MASTERPIECE TECHNOLOGY GROUP, INC.
FINANCIAL STATEMENTS AND INDEPENDENT AUDITORS' REPORT
March 31, 2000
MASTERPIECE TECHNOLOGY GROUP, INC.
TABLE OF CONTENTS
PAGE
Independent Auditors' Report
Financial Statements
Balance Sheets 1
Statements of Income 2
Statements of Stockholders' Equity 3
Statements of Cash Flows 4
Notes to the Financial Statements 5-13
Supplemental Information
Independent Auditor's Report on Supplemental
Information 14
Division Balance Sheets 15
Division Statements of Income 16
INDEPENDENT AUDITORS' REPORT
Directors and Officers
Masterpiece Technology Group, Inc.
We have audited the accompanying balance sheets of Masterpiece Technology
Group, Inc. as of March 31, 2000, and the related statements of income,
stockholders' equity, and cash flows for the year then ended. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit. The financial statements of Masterpiece Technology Group, Inc.
(formerly Global Digital Information, Inc.) as of March 31, 1999 and for the
years ended March 31, 1999 and 1998, were audited by other auditors whose report
dated November 8, 1999 on those statements included an explanatory paragraph
that described the fact that the Company had suffered recurring losses from
operations and has a working capital deficiency.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provided a reasonable basis for our opinion.
In our opinion, the financial statements referred to above presents fairly, in
all material respects, the financial position of Masterpiece Technology Group,
Inc., as of March 31, 2000, and the results of operations, cash flows and
changes in stock-holders' equity for the year then ended, in conformity with
generally accepted accounting principles.
Masterpiece Technology Group, Inc.
Page Two
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 2 to the
financial statements, the Company has incurred a substantial operating loss for
the year and has a working capital deficiency. These conditions raise
substantial doubt about its ability to continue as a going concern. Management
plans regarding those matters are also described in Note 2. The financial
statements do not include any adjustments that might result from the outcome of
this uncertainty.
Fort Mitchell, Kentucky
July 7, 2000
MASTERPIECE TECHNOLOGY GROUP, INC.
BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
March 31
--------------------------------------------
2000 1999
<S> <C> <C>
Current Assets
Accounts Receivable $ 447,491 $14,800
Other Current Assets 303,531 170
Notes Receivable - Current _________ ________
Total Current Assets 751,022 14,970
_________ ________
Property and Equipment
Building and Improvements 257,786 -
Equipment, Furniture and Fixtures 834,787 38,603
_________ ________
1,092,573 38,603
Less Accumulated Depreciation 680,368 9,974
_________ ________
Total Property and Equipment 412,205 28,629
_________ ________
Other Assets
Due from Masterpiece Medical - 81,000
Capitalized Software Cost 6,532,125 53,309
Deposits and Other Assets 29,774 -
_________ ________
Total Other Assets 6,561,899 134,309
_________ ________
Total Assets $7,725,126 $177,908
========= ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Bank overdraft 72,720 418
Current Portion of Mortgage Note 1,131 -
Notes Payable - Banks 1,491,428 -
Notes Payable - Officers and Related Parties 1,402,375 -
Notes Payable - Others 1,247,171 -
Capital Lease Obligations - Current 49,048 -
Accounts Payable 1,096,824 176,116
Accrued Expenses 1,153,610 122,513
_________ ________
Total Current Liabilities 6,514,307 299,047
_________ ________
Long-Term Liabilities
Mortgage Payable - Bank (Less Current Portion) 150,550 -
Notes Payable - Shareholders - 203,552
Capital Lease Obligations (Less Current Portion) 35,842 -
_________ ________
Total Long-Term Liabilities 186,392 203,552
_________ ________
Stockholders' Equity
Common Stock, No Par Value; 50,000,000 Shares
Authorized 5,672,416 in 2000 and 220,148 in 1999,
Issued and Outstanding 5,672 10,779
Paid-In Capital 7,698,043 837,352
Accumulated Deficit (6,679,288) (1,172,822)
_________ ________
Total Stockholders' Equity 1,024,427 (324,691)
_________ ________
Total Liabilities and Stockholders' Equity $7,725,126 $ 177,908
=========== ===========
</TABLE>
See auditors' report and accompanying notes.
<PAGE> 1
MASTERPIECE TECHNOLOGY GROUP, INC.
STATEMENTS OF INCOME
<TABLE>
<CAPTION>
Years Ended March 31
--------------------------------
2000 1999 1998
-------- -------- -------
<S> <C> <C> <C>
Sales $ 263,902 $ - $ -
Cost of Sales 259,994 - -
-------- -------- --------
Gross Profit 3,908 - -
Other Revenue 1,012,128 182,555 65,737
-------- -------- --------
Operating Profit Before
Administrative Expenses 1,016,036 182,555 65,737
-------- -------- --------
Administrative Expenses
Payroll, Fees, Taxes and Related Benefits 992,053 310,254 304,835
Rent 303,409 22,101 13,120
Interest Expense 152,536 7,396 -
Professional Fees 455,196 - -
Depreciation 72,075 6,630 3,345
Amortization 113,552 - -
Utilities and Telephone 115,296 43,807 30,976
Travel and Entertainment 63,473 36,574 28,009
Other 221,355 46,430 126,925
-------- -------- --------
Total Administrative Expenses 2,488,945 473,192 507,210
-------- -------- --------
Loss from Operations (1,472,909) (290,637) (441,473)
Other Income and (Expenses) 282,299 - -
-------- -------- --------
Loss Before Taxes (1,190,610) (290,637) (441,473)
Income Taxes - - -
-------- -------- --------
Net Loss $(1,190,610) $(290,637) $(441,473)
======== ======== ========
Net Loss Per Share $ (.039) $ (1.37) $ (3.50)
</TABLE>
See auditor's report and accompanying notes.
<PAGE> 2
<PAGE>
MASTERPIECE TECHNOLOGY
STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
Common Common Paid in Accumulated
Shares Stock Surplus Deficit
-------- -------- -------- -----------
<S> <C> <C> <C> <C>
Balance, March 31, 1997 $ 491,314 $ 491 $ 441,169 $(440,712)
Stock Split 491,314 492 (492) -
Shares Issued for Cash 440,962 441 52,059 -
Common Shares Issued in Exchange
For Consulting 276,410 277 - -
Shares Issued for Acquisition Rights 8,044,150 8,044 - -
Shares Issued for Cash 787,244 787 333,192 -
Net Loss - - - (441,473)
------------ -------- -------------- -----------
Balance, March 31, 1998 10,531,394 10,532 825,928 (882,185)
Shares Issued 247,000 247 99,324 -
Less: Expenses of Issuing
Common Stock - - (87,900) -
Net Loss - - - (290,637)
-------- -------- ------------- -----------
Balance, March 31, 1999 10,778,394 10,779 837,352 (1,172,822)
Reverse Stock Split (10,747,413) (10,749) - -
Merger of GDI and Masterpiece Medical
and Del Crane Medical 1,900,000 1,900 2,125,229 (4,315,856)
Common Shares Issued in Exchange
For Consulting 1,340,670 1,341 652,197 -
Acquisition of Maplecrest
Software 1,850,765 1,851 3,121,315 -
Acquisition of Claims Direct 550,000 550 961,950 -
Net Loss - - - (1,190,610)
-------- -------- ------------ -----------
Balance, March 31, 2000 $5,672,416 $5,672 $7,698,043 $(6,679,288)
========== ======== ===================
</TABLE>
See auditors' report and accompanying notes.
<PAGE> 3
MASTERPIECE TECHNOLOGY GROUP, INC.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Years Ended March 31
-------------------------------------
2000 1999 1998
------------ ----------- -----------
<S> <C> <C> <C>
Cash Flows From Operating Activities
Net Loss $(1,190,610) $ (290,637) $ (441,473)
Reconciliation of Net Loss with
Cash Flows from Operations
Depreciation 72,075 6,630 3,345
Amortization 113,552 - -
Stock Issued for Services 653,538 - -
Changes in
Accounts Receivable 77,800 5,500 (20,300)
Other Current Assets 289,713 (170) -
Deposits and Other Assets (19,864) - -
Accounts Payable 130,769 176,116 -
Accrued Expenses (83,331) 95,596 26,917
------------ ----------- -----------
Cash Provided (Used) by Operations 43,642 (6,965) (431,551)
------------ ----------- -----------
Cash Flows from Investing Activities
Acquisition of Property and Equipment (90,584) (50,419) (33,449)
Capitalized Software Costs (171,022) - -
Payments of Notes Receivable 81,000 (81,000) -
------------ ----------- -----------
Cash Used by Investing Activities (180,606) (131,419) (33,449)
------------ ----------- -----------
Cash Flows From Financing Activities
Increase in Bank Overdraft (56,596) 418 -
Increase in Notes Payable 237,428 89,962 113,590
Payments on Capital Lease Obligations (43,868) - -
Sale of Common Stock, Net of Cost - 11,637 387,737
------------ ----------- -----------
Cash Provided by Financing Activities 136,964 102,017 501,327
------------ ----------- -----------
Net Change in Cash - (36,367) 36,367
------------ ----------- -----------
Beginning Cash Balance - 36,367 -
------------ ----------- -----------
Ending Cash Balance $ - $ - $ 36,367
========== ========== =========
</TABLE>
See auditors' report and accompanying notes.
<PAGE> 4
MASTERPIECE TECHNOLOGY GROUP, INC.
NOTES TO THE FINANCIAL STATEMENTS
NOTE 1 - ACCOUNTING POLICIES
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.
In 1999, the Company acquired Masterpiece Medical, Inc. and Del Crane Medical,
Inc. Masterpiece Medical is a Delaware corporation and Del Crane is an Ohio
corporation with software programs and billing capability that 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 Masterpiece Medical, Inc. The merger was accounted for as a
pooling of interests under APB No. 16. The Company changed its name to
Masterpiece Technology Group, Inc. (MPTG).
The Company acquired Maplecrest Software, a Connecticut corporation, on November
18, 1999. This business combination was accounted for as a purchase under APB
No. 16.
The Company acquired Claims Direct on March 30, 2000. This business combination
was accounted for as a purchase under APB No. 16.
Business Activity
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.
NOTE 1 - ACCOUNTING POLICIES (Continued)
Accounts Receivable
No allowance for bad debts has been provided since management expects no
material losses.
Fixed Assets
Furniture and fixtures, computer equipment are stated at cost. They are being
depreciated over their estimated useful lives of five to twenty years, as
appropriate.
Maintenance and repairs are charged to operations when incurred. Significant
betterments and renewals are capitalized. When property and equipment is sold
or otherwise disposed of, the asset account and related accumulated depreciation
account are relieved, and any gain or loss is included in operations.
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.
Use of Estimates
The process of preparing the financial statements in conformity with generally
accepted accounting principles requires the use of estimates and assumptions
regarding certain types of assets, liabilities, revenues, and expenses. Certain
estimates related to unsettled transactions and events as of the date of the
financial statements. Other estimates relate to assumptions about the ongoing
operations and may impact future periods. Accordingly, upon settlement, actual
results may differ from estimated amounts.
Advertising
Advertising costs are charged to operations when incurred.
Amortization
Capitalized software costs are amortized over fifteen years using the straight-
line method. Capitalized software costs are stated net of accumulated
amortization of $630,570 as of March 31, 2000.
NOTE 1 - ACCOUNTING POLICIES (Continued)
Profit Sharing
The Company has a defined contribution 401(k) plan that covers substantially all
of its employees. Company contributions to the plan are discretionary and no
contributions by the Company were made in 2000. By its nature, the plan is
fully funded.
NOTE 2 - GOING CONCERN
The accompanying financial statements have been prepared in accordance with
generally accepted accounting principles, which contemplates continuation of the
company as a going concern. However, the Company has sustained substantial
operating losses in recent years. In addition, its working capital is in a
deficiency. At March 31, 2000 current liabilities exceeded current assets by
$5.8 million.
In view of these matters, realization of a major portion of the assets in the
accompanying balance sheet is dependent upon continued operations of the
Company, which is dependent upon the Company's success of its future operations.
Management believes that actions presently being taken to revive the Company's
operating and financing requirements provide the opportunity for the Company to
continue as a going concern. Some of these steps include:
a. Upon acquisition of Maplecrest Software by MPTG, a debt was incurred due to
past salary owed to three of the founders of Maplecrest. An agreement has been
reached between Masterpiece and these individuals for full settlement for all
past due salaries arising for all periods between January 1, 1999 and May 1,
2000 by issuing to those individuals free trading stock in MPTG, as soon as
those shares are registered. There will be 111,200 shares of free trading stock
issued to satisfy $278,000 of salaries that are shown as a liability on the
balance sheet at March 31, 2000. This transaction is expected to occur in the
fiscal year ended March 31, 2001.
b. Upon acquisition of Maplecrest Software by MPTG, a debt was incurred
resulting from past unpaid payroll taxes and other bank and vendor debt. Three
of Maplecrest founders have agreed to sell off their personal stock to satisfy
approximately $992,000 in past debt. This transaction is expected to occur in
the fiscal year ended March 31, 2001. The agreed-upon debt is shown below:
Internal Revenue Service $600,000
Various Bank Debt 162,000
Equipment Leases 57,000
Various Credit Card Debt 173,000
NOTE 2 - GOING CONCERN (Continued)
c. MPTG has a current bank debt incurred over the past three years of
approximately $980,000 from past lines of credit. MPTG has recently turned over
800,000 shares of insider stock as collateral to this bank debt and the bank has
agreed to accept the stock and sell it to make payments towards the loans. As
this stock can be sold to make payments towards this debt, it will be.
NOTE 3 - CASH AND CASH FLOW INFORMATION
At various times throughout the year, the Company may have cash in certain
financial institutions in excess of insured limits.
For purposes of the cash flows statement, cash includes cash on hand and in
checking accounts.
Cash paid for interest was $18,347 for 2000.
The Company had noncash financing and investing transactions as follows:
March 31,
2000
Common stock issued for services
performed or to be performed $ 653,538
Common stock issued for mergers
Accounted for as a purchase:
Maplecrest $ 3,123,166
Claims Direct $ 962,500
NOTE 4 - 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. As part of the "Plan" the shareholders of GDI were
issued an additional 8,044,150 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 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 4 - MERGER AND REORGANIZATION (Continued)
On June 22, 1999, Masterpiece Technology Group, Inc. (formerly Global Digital
Information, Inc.) merged with Masterpiece Medical and Del Crane Medical, with
1,900,000 shares of stock going to the shareholders of Masterpiece Medical.
This was accounted for using the pooling of interest method under APB No. 16.
The balance sheet as of March 31, 2000 includes the accounts of Masterpiece
Medical and Del Crane Medical. The activity for the entire year ended March 31,
2000 is included in the statement of income. Activity for 1999 and 1998 is not
available and, therefore, not included in the income statements for these two
years.
On November 18, 1999, Maplecrest Software Development, Inc. was acquired by MPTG
by issuing 1,850,765 shares of MPTG to the shareholders of Maplecrest. The
cost of acquisition was $3,123,166 (using a value as of the date of acquisition
of $1.6875 per share), and resulting in an increase in the valuation of
Maplecrest's capitalized software cost of $3,680,877, which is being amortized
over 15 years. This was accounted for using the purchase method under APB No.
16. The balance sheet as of March 31, 2000 includes the accounts of Maplecrest,
but the income statement only includes activities from the date of merger
(November 18, 1999) through year end.
On March 30, 2000, Claims Direct, Inc. was acquired by MPTG by issuing 550,000
shares of MPTG to the shareholders of Claims Direct. The cost of acquisition
was $962,500 (using a value as of the date of acquisition of $1.75 per share).
This purchase price did not result in any goodwill or other increase in
intangible assets. This was accounted for using the purchase method under APB
No. 16. The balance sheet as of March 31, 2000 includes the accounts of Claims
Direct, but the income statement does not include any activity since the merger
date was March 30, 2000.
The following summarized proforma (unaudited) information assumes the
acquisition had occurred on April 1, 1999.
Year Ended
March 31, 2000
Sales $ 3,348,173
Net Loss $(1,967,324)
NOTE 5 - NOTES PAYABLE
The Company has several unsecured notes payable to officers and related parties.
The notes bear interest at rates ranging from 5.50% to 8% and are due on demand.
Interest expense on these notes was $67,535 for the year ended March 31, 2000.
The Company has several unsecured notes payable to various individuals. These
notes bear interest at rates ranging from 8% through 12% and are currently due.
The Company has several notes payable to banks. The notes are secured by
general assets of the Company. These notes bear interest at rates ranging from
8.5% through 10.5% and are currently due.
NOTE 5 - NOTES PAYABLE (Continued)
2000
Mortgage Loan Payable
The Company has a mortgage loan
payable with an interest rate of 8.5%, the
final balloon payment of which is due
December, 2026. $151,681
Less Current Portion 1,131
Long-Term Portion $150,550
The remaining maturities on the mortgage note payable are as follows:
Year Ended
March 31,
2001 $ 1,131
2002 109
2003 128
2004 137
2005 150
Thereafter 150,026
-------
$151,681
=======
NOTE 6 - CAPITAL LEASE OBLIGATIONS
The Company leases equipment under several capital lease obligations. They will
expire on various dates ranging from July, 2000 through June, 2005. The assets
and accumulated depreciation under capital leases at March 31, 2000 are as
follows:
Equipment $167,698
Accumulated Depreciation (83,472)
---------
$ 84,226
=========
<PAGE>
NOTE 6 - CAPITAL LEASE OBLIGATIONS (Continued)
Minimum future payments under the capital lease obligations are as follows:
Year Ended
March 31,
2001 $ 60,858
2002 31,122
2003 5,885
2004 2,898
2005 724
---------
Total Payments 101,487
Interest Portion of
Minimum Payments (16,597)
--------
Present Value of Capital
Lease Obligations 84,890
Less Current Portion 49,048
------
Long-Term Portion $35,842
======
The interest rates are based on the imputed rate of return and range from 10.3%
to 30.1%.
NOTE 7 - ADVERTISING EXPENSE
Advertising expense was $16,222 for the year ended March 31, 2000.
NOTE 8 - INCOME TAXES
The Company has no income tax provision for the years ended March 31, 2000, 1999
and 1998 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, 2000 is as follows:
Federal net operating loss carryforwards $ 2,274,400
Total deferred tax asset 773,296
Valuation allowance (773,296)
Net deferred tax asset $ -
============
<PAGE> 11
NOTE 8 - INCOME TAXES (Continued)
The Company records a valuation allowance due to the uncertainty of utilization
of net operating loss carryforwards. The change in the valuation allowance for
the year ended March 31, 2000 is as follows:
Balance April 1, 1999 $398,760
Increase in Non-Utilization of Net Operating
Loss Carryforwards 374,536
-------------
Balance, March 31, 2000 $773,296
==========
At March 31, 2000, the Company had unused net operating loss carryforwards for
income tax purposes available to offset future taxable income, if any, as
follows:
Expiring In
2008 $ 17,000
2013 567,000
2014 589,000
2020 1,101,400 (a)
(a) The Company's tax returns are filed through 1997. Due to net operating
losses no tax should be due. These loss carryforwards are estimated based upon
preliminary review of tax filings.
NOTE 9 - SHAREHOLDER SUIT
Subsequent to the previously disclosed merger, 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 is going to sue for performance. The Company's
attorney's opinion is that any monetary impact from this suit to the Company
would be insignificant.
NOTE 10 - LEASE COMMITMENTS
Facilities
The Company leases one of its premises from an unrelated entity. The lease
expires in December, 2004. Under the agreement, the Company pays a monthly base
rent plus a portion of the building's operating expenses. The Company's
building lease expense was $224,263 for the year ended March 31, 2000.
NOTE 10 - LEASE COMMITMENTS (Continued)
Equipment
The Company leases equipment under several noncancellable operating leases. The
leases expire on various dates from December, 2000 through June, 2002. The
Company's equipment lease expense was $19,611 for the year ended March 31, 2000.
Minimum future annual rental payments under the noncancellable leases are as
follows for the years ending March 31:
Building Equipment
Rent Lease Total
2001 $ 233,916 $24,957 $ 258,873
2002 243,180 19,773 262,953
2003 252,444 7,074 259,518
2004 261,708 - 261,708
2005 201,492 - 201,492
Thereafter - - -
$1,192,740 $51,804 $1,244,544
NOTE 11 - EARNINGS (LOSS) PER SHARE
Earnings (loss) per share amount for the year ended March 31, 2000 is based upon
the average outstanding shares of the Company. Earnings (loss) per share has
been restated for prior years to reflect the effect of the reverse stock split.
The average number of shares outstanding was 3,068,397, 212,531 and 126,046 for
the years ended March 31, 2000, 1999 and 1998, respectively.
INDEPENDENT AUDITORS' REPORT
ON SUPPLEMENTAL INFORMATION
Directors and Officers
Masterpiece Technology Group, Inc.
Our audit was made for the purpose of forming an opinion on the basic financial
statements taken as a whole. The following supplemental information as listed
in the table of contents is presented for purposes of additional analysis and is
not a required part of the basic financial statements. Such information has
been subjected to the auditing procedures applied in the audit of the basic
financial statements and, in our opinion, is fairly stated in all material
respects in relation to the basic financial statements taken as a whole.
Fort Mitchell, Kentucky
July 7, 2000
<PAGE>
MASTERPIECE TECHNOLOGY GROUP, INC.
DIVISION BALANCE SHEETS
<TABLE>
<CAPTION>
March 31, 2000
------------------------------------------------------------------------
Claims
Masterpiece Direct Maplecrest Total
-------------- ------------- --------------- ------------------
<S> <C> <C> <C> <C>
Current Assets
Accounts Receivable $ 17,399 $ 165,793 $264,299 $ 447,491
Other Current Assets 300,120 - 3,411 303,531
-------------- ------------- --------------- ------------------
Total Current Assets 317,519 165,793 267,710 751,022
-------------- ------------- --------------- ------------------
Property and Equipment
Buildings and Improvements - - 257,786 257,786
Equipment, Furniture and Fixtures 130,185 86,658 617,944 834,787
-------------- ------------- --------------- ------------------
130,185 86,658 875,730 1,092,573
Less Accumulated Depreciation 87,017 47,192 546,159 680,368
-------------- ------------- --------------- ------------------
Total Property and Equipment 43,168 39,466 329,571 412,205
-------------- ------------- --------------- ------------------
Other Assets
Due from Masterpiece Medical - - - -
Capitalized Software Cost 63,460 1,231,664 5,237,001 6,532,125
Deposits and Other Assets 23,839 4,017 1,918 29,774
-------------- ------------- --------------- ------------------
Total Other Assets 87,299 1,235,681 5,238,919 6,561,899
-------------- ------------- --------------- ------------------
Total Assets $ 447,986 $ 1,440,940 $ 5,836,200 $ 7,725,126
==========================================================================
LIABILITES AND STOCKHOLDER'S EQUITY
Current Liabilities
Bank Overdraft $ 93,436 $ (18,631) $ (2,085) $ 72,720
Notes Payable - Banks 1,014,796 - 477,763 1,492,559
Note Payable - Officers and
Related Parties 1,218,475 34,500 149,400 1,402,375
Notes Payable - Others 889,398 113,965 243,808 1,247,171
Capital Lease Obligations - Current - 21,435 27,613 49,048
Accounts Payable 307,154 123,514 666,156 1,096,824
Accrued Expenses 338,481 188,994 626,135 1,153,610
-------------- ------------- --------------- ------------------
Total Current Liabilities 3,861,740 463,777 2,188,790 6,514,307
-------------- ------------- --------------- ------------------
Long-Term Liabilities
Note Payable - Bank - - 150,550 150,550
Capital Lease Obligations
(Less Current Portion) - 14,663 21,179 35,842
-------------- ------------- --------------- ------------------
Total Long-Term Liabilities - 14,663 171,729 186,392
-------------- ------------- --------------- ------------------
Total Liabilities 3,861,740 478,440 2,360,519 6,700,699
-------------- ------------- --------------- ------------------
Stockholder's Equity
Common Stock, No Par Value; 50,000,000 Shares
Authorized, 5,672,416 Shares Issued
and Outstanding 5,672 - - 5,672
Paid in Capital 2,404,210 962,500 4,331,333 7,698,043
Retained Earnings (5,823,636) - (855,652) (6,679,288)
-------------- ------------- --------------- ------------------
Total Stockholder's Equity (3,413,754) 962,500 3,475,681 1,024,427
-------------- ------------- --------------- ------------------
Total Liabilities and
Stockholder's Equity $ 447,986 $ 1,440,940 $5,836,200 $7,725,126
============================================
</TABLE>
See auditor's report on supplemental information and accompanying notes.
<PAGE> 15
<PAGE>
MASTERPIECE TECHNOLOGY GROUP, INC.
DIVISION STATEMENTS OF INCOME
<TABLE>
<CAPTION>
Year Ended March 31, 2000
------------------------------------------------------------------------
Claims
Masterpiece Direct Maplecrest Total
-------------- ------------- --------------- ------------------
<S> <C> <C> <C> <C>
Sales $ 139,537 $ - $ 124,365 $ 263,902
Cost of Sales 61,148 - 198,846 259,994
-------------- ------------- --------------- ------------------
Gross Profit 78,389 - (74,481) 3,908
Other Revenue 775,000 - 237,128 1,012,128
-------------- ------------- --------------- ------------------
Operating Profit Before Administrative
Expense 853,389 - 162,647 1,016,036
-------------- ------------- --------------- ------------------
Administrative Expenses
Payroll, Fees, Taxes and Related
Benefits 592,319 - 399,734 992,053
Rent 87,728 - 215,681 303,409
Interest Expense 112,105 - 40,431 152,536
Professional Fees 433,861 - 21,335 455,196
Depreciation 28,463 - 43,612 72,075
Amortization 17,477 - 96,075 113,552
Utilities and Telephone 57,973 - 57,323 115,296
Travel and Entertainment 57,785 - 5,688 63,473
Other 69,005 - 152,350 221,355
-------------- ------------- --------------- ------------------
Total Administrative Expenses 1,456,716 - 1,032,229 2,488,945
-------------- ------------- --------------- ------------------
(Loss) Income from Operations (603,327) - (869,582) (1,472,909)
Other Income and (Expenses) 268,369 - 13,930 282,299
-------------- ------------- --------------- ------------------
Net Loss $ (334,958) $ - $(855,652) $(1,190,610)
==============================================
</TABLE>
See auditors' report on supplemental information and accompanying notes.
<PAGE> 16
The following documents are filed as part of this
Form 10-K Annual Report:
3)(i) Articles of Incorporation Incorporated by Reference
(ii) Bylaws Incorporated by Reference
5) Opinion re: legality Included
15) Letter re change in certifying accountant Incorporated by Reference
23) Consents of Experts and Counsel Included
SIGNATURES
Pursuant to the requirements of Section
13 or 15(d) of the Securities and Exchange Act
of 1934, the Company has duly caused this
report to be signed on its behalf by the
undersigned, thereunto duly authorized.
Masterpiece
Technology Group,
Inc.
By: /s/ Newell D. Crane
Newell D. Crane
President, Director
Date: July 11, 2000
