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

                               FORM 10-K

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

For the fiscal year ended March 31, 1999.

Commission file number 0-11284

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


          Colorado                           84-0910490
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  (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

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              (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
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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 [X].

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, 1999 was  $365,849.  The aggregate  market value was  calculated
based upon the number of shares held by non-affiliates on March 31, 1999 and the
price at which the  registrant's  common  stock  traded on June 25,1999 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, 1999: 3,805,000.

Documents incorporated by reference:



Proxy Statement to shareholders to be filed by July 29, 1999           Part III

Annual Report to shareholders  for the fiscal year ended
 March 31, 1999                                                 Parts II and IV

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

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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 three locations,  its corporate  office and
production facility located in metropolitan  Denver,  Colorado and sales offices
located in Chicago,  Illinois and New York City,  New York.  During  fiscal year
1999 and 1998,  the Company also had sales  consultants  located in Los Angeles,
California and New York City, New York.  These  positions are currently  vacant;
however,  management expects to fill the vacancies with sales consultants by the
end of the second quarter of fiscal year 2000, as well as develop alliances with
independent  sales  representatives  in these areas. The Company operates within
only one industry segment.

The Company  provides video  graphic  presentation  services  in the  litigation
services industry for commercial and government  customers.  Litigation  support
customers include law firms, corporations and insurance companies throughout the
United  States.  During  fiscal years 1999,  1998 and 1997 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.  Three customers accounted for 44%
of sales in fiscal 1999, two customers accounted for 44% of sales in fiscal 1998
and three customers accounted for 34% of sales in fiscal 1997 .

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.  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, 1999 and 1998,  the
Company earned $161,451 and $357,093,  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  1999 and  1998,  the  Company  expensed  $13,967  and  $312,611,
respectively, in related software development costs that were capitalized during
fiscal years ended March 31, 1999 and March 31, 1997 and 1996.

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,  1999 and 1998,  the  Company had a backlog of orders for its video
services   in  the  amounts  of   approximately   $1,123,000   and   $1,062,000,
respectively.  Management  believes  that the backlog will be  comparable in the
second and third quarters of fiscal 2000. 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,  1999,  the  Company  had  25  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.

Year 2000 Compliance

General

Many older computer  systems,  software  products and embedded chips that are in
use today were  programmed  to accept  two digit  entries in the date code field
(e.g.  "98" for "1998").  These systems,  software and embedded chips need to be
modified or upgraded to  distinguish  twenty-first  century dates (e.g.  "2002")
from twentieth century dates (e.g. "1902"), in order to avoid the possibility of
erroneous results or systems failures.

The Company's  management has addressed  potential Year 2000  compliance  issues
relating to its 1) internal operating systems, 2) vendors,  facilities and other
third parties and 3) software products that it licenses to customers. Management
believes that adequate  resources have been allocated to this effort and expects
that any Year 2000  considerations  will not  materially  impact  the  Company's
internal operations.  Year 2000 considerations may have an affect on some of the
Company's customers and suppliers, and thus indirectly affect the Company.

Corporate Infrastructure State of Readiness

Management  has  addressed  the Year 2000  issues with  respect to the  software
product  ("VuPoint")  which the  Company  licenses  to  existing  and  potential
customers.  VuPoint  currently is Year 2000 compliant and any  modifications  or
rewrites of the  software  code will be tested to be assured  that they are also
Year 2000  compliant.  Management  has also  evaluated  the  Company's  internal
critical  business  systems that have date  sensitivity.  Any internal  critical
business  systems that are not Year 2000 compliant have been or will be replaced
or modified before their potential  "failure date".  Management has communicated
with major vendors, suppliers,  landlords and other third parties regarding Year
2000  compliance  of  embedded   processors  in  the  Company's   computers  and
facilities,  software and other information  technology,  and other products and
services which the Company obtains from third parties.

Costs

In  the  course  of  normal  business  operations,   the  Company  has  incurred
approximately  $110,000  in costs to replace and  upgrade  computer  systems and
software  programs that  potentially  were not Year 2000  compliant.  Management
estimates  that an  additional  $5,000 to $10,000  will need to be  expended  to
upgrade  the  remaining  business  systems  that  are not  currently  Year  2000
compliant.  As a result of the  expenditures  already made,  and those  planned,
management  is  confident  that all critical  business  systems that the Company
relies upon for  operations are or will be Year 2000 compliant by the end of the
current calendar year.

Risks

The VuPoint  software that the Company  intends to offer to its customers  under
licensing  arrangements,  might contain undetected errors or failures when first
introduced  or when new  versions  are  released,  even  though  the  product is
intended to be Year 2000  compliant.  While the Company has assessed,  corrected
and tested VuPoint in regard to Year 2000 compliance, there can be no assurances
that the product or future  releases of the product will not contain  undetected
date  sensitivity  errors.  If the Company is unable or is delayed in making the
necessary  date code changes to VuPoint or future  releases of the product,  the
Company does not anticipate  that there would be a material  adverse effect upon
the Company's business, operating results, financial condition and cash flows.

There can be no  assurances  that the  systems of other  parties  upon which the
Company relies will be made Year 2000  compliant on a timely basis.  The Company
utilizes third party vendor equipment, telecommunications products, and software
products. Third parties' Year 2000 compliance efforts are not within the control
of the Company.  The failure of any critical  technology  components  to operate
properly  may have a material  impact on  business  operations  or  require  the
Company to incur unanticipated expenses to remedy any problems.

The most substantial  operational  risks are those that are beyond the Company's
control, including the progress of government agencies and compliance efforts of
utility  companies.  It is possible that  interruptions in vital services due to
Year 2000  non-compliance will interfere with normal business  operations.  Such
failures  could  materially  and  adversely  affect  the  Company's  results  of
operations.

Forward-looking  statements  contained in this Year 2000  Compliance  disclosure
should be read in conjunction with the Company's disclosure under the heading of
Forward Looking Statements for the purposes of the Safe Harbor provisions of the
Private Securities Litigation Act of 1995.

Item 2.  Properties

The  Company's  current  headquarters  and  production  facility  are located in
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,
1999 was 442 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." 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, 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
Fiscal year ended March 31, 1998:
 First quarter ..................       $0.1875     $0.1875   $0.5625   $0.5625
 Second quarter .................       $0.1875     $0.1875   $0.5625   $0.4375
  Third quarter .................       $0.1875     $0.0625   $0.4375   $0.3750
  Fourth quarter ................       $0.1875     $0.0625   $0.3750   $0.2500

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

Item 6.  Selected financial data

Selected  Financial Data on page 17 of the Annual Report to shareholders for the
fiscal year ended March 31, 1999 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, 1999 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, 1999 are incorporated herein by
reference.

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

On April 12, 1999 the Company  engaged a new independent  auditor.  On April 28,
1999 a form 8-K/A,  which is included  herein by reference, was filed reflecting
this change.

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,  1999,  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,  1999,  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, 1999, 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, 1999, with respect to certain relationships
and related transactions, is incorporated herein by reference.

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, 1999 and 1998

            Statements of Operations - Years ended March 31, 1999, 1998 and 1997

            Statements of Cash Flows - Years ended March 31, 1999, 1998 and 1997

            Statements of Stockholders' Equity - Years ended March 31, 1999,
            1998 and 1997

            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  July 14, 1999


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,
Alan Treibitz                          Chief Financial Officer, Principal
                                       Accounting Officer

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



                               Z-AXIS CORPORATION
                               Selected Financial
                                      Data

<TABLE>
<CAPTION>


                                                    Years Ended March 31,
                           ----------------------------------------------------------------------
                              1999          1998           1997             1996          1995
                           ----------     ----------     ----------     ----------     ----------
<S>                        <C>            <C>            <C>            <C>            <C>
Net sales ............     $3,748,053     $3,894,627     $2,477,645     $2,830,797     $3,279,330
Income from operations         67,296        113,111          7,429         27,564        655,264
Income before
 extraordinary items
 and cumulative
 effect of change
 in accounting for
 income taxes ........         26,809         87,258         11,356          4,437        632,919
Net income ...........         14,439         53,403          7,856          2,937        453,919
Total assets .........      1,765,326      1,927,628      1,735,908      1,651,145      1,836,209
Long-term debt and
 capital lease
 obligations .........        131,102        114,585         85,808        110,129        187,154
Stockholders' equity .      1,138,334      1,121,395      1,065,492      1,056,886      1,052,449
Working capital ......        506,022        616,315        330,206        393,147        505,373
Net income per common
share:
    Basic ............     $     0.00     $     0.01     $     0.00     $     0.00     $     0.12
    Diluted ..........     $     0.00     $     0.01     $     0.00     $     0.00     $     0.12

Weighted average
 number of common
 shares outstanding
 during the period:
    Basic ............      3,800,726      3,775,411      3,761,992      3,759,000      3,752,500
    Diluted ..........      3,850,216      3,779,458      3,761,999      3,759,000      3,752,500
Cash dividends .......           --             --             --             --             --

</TABLE>


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

The  following  discussion  should  be read in  conjunction  with the  Company's
financial  statements and notes for the fiscal years ended March 31, 1999,  1998
and 1997. 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 1999,  1998 and 1997 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. Net sales decreased 4% during 1999. This followed
an increase of 57% during 1998 and a decrease of 12% during  1997.  The decrease
during 1999 was due to lower revenues from the rental and service of the VuPoint
courtroom  presentation software system as compared to 1998. The core litigation
services  revenues  remained  at a  consistent  level  from  1998 to  1999.  The
significant  increase  in revenues  during 1998 was due to a stable  sales force
coupled with more effective management of client engagements, resulting in a 43%
increase in revenues from core litigation services. In addition, during 1998 the
Company  earned  revenues  from the rental and service of the VuPoint  courtroom
presentation  software  system.  The  decrease  in net  sales  during  1997  was
primarily  attributable  to turnover in the sales  department.  Three  customers
accounted for a total of 44% of sales in 1999.  Two customers  accounted for 44%
of sales in 1998 and three  customers  accounted  for 34% of sales in 1997.  The
Company's on-going  operations and business are not dependent on any customer or
group of customers and are not materially impacted by the effects of inflation.

During fiscal year 1999, the Company announced a strategic  alliance formed 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 can assist in
reducing the  communication  challenges and  eliminating  the obstacles that can
potentially thwart the success at trial.  Working together the two companies can
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.  Z-Axis will pay ACORA a fee based on revenues  generated
from leads  provided  by ACORA.  Management  believes  that this  alliance  will
further  strengthen  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.

Operating expenses

For the years ended March 31, 1999, 1998 and 1997, total operating expenses were
98%, 97% and 99% of net sales, respectively, producing income from operations of
$67,296,  $113,111 and $7,429,  respectively.  During 1999,  operating  expenses
decreased 3% over 1998. During 1998, operating expenses increased 53% over 1997.
The decrease in 1999 is consistent with the 4% decrease in revenues for the same
period.  The  increase in 1998 is  consistent  with the 57% increase in revenues
during 1998; 24% of the increase in operating  expenses for that period were due
to the amortization of $312,611 in prior years' capitalized software development
costs.  Labor  expense  continues to be the most  significant  of the  Company's
operating costs during 1999, 1998 and 1997. During the years 1999, 1998 and 1997
employee  compensation  costs  accounted  for  approximately  58%,  47% and 49%,
respectively,  of total operating  expenses.  The increase in compensation costs
for 1999 was due to the  addition of a director  level  position in the research
and development  department,  addition of a sales  consultant in Los Angeles and
staff salary adjustments primarily in production to bring compensation levels up
to the current  market rates.  Management  believes that the Company's  staffing
levels  and  production   capacity  are  sufficient  to  maintain   current  and
anticipated  near-term  production  levels.  In  addition,  there is an adequate
supply of local  personnel who are trained and qualified  that the Company hires
on a contract basis as production requirements dictate.

Production  expenses  increased  during  1999  as  compared  to 1998  and  1997.
Production  costs as a  percentage  of sales  were 44% for 1999 and 40% for both
1998 and 1997.  Production  costs for direct  contract  labor and other billable
expenses will vary directly with sales levels.  The increase in production costs
during 1999 were  primarily  due to the  increased  market rates for the type of
labor the Company employs. Over the past two years, the Company has increasingly
employed  more contract  labor 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.

Research and development costs,  before  capitalization of software  development
costs,  increased  during 1999 as compared to 1998 and 1997.  During  1999,  the
research  and  development  costs  increased  due to the  addition of a director
position to the department.  The total research and  development  costs for 1999
were $246,024;  $146,873 of these costs were capitalized as software development
costs in accordance  with  Statement of Position  98-1.  The  capitalized  costs
represent a significant change to VuPoint which resulted in a new version of the
software  that  became  available  for sale  January 1, 1999.  During the fourth
quarter of fiscal 1999, the Company  earned VuPoint rental and service  revenue,
and accordingly,  $13,967 in amortization of the capitalized software costs were
recorded.  During 1998, the Company  expensed  $234,967 in current  research and
development  costs,  and  also  amortized   $312,611  in  capitalized   software
development  costs  previously   capitalized  in  1997  and  1996.  The  Company
determined  that revenues  earned from the sale and  associated  services of the
version of VuPoint that was  available  for sale during  fiscal year ended March
31, 1998 were complete.  Accordingly, all capitalized costs associated with that
version of VuPoint were  amortized by March 31, 1998.  The Company has filed for
trademark  protection  of the  "VuPoint"  name  and  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 1995
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.  In  addition,   VuPoint  is  being  considered  for
introduction  into other markets that may need document  intensive  presentation
systems.

General  and  administrative  expenses  increased  4% during 1999 as compared to
1998. General and administrative  expenses represented 20%, 19% and 30% of sales
for 1999,  1998 and 1997,  respectively.  The increase during 1999 was primarily
due to increasing  the monthly  reserves for bad debts and sales and use tax. In
addition, the Company increased expenditures on professional consultation in the
area of human  resources  and  strategic  planning.  General and  administrative
expenses did not fluctuate  significantly during 1998 when compared to 1997. The
decrease in 1998 as a percentage of sales is due to more effective management of
overhead costs during 1998. Also,  included in general and administrative  costs
for 1997 is approximately  $30,000 in expenses associated with relocation of the
corporate  offices,  which  occurred in August  1996;  there were no  relocation
expenses incurred during 1999 or 1998.

Marketing  expenses  increased  during 1999 when compared to 1998 and 1997.  The
increase in 1999 is primarily  due to opening a new sales office in Los Angeles,
coupled with an increase in travel and advertising  costs.  Management  believes
that training and  development  of sales  consultants  in regional  locations is
important to the overall  strategy of increasing  market share in the litigation
support industry.  The increase in marketing costs during 1998 was the result of
commissions increase based on sales levels.  Marketing expenses represented 24%,
20% and 24% of sales for 1999, 1998 and 1997, respectively.

Depreciation  expense  increased  during  1999,  1998 and  1997 as a  result  of
purchase of $316,611,  $339,910 and $185,784,  respectively  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 $181,167,  $226,757
and $124,602  were entered into during  1999,  1998 and 1997,  respectively,  to
finance the purchase of the production  equipment noted above. During 1999, 1998
and 1997, the Company retired equipment with a net book value of $21,161, $7,030
and $35,258, 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.

Other income and expenses

Interest expense  remained  consistent at 1% of net sales for fiscal years 1999,
1998, and 1997.  Included in the net interest for 1997 is approximately  $22,000
of interest  income paid by a customer due to settlement of a receivable.  Other
income  (expense) is comprised  primarily of gain (loss) on sale and disposal of
fixed assets during 1999, 1998 and 1997 respectively.

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,  1999 and 1998,  the  Company  had  federal  income  tax loss carry
forwards of approximately  $1,130,000 and $1,139,000,  respectively which expire
in  the  years  2001   through  2014  and  federal  and  state  tax  credits  of
approximately  $0 and  $14,000,  respectively.  The  Company's  taxes on  income
decreased  to $12,370  during 1999 as compared to $33,855  during  1998.  Income
taxes were $3,500  during 1997 as compared to 1998 and 1999 as noted above.  The
changes in the income taxes are the direct result of the  corresponding  changes
in the Company's  deferred tax amounts and  liabilities  for such  periods.  The
Company had a net  deferred tax asset of $120,205 and $132,575 at March 31, 1999
and 1998 resulting  primarily from cash basis adjustments and operating loss and
tax credit carry-forwards.  The company has established a valuation allowance of
$0 and $14,000 at March 31,  1999 and 1998  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

The Company  recorded  net income in the amounts of $14,439,  $53,403 and $7,856
during the years ended March 31, 1999, 1998 and 1997, respectively.

At March  31,  1999,  the  Company  had a backlog  of  orders  in the  amount of
approximately  $1,123,000,  compared to  approximately  $1,062,000  at March 31,
1998.  Management believes that the backlog will be comparable during the second
and third  quarters of fiscal  2000.  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, 1999,  the  Company's  working  capital  position was  $506,023,  a
decrease of 18% when  compared to that of March 31,  1998.  The working  capital
position  during 1998 increased 87% when compared to 1997.  Total  stockholders'
equity at March 31, 1999 increased to $1,138,334.  The increase in stockholders'
equity was due to net income of $14,439 and proceeds from the issuance of common
stock of $2,500.

Cash flows from operations were $390,864, $385,686 and $(8,141) during the years
ended March 31, 1999,  1998 and 1997,  respectively.  Cash flows from operations
for 1999 were  consistent with 1998 and fluctuated less than 1%. The increase in
cash flows from operations  during 1998 was attributable to higher sales volumes
than 1997. 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
$400,000  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 $316,611,  $339,910 and $185,784  during the years ended
March 31, 1999,  1998 and 1997,  respectively.  The  expenditures  for all three
periods were made primarily for new and replacement  production and research and
development  equipment.  Of the total  capital  additions  during the three year
period,  approximately  37% were paid for 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  by)  financing   activities  were  $(229,842),
$(160,671)  and $149,464  during the years ended March 31, 1999,  1998 and 1997,
respectively.  The decrease in cash flows from financing  activities during 1999
was due to payoff of approximately $200,000 on the outstanding beginning balance
on the line of credit. The decrease in cash flows from financing during 1998 was
the result of payoff of outstanding  notes to related  parties.  The increase in
cash  flows  from  financing  activities  during  1997  was  the  result  of the
utilization  of the bank line of credit  available to the  Company.  The line of
credit,  which  matures  annually  each August,  is expected by management to be
renewed during the normal course of business.

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 2000 with a 35%  decrease  in sales  volumes  as
compared to the fourth quarter of fiscal year 1999. Sales revenues for the first
quarter  of  fiscal  year  2000 are  anticipated  to be  approximately  $565,000
resulting in an after tax loss of approximately $(200,000).  The decrease in the
sales  volumes and  resulting  net profit is due to an overall  slow-down in the
revenues  generated by the  litigation  industry.  Management  believes that the
slow-down is  temporary  and sales  volumes are expected to increase  during the
remaining  quarters of fiscal 2000.  In  addition,  management  is  aggressively
pursuing  development of alternative  revenue sources from other industries that
can benefit  from the many  artistic  and  creative  resources  found within the
Company.  Management believes that its current working capital position and cash
flow from operations will be sufficient to meet future  operating costs and debt
service obligations.

Recent Accounting Pronouncements

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 is effective  for all fiscal  quarters of all
fiscal years  beginning  after June 15, 1999.  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,  1999,  1998 and
1997.

Year 2000 Compliance

   General

Many older computer  systems,  software  products and embedded chips that are in
use today were  programmed  to accept  two digit  entries in the date code field
(e.g.  "98" for "1998").  These systems,  software and embedded chips need to be
modified or upgraded to  distinguish  twenty-first  century dates (e.g.  "2002")
from twentieth century dates (e.g. "1902"), in order to avoid the possibility of
erroneous results or systems failures.

The Company's  management has addressed  potential Year 2000  compliance  issues
relating to its 1) internal operating systems, 2) vendors,  facilities and other
third parties and 3) software products that it licenses to customers. Management
believes that adequate  resources have been allocated to this effort and expects
that any Year 2000  considerations  will not  materially  impact  the  Company's
internal operations.  Year 2000 considerations may have an affect on some of the
Company's customers and suppliers, and thus indirectly affect the Company.

   Corporate Infrastructure State of Readiness

Management  has  addressed  the Year 2000  issues with  respect to the  software
product  ("VuPoint")  which the  Company  licenses  to  existing  and  potential
customers.  VuPoint  currently is Year 2000 compliant and any  modifications  or
rewrites of the  software  code will be tested to be assured  that they are also
Year 2000  compliant.  Management  has also  evaluated  the  Company's  internal
critical  business  systems that have date  sensitivity.  Any internal  critical
business  systems that are not Year 2000 compliant have been or will be replaced
or modified before their potential  "failure date".  Management has communicated
with major vendors, suppliers,  landlords and other third parties regarding Year
2000  compliance  of  embedded   processors  in  the  Company's   computers  and
facilities,  software and other information  technology,  and other products and
services which the Company obtains from third parties.

   Costs

In  the  course  of  normal  business  operations,   the  Company  has  incurred
approximately  $110,000  in costs to replace and  upgrade  computer  systems and
software  programs that  potentially  were not Year 2000  compliant.  Management
estimates  that an  additional  $5,000 to $10,000  will need to be  expended  to
upgrade  the  remaining  business  systems  that  are not  currently  Year  2000
compliant.  As a result of the  expenditures  already made,  and those  planned,
management  is  confident  that all critical  business  systems that the Company
relies upon for  operations are or will be Year 2000 compliant by the end of the
current calendar year.

Risks

The VuPoint  software that the Company  intends to offer to its customers  under
licensing  arrangements,  might contain undetected errors or failures when first
introduced  or when new  versions  are  released,  even  though  the  product is
intended to be Year 2000  compliant.  While the Company has assessed,  corrected
and tested VuPoint in regard to Year 2000 compliance, there can be no assurances
that the product or future  releases of the product will not contain  undetected
date  sensitivity  errors.  If the Company is unable or is delayed in making the
necessary  date code changes to VuPoint or future  releases of the product,  the
Company does not anticipate  that there would be a material  adverse effect upon
the Company's business, operating results, financial condition and cash flows.

There can be no  assurances  that the  systems of other  parties  upon which the
Company relies will be made Year 2000  compliant on a timely basis.  The Company
utilizes third party vendor equipment, telecommunications products, and software
products. Third parties' Year 2000 compliance efforts are not within the control
of the Company.  The failure of any critical  technology  components  to operate
properly  may have a material  impact on  business  operations  or  require  the
Company to incur unanticipated expenses to remedy any problems.

The most substantial  operational  risks are those that are beyond the Company's
control, including the progress of government agencies and compliance efforts of
utility  companies.  It is possible that  interruptions in vital services due to
Year 2000  non-compliance will interfere with normal business  operations.  Such
failures  could  materially  and  adversely  affect  the  Company's  results  of
operations.

Forward-looking  statements  contained in this Year 2000  Compliance  disclosure
should be read in conjunction with the Company's disclosure under the heading of
Forward Looking Statements for the purposes of the Safe Harbor provisions of the
Private Securities Litigation Act of 1995.

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, 1999 and 1998 was as follows:

                                                Bid                  Ask
                                        -------------------   -----------------
                                         High         Low       High      Low
                                        -------     -------   -------   -------
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
Fiscal year ended March 31, 1998:
 First quarter ..................       $0.1875     $0.1875   $0.5625   $0.5625
 Second quarter .................       $0.1875     $0.1875   $0.5625   $0.4375
  Third quarter .................       $0.1875     $0.0625   $0.4375   $0.3750
  Fourth quarter ................       $0.1875     $0.0625   $0.3750   $0.2500

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

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

Marvin A. Davis                                Jon D. Ackelson
   Member, Compensation Committee               Vice  President, Production

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

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


Alan Treibitz                                  Alan Treibitz
                                                President, Chief Operating
                                                Officer, Chief Financial Officer
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 & Hottman PC
938 Quail Street, Suite 101                  7979 E. Tufts Avenue
Lakewood, Colorado 80215                     Suite 400
                                             Denver, Colorado 80237-2843

Dividends

No  dividends  have been  declared as of March 31, 1999 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,  1999,  as filed with the
Securities  and Exchange  Commission,  is available  without charge upon written
request to the corporate Secretary.

<PAGE>



                           Table of Contents



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

Report of Independent Certified Public Accountants....................2

Financial Statements

    Balance Sheets....................................................3

    Statements of Operations..........................................4

    Statement of Stockholders' Equity.................................5

    Statements of Cash Flows..........................................6

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, 1999 and the related statements of operations, stockholders' equity and cash
flows for the year then ended. These financial statements are the responsibility
of the  Company's  management.  Our  responsibility  is to express an opinion on
these  financial  statements  based on our audit.  The  financial  statements of
Z-Axis  Corporation as of March 31, 1998 and 1997 were audited by other auditors
whose  report dated June 10, 1998,  expressed  an  unqualified  opinion on those
statements.

We conducted our audit in accordance with generally accepted auditing standards.
Those standards  require that we plan and perform the audit to obtain reasonable
assurance   about  whether  the  financial   statements  are  free  of  material
misstatement.  An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements.  An audit also includes
assessing  the  accounting  principles  used and  signficant  estimates  made by
management,  as well as evaluating the overall financial statement presentation.
We believe our audit provides 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, 1999 and the results of its  operations and its cash flows for the year then
ended in conformity with generally accepted accounting principles.




                                /s/ Ehrhardt Keefe Steiner & Hottman PC
                                    Ehrhardt Keefe Steiner & Hottman PC

May 11, 1999
Denver, Colorado


<PAGE>







          Report of Independent Certified Public Accountants



Board of Directors
Z-Axis Corporation
Greenwood Village, Colorado


We have audited the accompany  balance sheet of Z-Axis  Corporation  as of March
31, 1998 and the related statements of operations, stockholders' equity and cash
flows for the years ended March 31, 1998 and 1997.  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,  1998 and the  results  of its  operations  and its cash flows for the years
ended March 31, 1998 and 1997 in conformity with generally  accepted  accounting
principles.



                                    BDO Seidman, LLP

Denver, Colorado
June 10, 1998



<PAGE>

                               Z-AXIS CORPORATION

                                 Balance Sheets
<TABLE>
<CAPTION>


                                                                        March 31,
                                                               ----------------------------
                                                                  1999              1998
                                                               -----------      -----------
                                     Assets
<S>                                                            <C>              <C>
Current assets
 Cash ....................................................     $    25,867      $   139,254
  Trade accounts receivable, net of allowance
   of $64,157 (1999) and $19,426 (1998) (Note 2) .........         925,249        1,121,753
  Other current assets ...................................          50,796           46,956
                                                               -----------      -----------
   Total current assets ..................................       1,001,912        1,307,963
                                                               -----------      -----------

Property and equipment, at cost (Note 5)
  Production equipment ...................................       1,193,485        1,182,463
  Office equipment .......................................         323,297          238,790
  Leasehold improvements .................................          35,226           29,584
  Accumulated depreciation and amortization ..............      (1,052,417)        (977,566)
                                                               -----------      -----------
   Net property and equipment ............................         499,591          473,271
                                                               -----------      -----------

Deferred income taxes (Note 4) ...........................         120,205          132,575

Capitalized software cost, net of accumulated
 amortization of $13,967 (1999) ..........................         132,906             --

Other assets .............................................          10,712           13,819
                                                               -----------      -----------

Total assets .............................................     $ 1,765,326      $ 1,927,628
                                                               ===========      ===========

                      Liabilities and Stockholders' Equity

Current liabilities
  Line-of-credit (Note 2) ................................     $    70,000      $   200,000
  Accounts payable .......................................         102,788          113,829
  Accrued expenses (Notes 3 and 8) .......................         160,143          278,168
  Customer deposits ......................................          28,000           27,000
  Current portion of capital lease
   obligations (Note 5) ..................................         134,959           72,651
                                                               -----------      -----------
   Total current liabilities .............................         495,890          691,648

Capital lease obligations (Note 5) .......................         131,102          114,585
                                                               -----------      -----------
   Total liabilities .....................................         626,992          806,233
                                                               -----------      -----------

Commitments (Notes 7 and 8)

Stockholders' equity
  Common stock, $.001 par value,
   10,000,000 shares authorized,
   shares issued and outstanding:
   3,805,000 (1999) and 3,785,000 (1998) .................           3,805            3,785
  Additional paid in capital .............................       1,444,191        1,441,711
  Accumulated deficit ....................................        (309,662)        (324,101)
                                                               -----------      -----------
   Total stockholders' equity ............................       1,138,334        1,121,395
                                                               -----------      -----------

Total liabilities and stockholders' equity ...............     $ 1,765,326      $ 1,927,628
                                                               ===========      ===========
</TABLE>


                       See notes to financial statements.

                                     - 3 -

<PAGE>

                               Z-AXIS CORPORATION

                            Statements of Operations
<TABLE>
<CAPTION>


                                                         Years Ended March 31,
                                             ---------------------------------------------
                                                 1999             1998             1997
                                             -----------      -----------      -----------

<S>                                          <C>              <C>              <C>
Net sales (Note 6) .....................     $ 3,748,053      $ 3,894,627      $ 2,477,645
                                             -----------      -----------      -----------
Operating expenses
  Production ...........................       1,652,828        1,548,629          984,229
  Research and development .............          99,151          234,967             --
  General and administrative ...........         764,539          732,204          741,871
  Marketing ............................         881,142          768,499          583,602
  Depreciation and amortization ........         269,130          184,606          160,514
  Amortization and write-off of software
  development costs ....................          13,967          312,611             --
                                             -----------      -----------      -----------
   Total operating expenses ............       3,680,757        3,781,516        2,470,216
                                             -----------      -----------      -----------

Income from operations .................          67,296          113,111            7,429

Interest (expense) .....................         (30,380)         (33,542)         (26,281)
Other income (expense) .................         (10,107)           7,689           30,208
                                             -----------      -----------      -----------

Income before income taxes .............          26,809           87,258           11,356

Provision for income taxes (Note 4) ....          12,370           33,855            3,500
                                             -----------      -----------      -----------

Net income .............................     $    14,439      $    53,403      $     7,856
                                             ===========      ===========      ===========

Net income per common share of stock
  Basic ................................     $        -       $       .01      $        -
  Diluted ..............................     $        -       $       .01      $        -

Weighted average number of common shares
 outstanding during the period
  Basic ................................       3,800,726        3,775,411        3,761,992
  Diluted ..............................       3,850,216        3,779,458        3,761,999

</TABLE>

                       See notes to financial statements.

                                     - 4 -


<PAGE>

                               Z-AXIS CORPORATION
                       Statements of Stockholders' Equity
<TABLE>
<CAPTION>


                             Number of                    Additional                       Total
                              Common        Common          Paid-in      Accumulated     Stockholders'
                              Shares         Stock          Capital        Deficit         Equity
                            ----------     ----------     ----------     ----------      ----------
<S>                          <C>           <C>            <C>            <C>             <C>
Balance, March 31, 1996      3,759,000     $    3,759     $1,438,487     $ (385,360)     $1,056,886

Issue 6,000 common shares        6,000              6            744            -               750

Net income ...........              -               -             -           7,856           7,856
                            ----------     ----------     ----------     ----------      ----------
Balance, March 31, 1997      3,765,000          3,765      1,439,231       (377,504)      1,065,492

Exercise of options
 (Note 9) .............         20,000             20          2,480           --             2,500

Net income ............           --             --             --           53,403          53,403
                            ----------     ----------     ----------     ----------      ----------

Balance, March 31, 1998      3,785,000          3,785      1,441,711       (324,101)      1,121,395

Exercise of options
 (Note 9) .............         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
                            ==========     ==========     ==========     ==========      ==========
</TABLE>


                       See notes to financial statements.

                                     - 5 -

<PAGE>

                               Z-AXIS CORPORATION

                            Statements of Cash Flows

<TABLE>
<CAPTION>

                                                               Years Ended March 31,
                                                   ---------------------------------------------
                                                      1999              1998             1997
                                                   -----------      -----------      -----------
<S>                                                <C>              <C>              <C>
Net income ...................................     $    14,439      $    53,403      $     7,856
                                                   -----------      -----------      -----------
  Adjustments to reconcile net income to
  net cash provided by (used in)
  operating activities
   Deferred income taxes .....................          12,370           33,425            5,000
   Depreciation ..............................         269,130          184,606          160,514
   Amortization of software development costs           13,967          312,611             --
   Loss on disposal of equipment .............          13,253            4,330           28,259
   Provision for bad debts ...................          60,000           34,400           45,000
   Accrued interest on notes payable .........            --               --             15,813
   Changes in operating assets and liabilities
    Trade accounts receivable ................         136,504         (294,049)        (200,507)
    Other current assets .....................          (3,840)         (18,938)          23,839
    Other assets .............................           3,107            3,667           (5,545)
    Accounts payable .........................         (11,041)         (47,220)         (22,613)
    Accrued expenses .........................        (118,025)         114,951          (58,704)
    Customer deposits ........................           1,000            4,500           (7,053)
                                                   -----------      -----------      -----------
                                                       376,425          332,283          (15,997)
                                                   -----------      -----------      -----------
         Net cash provided by (used in)
              operating activities ...........         390,864          385,686           (8,141)
                                                   -----------      -----------      -----------

Investing activities
  Purchase of property and equipment .........        (135,444)        (113,153)         (61,182)
  Additions to software development costs ....        (146,873)            --           (178,272)
  Proceeds from sale of property and
   equipment .................................           7,908            2,700            4,000
                                                   -----------      -----------      -----------
      Net cash used in investing
       activities ............................        (274,409)        (110,453)        (235,454)
                                                   -----------      -----------      -----------

Financing activities
  Borrowing on line-of-credit ................       1,180,000        1,035,000          530,000
  Payments on line-of-credit .................      (1,310,000)      (1,035,000)        (330,000)
  Capital lease principal payments ...........        (102,342)        (163,171)         (50,536)
  Proceeds from the exercise of stock
   options ...................................           2,500            2,500             --
                                                   -----------      -----------      -----------
      Net cash (used in) provided by
       financing activities ..................        (229,842)        (160,671)         149,464
                                                   -----------      -----------      -----------

Net (decrease) increase in cash ..............        (113,387)         114,562          (94,131)

Cash, beginning of year ......................         139,254           24,692          118,823
                                                   -----------      -----------      -----------

Cash, end of year ............................     $    25,867      $   139,254      $    24,692
                                                   ===========      ===========      ===========

</TABLE>

                       See notes to financial statements.

                                     - 6 -

<PAGE>

                               Z-AXIS CORPORATION

                            Statements of Cash Flows



Supplemental disclosures of cash flow information:

<TABLE>
<CAPTION>


                                                               Years Ended March 31,
                                                   ---------------------------------------------
                                                      1999              1998             1997
                                                   -----------      -----------      -----------

<S>                                                <C>              <C>              <C>
Cash paid for taxes                                $      -         $     -          $     -
Cash paid for interest                             $ 35,854         $ 42,114         $ 29,396
</TABLE>

Supplemental noncash disclosure:
      Capital  lease  obligations  were  incurred in the amount of $181,167  and
      $226,757 during the year ended March 31, 1999 and 1998, respectively, when
      the Company entered into capital lease  agreements for certain  production
      and office equipment.

      Accrued interest on notes payable to related parties in the amounts of $0,
      $5,525 and $8,376 was added to the principal of the notes during the years
      ended March 31, 1999, 1998 and 1997, respectively.

      During the years ended March 31, 1998,  fixed assets with a net book value
      in the amount of $7,030 were retired.

                       See notes to financial statements.

                                     - 7 -

<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 two
types of courtroom  presentation  systems for its clients:  a touchscreen  video
presentation system and "VuPoint," an electronic image presentation  system. 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.

Property and Equipment

Property  and  equipment  are stated at cost.  Depreciation  is  computed by the
straight-line  method over periods 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.


<PAGE>




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, 1999, 1998 and 1997 were approximately $90,000, $92,000 and $69,000.



<PAGE>




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 over the estimated useful life of two years.

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.


<PAGE>




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

Recently Issued Accounting Pronouncements

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 is effective  for all fiscal  quarters of all
fiscal years  beginning  after June 15, 1999.  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.


Note 2 - Line-of-Credit

The  Company  entered  into an  agreement  with a bank for a  line-of-credit  of
$400,000 due August 1999.  The interest rate is calculated at 1% over the bank's
prime rate (8.75% at March 31, 1999) 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, 1999 and 1998 was
$70,000 and $200,000, respectively.


Note 3 - Accrued Expenses

Accrued expenses consist of the following:
                                                           March 31,
                                                   -----------------------
                                                      1999          1998
                                                   -----------   ---------


Compensation (Note 8)                               $104,353      $212,922
Interest, officers and directors                           -         4,122
Other                                                 55,790        61,124
                                                    --------      --------

                                                    $160,143      $278,168
                                                    ========      ========

Interest expense incurred on indebtedness to related parties was $1,895, $9,896,
and $14,254 during the years ended March 31, 1999, 1998 and 1997, respectively.


<PAGE>




Note 4 - 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,
                                            -------------------------------
                                               1999      1998       1997
                                            ---------- ---------- ---------

Income tax expense at the statutory rate     $  9,115   $ 29,668   $   3,861

State tax, net                                    885      3,145         474

Non-deductible items                            2,370      2,736       1,020

Other                                              -      (1,694)     (1,855)
                                             --------   --------   ---------

                                             $ 12,370   $ 33,855   $   3,500
                                             ========   ========   =========

Income tax expense consists of the following:


                                                 Years Ended March 31,
                                            -------------------------------
                                               1999      1998       1997
                                            ---------- ---------- ---------

Current                                      $     -    $     -    $      -
Deferred                                       12,370     33,855       3,500
                                             --------   --------   ---------

                                             $ 12,370   $ 33,855   $   3,500
                                             ========   ========   =========

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

                                                           March 31,
                                                   -----------------------
                                                      1999          1998
                                                   -----------   ---------

Current
  Deferred tax assets
   Accounts payable and accrued expenses            $109,100      $157,000
   Net operating loss carryforwards                  247,900       281,000
                                                    --------      --------
    Total deferred tax asset                         357,000       438,000
                                                    --------      --------

Deferred tax liabilities
  Accounts receivable                                339,500       420,000
  Prepaid expenses and other assets                   17,500        18,000
                                                    --------      --------
   Total deferred tax liability                      357,000       438,000
                                                    --------      --------

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


<PAGE>




Note 4 - Income Taxes (continued)

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

                                                            March 31,
                                                   -----------------------
                                                      1999         1998
                                                   -----------   ---------

Non-current
  Deferred tax assets
   Net operating loss carryforwards                 $177,780      $146,000
   Investment and other tax credits                       -         14,000
   Valuation allowance                                    -        (14,000)
                                                    --------      --------
    Total deferred tax asset                         177,780       146,000
                                                    --------      --------

Deferred tax liabilities
  Property and equipment                               7,735        13,425
  Capitalized software cost                           49,840            -
                                                    --------      -------
   Total deferred tax liability                       57,575        13,425
                                                    --------      --------

Net non-current deferred tax asset                  $120,205      $132,575
                                                    ========      ========

At March 31,  1999 and 1998,  the  Company  has  federal  income  tax loss carry
forwards of approximately  $1,130,000 and $1,139,000,  respectively which expire
in  the  years  2001   through  2019  and  federal  and  state  tax  credits  of
approximately $0 and $14,000.


Note 5 - 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,

           2000                                     $157,026
           2001                                      105,038
           2002                                       53,446
           2003                                        1,925
                                                    --------
           Total future minimum lease payments       317,435
           Less amount representing interest         (51,374)
                                                    --------
           Present  value  of  minimum  payments
           under capital leases                      266,061
           Less current portion                     (134,959)
                                                    --------

                                                    $131,102
                                                    ========


<PAGE>




Note 5 - 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 $407,924 and
$226,757  at March 31,  1999 and 1998,  respectively.  The  related  accumulated
depreciation was $167,115 and $48,824 at March 31, 1999 and 1998, respectively.


Note 6 - Major Customers

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


                                                 Years Ended March 31,
                                            -------------------------------
                                               1999      1998       1997
                                            ---------- ---------- ---------
Sales:
  Customer A                                       -       19.24%     12.33%

  Customer B                                       -         -        10.70

  Customer C                                    13.46        -          -

  Customer D                                    18.10      24.38      10.38

  Customer E                                    12.02        -          -




<PAGE>




Note 7 - Commitments

The  Company  leases its office and  production  facility  under the terms of an
operating  lease.  The lease term  commenced on August 1, 1996 and extends for a
sixty-month period ending on July 31, 2001.

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

      Years Ending March 31,

           2000                                     $121,393
           2001                                      123,368
           2002                                       41,552
                                                    --------

                                                    $286,313
                                                    ========

Rent  expense was  $133,409,  $101,628 and $88,525 for the years ended March 31,
1999, 1998 and 1997.


Note 8 - 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 $4,909, $3,144
and $2,899 during the years ended March 31, 1999, 1998 and 1997, 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 $12,125, $113,082 and $0 during the years ended March
31, 1999,  1998 and 1997,  respectively,  under the terms of the Profit  Sharing
Plan.


<PAGE>




Note 9 - 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, 1999, 1998 and 1997 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 54 percent for 1999, 26
percent  for 1998 and 18  percent  for 1997;  risk-free  interest  rates of 5.45
percent for 1999,  5.5 percent  for 1998 and 6.00 - 6.55  percent for 1997;  and
expected  lives of 10 years for 1999 and 1998 and five  years for 1997 for 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 1999 and 1998.

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,
                                       --------------------------------------
                                           1999           1998         1997
                                       ------------   -----------   ---------

Net income
  As reported                           $ 14,439       $ 53,403      $  7,856
  Pro forma                             $  6,008       $ 53,403      $  3,442

Basic earnings per share
  As reported                           $     -        $     .01     $     -
  Pro forma                             $     -        $     .01     $     -

Diluted earnings per share
  As reported                           $     -        $     .01     $     -
  Pro forma                             $     -        $     .01     $     -



<PAGE>




Note 9 - Incentive Stock Option Plan (continued)

A summary of the status of the Company's stock option plan follows:

                                                   Exercise
                                    Number of      Price Per     Exercisable
                                      Shares         Share          Shares
                                    ---------     ----------    -------------

Outstanding balance at
 March 31,  1997                      115,000      $.125-.138        115,000
  Options granted                      40,000       .125-.275         40,000
  Options exercised                   (20,000)      .125             (20,000)
                                      --------      ---------       --------
Outstanding balance at
 March 31, 1998                       135,000     .1875-.2063        135,000
  Options granted                      64,000     .1875-.2063         64,000
  Options exercised                   (20,000)    .125               (20,000)
                                      --------      ---------       --------

Outstanding balance at
 March 31, 1999                       179,000      $.125-.275        179,000
                                      ========      =========       ========

The weighted  average fair value of options granted during the years ended March
31, 1999, 1998 and 1997 were $.13, $0.07 and $.03, respectively.

The following table summarizes  information  about stock options  outstanding at
March 31, 1999:

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


$.125 - .275                                  179,000      8.72  $    .1790
============                                 ========   =======  ==========