SECURITIES AND EXCHANGE COMMISSION
Washington, D.D. 20549
(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, 1999
or
[ ] Transition report pursuant to Section
13 or 15(d) of the Securities Exchange Act of
1934
For the transition period from to
Commission file number 0-22851
MASTERPIECE TECHNOLOGY GROUP, INC.
(Exact name of registrant as specified in its
charter)
Washington 91-179-3053
(State or jurisdiction (I.R.S. Employer
of incorporation Identification No.)
or organization)
455 Wards Corner Road
Loveland, OH 45140
513-831-6647
(Registrant's telephone number, including
area code)
(Former Address, if changed since last
report)
Indicate by check mark whether the
registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the
preceding 12 months (or for such that the
registrant was required to file such
reports), and (2) has shorter period been
subject to such filing requirements for the
past 90 days.
Yes X No
APPLICABLE ONLY TO ISSUERS INVOLVED IN
BANKRUPTCY.
Indicate by check mark whether the
registrant has filed all documents and
reports required to be filed by Sections 12,
13 or 15(d) of the Securities Exchange Act of
1934 subsequent to the distribution of
securities under a plan confirmed by a court.
Yes No
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares
outstanding of each of the issuer's classes
of common stock, as of the latest practicable
date.
As of June 30, 1999, approximately
2,384,730 shares of the Registrant's Common
Stock, $.01 par value, were outstanding.
As of June 30, 1999, approximately
100,000 shares of the Registrant's Preferred
Stock, $.10 par value, were outstanding.
Part I - Financial Information.
Item 1. Financial Statements.
SEE ATTACHED EXHIBIT 27,
FINANCIAL DATA SHEET.
Item 2. Managements Discussion and Analysis
of Financial Condition and Results of
Operations.
NOTES TO FINANCIAL STATEMENT
NOTE 1. - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
.....(a) The Company
.....The Company was incorporated in 1983 under the laws of the State of Utah
as Forward Electronics Corporation. In 1988 it was reorganized with United
States Mining & Exploration, Inc.(USM) and changed its name at that time.
Also in 1998 the Company acquired Ridge Rock Mining Corporation which it
subsequently dissolved. During 1989 Rocky Mountain Process Components was
acquired. This company was also dissolved. Since 1990 the Company has had no
operations, until the merger with Global Digital Information, Inc.(GDI). After
the merger the Company changed its name to Global Digital Information, Inc.
GLOBAL DIGITAL INFORMATION, INC. was incorporated June 25, 1997 in the State of
Washington. The Company designs, develops, markets and supports medical
document management systems and personal productivity software which facilitates
the recording, imaging, manipulation, distribution and storage of paper-based
medical information on personal network computers. The Company has acquired
"CaduSys Medical Record" a client/server clinical information software package
that collects and stores patient data during the creation of the clinical
narrative. It is sold to health care organizations including, but not limited
to, single and multi-doctor practices, clinics, health care organizations and
small hospitals. Some of the Company's other products include office
adaptations which use the personal computer to eliminate paper in the office
filing system. With the merger of Masterpiece Technology Group (see Note
10), the Company adds additional software systems for physicians and
an established distribution system. Also the Company now is a participating
Medicare privider and billing service.
.....(b) Inventories - Inventories are valued at the lower of cost (determined
on a first-in, first-out basis) or market and consist mainly of finished goods.
.....(c) Fixed Assets
.....Fixed Assets includes all property, plant and equipment. Furniture and
fixtures, computer equipment and manufacturing equipment are stated at cost.
They are be depreciated over their estimated useful lives of five to twenty
years, as appropriate. Depreciation expense amounted $5,865 for the quarter
ended June 30, 1998 and $5,507 for the quarter ended June 30, 1999.
.....(d) Property, Plant and Equipment - Property, plant and equipment are
stated at cost. Depreciation is computed using the straight-line method over
the estimated useful lives of the related assets.
.....(e) Cash and Cash Equivalents - For purposes of the statement of cash
flows, the Company considers all highly liquid debt instruments with a maturity
date of three months or less to be cash equivalents.
.....(f) Software Development Costs - Costs incurred internally in creating a
computer software product are charged to research and development expense when
incurred until technological feasibility has been established for the product.
Thereafter, until general release, all software productions costs are
capitalized and subsequently reported (at lower of amortized cost or net
realizable value). Capitalized costs are included in other assets in the
accompanying balance sheet and are amortized on a straight-line basis over the
estimated economic life of the product, which is 24 months.
.....(g) Deferred Revenue - Deferred revenue results from the sale of certain
receivables arising
from long-term contracts with distributors. These contracts also give rise to
the restricted cash balances. These revenues are recognized and cash becomes
unrestricted when the related receivable is collected.
.....(h) Use of Estimates - The preparation of the financial statements in
conformity with generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
.....(i) Revenue - Generally, the Company records revenue from product sales
when the product is shipped. Contracts with certain distributors may have
terms which cause the Company to record revenue when the product is sold to
third parties. Certain initial dealers have agreements to purchase initial
product quantities and licensing terms of fifty-four months. Revenues on these
agreements are recognized over the term of the agreement.
.....(j) Income Taxes.....Effective April 1, 1993, the Company adopted the
provisions of Statement of Financial Accounting Standards No. 109,
"Accounting for Income Taxes". SFAS No. 109 requires a company to recognize
deferred tax assets and liabilities for the expected future income tax
consequences of events that have been recognized in the financial statements.
Under this method, deferred tax assets and liabilities are determined based on
the temporary differences between the financial statement carrying amounts and
tax basis of assets and liabilities using enacted tax rates in effect in the
year in which the temporary differences are expected to reverse. There was
no cumulative effect of adopting SFAS No. 109.
.....(k) Principals of Consolidation..The Consolidated Financial Statements,
including the Balance Sheet, Statement of Retained Earnings, Statement of Net
Income(Loss), and Statement of Cash Flows, include the accounts of all
subsidiaries. All intercompany items and transactions have been eliminated.
NOTE 2. - MERGER AND REORGANIZATION
.....Effective November 11, 1997 the Company U. S. Mining & Exploration, Inc.
(USM) pursuant to a Reorganization Agreement(the "Plan") with Global Digital
Information, Inc.(GDI) USM was acquired in a "reverse acquisition" and the
shareholders of GDI became the major shareholders in USM. the "Plan" as
approved by the Board of Directors provided for a 2 for 1 split of the then
owned shares of the USM, the issuance of additional shares(440,962)
for cash($52,500), and 276,410 shares issued for services rendered by
officers and directors of the Company. The total shares of Common stock
outstanding at that time was then 1,700,000. As part of the "Plan" the
shareholders of GDI were issued an additional 8,500,000 shares making
the total shares outstanding 10,200,000 shares. The then existing Board of
Directors(USM) resigned and was replaced by directors from GDI.
.....The acquisition has been accounted for as a "Pooling of Interests" as per
APB Opinion No 16. Since GDI came into existence on June 25, 1997, its results
of operations have been included in these financial statements. No adjustment
is made to prior years presented because GDI was not in existence at that time.
NOTE 3 - EARNINGS PER SHARE:
Primary earnings per share have been computed using the weighted average number
of shares outstanding during the period.
NOTE 4 - LONG-TERM DEBT and NOTES PAYABLE
<TABLE>
<C> <C>
.....*6.5% installment loan; interest of $823.33 due monthly until May 2004; the
financial institution has the option to change the interest rate to .50% above
the current index every six months; principal and interest of $1,324.08 due
monthly beginning May 2004 through April 2019; this note is secured
by the building of the Company....................................$ 151,681
*Revolving note payable to a financial institution (maximum $65,000) due
August, 2007, plus interest payable monthly at 1.5% above prime rate
(not to exceed 16%), this note is secured by the building of the Company........... 64,744
*Promissory note payable to bank (maximum $100,000) due on demand, with
monthly payments of interest only at 1% above prime rate, this note is secured
by all assets of the Company...................................................... 99,635
*Unsecured revolving note payable to bank (maximum $100,000) due on demand,
plus interest only payable monthly at 2% above prime rate......................... 96,635
*Promissory note payable to bank with monthly payments of $26,000. Interest
accrues at prime plus 1%. The note is secured by personal guarantees by
officers of the Company........................................................... 1,079,477
*The Company has a note payable of $345,575. Interest is payable monthly at
the banks prime rate (7.75% at December 31, 1998) plus 1%. The line is
collateralized by substantially all the assets of the Company as well as personally
by the shareholders.............................................................. 345,275
*Notes payable to the Wiswell and Breslow Trusts. Interest accrues at 1% above prime....
300,000
*The Company has an unsecured demand note payable to an affiliate in the amount
of $57,963. The note provides for interest at 6% to be accrued until payment is
demanded............................................................................ 57,963
*Revolving credit line payable to bank (maximum $50,000) due May 2001, monthly
payments of principal, equalling 1/36 of principal balance owed plus interest at
1 1/2 % above prime rate. This credit line is secured by personal guarantees by the
officers of the Company. ..... .................................................. 40,702
*Various credit with interest paid monthly at various rates of interest ranging from
15.7% to 22.9%..................................................................... 107,257
........................................................................................ 2,343,486
Less: Current maturities included in current liabilities................................(1,424,328)
................................................................................. 919,158
</TABLE>
Following are maturities of long-term debt for each of the next five years:
1999..... $ 1,424,328
2000..... 312,000
2001..... 312,000
2002..... 143,477
2003..... none
Thereafter.. 151,681....................
$ 2,343,486
NOTE 5 - RELATED PARTY TRANSACTIONS
The Company has acquired its rights to most of its software programs from its
shareholders who are also shareholders in previous corporations which had these
rights or had developed the programs. The company purchased these rights
through the issuance of common stock. Although the value of these rights may
be substantial, because of the lack of a proper valuation method, they have
been recorded at the par value of the stock issued. ie. 8,044,150 shares
were issued to the founders and they have been valued at $.001 per share or
$8,044. In addition to the stock the Company agreed to pay for liabilities
in the approximate amount of $47,000.00. Accounts payable of $ 141,966 is
due Del Crane Supply a related party.
NOTE 6 - Issuance of COMMON Stock and Reverse Split
.....Effective July 1, 1997, the Company offered shares of its common stock to a
limited number of investors pursuant to a Regulation D exemption up to a maximum
of 500,000 shares at $1.00 per share or $500,000. At JUNE 30, 1999, as a result
of this offering, 1,034,244 Common Shares of stock were sold to individual
investors for $1.00 per unit, grossing the company $652,850. The placement
is being offered on a "best efforts" basis by various employees and officers
of the company. Fees and expenses were paid in conjunction with the
offering amounting to $254,423 at JUNE 30, 1999, including commissions for
a net total of $398,427.
Prior to the merger with Masterpiece Medical (see Note 10), the Board of
Directors approved a reverse stock split of 1 share of common stock for each
80 shares owned. This reverse split is reflected in the statements of
shareholders' equity. On June 16, 1999, the Company borrowed $100,000 with
terms which allowed the Company to convert the debt to preferred
stock and warrants to purchase common stock.
NOTE 7 - CASH TRANSACTIONS
Since no cash was actually paid by the company for the original acquisition of
the CaduSys software no cash disbursements have been shown on these financial
statements for that transaction.
NOTE 8 - COMMON STOCK SALE
As part of the reorganization between U. S. Mining and Exploration, Inc.(USM)
and Global Digital Information, Inc.(GDI) the Company previously reported the
receipt of $52,500(the amount has been reported as expense of issuing common
stock on the financial statements). Upon further review, it has been
determined that this amount is not correct The correct amount may be
$220,481 or it may be that the Company has not received any funds for the
sale of stock. The Company's previous attorney, who is in control of the
records, has refused to release them. The Company is endeavoring to settle
with the former majority shareholders of USM concerning the merger between
USM and GDI. Upon receipt of those records, the correct amount received, as
well as a determination of what should have been received, will be known.
If the amounts actually received by the Company were greater than that which
was reported, the difference will be reported as additional costs or reduced
costs of issuing the common stock to effect the merger.
NOTE 9. - INCOME TAXES
As discussed in Note 1, effective April 1, 1993, the Company applied the
provisions of SFAS No. 109 in accounting for income taxes. Prior to that
date, the Company accounted for income taxes under the provisions of
Accounting Principles Board Opinion No. 11. The adoption of SFAS No. 109 had
no cumulative effect on the results of operations.
The Company has no income tax provision for the years ended March 31, 1998 and
1997 due to net operating loss carryforwards.
The income tax effect of the temporary differences giving rise to the Company's
deferred tax assets as of March 31, 1999 is as follows:
.....Federal net operating loss carryforwards $ 1,172,822
.....Total deferred tax asset 398,760
.....Valuation allowance (398,760)
.....Net deferred tax asset $ -0-
Upon implementation of SFAS No. 109 at April 1, 1993, the Company recorded a
valuation allowance due to the uncertainty of utilization of net operating
loss carryforwards. The change in the valuation allowance for the year ended
October 30, 1995 is as follows:
.....Balance April 1, 1997 $ 2,592
.....Increase in non-utilization of net operating
..... loss carryforwards 396,168
.....
.....Balance, October 30, 1995 $ 398,760
At March 31, 1999, the Company had unused net operating loss carryforwards for
income tax purposes available to offset future taxable income, if any, as
follows:
Alternative
.....Expiring In Regular Tax Minimum Tax
..... 2008 17,279 17,279
..... 2013......................... 566,799 566,799
..... 2014......................... 588,744 588,744
..... $1,172,822 $ 1,172,822
NOTE 10 ACQUISITION OF MASTERPIECE MEDICAL
The Board of Directors of Global Digital Information, Inc. approved the
acquisition of Masterpiece Medical, Inc.(MM), and Del Crane Medical, Inc(DC).
Masterpiece Medical and Del Crane Medical are Ohio corporations with software
programs and billing capability which complment the CaduSys medical records
program offered by the Company. The merger was completed effective June 22,
1999 by issuance of 2,150,000 shares of stock to the stockholders of MM. The
merger will be accounted for as a pooling of interests as provided for under
APB No. 16.
The Company believes that the addition of the sales generated by MM and DC
combined with the anticipated sales of the CaduSys product, will produce
significant sales and potential income for the Company. In addition, the
management and technical personnel of MM and DC will be added to and
compliment those of the Company.
NOTE 11 Shareholder Suit:
Subsequent to the above merger one of the original shareholders of the Company
requested the exercise of an option to purchase shares of the Compnay's stock.
Management has refused to honor the option and it has been reported that the
shareholder is going to sue for performance. The Company's attorney has no
opinion as to whether there will be any monetary impact from this suit and
that management will contest the suit vigorously.
NOTE 12 Bank Settlement:
In previuos years Masterpiece Technology financed contracts with a bank for
future receipt of income. During the current period the contractees have
reneged on the contracts and the banks are due the amount of $1,141,133. The
Company intentd to settle this liability with the bank.
NOTE 13 EMPLOYEE BENEFIT PLANS
The Company has a Savings and Security Plan which qualifies under Section 401(k)
of the Internal Revenue Code. Under provisions of the plan, the employer
matches 50% of the employee contributions, with the employer contribution not
to exceed 2%. Such matching contributions amounted to approximately $3,426
during the twelve months ended December 31, 1998.
Part II - Other Information
Signatures
Pursuant to the requirements of the
Securities Exchange Act of 1934, the
registrant has duly caused this report to be
signed on its behalf by the undersigned there
unto duly authorized.
Global Digital Information, Inc.
(Registrant)
Date /s/ Newell Crane
President
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