SECURITIES EXCHANGE COMMISSION
                             Washington, D.C. 20549


                                   FORM 10-KSB
                            Annual Report Pursuant to
                       the Securities Exchange Act of 1934


                  For the fiscal year ended September 30, 1998
                        Commission file number 33-5203-D

                                THE ENTITY, INC.
                                ----------------
             (Exact name of registrant as specified in its charter)

                                 MOONSTONE, INC.
                                 ---------------
                           (Prior Name of Registrant)

          Colorado                                84-0953839
          --------                                ----------
   (State of incorporation)                      (I.R.S. Employer
                                                 Identification No.)

             10200 W. 44th Avenue, Suite 400, Wheat Ridge, CO 80033
                 ----------------------------------------------
               (Address of principal executive offices) (Zip Code)

        Registrant's telephone number, including area code:(303) 422-8127

           Securities registered pursuant to Section 12(b) of the Act:

                            Title of each class: None

                 Name of each exchange on which registered: N/A

           Securities registered pursuant to Section 12(g) of the Act:

                            Title of each class: None

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  shorter  period that the  registrant  was
required  to file  such  reports),  and  (2)  has  been  subject  to the  filing
requirements for at least the past 90 days.

                      Yes  No   X

Check if disclosure of delinquent  filers pursuant to Item 405 of Regulation S-B
is not contained in this form, and no disclosure will be contained,  to the best
of  Registrant's  knowledge,  in  definitive  proxy  or  information  statements
incorporated  by reference  in Part III of this Form 10-KSB or any  amendment to
this Form 10-KSB.

State issuer's revenues for its most recent fiscal year. $0


<PAGE>



Transitional Small Business Disclosure Format:

                         Yes              X    No
                    -----               -------

Aggregate  market  value  of the  voting  stock  held by  non-affiliates  of the
registrant as of September 30, 1998: $0

Number of outstanding  shares of the  registrant's no par value common stock, as
of September 30, 1998: 81,400,000





                                       -2-

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                                     PART 1

Item 1.  Business

         Moonstone,  Inc (the  "Registrant"  or the "Company") was  incorporated
         under the laws of the State of Colorado on July 7, 1983 for the primary
         purpose of seeking  acquisitions  of businesses or properties,  without
         limitation as to geographic location or type of business. The Company's
         initial  activities  were directed  toward the acquisition of operating
         capital. The Company changed its name to The Entity, Inc. in 1991.

         On December  15, 1986,  the Company  completed a public  offering  (the
         "Offering") of 5,000,000  Units,  each Unit  consisting of one share of
         Common Stock,  $.0001 par value, and one Warrant to purchase a share of
         Common  Stock.  From this public  offering,  the Company  received  net
         proceeds of approximately $33,597.

         Since the  completion of the  Offering,  the Company has not engaged in
         any operations  nor has it generated any revenue.  The Company has been
         engaged  in  the  identification  and  evaluation  of  target  business
         entities for possible acquisition.

Current Activities

         The Company is currently engaged,  and for the next fiscal year intents
         to engage,  in the continued  identification  and  evaluation of target
         business entities and/or assets for possible acquisition.

Employees

         The Company has no full-time employees. Its officers, who represent the
         only part time employees,  devote as much of their time as is necessary
         to conduct the Company's business.

         No business  activity was  conducted  by the Company  during the fiscal
         year.  As a result,  no income was  realized by the Company in its last
         fiscal year.

         The Company was  inactive and  presently  does not  participate  in any
         industry segment.  The Company had no material  revenues,  or operating
         profits or identifiable assets attributable to its industry segment.

         In December 1997,  the  shareholders elected  three  new directors.  In
         1997, Larry Carr acquired 34,574,000 shares of


                                       -3-

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         common  stock  from  James D.  Pauls in a levy  and  execution  under a
         judgment and controls the Company through such shares.

         The Company is actively seeking acquisition candidates.

         The  Company's  Articles of  Incorporation,  as amended,  entitle it to
         transact any lawful business or businesses for which  corporations  may
         be incorporated  pursuant to the Colorado Corporation Code. The Company
         can be defined as a "shell" company, whose sole purpose at this time is
         to locate and consummate a merger or acquisition with a private entity.
         Any  business  combination  or  transaction  will  likely  result  in a
         significant  issuance  of shares and  substantial  dilution  to present
         stockholders of the Company.

         The proposed business activities  described herein classify the Company
         as a "blank check" company.  Many states have enacted  statutes,  rules
         and  regulations  limiting  the sale of  securities  of  "blank  check"
         companies in their  respective  jurisdictions.  In order to comply with
         these various limitations,  management does not intend to undertake any
         efforts to sell any additional  securities of the Company,  either debt
         or equity,  or cause a market to develop  in the  Company's  securities
         until  such  time  as the  Company  has  successfully  implemented  its
         business plan described herein.

         General Business Plan

         The   Company's   purpose  is  to  seek,   investigate   and,  if  such
         investigation  warrants,  acquire an interest in business opportunities
         presented  to it by  persons  or firms who or which  desire to seek the
         perceived  advantages  of a corporation  which is registered  under the
         Securities  Exchange Act of 1934 (the "Exchange Act"). The Company will
         not  restrict  its  search  to  any  specific  business,   industry  or
         geographical  location  and the Company may  participate  in a business
         venture  of  virtually  any  kind or  nature.  This  discussion  of the
         proposed  business  is  purposefully  general  and is not  meant  to be
         restrictive of the Company's virtually  unlimited  discretion to search
         for  and  enter  into  potential  business  opportunities.   Management
         anticipates  that it may be able to  participate  in only one potential
         business  venture  because the  Company has nominal  assets and limited
         financial   resources.   See  "Financial   Statements."  This  lack  of
         diversification should be considered a substantial risk to shareholders
         of the  Company  because  it will not  permit  the  Company  to  offset
         potential losses from one venture against gains from another.

         The Company may seek a business  opportunity  with entities  which have
         recently  commenced  operations,  or which wish to  utilize  the public
         marketplace in order to raise additional


                                       -4-

<PAGE>



         capital in order to expand into new  products or markets,  to develop a
         new product or service or for other corporate purposes. The Company may
         acquire  assets  and  establish  wholly-owned  subsidiaries  in various
         businesses or acquire existing businesses as subsidiaries.

         The Company anticipates that the selection of a business opportunity in
         which to  participate  will be  complex  and  extremely  risky.  Due to
         general economic conditions, rapid technological advances being made in
         some industries and shortages of available capital, management believes
         that there are  numerous  firms  seeking  the  perceived  benefits of a
         publicly  registered  corporation.  Such perceived benefits may include
         facilitating  or  improving  the  terms  on  which  additional   equity
         financing  may be  sought,  providing  liquidity  for  incentive  stock
         options or  similar  benefits  to key  employees,  providing  liquidity
         (subject to restrictions of applicable  statutes) for all  shareholders
         and other factors.  Potentially,  available business  opportunities may
         occur  in  many   different   industries   and  at  various  stages  of
         development,   all  of  which   will  make  the  task  of   comparative
         investigation  and analysis of such  business  opportunities  extremely
         difficult and complex.

         The Company  has, and will  continue to have,  no capital with which to
         provide the owners of business  opportunities with any significant cash
         or other assets. However,  management believes that the Company will be
         able to offer  owners of  acquisition  candidates  the  opportunity  to
         acquire a  controlling  ownership  interest  in a  publicly  registered
         company  without  incurring  the cost and time  required  to conduct an
         initial public offering. The owners of the business opportunities will,
         however,  incur  significant  legal and accounting  costs in connection
         with the acquisition of a business  opportunity  including the costs of
         preparing  forms 8-K,  10Q,  or  agreements  and  related  reports  and
         documents.  The Exchange Act  specifically  requires that any merger or
         acquisition    candidate   comply   with   all   applicable   reporting
         requirements,  which include providing audited financial  statements to
         be included  within the  numerous  filings  relevant to comply with the
         Exchange Act.  Nevertheless,  the officers and directors of the Company
         have not  conducted  market  research and are not aware of  statistical
         data  which  would  support  the  perceived  benefits  of a  merger  or
         acquisition  transaction for the owners of a business opportunity.  The
         analysis of new business  opportunities will be undertaken by, or under
         the  supervision of, the officers and directors of the Company have not
         conducted market research and are not aware of statistical  acquisition
         transaction for the owners of a business opportunity.



                                       -5-

<PAGE>



         The analysis of new business  opportunities  will be undertaken  by, or
         under the  supervision  of, the officers and  directors of the Company,
         none of whom is a professional business analyst.  Management intends to
         concentrate   on   identifying    preliminary    prospective   business
         opportunities  which may be brought to its  attention  through  present
         associations  of  the  Company's  officers  and  directors,  or by  the
         Company's    shareholders.    In   analyzing    prospective    business
         opportunities,  management  will consider such matters as the available
         technical,  financial and  managerial  resources;  working  capital and
         other financial requirements;  history of operations, if any; prospects
         for the future; nature of present and expected competition; the quality
         and  experience of management  services  which may be available and the
         depth  of  that  management;   the  potential  for  further   research,
         development or  exploration;  specific risk factors not now foreseeable
         but which then may be anticipated to impact the proposed  activities of
         the Company;  the potential for growth or expansion;  the potential for
         profit;  the perceived  public  recognition  or acceptance of products,
         services or trades;  name  identification;  and other relevant factors.
         Officers  and  directors  of the  Company  will  meet  personally  with
         management  and key  personnel of the business  opportunity  as part of
         their  investigation.  To the extent  possible,  the Company intends to
         utilize  written  reports and  personal  investigation  to evaluate the
         above  factors.  The Company will not acquire or merge with any company
         for which  audited  financial  statements  cannot be obtained  within a
         reasonable period of time after closing of the proposed transaction.

         Management of the Company,  while not especially experienced in matters
         relating to the new business of the Company,  shall rely upon their own
         efforts  and, to a much  lesser  extent,  the efforts of the  Company's
         shareholders, in accomplishing the business purposes of the Company. It
         is not anticipated that any outside consultants or advisors, other than
         the Company's  legal counsel and  accountants,  will be utilized by the
         Company to effectuate its business purposes described herein.  However,
         if the Company does retain such an outside  consultant or advisor,  any
         cash fee earned by such  party will need to be paid by the  prospective
         merger/acquisition  candidate,  as the  Company has no cash assets with
         which  to  pay  such  obligation.  There  have  been  no  contracts  or
         agreements with any outside consultants and none are anticipated in the
         future.

         The Company will not restrict its search to any specific kind of firms,
         but may acquire a venture which is in its  preliminary  or  development
         stage,  which is already in  operation or which is in  essentially  any
         stage of its  corporate  life. It is impossible to predict at this time
         the status of any business in which the Company may become


                                       -6-

<PAGE>



         engaged, in that such business may need to seek additional capital, may
         desire to have its shares  publicly  traded or may seek other perceived
         advantages which the Company may offer.

         It is anticipated  that the Company will incur nominal  expenses in the
         implementation  of its  business  plan  described  herein.  Because the
         Company has no capital  with which to pay these  anticipated  expenses,
         present  management  of the Company  will pay these  charges with their
         personal  funds,  as interest free loans to the Company.  However,  the
         only  opportunity  which management has to have these loans repaid will
         be from a prospective merger or acquisition  candidate.  Management has
         agreed among  themselves that the repayment of any loans made on behalf
         of the Company will not impede,  or be made  conditional in any manner,
         on consummation of a proposed transaction.

         Acquisition of Opportunities

         In implementing a structure for a particular business acquisition,  the
         Company may become a party to a merger, consolidation,  reorganization,
         joint  venture or  licensing  agreement  with  another  corporation  or
         entity. It may also acquire stock or assets of an existing business. On
         the  consummation  of a  transaction,  it is probable  that the present
         management and shareholders of the Company will no longer be in control
         of the Company.  In addition,  the Company's  directors may, as part of
         the terms of the acquisition transaction, resign and be replaced by new
         directors  without  a vote of the  Company's  shareholders  or may sell
         their stock in the Company. Any and all such sales will only be made in
         compliance  with  the  securities  laws of the  United  States  and any
         applicable state.

         It is anticipated that any securities issued in any such reorganization
         would be issued in reliance  upon  exemption  from  registration  under
         applicable  federal and state securities  laws. In some  circumstances,
         however,  as a negotiated  element of its transaction,  the Company may
         agree to register all or a part of such  securities  immediately  after
         the  transaction is consummated or at specified  times  thereafter.  If
         such registration  occurs, of which there can be no assurance,  it will
         be  undertaken   by  the   surviving   entity  after  the  Company  has
         successfully  consummated a merger or acquisition and the Company is no
         longer  considered a "shell"  company.  Until such time as this occurs,
         the Company will not attempt to register any additional securities. The
         issuance of substantial  additional securities and their potential sale
         into any trading  market which may develop in the Company's  securities
         may have a depressive effect on the value of the Company's


                                       -7-

<PAGE>



         securities in the future, if such a market develops, of which
         there is no assurance.

         While the actual terms of a  transaction  to which the Company may be a
         party cannot be  predicted,  it may be expected that the parties to the
         business  transaction will find it desirable to avoid the creation of a
         taxable  event and thereby  structure  the  acquisition  in a so-called
         "tax-free"  reorganization  under  Sections  368(a)(1)  or  351  of the
         Internal  Revenue  Code  (the  "Code").  In  order to  obtain  tax-free
         treatment  under the Code,  it may be  necessary  for the owners of the
         acquired  business  to own  80% or  more  of the  voting  stock  of the
         surviving  entity. In such event, the shareholders of the Company would
         retain  less  than 20% of the  issued  and  outstanding  shares  of the
         surviving  entity,  which would result in  significant  dilution in the
         equity of such shareholders.

         As part of the Company's  investigation,  officers and directors of the
         Company will meet  personally  with  management and key personnel,  may
         visit and inspect material  facilities,  obtain independent analysis or
         verification  of certain  information  provided,  check  references  of
         management  and key personnel and take other  reasonable  investigative
         measures,  to the extent of the Company's limited  financial  resources
         and management expertise.  The manner in which the Company participates
         in an  opportunity  will depend on the nature of the  opportunity,  the
         respective  needs and  desires of the Company  and other  parties,  the
         management of the opportunity and the relative  negotiation strength of
         the Company and such other management.

         With  respect to any merger or  acquisition,  negotiations  with target
         company  management  are  expected  to focus on the  percentage  of the
         Company which target company shareholders would acquire in exchange for
         all of their shareholdings in the target company. Depending upon, among
         other  things,  the  target  company's  assets  and  liabilities,   the
         Company's  shareholders  will in all  likelihood  hold a  substantially
         lesser  percentage  ownership  interest  in the Company  following  any
         merger or  acquisition.  The  percentage  ownership  may be  subject to
         significant  reduction  in the  event  the  Company  acquires  a target
         company with substantial assets. Any merger or acquisition  effected by
         the Company can be expected to have a  significant  dilutive  effect on
         the  percentage of shares held by the Company's  then-shareholders.  If
         required to so do under  relevant  law,  management of the Company will
         seek  shareholder  approval of a proposed  merger or acquisition  via a
         Proxy  Statement.   However,  such  approval  would  be  assured  where
         management  supports  such a business  transaction  because  management
         presently  controls  sufficient  shares of the Company to  effectuate a
         positive  vote on the  proposed  transaction.  Further,  a  prospective
         transaction may be structured so that


                                       -8-

<PAGE>



         shareholder  approval is not required,  and such a  transaction  may be
         effectuated by the Board of Directors without shareholder approval.

         The Company will  participate in a business  opportunity only after the
         negotiation and execution of appropriate written  agreements.  Although
         the  terms of such  agreements  cannot  be  predicted,  generally  such
         agreements will require some specific representations and warranties by
         all of the parties  thereto,  will specify  certain  events of default,
         will  detail  the terms of  closing  and the  conditions  which must be
         satisfied by each of the parties prior to and after such closing,  will
         outline the manner of bearing costs,  including  costs  associated with
         the Company's  attorneys and  accountants,  will set forth  remedies on
         default and will include miscellaneous other terms.

         As stated  hereinabove,  the Company will not acquire or merge with any
         entity which cannot provide  independent  audited financial  statements
         within a  reasonable  period  of time  after  closing  of the  proposed
         transaction.   The   Company  is  subject  to  all  of  the   reporting
         requirements   included  in  the  Exchange   Act.   Included  in  these
         requirements is the affirmative duty of the Company to file independent
         audited  financial  statements as part of its Form 8-K to be filed with
         the Securities and Exchange Commission upon consummation of a merger or
         acquisition,  as well as the  Company's  audited  financial  statements
         included in its annual report on Form 10-KSB (or 10-K, as  applicable).
         If such audited financial  statements are not available at closing,  or
         within time  parameters  necessary to insure the  Company's  compliance
         with the requirements of the Exchange Act, or if the audited  financial
         statements provided do not conform to the  representations  made by the
         candidate  to  be  acquired  in  the  closing  documents,  the  closing
         documents will provide that the proposed  transaction will be voidable,
         at the  discretion of the present  management  of the Company.  If such
         transaction  is voided,  the  agreement  will also  contain a provision
         providing for the  acquisition  entity to reimburse the Company for all
         costs associated with the proposed transaction.

         Competition

         The Company will remain an  insignificant  participant  among the firms
         which engage in the  acquisition of business  opportunities.  There are
         many  established  venture  capital and financial  concerns  which have
         significantly  greater financial and personnel  resources and technical
         expertise than the Company. In view of the Company's combined extremely
         limited financial resources and limited management availability, the


                                       -9-

<PAGE>



         Company will continue to be at a significant  competitive  disadvantage
         compared to the Company's competitors.

         Employees

         The  Company  has no full  time  employees.  The  Company's  president,
         treasurer and secretary have agreed to allocate a portion of their time
         to the activities of the Company, without compensation.  These officers
         anticipate  that the business plan of the Company can be implemented by
         their devoting approximately 20 hours per month to the business affairs
         of the Company and, consequently,  conflicts of interest may arise with
         respect to the limited time  commitment by such  officers.  See Item 9,
         "Directors,   Executive   Officers,   Promoters  and  Control  Persons;
         Compliance with Section 16(a) of the Exchange Act."

         Investment Company Act of 1940

         The Company may participate in a business or opportunity by purchasing,
         trading  or selling  the  securities  of such  business.  However,  the
         Company  does  not  intend  to  engage  primarily  in such  activities.
         Specifically,  the Company  intends to conduct its  activities so as to
         avoid being classified as an "investment  company" under the Investment
         Company  Act of  1940  (the  "Investment  Act"),  and  therefore  avoid
         application  of the  costly  and  restrictive  registration  and  other
         provisions  of the  Investment  Act  and  the  regulations  promulgated
         thereunder.

         Section  3(a) of the  Investment  Act  provides  the  definition  of an
         "investment  company"  which  includes an entity that  engages or holds
         itself out as being  engaged  primarily in the  business of  investing,
         reinvesting  or trading in  securities,  or that engages or proposes to
         engage in the business of investing,  reinvesting,  owning,  holding or
         trading "investment  securities"  (defined as all securities other than
         government  securities,  securities of majority-owned  subsidiaries and
         certain other  securities)  the value of which exceeds 40% of the value
         of its total  assets  (excluding  government  securities,  cash or cash
         items).  The Company intends to implement its business plan in a manner
         that  will  result  in the  availability  of this  exception  from  the
         definition  of  "investment  company."   Consequently,   the  Company's
         participation  in a business or  opportunity  through the  purchase and
         sale of  investment  securities  will be  limited.  In  order  to avoid
         classification as an investment  company,  the Company will search for,
         analyze and acquire or participate in a business  opportunity by use of
         a method that does not involve the acquisition, ownership or holding of
         investment securities.


                                      -10-

<PAGE>




         The  Company's  plan of  business  may  involve  changes in its capital
         structure,   management,   control  and  business,   especially  if  it
         consummates a reorganization as discussed above. Each of these areas is
         regulated by the  Investment  Act,  which  regulation has the purported
         purpose of  protecting  purchasers of  investment  company  securities.
         Since the Company  will not  register  as an  investment  company,  its
         shareholders will not be afforded these purported protections.

         The  Company  intends  to  vigorously   resist   classification  as  an
         investment   company  and  to  take  advantage  of  any  exemptions  or
         exceptions  from  application  of the  Investment  Act, which allows an
         entity a  one-time  option  during  any  three-year  period to claim an
         exemption  as  a  "transient"  investment  company.  The  necessity  of
         asserting any such resistance, or making any claim of exemption,  could
         be time-consuming and costly, or even prohibitive,  given the Company's
         limited resources.

         Certain Risks

         The Company's  business is subject to numerous risk factors,  including
         the following:

         No Operating History or Revenue and Minimal Assets. The Company has had
         no operating history nor any revenues or earnings from operations.  The
         Company has no significant assets or financial  resources.  The Company
         will,  in  all   likelihood,   sustain   operating   expenses   without
         corresponding  revenues,  at least until the consummation of a business
         combination.  This may result in the Company  incurring a net operating
         loss which will increase  continuously until the Company can consummate
         a business combination with a profitable business opportunity. There is
         no assurance that the Company can identify such a business  opportunity
         and consummate such a business combination.

         Speculative Nature of Company's Proposed Operations. The success of the
         Company's  proposed plan of operation  will depend to a great extent on
         the  operations,  financial  condition and management of the identified
         business  opportunity.   While  management  intends  to  seek  business
         combination(s)  with entities having established  operating  histories,
         there  can be no  assurance  that the  Company  will be  successful  in
         locating  candidates  meeting such  criteria.  In the event the Company
         completes a business  combination,  of which there can be no assurance,
         the  success  of  the  Company's   operations  may  be  dependent  upon
         management of the successor  firm or venture  partner firm and numerous
         other factors beyond the Company's control.


                                      -11-

<PAGE>




         Scarcity   of  and   Competition   for   Business   Opportunities   and
         Combinations.  The Company is and will continue to be an  insignificant
         participant  in the business of seeking  mergers with,  joint  ventures
         with and  acquisitions  of small private and public  entities.  A large
         number of established and  well-financed  entities,  including  venture
         capital  firms,  are active in mergers and  acquisitions  of  companies
         which may be desirable  target  candidates for the Company.  Nearly all
         such entities have significantly greater financial resources, technical
         expertise   and   managerial   capabilities   than  the  Company   and,
         consequently,  the Company  will be at a  competitive  disadvantage  in
         identifying possible business opportunities and successfully completing
         a business  combination.  Moreover,  the Company  will also  compete in
         seeking  merger or  acquisition  candidates  with numerous  other small
         public companies.

         No  Agreement  for  Business  Combination  or  Other  Transaction;   No
         Standards  for Business  Combination.  The Company has no  arrangement,
         agreement or  understanding  with respect to engaging in a merger with,
         joint venture with or acquisition of, a private or public entity. There
         can be no assurance  that the Company will be successful in identifying
         and  evaluating  suitable  business  opportunities  or in  concluding a
         business  combination.  Management  has not  identified  any particular
         industry or specific  business within an industry for evaluation by the
         Company.  There  is no  assurance  that  the  Company  will  be able to
         negotiate a business combination on terms favorable to the Company. The
         Company has not established a specific length of operating history or a
         specified level of earnings,  assets, net worth or other criteria which
         it will require a target  business  opportunity to have  achieved,  and
         without which the Company would not consider a business  combination in
         any form with such business opportunity.  Accordingly,  the Company may
         enter into a business combination with a business opportunity having no
         significant  operating  history,  losses,  limited or no potential  for
         earnings,   limited  assets,  negative  net  worth  or  other  negative
         characteristics.

         Continued Management Control; Limited Time Availability.  While seeking
         a business combination,  management anticipates devoting up to 20 hours
         per  month  to the  business  of the  Company.  None  of the  Company's
         officers  has  entered  into a written  employment  agreement  with the
         Company and none is expected to do so in the  foreseeable  future.  The
         Company has not obtained key man life  insurance on any of its officers
         or directors.  Notwithstanding the combined limited experience and time
         commitment  of  management,  loss  of the  services  of  any  of  these
         individuals would adversely affect development of the


                                      -12-

<PAGE>



         Company's business  and its  likelihood of  continuing operations.  See
         Item 9, "Directors, Executive Officers,  Promoters and Control Persons;
         Compliance with Section 16(a) of the Exchange Act."

         Conflicts of Interest - General.  Certain of the officers and directors
         of the Company are directors  and/or  principal  shareholders  of other
         blank check companies and, therefore,  could face conflicts of interest
         with  respect to  potential  acquisitions.  In  addition,  officers and
         directors  of the  Company  may in the future  participate  in business
         ventures  which could be deemed to compete  directly  with the Company.
         Additional  conflicts of interest and non-arms length  transactions may
         also  arise in the  future  in the  event  the  Company's  officers  or
         directors  are  involved in the  management  of any firm with which the
         Company  transacts  business.  The  Company's  Board of  Directors  has
         adopted  a policy  that the  Company  will not seek a merger  with,  or
         acquisition  of, any entity in which  management  serve as  officers or
         directors,  or in which  they or  their  family  members  own or hold a
         controlling  ownership interest.  Although the Board of Directors could
         elect to change  this  policy,  the Board of  Directors  has no present
         intention to do so. In  addition,  if the Company and other blank check
         companies   with  which  the  Company's   officers  and  directors  are
         affiliated  both  desire  to take  advantage  of a  potential  business
         opportunity,   then  the  Board  of  Directors  has  agreed  that  said
         opportunity  should be  available  to each such company in the order in
         which  such  companies  registered  or became  current in the filing of
         annual  reports  under the Exchange Act  subsequent to January 1, 1997.
         See Item 9,  "Directors,  Executive  Officers,  Promoters  and  Control
         Persons;  Compliance with Section 16(a) of the Exchange Act - Conflicts
         of Interest."

         Reporting  Requirements May Delay or Preclude Acquisition.  Sections 13
         and 15(d) of the  Exchange  Act require  companies  subject  thereto to
         provide certain information about significant  acquisitions,  including
         certified financial statements for the company acquired,  covering one,
         two or three years,  depending on the relative size of the acquisition.
         The time and  additional  costs  that may be  incurred  by some  target
         entities  to  prepare  such  statements  may  significantly   delay  or
         essentially preclude consummation of an otherwise desirable acquisition
         by the Company. Acquisition prospects that do not have or are unable to
         obtain the  required  audited  statements  may not be  appropriate  for
         acquisition so long as the reporting  requirements  of the Exchange Act
         are applicable.

         Lack  of Market  Research or  Marketing Organization.  The Company  has
         neither conducted, nor have others made available


                                      -13-

<PAGE>



         to it, results of market research  indicating that market demand exists
         for the transactions contemplated by the Company. Moreover, the Company
         does  not  have,   and  does  not  plan  to   establish,   a  marketing
         organization.  Even in the event demand is  identified  for a merger or
         acquisition  contemplated  by the Company,  there is no  assurance  the
         Company will be successful in completing any such business combination.

         Lack of  Diversification.  The Company's proposed  operations,  even if
         successful,  will in all likelihood result in the Company engaging in a
         business  combination with a business  opportunity.  Consequently,  the
         Company's activities may be limited to those engaged in by the business
         opportunity or opportunities which the Company merges with or acquires.
         The Company's  inability to diversify its  activities  into a number of
         areas  may  subject  the  Company  to  economic  fluctuations  within a
         particular  business  or  industry  and  therefore  increase  the risks
         associated with the Company's operations.

         Regulation.  Although the Company will be subject to  regulation  under
         the Exchange Act,  management  believes the Company will not be subject
         to regulation under the Investment  Company Act of 1940, insofar as the
         Company  will not be engaged in the business of investing or trading in
         securities.  In the event the Company engages in business  combinations
         which result in the Company holding passive  investment  interests in a
         number of entities,  the Company could be subject to  regulation  under
         the Investment Company Act of 1940. In such event, the Company would be
         required to register as an investment  company and could be expected to
         incur  significant  registration and compliance  costs. The Company has
         obtained  no formal  determination  from the  Securities  and  Exchange
         Commission as to the status of the Company under the Investment Company
         Act of 1940 and, consequently,  any violation of such Act would subject
         the Company to material adverse consequences.

         Probable  Change in Control  and  Management.  A  business  combination
         involving  the  issuance of the  Company's  Common  Stock will,  in all
         likelihood,  result in shareholders  of a private  company  obtaining a
         controlling  interest in the Company. Any such business combination may
         require  management of the Company to sell or transfer all or a portion
         of the Company's Common Stock held by them, or resign as members of the
         Board of Directors of the Company.  The resulting  change in control of
         the Company could result in removal of one or more present officers and
         directors  of  the  Company  and  a   corresponding   reduction  in  or
         elimination  of  their  participation  in  the  future  affairs  of the
         Company.



                                      -14-

<PAGE>



         Reduction of Percentage Share Ownership Following Business Combination.
         The  Company's  primary  plan of  operation  is based  upon a  business
         combination  with a private  concern which,  in all  likelihood,  would
         result in the Company  issuing  securities to  shareholders of any such
         private  company.  The issuance of previously  authorized  and unissued
         shares of Common  Stock of the Company  would  result in a reduction in
         the percentage of shares owned by present and prospective  shareholders
         of the Company and may result in a change in control or  management  of
         the Company.

         Disadvantages  of Blank Check  Companies.  The Company may enter into a
         business  combination with an entity that desires to establish a public
         trading market for its shares.  A business  opportunity  may attempt to
         avoid what it deems to be adverse  consequences  of undertaking its own
         public  offering by seeking a business  combination  with the  Company.
         Such  consequences may include,  but are not limited to, time delays of
         the registration  process,  significant expenses to be incurred in such
         an  offering,  loss of voting  control to public  shareholders  and the
         inability or  unwillingness  to comply with  various  federal and state
         laws enacted for the protection of investors.

         Taxation.  Federal and state tax consequences  will, in all likelihood,
         be major  considerations  in any business  combination  the Company may
         undertake.  Currently,  such  transactions  may be  structured so as to
         result in tax-free  treatment  to both  companies,  pursuant to various
         federal and state tax provisions.  The Company intends to structure any
         business  combination  so as to  minimize  the  federal  and  state tax
         consequences to both the Company and the target entity;  however, there
         can be no  assurance  that  such  business  combination  will  meet the
         statutory requirements of a tax-free reorganization or that the parties
         will obtain the intended tax-free treatment upon a transfer of stock or
         assets. A non-qualifying  reorganization could result in the imposition
         of both  federal and state  taxes  which may have an adverse  effect on
         both parties to the transaction.

         Requirement of Audited  Financial  Statements  May Disqualify  Business
         Opportunities.  Management  of the Company  believes that any potential
         business  opportunity  must provide  audited  financial  statements for
         review, for the protection of all parties to the business  combination.
         One or more attractive business  opportunities may choose to forego the
         possibility  of a business  combination  with the Company,  rather than
         incur  the  expenses   associated  with  preparing   audited  financial
         statements.



                                      -15-

<PAGE>



Item 2.  Property

         The Company does not have any  formal offices at year end.  Records are
         maintained and mail  received at  10200 W.  44th Avenue,  Suite,  Wheat
         Ridge, CO 80033.  The Company owns no real property.

Item 3.  Legal Proceedings

         The  Company is a party to no  pending  legal  proceedings,  nor is its
         property subject to such proceedings, at September 30, 1998.

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

         On December 23, 1997, a Special  Meeting of  Shareholders  was held, at
         which  new  directors  were  elected,   whose  names  and  biographical
         information are contained in Item III, Management.




                                      -16-

<PAGE>



                                     PART II

Item 5.  Market for Registrant's Common Equity and Related Stockholder Matters

         As of the  date of this  report,  management  knows  of no  trading  or
         quotation of the Company's  common stock. The range of high and low bid
         quotations for each fiscal  quarter since the last report,  as reported
         by the National Quotation Bureau Incorporated, was as follows:

                                 1997                 High     Low
                           -------------             ------   ------

                           First quarter             *           *
                           Second quarter            *           *
                           Third quarter             *           *
                           Fourth quarter            *           *

                                 1996                 High      Low
                           -------------             ------   ------

                           First quarter             *           *
                           Second quarter            *           *
                           Third quarter             *           *
                           Fourth quarter            *           *

                                 1995                 High      Low
                           -------------             ------   ------

                           First quarter             *           *
                           Second quarter            *           *
                           Third quarter             *           *
                           Fourth quarter            *           *

* No quotations reported

         The  above  quotations  reflect  inter-dealer  prices,  without  retail
         mark-up,  mark-down,  or commission and may not  necessarily  represent
         actual transactions.

         As of  September  30,  1998,  there  were  421  record  holders  of the
         Company's common Stock.

         The Company has not  declared or paid any cash  dividends on its common
         stock and does not  anticipate  paying  dividends  for the  foreseeable
         future.




                                      -17-

<PAGE>



Item 6.  Management's Discussion and Analysis of Financial Condition and Results
         of Operations

         Financial Condition and Changes in Financial Condition

         No operations  were  conducted  and no revenues  were  generated in the
fiscal year.  The Company had no income in year ended  September  30, 1998.  The
Company at year end had no capital, no cash, and no other assets. The Company at
year end was totally  illiquid and needed cash  infusions from  shareholders  to
provide capital, or loans from any sources.

Results of Operations - Year Ended  September  30, 1998  Compared  to Year Ended
September 30, 1997

         During the fiscal year ended  September  30,  1998,  the Company had no
revenues,  and in 1997,  the  Company  had no  revenues.  In 1998,  the  Company
incurred no expenses for operations.  In 1997, the Company incurred no expenses.
The  Company had no profit or loss on  operations  in 1998 and in 1997 wrote off
$14,240 in assets of ($14,240).

Item 7.  Financial Statements and Supplementary Data

                  Please refer to pages F-1 through F-7.

Item 8.  Changes in and Disagreements on Accounting
         and Financial Disclosure

                  Michael B.  Johnson & Company,  CPA's of Denver,  Colorado was
retained  in 1998 as  auditors  for the  Company  for fiscal  year  1998.  Prior
auditors for the Company  were Michael B. Johnson & Co.,  P.C. of Denver for the
fiscal years 1988.

         In  connection  with audits of most recent  fiscal year and any interim
period preceding resignation,  no disagreements exist with any former accountant
on any  matter  of  accounting  principles  or  practices,  financial  statement
disclosure, or auditing scope of procedure,  which disagreements if not resolved
to the  satisfaction  of the former  accountant  would  have  caused him to make
reference  in  connection   with  his  report  to  the  subject  matter  of  the
disagreement(s).

         The principal  accountants' reports on the financial statements for any
of the past year contained no adverse opinion or a disclaimer of opinion nor was
qualified as to uncertainty,  audit scope, or accounting  principles  except for
the "going concern" qualification.



                                      -18-

<PAGE>



                                    PART III

Item 9.  Directors and Executive Officers of the Registrant and Compliance with
Section 16(a)

         The directors and executive officers of the Company as of September 30,
         1998, are as follows:

          Name               Age         Position
------------------         ------       -------------

Larry Carr                   56         President and Director

Sharon Carr                  56         Secretary and Director

Chris Sanders                39         Vice President and Director

         The term of office of each director and  executive  officer ends at, or
immediately  after,  the next annual  meeting of  shareholders  of the  Company.
Except as otherwise indicated,  no organization by which any director or officer
has been  previously  employed  is an  affiliate,  parent or  subsidiary  of the
Company.

         Larry M. Carr,  age 56, has been  President and Director of the Company
since 1997. He attended Loyola University from 1961- 63 and 1967-68 and attended
Tarkio  College  from  1963-64.  From 1989 to the  present,  he has been CEO and
principal of Nursefinders  Management  Corporation From 1996 to the present,  he
has been CEO and principal of Computerized  Healthcare Management Services, LLC.
He has been Chairman of the Board of Northwest  National Bank of Arlington since
1996.  He has been  Chairman  of the Board of VSI  Enterprises,  Inc.,  a public
company, since 1994.

         Sharon R. Carr, age 56, has been Secretary and Director since 1997. She
received a Bachelors  Degree from the  University of Miami in 1965 and a Masters
Degree from Roosevelt University in 1971. From 1989 to the present, she has been
a Director and principal in Nursefinders Management Corporation and Computerized
Healthcare Management Services, LLC.

         Christine Sanders, age 39, has been a Director since 1997. She received
a BSN from Marquette  University in 1982. From 1995 to the present, she has been
President  and COO of  Nursefinders  Management  Corporation.  From  1996 to the
present, she has been President of Computerized  Healthcare Management Services,
LLC. From 1988 to the present, she has been Regional Vice President and Regional
Director of Nursefinders, Inc.



                                      -19-

<PAGE>



Conflicts of Interest

         Members of the Company's  management  are  associated  with other firms
involved in a range of business  activities.  Consequently,  there are potential
inherent  conflicts of interest in their acting as officers and directors of the
Company.  Insofar as the officers and  directors  are engaged in other  business
activities, management anticipates it will devote only a minor amount of time to
the Company's affairs.

         Certain of the officers and  directors of the Company are directors and
principal  shareholders  in  other  blank  check  companies,  and  officers  and
directors  of the Company  may in the future  become  shareholders,  officers or
directors of other  companies which may be formed for the purpose of engaging in
business  activities  similar to those  conducted by the  Company.  Accordingly,
direct  conflicts  of  interest  may arise in the  future  with  respect to such
individuals  acting on behalf of the  Company or other  entities.  Conflicts  of
interest may arise with respect to opportunities  which come to the attention of
such  individuals in the  performance of their duties or otherwise.  The Company
does not  currently  have a right of first refusal  pertaining to  opportunities
that come to management's  attention insofar as such opportunities may relate to
the Company's proposed business operations.

         The  officers  and  directors  are,  so long as they  are  officers  or
directors  of the Company,  subject to the  restriction  that all  opportunities
contemplated by the Company's plan of operation  which come to their  attention,
either  in the  performance  of their  duties or in any  other  manner,  will be
considered  opportunities  of,  and be made  available  to the  Company  and the
companies  that they are  affiliated  with on an equal  basis.  A breach of this
requirement will be a breach of the fiduciary duties of the officer or director.
If the Company and the  companies  with which the  officers  and  directors  are
affiliated  both desire to take advantage of an  opportunity,  then the Board of
Directors  has agreed that said  opportunity  should be  available  to each such
company in the order in which such companies registered or became current in the
filing of annual  reports under the Exchange Act  subsequent to January 1, 1997.
All directors may still  individually  take  advantage of  opportunities  if the
Company should decline to do so. Except as set forth above,  the Company has not
adopted any other conflict of interest policy with respect to such transactions.

         The Company's  Board of Directors has adopted a policy that the Company
will not seek a merger with, or acquisition  of, any entity in which any officer
or director  serves as an officer or  director or in which they or their  family
members own or hold a  controlling  ownership  interest.  Although  the Board of
Directors  could  elect to change this  policy,  the Board of  Directors  has no
present intention to do so.


                                      -20-

<PAGE>




         There can be no assurance that management will resolve all conflicts of
interest in favor of the Company.

Item 10.          Executive Compensation

         The Company  accrued no  compensation  to the  executive  officers as a
group for  services  rendered to the Company in all  capacities  during the 1998
fiscal year. No one executive officer received,  or has accrued for his benefit,
in excess of $60,000  for the year.  No cash  bonuses  were or are to be paid to
such persons.

         The Company does not have any employee incentive stock option plans.

         There are no plans pursuant to which cash or non-cash  compensation was
paid or  distributed  during the last fiscal year,  or is proposed to be paid or
distributed in the future,  to the executive  officers of the Company.  No other
compensation not described above was paid or distributed  during the last fiscal
year to the executive  officers of the Company.  There are no compensatory plans
or  arrangements,  with respect to any  executive  office of the Company,  which
result or will result from the resignation,  retirement or any other termination
of such individual's  employment with the Company or from a change in control of
the Company or a change in the individual's  responsibilities following a change
in control.



                                      -21-

<PAGE>
<TABLE>
<CAPTION>



                                     SUMMARY COMPENSATION TABLE OF EXECUTIVES

                                            Annual Compensation                         Awards

Name and                  Year          Salary          Bonus         Other Annual               Restricted            Securities
Principal                               ($)             ($)           Compensation               Stock                 Underlying
Position                                                              ($)                        Award(s)              Options/
                                                                                                 ($)                   SARs (#)
-------------------------
<S>                       <C>           <C>             <C>           <C>                        <C>                   <C>

Larry Carr,               1996          0               0             0                          0                     0
President
                          1997          0               0             0                          0                     0
                          ------------- --------------  ------------  -------------------------  --------------------- -------------
                          1998          0               0             0                          0                     0
                          ------------- --------------  ------------  -------------------------  --------------------- -------------
Sharon                    1996          0               0             0                          0                     0
Carr,
Secretary
-------------------------
                          1997          0               0             0                          0                     0
                          ------------- --------------  ------------  -------------------------  --------------------- -------------
                          1998          0               0             0                          0                     0
                          ------------- --------------  ------------  -------------------------  --------------------- -------------
Christine                 1996          0               0             0                          0                     0
Sanders,
Vice
President
-------------------------
                          1997          0               0             0                          0                     0
                          ------------- --------------  ------------  -------------------------  --------------------- -------------
                          1998          0               0             0                          0                     0
                          ============= ==============  ============  =========================  ===================== =============

</TABLE>

         Option/SAR Grants Table (None)

         Aggregated Option/SAR Exercises in Last Fiscal Year an FY-End
Option/SAR value (None)

         Long Term Incentive Plans - Awards in Last Fiscal Year (None)

                                    DIRECTOR COMPENSATION FOR LAST FISCAL YEAR

(Except for  compensation of Officers who are also Directors which  Compensation
is listed in Summary Compensation Table of Executives)

<TABLE>
<CAPTION>


                                    Cash Compensation                           Security Grants

Name                              Annual             Meeting           Consulting             Number          Number of
                                  Retainer           Fees              Fees/Other             of              Securities
                                  Fees ($)           ($)               Fees ($)               Shares          Underlying
                                                                                              (#)             Options/SARs(#)
<S>                               <C>                <C>               <C>                    <C>             <C>
A. All                            0                  0                 0                      0               0
Directors


</TABLE>



                                      -22-

<PAGE>



Item 11.          Security Ownership of Certain Beneficial Owners and Management

         The following table sets forth  information,  as of September 30, 1998,
with respect to the  beneficial  ownership of the  Company's no par value common
stock by each  person  known by the Company to be the  beneficial  owner of more
than five percent of the outstanding common stock.

      Stock        Names and Address        Beneficial        Percent
Title of Class   of Beneficial Owner         Ownership        of Class
--------------   -------------------        ----------        --------
Common             Larry Carr               34,574,000          42%


                  Security Ownership of Certain Beneficial Owners and Management
                  (Continued)

         The following table sets forth  information,  as of September 30, 1998,
with respect to the  beneficial  ownership of the  Company's no par value common
stock by the directors and officers of the Company,  both  individually and as a
group.

      Stock        Names and Address        Beneficial        Percent
Title of Class   of Beneficial Owner         Ownership        of Class
--------------   -------------------        ----------        ---------
Common            Larry Carr                34,574,000        42%

Common            Sharon Carr                        0        0%

Common            Christine Sanders                  0        0%

                  Officers and Directors as a group           42%

Item 12.          Certain Relationships and Related Transactions

         None.



                                      -23-

<PAGE>



                                     PART IV

Item 13.          Exhibits and Reports on Form 8-K

                  The following documents are filed as part of this report:

                  1.       Reports on Form 8-K:
                           None

                  2.       Exhibits:

                                      INDEX

                                                     Form 10-K
Regulation                                           Consecutive
S-K Number        Exhibit                            Page Number
----------        -------                            -----------

3.1               Articles of Incorporation          *Incorporated by reference
                                                     to Registration Statement

3.2               Bylaws                             *Incorporated by reference
                                                     to Registration Statement


27.1              Financial Data Schedule            EX-27.1



                                      -24-

<PAGE>



                                   SIGNATURES

Pursuant to the  requirements of Section 13 or 15(d) of the Securities  Exchange
Act of 1934,  the  registrant  has duly  caused  this report to be signed on its
behalf by the undersigned, thereunto duly authorized.

                                                The Entity, Inc.
                                                (Registrant)

Date: December 20, 1999

                                                /s/ Larry Carr
                                                --------------------------------
                                                Larry Carr, President/Director


                                                /s/ Sharon Carr
                                                --------------------------------
                                                Sharon Carr, Secretary/Director


                                                Christine Sanders
                                                --------------------------------
                                                Christine Sanders, Director




                                      -25-

<PAGE>



                                THE ENTITY, INC.
                              FINANCIAL STATEMENTS
                      FOR THE YEAR ENDED SEPTEMBER 30, 1999





<PAGE>



                          INDEPENDENT AUDITORS' REPORT


To:      The Board of Directors
         The Entity, Inc.
         Denver, Colorado


We have  audited  the  accompanying  balance  sheet of The Entity,  Inc.,  as of
September  30,  1999  and  1998,  and  the  related  statements  of  operations,
stockholders' equity and cash flows for the years then ended. Our responsibility
is to express an opinion on these financial statements based on our audit.

We conducted our audit in accordance with generally accepted auditing standards.
These 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 provides a reasonable basis for our opinion.

The company has been  dormant for many years and has lost or  destroyed  many of
the financial  records during this time. Due to loss records,  we were unable to
confirm the liabilities and stockholders'  equity and accordingly do not express
an opinion on these items.

As shown in the financial statements,  the company incurred a net loss of $3,000
for 1999 and had incurred  substantial  losses in the prior years.  At September
30, 1999, current  liabilities  exceed assets by $9,624.  These factors indicate
that the company has substantial  doubt about its ability to continue as a going
concern. The financial statements do not include any adjustments relating to the
recoverability  and  classification  of  recorded  assets,  or the  amounts  and
classification  of liabilities  that might be necessary in the event the company
cannot continue in existence.

In our opinion,  except for the items mentioned above, the financial statements,
referred to above,  present  fairly,  in all material  respects,  the  financial
position of The Entity, Inc., as of September 30, 1999 and 1998, and the results
of its operations and its cash flows for the years then ended in conformity with
generally accepted accounting principles.


/s/ Michael Johnson & Co.

Denver, Colorado
December 28, 1999


                                      F-1

<PAGE>
<TABLE>
<CAPTION>



                                                 THE ENTITY, INC.
                                                   BALANCE SHEET
                                         FOR THE YEAR ENDED SEPTEMBER 30,



                                                                                                1999               1998
                                                                                                ----               ----
<S>                                                                                                <C>                <C>
ASSETS:
Other Assets
TOTAL ASSETS                                                                                             $-                 $-
                                                                                          =================  =================

LIABILITIES & STOCKHOLDERS' EQUITY (DEFICIT)

Current Liabilities

Accounts Payable                                                                                      4,624              4,624
Advance from Stockholders                                                                             5,000              2,000
                                                                                          -----------------  -----------------

Total Current Liabilities                                                                             9,624              6,624
                                                                                          -----------------  -----------------

Stockholders' Equity

Preferred Stock, ($.01) par value, 10,000,000                                                             -                  -
shares authorized, none issued and outstanding

Common Stock, (.0001) par value, 100,000,000                                                          8,140              8,140
shares authorized.  81,400,000 shares issued and
outstanding
Additional Paid-In Capital                                                                           53,610             53,610
Accumulated Deficit                                                                                (71,374)           (68,374)
                                                                                          -----------------  -----------------

Total Stockholders' Equity (Deficit)                                                                (9,624)            (6,624)
                                                                                          -----------------  -----------------

TOTAL LIABILITIES & STOCKHOLDERS' EQUITY                                                                 $-                 $-
                                                                                          =================  =================


</TABLE>

     The accompanying notes are an integral part of this financial statement


                                      F-2

<PAGE>
<TABLE>
<CAPTION>



                                                     THE ENTITY, INC.
                                                  STATEMENT OF OPERATIONS
                                             FOR THE YEAR ENDED SEPTEMBER 30,




                                                                    1999                        1998
                                                                    ----                        ----
<S>                                                             <C>                        <C>
REVENUES:

TOTAL REVENUES:                                                         $-                         $-
                                                       =========================== ==========================

EXPENSES:

Operational Expenses                                                (3,000)                          -
                                                       --------------------------- --------------------------

TOTAL EXPENSES                                                      (3,000)                          -
                                                       --------------------------- --------------------------

NET LOSS                                                           ($3,000)                         $-
                                                       =========================== ==========================



Net Loss Per share                                                   (0.01)                          -

Weighted Average Number of
Shares Outstanding                                              81,400,000                 81,400,000
                                                       =========================== ==========================

</TABLE>


     The accompanying notes are an integral part of this financial statement


                                      F-3

<PAGE>
<TABLE>
<CAPTION>



                                                     THE ENTITY, INC.
                                                   STOCKHOLDERS' EQUITY
                                                    SEPTEMBER 30, 1999



                                                                             Additional
                                                 Common Stock                Paid-In                Accum.
                                        Shares                 Amount        Capital                Deficit              Total
                                        ------                 ------        ----------             -------              -----
<S>                                     <C>                    <C>               <C>                <C>                   <C>
Balance 09/30/97                        81,400,000             $8,140            $53,610            ($68,374)             ($6,624)

Net Loss 09/30/98                                -                  -                  -                    -                    -
                                   ---------------------- ------------------ ---------------------  -------------------  -----------

Balance 09/30/98                        81,400,000              8,140             53,610             (68,374)              (6,624)

Net Loss 09/30/99                                -                  -                  -              (3,000)              (3,000)
                                   ---------------------- ------------------ ---------------------  -------------------  -----------

Balance 09/30/99                        81,400,000             $8,140            $53,610            ($71,374)             ($9,624)
                                   ====================== ================== =====================  ===================  ===========

</TABLE>

     The accompanying notes are an integral part of this financial statement


                                      F-4

<PAGE>
<TABLE>
<CAPTION>



                                                          THE ENTITY, INC.
                                                      STATEMENT OF CASH FLOWS
                                                  FOR THE YEAR ENDED SEPTEMBER 30,




                                                                         1999                     1998
                                                                         ----                     ----
<S>                                                                      <C>                          <C>
OPERATING ACTIVITIES:

Net Loss                                                                 ($3,000)                     $-

Cash Used in Operating Activities

Increase in Advance from Stockholders                                      3,000                      -
                                                               -------------------------- ----------------------

Net Cash Used in Operating Activities                                          -                      -

Cash and cash equivalents at
Beginning of Year                                                              -                      -

Cash and cash equivalents at
End of Year                                                                   $-                     $-
                                                               ========================== ======================



Supplemental Disclosure of Cash Flows
  Information Cash Paid During the Year for:
  Interest                                                                     -                      -
  Income Taxes                                                                 -                      -

</TABLE>

     The accompanying notes are an integral part of this financial statement


                                      F-5

<PAGE>



                                THE ENTITY, INC.
                          NOTES TO FINANCIAL STATEMENTS
                 FOR THE YEAR ENDED SEPTEMBER 30, 1999 AND 1998


NOTE 1            SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
                  ------------------------------------------

                  The  following  is a summary  of The  Entity,  Inc.  (Company)
                  significant accounting policies:

                  Organizations

                  The  Company was  incorporated  July 7, 1983 under the laws of
                  Colorado  under the name of  Moonstone,  Inc.  for the primary
                  purpose of seeking  acquisitions  of business  or  properties,
                  without  limitation  as to  geographic  location  or  type  of
                  business.  Moonstone,  Inc., a publicly traded entity,  merged
                  with The Entity,  Inc.  Moonstone,  Inc., the surviving entity
                  after the merger, changed its name to The Entity, Inc.

                  On December 23, 1997, an  application  for  Reinstatement  and
                  Corporate  Report was approved and  submitted  after a special
                  stockholders' meeting. Many of the corporate records have been
                  lost  or  destroyed.  Since  the  completion  of  the  initial
                  offering,  the Company has not engaged in any  operations  nor
                  has it generated any revenue.  The Company has been engaged in
                  the  identification and evaluation of target business entities
                  or assets for possible acquisition.

                  Cash and Cash Equivalents

                  For  purpose of the  statement  of cash  flows,  cash and cash
                  equivalents  include cash in banks and money market  accounts.
                  The Company has no cash accounts at the present time.

                  Deferred Organization Expenses

                  Cost incurred in connection with the organization were charged
                  to expenses using the straight-line method over 60 months.

                  Income Taxes

                  The  Financial  Accounting  Standards  Board (FASB) has issued
                  Statement of Financial  Accounting Standards Number 109 ("SFAS
                  109"),  "Accounting for Income Taxes," which requires a change
                  from the deferred  method to the assets and liability  method,
                  deferred income taxes are recognized for the tax  consequences
                  of "temporary  differences" by applying enacted  statutory tax
                  rates  applicable to future years to  differences  between the
                  financial  statement  carrying  amounts  and the tax  basis of
                  existing assets and liabilities.

                  At September  30,  1999,  the Company had net  operating  loss
                  carryforwards of approximately  $71,370 for federal income tax
                  purposes.  These  carryforwards,  if not  utilized  to  offset
                  taxable  income,  will expire at the end of 2002.  There is no
                  provision or benefit for income taxes in fiscal 1999.


                                      F-6

<PAGE>


                                THE ENTITY, INC.
                          NOTES TO FINANCIAL STATEMENTS
                 FOR THE YEAR ENDED SEPTEMBER 30, 1999 AND 1998



NOTE 1 -          SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.)
                  --------------------------------------------------

                  Use of Estimates in the Preparation of Financial Statements

                  The  preparation  of financial  statements in conformity  with
                  generally accepted  accounting  principles requires management
                  to make  estimates  and  assumptions  that affect the reported
                  amount of assets and liabilities and disclosures 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.

NOTE 2 -          GOING CONCERN
                  -------------

                  The  accompanying  financial  statements have been prepared in
                  conformity  with  generally  accepted  accounting  principles,
                  which  contemplates  continuation  of the  Company  as a going
                  concern.  However, the Company has sustained an operation loss
                  this year. As shown in the financial  statements,  the Company
                  incurred  a net loss of $3,000 for 1999 and had  incurred  net
                  losses in the prior  years.  At September  30,  1999,  current
                  liabilities  exceed  current  assets by $9,624.  These factors
                  indicate  that the  Company  has  substantial  doubt about its
                  ability  to  continue  as  a  going  concern.   The  financial
                  statements  do not  include  any  adjustments  relating to the
                  recoverability  and  classification of recorded assets, or the
                  amounts  and  classification  of  liabilities  that  might  be
                  necessary  in  the  event  the  Company  cannot   continue  in
                  existence.

                  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  in  turn  is
                  dependent  upon the  Company's  ability to meet its  financial
                  requirements, and the success of its future operations.



                                      F-7