003. Markland was 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  was  responsible  to pay a contract  management  fee equal to  contract
revenues. As the contracts were not assigned to Markland by the government,  all
revenues and expenses  related to the contracts  were  recognized by the Company
with the difference  between contract revenues and reimbursable costs payable or
receivable  from  Markland.  The Company's last  government  contract under this
arrangement  was  completed in April 2004 and  accordingly  the Company does not
expect future revenues from  discontinued  operations.  At the conclusion of the
contract the Company  accrued  $9,658 as a net fee (excess of contract  revenues
owed  to  Markland   over   reimbursable   costs)  to  Markland   and   recorded
administrative  fees  earned of  $32,500  for a net  amount  due the  Company by
Markland of $22,842. Collectibility of this amount is uncertain and therefore an
allowance for doubtful  accounts in this amount has been recorded as of December
31, 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.

                                     F - 12
<PAGE>
ASI Technology Corporation
(A Development Stage Company)

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

Separately  in March 2003 the Company and  Markland  entered  into a  sublicense
agreement  pursuant to which the Company  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.  This sublicense  agreement was
terminated in February 2004.


                                     F - 13
<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  contract to Markland
has resulted in the discontinuation of the plasma antenna technology business of
the Company. The plasma antenna technology component generated 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)  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, 2004,  2003 and 2002 and from  inception of the  development
stage on January 1, 1999 to December 31, 2004,  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,
                                                                      2004              2003              2002               2004
                                                                  -----------       -----------       -----------        -----------
<S>                                                               <C>               <C>               <C>                <C>
Contract revenues                                                 $    45,864       $   467,855       $   375,677        $ 1,127,958
Proceeds received from sale of antenna business                        62,722           940,000              --            1,002,722
                                                                  -----------       -----------       -----------        -----------
                                                                      108,586         1,407,855           375,677          2,130,680
                                                                  -----------       -----------       -----------        -----------
Research and development                                               31,723           405,429           441,469          1,562,383
Marketing and promotion                                                25,197            74,847            71,981            296,186
                                                                  -----------       -----------       -----------        -----------
                                                                       56,920           480,276           513,450          1,858,569
                                                                  -----------       -----------       -----------        -----------
Income (loss) from discontinued operations                        $    51,666       $   927,579       $  (137,773)       $   272,111
                                                                  ===========       ===========       ===========        ===========
</TABLE>

All cash flows from the plasma antenna technology have been eliminated.

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 - 14
<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 performed 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. 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.


Note 4.       Investment Securities

The Company  received a total of 306,283 (post  reverse  split) common shares of
Markland  Technologies,  Inc. a public company traded over the counter. The cost
basis of the securities is $861,722.  Previously the securities  were carried at
fair value, with unrealized gains and losses reported in stockholders' equity as
a separate component of accumulated other  comprehensive  loss. There has been a
substantial  decline in the value of the securities and there is no assurance of
future recovery in value.  Accordingly,  the Company recorded an unrealized loss
on  available-for-sale  securities  of $603,521  in 2004 to reduce the  carrying
value of the securities to their market value at September 30, 2004. The Company
reversed the cumulative  unrealized  loss of $143,810  previously  recorded as a
comprehensive loss in stockholders' equity in 2003. During 2004 the Company sold
100,000  shares  for a  realized  loss of  $19,406.  The value of the  remaining
securities at December 31, 2004 was $160,901.



                                     F - 15
<PAGE>
ASI Technology Corporation
(A Development Stage Company)

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

Note 5.       Research Contracts

Government  research  contracts  accounted  for 100%,  90% and 100% of  revenues
(aggregating  continued and discontinued  operating  revenues) in 2004, 2003 and
2002, respectively.  The Company completed its only existing government contract
in April 2004.

Note 6.       Note Receivable

The Company had an unsecured note receivable from the prior sale of assets. This
9% note was due in monthly  installments  of principal  and interest of $500 and
matured and was paid in full in 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.

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  2004,  2003 and 2002,  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.


                                     F - 16
<PAGE>
ASI Technology Corporation
(A Development Stage Company)

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

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 and
vest immediately unless otherwise designated at grant.

The following table summarizes  option activity for for the years ended December
31, 2004, 2003 and 2002.

<TABLE>
<CAPTION>
                                                            2004                          2003                      2002
                                                                 Weighted-                    Weighted-                    Weighted-
                                                                 Average                      Average                      Average
                                                                 Exercise                     Exercise                     Exercise
                                                  Shares           Price       Shares           Price       Shares           Price
                                                  ------           -----       ------           -----       ------           -----
<S>                                               <C>            <C>           <C>            <C>           <C>           <C>
Outstanding at beginning of year                   90,000        $   0.50      100,000        $   0.50      100,000       $   0.50
Granted                                            60,000            0.35         --           --              --          --
Exercised                                            --           --              --           --              --          --
Cancelled                                         (10,000)           0.50      (10,000)           0.50         --          --
                                                  -------                       ------                      -------
Outstanding at end of year                        140,000            0.44       90,000            0.50      100,000           0.50
                                                  =======                      =======                      =======
Options exercisable at year-end                   140,000            0.44       90,000            0.50      100,000           0.50
Weighted-average fair value of
options granted during the year                   $   0.25                     $    --                      $    --

</TABLE>

During 2004 the Company granted  options on 60,000 common shares  exercisable at
$0.35 per share until December 6, 2009. The Company  recorded $4,960 as the fair
value of  20,000  options  granted  to two  consultants  who are not  directors,
officers,  or employees of the Company for services rendered in 2004. The amount
recorded was  determined  using the fair value  method  under the  Black-Scholes
Option-pricing model assuming a 3.60% risk free interest rate, a 5 year expected
life, a volatility  rate of 89% and a 0% dividend  rate. At the grant date,  the
fair value per option  granted was $0.25.  There were no options  granted during
2002 or 2003.

During 2003  options on 10,000  shares  were  cancelled  and in 2004  options on
10,000 shares were also  cancelled.  At December 31, 2004,  140,000 options were
outstanding and exercisable and options on 110,000 shares remain available to be
granted.  At December 31, 2004 and 2003 the options on 140,000 shares and 90,000
shares,  respectively,  were fully vested and had a weighted average life of 3.2
and 2.9  years  and a  weighted  average  exercise  price of $0.44 and $0.50 per
common share.

Note 9.  Income Taxes

Deferred  tax assets at  December  31, 2004 and 2003 of  $331,000  and  $92,000,
respectively.  The 2004 balance includes  $183,000  resulting from net operating
loss  carryforwards,  $140,000 from investment  writedowns and $8,000 other. The
2003  amount  resulted  primarily  from  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.


                                     F - 17
<PAGE>
ASI Technology Corporation
(A Development Stage Company)

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

Note 9.  Income Taxes (continued)

For tax purposes,  the Company has loss carryforwards of approximately  $523,000
as of December 31, 2004 that expire  between  December 31, 2021 and December 31,
2024.   The  Company's   utilization   of  its  available  net  operating   loss
carryforwards  against future  taxable income may be restricted  pursuant to the
"change in ownership"  rules in Section 382 of the Internal  Revenue Code. These
rules in general  provide that an ownership  change  occurs when the  percentage
shareholdings  of 5% direct or indirect  shareholders of a loss corporation have
in aggregate  increased by more than 50 percentage points during the immediately
preceding three years.

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, 2004, 2003 and 2002.


                                                2004         2003         2002
                                             -----------------------------------
Computed "expected" tax (credit)             $(250,000)   $ 237,000    $(99,000)
Increase (decrease) in income taxes
resulting from:
Expiration of loss carryforward                   --           --         2,000
Increase (decrease) in valuation allowance     239,000     (245,000)     89,000
Nondeductible compensation and other            11,000        8,000       8,000
                                             ----------------------------------
                                             $     --     $    --      $    --
                                             ==================================

Note 10.      Related Party Transactions

Commencing  in  September  1999,  the  Company  began  paying a company  that is
controlled by its President and also a stockholder of the Company,  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  $12,000 in 2003 and $12,000 in 2004. In addition  during 2004,  2003
and 2002, the Company also paid companies  affiliated with its President a total
of  $7,632,  $8,532,  $15,828,  respectively  as  reimbursements  for travel and
related costs.

At December 31, 2004 stockholders  (including one  officer/director for $75,000)
had advanced $225,000 on 10% unsecured demand notes. During 2004, 2003 and 2002,
the Company incurred interest of $22,562,  $22,500, and $2,022,  respectively in
connection with short-term loans from related parties.


                                     F - 18
<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 - 19