Edgar Filing: SYSCAN IMAGING INC

As filed with the Securities and Exchange Commission on April 25, 2005
Registration No. 333-____________

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

FORM SB-2

REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933

Syscan Imaging, Inc.
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(Name of small business issuer in its charter)

Delaware 3679 59-3134518
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(State or jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)

1772 Technology Drive
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San Jose, California 95110
(408) 436-9888
(Address and telephone number of principal executive offices)

Darwin Hu.
1772 Technology Drive
San Jose, California 95110
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(408) 436-9888
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(Name, address and telephone number of agent for service)

Copies to:

Douglas S. Ellenoff, Esq.
Jody R. Samuels, Esq.
Ellenoff Grossman & Schole LLP
370 Lexington Avenue, 19th Floor
New York, New York 10017
(212) 370-1300

Approximate date of proposed sale to the public: As soon as practicable, after
this registration statement becomes effective.

If this Form is filed to register additional securities for an offering pursuant
to Rule 462(b) under the Securities Act, please check the following box and list
the Securities Act registration statement number of the earlier effective
registration statement for the same offering. |_|

If this Form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. |_|

If this Form is a post-effective amendment filed pursuant to Rule 462(d) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. |_|

If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. |_|

CALCULATION OF REGISTRATION FEE

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Proposed Proposed maximum
Title of each class maximum aggregate Amount of
of securities Amount to be offering price offering registration
to be registered registered per unit price fee
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common stock, par value $0.01 per share, 1,865,000shares(1) $1.00 ((2)) $1,865,000 $219.52
underlying preferred stock
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common stock, par value $0.01 per share, 932,500 shares(1) $2.00 ((2)) $1,865,000 $219.52
underlying warrants
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common stock, par value $0.01 per share, 186,500 shares(1) $1.00((2)) $186,500 $21.96
underlying warrants
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TOTAL................................ 2,984,000 shares(1) $3,916,500 $461.00
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(1) Also registered hereby are such additional and indeterminable number of
shares as may be issuable due to adjustments for changes
resulting from stock dividends, stock splits and similar changes as well
as anti-dilution provisions applicable to the Series A Preferred Stock
and the warrants.

(2) Represents the higher of: (i) the exercise prices of the convertible
security and (ii) the offering price of securities of the same class as
the common stock underlying the convertible security calculated in
accordance with Rule 457(c) under the Securities Act, for the purpose of
calculating the registration fee pursuant to Rule 457(g) under the
Securities Act.

The Registrant hereby amends this registration statement on such date
or dates as may be necessary to delay its effective date until the registrant
shall file a further amendment which specifically states that this registration
statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act or until the registration statement shall become effective on
such date as the Securities and Exchange Commission, acting pursuant to said
Section 8(a), may determine.

Preliminary Prospectus Subject To Completion Dated April 25, 2005

SYSCAN IMAGING, INC.

2,984,000 Shares of Common Stock

This prospectus relates to the public offering of up to 2,984,000
shares of our common stock, par value $0.001 per share, for sale by the selling
stockholders for their own account. These shares include up to 1,865,000 shares
of common stock issuable upon conversion of the Series A Convertible Preferred
Stock and up to 1,119,000 shares of common stock issuable upon the exercise of
warrants. We will pay the expenses of registering these shares.

Our common stock is quoted on the NASD's Over The Counter Bulletin
Board (OTCBB) under the symbol "SYII". On April 22, 2005, the closing sales
price for the common stock on the OTCBB was $0.75 per share.

To the extent they wish to sell their shares of our common stock as
provided for herein, the selling stockholders may offer and sell such shares on
a continuous or delayed basis in the future. These sales may be conducted in the
open market or in privately negotiated transactions and at market prices, fixed
prices or negotiated prices. We will not receive any of the proceeds from the
sale of the shares of common stock owned by the selling stockholders, but we
will receive funds from the exercise of their warrants upon exercise. Any such
proceeds will be used by us for working capital and general corporate purposes.
Prospective investors should read this prospectus and any amendment or
supplement hereto together with additional information described under the
heading "Available Information."

Our principal executive offices are located at 1772 Technology Drive,
San Jose, California 95110. Our telephone number is (408) 436-9888.

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An investment in the shares of our common stock being offered by this
prospectus involves a high degree of risk. You should read the "Risk Factors"
section beginning on page 4 before you decide to purchase any shares of our
common stock.

Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or passed upon the
adequacy or accuracy of the prospectus. Any representation to the contrary is a
criminal offense.

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The date of this prospectus is , 2005.

TABLE OF CONTENTS

Page

Prospectus Summary............................................................1
Risk Factors..................................................................4
Note on Forward Looking Statements...........................................13
Business.....................................................................14
Use of Proceeds..............................................................25
Selling Stockholders.........................................................25
Plan of Distribution.........................................................29
Directors, Executive Officers, Promoters and Control Persons;
Compliance With Section 16(a) of the Exchange Act........................31
Security Ownership of Management and Certain Beneficial Owners...............34
Description of Securities....................................................36
Management's Discussion and Analysis or Plan of Operation....................41
Certain Relationships and Related Transactions...............................51
Market For Common Equity and Related Stockholder Matters.....................53
Executive Compensation.......................................................55
Financial Statements.........................................................62
Legal Matters................................................................62
Experts......................................................................62
Available Information........................................................62

You should rely only upon the information contained in this prospectus
and the registration statement of which this prospectus is a part. We have not
authorized any other person to provide you with different information. If anyone
provides you with different or inconsistent information, you should not rely on
it. We are not making an offer to sell these securities in any jurisdiction
where the offer or sale is not permitted. You should assume the information
appearing in this prospectus is accurate only as of the date on the front cover
of this prospectus. Our business, financial condition, results of operations and
prospects may have changed since that date. This prospectus is based on
information provided by us and other sources that we believe are reliable. We
have summarized certain documents and other information in a manner we believe
to be accurate, but we refer you to the actual documents for a more complete
understanding of what we discuss in this prospectus. In making an investment
decision, you must rely on your own examination of our business and the terms of
the offering, including the merits and risks involved.

PROSPECTUS SUMMARY

The following summary highlights selected information contained in this
prospectus. This summary does not contain all of the information you should
consider before investing in the securities. Before making an investment
decision, you should read the entire prospectus carefully, including the risk
factors section, the financial statements and the notes to the financial
statements. In this prospectus and any amendment or supplement hereto, unless
otherwise indicated, the terms "Syscan Imaging, Inc.", "SYII", "we", "us", and
"our" refer and relate to Syscan Imaging, Inc. and its consolidated
subsidiaries.

Our Business

We are in the business of developing, designing and delivering imaging
technology solutions. We currently have 14 issued patents held by us all of
which are U.S. patents. Our technology is also covered by 5 issued patents in
Taiwan. We also have 3 patent applications currently pending with the US Patent
& Trademark Office, 2 of which relate to image display technology and one of
which relates to image scanning. Our approach to research and development (R&D)
is focused on creating new deliverable and marketable technologies. We sell our
products to clients' throughout the world, including the United States, Canada,
Europe, South America, Australia and Asia. We intend to expand our business and
product offerings into the much larger image display market where we intend to
leverage our experience and expertise. We also believe that we may benefit from
a level of transfer of technologies from image capture to image display.

Our wholly-owned operating subsidiary, Syscan, Inc. ("SI"), was
incorporated on May 1, 1995, under the laws of the State of California and is
headquartered in San Jose with additional strategic offices in Arnhem (the
Netherlands). Our majority stockholder is Syscan Imaging Limited, which is
wholly-owned by Syscan Technology Holdings Limited. Syscan Technology Holdings
Limited is a publicly-held company incorporated in Bermuda whose shares are
listed on The Growth Enterprise Market of The Stock Exchange of Hong Kong
Limited.

We intend to expand our image capture product line with three new
products, each of which we intend to release in 2005. The first product is a
high-quality true-duplex high-speed A4 scanner in which our customers have
expressed interest. Several OEM and VAR brands have formally agreed to partner
with us in the product launch. The second product is an A6 scanner that follows
in the footsteps of the current 662 but is high speed and allows true duplex
scanning, allowing image capture of both sides of a two-sided document
simultaneously. The third product is a specialized security document scanner
that utilizes infrared light sources to help in the process of identifying
fraudulent or tampered with documents. With the growing concerns over Homeland
Security and the implementation of the Patriot Act in the United States, we
believe this product has the ability to address these evolving security
requirements and needs. We believe that this product not only addresses today's
security scanning needs, but also anticipates the proliferation of new
technologies such as digital watermarking.

-1-

Over the past twelve months we have begun focusing our sales and
marketing efforts substantially towards the vertical markets such as the Value
Added Reseller (VAR) and small-office-home-office (SOHO) markets. We believe
focusing on these markets is the most effective way to showcase our
technological capabilities and manufacturing efficiencies, while enabling us to
maintain higher margins, and require fewer resources than working directly with
the mass retailers.

While we continue to grow our presence in image capture technology, we
have begun creating, through research and development, new technology solutions
for the substantially larger, image display market. More specifically we are
creating products and technologies to accent and enhance the Liquid Crystal
Display (LCD) television market. Our first image display product, expected to be
available for delivery during the second half of 2005 is the Syscan View Tech
image/video display processor. The View Tech control board is a highly
integrated, high performance video processor that combines state-of-the-art
scaling and video processing techniques for displaying analog and digital
video/graphics on a LCD-TV/DTV display. We believe that this product will
provide advanced image processing that will greatly enhance LCD display quality.
Its state-of-the-art design incorporates a system-on-chip (SOC) that improves
any pixilated multimedia video. The next product/technology that we are
developing is a Light Emitting Diode (LED) backlighting solution to replace the
industries current standard Cold Cathode Fluorescent Lamp (CCFL). The principal
behind this technology is related to the proprietary technology used in our
image capture products. The benefits are substantial, including longer life,
higher dimming ratio, sharper contrast, and near high definition resolution
without filters, all at a performance value.

In addition to future products and technologies in various stages of
research and development, one of our objectives is to acquire companies in the
image capture and display industry that could compliment our business model,
improve our competitive positioning and expand our offerings to the marketplace,
of which there can be no assurance, and of which we do not currently have any
acquisitions targeted. In identifying potential acquisition candidates we will
seek to acquire companies with varied distribution channels, rich intellectual
property (IP) and high caliber engineering personnel.

We intend to finance our research and development, commercialization
and distribution efforts and our working capital needs primarily through cash
flow generated from operations, our line of credit and through funding from
other sources, including debt financing and equity financing. While there can be
no assurance that such sources will provide adequate funding for our operations,
management believes such sources will be available to us.

Our principal executive offices are located at 1772 Technology Drive,
San Jose, California 95110 and our phone number (408) 436-9888.

SERIES A PREFERRED STOCK FINANCING

On March 15, 2005, we sold $1.865 million of our Series A Preferred
Stock to accredited investors. Net proceeds from the financing will be used for
marketing and sales, research and development opportunities and for general
working capital purposes.

The Series A Preferred Stock is convertible into shares of our common
stock at a conversion price of $1.00 per share and is entitled to receive
interest at a rate of 5.0% per annum. In connection with the financing, we also
issued to the selling stockholders common stock purchase warrants to purchase up
to 932,500 shares of our common stock at a price equal to $2.00 per share.
Starboard Capital Markets, LLC, an NASD member firm, acted as placement agent in
the sale of our Series A Preferred Stock and received a cash commission of
$186,500 and warrants to purchase up to 186,500 shares of our common stock at an
exercise price of $1.00 per share.

-2-

We have agreed, pursuant to a registration rights agreement, to
register the shares of common stock underlying the Series A Preferred Stock and
warrants, and are fulfilling our agreement by filing the registration statement
of which this prospectus is a part with the Securities and Exchange Commission.

THE OFFERING

Outstanding Common Stock 23,110,515 shares as of the date of this prospectus.

Common Stock Offered Up to 2,984,000 shares of common stock, including up to 1,865,000
shares of common stock issuable upon conversion of the Series A
Preferred Stock, up to 932,500 shares of common stock issuable upon
the exercise of warrants, which warrants have an exercise price of
$2.00 per share, and up to 186,500 shares of common stock issuable
upon the exercise of warrants, which have an exercise price of $1.00
per share.

Proceeds We will not receive any proceeds from the sale of the common stock
issuable upon conversion of the Series A Preferred Stock that may be
sold pursuant to this prospectus. We will, however, receive proceeds
upon the exercise of the warrants which, if all such warrants are
exercised in full, would be $2,051,500. The selling stockholders are
under no obligation to exercise their warrants. Proceeds, if any,
received from the exercise of warrants will be used for general
corporate purposes.

Risk Factors The securities offered hereby involve a high degree of risk. See "Risk
Factors."

OTC Bulletin Board Symbol SYII

[remainder of page intentionally left blank]

-3-

RISK FACTORS

AN INVESTMENT IN OUR SECURITIES IS EXTREMELY RISKY. YOU SHOULD
CAREFULLY CONSIDER THE FOLLOWING RISKS, IN ADDITION TO THE OTHER INFORMATION
PRESENTED IN THIS PROSPECTUS BEFORE DECIDING TO PURCHASE OUR SECURITIES. IF ANY
OF THE FOLLOWING RISKS ACTUALLY MATERIALIZE, OUR BUSINESS AND PROSPECTS COULD BE
SERIOUSLY HARMED, THE PRICE AND VALUE OF OUR SECURITIES COULD DECLINE AND YOU
COULD LOSE ALL OR PART OF YOUR INVESTMENT.

RISKS RELATING TO OUR BUSINESS

BECAUSE WE DEPEND ON A SMALL NUMBER OF KEY CUSTOMERS, OUR BUSINESS COULD BE
ADVERSELY AFFECTED IF WE FAIL TO RETAIN THESE CLIENTS AND/OR OBTAIN NEW CLIENTS
AT A LEVEL SUFFICIENT TO SUPPORT OUR OPERATIONS AND/OR BROADEN OUR CLIENT BASE.

During the year ended December 31, 2004 three of our customers
accounted for approximately 69% of total revenues. During the year ended
December 31, 2003, three customers accounted collectively for approximately 59%
of total revenues. The loss of any of our largest clients could have a material
adverse effect on our business.

FOR THE YEAR ENDED DECEMBER 31, 2004 WE SUFFERED A NET LOSS AND WE MAY CONTINUE
TO INCUR LOSSES FOR THE FORESEEABLE FUTURE.

During the fiscal year ended December 31, 2004, we had a decrease in
revenues and we sustained an operating loss and cannot be sure that we will
again operate profitably in the future. During the fiscal year ended December
31, 2004, our revenues decreased by $1.4 million from $7.457 million for the
year ended December 31, 2003 to $6.058 million for the year ended December 31,
2004. In addition, we had a net loss of approximately $180,000 for the year
ended December 31, 2004, as compared to net income of $835,232 for the year
ended December 31, 2003.

WE OUTSOURCE THE MANUFACTURING OF OUR IMAGE SCANNING PRODUCTS TO SYSCAN
TECHNOLOGY HOLDINGS LIMITED (STH), THE PARENT COMPANY OF OUR MAJORITY
SHAREHOLDER, AND IF THE OPERATIONS STH ARE INTERRUPTED OR IF OUR ORDERS EXCEED
THE MANUFACTURING CAPABILITIES OF STH, WE MAY NOT BE ABLE TO DELIVER OUR
PRODUCTS TO CUSTOMERS ON TIME.

We currently utilize the manufacturing services of STH the parent
company of our majority stockholder to manufacture all of our current products.
STH serves as the exclusive manufacturer of all current and future image capture
products to be produced by us, although there is no written agreement between us
and STH. STH operates a single facility and if our customers place orders for
large quantities of our products, or if STH's other customers place large orders
of products, may not be able to produce our products in sufficient quantities.
In addition, if the operations of STH were halted or restricted, even
temporarily, or they are unable to fulfill large orders, we could experience
business interruption, increased costs, damage to our reputation and loss of our
customers.
For the year ended December 31, 2004, STH reported a net loss of $3.06 million
on revenues of $24.6 million and had a working capital deficit of $14.8 million.
In the event that STH's financial condition worsens and they are unable to
continue to support their infrastructure and manufacturing operations, they may
be forced to cease their operations. Although we have the right to utilize other
manufacturers at any time, identifying and qualifying a new manufacturer to
replace STH as the manufacturer of our products could take several months during
which time, we would likely lose customers and our revenues could be materially
delayed and/or reduced.

-4-

BECAUSE OF OUR RELATIONSHIP WITH STH, CONFLICTS OF INTEREST MAY ARISE BETWEEN US
AND STH.

Our majority stockholder is a wholly-owned subsidiary of STH and our
Chairman of the Board and Chief Executive Officer was formerly an officer of STH
and beneficially owns approximately 5.33% of STH's outstanding capital stock. In
addition, Darwin Hu our Chairman and Chief Executive Officer serves as a
director of our majority stockholder Syscan Imaging Limited, which is
wholly-owned by STH. This could create, or appear to create, potential conflicts
of interest when members of our senior management are faced with decisions that
could have different implications for us and for STH. For example, conflicts of
interest could arise between us and STH in various areas such as fundraising,
competing for new business opportunities, and other areas. In addition, STH
serves as the exclusive manufacturer of our products. No assurance can be given
as to how potentially conflicted members of our management team will evaluate
their fiduciary duties to us and our majority stockholder, respectively, or how
such individuals will act under such circumstances. Furthermore, the appearance
of conflicts, even if such conflicts do not materialize, might adversely effect
the public's perception of us.

WE DEPEND ON A LIMITED NUMBER OF SUPPLIERS FOR OUR COMPONENTS AND RAW MATERIALS
AND ANY INTERRUPTION IN THE AVAILABILITY OF THESE COMPONENTS AND RAW MATERIALS
USED IN OUR PRODUCT COULD REDUCE OUR REVENUES.

We rely on a limited number of suppliers for the components and raw
materials used in our image scanning products. Although there are many suppliers
for each of our component parts and raw materials, we are dependent on a single
or limited number of suppliers for many of the significant components and raw
materials. This reliance involves a number of significant risks, including:

- unavailability of materials and interruptions in delivery of
components and raw materials from our suppliers;
- manufacturing delays caused by such unavailability or interruptions in
delivery; and
- fluctuations in the quality and the price of components and raw
materials.

We do not have any long-term or exclusive purchase commitments with any
of our suppliers. Our failure to maintain existing relationships with our
suppliers or to establish new relationships in the future could also negatively
affect our ability to obtain our components and raw materials used in our
products in a timely manner. If we are unable to obtain ample supply of product
from our existing suppliers or alternative sources of supply, we may be unable
to satisfy our customers' orders which could reduce our revenues and adversely
affect our relationships with our customers

OUR BUSINESS COULD BE ADVERSELY AFFECTED IF WE FAIL TO ADAPT TO EMERGING AND
EVOLVING MARKETS.

The markets for our products are changing rapidly and evolving and,
therefore, the ultimate level of demand for our products is subject to
substantial uncertainty. Most of our historic revenue was generated from selling
image scanning products only. We expect that our future revenues will be
generated by the sale of image scanning and image display products. We intend to
expend significant resources towards developing our image display products. Any
significant decline in demand for image scanning and/or image display products
could materially and adversely affect our business and prospects.

IF WE SHOULD EXPERIENCE RAPID GROWTH, SUCH GROWTH COULD STRAIN OUR MANAGERIAL
AND OPERATIONAL RESOURCES, WHICH COULD ADVERSELY AFFECT OUR BUSINESS.

Any rapid growth that we may experience would most likely place a
significant strain on our managerial and operational resources. If we continue
to acquire other companies, we will be required to manage multiple relationships
with various clients, strategic partners and other third parties. Further growth
(organic or by acquisition) or an increase in the number of strategic
relationships may increase this strain on existing managerial and operational
resources, inhibiting our ability to achieve the rapid execution necessary to
implement our growth strategy without incurring additional corporate expenses.

-5-

WE DEPEND ON OUR MANAGEMENT. IF WE FAIL TO RETAIN KEY PERSONNEL, OUR BUSINESS
COULD BE ADVERSELY AFFECTED.

There is intense competition for qualified personnel in the areas in
which we operate. The loss of existing personnel or the failure to recruit
additional qualified managerial, technical and sales personnel, as well as
expenses in connection with hiring and retaining personnel could adversely
affect our business. We also depend upon the performance of our executive
officers and key employees in particular, Messrs. Darwin Hu and William Hawkins.
Although we intend to enter into employment agreements with each of Messrs. Hu
and Hawkins, the loss of either of these individuals could have a material
adverse effect upon us. In addition, we have not obtained "key man" life
insurance on the lives of either Messrs. Hu or Hawkins.

We will need to attract, train and retain more employees for
management, engineering, research and development, sales and marketing and
support positions. As noted above, competition for qualified employees,
particularly engineers and research and development personnel, continues to be
intense. Consequently, we may not be able to attract, train and retain the
personnel we need to continue to offer our products to current and future
customers in a cost effective manner, if at all.

IF WE FAIL TO RAISE CAPITAL THAT WE MAY NEED TO SUPPORT AND INCREASE OUR
OPERATIONS, OUR BUSINESS COULD BE ADVERSELY AFFECTED.

Our future capital uses and requirements will depend on numerous factors,
including:

- the extent to which our products gain market acceptance;
- the level of revenues from current and future products;
- the expansion of operations;
- the costs and timing of product developments and sales and marketing
activities;
- the costs related to acquisitions of technology or businesses; and
- competitive developments.

We may require additional capital in order to continue to support and
increase our sales and marketing efforts, continue to expand and enhance the
products we offer to current and future customers and fund potential
acquisitions. This capital may not be available on terms acceptable to us, if at
all. In addition, we may be required to spend greater-than-anticipated funds if
unforeseen difficulties arise in the course of these or other aspects of our
business. As a consequence, we will be required to raise additional capital
through public or private equity or debt financings, collaborative
relationships, bank facilities or other arrangements. We cannot assure you that
such additional capital will be available on terms acceptable to us, if at all.
Any additional equity financing is expected to be dilutive to our stockholders,
and debt financing, if available, may involve restrictive covenants and
increased interest costs. Our inability to obtain sufficient financing may
require us to delay, scale back or eliminate some or all of our expansion
programs or to limit the marketing of our products. This could have a material
and adverse effect on our business.

-6-

WE HAVE NOT PAID DIVIDENDS IN THE PAST AND DO NOT EXPECT TO PAY DIVIDENDS IN THE
FUTURE, AND ANY RETURN ON INVESTMENT MAY BE LIMITED TO THE VALUE OF YOUR STOCK.

We have never paid any cash dividends on our common stock and do not
anticipate paying any cash dividends on our common stock in the foreseeable
future and any return on investment may be limited to the value of your stock.
We plan to retain any future earnings to finance growth.

OUR MAJORITY STOCKHOLDER, SYSCAN IMAGING LIMITED, AND ITS PARENT COMPANY STH OWN
AND CONTROL A SIGNIFICANT NUMBER OF THE OUTSTANDING SHARES OF OUR COMMON STOCK
AND WILL CONTINUE TO HAVE SIGNIFICANT OWNERSHIP OF OUR VOTING SECURITIES FOR THE
FORESEEABLE FUTURE.

Syscan Imaging Limited, our majority stockholder, and STH its parent
company, beneficially own approximately 82.1% of our outstanding common stock.
As a result, these entities will have the ability to control our affairs and
business, including the election of directors and subject to certain
limitations, approval or preclusion of fundamental corporate transactions. This
concentration of ownership of our common stock may:

- delay or prevent a change in the control;
- impede a merger, consolidation, takeover or other transaction
involving us; or
- discourage a potential acquirer from making a tender offer or
otherwise attempting to obtain control of us.

THE AUTHORIZATION AND ISSUANCE OF "BLANK CHECK" PREFERRED STOCK COULD HAVE AN
ANTI-TAKEOVER EFFECT DETRIMENTAL TO THE INTERESTS OF OUR STOCKHOLDERS.

Our certificate of incorporation allows the Board of Directors to issue
preferred stock with rights and preferences set by our board without further
stockholder approval. The issuance of shares of this "blank check preferred"
under particular circumstances could have an anti-takeover effect. For example,
in the event of a hostile takeover attempt, it may be possible for management
and the board to endeavor to impede the attempt by issuing shares of blank check
preferred, thereby diluting or impairing the voting power of the other
outstanding shares of common stock and increasing the potential costs to acquire
control of us. Our Board of Directors has the right to issue blank check
preferred without first offering them to holders of our common stock, as the
holders of our common stock have no preemptive rights.

WE MAY NOT BE ABLE TO COMPLY WITH THE SARBANES-OXLEY ACT.

The enactment of the Sarbanes-Oxley Act in July 2002 created a
significant number of new corporate governance requirements and additional
requirements may be enacted in the future. Although we expect to implement the
requisite changes to become compliant with existing and new requirements when
they do apply to us, we may not be able to do so, or to do so in a timely
manner.

RISKS RELATED TO OUR INTELLECTUAL PROPERTY AND TECHNOLOGY

UNAUTHORIZED USE OF OUR PROPRIETARY TECHNOLOGY AND INTELLECTUAL PROPERTY WILL
ADVERSELY AFFECT OUR BUSINESS AND RESULTS OF OPERATIONS.

Our success and competitive position depend in large part on our
ability to obtain and maintain intellectual property rights protecting our
products. We currently and may in the future rely on a combination of patents,
copyrights, trademarks, service marks, trade secrets, confidentiality provisions
and licensing arrangements to establish and protect our intellectual property
and proprietary rights. Unauthorized parties may attempt to copy aspects of our
products or to obtain, license, sell or otherwise use information that we regard
as proprietary. Policing unauthorized use of our products is difficult and we
may not be able to protect our technology from unauthorized use. Additionally,
our competitors may independently develop technologies that are substantially
the same or superior to ours and that do not infringe our rights. In these
cases, we would be unable to prevent our competitors from selling or licensing
these similar or superior technologies. In addition, the laws of some foreign
countries do not protect our proprietary rights to the same extent as the laws
of the United States.

-7-

Third parties have claimed and may claim in the future that we are
infringing their intellectual property, and we could be exposed to significant
litigation or licensing expenses or be prevented from selling our products if
such claims are successful. From time to time, we are subject to claims that we
or our customers may be infringing or contributing to the infringement of the
intellectual property rights of others. We may be unaware of intellectual
property rights of others that may cover some of our technologies and products.
If it appears necessary or desirable, we may seek licenses for these
intellectual property rights. However, we may not be able to obtain licenses
from some or all claimants, the terms of any offered licenses may not be
acceptable to us, and we may not be able to resolve disputes without litigation.
Any litigation regarding intellectual property could be costly and
time-consuming and could divert the attention of our management and key
personnel from our business operations. In the event of a claim of intellectual
property infringement, we may be required to enter into costly royalty or
license agreements. Third parties claiming intellectual property infringement
may be able to obtain injunctive or other equitable relief that could
effectively block our ability to develop and sell our products.

THE MARKETS IN WHICH WE OPERATE ARE HIGHLY COMPETITIVE AND RAPIDLY CHANGING, AND
WE MAY BE UNABLE TO COMPETE SUCCESSFULLY.

There are a number of companies that develop or may develop products
that compete in our targeted markets; however, currently there is no one company
that competes with us in all of our product areas. The individual markets in
which we compete are highly competitive, and are subject to rapid technology
changes. Within image capture, we compete directly with Plustek, Mustek and
Silitek. Within Image Display, we will compete with Sony, Samsung, Sharp, Sanyo
and Phillips. In image scanning, we compete with numerous companies, some of
which are our private label partners. In addition, a number of smaller companies
in both image scanning and image display technologies are in some markets
competitive with our solutions. Current and potential competitors have
established, or may establish, cooperative relationships among themselves or
with third parties to increase the ability of their technologies to address the
needs of our prospective customers. Most of our competitors in each of the
markets in which we compete have significantly greater financial, technical and
marketing resources than us. These competitors may be able to respond more
rapidly than we can to new or emerging technologies or changes in customer
requirements. They may also devote greater resources to the development,
promotion and sale of products than we do.

The market for image scanning and image display products is rapidly
evolving. Significant technological changes could render our products obsolete.
We must adapt to this rapidly changing market by continually improving the
functionality and features of our products to meet clients' needs. If we are
unable to develop new products and enhance functionalities or technologies to
adapt to these changes in a cost-effective and timely manner, our business could
be materially and adversely affected.

RISKS RELATING TO ACQUISITIONS

ANY ACQUISITIONS WE MAKE COULD RESULT IN DILUTION TO OUR EXISTING SHAREHOLDERS
AND COULD BE DIFFICULT TO INTEGRATE WHICH COULD CAUSE DIFFICULTIES IN MANAGING
OUR BUSINESS, RESULTING IN A DECREASE THE VALUE OF YOUR INVESTMENT.

We believe that we will need to make strategic acquisitions of other
businesses in order to achieve growth and profitability. Evaluating acquisition
targets is difficult and acquiring other businesses involves risk. Our
consummation of the acquisition of other businesses would subject us to a number
of risks, including the following:

-8-

- difficulty in integrating the acquired operations and retaining
acquired personnel;
- limitations on our ability to retain acquired sales and distribution
channels and customers;
- diversion of management's attention and disruption of our ongoing
business; and
- limitations on our ability to incorporate acquired technology and
rights into our product offerings and maintain uniform standards,
controls, procedures and policies.

Furthermore, we may incur indebtedness or issue equity securities to
pay for future acquisitions. The issuance of equity or convertible debt
securities would be dilutive to our then existing shareholders.

RISKS RELATING TO OUR COMMON STOCK

THE LIMITED PRIOR PUBLIC MARKET AND TRADING MARKET MAY CAUSE POSSIBLE VOLATILITY
IN OUR STOCK PRICE.

There has only been a limited public market for our securities and
there can be no assurance that an active trading market in our securities will
be maintained. The Over The Counter Bulletin Board (OTCBB) is an unorganized,
inter-dealer, over-the-counter market which provides significantly less
liquidity than NASDAQ and the national securities exchange, and quotes for
securities quoted on the OTCBB are not listed in the financial sections of
newspapers as are those for NASDAQ and the national securities exchange. In
addition, the overall market for securities in recent years has experienced
extreme price and volume fluctuations that have particularly affected the market
prices of many smaller companies. The trading price of our common stock is
expected to be subject to significant fluctuations including, but not limited
to, the following:

- quarterly variations in operating results and achievement of key
business metrics;
- changes in earnings estimates by securities analysts, if any;
- any differences between reported results and securities analysts'
published or unpublished expectations;
- announcements of new products by us or our competitors;
- market reaction to any acquisitions, joint ventures or strategic
investments announced by us or our competitors;
- demand for our products;
- shares being sold pursuant to Rule 144 or upon exercise of warrants
and options or conversion of Series A Preferred Stock; and
- general economic or stock market conditions unrelated to our operating
performance.

These fluctuations, as well as general economic and market conditions,
may have a material or adverse effect on the market price of our common stock.

THERE ARE LIMITATIONS IN CONNECTION WITH THE AVAILABILITY OF QUOTES AND ORDER
INFORMATION ON THE OTCBB.

Trades and quotations on the OTCBB involve a manual process and the
market information for such securities cannot be guaranteed. In addition, quote
information, or even firm quotes, may not be available. The manual execution
process may delay order processing and intervening price fluctuations may result
in the failure of a limit order to execute or the execution of a market order at
a significantly different price. Execution of trades, execution reporting and
the delivery of legal trade confirmation may be delayed significantly.
Consequently, one may not able to sell shares of our common stock at the optimum
trading prices.

-9-

THERE ARE DELAYS IN ORDER COMMUNICATION ON THE OTCBB.

Electronic processing of orders is not available for securities traded
on the OTCBB and high order volume and communication risks may prevent or delay
the execution of one's OTCBB trading orders. This lack of automated order
processing may affect the timeliness of order execution reporting and the
availability of firm quotes for shares of our common stock. Heavy market volume
may lead to a delay in the processing of OTCBB security orders for shares of our
common stock, due to the manual nature of the market. Consequently, one may not
able to sell shares of our common stock at the optimum trading prices.

PENNY STOCK REGULATIONS MAY IMPOSE CERTAIN RESTRICTIONS ON MARKETABILITY OF OUR
SECURITIES.

The SEC has adopted regulations which generally define a "penny stock"
to be any equity security that has a market price (as defined) of less than
$5.00 per share or an exercise price of less than $5.00 per share, subject to
certain exceptions. As a result, our shares of common stock are subject to rules
that impose additional sales practice requirements on broker-dealers who sell
such securities to persons other than established clients and "accredited
investors". For transactions covered by these rules, the broker-dealer must make
a special suitability determination for the purchase of such securities and have
received the purchaser's written consent to the transaction prior to the
purchase. Additionally, for any transaction involving a penny stock, unless
exempt, the rules require the delivery, prior to the transaction, of a risk
disclosure document mandated by the SEC relating to the penny stock market. The
broker-dealer must also disclose the commission payable to both the
broker-dealer and the registered representative, current quotations for the
securities and, if the broker-dealer is the sole market maker, the broker-dealer
must disclose this fact and the broker-dealer's presumed control over the
market. Finally, monthly statements must be sent disclosing recent price
information for the penny stock held in the account and information on the
limited market in penny stocks. Consequently, the "penny stock" rules may
restrict the ability of broker-dealers to sell our shares of common stock and
may affect the ability of investors to sell such shares of common stock in the
secondary market and the price at which such investors can sell any of such
shares.

Investors should be aware that, according to the SEC, the market for
penny stocks has suffered in recent years from patterns of fraud and abuse. Such
patterns include:

- control of the market for the security by one or a few broker-dealers
that are often related to the promoter or issuer;
- manipulation of prices through prearranged matching of purchases and
sales and false and misleading press releases;
- "boiler room" practices involving high pressure sales tactics and
unrealistic price projections by inexperienced sales persons;
- excessive and undisclosed bid-ask differentials and markups by selling
broker-dealers; and
- the wholesale dumping of the same securities by promoters and
broker-dealers after prices have been manipulated to a desired level,
along with the inevitable collapse of those prices with consequent
investor losses.

Our management is aware of the abuses that have occurred historically
in the penny stock market.

-10-

THERE IS A RISK OF MARKET FRAUD.

OTCBB securities are frequent targets of fraud or market manipulation.
Not only because of their generally low price, but also because the OTCBB
reporting requirements for these securities are less stringent than for listed
or NASDAQ traded securities, and no exchange requirements are imposed. Dealers
may dominate the market and set prices that are not based on competitive forces.
Individuals or groups may create fraudulent markets and control the sudden,
sharp increase of price and trading volume and the equally sudden collapse of
the market price for shares of our common stock.

THERE IS LIMITED LIQUIDITY ON THE OTCBB.

When fewer shares of a security are being traded on the OTCBB,
volatility of prices may increase and price movement may outpace the ability to
deliver accurate quote information. Due to lower trading volumes in shares of
our common stock, there may be a lower likelihood of one's orders for shares of
our common stock being executed, and current prices may differ significantly
from the price one was quoted by the OTCBB at the time of one's order entry.

THERE IS A LIMITATION IN CONNECTION WITH THE EDITING AND CANCELING OF ORDERS ON
THE OTCBB.

Orders for OTCBB securities may be canceled or edited like orders for
other securities. All requests to change or cancel an order must be submitted
to, received and processed by the OTCBB. Due to the manual order processing
involved in handling OTCBB trades, order processing and reporting may be
delayed, and one may not be able to cancel or edit one's order. Consequently,
one may not able to sell shares of our common stock at the optimum trading
prices.

INCREASED DEALER COMPENSATION COULD ADVERSELY AFFECT THE STOCK PRICE.

The dealer's spread (the difference between the bid and ask prices) may
be large and may result in substantial losses to the seller of shares of our
common stock on the OTCBB if the stock must be sold immediately. Further,
purchasers of shares of our common stock may incur an immediate "paper" loss due
to the price spread. Moreover, dealers trading on the OTCBB may not have a bid
price for shares of our common stock on the OTCBB. Due to the foregoing, demand
for shares of our common stock on the OTCBB may be decreased or eliminated.

ADDITIONAL AUTHORIZED SHARES OF OUR COMMON STOCK AND PREFERRED STOCK AVAILABLE
FOR ISSUANCE MAY ADVERSELY AFFECT THE MARKET.

We are authorized to issue 50,000,000 shares of our common stock. As of
the date hereof, there were 23,110,515 shares of common stock issued and
outstanding. However, the total number of shares of our common stock issued and
outstanding does not include shares reserved in anticipation of the exercise of
options or warrants or the conversion of our Series A Preferred Stock. As of the
date hereof, we had outstanding Series A Preferred Stock, stock options and
warrants to purchase approximately 3,044,000 shares of our common stock, the
exercise or conversion prices of which range between $0.90 and $2.50 per share,
and we have reserved shares of our common stock for issuance in connection with
the potential exercise thereof. In addition, our board of directors approved the
issuance of up to 4,000,000 options to purchase shares of our common stock to
certain of our officers, employees and consultants, in connection with the
execution of employment and consulting agreements, at an exercise price of $0.01
per share, which agreements, as of the date hereof, have not been entered into
by us with any of such officers, employees or consultants. Of the reserved
shares, a total of 2,035,000 shares are currently reserved for issuance in
connection with our 2002 Stock Option Plan, of which options to purchase an
aggregate of 2,035,000 shares have been issued under the plan. A significant
number of such options and warrants contain provisions for cashless exercise. To
the extent such options or warrants are exercised, the holders of our common
stock will experience further dilution. In addition, in the event that any
future financing should be in the form of, be convertible into or exchangeable
for, equity securities, and upon the exercise of options and warrants, investors
may experience additional dilution.

-11-

The exercise of the outstanding derivative securities will reduce the
percentage of common stock held by our stockholders. Further, the terms on which
we could obtain additional capital during the life of the derivative securities
may be adversely affected, and it should be expected that the holders of the
derivative securities would exercise them at a time when we would be able to
obtain equity capital on terms more favorable than those provided for by such
derivative securities. As a result, any issuance of additional shares of common
stock may cause our current stockholders to suffer significant dilution which
may adversely affect the market.

In addition to the above-referenced shares of common stock which may be
issued without stockholder approval, we have 1,940,000 shares of authorized
preferred stock, the terms of which may be fixed by our Board of Directors. We
currently have 60,000 shares of Series A Preferred Stock authorized, 18,650 of
which are issued and outstanding. While we have no present plans to issue any
shares of preferred stock other than the Series A Preferred Stock, our Board of
Directors has the authority, without stockholder approval, to create and issue
one or more series of such preferred stock and to determine the voting, dividend
and other rights of holders of such preferred stock. The issuance of any of such
series of preferred stock may have an adverse effect on the holders of common
stock.

SHARES ELIGIBLE FOR FUTURE SALE MAY ADVERSELY AFFECT THE MARKET.

From time to time, certain of our stockholders may be eligible to sell
all or some of their shares of common stock by means of ordinary brokerage
transactions in the open market pursuant to Rule 144, promulgated under the
Securities Act of 1933 (Securities Act), subject to certain limitations. In
general, pursuant to Rule 144, a stockholder (or stockholders whose shares are
aggregated) who has satisfied a one-year holding period may, under certain
circumstances, sell within any three-month period a number of securities which
does not exceed the greater of 1% of the then outstanding shares of common stock
or the average weekly trading volume of the class during the four calendar weeks
prior to such sale. Rule 144 also permits, under certain circumstances, the sale
of securities, without any limitation, by our stockholders that are
non-affiliates that have satisfied a two-year holding period. Any substantial
sale of our common stock pursuant to Rule 144 or pursuant to any resale
prospectus may have material adverse effect on the market price of our
securities.

DIRECTOR AND OFFICER LIABILITY IS LIMITED.

As permitted by Delaware law, our certificate of incorporation limits
the liability of our directors for monetary damages for breach of a director's
fiduciary duty except for liability in certain instances. As a result of our
charter provision and Delaware law, stockholders may have limited rights to
recover against directors for breach of fiduciary duty. In addition, our
certificate of incorporation provides that we shall indemnify our directors and
officers to the fullest extent permitted by law.

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-12-

NOTE ON FORWARD LOOKING STATEMENTS

Certain statements contained in this prospectus constitute
"forward-looking statements" as that term is defined under the Private
Securities Litigation Reform Act of 1995 and releases issued by the Securities
and Exchange Commission and within the meaning of Section 27A of the Securities
Act and Section 21E of the Securities Exchange Act of 1934, as amended, or the
Exchange Act. The words "believe," "expect," "anticipate," "intend," "estimate,"
"plan" and other expressions which are predictions of or indicate future events
and trends and which do not relate to historical matters identify
forward-looking statements. Reliance should not be placed on forward-looking
statements because they involve known and unknown risks, uncertainties and other
factors, which may cause our actual results, performance or achievements to
differ materially from anticipated future results, performance or achievements
expressed or implied by such forward-looking statements. Factors that could
cause actual results to differ materially from those expressed or implied by
such forward-looking statements include, among other things, those listed under
"Risk Factors" and elsewhere in this prospectus.

We operate in a very competitive and rapidly changing environment. New
risks emerge from time to time and it is not possible for our management to
predict all risks, nor can we assess the impact of all risks on our business or
the extent to which any risk, or combination of risks, may cause actual results
to differ from those contained in any forward-looking statements. All
forward-looking statements included in this prospectus are based on information
available to us on the date of this prospectus. Except to the extent required by
applicable laws or rules, we undertake no obligation to publicly update or
revise any forward-looking statement, whether as a result of new information,
future events or otherwise. All subsequent written and oral forward-looking
statements attributable to us or persons acting on our behalf are expressly
qualified in their entirety by the cautionary statements contained throughout
this prospectus.

-13-

BUSINESS

GENERAL

We develop, design and deliver imaging technology solutions offering
businesses and consumers market-leading USB powered mobile imaging scanning
solutions that facilitate the way information is stored, shared and managed in
business and personal use. We market and distribute our products indirectly
through a global network of resellers, system integrators, value-added
resellers, and distributors; and directly to businesses and consumers through a
dedicated direct sales force. Our products may be viewed on our website at
www.syscaninc.com. We believe that the value of our mobile image scanning
solutions is best realized in vertical markets that are information and process
intensive, such as healthcare, security, financial services, legal and
government.

We have developed our business model around intellectual property (IP)
driven products sold primarily to Private Label brands, Value-Added-Reseller
(VAR's) and Original Equipment Manufacturer's (OEM's). Our core experience,
expertise, and resources lend themselves to developing new technology solutions
and implementing them into useable finished products. Going forward we plan on
leveraging our current IP and these core competencies in other areas of the
imaging market. To that end we have allocated certain resources over the past
year to exploiting various crossover technologies to the LCD display technology
arena and have accordingly filed related patent applications.

Our corporate headquarters and executive offices are located at 1772
Technology Drive, San Jose, California 95110. Our telephone number is
408-436-6151. We have additional offices in Arnhem, Netherlands. Our Annual
Reports on Form 10-KSB, Quarterly Reports on Form 10-QSB, Proxy Statements
relating to our annual meetings of stockholders, Current Reports on Form 8-K and
amendments to these reports are available free of charge on our website at
www.syscaninc.com, as well as from the SEC's website at www.sec.gov.

BACKGROUND

On April 2, 2004, we completed our acquisition of 100% of the issued
and outstanding capital stock of Syscan, Inc., pursuant to a Share Exchange
Agreement ("Agreement") dated March 29, 2004. Pursuant to the Agreement, the
sole shareholder of Syscan, Inc., Syscan Imaging Limited, received 18,773,514
post-reverse split shares of our common stock in exchange for all of the issued
and outstanding capital stock of Syscan, Inc. In connection with the issuance of
our common stock to Syscan Imaging Limited, Syscan Imaging Limited beneficially
became the owner of 81.2% of our issued and outstanding voting securities.

Upon completion of the reverse acquisition, we changed our name to
Syscan Imaging, Inc. and effectuated a 1-for-10 reverse split of our common
stock.

Our wholly-owned subsidiary, Syscan Inc., was founded in Silicon Valley
in 1995 to develop and manufacture a new generation of CIS (CMOS-Complimentary
Metal Oxide Silicon) imaging sensor devices. During the late 1990's, Syscan Inc.
established many technical milestones and was granted numerous patents based on
their linear imaging technology (Contact Image Sensors). Our patented CIS and
mobile imaging scanner technology provides very high quality images but at
extremely low power consumption, allowing us to deliver very compact scanners in
a form ideally suited for the mobile computer user who needs to scan and/or fax
documents while away from their office.

-14-

This "enabling" technology is found in a variety of applications such
as document management, ID card and passport security scanners, bank note/check
verification, business card readers, scanning 2D bar codes and optical mark
readers used in lottery terminals. We have grown to be one of the largest OEM --
private label manufacturers of mobile scanning systems and contact image sensor
modules for a large number of major brands such as PENTAX, COREX, VISIONEER,
DATACOLOR, DIGIMARC, SCANSOFT, NORTEK and OMRON. Our vertically integrated
design and manufacturing model allows rapid time-to-market for these leading
companies. Our manufacturing is completed in China by a wholly-owned subsidiary
of the parent company of our majority stockholder, which provides a low-cost
manufacturing base for these industrial and consumer products.

MARKET OPPORTUNITY

IMAGE SCANNING

In the past decade, information has become an increasingly important
source of capital for businesses and enterprises, and the speed and
sophistication of information exchange is often a defining characteristic of the
most successful entities worldwide. Many organizations define their strategy,
assess their ability to compete and manage their customer relationships based on
the quality, diversity and availability of their information products, services
and resources. The medium and optimal format for vital business information is
wide and varied, and includes paper, electronic files and Web content.

Confronted by exponentially increasing information through more and
more channels, consumers and business personnel employ a variety of resources
for retrieving information, conducting transactions and performing their jobs.
The Internet and related corporate infrastructure have emerged as a powerful
global communications network and channel for business. These electronic systems
have fundamentally changed the way organizations and consumers obtain
information, communicate, purchase goods and conduct business.

Businesses around the world share a common motivation to improve
operating efficiency and enhance customer service. Customer satisfaction,
employee productivity and company operating results can often be linked to an
organization's ability to effectively manage, utilize and communicate
information.

We believe there is a significant opportunity for our solutions to help
simplify the way people access, share, manage and use information in business
and in daily life. Our strategy is to deliver premier, comprehensive imaging
technologies. Our imaging solutions eliminate the need to manually reproduce
documents, automate the integration of documents into business systems, and
enable the use of electronic documents and forms over the Internet, through
mobile faxing and other business applications. Our products and technologies
deliver a measurable return on investment to our customers.

IMAGE DISPLAY

The television has over time revolutionized the way the masses
worldwide live their lives. It provides an audiovisual experience that delivers
information and entertainment directly into our homes and businesses. Since its
introduction in 1930's the TV has become a ubiquitous part of life for the
majority worldwide. In 1936 there were a mere 200 TV sets in use world-wide, by
1945 that number had risen to approximately 7,000 in the United States alone and
by 1948 the number of TV's in use in the US surpassed one million. An estimated
180 million TV's were sold world wide in 2004.

-15-

Since its introduction the mechanics of the TV have changed very little
relying in large part on the Cathode Ray Tube (CRT). This technology provided
the best picture but weight and bulkiness became limiting factors to screen size
topping out at around forty inches. It was the introduction of the VCR that
primarily drove the demand for larger screen sizes in order to bring the movie
theater experience into the home. In response to this demand various types of
projection models were introduced. Originally the projection models solved the
screen size issue but the picture quality and viewing angel could not match that
of the CRT models and they were still bulky taking up valuable floor space.

OUR MARKETS AND SOLUTIONS

We are the leading manufacturer of USB powered mobile image scanning
devices that allow users to incorporate images and documents in digital
applications, systems and devices. Our products and technologies automate manual
processes and help enterprises, professionals and consumers increase
productivity, reduce costs and save time. We currently deliver premier,
comprehensive technologies and products in the imaging scanning market and plan
to expand our business to include new technologies based on our current patented
IP and products for the image display market, specifically the LCD TV market.

OVERVIEW OF IMAGE SCANNING MARKET

The Internet has changed many things, including the way people create
and share information. The ease and popularity of email has reduced people's
dependency on fax machines and postal service, while magazines and newspapers
now deliver as much information through Web-based material as they do in print.
Almost every office worker and many consumers at home use a computer, and a vast
majority of those are connected to the Internet or a network. Despite advances
in technology and networks, businesses are still confronted with productivity
challenges associated with creating, sharing and working with documents

We believe there is a market opportunity for mobile image scanners that
maximize value and efficiency for information and document processes. Our
imaging solutions simplify the way businesses and consumers store and share
documents.

Despite the broad use of computing systems in enterprises, the majority
of business information is still maintained in paper form. The proliferation of
PDF as a digital document standard has allowed for the simple scanning, storage
and sharing of important documents. Enterprises, workgroups and individuals seek
solutions that integrate paper and static PDF documents into their business
processes, allowing them to automate the way they store, use and share
information. From printing, signing, scanning, sending and then storing
important documents to scanning various pictures and graphs for use in a power
point presentation image scanning has become a viable enhancement to paper
storage. Our solutions are used in professional office settings, particularly in
the government, legal, finance, real estate and education sectors.

DIGITAL PAPER MANAGEMENT. As the volume and complexity of corporate data
continues to multiply, organizations are increasingly challenged in their
efforts to manage all of their paper and digital documents. The wide dispersion
of documents makes finding information even more difficult, time-consuming and
costly. As a result, businesses need solutions that allow individuals,
workgroups or the entire organization to more efficiently organize, find and
share business documents.

Our digital paper management solutions, convert paper into digital
documents that can be easily archived, retrieved and shared. Our image scanning
devices can be used to preserve an image of a document exactly as it appears on
paper. Third party software then automatically indexes the scanned image, so
that it can be stored together with other digital documents on a desktop, over a
network or within an enterprise content management system. In a single search,
users can quickly find scanned documents and existing digital files that match
the search criteria.

-16-

These digital documents can then be transferred into email, print and
other business applications. This streamlines the flow of documents between
workers, decreasing the time and costs associated with managing and using paper
documents. Our solutions are packaged with comprehensive third party software
that assist the user in moving images into established file systems to simplify
the transfer of documents between desktop and enterprise content management
systems.

OVERVIEW OF IMAGE DISPLAY MARKET

The image display market as specifically related to the LCD flat panel
display (FPD) TV is evolving at a rapid pace. Various new technologies have been
vying for mass acceptance driven predominately by pricing and visual
performance. To date Plasma technology has been the leader in delivering a price
performance value in the larger screen sizes typically 42" and up. With this
technology comes certain long-term challenges. While Plasma technology continues
to be viable many believe that the LCD format is likely to be the long term
leader as the size to price ratios converge. The FPD-TV market is currently in
the process of major transition, as several technologies challenge plasma
technology as the dominant force in large format displays. This transition, we
believe, will happen over the next 24-36 months as the major (tier 1)
competitors lead the way. The current market leaders are Samsung, Sony, Sanyo
and Toshiba with other 1st tier suppliers being Phillips, LG, Sampo, Panasonic
and Hitachi. Some of these tier one competitors compete under different brand
names and in collaboration with regional brands in the international markets.
The tier 2 competitors add another 15-30 (considering on private label brands)
competitors to the already crowded marketplace. In short, there are roughly
30-40 different competitors worldwide in the FPD-TV market worldwide. Several of
the tier one suppliers have already announced emerging FPD-TV technology, such
as Sony in June 2004 disclosing that it would transition to LCD technology in
the coming years and further scheduling the introduction of the first
commercially available light-emitting diode (LED) backlit LCD display.

OUR COMPETITIVE STRENGTHS

CORE TECHNOLOGY ASSETS. In recent years, we have developed and acquired
technology assets, intellectual property and industry expertise in mobile image
capture. A significant investment in capital and time would be necessary to
replicate our current capabilities. We continue to invest in the advancement of
our technologies to maintain our market leading position and to develop new
applications. As of December 31, 2004, we had 8 full-time employees in research
and development, and our technologies were covered by 14 issued patents held by
us all of which are U.S. patents. Our technology is also covered by 5 issued
patents in Taiwan. We also have 3 patent applications currently pending with the
US Patent & Trademark Office, 2 of which relate to image display technology and
one of which relates to image scanning.

BROAD DISTRIBUTION CHANNELS. We maintain an extensive network of resellers to
address the needs of specific markets, such as financial, legal, healthcare and
government. We believe that our extensive channel relationships increase the
difficulty for competitors to develop a similar channel network and make it
difficult for our products to be displaced. In addition, our far-reaching
channel network enables us to introduce new products quickly and effectively
throughout the global marketplace.

LEADING MARKET SHARE. We are the market leader in USB powered mobile image
scanning. Organizations tend to look to established market leading vendors when
making product selections. As the established manufacture in our markets, we
believe we can target and win more partnership arrangements and new customers
than our competition.

INTERNATIONAL FOCUS. Our international experience and diverse heritage allow us
to efficiently compete on a global basis. We recognize cultural and language
benefits in both manufacturing and sales.

-17-

OUR STRATEGY

PURSUE HIGH GROWTH MARKETS IN IMAGE SCANNING. We intend to leverage our
technologies and market leadership to expand our opportunities in mobile and
other markets. We also intend to pursue emerging opportunities to use our
technology within consumer devices, and other wide spread devices. To expand our
position in mobile image scanning, we intend to introduce new versions of our
products and applications; complete new license agreements with customers and
partners that will resell our technologies; and make strategic acquisitions that
we believe complement our existing solutions and resources in various evolving
markets.

EXPAND IMAGE SCANNING SOLUTIONS. We intend to enhance the value of our imaging
scanning solutions for enterprises to address the proliferation of security
related applications, the expanded use of content management systems, and the
widespread adoption of networked multifunction and digital image scanning
devices. We intend to introduce new products or new versions of existing
products to take advantage of these growth opportunities. We also plan to
enhance our software development toolkits so our technologies can be integrated
with more third-party solutions.

FOCUS ON SPECIFIC VERTICAL MARKETS. We intend to focus our marketing and sales
resources to generate demand and deliver solutions in specific vertical markets.
The value of our solutions is best realized in vertical markets that are
information and process intensive, such as healthcare, telecommunications,
financial services, legal and government. In addition, we intend to offer custom
versions of certain applications and products for specific vertical markets such
as medical, legal and utilities.

EXPAND WORLDWIDE CHANNELS. We intend to expand our global channel network and
build upon our existing distribution channels, especially in Europe, Asia and
Latin America. In particular, we intend to replicate our successful North
American value-added reseller channel in Europe. Along these lines, we intend to
add sales employees in different geographic regions and launch programs and
events to help recruit new partners for our channel network.

PURSUE STRATEGIC ACQUISITIONS. We will selectively pursue strategic acquisitions
of companies in the image capture and display industry that could compliment our
business model, improve our competitive positioning and expand our offerings to
the marketplace, of which there can be no assurance. In identifying potential
acquisition candidates we will seek to acquire companies with varied
distribution channels, rich intellectual property (IP) and high caliber
engineering personnel.

For the FPD-TV market, we are concentrating our efforts and investment
towards an LCD product that uses LED's as a backlight source. Most of our LCD
FPD-TV strategy is leveraged on core technologies and market synergy that we
established in the image capture (scanning) market since our scanner devices
utilize LED's as a light source, and the precise control of this light source is
a critical capability in the performance and ultimate market success of this new
technology. In order to meet the competitive requirements, we believe that we
will need a collaborator (or partner) that has significant experience in the FPD
panel design and tooling. A partner also reduces the time-to-market and overall
risk associated with entry into the marketplace.

-18-

PRODUCTS

IMAGE SCANNING PRODUCTS

TRAVEL SCAN

We are actively shipping five image capture products under the Travel
Scan marquee or their OEM counterparts. The Travel Scan series features portable
lightweight scanning in color and black & white with low power consumption that
requires no power adapter. The 2300U-USB is a 300dpi A4 scanner which
represented approximately 7% of our sales during the year ended December 31,
2004. The 464, like the 2300 series, is an A4 scanner with 600dpi resolution as
opposed to 300dpi resolution. The 464 is currently our most popular A4 product
and represented approximately 22% of our sales for the year ended December 31,
2004. The 662 has an A6 scanning area ideal for photos, checks, passports and
various identification cards. The 662 is our first product geared towards, and
being implemented in, the fast growing security industry. The 662 is our best
selling product and represented approximately 45% of our sales during the 12
months ended December 31, 2004. Our fifth product representing approximately 6%
of our sales during the 12 months ended December 31, 2004, is the 860 Business
Card reader. A different version of the 860 represents approximately 12% of our
860 Business Card reader sales on the product and was specifically designed for
one of our OEM customers that maintains the leading market share for this
category of products worldwide.

CONTACT IMAGE SENSOR (CIS) MODULES

In addition to the Travel Scan product line, we also design, configure
and sell the Contact Image Sensor (CIS) Modules that we use in our products and
separately as a component to other manufacturers. These manufacturers, that we
sell our modules to, integrate our modules into their products. The product
applications typically include check and currency scanners, copiers, and fax
machines, and the finished product is resold by the manufacturer to the
retailer. The CIS business represented approximately 5% of our overall sales
during the 12 months ended December 31, 2004.

PRODUCTS IN DEVELOPMENT

IMAGE DISPLAY PRODUCTS

VIEW TECH CONTROL BOARD

Our first image display product, expected to be available for delivery
during the second half of 2005 is the Syscan View Tech image/video display
processor. The View Tech control board is a highly integrated, high performance
video processor that combines state-of-the-art scaling and video processing
techniques for displaying analog and digital video/graphics on a LCD-TV/DTV
display. We believe that this product will provide advanced image processing
that will greatly enhance LCD display quality. Its state-of-the-art design
incorporates a system-on-chip (SOC) that improves any pixilated multimedia
video.

-19-

FUTURE PRODUCTS

The next product/technology that we are developing is a Light Emitting
Diode (LED) backlighting solution to replace the industries current standard
Cold Cathode Fluorescent Lamp (CCFL). The principal behind this technology is
related to the proprietary technology used in our image capture products. We
believe the benefits of LED backlighting are substantial, including longer life,
higher dimming ratio, sharper contrast, and near high definition resolution
without filters, all at a performance value.

SALES, DISTRIBUTION AND FULFILLMENT

We market and distribute our products indirectly through a global
network of OEM's, system integrators, value-added resellers and regional
distributors.

We have established relationships with more than 25 channel partners,
including leading system vendors, value-added resellers and regional
distributors, through which we market and distribute our products and solutions.
In image scanning, companies such as Visioneer and Xerox include our technology
in their scanners, as well as multifunction devices that combine multiple
capabilities.

In addition our products are sold through a variety of retail and
e-tail channels including but not limited to CDW, Ingram Micro, Outpost.com and
Fry's Electronics.

MANUFACTURING

All of our products are manufactured by Syscan Technology Holdings
(STH), the parent company of our majority stockholder. We and STH have
established an internal-pricing agreement that is updated on a semi-annual
basis. STH serves as the exclusive manufacturer of all current and future image
capture products to be produced by us. We believe, for quality control and
pricing reasons that this type of relationship is more favorable then could be
attained from unaffiliated third-parties. We purchase and provide STH with
critical parts and components necessary to manufacture our products.

STH warrants the products it manufactures for us against defects in
material and workmanship for a period of 12 months after the completion of
manufacture. After such 12 month period, STH has agreed to provide repair
services for the products to us at its customary hourly repair rate plus the
cost of any parts, components or items necessary to repair the products.

Since STH is the primary manufacturer of all of our current products,
if the operations of STH are interrupted or if our orders or orders of other STH
clients exceed the manufacturing capabilities of STH, STH may not be able to
deliver our products to us on time and we may not be able to deliver our
products to our customers on time, which could adversely affect our business,
reduce our revenues and significantly harm our relationship with our customers.
We have the right at anytime to engage third parties to manufacture some or all
of our products.

We believe that it could take approximately three to six months to
secure a third-party manufacturer to supplement STH's manufacturing capabilities
and approximately six to twelve months to replace STH as our sole manufacturer.
Although we believe that there are a number of third-party manufacturers (other
than STH) available to us, we cannot assure that we would be able to secure
another manufacturer on terms favorable to us, or at all, or how long it would
take us to secure such manufacturing.

-20-

SUPPLIERS

All of the raw materials, parts, components and other items that are
required to manufacture our products are purchased by us. We rely on a single or
limited number of suppliers for such raw materials, parts, components and other
items. Although there are many suppliers for each of these raw materials, parts,
components and other items, we are dependent on a limited number of suppliers
for many of the significant raw materials and components. We do not have any
long-term or exclusive purchase commitments with any of such suppliers. Our
failure to maintain existing relationships with our suppliers or to establish
new relationships in the future could also negatively affect our ability to
obtain the raw materials and components used in the manufacture of our products
in a timely manner. If we are unable to obtain ample supply of product from our
existing suppliers or alternative sources of supply, we may be unable to satisfy
our customers' orders which could reduce our revenues and adversely affect our
relationship with our customers.

PROPRIETARY TECHNOLOGY

We exploit our proprietary technology, trade secrets, know-how,
continuing technological innovations and licensing opportunities to maintain our
competitive position. We rely on patent law, copyright law, trade secret laws,
secrecy, technical measures, licensee agreements and non-disclosure agreements
to protect our technology, trade secrets and other proprietary rights. Our
policy is to file patent applications to protect technology, inventions and
improvements that are important to the development of our business, to maintain
a technological advantage over our competitors and to in some cases generate
licensing revenue. In this regard, we have obtained patents that directly relate
to our products. Our mobile imaging scanning technologies are covered by
numerous patents and patent applications owned by us. We currently have 14
issued patents held by us all of which are U.S. patents. Our technology is also
covered by 5 issued patents in Taiwan. We also have 3 patent applications
currently pending with the US Patent & Trademark Office, 2 of which relate to
image display technology and one of which relates to image scanning. These
patents expire on various dates between 2017 and 2022.

We require our employees to execute confidentiality and invention
assignment agreements in order to protect our proprietary technology and other
proprietary rights. We also rely on trade secrets and proprietary know-how to
protect our proprietary rights.

RESEARCH AND DEVELOPMENT

The market for our products and services is characterized by rapid
technological change, frequent new product introductions and enhancements,
evolving industry standards, and rapidly changing client requirements. As a
result, we believe that our future growth is highly dependent on the timely and
efficient introduction of new and updated products and technology. As of
December 31, 2004, we employed or directly contracted 8 people in research and
development, 2 of whom are located in international locations. Our employees
based in overseas facilities extend our global focus while often lowering our
overall cost of research and development. To promote efficiency in our research
and development efforts, we have organized the effective use of global
development teams and a comprehensively integrated development process. In
addition, we have developed and refined our time-to-market process, which
contributes to cost-effective resource management while promoting technology
sharing across programs.

-21-

Our future success will depend in part on our ability to anticipate
changes, enhance our current products, develop and introduce new products that
keep pace with technological advancements and address the increasingly
sophisticated needs of our clients. Our research and development expenses for
the twelve months ending December 31, 2004 and the twelve months ended December
31, 2003 were $528,417 and $799,825, respectively. We expect that we will
continue to commit significant resources to research and development in the
future, specifically with respect to the LCD market. To date we have not
capitalized any research and development expenses and all costs have been
expensed as incurred.

INTERNATIONAL OPERATIONS

Our international operations include research and development, customer
support and sales and marketing. Our international research and development is
conducted in the US and China. Additionally sales and support offices are
located in the US, the Netherlands and China to support our current
international customers and to expand our international revenue opportunities.

Geographic revenue classification is based on the country in which the
sale is invoiced. Revenue for the twelve months ended December 31, 2004 was 93%
North America and 7% international, versus 80% North America and 20%
international for the year ended December 31, 2003.

Additional financial information relating to foreign and domestic sales
and operations for each of the twelve months ended December 31, 2004 and the
year ended in the period ended December 31, 2003 is set forth in Note 1, "
Geographic Sales and Significant Customers," of the Notes to Consolidated
Financial Statements.

COMPETITION

EMPLOYEES

As of December 31, 2004, we employed 18 people on a full-time basis, 12
in the United States and 6 internationally. Of the total, 8 were in product
research and development, 2 in sales and marketing, 4 in operations and support,
and 4 in finance and administration. From time-to-time, as the need arises, we
contract with STH for the use of certain of their R&D and engineering personnel.
None of our employees located in the United States or internationally are
represented by unions or collective bargaining agreements. We have experienced
no work stoppages and believe that our employee relations are good. We have
utilized the services of consultants, third-party developers, and other vendors
in our sales, development, manufacturing activities and finance and
administration functions.

-22-

RECENT FINANCINGS

On March 15, 2005, we sold $1,865,000 of our Series A Convertible
Preferred Stock to institutional and accredited retail investors in a private
offering pursuant to exemption from registration under Section 4(2) of the
Securities Act of 1933, as amended (the "Securities Act"). We intend to use the
net proceeds from the financing for sales, marketing, research and development
and for working capital and general corporate purposes. Starboard Capital
Markets, LLC, an NASD member firm, acted as placement agent in the sale of the
Preferred Stock, for which it received $186,500 in commissions and 186,500
warrants to purchase shares of our common stock at an exercise price equal to
$1.00 per share. We also paid legal fees of $25,000 to counsel for the
Investors. The net proceeds of this offering to us after the payment of
commissions, fees and other expenses of the offering were approximately
$1,653,500.

In connection with the financing, we also issued to the purchasers
common stock purchase warrants to purchase up to an aggregate of 932,500 shares
of our common stock at an exercise price of $2.00 per share. The warrants are
exercisable for a period of five years from the date of issuance. We have
agreed, pursuant to a registration rights agreement, to register the shares of
common stock issuable upon conversion of the Preferred Stock and upon exercise
of the warrants with the Securities and Exchange Commission.

DESCRIPTION OF PROPERTY

Our corporate headquarters are located at 1772 Technology Drive, San
Jose, CA 95110, where we operate under a lease agreement expiring in November
2006. Our offices contain 5,300 square feet of office space and our monthly
rental expense is approximately $8,000. We also maintain a sales office in the
Netherlands at IJsselburcht 3, Lorentz Building, Suite 201, 6825 BS Arnhem,
Netherlands. The lease is on a month-to-month basis at a monthly rate of $480.

We believe that our current facilities are adequate for our current
operations.

LEGAL PROCEEDINGS

On May 20, 2003, Syscan, Inc., our wholly-owned subsidiary, filed a
lawsuit captioned Syscan v. PPL (Case No. C03-02367 VRW) in United States
District Court, Northern District of California in San Francisco. Syscan alleges
claims against Portable Peripheral Co., Ltd., Image Recognition Integrated
Systems, Inc., Cardreader Inc., and Targus, Inc. for patent infringement. We are
claiming that our various A-6 and A-8 mobile scanners sold by defendants in the
United States have infringed upon our patents including US Patent Nos. 6,054,707
(Portable Scanners Capable of Scanning both Opaque and Transparent Materials),
6,275,309 (Lightweight Mobile Scanners) and 6,459,506 Lightweight Dual-mode
Mobile Scanner Powered from a Universal Serial Bus Port). We are seeking: (1) a
temporary restraining order, preliminary injunction and permanent injunction
against defendants, restraining defendants from patent infringement and unfair
competition; (2) treble damages due to defendants' willful infringement; (3)
punitive damages; (4) accounting of unjust enrichment by defendants, resulting
from defendants' unfair competition; and (5) attorney's fees and costs.

The defendants are jointly represented by PPL's counsel. PPL has
initiated counterclaims against us for patent invalidity. This case is currently
pending for claim construction. We intend to continue this case unless a
reasonable settlement amount from defendants or a licensing agreement to our
satisfaction is entered. We have not yet been able to quantify our damage claim
against PPL. We intend to vigorously pursue this claim and we deny PPL's
counterclaim of patent invalidity.

-23-

Other than as disclosed above, we are not a party to any material
legal proceedings. We from time to time experience routine litigation in the
normal course of our business. We do not believe that any pending litigation
will have a material adverse effect on our financial condition, results of
operations or cash flows.

-24-

USE OF PROCEEDS

We will not receive any of the proceeds from the sale of the shares of
common stock issuable upon conversion of the Series A Preferred Stock by the
selling stockholders. If and when all of the warrants held by the selling
stockholders are exercised, we will receive the proceeds from the exercise of
those warrants. If these warrants are exercised in full, we may receive up to
$2,051,500, which we intend to use for working capital and other general
corporate purposes.

SELLING STOCKHOLDERS

Up to an aggregate of 2,984,000 shares of common stock may be offered
under this prospectus consisting of up to 1,865,000 shares of common stock
issuable upon conversion of Series A Preferred Stock and up to 1,119,000 shares
of common stock issuable upon the exercise of warrants.

All proceeds of this offering will be received by the selling
stockholders for their own account. We may receive proceeds in connection with
the exercise of the warrants, the underlying shares associated with which may,
in turn, be sold by the selling stockholders. As used in this prospectus, the
term "selling stockholder" includes the selling stockholders listed below and
their transferees, assignees, pledgees, donees or other successors.

On March 15, 2005, we consummated the sale of 18,650 shares of our
Series A Preferred Stock for gross proceeds of $1,865,000. The Series A
Preferred Stock bears interest at a rate equal to 5% per annum. The Series A
Preferred Stock is convertible, under certain conditions, into shares of our
common stock at a price equal to $1.00 per share. In connection with the
financing, we also issued to the purchasers of the Series A Preferred Stock
common stock purchase warrants to purchase up to 932,500 shares of our common
stock at a price equal to $2.00 per share. We also issued 186,500 warrants to
affiliates of the placement agent, Starboard Capital Markets, LLC, to purchase
common stock at a price equal to $1.00 per share.

The following table sets forth, to our knowledge, certain information
about the selling stockholders as of the date of this prospectus.

Beneficial ownership is determined in accordance with Rule 13d-3
promulgated by the Securities and Exchange Commission, and generally includes
voting or investment power with respect to securities. In computing the number
of shares beneficially owned by the holder and the percentage ownership of the
holder, shares of common stock issuable upon conversion of the note and upon
exercise of the warrant held by the holder that are currently convertible or are
exercisable within 60 days after the date of the table are deemed outstanding.

The percent of beneficial ownership for the selling stockholder is
based on 23,110,515 shares of common stock outstanding as of April 25, 2005.
Shares of common stock subject to warrants, options and other convertible
securities that are currently exercisable or exercisable within 60 days of April
25, 2005, are considered outstanding and beneficially owned by a selling
stockholder who holds those warrants, options or other convertible securities
for the purpose of computing the percentage ownership of that selling
stockholder but are not treated as outstanding for the purpose of computing the
percentage ownership of any other stockholder.

The following table sets forth information as of that date regarding
beneficial ownership of our common stock by each of the selling stockholders
before and immediately after the offering. Actual ownership of the shares is
subject to conversion of the Series A Preferred Stock and exercise of the
warrants.

-25-

The shares of common stock being offered under this prospectus may be
offered for sale from time to time during the period the registration statement
of which this prospectus is a part remains effective, by or for the account of
the selling stockholders.

After the date of effectiveness of the registration statement of which
this prospectus is a part, the selling stockholders may have sold or
transferred, in transactions covered by this prospectus or in transactions
exempt from the registration requirements of the Securities Act, some or all of
its common stock. Information about the selling stockholders may change over
time.

Any changed information will be set forth in an amendment to the
registration statement or supplement to this prospectus, to the extent required
by law.

Number of Shares Number of
Position, of common stock, Shares Total Number of Number of
Office or not including Represented by Number of Shares to be Shares to Percentage
Other Material shares issuable on preferred Shares of Offered for be Owned to be
Relationship conversion of stock and common the Account after Beneficially
With us preferred stock or warrants, stock of the this Owned after
During Past warrants, Beneficially Beneficially Selling Offering this
Name Three Years Beneficially Owned Owned Owned Stockholder (1) Offering (1)

Iron Horse
Capital LLC (2) None -0- 37,500 37,500 37,500 -0- -0-

Maloney &
Company, LLC (3) None -0- 37,500 37,500 37,500 -0- -0-

Gordon Gregoretti
(4) None -0- 37,500 37,500 37,500 -0- -0-

Whalehaven
Capital Fund (5) None -0- 600,000 600,000 600,000 -0- -0-

Basso
Multi-Strategy
Holding Fund Ltd.
(6) None -0- 877,500 877,500 877,500 -0- -0-

Basso Private
Opportunity
Holding Fund Ltd.
(7) None -0- 247,500 247,500 247,500 -0- -0-

AJW Partners, LLC
(8) None -0- 48,000 48,000 48,000 -0- -0-

AJW Qualified
Partners, LLC (9) None -0- 111,000 111,000 111,000 -0- -0-

AJW Offshore LTD
(10) None -0- 135,000 135,000 135,000 -0- -0-

New Millenium
Capital Partners
II, LLC (11) None -0- 6,000 6,000 6,000 -0- -0-

Gerard Caviston
(12) None -0- 37,500 37,500 37,500 -0- -0-

Enable Growth
Partners (13) None -0- 600,000 600,000 600,000 -0- -0-

-26-

Michael Hamblett
(14) (14) -0- 93,250 93,250 93,250 -0- -0-

Anthony Spatacco
(15) (15) -0- 46,625 46,625 46,625 -0- -0-

Starboard Capital
Markets, LLC (16) (16) -0- 46,625 46,625 46,625 -0- -0-

Sean F. Moran (17) None -0- 22,500 22,500 22,500 -0- -0-
------------------

* Less than one percent.

(1) Assumes that all shares of common stock offered in this prospectus and
otherwise beneficially owned will be sold.
(2) The address for Iron Horse Capital LLC is 429 Corber Street, New
Canaan, CT 06840. The number of shares being registered for Iron Horse
Capital LLC includes 25,000 shares issuable upon the conversion of
preferred stock and 12,500 shares issuable upon the exercise of
warrants.
(3) The address for Maloney & Company, LLC is 762 Boston Post Road,
Madison, CT 06443. Michael J. Maloney, a member of Maloney & Company,
LLC has voting and investment power over the shares held by Maloney &
Company, LLC. The number of shares being registered for Maloney &
Company, LLC includes 25,000 shares issuable upon the conversion of
preferred stock and 12,500 shares issuable upon the exercise of
warrants.
(4) The number of shares being registered for Mr. Gregoretti
includes 25,000 shares issuable upon the conversion of preferred stock
and 12,500 shares issuable upon the exercise of warrants.
(5) The address for Whalehaven Capital Fund Limited is 3rd Floor, 14
Par-La-Ville Road, P.O. Box HM 1027, Hamilton HMDX Bermuda. Evan
Schemenauer, Arthur Jones and Jennifer Kelly share voting and
investment power over the shares held by Whalehaven Capital Fund
Limited. The number of shares being registered for Whalehaven Capital
Fund Limited includes 400,000 shares issuable upon the conversion of
preferred stock and 200,000 shares issuable upon the exercise of
warrants.
(6) The address for Basso Multi-Strategy Holding Fund Ltd. is 1266 East
Main Street, Stamford, CT 06902. Howard I. Fischer is the managing
member of the general partner of the investment manager of Basso
Multi-Strategy Holding Fund Ltd. and has voting and investment control
over the shares held by Basso Multi-Strategy Holding Fund Ltd. Mr.
Fischer disclaims beneficial ownership over the shares owned by Basso
Multi-Strategy Holding Fund Ltd. The number of shares being registered
for Basso Multi-Strategy Holding Fund Ltd. includes 585,000 shares
issuable upon the conversion of preferred stock and 292,500 shares
issuable upon the exercise of warrants.
(7) The address for Basso Private Opportunity Holding Fund Ltd. is 1266
East Main Street, Stamford, CT 06902. Howard I. Fischer is the
managing member of the general partner of the investment manager of
Basso Private Opportunity Holding Fund Ltd. and has voting and
investment control over the shares held by Basso Private Opportunity
Holding Fund Ltd. Mr. Fischer disclaims beneficial ownership over the
shares owned by Basso Private Opportunity Holding Fund Ltd. The number
of shares being registered for Basso Private Opportunity Holding Fund
Ltd. includes 165,000 shares issuable upon the conversion of preferred
stock and 82,500 shares issuable upon the exercise of warrants.
(8) The address for AJW Partners LLC is c/o The NIR Group, 1044 Northern
Boulevard, Suite 302, Roslyn, NY 11576. Corey Ribotsky has voting and
investment control over the shares held by AJW Partners LLC. The
number of shares being registered for AJW Partners LLC includes 32,000
shares issuable upon the conversion of preferred stock and 16,000
shares issuable upon the exercise of warrants.
(9) The address for AJW Qualified Partners LLC is c/o The NIR Group, 1044
Northern Boulevard, Suite 302, Roslyn, NY 11576. Corey Ribotsky has
voting and investment control over the shares held by AJW Qualified
Partners LLC. The number of shares being registered for AJW Qualified
Partners LLC includes 74,000 shares issuable upon the conversion of
preferred stock and 37,000 shares issuable upon the exercise of
warrants.

-27-

(10) The address for AJW Offshore LTD is c/o The NIR Group, 1044 Northern
Boulevard, Suite 302, Roslyn, NY 11576. Corey Ribotsky has voting and
investment control over the shares held by AJW Offshore LTD. The
number of shares being registered for AJW Offshore LTD includes 90,000
shares issuable upon the conversion of preferred stock and 45,000
shares issuable upon the exercise of warrants.
(11) The address for New Millenium Capital Partners II, LLC is c/o The NIR
Group, 1044 Northern Boulevard, Suite 302, Roslyn, NY 11576. Corey
Ribotsky has voting and investment control over the shares held by New
Millenium Capital Partners II, LLC. The number of shares being
registered for Millenium Capital Partners II, LLC includes 4,000
shares issuable upon the conversion of preferred stock and 2,000
shares issuable upon the exercise of warrants.
(12) The number of shares being registered for Mr. Caviston includes
25,000 shares issuable upon the conversion of preferred stock and
12,500 shares issuable upon the exercise of warrants.
(13) The address for Enable Growth Partners is One Ferry Bldg., Suite 255,
San Francisco, CA 94111. Mitch Levine, the managing partner of Enable
Growth Partners, has voting and investment control over the shares
held by Enable Growth Partners. The number of shares being registered
for Enable Growth Partners includes 400,000 shares issuable upon the
conversion of preferred stock and 200,000 shares issuable upon the
exercise of warrants.
(14) Mr. Hamblett is a registered representative with Starboard Capital
Markets, LLC, an NASD member firm. Mr. Hamblett's address is c/o
Starboard Capital Markets, LLC, 736 Boston Post Road, Madison, CT
06443. The number of shares being registered for Mr. Hamblett includes
93,250 shares issuable upon the exercise of warrants.
(15) Mr. Spatacco is a registered representative with Starboard Capital
Markets, LLC, an NASD member firm. Mr. Spatacco's address is c/o
Starboard Capital Markets, LLC, One Logan Square, Suite 2650,
Philadelphia, PA 19103. The number of shares being registered for Mr.
Spatacco includes 46,625 shares issuable upon the exercise of
warrants.
(16) Starboard Capital Markets, LLC acted as our placement agent in
connection with the sale of the Series A Preferred Stock and Warrants
sold by us in the Series A Preferred Stock offering. Starboard Capital
Markets, LLC received the shares of our common stock in the ordinary
course of their business and at the time that they received the shares
of our common stock had no agreements, understandings, directly or
indirectly, with any person to distribute the securities. Starboard
Capital Markets, LLC's address is One Logan Square, Suite 2650,
Philadelphia, PA 19103. James Dotzman, a managing director of
Starboard Capital Markets, LLC, has voting and investment control over
the shares held by Starboard Capital Markets, LLC. The number of
shares being registered for Starboard Capital Markets, LLC includes
46,625 shares issuable upon the exercise of warrants.
(17) The number of shares being registered for Mr. Moran includes 15,000
shares issuable upon the conversion of preferred stock and 7,500
shares issuable upon the exercise of warrants.

The selling stockholders and we are not making any representation that
any shares covered by the prospectus will or will not be offered for sale or
resale. The selling stockholders reserve the right to accept or reject, in whole
or in part, any proposed sale of shares. The shares offered by this prospectus
may be offered from time to time by the selling stockholder named above.

-28-

PLAN OF DISTRIBUTION

Selling stockholders may offer and sell, from time to time, the shares
of our common stock covered by this prospectus. The term selling stockholders
includes donees, pledgees, transferees or other successors-in-interest selling
securities received after the date of this prospectus from a selling stockholder
as a gift, pledge, partnership distribution or other non-sale related transfer.
The selling stockholders will act independently of us in making decisions with
respect to the timing, manner and size of each sale. Sales may be made on one or
more exchanges or in the over-the-counter market or otherwise, at prices and
under terms then prevailing or at prices related to the then current market
price or in negotiated transactions. The selling stockholders may sell their
securities by one or more of, or a combination of, the following methods:

o purchases by a broker-dealer as principal and resale by the
broker-dealer for its own account pursuant to this prospectus;

o ordinary brokerage transactions and transactions in which the broker
solicits purchasers;

o block trades in which the broker-dealer so engaged will attempt to
sell the securities as agent but may position and resell a portion of
the block as principal to facilitate the transaction;

o an over-the-counter distribution in accordance with the rules of the
NASDAQ National Market;

o in making short sales or in transactions to cover short sales;

o in put or call option transactions relating to the shares;

o in privately negotiated transactions; and,

o in options, swaps or derivatives transactions.

The selling stockholders may effect these transactions by selling
shares directly to purchasers or to or through broker-dealers, which may act as
agents or principals. These broker-dealers may receive compensation in the form
of discounts, concessions or commissions from the selling stockholders and/or
the purchasers of shares for whom such broker-dealers may act as agents or to
whom they sell as principals, or both (which compensation as to a particular
broker-dealer might be in excess of customary commissions). The selling
stockholders have advised us that they have not entered into any agreements,
understandings or arrangements with any underwriters or broker-dealers regarding
the sale of their securities.

To the extent required, we may amend or supplement this prospectus to
describe a specific plan of distribution. In connection with distributions of
the securities or otherwise, the selling stockholders may enter into hedging
transactions with broker-dealers or other financial institutions. In connection
with those transactions, broker-dealers or other financial institutions may
engage in short sales of shares of our common stock in the course of hedging the
positions they assume with selling stockholders. The selling stockholders may
also sell shares of our common stock short and redeliver the securities to close
out their short positions. The selling stockholders may also enter into option
or other transactions with broker-dealers or other financial institutions that
require the delivery to the broker-dealer or other financial institution of
securities offered by this prospectus, which securities the broker-dealer or
other financial institution may resell pursuant to this prospectus, as
supplemented or amended to reflect the transaction. The selling stockholders may
also loan or pledge securities to a broker-dealer or other financial
institution, and, upon a default, the broker-dealer or other financial
institution, may affect sales of the loaned or pledged securities pursuant to
this prospectus, as supplemented or amended to reflect the transaction.

-29-

The selling stockholders may also sell shares under Rule 144 under
the Securities Act, if available, rather than under this prospectus. In
effecting sales, broker-dealers or agents engaged by the selling stockholders
may arrange for other broker-dealers to participate. Broker-dealers or agents
may receive commissions, discounts or concessions from the selling stockholders
in amounts to be negotiated immediately prior to the sale.

In offering the securities covered by this prospectus, the selling
stockholders and any broker-dealers who execute sales for the selling
stockholders may be treated as "underwriters" within the meaning of the
Securities Act in connection with sales. Any profits realized by the selling
stockholders and the compensation of any broker-dealer may be treated as
underwriting discounts and commissions.

The selling stockholders and any other person participating in a
distribution will be subject to the Securities Exchange Act of 1934 (Exchange
Act). The Exchange Act rules include, without limitation, Regulation M, which
may limit the timing of purchases and sales of any of the securities by the
selling stockholders and other participating persons. In addition, Regulation M
may restrict the ability of any person engaged in the distribution of the
securities to engage in market-making activities with respect to the particular
security being distributed for a period of up to five business days prior to the
commencement of the distribution. This may affect the marketability of the
securities and the ability of any person or entity to engage in market-making
activities with respect to the securities. We have informed the selling
stockholders that the anti-manipulation rules of the SEC, including Regulation M
promulgated under the Exchange Act, may apply to their sales in the market.

We will make copies of this prospectus available to the selling
stockholders for the purpose of satisfying the prospectus delivery requirements
of the Securities Act. The selling stockholders may indemnify any broker-dealer
that participates in transactions involving the sale of the securities against
certain liabilities, including liabilities arising under the Securities Act. We
have agreed to indemnify the selling stockholders and the selling stockholders
have agreed to indemnify us against certain liabilities in connection with the
offering of the shares, including liabilities arising under the Securities Act.

At the time a particular offer of securities is made, if required, a
prospectus supplement will be distributed that will set forth the number of
securities being offered and the terms of the offering, including the name of
any underwriter, dealer or agent, the purchase price paid by any underwriter,
any discount, commission and other item constituting compensation, any discount,
commission or concession allowed or re-allowed or paid to any dealer, and the
proposed selling price to the public.

We are paying all expenses and fees in connection with the registration of
the shares. The selling stockholders will bear all brokerage or underwriting
discounts or commissions paid to broker-dealers in connection with the sale of
their shares.

-30-

DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT

The following table sets forth the names and ages our current directors
and executive officers, the principal offices and positions with us held by each
person and the date such person became a director or executive officer. Each
year the stockholders elect the members of our Board of Directors.

Our directors and executive officers are as follows:

-------------------- ----------------------- ------- ---------------------------
Year First Elected As
Name an Officer Or Director Age Position(s) Held
-------------------- ----------------------- ------- ---------------------------
Darwin Hu 2004 52 President, Chief Executive
Officer and Chairman
-------------------- ----------------------- ------- ---------------------------
William Hawkins 2004 48 Chief Operating Officer,
Acting Chief Financial
Officer and Secretary
-------------------- ----------------------- ------- ---------------------------
David Clark 2004 36 Senior Vice President of
Business Development and
Director
-------------------- ----------------------- ------- ---------------------------
Peter Mor 2004 54 Director
-------------------- ----------------------- ------- ---------------------------
Lawrence Liang 2004 68 Director
-------------------- ----------------------- ------- ---------------------------

There are no family relationships between any director, executive officer, or
person nominated or chosen to become a director or executive officer.

DARWIN HU became our Chairman, President and Chief Executive Officer on April 2,
2004, in connection with our acquisition of Syscan, Inc. Prior thereto, Mr. Hu
was the President and Chief Executive Officer of Syscan, Inc., our wholly-owned
subsidiary. Mr. Hu has over 21 years of experience in the high-tech industry and
has held various management related positions within organizations related to
color graphic imaging input scanning, display output and imaging communication
product development, manufacturing and sales and marketing. Before joining
Syscan, Inc. in April 1998, Mr. Hu held senior management positions at Microtek,
Xerox, OKI, AVR, DEST, Olivetti and Grundig. Mr. Hu holds a bachelor's degree in
Engineering Science from National Cheng-Kung University, Taiwan, and a master's
degree in Computer Science and Engineering from California State University,
Chico, USA.

WILLIAM HAWKINS became our Chief Operating Officer and Secretary on April 2,
2004, in connection with our acquisition of Syscan, Inc. Mr. Hawkins has held
various management positions at Syscan, Inc., our wholly-owned subsidiary, since
1999, including V.P. of Sales and Marketing, President and General Manager
Syscan Imaging Group. Prior thereto, Mr. Hawkins' product focus has been
primarily in the imaging systems and computer peripheral markets, including
senior positions with General Electric (UK), Kaman Aerospace, British Aerospace
Engineering, Gartner Research and Per Scholas. Mr. Hawkins received a bachelor's
degree in physics from the University of Maryland in 1978 and an MBA from Johns
Hopkins University in Management of Technology Concentration (MOT).

DAVID CLARK has been our Senior Vice President of Business Development and a
director since July 15, 2004. From October, 2003 to July, 2004 Mr. Clark was
President of Nautical Vision, Inc. a market specific image display company where
he created and implemented the company's business plan which involved product
sourcing, sales and marketing and general management. From June, 2001 to
October, 2003 Mr. Clark actively invested in and consulted to a diverse group of
companies in addition to being involved in residential development. Mr. Clark

-31-

was President and CEO of Homebytes.com from November, 1998 to May of 2001, where
he was primarily responsible for raising in excess of twenty five million
dollars in funding from investors including America Online, FBR Technology
Venture Partners, PNC Bank, and Bank of America, as well as being instrumental
in the acquisition of a key competitor of Homebytes.com. Prior thereto Mr. Clark
was the head of distribution and a director of Take Two Interactive
(NASDAQ:TTWO) which was a result of TTWO's acquisition of Inventory Management
Systems, Inc. (I.M.S.I.), of which Mr. Clark was a co-founder and President.
Prior to founding I.M.S.I., Mr. Clark held various management positions with
Acclaim Entertainment (NASDAQ:AKLM), and the Imagesoft division of SONY Music
(NYSE:SNE). Mr. Clark received a B.S. in Business from the State University of
New York at Binghamton in 1990.

PETER MOR has been a director since April 2, 2004. Mr. Mor has been the Senior
Vice President of Engineering & Operations of Focus Enhancements since February
1, 2005. Prior to joining Focus Enhancements, Mr. Mor served as a Vice President
of Engineering of SONY Corp. from July 23, 1999 to January 31, 2005 where he is
responsible for research and development of SONY's VAIO Notebook and Desktop
PCs, accessories and web based network services. Prior thereto, Mr. Mor has
extensive experience in engineering, operations and manufacturing, as well as
off-shore manufacturing, international outsourcing and procurement and ODM
management. Prior to joining SONY Corp., since 1980 Mr. Mor held various senior
positions with AMAX Engineering, AVR Technologies, Fujitsu Computer Products of
America, XEROX and QUME. Mr. Mor holds a master's degree in Computer Science
from the University of Oregon and a bachelor's degree in Electrical Engineering
from National Cheng-Kung University, Taiwan.

LAWRENCE LIANG has been a director since April 2, 2004. Since 1984 Mr. Liang has
been the President and Vice President of Genoa Systems Corporation, a graphics
company that developed the flicker free and true color technologies in the late
1980's, the President of Telecom Marketing, a marketing consultant for
telecommunications infrastructure, and the President of Cwaves Technology, a
wireless LAN/WAN company. Mr. Liang has also worked for IBM's Technology
Component Division to help develop semiconductor products and RISC CPU
Instruction sets. Mr. Liang also spent five years in IBM's Disk Drive division
in Silicon Valley where he held various management positions. Mr. Liang holds a
master's degree in Applied Mathematics from the City University of New York.

BOARD COMMITTEES

Our board of directors does not currently have any committees. We
intend to establish an audit committee which we expect will be comprised of a
majority of our independent directors.

SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

Section 16(a) of the Securities Exchange Act of 1934, as amended,
requires that our directors and executive officers and persons who beneficially
own more than 10% of our common stock (referred to herein as the "reporting
persons") file with the SEC various reports as to their ownership of and
activities relating to our common stock. Such reporting persons are required by
the SEC regulations to furnish us with copies of all Section 16(a) reports they
file. Based solely upon a review of copies of Section 16(a) reports and
representations received by us from reporting persons, and without conducting
any independent investigation of our own, in 2004, we believe all Forms 3, 4 and
5 were timely filed with the SEC by such reporting persons.

-32-

CODE OF ETHICS

Our Board of Directors has adopted a Code of Ethics which is applicable
to all of our chief executive officer senior financial officers and members of
our board of directors, including our principal executive officer and principal
financial officer, principal accounting officer or controller, or other persons
performing similar functions.

Any amendment of our Code of Ethics or waiver thereof applicable to
any of our principal executive officer, principal financial officer and
controller, principal accounting officer, directors or persons performing
similar functions will be disclosed on our website within 5 days of the date of
such amendment or waiver. In the case of a waiver, the nature of the waiver, the
name of the person to whom the waiver was granted and the date of the waiver
will also be disclosed.

SECURITIES AUTHORIZED FOR ISSUANCE UNDER EQUITY COMPENSATION PLANS

For information regarding securities authorized for issuance under
Equity Compensation Plans, and the equity compensation plan information table
see "Market for Common Equity and Related Stockholder Matters."

-33-

SECURITY OWNERSHIP OF MANAGEMENT AND
CERTAIN BENEFICIAL OWNERS

The following table sets forth as of the date of this prospectus information
regarding the beneficial ownership of our common stock based upon the most
recent information available to us for: (i) each person known by us to own
beneficially more than five (5%) percent of our outstanding common stock, (ii)
each of our officers and directors, and (iii) all of our officers and directors
as a group. Unless otherwise indicated, each of the persons listed below has
sole voting and investment power with respect to the shares beneficially owned
by them. As of the date of this prospectus there were 23,110,515 shares of our
common stock outstanding.

Name and Address of Number of Common Shares Percentage of Common Shares
Beneficial Owner(1) Beneficially Owned(2) Beneficially Owned
------------------- --------------------- ------------------

Darwin Hu (3) -0- -
William Hawkins (4) -0- -
David Clark (5) 50,000 *
Peter Mor (6) -0- -
Lawrence Liang (7) -0- -
Syscan Imaging Limited(8) 18,773,514 81.2%
All Directors and
Officers as a group
(5 persons) (3)-(7) 50,000 *
* less than one percent

(1) Unless otherwise indicated, the address of each person listed below is c/o
Syscan Imaging, Inc., 1772 Technology Drive, San Jose, California 95110.

(2) Pursuant to the rules and regulations of the Securities and Exchange
Commission, shares of common stock that an individual or group has a right to
acquire within 60 days pursuant to the exercise of options or warrants are
deemed to be outstanding for the purposes of computing the percentage ownership
of such individual or group, but are not deemed to be outstanding for the
purposes of computing the percentage ownership of any other person shown in the
table.

(3) Does not include 560,000 shares issuable upon the exercise of options
granted pursuant to our Amended and Restated 2002 Stock Option Plan which are
not exercisable within 60 days of the date hereof. Also does not include shares
underlying options to be issued to Mr. Hu upon execution of an employment
agreement previously approved by the board of directors, pursuant to which Mr.
Hu will receive options to purchase up to 1,500,000 shares of our common stock,
500,000 of which shall vest upon the later to occur of: (i) April 4, 2005, and
(ii) execution of the employment agreement between us and Mr. Hu. Mr. Hu also
disclaims beneficial ownership of any shares of common stock held by Syscan
Imaging Limited, our majority-stockholder, of which Mr. Hu is a director.

(4) Does not include 360,000 shares issuable upon the exercise of options
granted pursuant to our Amended and Restated 2002 Stock Option Plan which are
not exercisable within 60 days of the date hereof. Also does not include shares
underlying options to be issued to Mr. Hawkins upon execution of an employment
agreement previously approved by the board of directors, pursuant to which Mr.
Hawkins will receive options to purchase up to 1,000,000 shares of our common
stock, 333,334 of which shall vest upon the later to occur of: (i) April 4,
2005, and (ii) execution of the employment agreement between us and Mr. Hawkins.

(5) Includes 50,000 shares of common stock. Does not include 400,000 shares
issuable upon the exercise of options granted pursuant to our Amended and
Restated 2002 Stock Option Plan which are not exercisable within 60 days of the
date hereof. Also does not include shares underlying options to be issued to Mr.
Clark upon execution of an employment agreement previously approved by the board
of directors, pursuant to which Mr. Clark will receive options to purchase up to
800,000 shares of our common stock, 266,667 of which shall vest upon the later
to occur of: (i) April 4, 2005, and (ii) execution of the employment agreement
between us and Mr. Clark.

-34-

(6) Does not include 80,000 shares issuable upon the exercise of options granted
pursuant to our Amended and Restated 2002 Stock Option Plan which are not
exercisable within 60 days of the date hereof.

(7) Does not include 80,000 shares issuable upon the exercise of options granted
pursuant to our Amended and Restated 2002 Stock Option Plan which are not
exercisable within 60 days of the date hereof.

(8) The sole shareholder of Syscan Imaging Limited is Syscan Technology Holdings
Limited, a publicly-held company whose shares are listed on The Growth
Enterprise Market of The Stock Exchange of Hong Kong Limited. The address for
Syscan Imaging Limited is Unit 808, 8th floor, K. Wah Centre, 191 Java Road,
North Point Hong Kong.

-35-

DESCRIPTION OF SECURITIES

GENERAL

The following description of our capital stock does not purport to be
complete and is subject to and qualified in its entirety by our certificate of
incorporation and bylaws, which are included as exhibits to the registration
statement of which this prospectus forms a part, and by the applicable
provisions of Delaware law.

Our authorized capital stock consists of 50,000,000 shares of common
stock, and 2,000,000 shares of blank-check preferred stock, 60,000 of which have
been designated Series A Preferred Stock. As of the date of this prospectus, our
outstanding capital stock consists of 23,110,515 shares of common stock, $.001
par value and 18,650 shares of Series A Preferred Stock, $.001 par value. These
figures do not include securities to be issued pursuant to our Amended and
Restated 2002 Stock Option Plan.

COMMON STOCK

As of the date of this prospectus, we have 23,110,515 shares of common
stock outstanding, held of record by approximately 359 stockholders. The holders
of common stock are entitled to one vote for each share held of record on all
matters submitted to a vote of the stockholders. Subject to preferential rights
with respect to any outstanding preferred stock, holders of common stock are
entitled to receive ratably such dividends as may be declared by the board of
directors out of funds legally available therefor. In the event of our
liquidation, dissolution or winding up, the holders of common stock are entitled
to share ratably in all assets remaining after payment of liabilities and
satisfaction of preferential rights of any outstanding preferred stock.

Our common stock has no preemptive or conversion rights or other
subscription rights. There are no sinking fund provisions applicable to the
common stock. The outstanding shares of common stock are fully paid and
non-assessable.

PREFERRED STOCK

We have authorized 2,000,000 shares of preferred stock, of which an
aggregate of 60,000 have been designated Series A Preferred Stock and of which
18,650 are outstanding as of the date of this prospectus. The issuance of
preferred stock with voting and conversion rights may adversely affect the
voting power of the holders of common stock, including voting rights, of the
holders of common stock. In certain circumstances, such issuance could have the
effect of decreasing the market price of the common stock. Notwithstanding the
broad discretion granted to our Board of Directors with respect to designating
the terms and conditions of any series of preferred stock, our Board of
Directors has agreed to refrain from issuing shares of preferred stock, unless
such designation and issuance are approved by a majority of our independent
directors who do not have an interest in the transactions and who have access to
and consulted with (at our expense) our counsel or counsel of their choosing.

SERIES A PREFERRED STOCK

In March 2005, we sold an aggregate of 18,650 shares of our Series A
Preferred Stock, the material terms of which are described below:

-36-

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

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

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

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

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

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

-37-

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

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

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

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

WARRANTS

We have outstanding warrants to purchase an aggregate of up to
1,119,000 shares of our Common stock. 932,500 of such warrants are exercisable
at $2.00 per share and 186,500 of such warrants are exercisable at $1.00 per
share, all of which were issued in connection with our Series Preferred Stock
financing. The warrants are exercisable through March 14, 2010 and must be
exercised by the payment of cash, except if there is no effective registration
statement covering the resale of the shares of Common stock underlying the
warrants, a holder may exercise their warrants on a cashless basis.

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

None of the individual holders of the Warrants are entitled to exercise
any such Warrant held by them, if such exercise would cause such holder to be
deemed to beneficially own in excess of 4.999% of the outstanding shares of our
Common stock on the date of issuance of such shares.

-38-

ANTI-TAKEOVER LAW

We are subject to Section 203 of the Delaware General Corporation Law,
which restricts certain transactions and business combinations between a
corporation and an "interested stockholder" (as defined in Section 203) owning
15% or more of the corporation's outstanding voting stock, for a period of three
years from the date the stockholder becomes an interested stockholder. Subject
to certain exceptions, unless the transaction is approved by the board of
directors and the holders of at least two-thirds of our outstanding voting stock
(excluding shares held by the interested stockholder), Section 203 prohibits
significant business transactions such as a merger with, disposition of assets
to, or receipt of disproportionate financial benefits by the interested
stockholder, or any other transaction that would increase the interest
stockholder's proportionate ownership of any class or series of the
corporation's stock. The statutory ban does not apply if, upon consummation of
the transaction in which any person becomes an interested stockholder, the
interested stockholder owns at least 85% of the outstanding voting stock of the
corporation (excluding shares held by persons who are both directors and
officers or by certain employee stock plans).

TRANSFER AGENT AND REGISTRAR

Interwest Transfer Company is the transfer agent for our common stock.
The address for Interwest Trust Company is 1981 East Murray Holladay Road, Salt
Lake City, Utah 84117.

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-39-

DISCLOSURE OF COMMISSION POSITION OF INDEMNIFICATION FOR
SECURITIES ACT LIABILITIES

Our certificate of incorporation provides that all our directors,
officers, employees and agents shall be entitled to be indemnified by us to the
fullest extent permitted under the Delaware General Corporation Law, provided
that they acted in good faith and that they reasoned their conduct or action was
in, or not opposed to, the best interest of our company.

Our Bylaws provide for indemnification of our officers, directors and
others who become a party to an action on our behalf by us to the fullest extent
not prohibited under the Delaware General Corporation Law. Further, we maintain
officer and director liability insurance.

Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to our directors, officers, and controlling persons
pursuant to the foregoing provisions, or otherwise, we have been advised that in
the opinion of the SEC such indemnification is against public policy as
expressed in the Securities Act and is, therefore, unenforceable. In the event
that a claim for indemnification against such liabilities (other than the
payment of expenses incurred or paid by a director, officer or controlling
person in a successful defense of any action, suit or proceeding) is asserted by
such director, officer or controlling person in connection with the securities
being registered, we will, unless in the opinion of our counsel the matter has
been settled by controlling precedent, submit to the court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.

[remainder of page intentionally left blank]

-40-

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis of our financial condition and plan of
operations should be read in conjunction with our consolidated financial
statements and related notes appearing elsewhere in this prospectus. This
discussion and analysis contains forward-looking statements that involve risks,
uncertainties and assumptions. The actual results may differ materially from
those anticipated in these forward-looking statements as a result of certain
factors, including, but not limited to, those which are not within our control.

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

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

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

o RESULTS OF OPERATIONS. This section provides an analysis of our
results of operations for the years ended December 31, 2004 compared
to the same periods in 2003. A brief description is provided of
transactions and events, including related party transactions that
impact the comparability of the results being analyzed.

o LIQUIDITY AND CAPITAL RESOURCES. This section provides an analysis of
our financial condition and cash flows as of and for the year ended
December 31, 2004.

The following management's discussion and analysis should be read in
conjunction with our consolidated audited financial statements for the fiscal
years ended December 31, 2004 and 2003 and related notes to those financial
statements.

OVERVIEW

Management's Discussion and Analysis (MD&A) contains statements that
are forward-looking. These statements are based on current expectations and
assumptions that are subject to risks and uncertainties. Actual results could
differ materially because of factors discussed in this prospectus, as well as
factors not within our control. We undertake no duty to update any
forward-looking statement to conform the statement to actual results or changes
in our expectations.

On April 2, 2004, we completed our acquisition of 100% of the issued
and outstanding capital stock of Syscan, Inc., pursuant to a Share Exchange
Agreement ("Agreement") dated March 29, 2004. Pursuant to the Agreement, the
sole stockholder of Syscan, Inc., Syscan Imaging Limited, received 18,773,514
post-reverse split shares of our common stock in exchange for all of the issued
and outstanding capital stock of Syscan, Inc. In connection with the issuance of
our common stock to Syscan Imaging Limited, Syscan Imaging Limited beneficially
became the owner of 81.2% of our issued and outstanding voting securities.

-41-

Upon completion of the reverse acquisition, we changed our name to
Syscan Imaging, Inc. from Bank Engine Technologies, Inc. and effectuated a
1-for-10 reverse split of our common stock. Pursuant to the Agreement, the
following persons were appointed to our board of directors: Darwin Hu, Wai
Cheung, Peter Mor and Lawrence Liang. Michael Xirinachs resigned as Chairman and
Chief Executive Officer, but remained as a director until his resignation on
July 19, 2004. Concurrent with the closing on April 2, 2004, the Board of
Directors appointed Darwin Hu as our President and Chief Executive Officer,
Stephen Yim as our Chief Financial Officer (Mr. Yim was subsequently terminated
as our Chief Financial Officer on February 4, 2005) and William Hawkins as our
Chief Operating Officer and Secretary. A more detailed description of this
transaction is set forth in our Current Report on Form 8-K dated April 2, 2004,
filed with the Securities and Exchange Commission on April 19, 2004.

Our strategy is to expand our image capture product line and technology
while leveraging our assets in other areas of the imaging industry. We are
actively shipping five image capture products under the Travel Scan marquee or
their OEM counterparts. The Travel Scan series features portable lightweight
scanning in color and black & white with low power consumption that requires no
power adapter. The 2300U-USB is a 300dpi A4 scanner which represented
approximately 7% of our sales during the year ended December 31, 2004. The 464,
like the 2300 series, is an A4 scanner with 600dpi resolution as opposed to
300dpi resolution. The 464 is currently our most popular A4 product and
represented approximately 22% of our sales for the year ended December 31, 2004.
The 662 has an A6 scanning area ideal for photos, checks, passports and various
identification cards. The 662 is our first product geared towards, and being
implemented in, the fast growing security industry. The 662 is our best selling
product and represented approximately 45% of our sales during the 12 months
ended December 31, 2004. Our fifth product representing approximately 6% of our
sales during the 12 months ended December 31, 2004, is the 860 Business Card
reader. A different version of the 860 represents approximately 12% of our 860
Business Card reader sales on the product and was specifically designed for an
OEM customer that maintains the leading market share for this category of
products worldwide. In addition to the Travel Scan product line, we also
manufacture and sell the Contact Image Sensor (CIS) Modules that we use in our
products and separately as a component to other manufacturers. These
manufacturers, that we sell our modules to, integrate our modules into their
products. The product application typically includes check and currency
scanners, copiers, and fax machines, and resell the finished product to the
retailer. The CIS business represented approximately 5% of our overall sales
during the 12 months ended December 31, 2004.

-42-

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

CRITICAL ACCOUNTING POLICIES

Our discussion and analysis is based upon our consolidated financial
statements, which have been prepared in accordance with accounting principles
generally accepted in the United States. The preparation of these financial
statements requires us to make estimates and judgments that affect the reported
amounts of assets, liabilities, revenues and expenses, and related disclosure of
contingent assets and liabilities. On an on-going basis, we evaluate our
estimates, including those related to revenue recognition, accounts receivable
and allowance for doubtful accounts, inventories, intangible and long-lived
assets, and income taxes. We base our estimates on historical experience and on
various other assumptions that are believed to be reasonable under the
circumstances, the results of which form the basis for making judgments about
the carrying values of assets and liabilities that are not readily apparent from
other sources. Actual results may differ from these estimates under different
assumptions or conditions.

-43-

An accounting policy is deemed to be critical if it requires an
accounting estimate to be made based on assumptions about matters that are
highly uncertain at the time the estimate is made, and if different estimates
that reasonably could have been used or changes in the accounting estimate that
are reasonably likely to occur could materially change the financial statements.
We believe the following critical accounting policies reflect our more
significant estimates and assumptions used in the preparation of our
consolidated financial statements:

REVENUE RECOGNITION

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

ACCOUNTS RECEIVABLE AND ALLOWANCE FOR DOUBTFUL ACCOUNTS

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

INVENTORIES

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

-44-

INTANGIBLE AND LONG-LIVED ASSETS

We evaluate our intangible assets and long-lived assets, which
represent goodwill, long-term investments, and fixed assets, for impairment
annually and when circumstances indicate the carrying value of an asset may not
be recoverable. If impairment exists, an adjustment is made to write the asset
down to its fair value, and a loss is recorded as the difference between the
carrying value and fair value would be charged to operations. We do not believe
any impairment exists for any of these types of assets as of December 31, 2004.

INCOME TAXES

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

CONTINGENCIES

Currently, there are no outstanding legal proceedings or claims, other
than that disclosed in Note 8 of the Consolidated Financial Statements. The
outcomes of potential legal proceedings and claims brought against us are
subject to significant uncertainty. SFAS 5, Accounting for Contingencies,
requires that an estimated loss from a loss contingency such as a legal
proceeding or claim should be accrued by a charge to income if it is probable
that an asset has been impaired or a liability has been incurred and the amount
of the loss can be reasonably estimated. Disclosure of a contingency is required
if there is at least a reasonable possibility that a loss has been incurred. In
determining whether a loss should be accrued we evaluate, among other factors,
the degree of probability of an unfavorable outcome and the ability to make a
reasonable estimate of the amount of loss. Changes in these factors could
materially impact our financial position or results of operations.

RESULTS OF OPERATIONS - TWELVE MONTHS ENDED DECEMBER 31, 2004 COMPARED TO
DECEMBER 31, 2003

REVENUE

Product revenues decreased to $6.058 million for the year ended
December 31, 2004 from $7.457 million for the same period in fiscal 2003, a
decrease of $1.4 million or approximately 18.8%. The decrease in revenues for
the year ended December 31, 2004 as compared to the same period in fiscal 2003
is the result of delayed new product introductions. Scanner products and imaging
modules comprised approximately 99% of our revenues during each of these
periods. Our revenue mix has been gradually trending towards the Value Added
Reseller (VAR) and small office home office (SOHO) markets, which is a result of
our efforts to appeal to customers in these sales channels. During the year
ended December 31, 2004 three of our customers accounted for approximately 69%
of total revenues. During the year ended December 31, 2003, three customers
accounted collectively for approximately 59% of total revenues. The loss of any
of our largest clients could have a material adverse effect on our business.

-45-

COST OF SALES

Cost of goods sold (COGS) includes all direct costs related to the
transfer of scanners, imaging modules and services related to the delivery of
those items manufactured in China. A relatively small percentage (< 1%) of COGS
is due to engineering services provided by us. COGS was approximately 68.8% for
the year ended December 31, 2004 compared to 68.2% for the same period in 2003.
COGS increased as a percentage of revenues for the year ended December 31, 2004
as compared to the same period in 2003 primarily as a result of higher gross
margins and better pricing elasticity than projected. We anticipate that our
COGS may continue to increase during 2005 as a result of higher source costs
from Mainland China as market insecurities and higher fuel prices persist.

GROSS PROFIT

Gross profit decreased to $1,890,000 or 31.2% of net revenues for the
year ended December 31, 2004 from $2,367,000, or 31.7% of net revenues for the
same period in 2003. The decrease in gross profit is primarily a result of a
change in payment terms, with our Mainland China supplier during the 3rd and 4th
quarters of 2004. We anticipate that our gross profit margins may continue to
decrease as our main supplier's source costs and logistics costs are projected
to continue to rise during 2005, which will result in our paying higher prices
for the purchase of our products.

SELLING AND MARKETING

Selling and marketing expenses include payroll, employee benefits and
other costs associated with sales, marketing and account management personnel.
Other direct selling and marketing costs include market development funds and
promotions (retail channels only), tradeshows, website support costs,
warehousing, logistics and certain sales representative fees. Selling and
marketing expenses increased to $745,557 for the year ended December 31, 2004
from $635,966 for the same period in 2003, an increase of $109,000 or
approximately 17%. The increase during the year ended December 31, 2004 is
primarily attributable to changes in staffing and marketing activities related
to the display imaging (LCD panel) group.

GENERAL AND ADMINISTRATIVE

General and administrative costs include payroll, employee benefits,
and other headcount-related costs associated with the finance, legal, facilities
and certain human resources, as well as legal and other professional and
administrative fees. General and administrative expenses increased to $827,294
for the year ended December 31, 2004 from $625,156 for the same period in fiscal
2003, an increase of $202,138 or approximately 32.3%. The increase for the year
ended December 31, 2004 is primarily attributable to additional personnel costs
in China, outside fees incurred in connection with our public listing compliance
expenses and the addition of senior financial management personnel.

OTHER INCOME (EXPENSE)

Our other income for the year ended December 31, 2004 was $31,521
compared to $529,650 during the same period of 2003, a decrease of $498,129.
Other income in 2004 primarily consisted of collection of a former receivable
written off and sale of inventory previously considered slow-moving. Other
income in 2003 also consisted of former receivables written off and subsequently
sold.

NET (LOSS) EARNINGS

Net loss for the year ended December 31, 2004 was $(179,866) compared
to net earnings of $835,232 during the same period in 2003. The decrease in net
earnings was primarily the result of a decrease in other income of $498,129, an
increase in general and administrative expenses of $202,138, an increase in
selling and marketing expenses of $109,000 and a slight increase in COGS and a
decrease in gross profit margin.

-46-

RELATED PARTY TRANSACTIONS

We purchase significantly all of our finished scanner imaging products
from the parent company of our majority stockholder, Syscan Technology Holdings
Limited ("STH"). Our Chairman and CEO, Darwin Hu, was formerly the CEO of STH,
and beneficially owns approximately 5.33% of the issued and outstanding capital
stock of STH. The following is a summary of significant related party
transactions, which were carried out in the normal course of our business,
during the years ended December 31, 2004 and 2003:

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

2004 2003
---------------- ----------------

SYSCAN Intervision Limited,
a wholly-owned subsidiary of $3.825M $4.480M
STH (purchases)
================ ================

SYSCAN Optoelectronics Technology
(Shenzhen) Company Limited,
a wholly-owned subsidiary of STH
(purchases) $0.520M $--
================ ================

AMOUNTS DUE TO/FROM RELATED PARTIES ARE UNSECURED, INTEREST-FREE AND REPAYABLE
ON DEMAND AND CONSISTED OF THE FOLLOWING:

AMOUNTS DUE FROM RELATED PARTIES:

Due from STH $345,998

Due from Majority Stockholder $100,000

Due from various subsidiaries wholly-owned by STH $1,818,989
==========

LIQUIDITY AND CAPITAL RESOURCES

Cash and cash equivalents were approximately $687,403 as of December
31, 2004 compared to approximately $1,020,000 as of December 31, 2003, a
decrease of approximately 32.6%. Working capital at December 31, 2004 was
approximately $3,747,520 as compared to approximately $3,940,000 at December 31,
2003, a decrease of approximately 4.9%. The decrease in cash and working capital
is primarily attributable to our prepayment of certain tooling expenses, an
increase in legal fees as a result of the acquisition, and trade show expenses.

Operating Activities. Net cash flows used in operating activities was $26,009
and $41,540 for the year ended December 31, 2004 and 2003, respectively. Net
cash used in operating activities for 2004 primarily reflects net loss adjusted
by cash collections from accounts receivables offset by prepayments for deposits
and payments on outstanding debt. Net cash used in operating activities for 2003
primarily reflects net income adjusted for a reversal of provision for
slow-moving inventories increased by trade receivables and an increase in
accounts payable and other accruals.

-47-

INVESTING ACTIVITIES. Net cash flows provided by (used in) investing activities
during each of 2004 and 2003 were minimal.

FINANCING ACTIVITIES. Net cash flows provided by (used in) financing activities
for the year ended December 31, 2004 and 2003 was ($308,389) and $728,775,
respectively. Cash flows from financing activities for 2004 consists of advances
under our line of credit totaling $700,000 to fund working capital and funds
advanced under a letter of credit totaling $233,036 for goods shipped on
account. For both periods presented, advances to and/or repayments from related
party receivables and payables were made in the ordinary course of business.

We have financed our activities primarily with cash flows from
operations and borrowings under our credit facilities. We have a $1,000,000 bank
line of credit, which bears interest at prime plus one percent, which is secured
by all of our general business assets. The subject bank line of credit had
$700,000 outstanding as of December 31, 2004. In March 2005, we sold an
aggregate of $1.865 million of our Series A Convertible Preferred Stock to
accredited investors. We believe that our line of credit or other financing
arrangements, existing working capital and anticipated cash flows from
operations will be adequate to satisfy our operating and capital requirements
for the next 12 months at our current run rate and without any further
expansion. In order to implement our growth strategy and expansion into the
image display area, additional funds will be required.

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

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

CONCENTRATION OF CREDIT RISK

Concentration of credit risk for cash held at banks. We maintain cash balances
at several banks. Accounts at each institution are insured by the Federal
Deposit Insurance Corporation up to $100,000.

Concentration of credit risk due to geographic sales and significant customers.
We operate in a single industry segment - scanner and fax modules. We market our
products in the United States, Europe and the Asia Pacific region through our
sales personnel and independent sales representatives.

Our geographic sales as a percent of total revenue were as follows for the years
ended December 31:

2004 2003
--------------- --------------
United States 93% 80%
Asia Pacific 2% 13%
Europe and others 5% 7%

-48-

Sales to major customers as a percentage of total revenues were as follows for
the years ended December 31:

2004 2003
------------ --------------
Customer A 38% 41%
Customer B 16% 9%
Customer C 15% 9%

CONCENTRATION OF CREDIT RISK DUE TO ACCOUNTS RECEIVABLE. Financial instruments
that potentially subject us to a concentration of credit risk consist primarily
of trade receivables. Our customers are concentrated in the industrial/consumer
electronics channels and with major original equipment manufacturers. As of
December 31, 2004 and 2003, the concentration was approximately 89% (2
customers) and 82% (5 customers), respectively. The loss of any of these
customers could have a material adverse effect on our results of operations,
financial position and cash flows.

CONCENTRATION OF CREDIT RISK DUE TO SIGNIFICANT VENDORS. For each of the years
ended December 31, 2004 and 2003, our purchases have primarily been concentrated
with the wholly-owned subsidiary of our majority stockholder. If this vendor was
unable to provide materials in a timely manner and we were unable to find
alternative vendors, our business, operating results and financial condition
would be materially adversely affected.

CONCENTRATION OF CREDIT RISK DUE TO PRODUCT SALES. We had 4 different products
in 2004 and 2 different products in 2003 that each accounted for more than 10%
of sales. If any of these products were to become obsolete or unmarketable and
we were unable to successfully develop and market alternative products, our
business, operating results and financial condition could be adversely affected

OFF-BALANCE SHEET ARRANGEMENTS

We do not have any transactions, agreements or other contractual
arrangements that constitute off-balance sheet arrangements.

CONTRACTUAL OBLIGATIONS

Our Contractual Obligations and Commercial Commitments are detailed below:

---------------------------- ------------------------------------------------------------------
Payments Due by Period

Contractual
Obligations
---------------------------- ------------------------------------------------------------------
Less
Than 1 1-3 4 - 5 After 5
Total Year Years Years Years
---------------------------- --------------- ------------ -------------- ---------- -----------

Line of Credit (1) $700,000 $700,000 -- -- --
---------------------------- --------------- ------------ -------------- ---------- -----------
Letter of credit (2) $233,036 $233,036 -- -- --
---------------------------- --------------- ------------ -------------- ---------- -----------
Operating Leases (3) $207,000 $106,000 $101,000 -- --
---------------------------- --------------- ------------ -------------- ---------- -----------
Total Cash Contractual
Obligations
$1,140,036 $1,039,036 $101,000 -- --
---------------------------- --------------- ------------ -------------- ---------- -----------

(1) LINE OF CREDIT - We have a line of credit to borrow up to $1,000,000,
bearing interest at the rate of prime plus 1%, (6% at December 31, 2004) and
secured by all of our assets. Interest payments are due monthly and all unpaid
interest and principal is due in full on August 24, 2005. Upon certain events of
defaults as more fully described in the agreement, the default variable interest
rate increases to prime plus 3%. We had $300,000 available for use at December
31, 2004.

(2) LETTER OF CREDIT - We issue letters of credit in the normal course of
business. The amount outstanding as of December 31, 2004, represents one letter
of credit for goods shipped to a related entity, expiring on January 15, 2005.

(3) OPERATING LEASES - We are committed under various non-cancelable operating
leases which expire through November 2006. Future minimum rental commitments are
as follows: 2005-$106,000 and 2006-$101,000. Rent expense charged to operations
was approximately $95,000 for 2004 (2003: $99,000).

-49-

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

MANUFACTURING

All of our products are manufactured by Syscan Technology Holdings
(STH), the parent company of our majority stockholder. We and STH have
established an internal-pricing agreement that is updated on a semi-annual
basis. STH currently serves as the manufacturer of all current image capture
products produced by us. We believe, for quality control and pricing reasons,
this type of relationship is more favorable then could be attained from
unaffiliated third-parties. We purchase and provide STH with critical parts and
components necessary to manufacture our products.

THE FOLLOWING IS A SUMMARY OF SIGNIFICANT RELATED PARTY PURCHASE TRANSACTIONS,
WHICH WERE CARRIED OUT IN THE NORMAL COURSE OF OUR BUSINESS:

2004 2003
------------------ -------------------

SYSCAN Intervision Limited $ 3,825,482 $ 4,418,415
================== ===================

SYSCAN Optoelectronics Technology
(Shenzhen) Company Limited
$ 520,200 $ -
================== ===================

AMOUNTS DUE TO/FROM RELATED PARTIES ARE UNSECURED, INTEREST-FREE AND REPAYABLE
ON DEMAND AND CONSISTED OF THE FOLLOWING:

December 31, 2004
Amounts due from related parties:
Due from STH $ 345,998

Due from our majority stockholder 100,000

Due from various subsidiaries wholly-owned by STH 1,818,989

----------------
Total $ 2,264,987
================

-50-

In February 2005, the independent members of our board of directors
approved employment agreements and option issuances to each of Darwin Hu, our
Chief Executive Officer, William Hawkins, our Chief Operating Officer and Acting
Chief Financial Officer, and David Clark, our Senior Vice President of Business
Development. Upon execution of the employment agreements referred to above, each
of Messrs. Hu, Hawkins and Clark will be granted options to purchase 1,500,000,
1,000,000 and 800,000 shares of our common stock, respectively, at an exercise
price of $0.01 per share. Such options shall vest one-third on the later to
occur of: (i) April 4, 2005; and (ii) the execution of such employment
agreement, one-third shall vest on April 3, 2006 and one-third shall vest on
April 2, 2007. Pursuant to such employment agreements, each of Messrs. Hu,
Hawkins and Clark shall be entitled to receive annual salaries of $200,000,
$160,000 and $150,000, respectively.

Other than those described above, we have no material transactions
which involved or are planned to involve a direct or indirect interest of a
director, executive officer, greater than 5% stockholder or any family member of
such parties.

We believe that all of the transactions set forth above were made on
terms no less favorable to us than could have been obtained from unaffiliated
third parties. All future transactions between us and our officers, directors
and principal shareholders and their affiliates will be on terms no less
favorable than could be obtained from unaffiliated third parties and will be
approved by the independent members of our board of directors.

To the best of our knowledge, other than as set forth above, there were
no material transactions, or series of similar transactions, or any currently
proposed transactions, or series of similar transactions, to which we were or
are to be a party, in which the amount involved exceeds $60,000, and in which
any director or executive officer, or any security holder who is known by us to
own of record or beneficially more than 5% of any class of our common stock, or
any member of the immediate family of any of the foregoing persons, has an
interest.

[remainder of page intentionally left blank]

-51-

MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

MARKET INFORMATION. Our common stock has been listed and quoted on the
OTC Bulletin Board since December 1998. From January 1, 2003 through April 1,
2004 our common stock traded under the symbol "BKET" and since April 2, 2004
under the symbol "SYII". All prices reflected herein have been adjusted to
reflect the 1-for-10 reverse split of our common stock that was effected on
April 2, 2004.

The following chart sets forth the high and low bid prices for each
quarter during the fiscal years ended December 31, 2003 and 2004, respectively.
Such prices represent quotations between dealers, without dealer markup,
markdown or commissions, and may not represent actual transactions.

HIGH LOW
---- ---

2003 by Quarter
January 1 - March 31 $1.90 $0.20
April 1 - June 30 $0.50 $0.20
July 1 - September 30 $0.50 $0.15
October 1 - December 31 $1.50 $0.25

2004 by Quarter
January 1 - March 31 $4.20 $0.70
April 1 - June 30 $4.75 $1.10
July 1 - September 30 $4.26 $1.40
October 1 - December 31 $4.10 $2.05

On April 22, 2005, the closing sale price for shares of our common
stock in the over-the-counter market, as reported by NASD's OTCBB was $0.75.

No prediction can be made as to the effect, if any, that future sales
of shares of our common stock or the availability of our common stock for future
sale will have on the market price of our common stock prevailing from
time-to-time. Sales of substantial amounts of our common stock in the public
market could adversely affect the prevailing market price of our common stock.

RECORD HOLDERS. As of the date hereof there were 359 record holders of our
common stock. As of the date hereof there were 23,110,515 shares of common stock
issued and outstanding.

DIVIDENDS. We have not paid dividends on our common stock in the past and do not
anticipate doing so in the foreseeable future. We currently intend to retain
future earnings, if any, to fund the development and growth of our business. The
holders of our Series A Preferred Stock are entitled to receive dividends at a
rate of 5% per annum, payable in cash or shares of our common stock, on a
cumulative basis.

-52-

EQUITY COMPENSATION PLAN INFORMATION

------------------------------- --------------------- --------------------- -----------------------
Number of Weighted average Number of securities
securities to be exercise price of remaining available
issued upon outstanding for future issuance
exercise of options, warrants under equity
outstanding and rights compensation plans
options, warrants (excluding securities
and rights reflected in column

(a) (b) (a) (c)
------------------------------- --------------------- --------------------- -----------------------

Equity compensation plans 200,000 $2.00 -0-
approved by security holders
------------------------------- --------------------- --------------------- -----------------------
Equity compensation plans not 2,000,000 $2.00 5,165,000(1)
approved by security holders
------------------------------- --------------------- --------------------- -----------------------
Total 2,200,000 $2.0066 5,165,000(1)
------------------------------- --------------------- --------------------- -----------------------
(1) Includes up to 4,000,000 options previously approved by the
independent members of the board of director to be issued to officers, certain
employees and consultants to us in connection with the execution of previously
approved employment and consulting agreements. None of such 4,000,000 options
have been issued as of the date hereof.

-53-

EXECUTIVE COMPENSATION

The following table sets forth, for the fiscal years indicated, all
compensation awarded to, paid to or earned by the following type of executive
officers for the fiscal years ended December 31, 2002, 2003 and 2004: (i)
individuals who served as, or acted in the capacity of, our principal executive
officer for the fiscal year ended December 31, 2004; and (ii) our other most
highly compensated executive officers, who together with the principal executive
officer are our most highly compensated officers whose salary and bonus exceeded
$100,000 with respect to the fiscal years ended December 31, 2004, 2003 and 2002
and who were employed by us at the end of fiscal year 2004.

SUMMARY COMPENSATION TABLE*

Long Term Compensation
----------------------
ANNUAL COMPENSATION AWARDS PAYOUTS
-------------------------------------------- ---------------------- ------------------------
OTHER SECURITIES
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS ANNUAL RESTRICTED UNDERLYING LTIP ALL OTHER
COMPEN- STOCK OPTIONS/ PAYOUTS COMPENSATION
SATION AWARD(S) SARS
($) ($) ($) ($) (#) ($) ($)

Darwin Hu, Chief Executive 2004 200,000 -- -- -- -- -- --
Officer and Chairman

2003 200,000 -- -- -- -- -- --
2002 200,000 -- -- -- -- -- --

William Hawkins 2004 160,000 -- -- -- -- -- --
Chief Operating Officer,
Acting Chief Financial
Officer and Secretary
2003 160,000 -- -- -- -- -- --
2002 160,000 -- -- -- -- -- --

David Clark 2004 68,750 -- -- -- -- -- --
Senior Vice President of
Business Development (1)

Stephen Yim 2004 97,307 -- -- -- -- -- --
Former Chief Financial
Officer(2)

-------------------------
* Salary reflects total compensation paid to these executives (both before
and after the merger described in Item 1).

(1) Mr. Clark became Senior Vice President of Business Development in July 2004
and is paid an annual salary of $150,000.

(2) Mr. Yim was our Chief Financial Officer from April 2004 through February 4,
2005 and was paid an annual salary of $120,000. Mr. Yim is no longer
employed by us.

-54-

OPTION GRANTS IN FISCAL 2004

The following table sets forth certain information regarding stock options
held as of December 31, 2004 by the named executive officers.

Number of
Securities % of Total Granted
Underlying to Employees in Exercise Expiration
Options Fiscal Year Price ($/Sh) Date
Name and Principal Position Granted

Darwin Hu 560,000 25.5% $2.00 July 20, 2014
President and Chief Executive Officer
William Hawkins 360,000 16.4% $2.00 July 20, 2014
Chief Operating Officer, Acting Chief
Financial Officer and Secretary

David Clark 400,000 18.2% $2.00 July 20, 2014
Senior Vice President of Business Development

Stephen Yim 220,000 10.0% $2.00 May 4, 2005
Former Chief Financial Officer

AGGREGATE OPTIONS EXERCISEABLE IN LAST FISCAL YEAR
AND FISCAL YEAR END OPTION VALUES

Number of Securities Value of Unexercised
Underlying Unexercised In-the-Money Options
Options at December 31, 2004 at December 31, 2004 (1)
---------------------------- ------------------------
Name and Principal Position Exercisable Unexercisable Exercisable Unexercisable
--------------------------- ----------- ------------- ----------- -------------
Darwin Hu -0- 560,000 $ 0 $ 616,000
President, Chief Executive Officer
and Chairman of the Board

William Hawkins -0- 360,000 $ 0 $ 396,000
Chief operating Officer, Acting Chief
Financial Officer and Secretary

David Clark -0- 400,000 $ 0 $ 440,000
Vice President of Business Development

Stephen Yim -0- 220,000 $ 0 $ 242,000
Former Chief Financial Officer (2)

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

(1) As of December 31, 2004, the market value of a share of common stock was $3.10.

(2) On February 4, 2005, Mr. Yim was terminated as our Chief Financial
Officer and the Board of Directors agreed to allow 55,000 options to
immediately vest. Additionally, 165,000 options expired immediately
upon such termination. The 55,000 options are exercisable through May
4, 2005.

No shares were exercised by named executive officers in fiscal year ended
December 31, 2004.

-55-

As of December 31, 2004, options to purchase a total of 2,200,000
shares of common stock were granted under our 2002 Amended and Restated Stock
option Plan, at an exercise price of $2.00 per share. One-fourth of the options
granted vest on the first anniversary, one-fourth of the options granted vest on
the second anniversary, one-fourth of the options granted vest on the third
anniversary and one-fourth of the options vest on the fourth anniversary. The
options expire on the ten year anniversary of their grant date.

All options described above have been issued pursuant to the 2002
Amended and Restated Stock Option Plan described below and are subject to
shareholder approval.

2002 AMENDED AND RESTATED STOCK OPTION PLAN

DESCRIPTION OF THE 2002 PLAN

THE PURPOSE OF THE 2002 PLAN. The purpose of the 2002 Plan is to
provide additional incentive to our directors, officers, employees and
consultants to us who are primarily responsible for our management and growth.
Each option shall be designated at the time of grant as either an incentive
stock option (an "ISO") or as a non-qualified stock option (a "NQSO").

Each option shall be designated at the time of grant as either an
incentive stock option (an "ISO") or a non-qualified stock option (a "NQSO").
The Board of Directors believes that the ability to grant stock options to
employees which qualify for ISO treatment provides an additional material
incentive to certain key employees. The Internal Revenue Code requires that ISOs
be granted pursuant to an option plan that receives shareholder approval within
one year of its adoption. We adopted the 2002 Plan in order to comply with this
statutory requirement and preserve its ability to grant ISOs.

The benefits to be derived from the 2002 Plan, if any, are not
quantifiable or determinable.

ADMINISTRATION OF THE PLAN. The 2002 Plan shall be administered by the
Board of Directors, or by any committee that we may in the future form and to
which the Board of Directors may delegate the authority to perform such
functions (in either case, the "Administrator"). The Board of Directors shall
appoint and remove members of the committee in its discretion in accordance with
applicable laws. In the event that we establish such a committee and are
required to comply with Rule 16b-3 under the Exchange Act and Section 162(m) of
the Internal Revenue Code (the "Code"), the committee shall, in the Board of
Director's discretion, be comprised solely of "non-employee directors" within
the meaning of said Rule 16b-3 and "outside directors" within the meaning of
Section 162(m) of the Code. Notwithstanding the foregoing, the Administrator may
delegate non-discretionary administrative duties to any of our employees as it
deems proper and the Board of Directors, in its absolute discretion, may at any
time and from time to time exercise any and all rights and duties of the
Administrator under the 2002 Plan.

Subject to the other provisions of the 2002 Plan, the Administrator
shall have the authority, in its discretion: (i) to grant options; (ii) to
determine the fair market value of the Common Stock subject to options; (iii) to
determine the exercise price of options granted; (iv) to determine the persons
to whom, and the time or times at which, options shall be granted, and the
number of shares subject to each option; (v) to interpret the 2002 Plan; (vi) to
prescribe, amend, and rescind rules and regulations relating to the 2002 Plan;
(vii) to determine the terms and provisions of each option granted (which need
not be identical), including but not limited to, the time or times at which
options shall be exercisable; (viii) with the consent of the optionee, to modify
or amend any option; (ix) to defer (with the consent of the optionee) the
exercise date of any option; (x) to authorize any person to execute on our
behalf any instrument evidencing the grant of an option; and (xi) to make all
other determinations deemed necessary or advisable for the administration of the
2002 Plan. The Administrator may delegate non-discretionary administrative
duties to any of our employees as it deems proper.

-56-

SHARES OF STOCK SUBJECT TO THE 2002 PLAN. Subject to the conditions
outlined below, the total number of shares of stock which may be issued under
options granted pursuant to the 2002 Plan shall not exceed 200,000 shares of
Common Stock, $.001 par value per share. In April 2004, the Board of Directors
unanimously voted to increase the total number of shares of stock which may be
issued under options granted pursuant to the 2002 Plan from 200,000 to 2,200,000
and subsequently increased in July 2004 to 3,200,000. Our stockholders will be
asked to ratify the increase in the authorized number of shares of stock that
may be issued under the 2002 Plan at the next annual meeting of stockholders.

The number of shares of Common Stock subject to options granted
pursuant to the 2002 Plan may be adjusted under certain conditions. If our stock
changed by reason of a stock split, reverse stock split, stock dividend,
recapitalization, combination or reclassification, appropriate adjustments shall
be made by the Board of Directors in (i) the number and class of shares of stock
subject to the 2002 Plan, and (ii) the exercise price of each outstanding
option; provided, however, that we shall not be required to issue fractional
shares as a result of any such adjustments. Each such adjustment shall be
subject to approval by the Board of Directors in its sole discretion.

In the event of the proposed dissolution or liquidation of us, the
Administrator shall notify each optionee at least thirty days prior to such
proposed action. To the extent not previously exercised, all options will
terminate immediately prior to the consummation of such proposed action;
provided, however, that the Administrator, in the exercise of its sole
discretion, may permit exercise of any options prior to their termination, even
if such options were not otherwise exercisable. In the event that we merge or
consolidate with or into another corporation or entity in which we do not
survive, or in the event of a sale of all or substantially all of our assets in
which our shareholders receive securities of the acquiring entity or an
affiliate thereof, all options shall be assumed or equivalent options shall be
substituted by the successor corporation (or other entity) or a parent or
subsidiary of such successor corporation (or other entity); provided, however,
that if such successor does not agree to assume the options or to substitute
equivalent options therefor, the Administrator, in the exercise of its sole
discretion, may permit the exercise of any of the options prior to consummation
of such event, even if such options were not otherwise exercisable.

PARTICIPATION. Every person who at the date of grant of an option is an
employee of ours or of any Affiliate (as defined below) of our is eligible to
receive NQSOs or ISOs under the 2002 Plan. Every person who at the date of grant
is a consultant to, or non-employee director of, us or any Affiliate (as defined
below) of us is eligible to receive NQSOs under the 2002 Plan. The term
"Affiliate" as used in the 2002 Plan means a parent or subsidiary corporation as
defined in the applicable provisions (currently Sections 424(e) and (f),
respectively) of the Code. The term "employee" includes an officer or director
who is an employee of ours. The term "consultant" includes persons employed by,
or otherwise affiliated with, a consultant.

OPTION PRICE. The exercise price of a NQSO shall be not less than 85%
of the fair market value of the stock subject to the option on the date of
grant. To the extent required by applicable laws, rules and regulations, the
exercise price of a NQSO granted to any person who owns, directly or by
attribution under the Code (currently Section 424(d)), stock possessing more
than 10% of the total combined voting power of all of our classes of stock or of
any Affiliate (a "10% Shareholder") shall in no event be less than 110% of the
fair market value of the stock covered by the option at the time the option is
granted. The exercise price of an ISO shall be determined in accordance with the
applicable provisions of the Code and shall in no event be less than the fair
market value of the stock covered by the option at the time the option is
granted. The exercise price of an ISO granted to any 10% Percent Shareholder
shall in no event be less than 110% of the fair market value of the stock
covered by the Option at the time the Option is granted.

-57-

TERM OF THE OPTIONS. The Administrator, in its sole discretion, shall
fix the term of each option, provided that the maximum term of an option shall
be ten years. ISOs granted to a 10% Shareholder shall expire not more than five
years after the date of grant. The 2002 Plan provides for the earlier expiration
of options in the event of certain terminations of employment of the holder.

RESTRICTIONS ON GRANT AND EXERCISE. Except with the express written
approval of the Administrator which approval the Administrator is authorized to
give only with respect to NQSOs, no option granted under the 2002 Plan shall be
assignable or otherwise transferable by the optionee except by will or by
operation of law. During the life of the optionee, an option shall be
exercisable only by the optionee.

TERMINATION OF THE 2002 PLAN. The 2002 Plan shall become effective upon
adoption by the Board or Directors; provided, however, that no option shall be
exercisable unless and until written consent of the our shareholders, or
approval of our shareholders voting at a validly called shareholders' meeting,
is obtained within twelve months after adoption by the Board of Directors. If
such shareholder approval is not obtained within such time, options granted
pursuant to the 2002 Plan shall be of the same force and effect as if such
approval was obtained except that all ISOs granted pursuant to the 2002 Plan
shall be treated as NQSOs. Options may be granted and exercised under the 2002
Plan only after there has been compliance with all applicable federal and state
securities laws. The 2002 Plan shall terminate within ten years from the date of
its adoption by the Board of Directors.

TERMINATION OF EMPLOYMENT. If for any reason other than death or
permanent and total disability, an optionee ceases to be employed by us or any
of our Affiliates (such event being called a "Termination"), options held at the
date of Termination (to the extent then exercisable) may be exercised in whole
or in part at any time within three months of the date of such Termination, or
such other period of not less than thirty days after the date of such
Termination as is specified in the Option Agreement or by amendment thereof (but
in no event after the expiration date of the option (the "Expiration Date"));
provided, however, that if such exercise of the option would result in liability
for the optionee under Section 16(b) of the Exchange Act, then such three-month
period automatically shall be extended until the tenth day following the last
date upon which optionee has any liability under Section 16(b) (but in no event
after the Expiration Date). If an optionee dies or becomes permanently and
totally disabled (within the meaning of Section 22(e)(3) of the Code) while
employed by us or an Affiliate or within the period that the option remains
exercisable after Termination, options then held (to the extent then
exercisable) may be exercised, in whole or in part, by the optionee, by the
optionee's personal representative or by the person to whom the option is
transferred by devise or the laws of descent and distribution, at any time
within twelve months after the death or twelve months after the permanent and
total disability of the optionee or any longer period specified in the Option
Agreement or by amendment thereof (but in no event after the Expiration Date).
"Employment" includes service as a director or as a consultant. For purposes of
the 2002 Plan, an optionee's employment shall not be deemed to terminate by
reason of sick leave, military leave or other leave of absence approved by the
Administrator, if the period of any such leave does not exceed 90 days or, if
longer, if the optionee's right to reemployment by us or any Affiliate is
guaranteed either contractually or by statute.

AMENDMENTS TO THE PLAN. The Board of Directors may at any time amend,
alter, suspend or discontinue the 2002 Plan. Without the consent of an optionee,
no amendment, alteration, suspension or discontinuance may adversely affect
outstanding options except to conform the 2002 Plan and ISOs granted under the
2002 Plan to the requirements of federal or other tax laws relating to ISOs. No
amendment, alteration, suspension or discontinuance shall require Shareholder
approval unless (i) shareholder approval is required to preserve incentive stock
option treatment for federal income tax purposes or (ii) the Board of Directors
otherwise concludes that shareholder approval is advisable.

-58-

TAX TREATMENT OF THE OPTIONS. Under the Code, neither the grant nor the
exercise of an ISO is a taxable event to the optionee (except to the extent an
optionee may be subject to alternative minimum tax); rather, the optionee is
subject to tax only upon the sale of the Common Stock acquired upon exercise of
the ISO. Upon such a sale, the entire difference between the amount realized
upon the sale and the exercise price of the option will be taxable to the
optionee. Subject to certain holding period requirements, such difference will
be taxed as a capital gain rather than as ordinary income. Optionees who receive
NQSOs will be subject to taxation upon exercise of such options on the spread
between the fair market value of the Common Stock on the date of exercise and
the exercise price of such options. This spread is treated as ordinary income to
the optionee, and we are permitted to deduct as an employee expense a
corresponding amount. NQSOs do not give rise to a tax preference item subject to
the alternative minimum tax.

EMPLOYMENT AGREEMENTS

The independent members of our board of directors have approved the terms of
each of the employment agreements described below. We intend to enter into the
employment agreements described below with each of the following persons.

Darwin Hu as our President and Chief Executive Officer. The agreement
provides for an initial term of three years, an annual salary to Mr. Hu of
$200,000 and an annual bonus to be determined by our board of directors. In
connection with the agreement, Mr. Hu was issued non-qualified options to
purchase up to 1,500,000 shares of our common stock at an exercise price of
$0.01 per share. One-third of the options shall vest on the later to occur of:
(i) April 4, 2005, and (ii) execution of the employment agreement, one-third
shall vest on April 3, 2006 and one-third shall vest on April 2, 2007. The
agreement also provides for the executive's ability to participate in our health
insurance program. In the event that Mr. Hu's employment is terminated other
than with good cause, he will receive a payment of the lesser of his then
remaining salary due pursuant to the employment agreement or six months of base
salary at his then current annual salary.

William Hawkins as our Chief Operating Officer. The agreement provides
an initial term of three years, an annual salary to Mr. Hawkins of $160,000 and
an annual bonus to be determined by our board of directors. In connection with
the agreement, Mr. Hawkins was issued non-qualified options to purchase up to
1,000,000 shares of our common stock at an exercise price of $0.01 per share.
One-third of the options shall vest on the later to occur of: (i) April 4, 2005,
and (ii) execution of the employment agreement, one-third shall vest on April 3,
2006 and one-third shall vest on April 2, 2007. The agreement also provides for
the executive's ability to participate in our health insurance program. In the
event that Mr. Hawkins' employment is terminated other than with good cause, he
will receive a payment of the lesser of his then remaining salary due pursuant
to the employment agreement or six months of base salary at his then current
annual salary.

David Clark as our Senior Vice President of Business Development. The
agreement provides for an initial term of three years, an annual salary to Mr.
Clark of $150,000 and an annual bonus to be determined by our board of
directors. In connection with the agreement, Mr. Clark was issued non-qualified
options to purchase up to 800,000 shares of our common stock at an exercise
price of $0.01 per share. One-third of the options shall vest on the later to
occur of: (i) April 4, 2005, and (ii) execution of the employment agreement,
one-third shall vest on April 3, 2006 and one-third shall vest on April 2, 2007.
The agreement also provides for the executive's ability to participate in our
health insurance program. In the event that Mr. Clark's employment is terminated
other than with good cause, he will receive a payment of the lesser of his then
remaining salary due pursuant to the employment agreement or six months of base
salary at his then current annual salary.

-59-

FINANCIAL STATEMENTS

See Financial Statements beginning on Page F-1.

LEGAL MATTERS

The law firm of Ellenoff, Grossman & Schole LLP, of New York, New York,
is passing on the validity of our common stock. An associate of this firm is the
beneficial owner of 16,666 shares of our common stock which was received in
settlement of legal fees owed to such associate's prior law firm.

EXPERTS

The financial statements for the years ended December 31, 2004 and 2003
included in this prospectus have been included in reliance on the report of
Clancy and Co., P.L.L.C., independent registered public accounting firm, given
on the authority of said firm as experts in auditing and accounting.

AVAILABLE INFORMATION

We file annual, quarterly and special reports, proxy statements and
other information with the Securities and Exchange Commission. You may read and
copy any document we file at the Commission's public reference rooms at 450
Fifth Street, N.W., Washington, D.C. 20549. You may obtain information on the
operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. We
also make available free of charge our annual, quarterly and current reports,
proxy statements and other information upon request. To request such materials,
please contact William Hawkins at 1772 Technology Drive, San Jose, California
95110. Additionally, please note that we file our SEC reports electronically.
The SEC maintains an Internet site that contains reports, proxy and information
statements, and other information regarding issuers that file electronically
with the SEC at http://www.sec.gov. Our Internet address is
http://www.syscaninc.com. Our website and the information contained therein or
connected thereto are not incorporated into this prospectus.

We have filed with the Commission a registration statement (which
contains this prospectus) on Form SB-2 under the Securities Act relating to the
common stock being offered pursuant to this prospectus. This prospectus does not
contain all of the information set forth in the registration statement and the
exhibits and schedules to the registration statement. Please refer to the
registration statement and its exhibits and schedules for further information
with respect to us and the common stock. Statements contained in this prospectus
as to the contents of any contract or other document are not necessarily
complete and, in each instance, we refer you to the copy of that contract or
document filed as an exhibit to the registration statement. You may read and
obtain a copy of the registration statement and its exhibits and schedules from
the SEC.

[remainder of page intentionally left blank]

-60-

SYSCAN IMAGING, INC.

Report of Independent Registered Public Accounting Firm -
Clancy and Co., P.L.L.C. F-2

Consolidated Balance Sheet as of December 31, 2004 F-3

Consolidated Statements of Operations for the years
ended December 31, 2004 and 2003 F-4

Consolidated Statement of Stockholders' Equity
for the years ended December 31, 2004 and 2003 F-5

Consolidated Statements of Cash Flows for the years
ended December 31, 2004 and 2003 F-6

Notes to Consolidated Financial Statements F-7

F-1

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders of
Syscan Imaging, Inc.

We have audited the accompanying consolidated balance sheet of Syscan Imaging,
Inc. (a Delaware Corporation) and Subsidiaries (the "Company") as of December
31, 2004, and the related consolidated statements of operations, changes in
stockholders' equity, and cash flows for the years ended December 31, 2004 and
2003. These consolidated financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
consolidated financial statements based on our audit.

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

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of the
Company as of December 31, 2004, and the consolidated results of its operations
and its cash flows for the periods indicated, in conformity with generally
accepted accounting principles in the United States of America.

Clancy and Co., P.L.L.C.
Phoenix, Arizona

March 7, 2005

F-2

SYSCAN IMAGING, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
DECEMBER 31, 2004

ASSETS
-------------------------------------------------------------------------------
Current assets

Cash and cash equivalents $ 687,403
Trade receivables, net 1,127,873
Inventories 496,680
Prepayments, deposits and other current assets 218,141
Due from related parties 2,264,987
------------
Total current assets 4,795,084

Fixed assets, net 23,985

Other assets
Intangible assets 13,493
Long-term investment 997,692
------------
Total other assets 1,011,185
------------

Total Assets $ 5,830,254
============

LIABILITIES AND STOCKHOLDERS' EQUITY
--------------------------------------------------------------------------------

Current liabilities
Bank line of credit $ 700,000
Letter of credit 233,036
Trade payables 62,307
Other payables and accruals 52,221
------------
Total current liabilities 1,047,564

Commitments and contingencies --

Stockholders' equity
Preferred stock: $0.001 par value; 2,000,000
shares authorized and none outstanding --
Common stock: $0.001 par value; 50,000,000
shares authorized and 23,110,515 shares
issued and outstanding 23,110
Additional paid in capital 25,478,263
Accumulated deficit (20,718,683)
------------
Total stockholders' equity 4,782,690
------------

Total Liabilities and Stockholders' Equity $ 5,830,254
============

The accompanying notes are an integral part of these financial statements.

F-3

SYSCAN IMAGING, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31

2004 2003
------------ ------------

Net sales $ 6,057,821 $ 7,456,782

Costs of sales 4,167,140 5,089,453
------------ ------------

Gross profit 1,890,681 2,367,329

Operating expenses
Selling and marketing expenses 745,557 635,966
General and administrative expenses 827,294 625,156
Research and development expenses 528,417 799,825
------------ ------------
Total operating expenses 2,101,268 2,060,947
------------ ------------

Operating earnings (loss) (210,587 306,382

Other income (expense), net 31,521 529,650
------------ ------------

Net earnings (loss) before taxes (179,066)) 836,032

Provision for income taxes 800 800
------------ ------------

Net earnings (loss) $ (179,866) $ 835,232
============ ============

Basic and diluted earnings (loss) per share $ (0.01) $ 0.04
============ ============

Weighted average shares outstanding 22,599,454 21,082,935
============ ============

The accompanying notes are an integral part of these financial statements.

F-4

SYSCAN IMAGING, INC. AND SUBISIDARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 2004 AND 2003

Common Common Additional
Stock Stock Paid in Accumulated
(Shares) (Amount) Capital Deficit Total
---------------------------------------------------------------------------

Initial capitalization as a
result of reverse acquisition 21,082,935 $ 21,083 $ 25,480,290 $(21,374,049) $ 4,127,324

Net earnings -- -- 835,232 835,232

------------------------------------------------------------------------
Balance - December 31, 2003 21,082,935 21,083 25,480,290 (20,538,817) 4,962,556
------------------------------------------------------------------------

Recapitalization to effect
reverse acquisition 2,027,580 2,027 (2,027) -- --

Net loss -- -- (179,866) (179,866)

------------------------------------------------------------------------
Balance - December 31, 2004 23,110,515 $ 23,110 $ 25,478,263 $(20,718,683) $ 4,782,690
========================================================================

The accompanying notes are an integral part of these financial statements.

F-5

SYSCAN IMAGING, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31

2004 2003
----------- -----------
Cash flows from operating activities

Net earnings (loss) $ (179,866) $ 835,232
----------- -----------
Adjustments to reconcile net earnings
(loss) to net cash flows
used in operating activities
Depreciation 3,279 7,938
Loss on disposal of fixed assets 9,861 --
Provision for doubtful accounts -- 23,560
Write back of provision for doubtful accounts 41,178
Provision (write-back) of slow-moving inventories -- (408,034)
Negative goodwill acquired in acquisition -- (18,262)
Changes in assets and liabilities
(Increase) decrease trade receivables 930,231 (1,212,776)
(Increase) decrease in inventories (297,130) 367,278
(Increase) decrease in other current assets (207,325) 29,077
Increase (decrease) in trade payables 36,661 18,195
Increase (decrease) in other payables and accruals (362,898) 316,252
----------- -----------
Net cash flows used in operating activities (26,009) (41,540)

Cash flows from investing activities
Cash acquired in reverse acquisition 28,288 --
Acquisition of a subsidiary -- (1)
Capital expenditures (26,309) (1,023)
----------- -----------
Net cash flows provided by (used in) investing activities 1,979 (1,024)

Cash flows from financing activities
Advances under bank line of credit 700,000 --
Funds under letter of credit 233,036 --
Advances (repayments) - related party payables (1,215,289) 393,241
(Advances) repayments - related party receivables (26,136) 335,534
----------- -----------
Net cash flows provided by (used in) financing activities (308,389) 728,775
----------- -----------

Increase (decrease) in cash and cash equivalents (332,419) 686,211

Cash and cash equivalents, beginning of year 1,019,822 333,611
----------- -----------

Cash and cash equivalents, end of year $ 687,403 $ 1,019,822
=========== ===========

Cash paid for:
Interest $ 11,621 --
Income taxes $ 800 $ 800
=========== ===========

The accompanying notes are an integral part of these financial statements.

F-6

SYSCAN IMAGING, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2004
================================================================================

NOTE 1 - BACKGROUND, BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES

BACKGROUND

On April 2, 2004, Syscan Imaging, Inc. (formerly known as "BankEngine
Technologies, Inc." and referred to herein as the "Company") completed its
acquisition of 100% of the issued and outstanding capital stock of Syscan, Inc.
("Syscan"), pursuant to a Share Exchange Agreement ("Agreement") dated March 29,
2004, in exchange for 20,859,459 shares of the Company's common stock. Pursuant
to the Agreement, the sole stockholder of Syscan, Syscan Imaging Limited,
received 18,773,514 post-reverse split shares of the Company's common stock in
exchange for all of the issued and outstanding capital stock of Syscan. In
connection with the issuance of the Company's common stock to Syscan Imaging
Limited, Syscan Imaging Limited beneficially became the owner of 81.2% of the
issued and outstanding securities of the Company. Its ultimate holding company
is Syscan Technology Holdings Limited, a company which is incorporated in
Bermuda and its shares are listed on The Growth Enterprise Market of The Stock
Exchange of Hong Kong Limited. (See Note 6)

Syscan, Inc. ("Syscan") was incorporated on May 1, 1995, under the laws of the
State of California. Syscan is headquartered in San Jose, California, and is
principally engaged in the design, development and marketing of Contact Image
Sensor ("CIS") modules for use in scanners and fax machines. Syscan's
manufacturing is completed at an affiliated China-based facility, which provides
a low-cost manufacturing base for these industrial and consumer products.
Syscan's products are ideally suited for the mobile computer user who needs to
scan and/or fax documents while away from their office.

BASIS OF PRESENTATION

As a result of the reverse acquisition, the financial statements of the Company
become those of Syscan and thus, the consolidated financial statements of the
Company represent the activities of its 100% owned subsidiary, Syscan. Although
the Company is the legal acquirer, Syscan will be treated as having acquired the
Company for accounting purposes (recapitalization) and all of the operations
reported represent the historical financial statements of Syscan. (See Note 6)

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

PRINCIPLES OF CONSOLIDATION - The consolidated financial statements include the
accounts of the Company and its subsidiaries. The results of subsidiaries
acquired or disposed of during the periods presented are consolidated from or to
their effective dates of acquisition or disposal. All significant inter-company
balances and transactions have been eliminated in consolidation.

USE OF ESTIMATES - The preparation of financial statements in conformity with
U.S. 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. Management makes its best estimate of the ultimate
outcome for these items based on historical trends and other information
available when the financial statements are prepared. Changes in estimates are
recognized in accordance with the accounting rules for the estimate, which is
typically in the period when new information becomes available to management.
Actual results could differ from those estimates.

F-7

FAIR VALUE OF FINANCIAL INSTRUMENTS - For certain of the Company's financial
instruments, including cash and cash equivalents, trade receivables and
payables, prepaid expenses and other current assets, amounts due to / from
related parties, and other payables and accruals, the carrying amounts
approximate fair values due to their short maturities.

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

CASH AND CASH EQUIVALENTS - The Company considers all highly liquid instruments
purchased with an original maturity of three months or less to be cash
equivalents.

CONCENTRATION OF CREDIT RISK - Financial instruments that potentially expose the
Company to a concentration of credit risk are as follows:

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

GEOGRAPHIC SALES AND SIGNIFICANT CUSTOMERS - The Company operates in a single
industry segment that being scanner and fax modules. The Company markets its
products in the United States, Europe and the Asia Pacific region through its
sales personnel and independent sales representatives.

The Company's geographic sales as a percent of total revenue are as follows:

2004 2003
---------------- --------------
United States 93% 80%
Asia Pacific 2% 13%
Europe and others 5% 7%

Sales to major customers, as a percentage of total revenues, are as follows:

2004 2003
---------------- --------------
A 38% 41%
B 16% 9%
C 15% 9%

TRADE RECEIVABLES - The Company's customers are concentrated in the personal
computer industry, motherboard manufacturers and original equipment
manufacturers. As of December 31, 2004 and 2003, the concentration was
approximately 89% (2 customers) and 82% (5 customers), respectively. The loss of
any of these customers could have a material adverse effect on the Company's
results of operations, financial position and cash flows.

SIGNIFICANT VENDORS - For the years ended December 31, 2004 and 2003, the
Company's purchases of finished scanner imaging products have primarily been
concentrated with one vendor that is a subsidiary of the Company's majority
stockholder. If this vendor was unable to provide materials in a timely manner
and the Company was unable to find alternative vendors, the Company's business,
operating results and financial condition would be materially adversely
affected.

F-8

PRODUCT SALES - The Company had 4 (2003: 2) different products, respectively,
that each accounted for more than 10% of sales. If any of these products were to
become obsolete or unmarketable and the Company was unable to successfully
develop and market alternative products, the Company's business, operating
results and financial condition could be adversely affected

INVENTORIES - Inventories consist of finished goods, which are stated at the
lower of cost or net realizable value, with cost computed on a first-in,
first-out basis. Provision is made for obsolete, slow-moving or defective items
where appropriate. The amount of any provision of inventories is recognized as
an expense in the period the provision occurs. The amount of any reversal of any
provision is recognized as other income in the period the reversal occurs. There
was no provision recorded at December 31, 2004.

FIXED ASSETS - Fixed assets, stated at cost, are depreciated over the estimated
useful lives of the assets using the straight-line method over periods ranging
from three to ten years. Significant improvements and betterments are
capitalized. Routine repairs and maintenance are expensed when incurred. Gains
and losses on disposal of fixed assets are recognized in the statement of
operations based on the net disposal proceeds less the carrying amount of the
assets.

LONG-LIVED ASSETS - Long-lived assets, such as fixed assets, are reviewed for
impairment when circumstances indicate the carrying value of an asset may not be
recoverable. For assets that are to be held and used, an impairment loss is
recognized when the estimated undiscounted cash flows associated with the asset
or group of assets is less than their carrying value. If impairment exists, an
adjustment is made to write the asset down to its fair value, and a loss is
recorded as the difference between the carrying value and fair value. Fair
values are determined based on quoted market values, discounted cash flows or
internal and external appraisals, as applicable. Assets to be disposed of are
carried at the lower of carrying value or estimated net realizable value.

LONG-TERM INVESTMENTS - Long-term investments are carried at cost less provision
for any impairment in value. Income from long-term investments is accounted for
to the extent of dividends received or receivable. Upon disposal of investments,
any profit and loss thereon is accounted for in the statement of operations.

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

ALLOWANCE FOR DOUBTFUL ACCOUNTS AND RETURN ALLOWANCES - The Company presents
accounts receivable, net of allowances for doubtful accounts and returns, to
ensure accounts receivable are not overstated due to uncollectibility. The
allowances are calculated based on detailed review of certain individual
customer accounts and an estimation of the overall economic conditions affecting
the Company's customer base. The Company reviews a customer's credit history
before extending credit. If the financial condition of its customers were to
deteriorate, resulting in an impairment of their ability to make payments,
additional allowances may be required. There was no allowance for doubtful
accounts at December 31, 2004, as management believes all of its accounts
receivable are collectible.

RESEARCH AND DEVELOPMENT EXPENSES - Research and development costs are expensed
as incurred and amounted to $528,417 in 2004 (2003: $799,825).

ADVERTISING COSTS - Advertising costs are expensed as incurred and amounted to
approximately $31,000 in 2004 (2003: $89,000).

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

F-9

INTANGIBLE ASSETS - Intangible assets represents goodwill arising from the
excess of the purchase consideration over the fair value of the net assets at
the date of acquisition of subsidiaries. Goodwill arising in a business
combination initiated after June 30, 2001 is not amortized. Negative goodwill is
charged to the statement of operations as the carrying amount of the asset
cannot be reduced to below zero. The amount was immaterial to the financial
statements as a whole.

COMPREHENSIVE INCOME - The Company includes items of other comprehensive income
by their nature in a financial statement and displays the accumulated balance of
other comprehensive income separately in the equity section of the balance
sheet.

FOREIGN CURRENCY TRANSLATION - The reporting currency used in the preparation of
these consolidated financial statements is U.S. dollars. Local currencies are
the functional currencies for the Companies subsidiaries. For the purpose of
consolidation, assets and liabilities of subsidiaries with functional currencies
other than U.S. dollars are translated into U.S. dollars at the applicable rates
of exchange in effect at the balance sheet date and income and expense items are
translated into U.S. dollars at the average applicable rates during the year.
Translation gains and losses resulting from fluctuations in exchange rates are
recorded as a separate component of other comprehensive income within
stockholders' equity as cumulative translation adjustments. Gains and losses
resulting from foreign currency transactions are included in results of
operations.

EARNINGS PER SHARE - Basic earnings per share ("EPS") are calculated using net
earnings (numerator) divided by the weighted-average number of shares
outstanding (denominator) during the reporting period. Diluted earnings or loss
per share is based on the weighted average number of common shares outstanding
and dilutive common stock equivalents. All earnings or loss per share amounts in
the financial statements are basic earnings or loss per share, as defined by
SFAS No. 128, "Earnings Per Share." Diluted earnings or loss per share does not
differ materially from basic earnings or loss per share for all periods
presented. Convertible securities that could potentially dilute basic earnings
per share in the future such as options are not included in the computation of
diluted earnings per share because to do so would be antidilutive. All per share
and per share information are adjusted retroactively to reflect stock splits and
changes in par value.

STOCK-BASED COMPENSATION - The Company accounts for stock-based compensation
using the intrinsic value method prescribed in Accounting Principles Board
("APB") Opinion No. 25, "Accounting for Stock Issued to Employees." Compensation
cost for stock options, if any, is measured as the excess of the quoted market
price of the Company's stock at the date of grant over the amount an employee
must pay to acquire the stock. SFAS No.123, "Accounting for Stock-Based
Compensation," established accounting and disclosure requirements using a
fair-value-based method of accounting for stock-based employee compensation
plans. The Company has elected to remain on its current method of accounting as
described above, and has adopted the disclosure requirements of SFAS No. 123. In
December 2002, the FASB issued SFAS No. 148, "Accounting for Stock-Based
Compensation - Transition and Disclosure, amending FASB No. 123, and "Accounting
for Stock-Based Compensation". This statement amends Statement No. 123 to
provide alternative methods of transition for an entity that voluntarily changes
to the fair value based method of accounting for stock-based employee
compensation. See Note 10 for a description of the stock-based compensation
plan.

Had compensation expense for the Company's stock-based compensation plans been
determined under SFAS No. 123, based on the fair market value at the grant
dates, the Company's pro forma net earnings and pro forma net earnings per share
would have been reflected as follows at December 31:

F-10

2004 2003
--------- -----------
Net earnings (loss), as reported $(179,866) $ 835,232
Less: stock-based compensation cost, net of tax
(3,824) 29,526
--------- -----------
Pro forma net earnings (loss) $(183,690) $ 805,706
========= ===========

Basic and diluted net earnings (loss) per share
As reported $ (0.01) $ 0.04
========= ===========
Pro forma $ (0.01) $ 0.04
========= ===========

RECENT ACCOUNTING PRONOUNCEMENTS - The Financial Accounting Standards Board
issued the following new accounting pronouncements during 2004:

In March 2004, the EITF reached consensus on EITF Issue No. 03-6, "Participating
Securities and the Two Class Method under FASB Statement No. 128" ("EITF 03-6").
EITF 03-6 addresses a number of questions regarding the computation of earnings
per share by companies that have issued securities other than common stock that
contractually entitle the holder to participate in the dividends and earnings of
the company when, and if, it declares dividends on its common stock. EITF 03-6
also provides further guidance in applying the two-class method of calculating
earnings per share, clarifying what constitutes a participating security and how
to apply the two-class method of computing earnings per share once it is
determined that a security is participating, including how to allocate
undistributed earnings to such a security. EITF 03-6 is effective for fiscal
periods beginning after March 31, 2004 and requires retroactive restatement of
prior earning per share amounts. This statement does not affect the Company.

In June 2004, the FASB issued EITF Issue No. 02-14, "Whether an Investor Should
Apply the Equity Method of Accounting to Investments Other Than Common Stock."
EITF Issue No. 02-14 addresses whether the equity method of accounting applies
when an investor does not have an investment in voting common stock of an
investee but exercises significant influence through other means. EITF Issue No.
02-14 states that an investor should only apply the equity method of accounting
when it has investments in either common stock or in-substance common stock of a
corporation, provided that the investor has the ability to exercise significant
influence over the operating and financial policies of the investee. The
accounting provisions of EITF Issue No. 02-14 are effective for the reporting
period beginning after September 15, 2004. This statement does not affect the
Company.

In November 2004, the FASB issued SFAS No. 151, "Inventory Costs, an amendment
of ARB No. 43, Chapter 4." The amendments made by SFAS No. 151 clarify that
abnormal amounts of idle facility expense, freight, handling costs, and wasted
materials (spoilage) should be recognized as current-period charges and require
the allocation of fixed production overheads to inventory based on the normal
capacity of the production facilities. The guidance is effective for inventory
costs incurred during fiscal years beginning after November 23, 2004. The
Company does not believe the adoption of SFAS No. 151 will have a material
impact on our financial position, results of operations or cash flows.

In December 2004, the FASB issued a revision of Statement of Financial
Accounting Standards No. 123, "Accounting for Stock-Based Compensation" (SFAS
123R). SFAS 123R supersedes APB Opinion No. 25, "Accounting for Stock Issued to
Employees," and its related implementation guidance. SFAS 123R establishes
standards for the accounting for transactions in which an entity incurs
liabilities in exchange for goods or services that are based on the fair value
of the entity's equity instruments or that may be settled by the issuance of
those equity instruments. SFAS 123R does not change the accounting guidance for
share-based payment transactions with parties other than employees provided in
SFAS 123 as originally issued and EITF Issue No. 96-18, "Accounting for Equity
Instruments That Are Issued to Other Than Employees for Acquiring, or in
Conjunction with Selling, Goods or Services." SFAS 123R is effective for interim
reporting period that begins after June 15, 2005. The Company is evaluating the
requirements of SFAS 123R and expects that the adoption of SFAS 123R will have a
material impact on the Company's consolidated results of operations and earnings
per share. The Company has not yet determined the method of adoption or the
effect of adopting SFAS 123R, and it has not determined whether the adoption
will result in amounts that are similar to the current pro forma disclosures
under SFAS 123

F-11

In December 2004, the FASB issued SFAS No. 152, "Accounting for Real
Estate Time-Sharing Transactions - an amendment of FASB Statements No. 66 and
67," which discusses the accounting and reporting of real estate time-sharing
transactions. This Statement is effective for financial statements for fiscal
years beginning after June 15, 2005, and restatement of previously issued
financial statements is not permitted. This statement does not affect the
Company.

In December 2004, the FASB issued SFAS No. 153, "Exchanges of
Nonmonetary Assets - an amendment of APB Opinion No. 29." The guidance in APB
Opinion No. 29, "Accounting for Nonmonetary Transactions," is based on the
principle that exchanges of nonmonetary assets should be measured based on the
fair value of the assets exchanged and provided an exception to the basic
measurement principle (fair value) for exchanges of similar productive assets.
That exception required that some nonmonetary exchanges, although commercially
substantive, be recorded on a carryover basis. This Statement eliminates the
exception to fair value for exchanges of similar productive assets and replaces
it with a general exception for exchange transactions that do not have
commercial substance--that is, transactions that are not expected to result in
significant changes in the cash flows of the reporting entity. The provisions of
this Statement are effective for nonmonetary asset exchanges occurring in fiscal
periods beginning after June 15, 2005, applied prospectively. This statement
does not affect the Company.

NOTE 2 - RELATED PARTY TRANSACTIONS

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

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

2004 2003
---------- ----------

SYSCAN Intervision Limited $3,825,482 $4,418,415
========== ==========

SYSCAN Optoelectronics Technology
(Shenzhen) Company Limited
$ 520,200 $ --
========== ==========

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

Amounts due from related parties:
Due from STH $ 345,998

Due from majority stockholder
100,000

Due from various subsidiaries wholly-owned by STH 1,818,989
----------
$2,264,987
==========

NOTE 3 - FIXED ASSETS

Fixed assets consist of the following:

Computer and office equipment $ 24,767
Furniture 2,565
-----------
Total 27,332
Less accumulated depreciation 3,347
-----------
Net book value $ 23,985
===========

Depreciation expense charged to operations in 2004 was $3,279 (2003: $7,938).

F-12

NOTE 4 - LONG-TERM INVESTMENT

Long-term investment consists of an equity interest in CMOS Sensor, Inc.
("CMOS"), a California corporation, which is principally engaged in the research
and development of infra-red sensors and CMOS sensors. On June 26, 2002, the
Company acquired 100% equity interest of Syscan Laser Technology Ltd. ("Syscan
Laser") from Syscan Holdings Limited, a fellow subsidiary of the Company, for
total consideration of $1. At the date of acquisition, Syscan Laser held 9.7%
equity interest (representing 750,000 shares purchased at $0.80 per share) in
CMOS. On October 29, 2003, the Company acquired 100% equity interest of
Leadbuilt Technology Limited ("Leadbuilt") from Syscan InterVision Limited, a
fellow subsidiary of the Company, for total consideration of $1. At the date of
acquisition, Leadbuilt held 6.4% (representing 500,000 shares purchased at $0.80
per share) equity interest in CMOS. As a result of both transactions, the
Company increased its equity interest in CMOS from 9.7% to 16.1%. The Company's
directors are of the opinion that the underlying value of the long-term
investment is not less than the carrying value at December 31, 2004.

NOTE 5 - OTHER INCOME (EXPENSE), NET

Other income (expense), net consists of the following:

2004 2003
------------ ------------
Interest income $ 5,966 $ 12,266
Write back of provision of inventories - 408,034
Write back of provision for bad debts 41,178
Loss on disposal of fixed assets (15,623)
Recovery of trade receivables written off - 109,350
------------ ------------
$ 31,521 $ 529,650
============ ============

NOTE 6 - STOCKHOLDERS' EQUITY

On April 2, 2004, the Company completed its acquisition of 100% of the issued
and outstanding capital stock of Syscan pursuant to an Agreement dated March 29,
2004, in exchange for 20,859,459 shares of the Company's common stock. As part
of the reorganization of the Company on April 2, 2004, the common shares of the
Company were subject to a reverse split of 1 share for each 10 shares
outstanding. The predecessor entity, Syscan Imaging, Inc., signed an employment
agreement in December 2003, for a term of 2 years for a total amount of $200,000
and 500,000 options as detailed in Note 10. Upon the reorganization on April 2,
2004, the employment agreement was settled in full for 200,000 post reverse
split common shares. Additionally, advances from a shareholder on behalf of the
predecessor entity in the amount of $11,500 to pay liabilities and $11,976 to
acquire equipment were converted to 23,476 common shares.

Immediately prior to the Agreement, the Company had 2,027,580 shares of common
stock issued and outstanding. The acquisition was accounted for as
recapitalization of Syscan because the shareholders of Syscan controlled the
Company after the acquisition. Syscan was treated as the acquiring entity for
accounting purposes and the Company was the surviving entity for legal purposes.
The combined company is considered to be a continuation of the operations of
Syscan. The issued and outstanding common stock of Syscan prior to the
completion of the acquisition was restated to reflect the 21,082,935 common
stock issued by the Company.

NOTE 7 - INCOME TAXES

Provision for income taxes for all periods presented represents the minimum
franchise tax due ($800) in the State of California. No provision for Hong Kong
Profits Tax has been made for the periods presented as the Company and its
subsidiaries operating in Hong Kong have no assessable profits during the years
being reported.

F-13

The Company believes sufficient uncertainty exists regarding the realizability
of the net operating loss carryforwards and other timing differences for the
periods presented. Accordingly, a valuation allowance has been provided for the
entire amount related thereto. The valuation allowance increased (decreased) by
approximately $142,000 (2003: ($223,000)).

As of December 31, 2004, the Company has available net operating loss
carryforwards for federal and state income tax purposes of approximately
$16,000,000 and $12,000,000, which expire through 2024 and 2014, respectively.
State net operating loss carryforwards are based on federal net operating
losses, which are limited to certain percentages and carryover periods based on
the year incurred. For taxable years beginning in 2002 and 2003, the State of
California suspended the net operating loss carryover deduction for two years
for losses incurred before January 1, 2002, and for one year for losses incurred
after January 1, 2002. Pursuant to the Tax Reform Act of 1986, annual
utilization of the Company's net operating loss carryforwards may be limited if
a cumulative change in ownership of more than 50% is deemed to occur within any
three-year period.

The net deferred income tax asset consisted of the following:

2004 2003
----------- -----------
Deferred tax assets
Federal net operating loss carryforwards $ 5,633,000 $ 5,423,000
State net operating loss carryforwards 1,080,000 1,025,000
Capitalized R&D Expenses 932,000 1,122,000
Tax credit carryforwards 708,000 643,000
----------- -----------
8,353,000 8,213,000
Less valuation allowance 8,353,000 8,211,000
----------- -----------
-- 2,000
Deferred tax liability
Excess tax over book depreciation -- (2,000)
----------- -----------

Net deferred income tax asset $ -- $ --
=========== ===========

THE FOLLOWING TABLE RECONCILES THE STATUTORY RATES TO THE COMPANY'S
EFFECTIVE RATE:

2004 2003
----------- --------------

U.S. and California statutory rate (43.0%) (43.0%)
Change in valuation allowance 43.0% 43.0%
----------- --------------
-- --
=========== ==============

NOTE 8 - COMMITMENTS AND CONTINGENCIES

OPERATING LEASES - The Company is committed under various non-cancelable
operating leases which expire through November 2006. Future minimum rental
commitments are as follows: 2005-$106,000 and 2006-$101,000. Rent expense
charged to operations was approximately $95,000 for 2004 (2003: $99,000).

LINE OF CREDIT - The Company has a line of credit to borrow up to $1,000,000,
bearing interest at the rate of prime plus 1%, (6% at December 31, 2004) and
secured by all of the assets of the Company. Interest payments are due monthly
and all unpaid interest and principal is due in full on August 24, 2005. Upon
certain events of defaults as more fully described in the agreement, the default
variable interest rate increases to prime plus 3%. The Company had $300,000
available for use at December 31, 2004.

F-14

LETTERS OF CREDIT - The Company issues letters of credit in the normal course of
business. The amount outstanding as of December 31, 2004, represents one letter
of credit for goods shipped to a related entity, expiring on January 15, 2005.

LITIGATION, CLAIMS AND ASSESSMENTS - On May 20, 2003, Syscan, Inc., the
Company's wholly-owned subsidiary, filed a lawsuit named Syscan, Inc. v.
Portable Peripheral Co., Ltd. ("PPL"), Imaging Recognition Integrated Systems,
Inc., Cardreader Inc. and Targus Inc. (Case No. C03-02367 VRW) in United States
District Court, Northern District of California. Syscan alleges claims against
the above-mentioned parties for patent infringement of patent nos. 6,054,707,
6,275,309 and 6,459,506, and unfair competition. Syscan expects to continue the
case unless a reasonable settlement amount from the defendants or a licensing
agreement to the satisfaction of Syscan is entered.

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

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

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

NOTE 9 - SUPPLEMENTAL CASH FLOW INFORMATION

Supplemental cash flow information for the year ended December 31, 2003
is presented below. The assets and liabilities arising from the acquisition of
one of its subsidiaries, Leadbuilt Technology Ltd. on October 29, 2003:

Share of net assets/(liabilities) acquired $ 18,263
Purchase consideration 1
---------------
(Negative goodwill) / Positive goodwill (18,262)
===============

Net assets/(liabilities) acquired $ 400,000
Long-term investment -
Due from a fellow subsidiary -
Due to a fellow subsidiary (381,737)
---------------
18,263
(Negative goodwill) / Positive goodwill (18,262)
---------------
Cash consideration $ 1
===============

Cash consideration paid $ (1)
Cash and cash equivalents acquired -
---------------
Net cash (paid) / received $ (1)
===============

F-15

NOTE 10 - STOCK OPTION AWARDS

Stock Options Outstanding

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

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

Options granted under the plans have a maximum term of ten years and shall be at
an exercise price that may not be less than 85% of the fair market value of the
common stock on the date of the grant. Options are non-transferable and if a
participant ceases affiliation with the company for a reason other than death or
permanent and total disability, the participant will have 90 days to exercise
the option subject to certain extensions. In the event of death or permanent and
total disability, the option holder or their representative may exercise the
option within one (1) year. Any unexercised options that expire or that
terminate upon an employee's ceasing to be employed by the Company become
available again for issuance under the plan, subject to applicable securities
regulation. The plan may be terminated or amended at any time by the Board of
Directors.

The Company has the following options outstanding as of December 31, 2004:

As part of an employment agreement signed in December 2003, the employee
received 500,000 options to acquire shares of the company at $0.09 per share for
a term of 2 years. Following the restructuring of the Company on April 2, 2004,
and in connection with the 1-for-10 reverse split, the options were re-issued as
50,000 options to acquire shares at $0.90 per share. The estimated fair value of
the options on the date of grant using the Black-Scholes option pricing model is
$29,526, based on a risk free interest rate of 1.91%, an expected volatility of
100%, an expected life of 2 years and no dividend yield.

The Company issued 100,000 options to its former legal counsel in consideration
of services rendered. The options are exercisable at $0.25 per share for a term
expiring December 2006. These options have been re-issued as 10,000 options to
acquire shares at $2.50 per share following the reverse split in April 2004. The
estimated fair value of the options on the date of grant using the Black-Scholes
option pricing model is $3,824, based on a risk free interest rate of 3%, an
expected volatility of 100%, an expected life of 2 years and no dividend yield.

Information about options outstanding and exercisable at December 31, 2004, is
summarized below:

--------------------------- ----------------- ----------------------- ---------------------
Weighted-Average
Remaining Contractual
Range of exercise prices Number Life (Years) Weighted-Average
outstanding Exercise Price
--------------------------- ----------------- ----------------------- ---------------------

$0.90-$2.50 60,000 2 $1.17

BOARD OF DIRECTOR APPROVED STOCK OPTIONS SUBJECT TO SHAREHOLDER APPROVAL

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

F-16

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

F-17

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

You should rely only on the
information contained in this document.
We have not authorized anyone to provide
you with information that is different.
This document may only be used where it
is legal to sell these securities. The
information in this document may only be
accurate on the date of this document.
Syscan Imaging, Inc.
Additional risks and uncertainties
not presently known or that are
currently deemed immaterial may also 2,984,000
impair our business operations. The shares of common stock
risks and uncertainties described in
this document and other risks and
uncertainties which we may face in the
future will have a greater impact on
those who purchase our common stock.
These purchasers will purchase our
common stock at the market price or at a
privately negotiated price and will run
the risk of losing their entire ---------------
investment.
PROSPECTUS

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

_________________, 2005

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

PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 24. INDEMNIFICATION OF DIRECTORS AND OFFICERS.

ITEM 25. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.

The following table sets forth estimated expenses expected to be incurred
in connection with the issuance and distribution of the securities being
registered. All such expenses will be paid by us.

Securities and Exchange Commission Registration Fee.........$ 461.00
Printing and Engraving Expenses.............................$ *
Accounting Fees and Expenses................................$ *
Legal Fees and Expenses.....................................$ *
Blue Sky Qualification Fees and Expenses....................$ *
Miscellaneous...............................................$ *
TOTAL.......................................................$ 461.00

* To be updated by amendment.

ITEM 26. RECENT SALES OF UNREGISTERED SECURITIES.

In the last three years, we sold the following unregistered securities:

On March 15, 2005, we sold $1,865,000 of our Series A Convertible
Preferred Stock. Starboard Capital Markets, LLC, an NASD member firm, acted as
placement agent in the sale of the Preferred Stock, for which it received
$186,500 in commissions and 186,500 warrants to purchase shares of our common
stock, par value $.001 per share at an exercise price equal $1.00 per share.

In connection with the financing, we also issued to the purchasers
common stock purchase warrants to purchase up to an aggregate of 932,500 shares
of our Common Stock at an exercise price of $2.00 per share. The Warrants are
exercisable for a period of five years from the date of issuance. We have
agreed, pursuant to a registration rights agreement, to register the shares of
Common Stock issuable upon conversion of the Preferred Stock and upon exercise
of the Warrants with the Securities and Exchange Commission.

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In July 2004, we granted options to purchase up to 2,200,000 shares of
our common stock to our officers, directors and employees pursuant to our 2002
Stock Option Plan. The options are exercisable for a period of ten years from
the date of grant at an exercise price of $2.00 per share. The options vest
equally over a four year period beginning in July 2005.

On April 2, 2004, in connection with our acquisition of Syscan, Inc.,
we issued an aggregate of 20,859,459 shares of its common stock to Syscan
Imaging Limited in exchange for 100% of the issued and outstanding common stock
of Syscan, Inc. Syscan Imaging Limited simultaneously transferred 2,085,945
shares of our common stock it was entitled to receive in connection with its
sale of Syscan, Inc. to Emerald Asset Advisors pursuant to a consulting
agreement entered into between the parties, as compensation for Emerald's
services in connection with the acquisition of Syscan, Inc. by the us.

On April 2, 2004, we issued a total of 223,476 shares of our $0.001 par
value per share common stock at a value of $1.00 per share to Michael Xirinachs,
a former director of the company, upon the completion of the April 2, 2004,
Share Exchange Agreement acquisition: (i) as settlement of loans payable
totaling $23,476; and (ii) settlement in full of an employment contract signed
in December 2003 for 200,000 post-reverse split common shares.

In February 2004, we sold 50,000 shares of our common stock at purchase
price of $1.00 per share to one accredited investor. We used the proceeds from
this sale for working capital and general corporate purposes.

In December 2003, we issued 10,000 shares of our common stock to Paul
Ankorn (former director) and 10,000 shares of our common stock to William
Campbell (former director) as compensation for serving on our board of
directors.

On April 2, 2002, Cyberstation Computers and Support Inc., an Ontario
corporation ("Cyberstation") and formerly a wholly-owned subsidiary of ours,
entered into a common stock purchase agreement by and among Platinum
Telecommunications, Inc. ("Platinum") and Mr. Zeeshan Saeed (the "Seller").
Pursuant to the agreement, Cyberstation acquired seventy percent (70%) of the
issued and outstanding shares of common stock of Platinum (the "Platinum
Shares") in consideration for 1,800,000 shares of our common stock, par value
$0.001 per share.

Other than as specifically set forth above, all of the above offerings
and sales were deemed to be exempt under Section 4(2) of the Securities Act. No
advertising or general solicitation was employed in offering the securities. In
each instance, the offerings and sales were made to a limited number of persons,
who were either (i) accredited investors, (ii) business associates of ours,
(iii) our employees, or (iv) our executive officers or directors. In addition,
the transfer of such securities was restricted by us in accordance with the
requirements of the Securities Act. With respect to the issuances to accredited
investors, in addition to representations by them, we have made independent
determinations that they were accredited or sophisticated investors, capable of
analyzing the merits and risks of their investment, and that they understood the
speculative nature of their investment. With respect to our business associates,
employees and executive officers or directors, in addition to representations by
them, they were provided with detailed information and had access to all
material information about us, and we have made independent determinations that
they were capable of analyzing the merits and risks of their investment, and
that they understood the speculative nature of their investment. Furthermore,
all of the above-referenced persons were provided with access to our filings
with the Securities and Exchange Commission.

ITEM 27. EXHIBITS AND REPORTS ON FORM 8-K.

The following exhibits are filed with this registration statement.

II-2

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

2.1 Share Exchange Agreement (previously filed as exhibit 99.1 on Form 8-K
dated April 19, 2004).

3.1 Certificate of Incorporation dated February 15, 2002 (previously filed
as exhibit 3.1 on Form 10-KSB dated March 31, 2005).

3.2 Certificate of Amendment to the Company's Certificate of Incorporation
dated March 19, 2004 (previously filed as exhibit

3.2 on Form 10-KSB dated March 31, 2005).

3.3 Certificate of Designation of Preferences, Rights and Limitations of
Series A Preferred Stock as filed with the Secretary of State of the
State of Delaware on March 15, 2005 (previously filed as exhibit 10.4
on Form 8-K dated March 21, 2005)

3.4 Amended and Restated Bylaws (previously filed as exhibit 3.4 on Form
10-KSB dated March 31, 2005).

5.1** Opinion of Ellenoff Grossman & Schole, LLP(*)

10.1 Form of Convertible Preferred Stock and Common Stock Warrant Purchase
Agreement entered into by and between the Company and the purchasers
(previously filed as exhibit 10.1 on Form 8-K dated March 21, 2005).

10.2 Form of Common Stock Purchase Warrant (previously filed as exhibit
10.2 on Form 8-K dated March 21, 2005).

10.3 Form of Registration Rights Agreement (previously filed as exhibit
10.3 on Form 8-K dated March 21, 2005).

10.4 2002 Amended and Restated Stock Option Plan (previously filed as
exhibit 10.4 on Form 10-KSB dated March 31, 2005).

14 Code of Ethics adopted by the Company's board of directors on March
28, 2005 (previously filed as exhibit 14 on Form 10-KSB dated March
31, 2005).

21 Subsidiaries of the Company (previously filed as exhibit 21 on Form
10-KSB dated March 31, 2005).

23.1** Consent of Ellenoff Grossman & Schole LLP (contained in Exhibit 5.1)
(*)

23.2* Consent of Clancy and Co., P.L.L.C.(*)

--------------------------------------------------------------------------------
* Filed herewith
** To be filed by amendment.
(2) Previously filed with Form 10QSB, for the quarter ended March 31, 2001.

ITEM 28. UNDERTAKINGS.

The undersigned registrant hereby undertakes:

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(1) To file, during any period in which it offers or sells securities, a
post-effective amendment to this registration statement
to:

(i) Include any prospectus required by Sections 10(a)(3) of the Act;

(ii) To reflect in the prospectus any facts or events arising after
the effective date of the Registration Statement (or the most
recent post-effective amendment thereof) which, individually or
in the aggregate, represent a fundamental change in the
information set forth in the Registration Statement.
Notwithstanding the foregoing, any increase or decrease in volume
of securities offered (if the total dollar value of securities
offered would not exceed that which was registered) and any
deviation from the low or high end of the estimated maximum
offering range may be reflected in the form of prospectus filed
with the Commission pursuant to Rule 424(b) if, in the aggregate,
the changes in volume and price represent no more than 20 percent
change in the maximum aggregate offering price set forth in the
"Calculation of Registration Fee" table in the effective
registration statement;

(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the Registration
Statement or any material change to such information in the
Registration Statement;

(2) That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed to
be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be
deemed to be a bona fide offering thereof.

(3) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the
termination of the offering.

(4) Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers and controlling
persons of the small business issuer pursuant to the foregoing
provisions, or otherwise, the small business issuer has been advised
that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the
Securities Act and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the
payment by the small business issuer of expenses incurred or paid by a
director, officer or controlling person of the small business issuer
in the successful defense of any action, suit or proceeding) is
asserted by such director, officer or controlling person in connection
with the securities being registered, the small business issuer will,
unless in the opinion of its counsel the matter has been settled by
controlling precedent, submit to a court of appropriate jurisdiction
the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the
final adjudication of such issue.

II-4

SIGNATURES

In accordance with the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form SB-2 and authorized this registration
statement to be signed on its behalf by the undersigned, in the City of San
Jose, State of California on April 25, 2005.

SYSCAN IMAGING, INC.

/s/ Darwin Hu
By: ________________________________________
Name: Darwin Hu
Title: Chairman of the Board and Chief Executive Officer

POWER OF ATTORNEY

Syscan Imaging, Inc. and each of the undersigned do hereby appoint
Darwin Hu and William Hawkins and each of them severally, its or his true and
lawful attorney to execute on behalf of Syscan Imaging, Inc. and the undersigned
any and all amendments to this Registration Statement on Form SB-2 and to file
the same with all exhibits thereto and other documents in connection therewith,
with the Securities and Exchange Commission; each of such persons shall have the
power to act hereunder with or without the other.

In accordance with the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates stated.

------------------------- ----------------------------------- ------------------
Person Capacity Date
------------------------- ----------------------------------- ------------------

------------------------- ----------------------------------- ------------------
/s/ Darwin Hu Chairman and Chief Executive April 25, 2005
------------- Officer
Darwin Hu
------------------------- ----------------------------------- ------------------
------------------------- ----------------------------------- ------------------
/s/ William Hawkins Chief Operating Officer and April 25, 2005
------------------- Acting Chief Financial Officer
William Hawkins
------------------------- ----------------------------------- ------------------
------------------------- ----------------------------------- ------------------
/s/ David Clark Senior Vice President of Business April 25, 2005
--------------- Development and Director
David Clark
------------------------- ----------------------------------- ------------------
------------------------- ----------------------------------- ------------------
/s/ Peter Mor Director April 25, 2005
-------------
Peter Mor
------------------------- ----------------------------------- ------------------
------------------------- ----------------------------------- ------------------
/s/ Lawrence Liang Director April 25, 2005
------------------
Lawrence Liang
------------------------- ----------------------------------- ------------------

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