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


                                   FORM 10-QSB

(Mark One)

[X]  QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
     ACT OF 1934

     For the quarterly period ended June 30, 2003

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

Commission File Number: 000-08149


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


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

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

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


The Registrant had 10,416,465 shares of Common Stock, no par value outstanding
as of July 31, 2003.

Transitional Small Business Disclosure Format (Check one): Yes [ ] No [x]





                        SCANNER TECHNOLOGIES CORPORATION

                                   FORM 10-QSB

                                Table of Contents


PART I.         FINANCIAL INFORMATION                                         3
       Item 1.  Financial Statements                                          3
       Item 2.  Management's Discussion and Analysis or Plan of Operation    10
       Item 3.  Controls and Procedures                                      14


PART II.        OTHER INFORMATION                                            14
       Item 1.  Legal Proceedings                                            14
       Item 2.  Changes in Securities                                        14
       Item 3.  Defaults Upon Senior Securities                              14
       Item 4.  Submissions Of Matters To A Vote of Security Holders         15
       Item 5.  Other Information                                            15
       Item 6.  Exhibits and Reports on Form 8-K                             15
SIGNATURE                                                                    15
EXHIBIT INDEX





                 SCANNER TECHNOLOGIES CORPORATION AND SUBSIDIARY
                 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                                   (unaudited)



                                               Three Months Ended                Six Months Ended
                                                    June 30,                         June 30,
                                         -----------------------------     -----------------------------
                                             2002             2003             2002             2003
                                         ------------     ------------     ------------     ------------
                                                                                
REVENUES                                 $    332,022     $    767,981     $    560,642     $    891,889

COST OF GOODS SOLD                             96,577          210,002          177,023          272,209
                                         ------------     ------------     ------------     ------------

GROSS PROFIT                                  235,445          557,979          383,619          619,680
                                         ------------     ------------     ------------     ------------

OPERATING EXPENSES
  Selling, general and administrative         378,925          304,349          689,082          626,517
  Research and development                    180,570          118,433          361,213          255,639
  Legal fees                                  190,797          187,995          351,762          221,327
                                         ------------     ------------     ------------     ------------
                                              750,292          610,777        1,402,057        1,103,483
                                         ------------     ------------     ------------     ------------

LOSS FROM OPERATIONS                         (514,847)         (52,798)      (1,018,438)        (483,803)

OTHER INCOME (EXPENSE)
  Other income (expense), net                  (1,802)         240,033              523          239,995
  Interest expense                                (10)        (153,310)             (10)        (166,877)
                                         ------------     ------------     ------------     ------------

INCOME (LOSS) BEFORE INCOME TAXES            (516,659)          33,925       (1,017,925)        (410,685)

INCOME TAXES (BENEFIT)                         78,000              300          (72,700)           2,800
                                         ------------     ------------     ------------     ------------

NET INCOME (LOSS)                        $   (594,659)    $     33,625     $   (945,225)    $   (413,485)
                                         ============     ============     ============     ============

NET INCOME (LOSS) PER SHARE - BASIC      $      (0.08)    $       0.00     $      (0.13)    $      (0.04)
                                         ============     ============     ============     ============

NET INCOME (LOSS) PER SHARE - DILUTED    $      (0.08)    $       0.00     $      (0.13)    $      (0.04)
                                         ============     ============     ============     ============

WEIGHTED AVERAGE SHARES OUTSTANDING -
  BASIC                                     7,061,196       10,229,798        7,061,196       10,126,386

WEIGHTED AVERAGE SHARES OUTSTANDING -
  DILUTED                                   7,061,196       11,532,836        7,061,196       10,126,386



See notes to condensed consolidated financial statements.


                                       3



                 SCANNER TECHNOLOGIES CORPORATION AND SUBSIDIARY
                      CONDENSED CONSOLIDATED BALANCE SHEETS



                                                                                            December 31,    June 30,
                                                                                                2002          2003
                                                                                            ------------  ------------
                                                                                              (audited)    (unaudited)
                                     ASSETS
                                                                                                    
CURRENT ASSETS
  Cash and cash equivalents                                                                 $    31,037   $    179,147
  Accounts receivable, less allowance of $40,000                                                168,008        344,546
  Income taxes receivable                                                                       235,900            -
  Inventory, less allowances of $32,000 and $52,000                                             827,857        846,567
  Prepaid expenses                                                                               25,152         38,749
                                                                                             -----------   ------------
    TOTAL CURRENT ASSETS                                                                      1,287,954      1,409,009

PROPERTY AND EQUIPMENT, net                                                                      52,159         43,993
PATENTS RIGHTS, net                                                                             344,776        313,900
OTHER                                                                                            16,939          9,590
                                                                                             -----------   ------------

                                                                                            $ 1,701,828   $  1,776,492
                                                                                             ===========   ============

                      LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
  Bank line of credit                                                                       $   570,000   $    291,000
  Notes payable to related parties                                                              274,886        334,726
  Accounts payable                                                                              647,521        691,909
  Accrued expenses                                                                              119,885        124,713
                                                                                             -----------   ------------
    TOTAL CURRENT LIABILITIES                                                                 1,612,292      1,442,348
                                                                                             -----------   ------------

COMMITMENTS AND CONTINGENCIES

STOCKHOLDERS' EQUITY
  Preferred stock, no par value, 50,000,000 shares authorized;
    no shares issued and outstanding                                                                 -             -
  Common stock, no par value, 50,000,000 shares authorized;
    10,000,982 and 10,396,465 shares issued and outstanding                                   3,064,941      4,053,528
  Warrants                                                                                           -         411,561
  Deferred financing costs, net                                                                      -        (442,055)
  Notes receivable for common stock                                                                  -        (300,000)
  Accumulated deficit                                                                        (2,975,405)    (3,388,890)
                                                                                             -----------   ------------
                                                                                                 89,536        334,144
                                                                                             -----------   ------------

                                                                                            $ 1,701,828   $  1,776,492
                                                                                             ===========   ============


See notes to condensed consolidated financial statements.


                                        4



                 SCANNER TECHNOLOGIES CORPORATION AND SUBSIDIARY
                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (unaudited)



                                                                                       Six Months Ended
                                                                                           June 30,
                                                                                 ---------------------------
                                                                                     2002            2003
                                                                                 -----------     -----------
                                                                                           
OPERATING ACTIVITIES
  Net loss                                                                       $  (945,225)    $  (413,485)
  Adjustments to reconcile net loss to net cash used by operating activities:
    Depreciation                                                                      12,154          11,169
    Amortization of patent rights and deferred financing costs                            --         163,492
    Interest expense added to related party debt principal                                --           9,808
    Deferred taxes                                                                   163,200              --
    Deferred stock option compensation                                                93,939              --
    Changes in operating assets and liabilities:
      Accounts receivable                                                            162,240        (176,538)
      Income taxes receivable                                                        161,729         235,900
      Inventory                                                                      (78,103)        (18,710)
      Prepaid expenses and other                                                     (30,621)         (6,248)
      Accounts payable                                                               312,667          44,388
      Accrued expenses                                                              (107,678)          4,828
                                                                                 -----------     -----------
        Net cash used by operating activities                                       (255,698)       (145,396)
                                                                                 -----------     -----------

INVESTING ACTIVITY
  Purchases of property and equipment                                                (12,800)         (3,003)
                                                                                 -----------     -----------

FINANCING ACTIVITIES
  Net payments on bank line of credit                                                     --        (279,000)
  Proceeds from related party debt                                                        --         100,000
  Payments on related party debt                                                          --         (49,968)
  Proceeds from sale of common stock and exercise of warrants                             --         525,477
  Refund of stock options issued for cash                                            (15,000)             --
                                                                                 -----------     -----------
    Net cash provided (used) by financing activities                                 (15,000)        296,509
                                                                                 -----------     -----------

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS                                (283,498)        148,110

CASH AND CASH EQUIVALENTS
  Beginning of period                                                                366,750          31,037
                                                                                 -----------     -----------

  End of period                                                                  $    83,252     $   179,147
                                                                                 ===========     ===========

Supplemental Disclosures of Cash Flow Information:
  Cash paid for:
    Interest                                                                     $        10     $    23,517
    Income taxes                                                                          --           2,809

  Noncash operating, financing and investing activities:
    Warrants issued in connection with line of credit                                     --         574,671
    Warrants exercised                                                                    --         163,110
    Notes receivable issued for purchase of common stock                                  --         300,000
    Unearned compensation forgiven and transferred to capital                      1,254,575              --
    Deferred tax asset related to forgiven unearned compensation                     436,000              --


See notes to condensed consolidated financial statements.


                                        5



                 SCANNER TECHNOLOGIES CORPORATION AND SUBSIDIARY
              Notes to Condensed Consolidated Financial Statements
                                   (unaudited)


         1.       Basis of Presentation and Significant Accounting Policies -

                  The accompanying condensed consolidated financial statements
                  account for the merger between Scanner Technologies
                  Corporation (Scanner) and Southwest Capital Corporation
                  (Southwest) as a capital transaction in substance (and not a
                  business combination of two operating entities) that would be
                  equivalent to Scanner issuing securities to Southwest in
                  exchange for the net monetary liabilities of Southwest,
                  accompanied by a recapitalization (See Note 2). The combined
                  entity of Scanner and its subsidiary and Southwest are
                  referred to as the "Company."

                  The accompanying unaudited condensed consolidated financial
                  statements have been prepared in accordance with accounting
                  principles generally accepted in the United States of America
                  for interim financial information. They do not include all of
                  the information and footnotes required by accounting
                  principles generally accepted in the United States of America
                  for complete financial statements. In the opinion of
                  management, all adjustments, consisting of normal recurring
                  accruals, considered necessary for a fair presentation have
                  been included. Operating results for the three-month and
                  six-month periods ended June 30, 2003 are not necessarily
                  indicative of the results that may be expected for the year
                  ending December 31, 2003. For further information, refer to
                  the financial statements and footnotes for the year ended
                  December 31, 2002 included in our Annual Report on Form
                  10-KSB.

                  Nature of Business

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

                  Principles of Consolidation

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

                  Revenue Recognition

                  Revenue is earned primarily through sales of test equipment to
                  third party customers and also to a distributor. For sales to
                  the distributor, revenue is recognized upon shipment as the
                  distributor has no acceptance provisions and title passes at
                  shipment. For sales to third party customers, title passes at
                  shipment; however, the customer has certain acceptance
                  provisions relating to installation and training. These
                  provisions require the Company to defer revenue recognition
                  until the equipment is installed and the customers' personnel
                  are trained. The Company provides the training but does not
                  install the equipment. As a result, revenue is recognized for
                  third party customers once the product has been shipped,
                  installed and customer personnel are trained. This process
                  typically is completed within two weeks to a month after
                  shipment.

                  Management Estimates

                  The preparation of these condensed consolidated financial
                  statements in conformity with accounting principles generally
                  accepted in the United States of America requires management
                  to make estimates and assumptions that affect the reported
                  amounts and disclosures in the condensed consolidated
                  financial statements and accompanying notes. Actual results
                  could differ from those estimates. Significant management
                  estimates relate to the valuation allowance on deferred tax
                  assets and payables for legal fees (See Note 3).


                                       6



                  Fair Value of Financial Instruments

                  The carrying amounts of financial instruments consisting of
                  cash and cash equivalents, receivables, bank line of credit,
                  notes payable, accounts payable and accrued liabilities
                  approximate their fair values.

                  Cash Equivalents

                  The Company considers all highly liquid debt instruments
                  purchased with a maturity of three months or less to be cash
                  equivalents.

                  Accounts Receivable

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

                  Inventory

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

                  Property and Equipment

                  Property and equipment are stated at cost less accumulated
                  depreciation. Depreciation is provided using accelerated
                  methods. Leasehold improvements are amortized straight-line
                  over the lease term.

                  Patent Rights

                  Patent rights are stated at cost less accumulated
                  amortization. Amortization is provided using the straight-
                  line method over six years, the deemed useful lives of the
                  patents. Patent rights are reviewed for impairment whenever
                  events or changes in circumstances indicate that the carrying
                  amounts of such assets may not be recoverable. Determination
                  of recoverability is based on an estimate of discounted future
                  cash flows from the use of the asset. Measurement of an
                  impairment loss for patent rights that management expects to
                  use is based on the fair value of the assets as established
                  using a discounted cash flow model.

                  Options and Warrants Valuation

                  The Company estimates the fair value of options and warrants
                  at the grant date using the Black-Scholes option pricing
                  model. The model takes into consideration weighted average
                  assumptions related to the following: risk-free interest rate;
                  expected life years; expected volatility; and expected
                  dividend rate. Since the Company's stock is thinly traded, the
                  Company is essentially a nonpublic entity. Therefore,
                  volatility is set at 0% as permitted by SFAS 123. The costs
                  associated with the valuation of the warrants issued in
                  connection with the line of credit are recorded as deferred
                  financing costs. These costs are being amortized over the term
                  of the line of credit, and the net unamortized balance is
                  offset against stockholders' equity.

                  Product Warranty

                  The Company provides an accrual for estimated incurred but
                  unidentified product warranty issues based on historical
                  activity. The warranty accrual and related expenses were not
                  significant.

                  Accounting for Stock-Compensation

                  The Company accounts for employee stock options under
                  Accounting Principles Board Opinion No. 25, "Accounting for
                  Stock Issued to Employees," and provides the disclosures
                  required by Statement of


                                       7



                  Financial Accounting Standards (SFAS) No. 123, "Accounting for
                  Stock-Based Compensation." Options and warrants to
                  non-employees are accounted for as required by SFAS No. 123.

                  Income Taxes

                  The Company is taxed as a domestic U.S. corporation under the
                  Internal Revenue Code. Income taxes are accounted for under
                  SFAS No. 109, "Accounting for Income Taxes." Deferred income
                  tax assets and liabilities are recognized for the expected
                  future tax consequences of events that have been included in
                  the consolidated financial statements or tax returns. Deferred
                  income tax assets and liabilities are determined based on the
                  differences between the financial statement and tax bases of
                  assets and liabilities using currently enacted tax rates in
                  effect for the years in which the differences are expected to
                  reverse. Deferred tax assets are evaluated and a valuation
                  allowance is established if it is more likely than not that
                  all or a portion of the tax asset will not be utilized. Income
                  tax benefit is the current tax refundable for the period and
                  the change during the period in deferred tax assets and
                  liabilities.

                  Credit Risk

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

                  Net Income (Loss) Per Share

                  Basic income (loss) per share is computed by dividing the net
                  income (loss) by the weighted-average common shares
                  outstanding for the reporting period. Diluted income (loss)
                  per share reflects the potential dilution that could occur if
                  holders of warrants and options that are not antidilutive
                  converted their holdings into common stock. The dilutive
                  effect of options and warrants included 1,303,038 warrants in
                  the three months ended June 30, 2003. Options and warrants for
                  831,750, 719,250, 306,765 and 2,750,537 shares were excluded
                  from the calculation of diluted outstanding shares for the
                  three and six months ended June 30, 2002 and 2003,
                  respectively because their effect was antidilutive.

         2.       Merger and Reorganization -

                  On January 16, 2002, the Company executed an Agreement and
                  Plan of Reorganization with Southwest Capital Corporation
                  (Southwest), a public company with no operations. The
                  agreement provided for the Company to merge into Southwest,
                  with Southwest continuing as the surviving corporation under
                  the name of Scanner Technologies Corporation. On July 31,
                  2002, the Company completed its merger with Southwest pursuant
                  to which the Company was merged with and into Southwest. This
                  merger was treated as a recapitalization.

                  At the effective date of the merger each of the 7,568,196
                  shares of Scanner's common stock outstanding was converted
                  into the right to receive 1.057 shares of the surviving
                  company's common stock and a five-year warrant to purchase
                  0.2642 shares of the surviving company's common stock. The
                  warrants are exercisable immediately at an exercise price of
                  $1.00 per share. The conversion ratio was based on the total
                  amount of Scanner's common stock outstanding at the effective
                  date of the merger. As a result, the surviving company issued
                  an additional 7,999,594 shares of its common stock and
                  warrants to purchase 1,999,543 shares of common stock. Each
                  share of common stock of Southwest issued and outstanding,
                  2,001,388 shares, remained issued and outstanding and
                  unaffected by the merger. Southwest had a deficiency in assets
                  of $27,019 at the date of the merger.

                  At the time of the merger, Scanner had outstanding warrants to
                  purchase 225,000 shares of its common stock at $2.75 per
                  share. At the time of the merger, these warrants were
                  converted into warrants to purchase a total of 59,445 units of
                  the surviving company's securities at $10.80 per unit, each
                  unit consisting of four shares of the surviving company's
                  common stock and a five-year warrant immediately exercisable
                  to purchase one share of the surviving company's common stock
                  at $1.00 per share. At the time of the merger, the Articles of
                  Incorporation were amended to authorize preferred stock,
                  increase the


                                       8


                  number of shares the Company is authorized to issue and to
                  change the common stock from $.01 par value to no par value
                  stock.

                  Upon the consummation of the merger of Scanner into Southwest,
                  the Company became the owner of the licensed know-how in
                  exchange for a secured note payable to the licensor
                  (officer/stockholder) for $1.00 and all expenses incurred for
                  securing and maintaining the intellectual property patent
                  rights, totaling $370,505. The exclusive license agreement,
                  which was terminated, covered the operation, manufacturing,
                  testing and selling of Scanner products. The agreement
                  required a fee of 5% of the Company's sales. License expense
                  was $18,532 and $28,032 for the three and six months ended
                  June 30, 2002, respectively.

                  Pro forma information for prior periods is not presented since
                  the effect is insignificant.

         3.       Contingencies and Uncertainty -

                  In an agreement dated April 19, 2002, the Company's President
                  and Chief Executive Officer (President) forgave the payment of
                  his accrued salary and released the Company, its successors,
                  its officers and directors from any liability in connection
                  with the accrued salary. In exchange, the Company agreed that
                  its President would receive certain proceeds, if any, that
                  Scanner may receive out of litigation involving patents that
                  Scanner had licensed. Under the agreement, the Company keeps
                  60% of any proceeds of the currently ongoing litigation and
                  pays its President 40% of such proceeds until the Company has
                  been reimbursed for all attorney fees and other expenses
                  incurred in connection with the current litigation, and its
                  President has received the total of $1,254,575. If one party
                  receives all the amounts owing to such party before the other
                  party's claim under this provision is satisfied, the other
                  party receives 100% of the proceeds until its claim is
                  satisfied. If any proceeds remain after such payment, the
                  Company's President receives 50% of such remainder. He also
                  has a right to receive part of the proceeds, if any, the
                  Company may receive out of any subsequent litigation involving
                  the licensed patents. The Company keeps 60% of any such
                  proceeds until its attorney fees and other expenses incurred
                  in connection with the current and any subsequent litigation
                  have been reimbursed, and its President receives 40% of any
                  such proceeds until he has received a total of $1,254,575 of
                  the proceeds of the currently ongoing and any subsequent
                  litigation. If any proceeds of the subsequent litigation
                  remain after such distribution, the Company will pay 25% of
                  such remaining proceeds to its President. The unearned
                  compensation forgiven ($1,254,575) less the related deferred
                  tax benefit ($436,000) was recorded as additional paid-in
                  capital in stockholders' equity.

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

                  In 2000, the Company instituted a lawsuit against a Belgian
                  corporation for infringement of two of its patents. The
                  patents related to three-dimensional ball array inspection
                  apparatus and method. Discovery was completed in the case and
                  a so-called Markman hearing was held in November 2001. In June
                  2003, the Company and the Belgian corporation reached a
                  settlement concerning one illumination source inspection
                  systems. Pursuant to the settlement agreement, the Belgian
                  corporation made a one-time payment of $400,000 to the Company
                  to settle all issues with regard to these one light source
                  inspection systems. The court found no infringement with
                  regard to the two illumination source devices that the Belgian
                  corporation sold. The Company agreed to the settlement
                  agreement in order to immediately appeal the court's ruling
                  concerning inspection systems involving two light sources,
                  eliminating the need, delay and expense of a trial with regard
                  to these systems at this stage. The Company intends to
                  continue to vigorously enforce its patent rights and expects
                  to incur significant additional expenses in 2003 to pursue
                  their appeal. The Company believes that any unfavorable
                  decision will not have a material or adverse effect on the
                  consolidated financial statements. In connection with the
                  settlement, the Company paid its President $160,000 pursuant
                  to the agreement noted above. The $400,000 settlement less the
                  $160,000 paid to the President is recorded at net in other
                  income in the condensed financial statements.

                  In 2002, the Company brought suit against two law firms that
                  previously represented the Company in the aforementioned
                  patent litigation. The Company demanded a full and complete
                  accounting for the fees and

                                       9



                  expenses, the payment of which these firms demand in
                  connection with the patent litigation. The Company has paid
                  the law firms $558,652 in legal fees and costs. The law firms
                  claim that the Company owes them an additional $402,984. When
                  the Company brought the patent suit, the law firms estimated
                  that legal fees and costs through the discovery stage of the
                  patent litigation would be $447,000 to $585,000. The Company,
                  therefore, contends that it does not owe any further payments
                  to the defendants. At June 30, 2003 and December 31, 2002, the
                  $402,984 is included in accounts payable in the condensed
                  consolidated balance sheets.

         4.       Financing Arrangements -

                  In 2003, the Company renewed its previous bank line of credit
                  through May 1, 2004. The line was increased from $400,000 to
                  $1,300,000 with an interest rate at prime and the Company
                  provided the bank with a security interest in its general
                  business assets. The new line is guaranteed by individuals who
                  received for their financial support (a) five-year warrants to
                  purchase 325,000 shares of the Company's common stock at $2.75
                  per share and (b) thirty-day warrants to purchase an
                  additional 325,000 shares of the Company's common stock at
                  $2.00 per share. Provided the guarantor paid cash for at least
                  one half of the shares subject to the thirty-day warrant, such
                  guarantor was permitted to purchase the remainder of the
                  shares with a promissory note, collateralized by the shares
                  purchased, payable one year from the exercise date. The
                  guarantors exercised all such warrants in exchange for
                  aggregate cash payments to the Company of $350,000 and
                  one-year promissory notes issued to the Company with an
                  aggregate principal amount of $300,000. In connection with the
                  exercise of their thirty-day warrants, the guarantors were
                  granted two-year warrants to purchase an additional 650,000
                  shares of the Company's common stock at $2.00 per share. All
                  of the warrants issued to the guarantors had a market value of
                  $574,671 as determined by the Black-Scholes Model. These
                  costs, which are amortized over the term of the line of
                  credit, are recorded as deferred financing costs and offset
                  against stockholders' equity in the condensed consolidated
                  balance sheet.

                  On April 10, 2003, the Company issued a $100,000 4.25% note
                  payable in exchange for cash. The note is due April 8, 2004. A
                  warrant, which expires on April 11, 2006, to purchase 25,000
                  shares of the Company's common stock at $2.75 per share was
                  issued in connection with the note. The warrant had no market
                  value as determined by the Black-Scholes Model.

         5.       Private Placement Offering/Subsequent Event -

                  Between January 1, 2003 and June 30, 2003, the Company sold
                  70,000 shares of common stock at $2.50 per share, for an
                  aggregate amount of $175,000, under a private placement
                  offering. Warrants to purchase an additional 17,500 shares of
                  common stock at $3.00 per share were issued in connection with
                  these sales. The warrants expire three years after issuance
                  and had no market value as determined by the Black-Scholes
                  Model.

                  Subsequent to June 30, 2003, the Company sold an additional
                  20,000 shares of common stock at $2.50 per share under the
                  private placement offering. Warrants to purchase an additional
                  5,000 shares of common stock at $3.00 per share were issued in
                  connection with these sales. The warrants expire three years
                  after issuance and had no market value as determined by the
                  Black-Scholes Model.

Item 2.  Management's Discussion and Analysis or Plan of Operation

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


                                       10



         GENERAL

         The Company's revenues have been adversely affected by the continuing
         lack of demand in the semiconductor marketplace, which has caused many
         potential customers to cease or defer purchases of capital equipment
         such as that offered by the Company. Although the Company has made
         efforts to manage expenses during this downturn, the Company is
         confronted with working capital shortages due to ongoing operating
         expenses and the Company's ongoing patent litigation. To address these
         working capital shortages, the Company is attempting to raise
         additional equity capital through a private placement offering and has
         extended and increased its bank line of credit. These efforts are
         discussed in more detail below. Assuming the availability of sufficient
         working capital, the Company's success will be dependent upon its
         ability to develop and commercialize new products, meet the demands of
         its customers, respond quickly to changes in its market, and control
         expenses and cash usage.

         In connection with efforts to raise capital or obtain additional
         financing, the Company may be obligated to issue additional shares of
         Common Stock or warrants or other rights to acquire Common Stock on
         terms that will result in dilution to existing shareholders or place
         restrictions on operations. The Company may also be unsuccessful in
         obtaining additional equity capital or financing on any terms and in
         that event may be obligated to cease operations and/or attempt to
         negotiate with its creditors to delay payments or compromise the
         amounts of its indebtedness. If the Company is unable to reach
         satisfactory arrangements with its creditors, the Company will
         responsibly evaluate alternatives including the possibility of seeking
         protection from creditors under the bankruptcy laws. Creditors may also
         take action that would force the Company into proceedings under the
         bankruptcy laws.

         CRITICAL ACCOUNTING POLICIES

         The discussion and analysis of financial condition and results of
         operations is based upon the consolidated financial statements, which
         have been prepared in accordance with accounting principles generally
         accepted in the United States. The preparation of these financial
         statements requires us to make estimates and judgments that affect the
         reported amounts of assets, liabilities, revenues and expenses, and
         related disclosure of contingent assets and liabilities. The Company
         evaluates, on an on-going basis, its estimates and judgments, including
         those related to bad debts, excess inventory, warranty obligations,
         income taxes, contingencies and litigation. Its estimates are based on
         historical experience and assumptions that we believe to be reasonable
         under the circumstances, the results of which form the basis for making
         judgments about the carrying values of assets and liabilities that are
         not readily apparent from other sources. Actual results may differ from
         these estimates under different assumptions or conditions.

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

                  o        Revenue recognition;
                  o        Allowances;
                  o        Inventories;
                  o        Patent rights;
                  o        Accounting for income taxes;
                  o        Accounting and valuation of options and warrants;

         Revenue is earned primarily through sales of test equipment to third
         party customers and also to a distributor. For sales to the
         distributor, revenue is recognized upon shipment as the distributor has
         no acceptance provisions and title passes at shipment. For sales to
         third party customers, title passes at shipment, however the customer
         has certain acceptance provisions relating to installation and
         training. These provisions require the Company to defer revenue
         recognition until the equipment is installed and the customers'
         personnel are trained. The Company provides the training but does not
         install the equipment. As a result, revenue is recognized for third
         party customers once the product has been shipped, installed and
         customer personnel are trained. This process typically is completed
         within two weeks to a month after shipment.

         The Company maintains allowances for doubtful accounts for estimated
         losses resulting from the inability of our customers to make required
         payments. Accounts receivable, historical bad debts, customer


                                       11



         concentrations, customer creditworthiness, current economic trends and
         changes in customer payment terms and practices are analyzed when
         evaluating the adequacy of the allowance for doubtful accounts. If the
         financial condition of the Company's customers were to deteriorate,
         resulting in an impairment of their ability to make payments,
         additional allowances and charges against earnings may be required.

         The Company writes down inventory for estimated excess and obsolete
         inventory equal to the difference between the cost of inventory and the
         estimated fair value based upon assumptions about future demand and
         market conditions. Any significant unanticipated changes in demand or
         competitive product developments could have a significant impact on the
         value of the Company's inventory, and its reported results. If actual
         market conditions are less favorable than those projected, additional
         inventory write-down, and charges against earnings may be required.

         Patent rights are reviewed for impairment whenever events or changes in
         circumstances indicate that the carrying amounts of such assets may not
         be recoverable. Determination of recoverability is based on an estimate
         of discounted future cash flows from the use of the asset. Measurement
         of an impairment loss for patent rights that management expects to use
         is based on the fair value of the asset as established using a
         discounted cash flow model.

         The Company accounts for income taxes using the asset and liability
         approach in accordance with Statement of Financial Accounting Standards
         No. 109, "Accounting for Income Taxes." The asset and liability
         approach requires the recognition of deferred tax liabilities and
         assets for the expected future tax consequences of temporary
         differences between the carrying amounts and the tax basis of assets
         and liabilities. The effect on deferred taxes of a change in tax rates
         is recognized in operations in the period that includes the enactment
         date. Additionally, deferred tax assets are evaluated and a valuation
         allowance is established if it is more likely than not that all or a
         portion of the tax asset will not be utilized.

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

         The Company estimates the fair value of warrants at the grant date
         using the Black-Scholes option pricing model. The model takes into
         consideration weighted average assumptions related to the following:
         risk-free interest rate; expected life years; expected volatility; and
         expected dividend rate. Since the Company's stock is thinly traded, the
         Company is essentially a nonpublic entity. Therefore, volatility is set
         at 0% as permitted by SFAS 123. The costs associated with the valuation
         of the warrants issued in connection with the line of credit are
         recorded as deferred financing costs. These costs are being amortized
         over the term of the line of credit, and the net unamortized balance is
         offset against stockholders' equity.

         RESULTS OF OPERATIONS

         THREE MONTHS ENDED JUNE 30, 2003 COMPARED TO THREE MONTHS ENDED JUNE
         30, 2002

         Sales for the three months ended June 30, 2003, were $767,981 compared
         to $332,022 for the three months ended June 30, 2002. The Company's
         revenues continue to be adversely affected by the lack of demand in the
         semiconductor industry which has caused reduced spending by
         semiconductor manufacturers for capital equipment such as that offered
         by the Company. The sales increase in 2003 relates primarily to the
         sale of the Company's first robotic inspection system to an end user
         and a slight improvement in the purchases of capital equipment by
         customers in the semiconductor industry.

         Cost of goods sold increased by $113,425 to $210,002 in the three
         months ended June 30, 2003, from $96,577 in 2002. Cost of goods sold as
         a percentage of sales decreased by 1.8% to 27.3% in 2003 compared to
         29.1% in 2002. In 2003, manufacturing expenses decreased as a percent
         of sales primarily because of the increase in sales. This decrease was
         partially offset by an increase in material cost as a percent of sales.

         Selling, general and administrative expenses decreased by $74,576 to
         $304,349 for the three months ended June 30, 2003, compared to $378,925
         in the prior period. Decreases in professional costs, amortization of


                                       12



         deferred stock option compensation and license fees were partially
         offset by increases in salaries and related expenses, marketing
         expenses and amortization of patent rights.

         Research and development expenses were $118,433 in the three months
         ended June 30, 2003 compared to $180,570 for the three months ended
         June 30, 2002. The research and development activities related to the
         Company's development of its own line of robotic inspection systems for
         sale to end users was in its early stages in 2002. The development
         process is continuing in 2003 with the first unit being sold in April
         2003.

         Legal fees decreased by $2,802 to $187,995 in the three months ended
         June 30, 2003, from $190,797 in 2002. A significant portion of the
         legal fees in both periods related to the patent infringement claim
         brought by the Company against a competitor.

         Other income (expense) was $86,723 in the three months ended June 30,
         2003, compared to ($1,812) in 2002. In 2003, the Company settled a
         portion of its litigation relating to its patent infringement claim for
         $400,000. In connection with the settlement and a prior agreement, the
         Company paid its President $160,000. Interest expense was $153,300
         higher in 2003 than it was in 2002 due primarily to the $132,616
         amortization of the warrant valuation related to the renewal of the
         line of credit and additional debt outstanding.

         The income taxes provided in the three months ended June 30, 2003
         represented minimum state taxes. The Company provided no additional
         income tax provision for the period because the income recognized will
         be offset by operating loss carryforwards for which the Company
         previoiusly recorded a full valuation allowance against. A tax
         provision of $78,000 was provided in the three months ended June 30,
         2002.

         The net income for the three months ended June 30, 2003 was $33,625, or
         $.00 per share, compared to a net loss of ($594,659), or ($.08) per
         share, in 2002. The change was the result of an increase in gross
         margin of $322,534, decreased operating expenses of $139,515, increased
         net nonoperating income of $88,535 and decreased income taxes of
         $77,700.

         SIX MONTHS ENDED JUNE 30, 2003 COMPARED TO SIX MONTHS ENDED JUNE 30,
         2002

         Sales for the six months ended June 30, 2003, were $891,889 compared to
         $560,642 for the six months ended June 30, 2002. The Company's revenues
         continue to be adversely affected by the lack of demand in the
         semiconductor industry which has caused reduced spending by
         semiconductor manufacturers for capital equipment such as that offered
         by the Company. The sales increase in 2003 relates primarily to the
         sale of the Company's first robotic inspection system to an end user
         and a slight improvement in the purchases of capital equipment by
         customers in the semiconductor industry.

         Cost of goods sold increased by $95,186 to $272,209 in the six months
         ended June 30, 2003, from $177,023 in 2002. Cost of goods sold as a
         percentage of sales decreased by 1.1% to 30.5% in 2003 compared to
         31.6% in 2002. In 2003, manufacturing expenses decreased as a percent
         of sales primarily because of the increase in sales. This decrease was
         partially offset by an increase in material cost as a percent of sales.

         Selling, general and administrative expenses decreased by $62,565 to
         $626,517 for the six months ended June 30, 2003, compared to $689,082
         in the prior period. Decreases in professional costs, amortization of
         deferred stock option compensation and license fees were partially
         offset by increases in salaries and related expenses and amortization
         of patent rights.

         Research and development expenses were $255,639 in the six months ended
         June 30, 2003 compared to $361,213 for the six months ended June 30,
         2002. The research and development activities related to the Company's
         development of its own line of robotic inspection systems for sale to
         end users was in its early stages in 2002. The development process is
         continuing in 2003 with the first unit being sold in April 2003.

         Legal fees decreased by $130,435 to $221,327 in the six months ended
         June 30, 2003, from $351,762 in 2002. A significant portion of the
         legal fees in both periods related to the patent infringement claim
         brought by the Company against a competitor.


                                       13



         Other income was $73,118 in the six months ended June 30, 2003,
         compared to $513 in 2002. In 2003, the Company settled a portion of its
         litigation relating to its patent infringement claim for $400,000. In
         connection with the settlement and a prior agreement, the Company paid
         its President $160,000. Interest expense was $166,867 higher in 2003
         than it was in 2002. The increase relates primarily to the $132,616
         amortization of the warrant valuation related to the renewal of the
         line of credit and additional debt outstanding.

         The Company recognized no income tax benefit to offset the loss before
         income taxes in the six months ended June 30, 2003, as no tax benefit
         is available to the Company. The $2,800 of taxes provided in the six
         months ended June 30, 2003 represented minimum state taxes. A benefit
         of $72,700 was recognized in the six months ended June 30, 2002.

         The net loss for the six months ended June 30, 2003 was ($413,485), or
         ($.04) per share, compared to a net loss of ($945,225), or ($.13) per
         share, in 2002. The decrease in the net loss was the result of an
         increase in gross margin of $236,061, decreased operating expenses of
         $298,574, and increased net nonoperating income of $72,605 offset by
         increased income taxes of $75,500.

         LIQUIDITY AND CAPITAL RESOURCES (FOR THE SIX MONTHS ENDED JUNE 30,
         2003)

         The Company is attempting to raise $1,500,000 of additional capital by
         offering shares of its Common Stock and warrants to purchase common
         stock through an offering conducted in reliance on an exemption from
         registration under the Securities Act of 1933, as amended (the
         "Offering"). As of July 31, 2003, the Company had received proceeds of
         $225,000 from investors in the Offering. As described above, there is
         no assurance that the Company will be successful in its efforts to
         complete the Offering. If adequate funds are not available or are not
         available on acceptable terms, the ability to take advantage of
         unanticipated opportunities, develop or enhance products and services
         or otherwise respond to competitive pressures would be significantly
         limited.

         In 2003, the Company renewed its previous bank line of credit through
         May 1, 2004. The line was increased from $900,000 to $1,300,000 with an
         interest rate at prime and the Company provided the bank with a
         security interest in its general business assets. The new line is
         guaranteed by individuals who received for their financial support (a)
         five-year warrants to purchase 325,000 shares of the Company's common
         stock at $2.75 per share and (b) thirty-day warrants to purchase an
         additional 325,000 shares of the Company's common stock at $2.00 per
         share. Provided the guarantor paid cash for at least one half of the
         shares subject to their thirty-day warrant, that guarantor was
         permitted to purchase the remainder of the shares with a promissory
         note, collateralized by the shares purchased, payable one year from the
         exercise date. The guarantors exercised all such warrants in exchange
         for aggregate cash payments to the Company of $350,000 and one-year
         promissory notes issued to the Company with an aggregate principal
         amount of $300,000. In connection with the exercise of their thirty-day
         warrants, the guarantors were granted two-year warrants to purchase an
         additional 650,000 shares of the Company's common stock at $2.00 per
         share. All of the warrants issued to the guarantors had a market value
         of $574,671 as determined by the Black-Scholes Model. These costs,
         which are amortized over the term of the line of credit, are recorded
         as deferred financing costs in the condensed consolidated balance sheet

         The Company believes that this line of credit, existing working capital
         and anticipated cash flows from operations and equity investments will
         be adequate to satisfy projected operating and capital requirements for
         the next year.

         Net cash used by operating activities for the six months ended June 30,
         2003 totaled $145,396. Negative operating cashflows resulted primarily
         from the net loss of $413,485 for the period that was partially offset
         by non-cash adjustments relating primarily to depreciation and
         amortization of $184,469 and by net changes in operating assets and
         liabilities of $83,620.

         Net cash used by investing activities for the six months ended June 30,
         2003 totaled $3,003. The funds were used to purchase property and
         equipment.

         Net cash provided by financing activities for the six months ended June
         30, 2003 totaled $296,509. Positive financing cashflows related to the
         proceeds from the sale of common stock and new borrowings offset by
         payments under the bank line of credit and on existing debt.


                                       14



Item 3.  Controls and Procedures

         As of the end of the period covered by this report, the Company carried
         out an evaluation, under the supervision and with the participation of
         the Company's management, including the Company's Chief Executive
         Officer, who is also the Company's Chief Financial Officer, of the
         effectiveness of the design and operation of the Company's disclosure
         controls and procedures pursuant to Exchange Act Rule 13a-15(b). Based
         upon the evaluation, the Chief Executive Officer, who is also the
         Company's Chief Financial Officer, concluded that the Company's
         disclosure controls and procedures are effective.

         There were no changes in the Company's internal controls over financial
         reporting that occurred during the period covered by this report that
         have materially affected, or are reasonably likely to materially
         affect, the Company's internal control over financial reporting.


PART II - OTHER INFORMATION

Item 1.  Legal Proceedings

         In July 2000, Scanner instituted a lawsuit against a Belgian
         corporation in the U.S. District Court for the Southern District of New
         York for infringement of two of its patents. The patents relate to
         three-dimensional ball array inspection apparatus and method. In June
         2003, Scanner and the Belgian corporation reached a settlement
         concerning one illumination source inspection systems. Pursuant to the
         settlement agreement, the Belgian corporation made a one-time payment
         of $400,000 to Scanner to settle all issues relating to these one light
         source inspection systems. The court found no infringement with regard
         to the two illumination source devices that the Belgian corporation
         sold. Scanner agreed to the settlement agreement in order to allow
         Scanner to immediately appeal the court's ruling concerning inspection
         systems involving two light sources, eliminating the need, delay and
         expense of a trial with regard to these systems at this stage. Scanner
         intends to continue to vigorously enforce its patent rights.

Item 2.  Changes in Securities

         In the three months ended June 30, 2003, the Company renewed its
         previous line of credit. The new line is guaranteed by individuals who
         received for their financial support (a) five-year warrants to purchase
         325,000 shares of the Company's common stock at $2.75 per share and (b)
         thirty-day warrants to purchase an additional 325,000 shares of the
         Company's common stock at $2.00 per share. Provided the guarantor paid
         cash for at least one half of the shares subject to their thirty-day
         warrant, they may provide a promissory note, secured by the shares
         purchased, payable one year from the exercise day for the remainder of
         the shares. All such thirty-day warrants were exercised in exchange for
         aggregate cash payments of $350,000 and one-year promissory notes
         totaling $300,000. In connection with the exercise of their thirty-day
         warrants, the guarantors were granted two-year warrants to purchase an
         additional 650,000 shares of the Company's common stock at $2.00 per
         share.

         In April 2003, the Company issued three-year warrants to purchase
         25,000 shares of the Company's common stock at $2.75 per share in
         connection with the issuance of a $100,000 note payable in exchange for
         cash.

         In the three months ended June 30, 2003, the Company sold 15,000 shares
         of its common stock at $2.50 per share to three individuals through a
         private placement offering. The shares were issued as follows: 10,000
         in April 2003 and 5,000 in June 2003.

         The individuals purchasing the above common stock were issued
         three-year warrants to purchase one share of common stock at $3.00 per
         share for each four shares purchased. Warrants to purchase 3,750 common
         shares at $3.00 per share were issued in the three months ended June
         30, 2003.

         The above common stock was issued in reliance on the exemption from
         registration provided by Rule 506 of Regulation D promulgated under
         Section 4(2) of the Securities Act of 1933. The certificates
         representing the securities bear a restrictive securities legend.


                                       15



Item 3.  Defaults Upon Senior Securities

         None.

Item 4.  Submission of Matters to a Vote of Security Holders

         None.

Item 5.  Other Information

         Laurence Zipkin resigned from the Company's Board of Directors on
         June 10, 2003.

Item 6.  Exhibits and Reports on Form 8-K

         Exhibits:

         See Exhibit Index on page following signature page.

         Reports on Form 8-K:

         None.



                                    SIGNATURE

         In accordance with the requirements of the Exchange Act, the registrant
         caused this report to be signed on its behalf by the undersigned,
         thereunto duly authorized.


                                                Scanner Technologies Corporation

         DATE:   August 14, 2003                By: /s/ Elwin M Beaty
                                                    -----------------
                                                    Elwin M. Beaty
                                                    Its Chief Executive Officer
                                                    and Chief Financial Officer




                                       16



                                  EXHIBIT INDEX

                        SCANNER TECHNOLOGIES CORPORATION

                   FORM 10-QSB FOR QUARTER ENDED JUNE 30, 2003



Exhibit Number    Description
--------------    -----------

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

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

       11*        Statement Regarding Computation of Earnings Per Share

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

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

       *Filed herewith.










                                       17