<PAGE>



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

                                   FORM 10-KSB

[ X ] Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934

For the fiscal year ended March 31, 2000.

Commission file number 0-11284

                               Z-Axis Corporation
-------------------------------------------------------------------------------
             (Exact name of registrant as specified in its charter)

             Colorado                                  84-0910490
-------------------------------------------------------------------------------
(State or other jurisdiction of           (I.R.S. Employer Identification No.)
  incorporation or organization)

7395 East Orchard Road, Suite A-100
Greenwood Village, Colorado                             80111-2509
-------------------------------------------------------------------------------
(Address of principal executive office)                 (Zip Code)

Registrant's telephone number, including area code: (303) 713-0200

Securities registered pursuant to Section 12(b) of the Act:  None

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

Title of each class                  Name of each exchange on which registered
-------------------------------------------------------------------------------
Common Stock, $.001 par value            Electronic Bulletin Board

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 such  filing
requirements for the past 90 days. Yes [ X ] No [ ]

Indicate by a check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation  S-K is not contained  herein,  and will not be contained,  to the
best of registrant's  knowledge,  in definitive proxy of information  statements
incorporated  by reference  in Part III of this Form 10 - K or any  amendment to
this Form 10-K [ ].

The  registrant's  common stock trades on the  electronic  bulletin board of the
Over-the-Counter  market under the trading symbol "AXIS".  The aggregate  market
value of the registrant's  voting stock held by non-affiliates of the registrant
as of March 31, 2000 was  $243,899.  The aggregate  market value was  calculated
based upon the number of shares held by non-affiliates on March 31, 2000 and the
price at which the  registrant's  common  stock  traded on June 6, 2000 the last
date on which the  registrant  had  knowledge  of a public trade prior to filing
this report.

The number of common shares outstanding as of March 31, 2000: 3,805,000.


<PAGE>


Documents incorporated by reference:

Title of Document                                        Part of Form 10-K
-------------------------------------------------------------------------------
Proxy Statement to shareholders to be
filed by July 29, 2000                                       Part III

Annual Report to shareholders for the
fiscal year ended March 31, 2000                          Parts II and IV

Registration Statement on Form S-18,
SEC file no. 2-85302-D                                         Part IV


FORWARD LOOKING STATEMENTS

In  addition  to  the  historical  information,   this  10K  and  Annual  Report
incorporated by reference herein, contain forward-looking  statements within the
meaning of the Private Securities  Litigation Reform Act of 1995 and the Company
desires to take advantage of the "Safe Harbor"  provisions  thereof.  Therefore,
the Company is  including  this  statement  for the express  purpose of availing
itself  of the  protections  of such Safe  Harbor  with  respect  to all of such
forward-looking  statements.  The  forward-looking  statements  in  this  report
reflect the Company's  current views with respect to future events and financial
uncertainties, including those discussed herein, that could cause actual results
to differ  materially  from  historical  results or those  anticipated.  In this
report, the words "anticipates",  "believes", "expects", "intends", "future" and
similar expressions identify forward-looking  statements.  Readers are cautioned
not to place undue reliance on the forward-looking  statements contained herein,
which speak only as of the date hereof.  The Company undertakes no obligation to
publicly   revise  these   forward-looking   statements  to  reflect  events  or
circumstances that may arise after the date of this report.

PART I

Item 1.  Business

Z-Axis  Corporation (the "Company") was incorporated under the laws of the State
of Colorado on May 16, 1983.  The  principal  business  and industry  segment in
which   the   Company   operates   is  the   development   and   production   of
computer-generated  video graphics and other presentation materials. The Company
conducts its business  primarily  from one location,  its  corporate  office and
production facility located in metropolitan Denver, Colorado. During fiscal year
2000 and 1999,  the  Company  also had sales  consultants  located  in  Chicago,
Illinois,  Los  Angeles,  California  and New York City,  New York.  The Company
operates within only one industry segment.

The Company was formed for the purpose of providing  video graphic  presentation
services in the  litigation  services  industry for  commercial  and  government
customers. Litigation support customers are primarily law firms and corporations
located throughout the United States. During fiscal years 2000 and 1999 over 95%
of the sales were derived from the  litigation  support  field.  The Company has
increasingly  developed its marketing  strategies in this field and expects that
the  core  business  revenues  will  continue  to be  focused  on  this  market.
Management  is also  exploring  other  markets that could  benefit from the core
technologies and expertise  developed in the litigation support field.  Although
certain  customers  from  time to time may  each  provide  more  than 10% of the
Company's  net  sales,  it is not  dependent  upon any group of  customers.  One
customer accounted for 33% of sales in fiscal 2000 and three customers accounted
for 44% of sales in fiscal 1999.

The  Company's  products may consist of any  combination  of  computer-generated
graphics,   live  action   video,   photographs,   graphic   artwork,   document
presentation,  special effects and presentation  exhibit boards.  The litigation
service  products have proven to be successful in courtroom  presentations  when
highly technical or complex concepts are being conveyed.

<PAGE>

The  Company's  video  product  is  delivered  to its  customers  on  videotape,
videodisc or in an electronic  format.  Videodisc  material can be presented via
either a bar code  system,  a touch  screen  system or an  electronic  courtroom
presentation  system  called  "VuPoint".  During the past four fiscal  years the
Company  designed and developed an advanced  electronic  courtroom  presentation
system  consisting of  proprietary  software in combination  with  off-the-shelf
hardware.  The system has been named "VuPoint".  The Company received  trademark
protection  of the name and has filed for patent  protection  for the  software.
VuPoint was  introduced to the  litigation  market in early 1997. It is designed
for use by trial  teams,  outside  counsel and in-house  attorneys.  The Company
considers it to have significant  long-term  revenue potential and will continue
further developments in the foreseeable future.  During fiscal years ended March
31, 2000 and 1999, the Company earned  $251,421 and $161,451,  respectively,  in
revenue from rental and service of the VuPoint system.  The Company  capitalized
$146,873 of costs  associated with a major revision of the VuPoint system during
fiscal  1999.  During  fiscal 2000 and 1999,  the Company  expensed  $24,638 and
$13,967,   respectively,   in  related  software  development  costs  that  were
capitalized during fiscal year ended March 31, 1999.

The Company competes  nationally with other providers of presentation  services.
Over the past several years, the Company has developed a high level of expertise
in the design and  development of technical  animations and visual  presentation
materials for the litigation  support  industry.  Competition at the high end of
this market is limited to a few  companies.  The  Company  has  developed a good
reputation for its services and has established  regular  customers.  Management
does not  consider  any  portion of its  business  or markets to be  seasonal in
nature.

There  are no  environmental  risks or risk  contingencies  associated  with the
conduct of the Company's business nor is there any foreign sales activity.

The materials  and  equipment  that the Company uses to provide its services are
readily available from a number of sources both locally and on a national level.
The Company does not encounter any  difficulty in obtaining  these  materials or
equipment or in servicing its equipment.



At March 31,  2000 and 1999,  the  Company had a backlog of orders for its video
services   in  the  amounts  of   approximately   $2,304,500   and   $1,123,000,
respectively.  Management believes that the backlog will stay at these levels in
the  second  and third  quarters  of  fiscal  2001.  Although  the  Company  had
agreements  to perform  services  in these  amounts,  in the case of  litigation
support services, the agreements may be canceled or modified for such reasons as
pre-trial  settlement  of the case  being  litigated  or a  decision  to use the
Company's  services to a greater or lesser extent than  originally  anticipated.
Federal government  contracts may be terminated at any time at the option of the
government.

At  March  31,  2000,  the  Company  had  23  regular  full-time  employees  and
approximately 10 temporary employees. In addition,  there is an adequate base of
local  well-qualified  independent  contract  personnel that the Company employs
from time to time as production demands require.

<PAGE>

Item 2.  Properties

The Company's  current  headquarters  and  production  facility are located in a
business park in the southern suburbs of Denver,  Colorado. It leases two spaces
from  unaffiliated  third  parties.  The terms of the leases are  five-year  and
three- year periods;  both expiring on July 31, 2001.  Management  believes that
the facilities are adequate for the Company's operations.

Item 3.  Legal proceedings

Not applicable.

Item 4.  Submission of matters to a vote of security holders

No  matters  were  submitted  to a vote of  security  holders  during the fourth
quarter of the fiscal year.

PART II

Item 5.  Market of registrant's common stock and related stockholder matters

The number of holders of record of the  Company's  common  stock as of March 31,
2000 was 435 as reported by the transfer agent.  This number does not include an
undetermined number of stockholders whose stock is held in "street" or "nominee"
name.

The Company has never paid a dividend  with respect to its common stock and does
not anticipate paying a dividend in the foreseeable future.

The Company's common stock had been traded in the NASDAQ over-the-counter market
under the trading symbol "AXIS." On November 1, 1985, the Company's common stock
was deleted from the NASDAQ  listing system because its net worth fell below the
minimum  required to be traded on NASDAQ.  Subsequent  to November 1, 1985,  the
Company's common stock was traded on the "Pink Sheets".

During  January  1995,  the Company  secured a market  marker for trading in its
common stock and it became listed for trading on the  electronic  bulletin board
of the Over-the-Counter market, under the trading symbol "AXIS.OB" Since listing
occurred  on  the  Over-the-Counter  market,  trading  has  been  sporadic.  The
following is a summary of the high and low bid and ask  quotations,  as reported
by the NASDAQ Stock Market, Inc. for the period indicated:

                                       Bid                        Ask
                            ------------------------    ----------------------
                               High         Low            High         Low
-------------------------------------------------------------------------------
Fiscal year ended
  March 31, 2000:
  First quarter             $    0.2500  $    0.1875    $    0.4375  $  0.3750
  Second quarter            $    0.1875  $    0.1563    $    0.3750  $  0.1875
  Third quarter             $    0.2188  $    0.1250    $    0.3750  $  0.1875
  Fourth quarter            $    0.6250  $    0.1250    $    0.8125  $  0.2500


Fiscal year ended
  March 31, 1999:
 First quarter              $    0.3125  $    0.3125    $    0.5625  $  0.5625
  Second quarter            $    0.2500  $    0.2500    $    0.4375  $  0.4375
  Third quarter             $    0.2500  $    0.2500    $    0.4375  $  0.4375
  Fourth quarter            $    0.1875  $    0.1875    $    0.3750  $  0.3750


Quotations reported may represent prices between dealers, may not include retail
markups, markdowns or commissions and may not represent actual trades.

<PAGE>

Item 6.  Selected financial data

Selected  Financial Data on page 17 of the Annual Report to shareholders for the
fiscal year ended March 31, 2000 is incorporated herein by reference.

Item 7. Management's discussion and analysis of financial condition and
        results of operations

Management's  Discussion  and  Analysis of  Financial  Condition  and Results of
Operations on pages 18 through 25 of the Annual Report to  shareholders  for the
fiscal year ended March 31, 2000 is incorporated herein by reference.

Item 8.  Financial statements and supplementary data

The financial  statements included on pages 3 through 17 of the Annual Report to
shareholders for the fiscal year ended March 31, 2000 are incorporated herein by
reference.

Item 9.  Changes in and disagreements with accountants on accounting
         and financial disclosure

None.


PART III

Item 10.  Directors and officers of the registrant

The   information   contained  in  Z-Axis   Corporation's   Proxy  Statement  to
shareholders  to be  filed by July 29,  2000,  with  respect  to  directors  and
officers of the registrant, is incorporated herein by reference.

Item 11.  Executive compensation

The   information   contained  in  Z-Axis   Corporation's   Proxy  Statement  to
shareholders   to  be  filed  by  July  29,  2000,  with  respect  to  executive
compensation, is incorporated herein by reference.

Item 12.  Security ownership of certain beneficial owners and management

The   information   contained  in  Z-Axis   Corporation's   Proxy  Statement  to
shareholders to be filed by July 29, 2000, with respect to security ownership of
certain beneficial owners and management, is incorporated herein by reference.

Item 13.  Certain relationships and related transactions

The   information   contained  in  Z-Axis   Corporation's   Proxy  Statement  to
shareholders to be filed by July 29, 2000, with respect to certain relationships
and related transactions, is incorporated herein by reference.

<PAGE>

PART IV

Item 14.  Exhibits, financial statement schedules and reports on Form 8-K

(a)  The following documents are incorporated by reference:

     1.  Financial Statements:

            Reports of Independent Certified Public Accountants

            Balance Sheets - March 31, 2000

            Statements of Income - Years ended March 31, 2000 and 1999

            Statements of Cash Flows - Years ended March 31, 2000 and 1999

            Statements of Stockholders' Equity - Years ended March 31, 2000
            and 1999

            Summary of Accounting Policies and Notes to Financial Statements



     2.  Exhibits:

Pursuant  to   Regulation   240.12b-23,   Exhibits  3.1  and  3.2  (Articles  of
Incorporation  and Bylaws) are  incorporated by reference from the  Registration
Statement on Form S-18, SEC File No. 2-85302-D, effective September 15, 1983.

All other exhibits required by Item 601 of Regulation S-K are not applicable.

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  of be signed on its
behalf by the undersigned, thereunto duly authorized.

Z-AXIS CORPORATION


By: _/s/ Steven H. Cohen_
    -----------------------
    Steven H. Cohen
    (Chief Executive Officer)


Date__________________


<PAGE>


Pursuant to the requirements of the Securities Exchange Act of 1934, as amended,
this  report has been  signed  below by the  following  persons on behalf of the
registrant and in the capacities and on the dates indicated.


/s/ Steven H. Cohen                  Director, Chief Executive Officer
----------------------
Steven H. Cohen

/s/ Alan Treibitz                    Director, President, Treasurer,
-----------------                    Chief Financial Officer, Principal
Alan Treibitz                        Accounting Officer

/s/ Marilyn T. Heller                Director, Secretary
---------------------
Marilyn T. Heller

<PAGE>

<TABLE>
<CAPTION>
 Z-AXIS CORPORATION
  Selected Financial Data

                                                                         Years ended March 31,
                                                      --------------------------------------------------------
                                                         2000           1999            1998           1997
  <S>                                                 ----------     ----------      ----------     ----------
                                                      <C>            <C>             <C>            <C>
  Net sales                                           $2,283,277     $3,748,053      $3,894,627     $2,477,645
  (Loss) income from operations                         (925,843)        67,296         113,111          7,429
  (Loss) income before extraordinary items
     and cumulative effect of change
     in accounting for income taxes                     (960,571)        26,809          87,258         11,356
  Net (loss) income                                   (1,087,393)        14,439          53,403          7,856
  Total assets                                           807,556      1,765,326       1,927,628      1,735,908
  Long-term debt and capital
     lease obligations                                    45,379        131,102         114,585         85,808
  Stockholders' equity                                    50,941      1,138,334       1,121,395      1,065,492
  Working capital                                       (307,691)       502,023         616,315        330,206
  Net income per common share:
      Basic                                               ($0.29)         $0.00      $     0.01     $     0.00
      Diluted                                             ($0.29)         $0.00      $     0.01     $     0.00
  Weighted average number of common shares
    outstanding during the period:
      Basic                                            3,805,000      3,800,726       3,775,411      3,761,992
      Diluted                                          3,805,000      3,850,216       3,779,458      3,761,999
  Cash dividends                                               -              -               -              -

</TABLE>

Management's discussion and analysis of financial condition and results of
operations

<PAGE>

The  following  discussion  should  be read in  conjunction  with the  Company's
financial  statements  and notes for the fiscal  years  ended March 31, 2000 and
1999.  Except where  otherwise  noted,  references  to years are to fiscal years
ending March 31 of the year stated.

Results of operations
---------------------

Net sales

During fiscal years 2000 and 1999 sales were derived from the litigation support
field. The Company has increasingly  developed its marketing  strategies in this
field and expects that the core business revenues will continue to be focused on
this market.  Management is also exploring other markets that could benefit from
the core technologies and expertise  developed in the litigation  support field.
Net sales decreased 39% during 2000. This followed a decrease of 4% during 1999.
Management  believes that the decrease in revenues during 2000 was due to a slow
down in the general business services that support the litigation industry. This
trend  started to improve in the first  quarter of fiscal year 2001. In order to
help mitigate the trend, management took steps to increase closes on new jobs by
focusing  new sales  consultants  on in-trial  presentation  management  revenue
opportunities with VuPoint and multimedia  technology.  Cost management measures
are also in place aimed at decreasing  overhead  expenses,  as well as effective
utilization  of contract  labor on revenue  producing  activities.  One customer
accounted  for 33% of total  sales in 2000 as compared  to three  customers  who
together  accounted for a total of 44% of sales in 1999. The percentage of sales
for any one customer  during a fiscal year can vary greatly  depending  upon the
number  of jobs or  magnitude  of the  dollar  value of the  projects  from that
customer.  Although the Company does have several law firms that provide  repeat
business, the sales focus is on developing relationships with many different law
firms  throughout  the  country  in order to expand the base of  potential  jobs
arising out of the litigation  industry.  The Company's on-going  operations and
business are not  dependent on any customer and are not  materially  impacted by
the effects of inflation.

In fiscal year 2000 the Company continued with the strategic  alliance formed in
1999 with Ann Cole  Opinion  Research  and  Analysis  (ACORA).  ACORA works with
attorneys and experts in refining their presentations or testimony in court, and
ACORA provides analysis on how these communications will be perceived by various
jurors. By combining  talents and resources,  Z-Axis and ACORA provide solutions
to customer communication challenges. Working together the two companies provide
an  approach  that  encompasses   virtually  every  form  of  communication  and
understanding,  so that attorneys have few, if any, surprises in court, and what
the judge and jury receive is a concise,  compelling,  complete,  effective  and
winning presentation. Management believes that this alliance further strengthens
Z-Axis leadership position within the litigation services industry.

The continued  investment of funds into research and  development,  expansion of
the market share in the litigation  support field and  exploration of additional
market opportunities are also high management priorities.  The Company's ability
to maintain  an  effective  marketing  program,  expand its market  share in the
near-term and establish new markets in the long-term,  may have an effect on its
future  financial  position and results of  operations.  The number of contracts
that the Company services at any given time varies significantly  throughout the
year.  Management  considers the expenses  associated  with  development  of the
VuPoint  software  presentation  system,  as well as expansion of the  marketing
program, necessary for future growth.

<PAGE>

Operating expenses

For the years ended  March 31,  2000 and 1999,  total  operating  expenses  were
$3,209,120 and $3,680,757, respectively,  representing 140% and 98% of net sales
resulting in (loss) income from operations of $(925,843) and $67,296.  Operating
expenses  decreased  in fiscal year 2000 by  $471,637,  which  represents  a 13%
decrease as compared to fiscal year 1999  operating  expenses.  The  decrease in
2000 was due to lower labor costs  coupled with other cost  reduction  measures.
Labor expense  continues to be the most  significant of the Company's  operating
costs during 2000 and 1999. During the years 2000 and 1999 employee compensation
and benefit costs  accounted for  approximately  64% and 68%,  respectively,  of
total  operating  expenses.  The  decrease  in  compensation  costs for 2000 was
primarily  due  to  reduced  personnel  needs  in  the  production   department.
Management  believes that the Company's staffing levels and production  capacity
are sufficient to maintain current and anticipated near-term production levels.

Production  expenses were $1,186,705 for 2000 as compared to $1,652,828 for 1999
representing a decrease of 28%.  Production  costs for direct contract labor and
other billable  expenses will vary directly with sales levels,  accordingly  the
decrease in  production  costs for 2000 are  comparable  to the decrease in core
business  revenues.  Production costs as a percentage of sales were 52% for 2000
and 44% for 1999. The increase in production  costs as a percentage of sales for
2000 were  primarily due to the increased  market rate for the type of labor the
Company employs.  Over the past two years, the Company has increasingly employed
more contract artists to produce the core business and VuPoint service revenues.
This strategy is used to manage more  effectively  the cost of labor, as monthly
revenue levels can vary significantly depending on the needs of the industry. In
addition,  the production department has compensation and benefit costs for core
staff  employees  including  artists,  producers and managers.  These core staff
costs do not vary as directly as contract  labor costs with sales revenue volume
as core staff compensation is salary based.

Research and development costs,  before  capitalization of software  development
costs in 1999, decreased 54% during 2000 as compared to 1999. The total research
and development costs were $111,909 in 2000 as compared to $246,024 in 1999. The
overall  decrease  in  costs  for  2000 was due to  personnel  attrition  in the
research and development  department.  During 1999, $146,873 of the research and
development   expenses  were  capitalized  as  software   development  costs  in
accordance  with  Statement  of  Financial   Standard  No.  86.  There  were  no
capitalized  costs in 2000 as the costs  incurred  during  this  period were for
continued  maintenance of the product and did not require  significant levels of
labor. The capitalized costs in 1999 represented a significant change to VuPoint
which  resulted in a new version of the software that became  available for sale
January  1,  1999.  During  fiscal  years 2000 and 1999,  $24,637  and  $13,967,
respectively,  in amortization of the capitalized  software costs were recorded.
The Company  received  trademark  protection of the "VuPoint" name and has filed
for  patent  protection  for  the  software.  It is a  state-of-the-art  exhibit
management and presentation  system for use by trial teams,  outside counsel and
in-house attorneys.  VuPoint's first full use was by the prosecution in the case
against  Timothy  McVeigh  for the  bombing of the Murrah  Federal  Building  in
Oklahoma  City,  Oklahoma.  The Company  considers  VuPoint to have  significant
long-term  revenue  potential  and will  continue  further  developments  in the
foreseeable future. The product fulfills a need in the marketplace, particularly
in presenting exhibits for document-intensive cases.

General  and  administrative  expenses  were  $722,428  in 2000 as  compared  to
$764,539 in 1999  representing  a decrease of 6%. The decrease was primarily due
to lower  compensation  costs as a result of personnel  attrition,  as well as a
decrease   in  the  use  of   contract   professional   services.   General  and
administrative  expenses represented 32% and 20% of sales for 2000 and 1999. The
increase with respect to sales levels is expected, as general and administrative
costs do not vary  significantly  with sales volumes due to the relatively fixed
nature of the costs.

<PAGE>

Marketing  expenses  were  $752,920  in 2000 as  compared  to  $881,142  in 1999
representing a decrease of 15%. The decrease in marketing  costs during 2000 was
the result of  commissions  expense  decrease of 21% based on sales  levels.  In
addition,  other marketing costs including  advertising  decreased by 12% during
2000 as compared to 1999.  Marketing  expenses  represented 33% and 24% of sales
for 2000 and  1999,  respectively.  The  increase  in  marketing  expenses  as a
percentage  of sales  for 2000 is due to the fact  that  expenditures  for sales
travel,  freight for demo VuPoint systems and other costs for sales  consultants
and sales management do not vary with revenue and remained at comparable  levels
to the same expenses in 1999.

Depreciation  expense  was  $277,484  in 2000 as  compared  to  $269,130 in 1999
representing an increase of 3%. The increased  during was the result of purchase
and financing of $63,660, in new production, research and development and office
equipment.  The purchase of this equipment was necessary to allow the Company to
keep pace with the rapidly changing  technology in the industry.  Capital leases
in the amount of $24,642 and  $181,167  were  entered into during 2000 and 1999,
respectively,  to finance the purchase of the  production  and office  equipment
noted above. During 2000 and 1999, the Company retired equipment with a net book
value of $ 748 and $0, respectively. Rapid technological advances in the type of
equipment  that  the  Company  uses  in  providing  its  services  require  that
depreciable lives of the equipment be relatively short.

Initial start up costs of Concept 2

During  fiscal year 2000 the  Company  incurred  $133,037  in  expenses  for the
initial start up of a new marketing  effort named "Concept 2". "Concept 2" was a
separate  marketing plan aimed at development of alternative  markets into which
the  Company  could  potentially  sell  animation  and  information   consulting
services.  Certain senior level personnel from the production  department worked
on development  of a "Concept 2" customer  base.  "Concept 2" was able to earn a
minimal amount of revenue for the Company,  however it was  discontinued  during
the fourth  quarter of 2000 due to the  inability  of the  division  to generate
anticipated  revenue  potential in a sufficient time frame.  Management does not
expect to engage in further efforts to develop  "Concept 2", but rather focus on
expansion of the current market and customer base through Core Business Services
and VuPoint products and consulting.

Other income and expenses

Interest   expense  was  $44,152  in  2000  as  compared  to  $30,380  in  1999,
representing  an increase of 45%. The  increase was due to the higher  levels of
borrowing  on the line of credit  during  fiscal  year 2000 as compared to 1999.
Management  expects that interest  expense will remain at current levels for the
next several quarters, as the Company will continue to use the line of credit to
manage cash flow fluctuations.  Other income (expense) is comprised primarily of
gain (loss) on sale and disposal of fixed assets during 2000 and 1999.

<PAGE>

Income taxes

For income tax  reporting  purposes,  the  Company  files its income tax returns
using the cash basis of accounting. Consequently, the timing of the reporting of
certain income and expense items is different than that for financial  statement
purposes.

At March 31,  2000 and 1999,  the  Company  had  federal  income  tax loss carry
forwards of approximately  $1,473,147 and $1,130,000,  respectively which expire
in the years 2001  through  2020.  The  Company's  taxes on income  increased to
$126,822  during  2000 as compared to $12,370  during  1999.  The changes in the
income taxes are the direct result of the corresponding changes in the Company's
deferred tax amounts for such periods.  The Company had a net deferred tax asset
of $126,823 at March 31, 2000 resulting  primarily  from cash basis  adjustments
and operating loss and tax credit carry-forwards.  The company has established a
valuation  allowance  of  $(126,823)  at March 31, 2000 against the deferred tax
asset as management  believes that it is more likely than not, that the deferred
tax asset  related to the tax credits  and a portion of the loss carry  forwards
may not be realized before all carry forward expiration dates. See Note 1 to the
Financial  Statements.  The Company  expects to utilize the  deferred  tax asset
arising out of net operating loss  carryforwards  due to improved  profitability
and future tax planning  strategies  which may include  acceleration  of taxable
income.

Net Income (Loss)

The  Company  recorded  net (loss)  income in the  amounts of  $(1,087,393)  and
$14,439 during the years ended March 31, 2000 and 1999.

At March  31,  2000,  the  Company  had a backlog  of  orders  in the  amount of
approximately  $2,304,500,  compared to  approximately  $1,123,000  at March 31,
1999.  Management believes that the backlog will be comparable during the second
and third  quarters of fiscal  2001.  Although  the Company  had  agreements  to
perform services in these amounts,  in the case of litigation  support services,
the  agreements  may be  modified  or  canceled  for such  reasons as  pre-trial
settlement of the case being litigated.  Production scheduling of the backlog is
generally determined by the Company's customers and is largely controlled by the
timing of courtroom  litigation.  As a consequence,  periods of idle  production
capacity  can occur.  During  these  periods,  management  makes every effort to
minimize  its impact  through a  combination  of cost  controls  and  production
scheduling to the extent possible.

Liquidity and capital resources

At March 31, 2000, the Company's  working  capital  position was  $(307,691),  a
decrease of 161% when  compared to that of March 31, 1999.  Total  stockholders'
equity at March 31, 2000  decreased to $50,941.  The  decrease in  stockholders'
equity was due to net loss of $(1,087,393).

Cash flows from  operations  were $(123,178) and $390,864 during the years ended
March 31, 2000 and 1999. The decrease in cash flows from  operations for 2000 as
compared to 1999 was due to the decrease in sales volumes.  Accounts  receivable
collection  performance  improved in 2000 as compared to 1999 with  average days
outstanding  of  45-60  days in 2000 as  compared  to 60-75  days in  1999.  The
Company's accounts  receivable at any given time are generally few in number and
relatively large in amount. Although the Company has not had any significant bad
debt experiences,  any delay in collection of its accounts receivable can result
in  a  disruption   of  cash  flow.  To  help  mitigate  any  future  cash  flow
irregularities,  the Company  carries a line of credit in the amount of $500,000
with a bank.  Capital  additions,  as they become  necessary to meet  production
demands  and replace  equipment,  will be acquired  with a  combination  of debt
financing and cash flow from operations.

Capital  additions  were $63,660 and  $316,611  during the years ended March 31,
2000 and 1999. The expenditures for 2000 and 1999 were for replacement of office
and production  equipment.  Of the total capital  additions  during the two year
period,  approximately  46% were paid from current  operating cash flows and the
remainder were obtained through lease or debt  arrangements  with terms of three
to five years.

Cash  flows  provided  by (used  in)  financing  activities  were  $191,621  and
$(229,842)  during the years ended March 31, 2000 and 1999. The increase in cash
flows from financing activities during 2000 was due to net borrowing of $330,000
on the line of credit coupled with principal  payments on outstanding  leases of
$138,379. The line of credit, which matures annually each September, is expected
by management to be renewed during the normal course of business.

<PAGE>

The timing of the Company's production volumes is largely dependent upon factors
that are not within its control,  namely the timing of courtroom  litigation  or
the potential that a litigation  may settle before trial.  The Company began the
first  quarter of fiscal  year 2001 with an  approximate  36%  increase in sales
volumes as compared to the fourth  quarter of fiscal year 2000.  Sales  revenues
for the first quarter of fiscal year 2000 are  anticipated  to be  approximately
$750,000  resulting  in an after tax net income of  approximately  $40,000.  The
increase in the sales  volumes and  resulting  net profit is due to a consistent
increase in the number of jobs closed by the sales consultants over the last two
quarters  of fiscal  2000 and the first  quarter  of fiscal  2001.  The  backlog
continues to grow as more  potential jobs are identified and closed by the sales
consultants.  Management  believes  that sales  volumes  are  expected  to range
between  $650,000 and $850,000 for the  remaining  quarters of fiscal year 2001,
with an anticipated  total sales volume of $3,200,000.  This volume should allow
the Company to generate an operating profit of approximately  7%.  Management is
negotiating  with its  banking  relationship  to provide for  long-term  capital
through the refinancing of fixed assets,  monitoring  operating costs and making
the necessary adjustments to allow the Company to continue to be in a profitable
financial  position  during  fiscal  year  2001 and  meet  operating  cash  flow
requirements and debt service  obligations.  Management also continues to pursue
development  of  alternative  revenue  sources  from other  industries  that can
benefit from the many  artistic and creative  resources  within the Company.  In
addition,.the  company is considering  introducing a software product based upon
its VuPoint presentation system. To finance the development of this new product,
management is considering  alternative funding sources including venture captial
and a possible secondary offering.


Recent Accounting Pronouncements

Statement of Financial  Accounting Standards No. 131, "Disclosure about Segments
of an Enterprise and Related  Information" is effective for financial statements
with fiscal years beginning  after December 15, 1997. The new standard  requires
that public  business  enterprises  report certain  information  about operating
segments in complete  sets of  financial  statements  of the  enterprise  and in
condensed  financial  statements of interim periods issued to  shareholders.  It
also requires that public business  enterprises report certain information about
their  products and services,  geographic  areas in which they operate and their
major  customers.  The Company  does not expect the  adoption of SFAS No. 131 to
have a material effect, if any, on its results of operations.

Statement of Financial  Accounting  Standards No. 132,  "Employers'  Disclosures
about  Pensions and Other  Postretirement  Benefits" is effective  for financial
statements  with  fiscal  years  beginning  after  December  15,  1997.  Earlier
application is permitted.  The new standard revises employers' disclosures about
pension  and  other  postretirement  benefit  plans  but  does  not  change  the
measurement  or  recognition  of those  plans.  SFAS No.  132  standardizes  the
disclosure  requirements for pensions and other  postretirement  benefits to the
extent practicable,  requires  additional  information on changes in the benefit
obligations  and fair values of the plan assets that will  facilitate  financial
analysis,  and eliminates certain disclosures previously required when no longer
useful.  The  Company  does not  expect the  adoption  of SFAS No. 132 to have a
material effect, if any, on its financial position or results of operations.

Statement of Position 97-2, "Software Revenue Recognition",  ("SOP 97-2") issued
by the  AICPA  is  effective  for  transactions  entered  into in  fiscal  years
beginning  after  December  15, 1997.  SOP 97-2  supercedes  SOP 91-1  regarding
software revenue  recognition.  SOP 97-2  establishes  standards which require a
company to recognize  revenue  when (i)  persuasive  evidence of an  arrangement
exists,  (ii)  delivery  has  occurred,  (iii)  the  vendor's  fee is  fixed  or
determinable,  and (iv)  collectability is probable.  The SOP also discusses the
revenue  recognition  criteria for multiple element  contracts and allocation of
the fee to various elements based on vendor-specific  objective evidence of fair
value.  The Company  does not expect the adoption of this SOP to have a material
effect, if any, on the financial statements.

<PAGE>

In June 1998, the FASB issued  Statement of Financial  Accounting  Standards No.
133,  "Accounting for Derivative  Instruments and Hedging  Activities" (SFAS No.
133).  SFAS  No.  133  addresses  the  accounting  for  derivative  instruments,
including  certain  derivative  instruments  embedded  in other  contracts,  and
hedging  activities.  SFAS No.  133  effective  date has been  postponed  by the
issuance of SFAS No. 137, to be effective for all fiscal  quarters of all fiscal
years beginning  after June 15, 2000. This statement  currently has no impact on
the  financial  statements  of the  Company  as the  Company  has no  derivative
instruments nor participates in hedging activities.

Inflation
---------
Management  believes  that  inflation  has not had a  significant  impact on the
Company's operations during the fiscal years ended March 31, 2000 and 1999.

Corporate Data and Stockholder Information

Stock Information

Prior to January 1995,  there was no market maker for the Company's common stock
and the Company was not aware of any public or private  trades and  accordingly,
was not aware of high or low bid or ask  quotations  prior to that time.  During
January  1995,  the  Company's  common  stock  began  trading on the  electronic
bulletin board of the  Over-the-Counter  market under the trading symbol "AXIS".
The range of the high and low bid and ask quotations,  as reported by the Nasdaq
Stock Market, Inc., for the period ended March 31, 2000 and 1999 was as follows:


                                     Bid                         Ask
                          -----------------------------------------------------
                              High         Low           High           Low
                          -----------   -----------   -----------   -----------
  March 31, 2000:
  First quarter           $    0.2500   $    0.1875   $    0.4375   $    0.3750
  Second quarter          $    0.1875   $    0.1563   $    0.3750   $    0.1875
  Third quarter           $    0.2188   $    0.1250   $    0.3750   $    0.1875
  Fourth quarter          $    0.6250   $    0.1250   $    0.8125   $    0.2500

Fiscal year ended
  March 31, 1999:
  First quarter           $    0.3125   $    0.3125   $    0.5625   $    0.5625
  Second quarter          $    0.2500   $    0.2500   $    0.4375   $    0.4375
  Third quarter           $    0.2500   $    0.2500   $    0.4375   $    0.4375
  Fourth quarter          $    0.1875   $    0.1875   $    0.3750   $    0.3750


Quotations reported may represent prices between dealers, may not include retail
markups, markdowns or commissions and may not represent actual trades.

<PAGE>



Corporate Data and Stockholder Information

Directors:                                         Officers:
Steven H. Cohen                                    Steven H. Cohen
   Chairman                                           Chief Executive Officer
   Member, Compensation Committee

Marvin A. Davis                                    Alan Treibitz
Member, Compensation Committee                        President,
                                                      Chief Operating Officer,
                                                      Chief Financial Officer

Marilyn T. Heller                                  Stephanie S. Kelso
                                                      Vice President, Sales
                                                        and Marketing

James E. Pacotti, Jr.                              Marilyn T. Heller
   Member, Compensation Committee                     Secretary

Alan Treibitz

Corporate Office
----------------
7395 E. Orchard Road, Suite A-100
Greenwood Village, Colorado 80111
Telephone: (303) 713-0200

Transfer Agent                                     Independent Auditors
--------------                                     --------------------
American Securities Transfer, Incorporated         Ehrhardt Keefe Steiner
938 Quail Street, Suite 101                         & Hottman PC
Lakewood, Colorado 80215                           7979 E. Tufts Avenue,
                                                   Suite 400
                                                   Denver, Colorado 80237-2843

Dividends
---------
No  dividends  have been  declared as of March 31, 2000 and the Company does not
anticipate paying dividends in the foreseeable future.

Form 10-K
---------
A copy of the Form 10-K for the year  ended  March 31,  2000,  as filed with the
Securities  and Exchange  Commission,  is available  without charge upon written
request to the corporate Secretary.










<PAGE>


Exhibit 27
Financial Data Schedule

This schedule contains summary financial  information extracted from the Balance
Sheet and  Statement  of  Income  for the  period  ended  March 31,  2000 and is
qualified in its entirety be reference to such financial statements.

(ARTICLE)                                                       6
(TABLE)
(S)                                                           (C)
(PERIOD TYPE)                                              12-MOS
(FISCAL-YEAR-END)                                     MAR-31-2000
(PERIOD-END)                                          MAR-31-2000
(CASH)                                                     25,867
(SECURITIES)                                                    0
(RECEIVABLES)                                             989,406
(ALLOWANCES)                                               64,157
(INVENTORY)                                                     0
(CURRENT ASSETS)                                        1,001,912
(PP&E)                                                  1,552,008
(DEPRECIATION)                                          1,052,417
(TOTAL-ASSETS)                                          1,765,326
(CURRENT-LIABILITIES)                                     495,889
(BONDS)                                                         0
(COMMON)                                                   3,805
(PREFERRED-MANDATORY)                                           0
(PREFERRED)                                                     0
(OTHER-SE)                                              1,134,529
(TOTAL-LIABILITY-AND-EQUITY)                            1,765,326
(SALES)                                                 3,748,053
(TOTAL-REVENUES0                                        3,748,053
(CGS)                                                           0
(TOTAL-COSTS)                                           3,680,757
(OTHER-EXPENSES)                                           10,107
(LOSS-PROVISION)                                                0
(INTEREST-EXPENSE)                                         30,380
(INCOME-PRETAX)                                            26,809
(INCOME-TAX)                                               12,370
(INCOME-CONTINUING)                                        14,439
(DISCONTINUED)                                                  0
(EXTRAORDINARY)                                                 0
(CHANGES)                                                       0
(NET-INCOME)                                               14,439
(EPS-BASIC)                                                   .00
(EPS-DILUTED)                                                 .00
(TABLE)
-----------------------------------------------------------------



<PAGE>



                               Z-AXIS CORPORATION

                            Financial Statements and
                          Independent Auditors' Report
                             March 31, 2000 and 1999



<PAGE>



                               Z-AXIS CORPORATION




                                Table of Contents



Independent Auditors' Report............................................1

Financial Statements

      Balance Sheet.....................................................2

      Statements of Operations..........................................3

      Statements of Stockholders' Equity................................4

      Statements of Cash Flows..........................................5

Notes to Financial Statements...........................................7






<PAGE>









                          INDEPENDENT AUDITORS' REPORT


Board of Directors
Z-Axis Corporation
Greenwood Village, Colorado


We have audited the accompanying balance sheet of Z-Axis Corporation as of March
31, 2000 and the related statements of operations, stockholders' equity and cash
flows for the years ended March 31, 2000 and 1999.  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 audits.

We  conducted  our  audits  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  signficant  estimates  made by
management,  as well as evaluating the overall financial statement presentation.
We believe our audits provide a reasonable basis for our opinion.

In our opinion,  the financial  statements  referred to above present fairly, in
all material respects,  the financial position of Z-Axis Corporation as of March
31,  2000 and the  results  of its  operations  and its cash flows for the years
ended March 31, 2000 and 1999 in conformity with generally  accepted  accounting
principles.




                                           Ehrhardt Keefe Steiner & Hottman PC

May 25, 2000
Denver, Colorado






<PAGE>


                               Z-AXIS CORPORATION
                                  Balance Sheet
                                 March 31, 2000


                                     Assets
Current assets
   Cash                                                       $   61,374
   Trade accounts receivable, net of
     allowance of $67,636 (Note 3)                               330,703
     Other current assets                                         11,469
                                                              ----------
       Total current assets                                      403,546
                                                              ----------

   Property and equipment, at cost (Note 6)
     Production equipment                                      1,185,513
     Office equipment                                            311,737
     Leasehold improvements                                       35,226
     Accumulated depreciation and amortization                (1,247,457)
                                                              ----------
       Net property and equipment                                285,019
                                                              ----------

    Capitalized software cost, net of
      accumulated amortization of $38,604                        108,269

Other assets                                                      10,722
                                                              ----------
Total assets                                                   $ 807,556
                                                              ==========

                      Liabilities and Stockholders' Equity

Current liabilities
   Line-of-credit (Note 3)                                    $  400,000
   Accounts payable                                               50,962
   Accrued expenses (Note 4)                                     132,328
   Customer deposits                                              21,000
   Current portion of capital lease obligations (Note 6)         106,946
                                                              ----------
     Total current liabilities                                   711,236


 Capital lease obligations (Note 6)                               45,379
                                                              ----------
       Total liabilities                                         756,615
                                                              ----------

 Commitments (Notes 8 and 9)

 Stockholders' equity (Note 10)
     Common stock, $.001 par value,
       10,000,000 shares authorized, 3,805,000 shares
       issued and outstanding                                      3,805
   Additional paid in capital                                  1,444,191
   Accumulated deficit                                        (1,397,055)
                                                              ----------

     Total stockholders' equity                                   50,941
                                                              ----------

Total liabilities and stockholders' equity                    $  807,556
                                                              ==========




                       See notes to financial statements.

                                      - 2 -


<PAGE>

                               Z-AXIS CORPORATION
                            Statements of Operations


                                                       For the Years Ended
                                                            March 31,
                                                   --------------------------
                                                      2000           1999
                                                   -----------    -----------

Net sales (Note 7)                                 $ 2,283,277    $ 3,748,053
                                                   -----------    -----------

Operating expenses
   Production                                        1,186,705      1,652,828
   Research and development                            111,909         99,151
   General and administrative                          722,428        764,539
   Marketing                                           752,920        881,142
   Initial start up of Concept 2                       133,037              -
   Depreciation and amortization                       277,484        269,130
   Amortization of software development costs           24,637         13,967
                                                   -----------    -----------
       Total operating expenses                      3,209,120      3,680,757
                                                   -----------    -----------

   (Loss) income from operations                      (925,843)        67,296

   Interest (expense)                                  (44,152)       (30,380)
   Other income (expense)                                9,424        (10,107)
                                                   -----------    -----------

   (Loss) income before income taxes                  (960,571)        26,809

   Provision for income taxes (Note 5)                 126,822         12,370
                                                   -----------    -----------

   Net (loss) income                               $(1,087,393)   $    14,439
                                                   ===========    ===========
   Net income per common share of stock
     Basic                                         $      (.29)   $         -
                                                   ===========    ===========
     Diluted                                       $      (.29)   $         -
                                                   ===========    ===========
    Weighted average number of common shares
      outstanding during the period:
     Basic                                           3,805,000      3,800,726
                                                   ===========    ===========
     Diluted                                         3,805,000      3,850,216
                                                   ===========    ===========





                       See notes to financial statements.

                                      - 3 -


<PAGE>

                               Z-AXIS CORPORATION
                       Statements of Stockholders' Equity
              For the Years Ended March 31, 2000 and March 31, 1999
<TABLE>
<CAPTION>
   <C>
                                           Number of                     Additional                         Total
                                            Common         Common          Paid-in        Accumulated    Stockholders'
                                            Shares         Stock           Capital          Deficit         Equity
                                         ------------    -----------    -------------    ------------    -------------
<S>                                      <C>             <C>            <C>              <C>             <C>
 Balance, March 31, 1998                    3,785,000    $     3,785    $   1,441,711    $   (324,101)   $   1,121,395

 Exercise of options                           20,000             20            2,480               -            2,500

 Net income                                         -              -                -          14,439           14,439
                                         ------------    -----------    -------------    ------------    -------------

 Balance, March 31, 1999                    3,805,000          3,805        1,444,191        (309,662)       1,138,334

 Net (loss)                                         -              -                -      (1,087,393)      (1,087,393)
                                         ------------    -----------    -------------    ------------    -------------
 Balance, March 31, 2000                 $  3,805,000    $     3,805    $   1,444,191   $  (1,397,055)   $      50,941
                                         ============    ===========    =============    ============    =============

</TABLE>



                       See notes to financial statements.

                                      - 4 -


<PAGE>




                               Z-AXIS CORPORATION
                            Statements of Cash Flows


                                                        For the Years Ended
                                                             March 31,
                                                    --------------------------
                                                         2000          1999
                                                    ------------   -----------

Net (loss) income                                   $ (1,087,393)  $    14,439
                                                    ------------   -----------
   Adjustments to reconcile net income to net cash
    provided by (used in) operating activities
       Deferred income taxes                             120,205        12,370
       Depreciation and amortization                     277,484       269,130
       Amortization of software development costs         24,637        13,967
       (Gain) loss on sale of equipment                   (5,333)       13,253
       Provision for bad debts                            60,000        60,000
       Changes in operating assets and liabilities
         Trade accounts receivable                       534,546       136,504
         Other current assets                             39,326        (3,840)
         Other assets                                        (10)        3,107
         Accounts payable                                (51,825)      (11,041)
         Accrued expenses                                (27,815)     (118,025)
         Customer deposits                                (7,000)        1,000
                                                    ------------   -----------
                                                         964,215       376,425
                                                    ------------   -----------
         Net cash (used in) provided by
          operating activities                          (123,178)      390,864
                                                    ------------   -----------

         Investing activities
          Purchase of property and equipment             (39,018)     (135,444)
          Additions to software development costs              -      (146,873)
          Proceeds from sale of property and
           equipment                                       6,082         7,908
                                                    ------------   -----------
             Net cash used in investing activities       (32,936)     (274,409)
                                                    ------------   -----------

         Financing activities
          Borrowing on line-of-credit                  1,720,000     1,180,000
          Payments on line-of-credit                  (1,390,000)   (1,310,000)
          Capital lease principal payments              (138,379)     (102,342)
          Proceeds from the exercise of stock
            options                                            -         2,500
                                                    ------------   -----------
         Net cash provided by (used in) financing
          activities                                     191,621      (229,842)
                                                    ------------   -----------
         Net increase (decrease) in cash                  35,507      (113,387)

         Cash, beginning of year                          25,867       139,254
                                                    ------------   -----------

         Cash, end of year                          $     61,374   $    25,867
                                                    ============   ===========

Continued on the following page.


                       See notes to financial statements.

                                      - 5 -


<PAGE>

                               Z-AXIS CORPORATION
                            Statements of Cash Flows


Continued from the previous page.


Supplemental disclosures of cash flow information:
Cash paid for taxes was $2,439  and $0 for the years  ended  March 31,  2000 and
1999, respectively.

Cash paid for  interest  was  $43,826  and $35,854 for the years ended March 31,
2000 and 1999, respectively.

Supplemental noncash disclosure:
Capital  lease  obligations  were incurred in the amount of $24,642 and $181,167
during the years ended March 31, 2000 and 1999,  respectively,  when the Company
entered  into  capital  lease  agreements  for  certain  production  and  office
equipment.




                       See notes to financial statements.

                                      - 6 -


<PAGE>


                               Z-AXIS CORPORATION
                         Notes to Financial Statements


Note 1 - Organization and Summary of Significant Accounting Policies
--------------------------------------------------------------------

Z-Axis  Corporation (the "Company") was incorporated under the laws of the State
of  Colorado  on May  16,  1983.  The  Company  is  engaged  in  consulting  and
presentation  services.  The primary  market for the  Company's  services is the
litigation  industry.  These services include the strategic  analysis of complex
litigation issues, the design of demonstrative  evidence, the production of such
evidence and courtroom  presentation.  In addition, the Company has developed an
electronic image presentation system for use in the courtroom called, "VuPoint."
The services are provided through its  headquarters  and production  facility in
Denver,  Colorado and its satellite sales offices in New York City,  Chicago and
Los Angeles.

During the year ended  March 31,  2000,  the  Company  expanded  their  existing
consulting and presentation services,  through Concept 2, to a new customer base
in the  telecommunications  and  entertainment  industry.  The  results of these
services  did  not  meet  management's  expectations;   therefore,  the  Company
discontinued such services.

Property and Equipment
----------------------

Property  and  equipment  are stated at cost.  Depreciation  is  computed by the
straight-line  method over their  estimated  useful lives of two to seven years.
Depreciation  expense includes amounts for owned and leased equipment.  Property
and  equipment  are  reviewed  each  year to  determine  whether  any  events or
circumstances  indicated  that the  carrying  amount  of the  assets  may not be
recoverable.  This review includes  estimating  future cash flows.  Property and
equipment  costs are expensed  when the carrying  amounts are  determined  to be
unrealizable.

Software Development Costs
--------------------------

Direct costs incurred in the  development of software are  capitalized  once the
preliminary project stage is completed,  management has committed to funding the
project and  completion  and use of the software  for its  intended  purpose are
probable.  The  Company  ceases  capitalization  of  development  costs once the
software has been  substantially  completed  and is ready for its intended  use.
Software  development  costs are  amortized in  proportion  to future  estimated
revenues.  Costs  associated  with  upgrades  and  enhancements  that  result in
additional functionality are capitalized.

Revenue and Cost Recognition
----------------------------

The Company  generates  revenue with both hourly-rate and fixed price contracts.
Revenue  generated  from  hourly-rate  contracts is  recognized  as services are
performed.  Revenue is  determined  by the contract  billing  rates and the time
incurred  to  perform  the  service  plus  reimbursable  expenses.   Expense  is
determined by actual cost incurred. Revenue generated from fixed price contracts
is  recognized  when the  contract is  completed.  The  contract  is  considered
complete when all costs,  except for insignificant  amounts,  have been incurred
which is typically completed within a 6 month time period.


                                      - 7 -


<PAGE>


                               Z-AXIS CORPORATION
                         Notes to Financial Statements


Note 1 - Organization and Summary of Significant Accounting Policies (continued)
--------------------------------------------------------------------------------

Income Taxes
------------

Deferred  income  taxes are recorded to reflect the tax  consequences  in future
years  of  temporary  differences  between  the  tax  basis  of the  assets  and
liabilities and their financial  statement  amounts at the end of each reporting
period.  Valuation  allowances  will be  established  when  necessary  to reduce
deferred tax assets to the amount expected to be realized. Income tax expense is
the tax  payable  for the  current  period and the  change  during the period in
deferred tax assets and  liabilities.  The  deferred tax assets and  liabilities
have been  netted  to  reflect  the tax  impact of  temporary  differences.  The
principal  temporary   differences  that  result  in  deferred  tax  assets  and
liabilities  are the cash-basis  treatment of certain assets and liabilities for
tax purposes and property and equipment.

Earnings Per Common Share
-------------------------

Basic  earnings  per common share is computed  based upon the  weighted  average
number of common  shares  outstanding  during the period.  Diluted  earnings per
share consists of the weighted average number of common shares  outstanding plus
the dilutive effects of options and warrants calculated using the treasury stock
method.  In loss periods,  dilutive common equivalent shares are excluded as the
effect would be anti-dilutive.

Stock Option Plan
-----------------

The Company  applies APB Opinion 25 "Accounting  for Stock Issued to Employees",
and related  Interpretations in accounting for all stock option plans. Under APB
Opinion 25, no compensation cost has been recognized for stock options issued to
employees as the exercise price of the Company's stock options granted equals or
exceeds the market  price of the  underlying  common stock on the date of grant.

SFAS No. 123, "Accounting for Stock-Based Compensation", requires the Company to
provide pro forma  information  regarding net income as if compensation cost for
the Company's stock option plans had been determined in accordance with the fair
value based method prescribed in SFAS No. 123. To provide the required pro forma
information,  the Company  estimates  the fair value of each stock option at the
grant date by using the Black-Scholes option-pricing model.

Advertising and Promotional Expense
-----------------------------------

Advertising expenses are charged to operations during the year in which they are
incurred.  Promotion  expenses are charged to operations  over the period of the
promotional  campaign.  Advertising and promotional  expense for the years ended
March 31, 2000 and 1999 were approximately $45,000 and $90,000.



                                      - 9 -


<PAGE>


                               Z-AXIS CORPORATION
                         Notes to Financial Statements


Note 1 - Organization and Summary of Significant Accounting Policies (continued)
--------------------------------------------------------------------------------

Research and Development
------------------------

Research and  development  costs related to both present and future products are
charged to operations in the year incurred.

Use of Estimates
----------------

The preparation of financial  statements in conformity  with generally  accepted
accounting principles requires management to make estimates and assumptions that
affect  the  reported  amounts  of assets  and  liabilities  and  disclosure  of
contingent  assets and  liabilities at the date of the financial  statements and
the reported amount of revenues and expenses during the reporting period. Actual
results could differ from those estimates.

During the year ended March 31, 1999,  certain costs were  incurred  relating to
the development and enhancement of software.  Management has estimated the costs
associated  with the  project  and have  capitalized  those  costs which will be
amortized at a percentage  rate of total costs  capitalized  over the  estimated
revenues earned on the sale of software.

Concentrations of Credit Risk
-----------------------------

Financial instruments which potentially subject the Company to concentrations of
credit risk consist primarily of cash and trade accounts receivable. The Company
maintains  cash in demand  deposits and interest  bearing money market  accounts
with high quality financial  institutions.  Such deposit accounts, at times, may
exceed federal  insured  limits.  The Company has not  experienced any losses in
such  accounts.  Concentrations  of credit risk with  respect to trade  accounts
receivable are limited due to the Company's  periodic credit  evaluations of its
significant   customers'   financial   condition  and  their  dispersion  across
geographic areas.

Fair Value of Financial Instruments
-----------------------------------
The carrying  value of cash,  accounts  receivable,  accounts  payable,  accrued
expenses and the line of credit  approximate their fair market values because of
the  short  maturity  of  these   instruments.   Accordingly,   the  fair  value
approximates  their reported carrying amount.  With respect to capitalized lease
obligations, fair value approximates their reported carrying amount.


                                     - 10 -


<PAGE>


                               Z-AXIS CORPORATION
                         Notes to Financial Statements


Note 2 - Management's Plan
--------------------------

During  the year  ended  March  31,  2000 the  Company  experienced  a loss from
operations of approximately $926,000.  Management believes that the loss was due
to a slow down in the general  business  services  that  support the  litigation
industry and to the number of cases that were settled prior to trial or deferred
until 2001. At March 31, 2000, the Company had a backlog of orders in the amount
of  approximately  $2,304,500 and  management  believes that the backlog will be
comparable  during the second and third quarters of fiscal 2001. The Company has
projected total sales for fiscal year 2000 to be $3,200,000.  This volume should
allow the Company to generate an operating profit. Management's plans consist of
negotiating  with its banking  relationship  to provide  for long- term  capital
through the  refinancing  of fixed  assets.  Finally,  management  is monitoring
operating costs and making the necessary  adjustments to allow the Company to be
in a profitable  financial  position  during fiscal year 2001 and meet operating
cash flow requirements.


Note 3 -  Line-of-Credit
-----------------------

The  Company  entered  into an  agreement  with a bank for a  line-of-credit  of
$500,000 due October 2000. The interest rate is calculated at 1% over the bank's
prime rate (10% at March 31, 2000) and interest is payable monthly.  The line is
collateralized by the Company's accounts receivable and general intangibles. The
balance  outstanding on the  line-of-credit at March 31, 2000 was $400,000.  The
agreement requires the Company to comply with certain  restrictive and financial
covenants  which the Company was not in  compliance  with at March 31, 2000.  At
March 31, 2000,  the Company had exceeded its borrowing base which was corrected
subsequent to year-end and the financial covenant violations have been waived.

Note 4 - Accrued Expenses
-------------------------

Accrued expenses consist of the following:

                                                      March 31,
                                                        2000
                                                    ------------
Compensation                                        $     89,232

Other                                                     43,096
                                                    ------------
                                                    $    132,328
                                                    ============

Interest  expense  incurred on  indebtedness  to related  parties was $1,240 and
$1,895 during the years ended March 31, 2000 and 1999, respectively.


                                     - 11 -


<PAGE>

                               Z-AXIS CORPORATION
                         Notes to Financial Statements


Note 5 - Income Taxes
---------------------

A  reconciliation  of the amount of income tax  expense  that would  result from
applying the  statutory  income tax rate of 34% to the net income  before income
taxes in the  accompanying  financial  statements  to the  reported  income  tax
expense is as follows:

                                       Years Ended March 31,
                                     --------------------------
                                        2000            1999
                                     ----------      ----------

 Income tax expense at the
  statutory rate                     $ (326,600)     $    9,115

 State tax, net                         (31,700)            885

 Non-deductible items                     2,500           2,370

 Valuation allowance and other          482,622               -
                                     ----------      ----------

                                     $  126,822      $   12,370
                                     ==========      ==========


Income tax expense consists of the
 following:
                                       Years Ended March 31,
                                     --------------------------
                                        2000            1999
                                     ----------      ----------
 Current                             $        -      $        -
 Deferred                               126,822          12,370
                                     ----------      ----------

                                     $  126,822      $   12,370
                                     ==========      ==========

The components of the current net
 deferred tax assets are as follows:

                                                   March 31,
                                            -----------------------
                                              2000           1999
                                            --------      ---------
Current
   Deferred tax assets
     Accounts payable and accrued
      expenses                              $ 69,459      $ 157,000
     Net operating loss
      carryforwards                          117,000        281,000
     Valuation allowance                     (70,121)             -
                                            --------      ---------
       Total deferred tax asset              116,338        438,000
                                            --------      ---------

 Deferred tax liabilities
     Accounts receivable                     112,439        420,000
     Prepaid expenses and other
      assets                                   3,899         18,000
                                            --------      ---------
       Total deferred tax liability          116,338        438,000
                                            --------      ---------

   Net current deferred tax asset           $      -      $       -
                                            ========      =========



                                     - 12 -


<PAGE>

                               Z-AXIS CORPORATION
                         Notes to Financial Statements


Note 5 - Income Taxes (continued)
---------------------------------

The components of the non-current net deferred tax assets are as follows:

                                                     March 31,
                                             ------------------------
                                               2000           1999
                                             ------------------------
   Non-current
     Deferred tax assets
       Net operating loss carryforwards      $ 383,870      $ 177,780
       Property and equipment                    7,559              -
       Valuation allowance                    (354,618)             -
                                             ---------      ---------
       Total deferred tax asset                 36,811        177,780
                                             ---------      ---------

   Deferred tax liabilities
     Property and equipment                          -          7,735
     Capitalized software cost                  36,811         49,840
                                             ---------      ---------
       Total deferred tax liability             36,811         57,575
                                             ---------      ---------

Net non-current deferred tax assets          $       -      $ 120,205
                                             =========      =========


At March 31, 2000 and 1999,  the Company has total federal income tax loss carry
forwards of approximately  $1,470,000 and $1,130,000,  respectively which expire
in the years 2001 through 2020.


Note 6 - Capital Lease Obligations
----------------------------------

The Company leases various  computer and office  equipment under capital leases.
The future  minimum  lease  payments  required  under the capital  leases are as
follows:

         Years Ending March 31,

                2001                                        $ 115,868
                2002                                           46,886
                2003                                            9,018
                                                            ---------
                Total future minimum lease payments           171,772
                Less amount representing interest             (19,447)
                                                            ---------
                Present value of minimum payments
                 under capital leases
                                                              152,325
                Less current portion                         (106,946)
                                                            ---------

                                                            $  45,379
                                                            =========



                                     - 13 -


<PAGE>

                               Z-AXIS CORPORATION
                         Notes to Financial Statements


Note 6 - Capital Lease Obligations (continued)
----------------------------------------------

The Company leases certain  production and office  equipment  under the terms of
capital leases.  The capitalized  value of the leased  equipment was $397,377 at
March 31, 2000. The related  accumulated  depreciation was $257,191 at March 31,
2000.


Note 7 - Major Customers
------------------------

The Company's revenues are concentrated in a few customers as follows:

                                               For the Years Ended
                                                     March 31,
                                             ------------------------
                                               2000           1999
                                             ------------------------
Sales:
   Customer A                                        -         13.46%

   Customer B                                   32.55%         18.10%

   Customer C                                        -         12.02%



Note 8 - Commitments
--------------------

The  Company  leases its  offices  and  production  facility  under the terms of
operating  leases.  The lease term commenced on August 1, 1996 and extends for a
sixty-month period ending in July, 2001.

Future minimum payments required under the terms of the lease are as follows:

         Years Ending March 31,
         ----------------------
                  2001                       $ 125,068
                  2002                          41,552
                                             ---------
                                             $ 166,620
                                             =========

Rent  expense was  $135,362  and $133,409 for the years ended March 31, 2000 and
1999, respectively.


                                     - 14 -


<PAGE>


                               Z-AXIS CORPORATION
                         Notes to Financial Statements


Note 9 - Employee Benefit Plans
-------------------------------

On April 1, 1993, the Company  established  the Z-Axis  Corporation  401(K) Plan
(the "Plan").  Eligible employees may elect to participate in the Plan beginning
on the first day of the  calendar  quarter  following  their  date of hire.  The
Company elected to make matching  contributions in amounts of ten percent of the
first five percent of a participating  employee's  salary deferral  amount.  The
Company  made  matching  contributions  to the Plan in the amounts of $4,518 and
$4,909 during the years ended March 31, 2000 and 1999, respectively.

On April 1, 1994, the Company  established the Z-Axis Corporation Profit Sharing
Compensation Plan (the "Profit Sharing Plan").  Eligible employees automatically
participate in the non-qualified  Profit Sharing Plan after one year of service.
The Company contributes a percentage of profits as defined in the Profit Sharing
Plan. The Company  expensed $0 and $12,125 during the years ended March 31, 2000
and 1999, respectively, under the terms of the Profit Sharing Plan.


Note 10 - Incentive Stock Option Plan
-------------------------------------

In  September  1996,  the Board of Directors  adopted,  with the approval of the
Stockholders,  the 1996 Stock Option Plan (the  "Plan").  The Plan  provides for
grants to  employees,  directors  or other  persons  deemed  appropriate  at the
discretion  of the  Compensation  Committee  (the  "Committee")  of the Board of
Directors,  stock  options to  purchase  common  stock of the Company at a price
equal in value to the fair market value, as defined,  on the date of grant.  The
exercise  period for options  granted  under the Plan shall be determined by the
Committee; however, the exercise period shall not exceed ten years from the date
they are granted.

FASB Statement 123, "Accounting for Stock-Based  Compensation" ("SFAS No. 123"),
requires the Company to provide pro forma  information  regarding net income and
net income per share as if  compensation  costs for the  Company's  stock option
plan had been determined in accordance  with fair value based method  prescribed
in SFAS No.  123.  The Company  estimates  the fair value of each stock award at
March 31, 2000 and 1999 by using the Black-Scholes option-pricing model with the
following  weighted-average  assumptions used respectively:  dividend yield of 0
percent  for all  years;  expected  volatility  of 300  percent  for 2000 and 54
percent for 1999;  risk-free  interest  rates of 6.03  percent for 2000 and 5.45
percent for 1999; and expected lives of 10 years for 2000 and 1999 stock awards.
Because the exercise  price of the Company's  employee stock options is equal to
or greater  than the  market  price of the  underlying  stock on the date of the
grant, no compensation costs was recognized during 2000 and 1999.


                                     - 15 -


<PAGE>

                               Z-AXIS CORPORATION
                         Notes to Financial Statements


Note 10 - Incentive Stock Option Plan (continued)
-------------------------------------------------

Under the  accounting  provisions for SFAS No. 123, the Company's net income per
share would have been decreased by the pro forma amounts indicated below:

                                                      March 31,
                                             --------------------------
                                               2000            1999
                                             ---------      -----------
Net (loss) income
   As reported                               $ (1,087,393)     $ 14,439
   Pro forma                                 $ (1,096,768)     $  6,008

Basic earnings per share
   As reported                               $    (.29)        $      -
   Pro forma                                 $    (.29)        $      -

Diluted earnings per share
   As reported                               $    (.29)        $      -
   Pro forma                                 $    (.29)        $      -

A summary of the status of the Company's stock option plan follows:
<TABLE>
<CAPTION>

                                                        Exercise Price      Exercisable
                                            Shares        Per Share           Shares
                                           --------     ---------------     -----------
<S>                                        <C>          <C>                 <C>

 Outstanding balance at March 31, 1998      135,000       .1875 - .2063         135,000
   Options granted                           64,000       .1875 - .2063          64,000
   Options exercised                        (20,000)      .1250                 (20,000)
                                           --------     ---------------     -----------
 Outstanding balance at March 31, 1999      179,000       .1250 - .2063         179,000
   Options granted                           25,000       .3750                  25,000
   Options cancelled                        (40,000)      .1250                 (40,000)
   Options exercised                              -                   -               -
                                           --------     ---------------     -----------
Outstanding balance at March 31, 2000       164,000     $ .1250 - .3750         164,000
                                           ========     ===============     ===========
</TABLE>

The weighted  average fair value of options granted during the years ended March
31, 2000 and 1999 were $.375 and $.13, respectively.


                                     - 16 -


<PAGE>


                               Z-AXIS CORPORATION
                         Notes to Financial Statements


Note 10 - Incentive Stock Option Plan (continued)
-------------------------------------------------

The following table summarizes  information  about stock options  outstanding at
March 31, 2000:

                                  Weighted
                                  Average
                                   Number         Weighted      Weighted
                                Outstanding       Remaining     Average
                                    and          Contractual    Exercise
Range of Exercise Prices        Exercisable         Life         Price
                                -----------      -----------    --------

$.1250 - .3750                      164,000              8.6    $   0.23
==============                  ===========      ===========    ========




                                     - 17 -


<PAGE>