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 September 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 September 30, 1999, approximately
2,384,730 shares of the Registrant's Common
Stock, $.01 par value, were outstanding.
As of September 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.
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 acquired "CaduSys Medical Record" (which name was
changed to Masterpiece EMR), 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 provider 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 $6,436 for
the quarter ended September 30, 1998 and $11,660 for the quarter ended
September 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, equaling 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. i.e. 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:
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.
Pursuant to a Resolution of the Board of Directors, a reverse split of
1 share for each 80 shares of common stock, occured on June 1, 1999.
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:
<TABLE>
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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
</TABLE>
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
compliment 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 aquisition of Masterpiece Medical (see Note 10),
one of the original shareholders of the Company requested the
exercise of an option to purchase shares of the Company's stock.
Management has refused to honor the option and it has
been reported that the shareholder has sued for performance, although
the Company has not yet been served. The Company's attorney has no
opinion as to whether there will be a monetary impact from this suit,
but believes that management will contest the suit vigorously.
NOTE 12 Bank Settlement:
In previous 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 intends 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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