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

                                        FORM 10-KSB/A

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

For the fiscal year ended March 31, 2001.

Commission file number 0-11284

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


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

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

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

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

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

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

Indicate by check mark  whether  the  registrant  (1) has filed all  reports  required to be
filed by Section 13 or 15(d) of the Securities  Exchange Act of 1934 during the preceding 12
months (or for such shorter  period that the  registrant was required to file such reports),
and (2) has been  subject to such  filing  requirements  for the past 90 days.
  Yes [ X ] No [    ]

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

The   registrant's   common  stock  trades  on  the   electronic   bulletin   board  of  the
Over-the-Counter  market under the trading  symbol  "AXIS".  The  aggregate  market value of
the registrant's  voting stock held by non-affiliates of the registrant as of March 31, 2001
was $191,250.  The  aggregate  market value was  calculated  based upon the number of shares
held by  non-affiliates  on March 31,  2001 and the price at which the  registrant's  common
stock  traded on June 13,  2001 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, 2001: 3,825,000.


Documents incorporated by reference:

Title of Document                                                       Part of Form 10-K

Proxy Statement to shareholders to be filed by July 29, 2001                Part III

Annual Report to shareholders for the fiscal year ended March 31, 2001      Parts II and IV

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



FORWARD LOOKING STATEMENTS

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

PART I

Item 1.  Business

Z-Axis  Corporation (the "Company") was incorporated under the laws of the State of Colorado
on May 16, 1983. The principal  business and industry  segment in which the Company operates
is  the  development  and  production  of   computer-generated   video  graphics  and  other
presentation  materials.  The Company conducts its business primarily from one location, its
corporate office and production facility located in metropolitan  Denver,  Colorado.  During
fiscal  year 2001 and 2000,  the  Company  also had sales  consultants  located in  Chicago,
Illinois,  Los  Angeles,  California  and New York  City,  New York.  The  Company  operates
within only one industry segment.

The Company was formed for the purpose of providing video graphic  presentation  services in
the  litigation  services  industry for  commercial  and  government  customers.  Litigation
support  customers are primarily law firms and  corporations  located  throughout the United
States.  During  fiscal years 2001 and 2000 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  together  accounted for 38% of total sales in
fiscal 2001 as compared to one customer that accounted for 33% of sales in fiscal 2000.

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 five 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 patent  protection  for a portion of the software
technology.  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, 2001 and 2000,  the Company
earned  $212,926  and  $251,421,  respectively,  in revenue  from  rental and service of the
VuPoint  system.  During fiscal 2001 and 2000,  the Company  amortized  $21,227 and $24,638,
respectively,  in related software  development  costs that were  capitalized  during fiscal
year ended March 31, 1999.

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

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

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

At March 31, 2001 and 2000,  the  Company had a backlog of orders for its video  services in
the amounts of approximately  $2,217,000 and $2,304,500,  respectively.  Management believes
that the  backlog  will stay at these  levels in the  second  and third  quarters  of fiscal
2002.  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, 2001,  the Company had 21 regular  full-time  employees  and  approximately  15
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.

Item 2.  Properties

The Company's  current  headquarters and production  facility are located in a business park
in the southern suburbs of Denver,  Colorado.  It leases two spaces from unaffiliated  third
parties.  The terms of the leases are five-year  and three- year  periods;  both expiring on
July 31,  2001.  In  December  2000,  management  elected  to renew the lease and extend the
terms for an  additional  60 months,  ending July 31, 2006.  The Company also has offices in
Illinois and New York, which are rented under  short-term  agreements.  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, 2001 was 425
as reported by the transfer agent.  This number does not include an  undetermined  number of
stockholders whose stock is held in "street" or "nominee" name.

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

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

During  January  1995,  the Company  secured a market marker for trading in its common stock
and it became listed for trading on the electronic  bulletin  board of the  Over-the-Counter
market,  under the trading symbol "AXIS.OB" Since listing  occurred on the  Over-the-Counter
market, trading has been sporadic.

The  following is a summary of the high and low bid and ask  quotations,  as reported by the
NASDAQ Stock Market, Inc. for the period indicated:

                                                Bid                          Ask
                                     -------------------------------------------------------
--------------------------------------------------------------------------------------------
                                            High        Low                High        Low
--------------------------------------------------------------------------------------------
Fiscal year ended March 31, 2001:
  First quarter                            $0.3750    $0.1250             $0.4375    $0.1250
  Second quarter                           $0.1875    $0.1250             $0.1875    $0.1250
  Third quarter                            $0.1875    $0.1250             $0.3125    $0.1250
  Fourth quarter                           $0.1250    $0.0625             $0.1563    $0.1250
--------------------------------------------------------------------------------------------
Fiscal year ended March 31, 2000:
  First quarter                            $0.2500    $0.1875             $0.4375    $0.3750
  Second quarter                           $0.1875    $0.1563             $0.3750    $0.1875
  Third quarter                            $0.2188    $0.1250             $0.3750    $0.1875
  Fourth quarter                           $0.6250    $0.1250             $0.8125    $0.2500

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

Item 6.  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,  2001 and 2000.  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 2001 and 2000 sales were derived  primarily 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  increased 33% during
2001.  This followed a decrease of 39% during 2000. The increase  during 2001 was the result
of sales  consultants  making  significant  progress  in closing  jobs  where the  Company's
services  could  be  utilized  at  an  earlier  stage  of  the  trial   process.   This  has
significantly  increased the revenue  opportunities and resulted in billable work started on
jobs much sooner than in previous years.  Cost  management  measures are also in place aimed
at decreasing  overhead  expenses,  as well as effective  utilization  of contract  labor on
revenue  producing  activities.  The  decrease in revenues  during  fiscal 2000 was due to a
slow down in the general  business  services  that  support the  litigation  industry.  This
trend  started to improve in the first  quarter of fiscal  2001.  Three  customers  together
accounted for 38% of total sales in 2001 as compared to one customer that  accounted for 33%
of sales in 2000.  The  percentage  of sales for any one  customer  during a fiscal year can
vary  greatly  depending  upon the number of jobs or  magnitude  of the dollar  value of the
projects  from that  customer.  Although the Company  does have  several  firms that provide
repeat business,  the sales focus is on developing  relationships  with many different firms
throughout  the  country in order to expand the base of  potential  jobs  arising out of the
litigation  industry.  The Company's  on-going  operations and business are not dependent on
any customer and are not materially impacted by the effects of inflation.

In fiscal years 2001 and 2000 the Company  continued with the strategic  alliance  formed in
1999 with Ann Cole Opinion  Research and Analysis  (ACORA).  ACORA works with  attorneys and
experts in refining their  presentations or testimony in court, and ACORA provides  analysis
on how these  communications  will be perceived by various jurors.  By combining talents and
resources,  Z-Axis  and  ACORA  provide  solutions  to  customer  communication  challenges.
Working  together the two companies  provide an approach that  encompasses  virtually  every
form of communication and  understanding,  so that attorneys have few, if any,  surprises in
court,  and what the judge and jury receive is a concise,  compelling,  complete,  effective
and  winning  presentation.  Management  believes  that this  alliance  further  strengthens
Z-Axis leadership position within the litigation services industry.

The continued  investment of funds into  research and  development,  expansion of the market
share in the litigation  support field and  exploration of additional  market  opportunities
are also high  management  priorities.  The  Company's  ability  to  maintain  an  effective
marketing  program,  expand its market share in the  near-term  and establish new markets in
the  long-term,  may  have an  effect  on its  future  financial  position  and  results  of
operations.  During fiscal years 2001 and 2000, the Company  decreased its  expenditures for
marketing  and  advertising  efforts.  In  order  to  continue  to  maintain  the  Company's
leadership  position in the litigation  support market,  management expects that advertising
and  marketing  expenses will increase  during  fiscal year 2002.  Management  considers the
expenses  associated with development and maintenance 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, 2001 and 2000,  total  operating  expenses were $2,859,277 and
$3,209,120, respectively,  representing 94% and 140% of net sales resulting in income (loss)
from  operations of $171,041 and  $(925,843).  Operating  expenses  decreased in fiscal year
2001 by  $349,843,  which  represents  an 11%  decrease  as  compared  to  fiscal  year 2000
operating  expenses.  The decrease in 2001 was due to general cost reduction measures in all
departments,  improved  management of contract labor costs and discontinuance of the Concept
2 division  in the last  quarter of fiscal  2000,  resulting  in no costs for this  division
during fiscal 2001.  Labor  expense  continues to be the most  significant  of the Company's
operating costs during 2001 and 2000.  During the years 2001 and 2000 employee  compensation
and benefit costs accounted for approximately 69% and 64%, respectively,  of total operating
expenses.  The increase in  compensation  costs for 2001 was primarily due to an increase in
the contract labor  utilization as a result of the increase in revenue  levels.  The Company
did not add regular  full-time  staff personnel to the production  department  during fiscal
2001, but rather  utilized  contract labor to manage the production  personnel  needs during
months of increased  revenues.  Management  believes that the Company's  staffing levels and
production capacity are sufficient to maintain current and anticipated  near-term production
levels.

Production   expenses  were   $1,157,336  for  2001  as  compared  to  $1,186,705  for  2000
representing  a  decrease  of 2%.  Production  costs  for  direct  contract  labor and other
billable  expenses will vary directly  with sales levels.  Production  costs as a percentage
of sales were 38% for 2001 and 52% for 2000. The decrease in production  costs during fiscal
2001  were due to a  decrease  in  personnel  costs  as a  percentage  of sales  and well as
decreases in  non-personnel  costs primarily  supplies and service  contracts for production
equipment.  Over  the past  several  years,  the  Company  has  increasingly  employed  more
contract  artists to produce the core business and VuPoint service  revenues.  This strategy
is used to manage more  effectively  the cost of labor,  as monthly  revenue levels can vary
significantly.  In addition,  the production  department has  compensation and benefit costs
for core staff employees including artists,  producers and managers.  These core staff costs
do not vary as directly as contract labor costs with sales revenue volume.

Research and  development  costs  decreased  21% during 2001 as compared to 2000.  The total
research and  development  costs were  $88,481 in 2001 as compared to $111,909 in 2000.  The
overall decrease in costs for 2001 was due to a decrease in professional  fees for legal and
patent application  process.  During 1999, $146,873 was capitalized as software  development
costs in accordance  with Statement of Financial  Standard No. 86. There were no capitalized
costs  in 2001 or 2000 as the  costs  incurred  during  these  periods  were  for  continued
maintenance of the product and did not require  significant levels of labor. The capitalized
costs in 1999 represented a significant  change to VuPoint that resulted in a new version of
the software that became  available  for sale January 1, 1999.  During fiscal years 2001 and
2000, $21,227 and $24,637,  respectively,  in amortization of the capitalized software costs
were  recorded.  The Company  received  trademark  protection of the "VuPoint" name and also
received  patent  protection  for a portion of the software  code. It is a  state-of-the-art
exhibit  management  and  presentation  system for use by trial teams,  outside  counsel and
in-house  attorneys.  The Company  considers  VuPoint to have significant  long-term revenue
potential and will continue  further  maintenance of the product in the foreseeable  future.
The product  fulfills a need in the  marketplace,  particularly  in presenting  exhibits for
document-intensive cases.

General and  administrative  expenses  were $706,289 in 2001 as compared to $722,428 in 2000
representing a decrease of 2%. General and administrative  expenses  represented 23% and 32%
of sales for 2001 and 2000.  Through  cost  management  measures,  the  Company  was able to
maintain comparable levels for general and administrative  costs,  including executive costs
to support an increase in sales revenues during fiscal 2001 as compared to fiscal 2000.

Marketing expenses were $705,033 in 2001 as compared to $752,920 in 2000 representing a
decrease of 6%.  The decrease in marketing costs during 2001 was the result of advertising
costs decrease of 73% during 2001 as compared to 2000.  Marketing expenses represented 23%
and 32% of sales for 2001 and 2000, respectively.  The decrease in marketing expenses as a
percentage of sales for 2001 is due to the fact that expenditures for advertising as noted
above, sales travel, freight for demo VuPoint systems were significantly lower than for
fiscal 2000.  Management expects that these costs will increase in fiscal 2002, as the
Company will need to incur advertising costs in order to maintain its current market share
in the industry.

Depreciation  expense was  $180,910 in 2001 as compared to $277,484 in 2000  representing  a
decrease of 35%.  The  decrease was  expected  since 85% of the  Company's  assets are fully
depreciated.  The  Company  purchased  $29,846  in  capital  assets  during  fiscal  2001 as
compared to $39,018 during fiscal 2000.  Management  expects that capital  expenditures will
increase  during  fiscal 2002 as computer  equipment  is replaced  and upgraded to keep pace
with the current  technology.  A capital  lease in the amount of $24,642  was  entered  into
during  fiscal  2000 to finance the  purchase of the  production  and office  equipment.  No
capital  leases were entered  into during  fiscal  2001.  During 2001 and 2000,  the Company
retired equipment with a net book value of $0 and $749,  respectively.  Rapid  technological
advances in the type of equipment  that the Company uses in providing  its services  require
that depreciable lives of the equipment be relatively short.

Initial start up costs of Concept 2

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

Other income and expenses

Interest  expense  was  $58,174 in 2001 as  compared  to $44,152  in 2000,  representing  an
increase of 32%.  The  increase  was due to the higher  levels of  borrowing  on the line of
credit  during  fiscal year 2001 as  compared  to 2000.  Management  expects  that  interest
expense will begin to decrease  during the next several  quarters,  as the Company pays down
the line of credit and  continues  to pay off the  remaining  capital  lease.  Other  income
(expense) is comprised  primarily of gain (loss) on sale and disposal of fixed assets during
2001 and 2000.

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,  2001 and 2000,  the  Company  had  federal  income tax loss carry  forwards of
approximately  $1,168,000  and  $1,470,000,  respectively  which  expire in the  years  2001
through  2020.  The Company had income tax expense of $0 and $126,822  during 2001 and 2000,
respectively.  The  income  tax  expense  in  fiscal  2000  was  the  direct  result  of the
corresponding  changes in the  Company's  deferred tax amounts for that period.  The Company
had a net deferred  tax asset of $126,822 at March 31, 2000  resulting  primarily  from cash
basis   adjustments  and  operating  loss  and  tax  credit   carry-forwards.   The  company
established  a valuation  allowance of $(126,822) at March 31, 2000 against the deferred tax
asset as  management  believes  that it is more likely than not, that the deferred tax asset
related to the tax  credits  and a portion of the loss carry  forwards  may not be  realized
before all carry  forward  expiration  dates.  See Note 1 to the Financial  Statements.  The
Company may utilize the deferred tax asset arising out of net operating  loss  carryforwards
in future years.

Net Income (Loss)

The Company  recorded net income (loss) in the amounts of $113,958 and  $(1,087,393)  during
the years ended March 31, 2001 and 2000.

At March 31,  2001,  the  Company  had a backlog  of orders in the  amount of  approximately
$2,217,000,  compared to  approximately  $2,304,500 at March 31, 2000.  Management  believes
that the backlog  will be  comparable  during the second and third  quarters of fiscal 2002.
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, 2001, the Company's working capital position was $(56,475),  an increase of 82%
when  compared  to that of March 31,  2000.  Total  stockholders'  equity at March 31,  2001
increased  from $50,941 to $167,399.  The  increase in  stockholders'  equity was due to net
income of $113,958.

Cash flows from  operations  were $(57,295) and $(123,178)  during the years ended March 31,
2001 and 2000.  The increase in cash flows from  operations for 2001 as compared to 2000 was
due to the increase in sales volumes.  Accounts  receivable  collection  performance in 2001
was  comparable to  performance  in 2000 with average days  outstanding  of 45-60 days.  The
Company's  accounts  receivable at any given time are generally few in number and relatively
large in amount.  Although  the Company has not had any  significant  bad debt  experiences,
any delay in  collection  of its  accounts  receivable  can result in a  disruption  of cash
flow. To help mitigate any future cash flow  irregularities,  the Company  carries a line of
credit in the amount of $500,000 with a bank.  Capital  additions,  as they become necessary
to meet  production  demands and replace  equipment,  will be acquired with a combination of
debt financing and cash flow from operations.

Capital  additions  were $29,846 and $63,660 during the years ended March 31, 2001 and 2000.
The  expenditures  for  2001  and  2000  were  for  replacement  of  office  and  production
equipment.  Of the total capital  additions  during the two year period,  approximately  75%
were paid from current  operating cash flows and the remainder  were obtained  through lease
or debt arrangements with terms of three to five years.

Cash flows  provided by financing  activities  were  $27,463 and  $191,621  during the years
ended March 31, 2001 and 2000. The decrease in cash flows from financing  activities  during
2001 was due to net  borrowing  of  $65,000  on the line of credit  coupled  with  principal
payments on  outstanding  leases of $105,037.  The line of credit,  which matured in October
2000,  has been under a  forbearance  agreement  with the lending  institution  that expires
April  15,  2002.  Management  expects  that  the  terms  of the  line  of  credit  will  be
renegotiated  within the next six months.  The Company  also  borrowed,  net of  repayments,
$65,000  from a  stockholder.  This debt was  subsequently  repaid in full  during the first
quarter of fiscal 2002.

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
litigation  may settle  before  trial.  The Company  began the first  quarter of fiscal year
2002 with  approximately  the same level of sales volumes as compared to the fourth  quarter
of  fiscal  year  2001.  Sales  revenues  for the  first  quarter  of  fiscal  year 2002 are
anticipated  to be  approximately  $1,000,000  resulting  in an  after  tax  net  income  of
approximately $55,000.  Management believes that sales volumes are expected to range between
$650,000 and $850,000 for the remaining  quarters of fiscal year 2002,  with an  anticipated
total  sales  volume of  $3,100,000.  This  volume  should  allow the Company to generate an
operating profit of approximately  5%.  Management  expects the Company to continue to be in
a profitable  financial  position during fiscal year 2002 and be able to meet operating cash
flow  requirements  and debt  service  obligations.  Management  also  continues  to  pursue
development of alternative  revenue sources from other  industries that can benefit from the
many artistic and creative resources within the Company.

Recent Accounting Pronouncements

In June 1998,  June 1999 and June 2000,  the  Financial  Accounting  Standards  Board issued
Statement of Financial Accounting Standards No. 133, "Accounting for Derivative  Instruments
and Hedging  Activities,"  SFAS 137,  "Accounting  for  Derivative  Instruments  and Hedging
Activities  - - Deferral  of the  Effective  Date of FASB  Statement  No. 133" and SFAS 138,
"Accounting for Certain  Derivative  Instruments and Certain Hedging Activities an amendment
of FASB Statement No. 133." These statements  establish  accounting and reporting  standards
requiring  that  every  derivative  instrument,  including  certain  derivative  instruments
embedded  in other  contracts,  be  recorded  in the  balance  sheet as  either  an asset or
liability  measured at its fair value.  These  statements  require  that changes in the fair
value of a derivative be recognized  currently in earnings unless specific hedge  accounting
criteria are met.  This accounting is effective beginning in 2001.

In  March  2000,  the  FASB  issued  FASB  Interpretation  No. 44, "Accounting  for  Certain
Transactions  Involving  Stock  Compensation"  ("FIN 44"), which was effective July 1, 2000,
except that  certain conclusions  in this Interpretation,  which cover  specific events that
occur after either  December 15, 1998  or January 12, 2000  are recognized  on a prospective
basis from July 1, 2000. This Interpretation clarifies the application of APB Opinion 25 for
certain issues related to stock issued to employees.

In December  1999,  the Securities  and Exchange  Commission  (SEC) issued Staff  Accounting
Bulletin  ("SAB") 101,  which will become  effective for financial  statements  with periods
ending after December 15, 2000.  SAB 101 provides  guidance on applying  generally  accepted
accounting  principles to selected revenue recognition issues.  Management believes that the
Company's revenue recognition policies are in accordance with SAB 101.

Inflation

Management  believes  that  inflation  has not had a  significant  impact  on the  Company's
operations during the fiscal years ended March 31, 2001 and 2000.


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, 2001 and 2000 was
as follows:

                                                  Bid                           Ask
                                           -------------------------------------------------
                                            High        Low                High        Low
--------------------------------------------------------------------------------------------
Fiscal year ended March 31, 2001:
  First quarter                            $0.3750    $0.1250             $0.4375    $0.1250
  Second quarter                           $0.1875    $0.1250             $0.1875    $0.1250
  Third quarter                            $0.1875    $0.1250             $0.3125    $0.1250
  Fourth quarter                           $0.1250    $0.0625             $0.1563    $0.1250
--------------------------------------------------------------------------------------------
Fiscal year ended March 31, 2000:
  First quarter                            $0.2500    $0.1875             $0.4375    $0.3750
  Second quarter                           $0.1875    $0.1563             $0.3750    $0.1875
  Third quarter                            $0.2188    $0.1250             $0.3750    $0.1875
  Fourth quarter                           $0.6250    $0.1250             $0.8125    $0.2500


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


Item 7.  Financial statements and supplementary data



                                Table of Contents


                          Independent Auditors' Report

                              Financial Statements

                                 Balance Sheets

                            Statements of Operations

                       Statements of Stockholders' Equity

                            Statements of Cash Flows

                         Notes to Financial Statements








                          INDEPENDENT AUDITORS' REPORT



Board of Directors
Z-Axis Corporation
Greenwood Village, Colorado


We have  audited the  accompanying  balance  sheets of Z-Axis  Corporation  as of
March 31, 2001 and 2000 and the related  statements of operations,  stockholders'
equity and cash flows for the years 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 audits.

We  conducted  our  audits  in  accordance  with  auditing  standards   generally
accepted  in the  United  States.  Those  standards  require  that  we  plan  and
perform the audit to obtain  reasonable  assurance  about  whether the  financial
statements are free of material  misstatement.  An audit includes  examining,  on
a test basis,  evidence  supporting the amounts and  disclosures in the financial
statements.  An audit also includes  assessing  the  accounting  principles  used
and significant  estimates made by management,  as well as evaluating the overall
financial  statement  presentation.  We believe 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,  2001 and 2000 and the results of its  operations  and its cash flows for the
years then ended in conformity  with  auditing  standards  generally  accepted in
the United States.


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

May 23, 2001
Denver, Colorado



                                 Balance Sheets


                                                                    March 31
                                                           ---------------------------
                                                              2001            2000
                                                           -----------     -----------
                                         Assets
Current assets
  Cash                                                      $    1,786      $   61,374
  Trade accounts receivable, net of allowance of
   $45,634 and $67,636, respectively                           886,109         330,703
  Prepaid expenses                                              31,505          11,469
                                                            ----------      ----------
   Total current assets                                        919,400         403,546
                                                            ----------      ----------

Property and equipment, at cost
  Production equipment                                       1,196,126       1,185,513
  Office equipment                                             310,475         311,737
  Leasehold improvements                                        35,226          35,226
  Accumulated depreciation and amortization                 (1,407,872)     (1,247,457)
                                                            ----------      ----------
   Net property and equipment                                  133,955         285,019
                                                            ----------      ----------

Capitalized software cost, net of accumulated
 amortization of $59,830 and $38,604, respectively              87,042         108,269

Other assets                                                    10,732          10,722
                                                            ----------      ----------

Total assets                                                $1,151,129      $  807,556
                                                            ==========      ==========

                          Liabilities and Stockholders' Equity
Current liabilities
  Line-of-credit                                            $  465,000      $  400,000
  Advance from stockholder                                      65,000              -
  Accounts payable                                             147,676          50,962
  Accrued expenses                                             209,736         132,328
  Customer deposits                                             49,030          21,000
  Current portion of capital lease obligations                  39,433         106,946
                                                            ----------      ----------
   Total current liabilities                                   975,875         711,236

Capital lease obligations, less current portion                  7,855          45,379
                                                            ----------      ----------
   Total liabilities                                           983,730         756,615
                                                            ----------      ----------

Commitments

Stockholders' equity
   Common stock, $.001 par value, 10,000,000 shares
   authorized, 3,825,000 and 3,805,000 shares issued
   and outstanding, respectively                                 3,825           3,805
  Additional paid-in capital                                 1,446,671       1,444,191
  Accumulated deficit                                       (1,283,097)     (1,397,055)
                                                            ----------      ----------
   Total stockholders' equity                                  167,399          50,941
                                                            ----------      ----------

Total liabilities and stockholders' equity                  $1,151,129      $  807,556
                                                            ==========      ==========

                       See notes to financial statements.



                            Statements of Operations


                                                              For the Years Ended
                                                                   March 31,
                                                          ---------------------------
                                                              2001             2000
                                                          ------------      ----------

Net sales                                                   $3,030,318      $2,283,277
                                                            ----------      ----------

Operating expenses
  Production                                                 1,157,336       1,186,705
  Research and development                                      88,483         111,909
  General and administrative                                   706,289         722,428
  Marketing                                                    705,032         752,920
  Initial start up of Concept 2                                     -          133,037
  Depreciation and amortization                                180,910         277,484
  Amortization of software development costs                    21,227          24,637
                                                            ----------      ----------
   Total operating expenses                                  2,859,277       3,209,120
                                                            ----------      ----------

Income (loss) from operations                                  171,041        (925,843)

Interest (expense)                                             (58,174)        (44,152)
Other income (expense)                                           1,091           9,424
                                                            ----------      ----------

Income (loss) before income taxes                              113,958        (960,571)

Provision for income taxes                                          -          126,822
                                                            ----------      ----------

Net income (loss)                                           $  113,958      $(1,087,393)
                                                            ==========      ===========

Earnings (loss) per common share
  Basic                                                     $       .03     $      (.29)
                                                            ===========     ===========

  Diluted                                                   $       .03     $      (.29)
                                                            ===========     ===========

Weighted average number of common shares outstanding
 during the period:
  Basic                                                      3,817,932       3,805,000
                                                            ==========      ==========

  Diluted                                                    3,838,199       3,805,000
                                                            ==========      ==========

                       See notes to financial statements.



                       Statements of Stockholders' Equity
                   For the Years Ended March 31, 2001 and 2000


                               Common Stock          Additional                     Total
                          -----------------------     Paid-in     Stockholders'   Accumulated
                            Shares       Amount       Capital        Deficit        Equity
                          ----------    ---------   -----------   ------------   ------------

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

Net (loss)                        -            -            -       (1,087,393)    (1,087,393)
                          ----------    ---------    ----------    -----------    -----------

Balance, March 31, 2000    3,805,000        3,805     1,444,191     (1,397,055)        50,941

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

Net income                        -            -             -         113,958        113,958
                          ----------    ---------    ----------    -----------    -----------

Balance, March 31, 2001    3,825,000    $   3,825    $1,446,671    $(1,283,097)   $   167,399
                          ==========    =========    ==========    ===========    ===========


                       See notes to financial statements.



                            Statements of Cash Flows


                                                                For the Years Ended
                                                                     March 31,
                                                             ---------------------------
                                                               2001             2000
                                                             ---------       -----------

Net (loss) income                                            $ 113,958       $(1,087,393)
                                                             ---------       -----------
  Adjustments to reconcile net income (loss) to net
   cash provided by (used in) operating activities
   Deferred income taxes                                            -            120,205
   Depreciation and amortization                               180,910           277,484
   Amortization of software development costs                   21,227            24,637
   (Gain) loss on sale of equipment                                (90)           (5,333)
   Provision for bad debts                                     (22,002)           60,000
   Changes in operating assets and liabilities
     Trade accounts receivable                                (533,404)          534,546
     Prepaid expenses                                          (20,036)           39,326
     Other assets                                                  (10)              (10)
     Accounts payable                                           96,714           (51,825)
     Accrued expenses                                           77,408           (27,815)
     Customer deposits                                          28,030            (7,000)
                                                             ---------       -----------
                                                              (171,253)          964,215
                                                             ---------       -----------
      Net cash used in operating activities                    (57,295)         (123,178)
                                                             ---------       -----------

Investing activities
  Purchase of property and equipment                           (29,846)          (39,018)
  Proceeds from sale of property and equipment                      90             6,082
                                                             ---------       -----------
      Net cash used in investing activities                    (29,756)          (32,936)
                                                             ---------       -----------

Financing activities
  Borrowing on line-of-credit                                  100,000         1,720,000
  Payments on line-of-credit                                   (35,000)       (1,390,000)
  Advances from stockholder                                    160,000                -
  Repayment of advances from stockholder                       (95,000)               -
  Capital lease principal payments                            (105,037)         (138,379)
  Proceeds from the exercise of stock options                    2,500                -
                                                             ---------       -----------
      Net cash provided by financing activities                 27,463           191,621
                                                             ---------       -----------

Net increase (decrease) in cash                                (59,588)           35,507

Cash, beginning of year                                         61,374            25,867
                                                             ---------       -----------

Cash, end of year                                            $   1,786       $    61,374
                                                             =========       ===========


Supplemental disclosures of cash flow information:
      Cash paid for taxes was $0 and $2,439 for the years  ended  March 31,  2001
      and 2000, respectively.

      Cash paid for  interest  was  $53,617 and $43,826 for the years ended March
      31, 2001 and 2000, respectively.

Supplemental non-cash disclosure:
      Capital lease  obligations  were  incurred in the amount of $24,642  during
      the year ended  March 31,  2000,  when the  Company  entered  into  capital
      lease agreements for certain production and office equipment.




                        Notes to the Financial Statements



Note 1 - Organization and Summary of Significant Accounting Policies


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

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

Property and Equipment

Property  and  equipment  are stated at cost.  Depreciation  is  computed  by the
straight-line  method over their  estimated  useful  lives of two to seven years.
Depreciation  expense includes amounts for owned and leased  equipment.  Property
and  equipment  are  reviewed  each  year to  determine  whether  any  events  or
circumstances  indicated  that the  carrying  amount of the  assets  might 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.

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 (Loss) Per Common Share

Basic  earnings  (loss)  per common  share is  computed  based upon the  weighted
average  number  of  common  shares  outstanding   during  the  period.   Diluted
earnings  (loss) per share  consists  of the  weighted  average  number of common
shares  outstanding  plus the dilutive  effects of options  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 Accounting  Principles  Bulletin (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.

Statement  of  Financial   Accounting   Standards   No.  123,   "Accounting   for
Stock-Based  Compensation"  (SFAS No.  123),  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 Expense

Advertising  expenses  are  charged to  operations  during the year in which they
are  incurred.  Advertising  expense  for the years ended March 31, 2001 and 2000
were approximately $9,000 and $45,000, respectively.

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,  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.

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.  With  respect to  capitalized  lease
obligations, fair value approximates their reported carrying amount.

Recently Issued Accounting Pronouncements

In June 1998, June 1999 and June 2000, the Financial  Accounting  Standards Board
issued  Statement of Financial  Accounting  Standards  No. 133,  "Accounting  for
Derivative  Instruments  and  Hedging  Activities,"  SFAS  137,  "Accounting  for
Derivative  Instruments  and Hedging  Activities  - - Deferral  of the  Effective
Date  of  FASB  Statement  No.  133"  and  SFAS  138,   "Accounting  for  Certain
Derivative  Instruments  and Certain  Hedging  Activities  an  amendment  of FASB
Statement  No.  133."  These  statements   establish   accounting  and  reporting
standards   requiring  that  every  derivative   instrument,   including  certain
derivative  instruments  embedded in other contracts,  be recorded in the balance
sheet  as  either  an asset  or  liability  measured  at its  fair  value.  These
statements  require that changes in the fair value of a derivative  be recognized
currently in earnings  unless  specific hedge  accounting  criteria are met. This
accounting is effective  beginning in 2001.  Management  believes that there will
be no impact as to their current accounting practices due to this pronouncement.

In March 2000,  the FASB  issued  FASB  Interpretation  No. 44,  "Accounting  for
Certain  Transactions   Involving  Stock  Compensation"  ("FIN  44"),  which  was
effective July 1, 2000, except that certain  conclusions in this  Interpretation,
which  cover  specific  events  that occur  after  either  December  15,  1998 or
January 12, 2000 are  recognized on a prospective  basis from July 1, 2000.  This
Interpretation  clarifies the  application  of APB Opinion 25 for certain  issues
related to stock issued to employees.

In December  1999,  the  Securities  and Exchange  Commission  (SEC) issued Staff
Accounting  Bulletin  ("SAB")  101,  which will become  effective  for  financial
statements  with  periods  ending  after  December  15,  2000.  SAB 101  provides
guidance  on  applying  generally  accepted  accounting  principles  to  selected
revenue  recognition  issues.  Management  believes  that the  Company's  revenue
recognition policies are in accordance with SAB 101.


Note 2 - Management's Plan

During the year ended March 31, 2001, the Company  experienced  operating  income
of   approximately   $167,000  as  compared   to  a  loss  from   operations   of
approximately  $(926,000)  for the year ended March 31,  2000.  The major  reason
for the  significant  turn around in operating  results was due to an increase in
sales  of  32%  from   approximately   $2.2   million  in  fiscal  year  2000  to
approximately  $3.0  million in fiscal year 2001.  In addition,  operating  costs
as a  percentage  of sales  decreased  from 104% of sales in fiscal  year 2000 to
94% of  sales in  fiscal  year  2001 due to  adjustments  made by  management  in
overhead  and other  operating  cost  during  fiscal  year 2001.  The  backlog at
March 31, 2000 was  approximately  $2,304,500,  which also allowed the Company to
obtain more positive financial results for the fiscal year 2001.

The backlog at March 31, 2001 is $2,217,000,  and management has projected  sales
for  fiscal  year 2002 to be  slightly  higher  than  2001.  This  volume  should
continue  to allow the  Company  to  generate  an  operating  profit.  Management
plans to continue  negotiating  with the  Company's  banking and other  financing
relationships  to provide for  long-term  capital  opportunities  that will allow
the Company to  maintain  its  current  position  in the market,  as well as meet
operating   cash   flow   requirements.    Finally,    management   is   actively
investigating  alliances  with other  companies in the  litigation  industry that
could provide additional sources of revenue.


Note 3 - Line-of-Credit

The  Company  entered  into an  agreement  with a bank  for a  line-of-credit  of
$500,000  that was due October  2000.  The bank  extended  the due date to August
15,   2001   by   issuance   of  a   forbearance   agreement   to  the   original
line-of-credit.  The  forbearance  agreement  requires  the Company to reduce the
principal  balance of the  line-of-credit to the lesser of $410,000 or the amount
available  under the  borrowing  base  limitations  as  originally  stated in the
line-of-credit  agreement by July 25, 2001.  The interest  rate is  calculated at
1% over the bank's  prime  rate (9% at March 31,  2001) 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, 2001 was  $465,000.  The agreement  requires the Company  comply with certain
restrictive  and  financial  covenants,  which the Company was not in  compliance
with at March 31, 2001.  The Company was in compliance  with the  borrowing  base
covenant  at March 31,  2001.  Subsequent  to  year-end,  the bank  extended  the
terms of the  forbearance  agreement to April 15, 2002,  which  requires  certain
paydowns on a monthly basis over the remaining term of the agreement.


Note 4 - Accrued Expenses

Accrued expenses consist of the following:
                                                                    March 31,
                                                           ---------------------------
                                                              2001            2000
                                                           -----------     -----------

Compensation                                                $  156,567      $   89,232

Other                                                           53,169          43,096
                                                            ----------      ----------

                                                            $  209,736      $  132,328
                                                            ==========      ==========

Interest  expense  incurred  on  indebtedness  to related  parties was $3,490 and
$1,240 during the years ended March 31, 2001 and 2000, respectively.


Note 5 - Income Taxes

A  reconciliation  of the amount of income tax  expense  that would  result  from
applying the  statutory  income tax rate of 34% to the net income  before  income
taxes  in the  accompanying  financial  statements  to the  reported  income  tax
expense is as follows:
                                                               For the Years Ended
                                                                    March 31,
                                                           ---------------------------
                                                              2001            2000
                                                           -----------     -----------

Income tax expense at the statutory rate                    $   37,448      $ (326,600)
State tax, net                                                   3,635         (31,700)
Non-deductible items                                             2,644           2,500
Valuation allowance and other                                  (43,727)        482,622
                                                            ----------      ----------

                                                            $       -       $  126,822
                                                            ==========      ==========

Income tax expense consists of the following:
                                                              For the Years Ended
                                                                    March 31,
                                                           ---------------------------
                                                              2001             2000
                                                           -----------      ----------

Current                                                     $       -       $       -
Deferred                                                            -          126,822
                                                            ----------      ----------

                                                            $       -       $  126,822
                                                            ==========      ==========

The components of the current net deferred tax assets are as follows:
                                                                    March 31,
                                                           ---------------------------
                                                              2001            2000
                                                           -----------     -----------
Current
  Deferred tax assets
   Accounts payable and accrued expenses                    $  138,190      $   69,459
   Net operating loss carryforwards                            342,000         117,000
   Valuation allowance                                        (138,607)        (70,121)
                                                            ----------      ----------
      Total deferred tax asset                                 341,583         116,338
                                                            ----------      ----------

Deferred tax liabilities
   Accounts receivable                                         301,277         112,439
   Prepaid expenses and other assets                            10,712           3,899
   Capitalized software                                         29,594              -
                                                            ----------      ----------
      Total deferred tax liability                             341,583         116,338
                                                            ----------      ----------

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


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

                                                                    March 31,
                                                           ---------------------------
                                                              2001            2000
                                                           -----------     -----------
Non-current
  Deferred tax assets
   Net operating loss carryforwards                         $  224,993      $  383,870
   Property and equipment                                       21,088           7,559
   Valuation allowance                                        (246,081)       (354,618)
                                                            ----------      ----------
      Total deferred tax asset                                      -           36,811
                                                            ----------      ----------

Deferred tax liabilities
   Capitalized software cost                                        -           36,811
                                                            ----------      ----------
      Total deferred tax liability                                  -           36,811
                                                            ----------      ----------

Net non-current deferred tax assets                         $       -       $       -
                                                            ==========      ==========

At March 31, 2001,  the Company has total federal  income tax loss carry forwards
of approximately $1,668,000, which expire in the years 2001 through 2020.


Note 6 - Capital Lease Obligations

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

      Years Ending March 31,
      ----------------------

            2002                                            $   46,886
            2003                                                 9,018
                                                            ----------
            Total future minimum lease payments                 55,904
            Less amount representing interest                   (8,616)
                                                            ----------
            Present  value  of  minimum  payments  under
             capital leases                                     47,288
            Less current portion                               (39,433)
                                                            ----------

                                                            $    7,855
                                                            ==========

The Company leases certain  production  and office  equipment  under the terms of
capital leases.  The capitalized  value of the leased  equipment was $205,809 and
the related accumulated amortization was $152,773 at March 31, 2001.


Note 7 - Major Customers

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

                                                             For the Years Ended
                                                                  March 31,
                                                           ------------------------
                                                              2001           2000
                                                           ----------     ---------
Sales:
  Customer A                                                    16.65%         2.64%

  Customer B                                                    10.73%           -

  Customer C                                                    10.45%           -

  Customer D                                                     4.85%        32.55%


Note 8 - Commitments

The  Company  leases its  offices  and  production  facility  under an  operating
lease.  The lease term commenced on August 1, 1996 and  originally  extends for a
sixty-month  period ending in July 2001.  In December  2000,  management  elected
to renew the lease and  extend  the terms for an  additional  60  months,  ending
July 2006.

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

      Years Ending March 31,
      ----------------------

            2002                                            $  110,249
            2003                                               116,059
            2004                                               119,268
            2005                                               122,477
            2006                                               125,682
            Thereafter                                          84,503
                                                            ----------

                                                            $  678,238
                                                            ==========

Rent  expense was  $164,004  and  $135,362 for the years ended March 31, 2001 and
2000 respectively.


Note 9 - Employee Benefit Plans

On April 1, 1993,  the Company  established  the Z-Axis  Corporation  401(K) Plan
(the  "Plan").   Eligible   employees  may  elect  to  participate  in  the  Plan
beginning  on the first  day of the  calendar  quarter  following  their  date of
hire.  The  Company  elected  to make  matching  contributions  in amounts of ten
percent of the first five percent of a participating  employee's  salary deferral
amount.  The Company made  matching  contributions  to the Plan in the amounts of
$4,376 and $4,518 during the years ended March 31, 2001 and 2000, respectively.


Note 10 - Incentive Stock Option Plan

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

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,  2001  and  2000 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
269% for 2001 and 300% for  2000;  risk-free  interest  rates of 5% to 5.75%  for
2001 and  6.03%  for 2000;  and  expected  lives of 5 to 10 years for 2001 and 10
years  for 2000  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 2001 and 2000.

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,
                                                            ---------------------------
                                                               2001            2000
                                                            ----------      -----------
Net (loss) income
  As reported                                               $  113,958      $(1,087,393)
  Pro forma                                                 $  109,410      $(1,096,768)

Basic earnings per share
  As reported                                               $      .03      $      (.29)
  Pro forma                                                 $      .03      $      (.29)

Diluted earnings per share
  As reported                                               $      .03      $      (.29)
  Pro forma                                                 $      .03      $      (.29)


A summary of the status of the Company's stock option plan follows:
                                                                           Exercise Price
                                                             Shares           Per Share
                                                         -------------   -----------------

Outstanding and exercisable balance at March 31, 1999          179,000    $  .1250 - .2063
  Options granted                                               25,000               .3750
  Options canceled                                             (40,000)              .1250
  Options exercised                                                 -                   -
                                                           -----------    ----------------

Outstanding and exercisable balance at March 31, 2000          164,000    $  .1250 - .3750
  Options granted                                               35,000       .0625 - .4120
  Options canceled                                              (7,029)              .1875
  Options exercised                                            (20,000)              .1250
                                                           -----------    ----------------

Outstanding balance at March 31, 2001                          171,971    $  .0625 - .4120
                                                           ===========    ================

The weighted  average fair value of options  granted during the years ended March
31, 2001 and 2000 were $.162 and $.375, respectively.


Note 10 - Incentive Stock Option Plan

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

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


$.1250 - .4120                                  171,971           6.12  $      0.22
==============                               ==========    ===========  ===========



Note 11 - Advances from Stockholder

During the year ended March 31,  2001,  the  Company  borrowed  and repaid  funds
from a  stockholder.  The  maximum  amount  borrowed  during the fiscal  year was
$70,000.  As of March 31, 2001, the balance  outstanding to the  stockholder  was
$65,000  plus  accrued  interest  of  $2,008   calculated  at  10.5%  per  annum.
Subsequent to year-end,  principal  and all accrued  interest was paid in full to
the stockholder.

Item 8.  Changes in and disagreements with accountants on accounting and financial
disclosure

None.

PART III

Item 9.  Directors and officers of the registrant

The  information  contained in Z-Axis  Corporation's  Proxy  Statement to shareholders to be
filed by July 29,  2001,  with  respect to  directors  and  officers of the  registrant,  is
incorporated herein by reference.

Item 10.  Executive compensation

The  information  contained in Z-Axis  Corporation's  Proxy  Statement to shareholders to be
filed by July 29, 2001, with respect to executive  compensation,  is incorporated  herein by
reference.

Item 11.  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, 2001, with respect to security  ownership of certain beneficial owners and
management, is incorporated herein by reference.

Item 12.  Certain relationships and related transactions

The  information  contained in Z-Axis  Corporation's  Proxy  Statement to shareholders to be
filed by July 29, 2001, with respect to certain relationships and related  transactions,  is
incorporated herein by reference.

Item 13.  Exhibits, financial statement schedules and reports on Form 8-K

(a)  The following documents are incorporated by reference:

     1.   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.



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/ Alan Treibitz
        Alan Treibitz
        (Chief Executive Officer)


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/ Alan Treibitz               Director, Chief Executive Officer, Treasurer
    Alan Treibitz               Chief Financial Officer, Principal
                                Accounting Officer


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