Exhibit 99.1





                        PROLOGIC MANAGEMENT SYSTEMS, INC.


                              FINANCIAL STATEMENTS


                       YEARS ENDED MARCH 31, 2006 and 2005








<PAGE>





                        PROLOGIC MANAGEMENT SYSTEMS, INC.
                                    CONTENTS





Report of Independent Registered Public Accounting Firm                     F-3

  Financial Statements
       Balance Sheet                                                        F-4
       Statements of Operations                                             F-5
       Statements of Changes in Stockholders' Deficit                       F-6
       Statements of Cash Flows                                             F-7

Notes to Financial Statements                                               F-8




<PAGE>

             REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
             -------------------------------------------------------

To the Board of Directors and Stockholders
Prologic Management Systems, Inc.

We have audited the accompanying  balance sheet of Prologic  Management Systems,
Inc.  (the  "Company")  as of March 31,  2006,  and the  related  statements  of
operations,  stockholders'  deficit, and cash flows for each of the two years in
the period 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 the standards of the Public  Company
Accounting Oversight Board (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  that  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 Prologic  Management  Systems,
Inc. as of March 31, 2006,  and the results of its operations and cash flows for
each of the two years in the period  then ended in  conformity  with  accounting
principles generally accepted in the United States of America.

The  accompanying  financial  statements  have been  prepared  assuming that the
Company  will  continue  as a  going  concern.  As  discussed  in  Note 1 to the
financial statements,  the Company has suffered recurring losses from operations
and has negative  working capital and a stockholders'  deficit.  The Company has
also had all of its  operating  assets  foreclosed  upon and no  longer  has any
continuing operations. These factors raise substantial doubt about the Company's
ability to continue as a going  concern.  Management's  plans in regard to these
matters are also  described in Note 1. The  financial  statements do not include
any adjustments that might result from the outcome of this uncertainty.





/s/ EPSTEIN, WEBER & CONOVER, PLC
    -----------------------------
    Scottsdale, Arizona
    July 20, 2006



<PAGE>


<TABLE>
<CAPTION>

                        PROLOGIC MANAGEMENT SYSTEMS, INC.
                                  BALANCE SHEET


<S>                                                                                                 <C>
ASSETS

   Cash                                                                                             $            12
                                                                                                      --------------

TOTAL ASSETS                                                                                        $            12
                                                                                                      ==============

LIABILITIES, PREFERRED STOCK AND STOCKHOLDERS' DEFICIT

 Current liabilities:
   Due to Shareholders                                                                              $        95,735
   Accounts payable                                                                                         183,695
   Notes payable (Note 4)                                                                                   398,846
   Accrued expenses                                                                                         602,443
   Accrued dividends                                                                                        325,400
                                                                                                      --------------

TOTAL LIABILITIES                                                                                         1,606,119
                                                                                                      --------------

Commitments and contingencies (Note 9)

Manditorily Redeemable Preferred stock (Note 6):

   Series A cumulative convertible preferred stock, no par value, 16,667 shares
    authorized, 16,667 shares issued and outstanding, aggregate liquidation
    preference of $100,002                                                                                  100,000

   Series B cumulative convertible preferred stock, no par value, 100,000 shares
    authorized, 9,500 shares issued and outstanding, aggregate liquidation
    preference of $95,000                                                                                    68,588

   Series C cumulative convertible preferred stock, no par value, 100,000 shares
    authorized, 55,850 shares issued and outstanding, aggregate liquidation
    preference of $558,500                                                                                  558,500

                                                                                                      --------------

Total  Redeemable Preferred Stock                                                                           727,088
                                                                                                      --------------

   Stockholders' Deficit:

   Common stock, no par value, 50,000,000 shares authorized, 7,301,364  shares
    issued and outstanding at March 31, 2006                                                             10,205,467
   Additional paid in capital                                                                               970,766
   Accumulated deficit                                                                                  (13,509,428)
                                                                                                      --------------

TOTAL STOCKHOLDERS' DEFICIT                                                                              (2,333,195)
                                                                                                      --------------

TOTAL LIABILITIES, PREFERRED STOCK AND
  STOCKHOLDERS' DEFICIT                                                                             $            12
                                                                                                      ==============
</TABLE>


                See accompanying notes to financial statements.

                                      F-4

<PAGE>



<TABLE>
<CAPTION>
                        PROLOGIC MANAGEMENT SYSTEMS, INC.
                            STATEMENTS OF OPERATIONS

                                                                                             Years ended March 31,
                                                                                         ------------------------------
                                                                                             2006              2005
                                                                                         -------------     ------------

<S>                                                                                    <C>               <C>
REVENUE                                                                                $            -    $           -
                                                                                         -------------     ------------
OPERATING EXPENSES:
  General and administrative                                                                  185,384          173,012
                                                                                         -------------     ------------
    Total operating expenses                                                                  185,384          173,012
                                                                                         -------------     ------------
OTHER INCOME
  Gain on relief of debt                                                                        9,606                -
                                                                                         -------------     ------------

LOSS BEFORE INCOME TAXES,  AND DISCONTINUED OPERATIONS                                       (175,778)        (173,012)
                                                                                         -------------     ------------
INCOME TAX (BENEFIT) PROVISION                                                                      -                -
                                                                                         -------------     ------------

INCOME (LOSS) FROM CONTINUING OPERATIONS                                                     (175,778)        (173,012)
                                                                                         -------------     ------------

DISCONTINUED OPERATIONS

  Gain on disposal of assets in discontinued business segments,
   no income tax effect                                                                             -        2,757,617
                                                                                         -------------     ------------

NET INCOME (Loss)                                                                      $     (175,778)   $   2,584,605
                                                                                         =============     ============

Weighted average number of common shares:
  Basic and diluted                                                                         7,281,537        7,275,048
                                                                                         =============     ============

Basic and Diluted Income (Loss) per common share:
  Continuing operations                                                                $        (0.03)   $       (0.03)
  Discontinued operations                                                                        0.00             0.37
                                                                                         -------------     ------------
    Net (loss) income  per share                                                       $        (0.03)   $        0.34
                                                                                         =============     ============
</TABLE>


                 See accompanying notes to financial statements.

                                      F-5

<PAGE>

<TABLE>
<CAPTION>
PROLOGIC MANAGEMENT SYSTEMS, INC.

STATEMENTS OF MANDATORILY REDEEMABLE CONVERTIBLE PREFERRED STOCK
AND STOCKHOLDERS' DEFICIT FOR THE YEARS ENDED MARCH 31, 2006 AND 2005

                        Mandatorily Redeemable
                      Convertible Preferred Stock
            ----------------------------------------------                                Additional
                                                                        Common Stock       Paid-In    Accumulated
            Shares  Amount  Shares Amount  Shares  Amount   Total     Shares    Amount     Capital      Deficit       Total
            -------------------------------------------------------------------------------------------------------------------
<S>         <C>    <C>      <C>    <C>     <C>    <C>      <C>      <C>       <C>          <C>       <C>           <C>
Balance,
 March 31,
 2004       16,667 $100,000  9,500 $68,588 55,850 $558,500 $727,088 7,275,048 $10,205,073  $970,766  $(15,771,555) $(4,595,716)

Dividend
 accrual                                                                                                  (73,350)     (73,350)

Net income                                                                                               2,584,605    2,584,605
            -------------------------------------------------------------------------------------------------------------------
Balance,
 March 31,
 2005       16,667 $100,000  9,500 $68,588 55,850 $558,500 $727,088 7,275,048 $10,205,073  $970,766  $(13,260,300) $(2,084,461)
            -------------------------------------------------------------------------------------------------------------------
Dividend
 accrual                                                                                                  (73,350)     (73,350)

Stock
 issued for
 conversion
 of debt                                                               26,316         394                                   394

Net loss                                                                                                 (175,778)    (175,778)
            -------------------------------------------------------------------------------------------------------------------
Balance,
 March 31,
 2006       16,667 $100,000  9,500 $68,588 55,850 $558,500 $727,088 7,301,364 $10,205,467  $970,766  $(13,509,428) $(2,333,195)
            ===================================================================================================================
</TABLE>


                 See accompanying notes to financial statements.

                                       F-6

<PAGE>

<TABLE>
<CAPTION>
                        PROLOGIC MANAGEMENT SYSTEMS, INC.
                            STATEMENTS OF CASH FLOWS

                                                                                         Years ended March 31,
                                                                                        2006             2005
                                                                                   --------------   --------------

<S>                                                                               <C>              <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
  Net income (loss)                                                               $     (175,778)  $    2,584,605
  Adjustments to reconcile net income to net cash provided by
   operating activities:
    Gain on exchange of common stock for debt                                             (9,606)               -
    Gain from discontinued operations                                                          -       (2,757,617)
    Change in assets and liabilities:
      Accrued expenses                                                                   185,055          171,772
                                                                                   --------------   --------------

Net cash  (used in) operating activities                                                    (329)          (1,240)
                                                                                   --------------   --------------
CASH FLOWS FROM INVESTING ACTIVITIES:

Net cash (used in) investing activities                                                        -                -
                                                                                   --------------   --------------
CASH FLOWS FROM FINANCING ACTIVITIES:

Net cash  provided by financing activities                                                     -                -
                                                                                   --------------   --------------

Net (decrease)  in cash                                                                     (329)          (1,240)

Cash, beginning of year                                                                      341            1,581
                                                                                   --------------   --------------

Cash, end of year                                                                 $           12   $          341
                                                                                   ==============   ==============

SUPPLEMENTAL STATEMENT OF CASH FLOW INFORMATION:
  Cash paid during the year for interest                                          $            -   $            -
                                                                                   ==============   ==============

NON-CASH FINANCING AND INVESTING ACTIVITIES:

 Common stock issued in exchange for relief of debt                               $          394                -
                                                                                   ==============   ==============
 Assets transferred in foreclosure action                                         $            -   $          545
                                                                                   ==============   ==============
 Debt forgiven in foreclosure action                                              $            -   $    2,758,162
                                                                                   ==============   ==============
</TABLE>

                 See accompanying notes to financial statements.

                                       F-7

<PAGE>


                        PROLOGIC MANAGEMENT SYSTEMS, INC.
                          NOTES TO FINANCIAL STATEMENTS
                                 MARCH 31, 2006

NOTE 1 -- ORGANIZATION AND OPERATIONS

Nature of Business and Summary of Operations

Prologic  Management  Systems,  Inc. (the  "Company") is an Arizona  corporation
founded in 1984. The Company and its former wholly owned subsidiary, BASIS, Inc.
("BASIS"),  were subject to foreclosure action in February of 2004. Prior to the
foreclosure  action,  the Company provided  commercial  systems  integration and
professional services firm.

Effective  March  24,  2005,  the  Corporate  Charter  of  BASIS  was  dissolved
administratively by the Arizona  Corporation  Commission for the failure to file
an annual  report.  At the time of  dissolution,  BASIS was not  conducting  any
business and had not conducted any business for over one year.

As of March 31, 2006,  the Company had  approximately  $1,606,000 of liabilities
and  obligations  to third  parties.  The Company  continues  to  negotiate  its
obligations with the individual creditors.

As a result of a foreclosure on substantially all of the Company's  assets,  the
Company  ceased  to  have  ongoing  business  operations.  The  Company  has  no
operations  and no sources of  revenue.  The  Company  does not have any current
agreements  or plan to replace  the assets or  business  units  taken  under the
foreclosure action.

Management is analyzing  options  regarding the Company's  solvency and creditor
issues facing the Company as well as seeking  potential  business  opportunities
that may be appropriate for the Company's long-term growth strategy.

Management's Plans
------------------

In light of the foreclosure  action and subsequent  dissolution of BASIS,  Inc.,
the  management  focus is on trying to  restructure  the  remaining  debt on the
balance sheet with the intent of converting a significant  amount of the debt to
equity.  If this can be accomplished  effectively and in a reasonable  period of
time,  management would then consider the acquisition or merger with one or more
companies, which would be a good candidate for the public entity. Currently, the
board  intends to work with  existing  shareholders  in order to  achieve  these
goals.  However,  it is  likely  that in  conjunction  with  any  such  suitable
acquisition or merger, the Company would likely need to raise capital to provide
the necessary working capital for the entity.  The Company has no commitments at
this time from third parties for any such financing  and/or any  acquisitions or
mergers.

The Company faces many challenges.  There is now no meaningful operating history
to evaluate the Company's prospects for successful  operations.  The Company has
operated in a highly competitive  industry and has incurred operating losses and
negative  operating cash flow.  Future losses are  anticipated and the Company's
plan to restructure its obligations,  even if successful,  may not result in the
Company  being  able to raise  the  capital  needed  to  effect  the  merger  or
acquisition of a suitable business.

The  accompanying  financial  statements  have been  prepared  assuming that the
Company will continue as a going concern,  which contemplates the realization of
assets and the  satisfaction  of  liabilities  in the normal course of business.
Management plans include intentions to acquire an operating business. Management
believes  it can  successfully  complete  an  acquisition  and raise  sufficient
capital  that will enable the Company to continue as a going  concern.  However,
there are no assurances that such a transaction  will occur.  The uncertainty of
future funding and the lack of cash flow from operations raise substantial doubt

                                       F-8

<PAGE>

                        PROLOGIC MANAGEMENT SYSTEMS, INC.
                          NOTES TO FINANCIAL STATEMENTS
                                 MARCH 31, 2006

about the  Company's  ability to  continue  as a going  concern.  The  financial
statements do not include any  adjustments  relating to the  recoverability  and
classification  of asset carrying  amounts or the amount and  classification  of
liabilities  that might  result  should the  Company be unable to  continue as a
going concern.

All  of the  information  provided  herein  regarding  the  operations  and  the
financial  performance  of the Company are provided for historical and financial
reporting purposes. The operations and the respective performance for the fiscal
year ending March 31, 2006 will provide no basis for any future activities.


NOTE 2 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Cash and Cash Equivalents

Cash and cash equivalents include cash on hand and all highly liquid investments
with maturity of three months or less when purchased.

Use of Estimates

The preparation of financial statements in conformity with accounting principles
generally  accepted  in the United  States of  America  requires  the  Company's
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  amounts of revenue and
expenses  during the reporting  period.  Actual  results could differ from those
estimates.

Fair Value of Financial Instruments

The estimated  fair value of financial  instruments  has been  determined by the
Company  using  available  market   information  and  valuation   methodologies.
Considerable  judgment is required in estimating fair values.  Accordingly,  the
estimates  may not be  indicative  of the amounts the Company could realize in a
current market exchange.

The carrying amount of accounts  payable and accrued  expenses  approximate fair
value due to the short maturity of these instruments. The terms of notes payable
and other  long-term  obligations  approximate  the terms in the  marketplace at
which  they  could be  replaced.  Therefore,  the fair  value  approximates  the
carrying value of these financial instruments.

Income Taxes

The  Company  accounts  for  income  taxes  utilizing  the asset  and  liability
approach,  which requires the recognition of deferred tax assets and liabilities
for the expected future tax  consequences of temporary  differences  between the
basis of  assets  and  liabilities  for  financial  reporting  purposes  and tax
purposes.  Deferred tax assets and  liabilities  are measured  using enacted tax
rates expected to apply to taxable income in the years in which those  temporary
differences  are expected to be recovered or settled.  A valuation  allowance is
provided when management  cannot determine  whether or not it is likely that the
net deferred tax asset will be realized.

Earnings/Loss Per Share

FASB Statement of Financial  Accounting  Standard No. 128,  "Earnings Per Share"
(SFAS 128) provides for the calculation of Basic and Diluted earnings per share.
Basic earnings per share includes no dilution and is computed by dividing income
available to common shareholders by the weighted average number of common shares
outstanding  for the period.  Diluted  earnings per share  reflect the potential

                                       F-9

<PAGE>

                        PROLOGIC MANAGEMENT SYSTEMS, INC.
                          NOTES TO FINANCIAL STATEMENTS
                                 MARCH 31, 2006

dilution of securities that could share in the earnings of the entity.  At March
31, 2006 and 2005, potential common stock, consisting of stock options, warrants
and  convertible  preferred  stock  totaling  1,695,445  and  1,827,111  shares,
respectively,  are excluded from the  computation of diluted  earnings per share
because they are  anti-dilutive.  As the loss from continuing  operations is the
control number for the  determination of whether  securities are dilutive,  such
securities are considered  anti-dilutive  for the years ended March 31, 2006 and
2005.

The following table presents the computation of basic and diluted loss per share
from continuing operations for the fiscal years ended March 31:

<TABLE>
<CAPTION>
                                                                          Weighted
                                                     Loss              Average shares          Per share
                                              ------------------    -------------------    -----------------
2006
----
<S>                                               <C>                     <C>                   <C>
Net loss                                          $    (175,778)
Preferred stock dividend                                (73,350)
                                              ------------------
Loss to common stockholders                       $    (249,128)
                                              ==================

Basic loss per share                              $    (249,128)          7,281,537             $   (0.03)
Effect of dilutive securities                               N/A
Diluted loss per share                            $    (249,128)          7,281,537             $   (0.03)


2005
----
Net income                                        $   2,584,605
Discontinued Operations                              (2,757,617)
Preferred stock dividend                                (73,350)
                                              ------------------
Loss to common stockholders                       $    (246,362)
                                              ==================

Basic loss per share                              $    (246,362)          7,275,048             $   (0.03)
Effect of dilutive securities                               N/A
Diluted loss per share                            $    (246,362)          7,275,048             $   (0.03)

</TABLE>


Stock-Based Compensation

The Company accounts for employee stock options or similar equity instruments in
accordance  with  Statement of Financial  Accounting  Standards  (SFAS) No. 123,
"Accounting for Stock-Based Compensation" (SFAS No. 123). SFAS No. 123 defines a
fair-value-based  method of  accounting  for employee  stock  options or similar
equity instruments. This statement gives entities a choice to recognize employee
related compensation expense by adopting the new fair-value method or to measure
compensation using the intrinsic value method under Accounting  Principles Board
(APB)  Opinion No. 25  "Accounting  for Stock Issued to  Employees",  the former
standard.  If the former  standard  for  measurement  is  elected,  SFAS No. 123
requires  supplemental  disclosure  to show  the  effect  of  using  fair  value
measurement  criteria.  The Company  has elected to account for its  stock-based
compensation plans under APB No. 25

                                      F-10

<PAGE>

                        PROLOGIC MANAGEMENT SYSTEMS, INC.
                          NOTES TO FINANCIAL STATEMENTS
                                 MARCH 31, 2006

The Company has elected to account for its stock-based  compensation plans under
APB  No.  25  and  has  therefore  recognized  no  compensation  expense  in the
accompanying financial statements for stock-based employee awards granted as the
option  price for all  employee  options  grants  exceeded the fair value of the
Company's common stock on the date of grant. The Company did not grant any stock
options in the fiscal year ended March 31, 2006.  Additionally,  the Company has
computed,  for pro forma disclosure  purposes,  the value of all options granted
during 2005 using the  Black-Scholes  option  pricing  model with the  following
weighted average assumptions:

<TABLE>
<CAPTION>
                                                                                     2006               2005
                                                                                    Options            Options
                                                                                 --------------     -------------

<S>                                                                            <C>                <C>
Risk free interest rate                                                                   N.A.%             4.12%
Expected dividend yield                                                                   N.A.                 -
Expected lives                                                                            N.A.           5 years
Expected volatility                                                                       N.A.%           241.80%
</TABLE>

If the Company had accounted for its stock-based employee compensation plans
using a fair value based method of accounting, the Company's net income (loss)
and income (loss) per common and common share equivalent would have been as
follows:

<TABLE>
<CAPTION>
                                                                                      Years ended March 31,
                                                                                 --------------------------------
                                                                                      2006               2005
                                                                                 --------------     -------------

<S>                                                                            <C>                <C>
Net income (loss) -- as reported                                               $      (175,778)   $    2,584,605
Add: stock-based employee compensation expense included in the determination
 of net income (loss)                                                                        -                 -
Less fair value of stock-based employee compensation expense                                 -              (992)
                                                                                 --------------     -------------

Net income (loss) -- pro forma                                                 $      (175,778)   $    2,585,597
                                                                                 ==============     =============

Net income (loss) per share (basic and diluted) -- as reported                 $         (0.03)   $         0.34
                                                                                 ==============     =============
Net income (loss) per share (basic and diluted) -- pro forma                   $         (0.03)   $         0.34
                                                                                 ==============     =============
</TABLE>

                                      F-11

<PAGE>

                        PROLOGIC MANAGEMENT SYSTEMS, INC.
                          NOTES TO FINANCIAL STATEMENTS
                                 MARCH 31, 2006

The effects of applying SFAS No. 123 for pro forma disclosures for 2006 and 2005
are not likely to be representative of the effects on reported net loss and loss
per common and common share  equivalent for future years,  because  options vest
over several years and additional awards generally are made each year.

New Accounting Pronouncements

In June  2003 the  FASB  issued  Statement  No.  150,  "Accounting  for  Certain
Financial  Instruments with Characteristics of both Liabilities and Equity" SFAS
No. 150 requires certain instruments,  including mandatorily  redeemable shares,
to be  classified  as  liabilities,  not as  part  of  shareholders'  equity  or
redeemable  equity.  For instruments that are entered into or modified after May
31, 2003, SFAS No. 150 is effective immediately upon entering the transaction or
modifying the terms.  For other  instruments  covered by Statement 150 that were
entered  into  before June 1, 2003,  Statement  150 is  effective  for the first
interim  period  beginning  after June 15, 2003.  The Company has  evaluated the
provisions  of SFAS No. 150. The  redeemable  preferred  stock does not meet the
criteria for  classification  as  liabilities  in accordance  with SFAS No. 150.
Therefore,  all  of  preferred  stock  that  was  previously  presented  between
liabilities and equity on the balance sheet remains presented as such.

In  December  2004  the  FASB  issued  a  revised  Statement  123  (SFAS  123R),
"Accounting for Stock-Based  Compensation"  requiring public entities to measure
the cost of  employee  services  received  in  exchange  for an award of  equity
instruments based on grant date fair value. The cost will be recognized over the
period  during which an employee is required to provide  service in exchange for
the award -- usually the vesting period. The Company is evaluating the impact of
this new  pronouncement  and does not expect the effect of  implementation  will
have a significant impact on the Company's financial statements.

In May  2005,  the FASB  issued  SFAS No.  154,  "Accounting  Changes  and Error
Corrections a replacement  of APB Opinion No. 20 and FASB Statement No. 3." This
Statement  changes the  requirements  for the  accounting for and reporting of a
change in accounting  principle.  This Statement applies to voluntary changes as
well  as  those  changes  required  by  an  accounting   pronouncement  if  that
pronouncement does not include specific  transition  provisions.  This Statement
requires  retrospective  application to prior periods'  financial  statements of
changes  in  accounting  principle  as opposed  to being  shown as a  cumulative
adjustment  in the period of change.  The Statement is effective for all changes
and  corrections  of errors made in fiscal years  beginning  after  December 15,
2005.  The adoption of this  standard is not expected to  materially  impact the
Company.


NOTE 3 -- DISCONTINUED OPERATIONS

Dissolution of BASIS, Inc.

As a result of the  dissolution  action and process  discussed in Note 1, at the
time of dissolution BASIS, Inc.  ("BASIS"),  was not conducting any business and
had not conducted any business for over one year.

All of the  substantive,  tangible  and  intangible  assets  of BASIS  and Solid
Systems,  an operating  division of BASIS, had been seized under the foreclosure
action discussed herein,  leaving  approximately  $3,000,000 of debt having been
incurred by BASIS, Inc. with no assets from which payment could be made.

                                      F-12

<PAGE>

                        PROLOGIC MANAGEMENT SYSTEMS, INC.
                          NOTES TO FINANCIAL STATEMENTS
                                 MARCH 31, 2006

Under Arizona law, upon the  dissolution  of a corporation  the ownership of any
assets of the  corporation  pass, in trust,  to its  shareholders to be held and
used to pay  creditors of the dissolved  corporation.  Upon the  dissolution  of
BASIS no assets passed to the Company because BASIS had no assets.

The  Company  does  not  otherwise  hold  any  assets  of  BASIS.  Consequently,
management  does not believe  that a creditor of BASIS  would be  successful  in
asserting  that the  Company is to use any assets  held by the  Company to pay a
claim owed a creditor of BASIS.  The Company will contest any assertion  that it
has liability for the debt obligations of BASIS.

Many of the  recorded  obligations  of BASIS have  exceeded  time  limits  under
statutes  of  limitations.  Management  believes  that  there is no value to the
remaining  obligations  due to the  dissolution  and the legal  basis  discussed
above.  The following  summarizes  the financial  results of the  dissolution of
BASIS:

                Accounts Payable        $ 1,471,258
                Sales Tax Payable           375,936
                Accrued Interest            180,725
                Other Accrued Expenses        6,788
                Notes Payable               722,910
                                        ------------
                Gain on Dissolution     $ 2,757,617
                                        ============


                                      F-13

<PAGE>

                        PROLOGIC MANAGEMENT SYSTEMS, INC.
                          NOTES TO FINANCIAL STATEMENTS
                                 MARCH 31, 2006

NOTE 4 -- NOTES PAYABLE

Notes payable as of March 31, 2006 are as follows:


Notes payable, interest at 2% per month, previously secured
 by various equipment, originally due on March 31, 1998, note
 is in default and is currently payable and collateralized
 by common stock.                                                $    100,000

Software purchase agreement for minimum royalties of $250,000,
 secured by purchased software, originally due on December
 31, 2001. Note is in default and has since been settled in
 a legal judgment.                                                     68,000

Note payable, interest at 8.5%, unsecured, principal and
 interest of $2,100 due monthly through March 31, 2004. Note
 is in default.                                                        60,186

Note payable, interest at 11% per annum on the outstanding
 principal, quarterly payments of $25,000 through October 12,
 2001. Note is in default.                                             75,000


Other unsecured notes requiring a total of $25,555 in monthly
 principal and interest payments with interest up to 24% per
 annum. The three notes are in default and currently due.              95,660
                                                                  ------------


Total notes payable                                              $    398,846
                                                                  ------------

The notes payable are all in default and currently payable. Due to the financial
insolvency of the Company and the ongoing  negotiations  with the creditors,  no
interest was accrued on the above notes during 2006.  The Company is  attempting
to negotiate payment terms with the creditors.


NOTE 5 -- INCOME TAXES

Deferred  income  taxes  reflect  the net tax effects of  temporary  differences
between the carrying  amounts of assets and liabilities for financial  reporting
purposes and the amounts used for income tax purposes.

Income taxes for years ended March 31, 2006 and 2005, is summarized as follows:

                                                     2006            2005

Current Provision (Benefit)                $      (129,000)   $     974,000
Deferred (Benefit) Provision                       129,000         (974,000)
                                             ----------------------------------

          Net income tax provision         $         - 0 -    $       - 0 -
                                             ==================================

The Company has net operating loss  carryforwards  approximating  $9,012,000 for
federal income tax purposes,  which expire in varying  amounts from 2021 through
2026.  Utilization of the net operating loss  carryforwards may be significantly
limited or  eliminated  as a result of change in ownership as defined in Section
382  of  the  internal   revenue  code.  The  Company  has  net  operating  loss
carryforwards  approximating  $1,849,000  for state income tax  purposes,  which
expire in varying  amounts from 2007 through 2012.  Since there is no net income

                                      F-14

<PAGE>

                        PROLOGIC MANAGEMENT SYSTEMS, INC.
                          NOTES TO FINANCIAL STATEMENTS
                                 MARCH 31, 2006

tax effect and all operations are consolidated for income tax purposes, there is
no allocation between continuing and discontinued operations.

A  reconciliation  of the difference  between the provision for income taxes and
the amount that would be computed using  statutory  federal and state income tax
rates is as follows for the years ended March 31,:

                                         2006                   2005
                                         ----                   ----

Federal statutory rates             $  (51,890)   (29)%   $    879,000      34%
State income taxes                     (10,560)    (6)%        155,000       6%
(Utilization)/increase of valuation
  allowance associated with net
  operating loss carryforwards          69,899     40%      (1,053,000)   (40)%
Other                                   (7,449)     -%          19,000       -%
                                     -------------------------------------------
Effective rate                      $    - 0 -      0%    $      - 0 -       -%
                                     ===========================================

A detail of the net deferred tax asset is as follows:

                                          Years ended March 31,
                                     ------------------------------
                                          2006             2005
                                     -------------    -------------

Deferred tax assets:
 Net operating loss carryforward        3,070,000    $   3,004,000
 Intangible assets                         60,000           60,000
                                     -------------    -------------
Total deferred tax assets               3,130,000        3,064,000
                                     -------------    -------------

Less valuation allowance               (3,130,000)      (3,064,000)
                                     -------------    -------------

Net deferred tax assets             $           -    $           -
                                     =============    =============

Net  deferred  tax assets have been offset by a valuation  allowance  because of
uncertainties that such assets will be realized. During the year ended March 31,
2006, the valuation allowance was increased by $70,000  representing the current
operating loss of $176,000.  During the year ended March 31, 2005, the valuation
allowance was increased by $1,587,000  representing  the  utilization of the net
operating loss  carryforwards of $974,000,  the reduction in the deferred income
tax  assets  of  $78,000  due to  reversal  of  temporary  differences  and  the
expiration on net operating loss carryforwards of $535,000.


NOTE 6 -- CAPITAL STOCK

Common Stock

The Company  issued no common  stock in fiscal year ended  March 31,  2005.  The
Company issued 26,316 shares of common stock in fiscal year ended March 31, 2006
in exchange  for the  conversion  of $10,000 in debt.  The trading  value of the
shares at the time the agreement  was entered into was $394  resulting in a gain
of $9,606.

                                      F-15

<PAGE>

                        PROLOGIC MANAGEMENT SYSTEMS, INC.
                          NOTES TO FINANCIAL STATEMENTS
                                 MARCH 31, 2006

Common Stock Warrants

As of March 31, 2006, a total of 700,000 shares of common stock are  exercisable
under warrants issued as consideration in connection with the renegotiation of a
note.  The exercise  prices for the warrants is $0.75 per share of common stock,
and bear expiration dates ranging from September 2006 through March 2007.


Series A Cumulative Convertible Preferred Stock

The Series A preferred stock agreement provides for dividends at the rate of 8%,
payable  quarterly  in cash or shares of common stock at a stated price of $2.00
per share,  at the  discretion of the Company's  Board of Directors.  Cumulative
unpaid dividends totaled approximately $64,000 and $56,000 at March 31, 2006 and
2005,  respectively.  Holders  of  Series A  preferred  stock  have  liquidation
preference over holders of common stock and receive $6.00 per share plus accrued
dividends,  in the event of liquidation.  The agreement  defines a more than 50%
change in voting power as a liquidation event.

Holders of Series A preferred stock may convert each share of Series A preferred
stock into shares of common stock with a minimum stated value of $2.00 per share
beginning  after June 1998, at a conversion  rate of $6.00 per  preferred  stock
share (each  share of Series A preferred  is  convertible  into three  shares of
common  stock),  subject to  adjustment.  In addition,  for each share of common
stock received through conversion,  holders were entitled to receive one warrant
to purchase one share of common  stock at the exercise  price ($2.00 per share).
Warrants issued under this agreement expired in December 2000.

Series A preferred  stock is subject to conversion 12 months after the issuance,
at the option of the Company, contingent upon an increase in the price of common
stock equal to at least 150% of the conversion  price ($3.00 per share,  subject
to adjustment).

Series B Cumulative Convertible Preferred Stock

In March 1998, the Company  authorized 100,000 shares of 10% Series B Cumulative
Convertible  preferred stock (Series B preferred).  The Series B preferred stock
agreement  provides for dividends at a rate of 10% of the issued and outstanding
balance payable  semi-annually  beginning October 31, 1998, in cash or shares of
common  stock,  subject  to  provisions  in  the  agreement.  Cumulative  unpaid
dividends totaled  approximately $38,000 and $28,500 at March 31, 2006 and 2005,
respectively.

Series B  Preferred  may be  converted  to  common  stock at the  option  of the
shareholder.  The  conversion  rate (4.44  common  shares to be received per one
preferred  share) is  calculated  by  dividing  the  stated  value  ($10) by the
effective conversion price ($2.25).

During  February 2001,  certain  holders of Series B preferred  stock  converted
62,500  shares of  preferred  stock  into  277,782  shares of common  stock at a
conversion  rate of 4.44 common shares to one preferred  share.  The Company may
redeem  Series B preferred at the stated value plus  accrued  dividends  with at
least  20  days  notice  to the  shareholders  and may not  reissue  any  shares
repurchased.

Holders of Series B preferred stock have liquidation  preference over holders of
common stock. In the event of liquidation,  Series B preferred shareholders will
receive $10 per share plus accrued dividends.  The agreement defines a more than
50% change in voting power as a liquidation.

                                      F-16

<PAGE>

                        PROLOGIC MANAGEMENT SYSTEMS, INC.
                          NOTES TO FINANCIAL STATEMENTS
                                 MARCH 31, 2006

Series C Cumulative Preferred Stock

In  December  1999,  the  Company  authorized  100,000  shares  of 10%  Series C
Cumulative  Convertible  preferred  stock. The Series C preferred stock provides
for dividends at the rate of 10% payable semi-annually beginning April 30, 2000,
to be paid in cash or  shares of  common  stock,  subject  to  provision  in the
agreement.  Cumulative  unpaid  dividends  totaled  approximately  $223,400  and
$167,550 at March 31, 2006 and 2005, respectively.

Series C preferred stock may be converted into common stock at the option of the
shareholder.  The  conversion  rate (4.44  common  shares to be received per one
preferred  share) is  calculated  by  dividing  the  stated  value  ($10) by the
effective conversion price ($2.25), subject to adjustment.

The  Company may redeem the Series C  preferred  stock at the stated  value plus
accrued  dividends with at least 20 days notice to the  shareholders and may not
reissue any shares repurchased.

Holders of Series C preferred stock have liquidation  preference over holders of
common stock and receive $10 per share plus accrued  dividends,  in the event of
liquidation.  The agreement  defines a more than 50% change in voting power as a
liquidation.

In fiscal 2000, the Company issued 55,850 shares of Series C preferred  stock to
two  entities in which  officers of the Company  hold  interests.  Of the 55,850
shares issued,  the Company received $337,720 in cash and $220,780 in conversion
of debt from a related party.

During the fiscal  year ended  March 31,  2006 and fiscal  year ended  March 31,
2005,  no  dividends  were paid to holders of the  Company's  Series A Preferred
Stock, Series B Preferred Stock or Series C Preferred Stock.

All  series of  preferred  stock do not  embody  unconditional  obligations  for
redemption at a specified date or upon an event certain to occur.  The Company's
preferred stock is presented  between equity and liabilities in the statement of
financial position.  Under Statement of Accounting Standards No. 150, Accounting
for Certain Financial  Instruments with  Characteristics of Both Liabilities and
Equity, the preferred stock does not fall within the definition of a liability.


NOTE 7 -- STOCK OPTION PLAN

During 1995,  the  Company's  Board of Directors  approved the 1994 Stock Option
Plan (the "Plan").  The maximum number of shares that may be issued  pursuant to
the Plan, as amended, is 3,500,000, and the Plan expires March 29, 2011. Options
granted under the Plan include  incentive and nonqualified  stock options,  with
vesting  determined  on the  grant  date,  not to  exceed  ten  years,  and  are
exercisable  over a ten-year  maximum period at a price no less than 100% of the
fair market value of the common stock at the date of grant.

                                      F-17

<PAGE>

                        PROLOGIC MANAGEMENT SYSTEMS, INC.
                          NOTES TO FINANCIAL STATEMENTS
                                 MARCH 31, 2006

<TABLE>
<CAPTION>
The following table summarizes the activity under the Company's stock option plan:

                                                                         Years ended March 31,
                                                       ----------------------------------------------------------
                                                                  2006                           2005
                                                       ---------------------------    ---------------------------
                                                                        Weighted                          Price
                                                         Number         Price Per      Number of           Per
                                                        of Shares         Share         Shares            Share
                                                       -----------    ------------    ------------    ------------

<S>                                                       <C>       <C>                 <C>         <C>
Options outstanding, beginning of year                    660,000   $        0.47       1,015,100   $        0.52
  Granted                                                       -               -          20,000            0.10
  Canceled/expired                                        (5,000)            0.50        (375,100)           0.58
  Exercised                                                     -                               -               -
                                                       -----------    ------------    ------------    ------------

Options outstanding, end of year                          655,000   $        0.47         660,000   $        0.47
                                                       ===========    ============    ============    ============

Options exercisable, end of year                          655,000   $        0.47         660,000   $        0.47
                                                       ===========    ============    ============    ============

Weighted average fair value of options granted                      $           -                   $       0.049
                                                                      ============                    ============
</TABLE>

<TABLE>
<CAPTION>
There were 2,845,000 options available for grant under the plan at March 31, 2006.

Options outstanding and exercisable by price range as of March 31, 2006 are as follows:

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

<S>                                  <C>                 <C>    <C>                     <C>       <C>
$0.50                                635,000             1.34   $       0.50            635,000   $       0.50
$0.10                                 20,000             3.00   $       0.10             20,000   $       0.10
                               --------------    -------------    -----------    ---------------    -----------

$0.10 - $0.50                        655,000             1.39   $       0.47            655,000   $       0.47
                               ==============    =============    ===========    ===============    ===========
</TABLE>



NOTE 8 -- RELATED PARTY TRANSACTIONS

During the fiscal  years ended March 31, 2005 and March 31,  2006,  Mr. James M.
Heim and Mr.  Martin A.  Diamond,  who are  executive  officers of the  Company,
provided approximately $40,000 and $55,000,  respectively,  in capital financing
to the  Company in the form of  payments of current  operating  expenses.  These
expenditures  were critical to the ongoing  operations.  These expenses included
accounting,  auditing,  SEC reporting and general  operating and  administrative
expenditures  related to the efforts to re-organize the creditors and efforts to
secure  capital.  In  addition,  Mr.  Heim  deferred  all  of  the  $240,000  of
compensation due under his employment agreement with the Company during the last
two fiscal years and is included in accrued expenses on the balance sheet. These
obligations  which have been incurred since the foreclosure  action in the prior
fiscal year will be treated as priority obligations by the Company.


NOTE 9 -- COMMITMENTS AND CONTINGENCIES

The  Company's  administrative  and  accounting  records  are located in Tucson,
Arizona in a storage facility  consisting of approximately 300 square feet under
a month-to-month  lease. If the Company  requires  additional or alternate space
within the next twelve  months,  the Company  believes that space  sufficient to
meet its requirements  will be available on commercially  reasonable terms. Rent
expense under  operating  leases for the years ended March 31, 2005 and 2006 was
$2,509  and  $2,300,  respectively.  There was one  operating  lease  that had a
remaining  non-cancelable  lease  term in excess of one year at March 31,  2005.
Minimum annual lease payments under this arrangement are $30,420 and $17,745 for
the years  ended  March 31,  2005 and 2006  respectively.  The lease  expired in
October 2005 and the total  unrecorded  liability for this lease as of March 31,
2006 is $48,165.  Due to the financial insolvency of the Company, no liabilities
have been recorded for the remaining lease term as of March 31, 2006.

Under its bylaws, the Company has agreed to indemnify its officers and directors
for  certain  events  or  occurrences  arising  as a result  of the  officer  or

                                      F-18

<PAGE>

director's serving in such capacity.  The term of the indemnification  period is
for the officer's or director's lifetime. The maximum potential amount of future
payments  the  Company  could be  required to make is  unlimited.  However,  the
Company has had no operations  since the  foreclosure and minimal trading in its
stock,  and as a result,  the Company believes the estimated fair value of these
indemnification  agreements is minimal and has no liabilities recorded for these
agreements as of March 31, 2006.

The Company  acknowledges the possibility that creditors and/or former employees
in the future may file  additional  lawsuits.  However,  there have been no such
specific asserted claims that have not been accrued for in the accompany balance
sheet at March 31, 2006. As discussed in Note 3, management  believes that there
is little  legal  basis for  creditors  to make and enforce  claims  against its
dissolved subsidiary.


                                    * * * * *




                                      F-19