SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                   FORM 10-KSB

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

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

   For the Fiscal Year Ended                         Commission File Number
       December 31, 2000                                   0-9574

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

                         UNITED SYSTEMS TECHNOLOGY, INC.

          Iowa                                          42-1102759
 (State of Incorporation)               (I.R.S. Employer Identification Number)

                          1850 Crown Road - Suite 1109
                               Dallas, Texas 75234
                                 (972) 402-8600

          (Address of principal executive offices and telephone number)

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

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

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

                     Common Stock, par value $.10 per share

     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 ___.

     As of March 21, 2001 the  aggregate  market  value of voting  stock held by
non-affiliates of the Registrant was $3,329,333.

     As of March 21,  2001,  there were  56,178,663  shares of the  Registrant's
Common Stock outstanding.

     DOCUMENTS   INCORPORATED  BY  REFERENCE:   Portions  of  the   Registrant's
definitive  proxy statement  relating to its 2001 annual meeting of shareholders
is incorporated by reference into Part III of this Form 10-KSB.

     Indicate by check mark if disclosure of delinquent  filers  pusuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of the  Registrant's  knowledge,  in the proxy  statement  incorporated  by
reference into Part III of the Form 10-KSB of any amendment hereto. X

<PAGE>

                                     PART I

ITEM 1.  BUSINESS

GENERAL DEVELOPMENT OF BUSINESS

     United Systems Technology,  Inc. ("USTI"),  was incorporated under the laws
of the State of Iowa on June 5, 1978, and its  wholly-owned  subsidiary,  United
Systems Technology East, Inc. ("USTEI"), was incorporated under the U.S. laws of
the  State  of  Delaware  on June  10,  1991,  and  its  wholly  owned  Canadian
subsidiary,  USTI Canada,  Inc., was registered under the laws of Canada on June
23, 2000 (USTI,  USTEI and USTI Canada  collectively,  are referred to herein as
the "Company"). The Company is engaged in the business of developing, supporting
and marketing  computer software products to county and local  governments.  The
software applications of the Company operate on IBM mid-range computers,  and on
various  network  computer  systems  both in DOS and Windows  environments.  The
products  are offered to customers in five  product  application  groups.  These
product application groups,  consisting of over 30 separate software titles, are
Financial, Public Works, General Administration and Public Safety.

NARRATIVE DESCRIPTION OF BUSINESS

PRODUCTS

     The software applications offered by the Company consist of a comprehensive
line of management  information  systems,  which were developed to  specifically
meet the  unique  requirements  of local  governmental  entities.  The  software
applications of the Company are offered through its LegacyTM,  QuestTM.  asystTM
and Auto AdminTM  product lines.  The LegacyTM  product line operates on the IBM
AS/400 mid-range  computer system. The QuestTM product line operates in a single
user or small network PC DOS enviorment.  The asystTM product line operates in a
single  user or  network  Windows  enviorment.  The Auto  AdminTM  product  line
operates in a PC DOS or single user or network Windows  environment.  An initial
software sale typically  averages  between  $1,500 and $40,000.  The cost of the
related  hardware varies  depending on the type of machine  purchased as well as
the  amount of memory  capacity,  peripheral  equipment  and  optional  features
obtained on the machine.

     The Company  markets its software  packages in the  following  four product
application groups.

    FINANCIAL SYSTEMS

     This group  includes  software  modules in the areas of general  ledger and
budgetary accounting,  budget preparation,  accounts payable,  payroll, accounts
receivable,   centralized  cash  receipts,  purchase  orders,  tax  billing  and
comprehensive financial report writer.

    PUBLIC WORKS

     This group includes  software  modules in the areas of utility  billing and
collections, hand held meter reading and bank drafting.

    GENERAL ADMINISTRATION

     This group  includes  software  modules in the areas of  building  permits,
animal licenses, business licenses and code enforcement.

    PUBLIC SAFETY

     This  group  includes  software  modules  in the  areas of  computer  aided
dispatch,  law  enforcement  records  management,   jail  management  and  court
administration.

                                       2
<PAGE>

     The Company has complete the development of several new software  products,
which  significantly  enhance the  competiveness of its  comprehensive  software
offering.  These  products  are  marketed  under the asystTM  brand  name,  were
developed as Windows  applications to "look and work like Microsoft Office", and
include a Fund  Accounting  product  line,  a Utility  Billing  product  line, a
General  Government  product line and a Public  Safety  product  line.  The Fund
Accounting product line includes General Ledger,  Budget XLence,  Report XLence,
Accounts  Payable,  Accounts  Receivable,  Purchase  Orders,  Cash  Receipts and
Payroll  modules.  The Utility  Billing product line includes  Utility  Billing,
Service Orders, Meter Reader Interface,  Bank Drafts and Budget Billing modules.
The  General  Government  product  line  includes  Master and Land  Directories,
Business and Animal Licenses, Code Enforcement and Building Permits modules. The
Public Safety product line includes Mater Name Index, Calls for Service, Offense
Reports,  Citations, State Interface,  Computer Aided Dispatch, Jail Management,
Alarm  Billing and UCR Reports  modules.  The  Company is  currently  developing
additional  modules  for its asystTM  product  line,  including  Tax Billing and
Collection,  to add to its existing asystTM  offerings and anticipates that this
package will be released during the second half of 2001.

     The Company  derives  its revenue  principally  from (i)  licensing  of its
software  packages,  (ii)  installation,  training and customer  support,  (iii)
maintenance agreements, and (iv) equipment and supplies sales.

    SOFTWARE PACKAGES

     The Company licenses its software  packages under a perpetual  nonexclusive
and nontransferable license agreement.

    INSTALLATION, TRAINING AND CUSTOMER SUPPORT

     The Company provides services related to the training and implementation of
the software  packages to its  customers.  These  services are  delivered at the
customer site, conducted in a classroom setting at the company's headquarters or
as "remote"  training through  interactive  computer-to-computer  hookup. In the
event that the customer requests  additional  functions from the product,  which
are  not  standard  in  the  software  packages,  the  Company  provides  custom
programming services for these modifications.

    MAINTENANCE AGREEMENTS

     The Company offers maintenance agreements in conjunction with the licensing
of its software packages.  These agreements provide telephone support,  software
product  enhancements,  error  corrections,   upgrades  and  remote  diagnostics
support.

    EQUIPMENT AND SUPPLIES SALES

     The Company sells PC's and hand-held  computers as well as certain computer
forms that are used in conjunction with the Company's products.

     For the year ended December 31, 2000, the Company  generated  approximately
12% of its revenue from the sale of software, 8% from installation, training and
customer  support,  68% from software  maintenance,  and 12% from  equipment and
supplies sales.

MARKETING

     The  Company  markets its  products on a  nationwide  basis.  Marketing  is
conducted through its full-time sales staff in Dallas,  Texas as well as through
the Company's full-time sales representatives located in Minneapolis,  Minnesota
and London, Ontario.

                                        3
<PAGE>

     The  Company's   customers  are  primarily   municipal   governments   with
populations between 1,000 and 100,000,  county governments,  police departments,
emergency  medical services  providers and municipal court systems.  The Company
currently has over 2,000  customer  installations  nationwide.  USTI proposes to
sell computer  equipment when selling its software,  but the customer may obtain
their  computer  equipment  from a  hardware  manufacturer  or  dealer  and then
purchase one or more software modules from the Company.

     The typical  purchaser's  representative is a City Manager,  Administrative
Manager,  Controller or Director of Finance. Customer leads are established from
customer  referrals,  direct mail  campaigns  and  attendance  at  national  and
regional  trade  shows.  In  addition,  the names and  addresses  of target city
governments are readily available from directory sources. The Company also holds
an annual  users'  meeting in Dallas,  Texas.  The two-day  meeting is typically
attended by  approximately  100 current and prospective  users. In the past, new
business has been generated from current  customers who have upgraded systems by
purchasing new modules.

     Approximately  24% of the  Company's  customers  are  located  in Texas and
Minnesota,  and the  remaining  customers  are  located  in  various  states and
provinces in the Untied States and Canada.

COMPETITION

     The Compnany is aware of sizable,  nationally prominent competitors,  which
market  products  that  are  similar  to those of the  Company.  Numerous  other
competitors  are  small,   local  vendors  who  often  do  not  market  standard
application  packages.  Management believes that the comprehensive nature of its
product offering,  including the uniqueness of the new asystTM product line, has
a positive impact on its competitive status.

EMPLOYEES

     The Company presently has 26 full-time  employees,  including its executive
officers.  In addition,  from time to time, the Company  engages the services of
consultants and part-time employees.

RESEARCH AND DEVELOPMENT

     During 2000, the Company  incurred  approximately  $100,000 in research and
development costs related the development of its asystTM product line.

PATENTS, COPYRIGHTS, TRADEMARKS AND ROYALTIES

     The Company  does not believe that its  products  are  patentable,  and, to
date, has not registered any copyright with respect to its products. The Company
believes that all of its products are of a proprietary  nature and the Company's
licensing  arrangements  prohibit  disclosure  of the  program by the  customer.
However,  there can be no assurance that the Company's  software is incapable of
being  duplicated  or that the Company  will be  successful  in  discovering  or
preventing any such duplication.

     The Company  entered into royalty  agreements as part of the sale of assets
to NCS on February  21,  1997.  In  addition,  the Company is a party to certain
royalty agreements, which, individually, and in the aggregate, have not required
the payment of material  amounts.  Under  these  agreements,  the Company is the
licensee of certain  software  systems,  which it markets as part of its product
line.

                                        4
<PAGE>

ITEM 2. PROPERTIES

     The Company leases its 5,033 square foot facility at 1850 Crown Road, Suite
1109,  Dallas,  Texas,  75234.  The lease for this  facility was entered into on
August 1, 2000 for a  sixty-month  lease term  commencing  on August 1, 2000 and
expiring on  September  30, 2005.  USTI  Canada,  Inc leases a 1,530 square foot
facility at 747 Hyde Park Road,  Suite 219,  London,  ON, N6H 3S3. The lease for
this  facility  was entered into on July 1, 2000 for a  twenty-four  month lease
term commencing on July 1, 2000 and expiring on June 30, 2002.

ITEM 3. LEGAL PROCEEDINGS

     The Company is a defendant in various legal actions, which arise out of the
normal  course of its  business.  In the  opinion of  management,  none of these
actions are expected to have a material  effect on the  consolidated  results of
operations or financial position of the Company.


ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

     No matters  were  submitted  to a vote of the  Company's  security  holders
during the fourth quarter of 2000.

                                        5
<PAGE>
                                     PART II

ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED SHAREHOLDER
        MATTERS

     The  Company's  common  stock is traded  over-the-counter  on the  National
Association of Securities Dealers, Inc.  Over-The-Counter Bulletin Board System.
The quotations shown below represent prices among the dealers and do not include
retail mark-ups,  mark-downs,  or commissions,  and do not necessarily represent
actual transactions.
<TABLE>
<S>     <C>                                  <C>                   <C>

                                             HIGH                  LOW
        QUARTER ENDED                      BID PRICE            BID PRICE

        March 31, 1999                       $0.11                $0.02
        June 30, 1999                        $0.09                $0.04
        September 30, 1999                   $0.15                $0.05
        December 31, 1999                    $0.29                $0.10
        March 31, 2000                       $0.56                $0.10
        June 30, 2000                        $0.30                $0.10
        September 30, 2000                   $0.13                $0.08
        December 31, 2000                    $0.10                $0.04
</TABLE>

     As of March 21, 2000,  the Company had 439  shareholders  of record and its
common  stock  had a closing  bid  price of $0.07 per share and a closing  asked
price of $0.08 per share.

     Holders  of the  Company's  common  stock  are  entitled  to  receive  such
dividends as may be declared by the Company's  Board of Directors.  However,  no
dividends  on common  stock  have ever  been paid by the  Company,  nor does the
Company  anticipate  that dividends will be paid in the foreseeable  future.  In
addition,  payment of  dividends  to holders of the  Company's  common stock are
restricted pursuant to the terms of outstanding shares of preferred stock.

ITEM 6.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
         CONDITION AND RESULTS OF OPERATIONS

RESULTS OF OPERATIONS

     The  Company  derives  its  revenue  from  the  licensing  of its  software
packages,  installation,   training  and  customer  modifications,   maintenance
agreements  and sale of equipment and supplies.  Results of operations  for 2000
include  revenues of $1,959,601  resulting in net income of $326,093 as compared
to revenues of $2,113,197 and net income of $422,253 in 1999.

     The Company has complete the development of several new software  products,
which  significantly  enhance the  competiveness of its  comprehensive  software
offering.  These  products  are  marketed  under the asystTM  brand  name,  were
developed as Windows  applications to "look and work like Microsoft Office", and
include a Fund  Accounting  product  line,  a Utility  Billing  product  line, a
General  Government  product line and a Public  Safety  product  line.  The Fund
Accounting product line includes General Ledger,  Budget XLence,  Report XLence,
Accounts  Payable,  Accounts  Receivable,  Purchase  Orders,  Cash  Receipts and
Payroll  modules.  The Utility  Billing product line includes  Utility  Billing,
Service Orders, Meter Reader Interface,  Bank Drafts and Budget Billing modules.
The  General  Government  product  line  includes  Master and Land  Directories,
Business and Animal Licenses, Code Enforcement and Building Permits modules. The
Public  Safety  product  line  includes  Master Name Index,  Calls for  Service,
Offense  Reports,  Citations,  State  Interface,  Computer Aided Dispatch,  Jail
Management,  Alarm  Billing and UCR Reports  modules.  The Company is  currently
developing  additional  modules  for its asystTM  product  line,  including  Tax
Billing and Collection, to add to its existing asystTM offerings and anticipates
that this package will be released during the second half of 2001.

                                        6
<PAGE>


     The Company  believes that its asystTM  product line will continue to offer
its current and prespective customers as attractive software solution, both from
a financial and functionality standpoint and follows the trend of clients moving
to Windows based PC networks.  This trend  resulted in an increase in the volume
of licensing  activity to new customers of the Company's asystTM products during
2000.  The Company  offered a Year 2000  compliant  upgraded  version of certain
modules of the LegacyTM products which it shipped to those customers in 1999.

     The  following  table sets forth,  for the period  indicated,  the relative
percentage which certain items in the  Consolidated  Statements of Operations of
the Company  bear as a percent of total  revenues and the  percentage  change in
those items from period to period.

<TABLE>
<S>                                <C>           <C>
                                 Percentage of Revenues
                                 Year Eended December 31,
                                   2000          1999
                                   ----          ----
Revenue
Software Packages                   12%           29%
Installation, training and
  customer support                   8%           14%
Maintenance                         68%           41%
Equipment and Other                 12%           16%
                                   ---           ---
                                   100%          100%

Costs and Expenses
Salaries                            51%           44%
Other general administrative
  and selling expense               25%           21%
Depreciation and amortization        9%            6%
Commissions                          -%            3%
Cos tof equipment sold               6%            8%
                                   ---           ---
Total costs and expenses            91%           82%

Operating income                     9%           18%

Non-operating income (expense)       1%            2%

Income before
 extraordinary items                10%           20%

Extraordinary item                   6%            -%

Net income                          16%           20%

</TABLE>


                                        7


<PAGE>

2000 VS 1999

     The Company's  total revenue  decreased 7% for the year ended  December 31,
2000 from  $2,113,197  in 1999 to  $1,959,601  in 2000.  Software  license  fees
recreased  62% in 2000 due,  in part,  to a decrease  ifn the  licensing  of the
Company's asystTM and LegacyTM products resulting from a less than normal demand
for its  software  products.  The  Company  believes  that  this  trend has been
experienced  throughout  the  local  government  software  industry  due  to the
accelerated  purchase  decisions made by local  governments  during the 12 TO 24
month period preceding the current year in response to concerns  surrounding the
Year 2000.  Installation,  traning and customer support revenue decreased 50% in
2000 due, in part, to a decerease in custom programming and conversion  services
related to the implementation of the Year 2000 version of the Company's LegacyTM
products.  Maintenance  revenue  increased  54% in 2000,  due to an  increase in
revenue from the CPS and Auto Admin  customers  acquired  during the year and an
increase in  maintenance  revenue from new asystTM  customers.  The increase was
partially  offset by a  reduction  in  maintenance  from irs LegacyM AND QuestTM
customers.  Equipment sales and supplies decreased 28% as a result of a decrease
in the  volume of  computer  equipment  sold in  conjunction  with its  software
products.

     Total costs and expenses remained  consistent for the period ended December
31, 2000 at  $1,774,662  as  compared  to  $1,727,176  in 1999.  Salary  expense
increased 8% in 2000 due to an increase in salaries resulting from new employees
added  related to the CPS and Auto Admin  acquisitions  completed  during  2000.
Depreciation  and  amortization  expense  increased  47% in 2000  from 1999 as a
result of the CPS and Auto Admin assets acquired.  Commission expenses decreased
85% in 2000 as a result of the  decreased  licensing of the  Company's  software
products in 2000.  Cost of equipment  sold  decreased 35% in 2000 as a result of
decreased sales of computer equipment in 2000.

LIQUIDITY AND CAPITAL RESOURCES

     The  Company  had net cash  provided by  operating  activities  of $177,198
during 2000 as compared  to $470,274  provided in 1999.  Net cash of $33,411 was
utilized  in  2000  for the  purchase  of  equipment  necessary  for the  sales,
development  and support of its  products  and  $438,973  was  utilized  for the
purchase of the CPS and Auto Admin assets.

     Management  believes that its ability to generate  positive cash flows from
operations,  in addition to its existing  cash balances will be adequate to meet
its working capital requirements in the near future.  However, if the Company is
not able to continue to generate  positive cash flows in the future by achieving
a level of sales  adequate to support the Company's cost  structure,  additional
financing may be required, of which there can be no assurance.

     The Company is  currently in arrears in the payment of dividends to holders
of its preferred  stock.  As of December 31, 2000,  dividends were in arrears on
the Series B preferred stock in the amount of $428,800 and on Series E preferred
stock in the amount of $200,735.

                                        8
<PAGE>



FORWARD-LOOKING STATEMENTS

     This report  contains  forward-looking  statements,  other than  historical
facts,  which  reflect the view of Company's  management  with respect to future
events.  Such  forward-looking  statements are based on assumptions  made by and
information currently available to the Company's management. Although management
believes that the expectations reflected in such forward-looking  statements are
reasonable,  it can give no assurance that such  expectations will prove to have
been  correct.  Important  factors  that could  cause  actual  results to differ
materially from such expectations  include,  without limitation,  the ability of
the Company i) to generate  levels of revenue and  adequate  cash flows from its
operations to support and maintain its current cost structure and ii) to develop
and deliver products that are  competitive,  accepted by its markets and are not
rendered  obsolete  by  changing  technology.   The  forward-looking  statements
contained  herein  reflect the current  views of the Company's  management  with
respect to future  events  and are  subject to these  factors  and other  risks,
uncertainties and assumptions relating to the operations,  results of operations
and  financial  position of the Company.  The Company  assumes no  obligation to
update the  forward-looking  statements or to update the reasons  actual results
could differ from those contemplated by such forward-looking statements.


                                        9
<PAGE>

ITEM 7.  CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

                United Systems Technology, Inc. and Subsidiaries
                   Index to Consolidated Financial Statements
                           And Supplementary Schedules

                                                                  PAGES
                                                                  -----
Report of Independent Certified Public Accountants                 F-1

Consolidated Financial Statements

         Balance sheets as of December 31, 2000 and 1999           F-2
         Statements of income for the years
           ended December 31, 2000 and 1999                        F-3
         Statements of stockholders' equity for the years
           ended December 31, 2000 and 1999                        F-4
         Statements of cash flows for the years
           ended December 31, 2000 and 1999                        F-5
         Notes to Consolidated Financial Statements                F-6 to F-14

                                       10

<PAGE>

               REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

Board of Directors and Stockholders
United Systems Technology, Inc.

     We have  audited the  accompanying  consolidated  balance  sheets of United
Systems Technology,  Inc. and subsidiaries as of December 31, 2000 and 1999, and
the related  consolidated  statements of income,  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 of America.  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 consolidated financial position of United Systems
Technology,  Inc. and  subsidiaries  as of December  31, 2000 and 1999,  and the
consolidated  results of their operations and their  consolidated cash flows for
the years  then  ended,  in  conformity  with  accounting  principles  generally
accepted in the United States of America.



/s/ GRANT THORNTON LLP

Dallas, Texas
February 9, 2001

                                       F-1

<PAGE>

                United Systems Technology, Inc. and Subsidiaries
                           Consolidated Balance Sheet
                           December 31, 2000 and 1999

<TABLE>
<S>                                                   <C>            <C>
                                                      2000           1999
                                                      ====           ====
Assets
Current Assets
 Cash and cash equivalents                        $  814,240     $  922,838
 Trade accounts receivable, less allowance
  for doubtful accounts of $32,000 in 2000
  and $25,000 in 1999                                574,073        216,577
                                                   ---------      ---------
Total current assets                               1,388,313      1,139,415
                                                   ---------      ---------

Property and equipment at cost, net                  119,295         86,572
Goodwill, net                                        457,731        345,715
Purchased software, net                              453,967         19,878
Deposits and other                                    45,702         18,824
                                                   ---------      ---------
                                                   1,076,695        470,989
                                                   ---------      ---------

    Total Assets                                  $2,465,008     $1,610,404
                                                   =========      =========

Liabilities and Stockholders' Equity

Current Liabilities
 Notes payable - related party                    $   12,499     $   22,915
 Trade accounts payable, including $113,200
  payable to a related party in 1999                  47,597        171,208
 Accrued payroll                                      92,381        157,611
 Accrued interest - related party                     22,127         38,673
 Other accrued expenses                              100,018         58,078
 Deferred revenue                                  1,038,908        512,109
                                                   ---------      ---------
Total current liabilities                          1,313,530        960,594
                                                   ---------      ---------

Commitments and contingencies                           -              -

    Stockholders' Equity
Preferred stock, convertible, voting, cumulative,
 par value $.10 per share; authorized 5,000,000
 shares; issued and outstanding, 500,000 shares
 of Series B, 300,000 shares of Series E,
 aggregate liqudating preference of $800,000
 ($1.00 per share)in 2000 and 1999                    80,000         80,000
Common stock, par value $.10 per share;
 authorized  100,000,000 shares; issued and
 outstanding 56,178,663 and 51,569,078
 shares in 2000 and 1999, respectively             5,617,866      5,156,907
Additional paid-in capital                         2,816,554      3,097,458
Accumulated deficit                               (7,318,462)    (7,644,555)
Currency translation and adjustments                  (4,480)          -
                                                   ---------      ---------
                                                   1,191,478        689,810
Less stock purchase note receivable                   40,000         40,000
                                                   ---------      ---------
    Total Stockholders' Equity                     1,151,478        649,810
                                                   ---------      ---------
    Total Liabilities and Stockholders' Equity    $2,465,008     $1,610,404
                                                   =========      =========
</TABLE>

    The accompanying notes are an integral part of the financial statements.

                                      F-2
<PAGE>

                United Systems Technology, Inc. and Subsidiaries
                       Consolidated Statements of Income
                        For The Years Ended December 31,
<TABLE>
<S>                                                   <C>            <C>

                                                      2000           1999
                                                      ====           ====
Revenue
 Software packages                                $  229,916     $  612,679
 Installation, training and customer support         149,572        296,647
 Maintenance                                       1,342,521        872,920
 Equipment sales and supplies                        225,066        313,554
 Other                                                12,526         17,397
                                                   ---------      ---------
                                                   1,959,601      2,113,197
Costs and Expenses
 Salaries                                          1,007,271        936,833
 Other general, administrative and selling expense   405,383        380,782
 Depreciation and amortization                       171,895        117,116
 Rent                                                 66,816         54,928
 Commissions                                           9,077         60,578
 Cost of equipment and supplies sold                 114,220        176,939
                                                   ---------      ---------
                                                   1,774,662      1,727,176
                                                   ---------      ---------
Operating income                                     184,939        386,021
                                                   ---------      ---------
Other(expense) income
 Interest expense                                     (1,679)        (2,044)
 Interest income                                      30,981         28,406
                                                   ---------      ---------
                                                      29,302         26,362
                                                   ---------      ---------

Net income before extraordinary item                 214,241        412,383

Extraordinary gain on settlement of debt             111,852          9,870
                                                   ---------      ---------

Net income                                           326,093        422,253

Preferred stock dividend requirement                 (56,000)       (82,177)
                                                   ---------      ---------

Income allocable to common shareholders           $  270,093     $  340,076
                                                   =========      =========

Net income per common share before
 extraordinary item                               $      NIL     $     0.01
Extraordinary gain on settlement of debt                 NIL            NIL
                                                   ---------      ---------
Net income per common share after
 extraordinary item                               $      NIL     $     0.01
                                                   =========      =========

Weighted average number of shares outstanding
 Basic                                            54,485,066     48,930,152
                                                  ==========     ==========
 Diluted                                          60,375,587     53,121,207
                                                  ==========     ==========
</TABLE>

    The accompanying notes are an integral part of the financial statements.

                                      F-3
<PAGE>

                United Systems Technology, Inc. and Subsidiaries
                Consolidated Statements of Stockholders' Equity
                        For the Years Ended December 31,
<TABLE>
<S>     <C>       <C>        <C>         <C>         <C>       <C>        <C>

                                                              Stock
                           Additional             Currency   Purchase
      Capital Stock Issued  Paid-In  Accumulated Translation   Note
       Preferred  Common    Capital    Deficit   Adjustments Receivable  Total
       =========  ======    =======    =======   =========== ==========  =====
Balance,
January 1,
1999   $130,000 $4,817,804 $3,333,561 $(8,066,808) $   -     $(40,000) $ 174,557
Conversion
of Series
D preferred
stock to
common
stock    (50,000)  239,104  (189,104)                                       -
Exercise
of stock
options
and
warrants           100,000   (65,000)                                     35,000
Recognition
of deferred
compensation
on sale of
stock                          18,000                                     18,000
Net income                               422,253                         422,253
         ------  ---------  ---------   ---------    -----    ------   ---------
Balance,
December
31,1999 $80,000 $5,156,908 $3,097,457 $(7,644,555) $    -     $(40,000)$ 649,810

Exercise
of stock
options
and
warrants           460,958  (298,903)                                    162,055
Recognition
of deferred
compensation
on sale of
stock                         18,000                                      18,000
Comprehesive
income
Net income                                326,093                        326,093
Currency
translation
adjustments                                         (4,480)              (4,480)
                                                                        --------
Total
comprehensive
income                                                                   321,613
         ------  ---------  ---------   ---------    -----    ------   ---------
Balance,
December
31,2000 $80,000 $5,617,866 $2,816,554 $(7,318,462) $(4,480) $(40,000) $1,151,478
         ======  =========  =========   =========    =====    ======   =========
</TABLE>

    The accompanying notes are an integral part of the financial statements.

                                      F-4
<PAGE>

                United Systems Technology, Inc. and Subsidiaries
                     Consolidated Statements of Cash Flows
                        For the Years Ended December 31,

<TABLE>
<S>                                                   <C>            <C>
                                                      2000           1999
                                                      ====           ====
Cash flows in operating activities:

 Net income                                       $  326,093     $  422,253

Adjustments to reconcile net income
 to net cash provided by operating activities:
  Depreciation and amortization                      171,895        117,116
  Deferred compensation costs on
   employee stock purchase                            18,000         18,000
  Extraordinary gain on settlement of debt          (111,852)        (9,870)
  Changes in operating assets and liabilities,
   net of effect of acquisitions:
    Trade accounts receivable                       (120,371)       113,131
    Deposits and other                               (26,730)       (13,685)
    Trade accounts payable                           (36,306)       (11,158)
    Accrued expenses                                 (88,985)        23,558
    Deferred revenue                                  45,454       (189,071)
                                                   ---------      ---------
Net cash provided by operating activities:        $  177,198     $  470,274
                                                   ---------      ---------
Cash flows from investing activities:
 Property and equipment additions                    (33,411)       (56,996)
 Sale of property and equipment                       30,500           -
 Acquisitions of businesses                         (438,973)          -
                                                   ---------      ---------
Net cash used in investing activities               (441,884)       (56,996)
                                                   ---------      ---------
Cash flows from financing activities:
 Exercise of common stock options                    162,055         35,000
 Payment of notes payable                             (5,000)        (1,000)
 Payments on capital lease obligations                   -           (2,448)
                                                   ---------      ---------
Net cash provided by financing activities            157,055         31,552

Effect of exchange rate changes on cash                 (967)          -
                                                   ---------      ---------

Increase (decrease)in cash and cash equivalents     (108,598)       444,830
Cash and cash equivalents, beginning of year         922,838        478,008
                                                   ---------      ---------
Cash and cash equivilents, end of year            $  814,240     $  922,838
                                                   =========      =========

Supplemental disclosure of cash paid during
 year for interest:                               $    1,679     $    2,044

Supplemental disclosure of non-cash
 investing activities:
  Acquisition of businesses:
   Assets Acquired                                $  996,505     $     -
   Cash paid for acquisitions                       (438,973)          -
                                                   ---------     ---------
  Liabilities assumed                             $  557,532     $     -
                                                   =========     =========
</TABLE>

    The accompanying notes are an integral part of the financial statements.

                                      F-5
<PAGE>

                UNITED SYSTEMS TECHNOLOGY, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           DECEMBER 31, 2000 AND 1999

1. Summary of Significant Accounting Policies:

   Nature of Operations

     The  Company  operates  in a  single  business  segment,  the  business  of
developing,  supporting and marketing  computer  software products to county and
local governments located throughout the United States and Canada.

   Basis of Presentation

     The financial statements include the accounts of United Systems Technology,
Inc. ("USTI") and its wholly-owned subsidiaries, United Systems Technology East,
Inc. ("USTEI") and USTI Canada, Inc.. All intercompany transactions and balances
have been eliminated.

   Cash Equivalents

     The Company  considers  short-term  investments  purchased  with an initial
maturity of three months or less to be cash equivalents.

   Property and Equipment

     Property and equipment are recorded at cost.  Depreciation  of property and
equipment is computed using the  straight-line  method over the estimated useful
lives of such  property  and  equipment,  which  range from three to five years.
Gains and losses on the disposal of such assets are recognized as incurred.

   Other Assets

     Goodwill  represents the excess of acquisition costs over the fair value of
the net assets of  business  purchased  and is  amortized  on the  straight-line
method over  periods of up to 20 years.  Purchased  software is amortized on the
straight-line method over 5 years.

   Revenue Recognition

     The  Company  recognizes  revenue  from the initial  license  for  computer
software  product  sales upon  delivery  of a  software  package.  Revenue  from
installation, training and customer support is recognized in the period in which
the  services  are  provided.  Revenue  from  contracts to maintain its computer
software products is recognized over the term of the contracts.

                                       F-6
<PAGE>
                UNITED SYSTEMS TECHNOLOGY, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           DECEMBER 31, 2000 AND 1999

1. Summary of Significant Accounting Policies (Cont'd.):

   Impairment of Long-Lived Assets

     The  Company  reviews  its  long-lived  assets  and  certain   identifiable
intangibles for impairment when events or changes in circumstances indicate that
the  carrying  amount  of the  assets  may  not  be  recoverable.  In  reviewing
recoverability,  the Company  estimates the future cash flows expected to result
from  using the  assets  and  eventually  disposing  of them.  If the sum of the
expected future cash flows  (undiscounted  and without interest charges) is less
than the carrying amount of the asset, an impairment loss is recognized.

   Earnings Per Common Share

     The  Company  computes  basic  earnings  per  common  share  based  on  the
weighted-average number of common shares outstanding. Diluted earnings per share
are computed based on the  weighted-average  number of common shares outstanding
plus the number of additional  common shares that would have been outstanding if
dilutive potential common shares had been issued

   Financial Instruments

     The fair value of the Company's financial  instruments,  consisting of cash
and cash equivalents and debt, approximate their carrying values.

   Stock-Based Compensation

     The Company  accounts for  stock-based  compensation to employees using the
intrinsic  value  method.  Accordingly,  compensation  cost for  employee  stock
options is  measured as the excess,  if any, of the quoted  market  price of the
Company's common stock at the date of grant over the exercise price.

   Foreign Currency Translation

     The functional  currency for the Company's foreign  subsidiary is the local
currency.  Assets and  liabilities  of the foreign  subsidiary are translated to
U.S. dollars at year-end exchange rates. Income and expense items are translated
at the rates of exchange  prevailing during the year. The adjustments  resulting
from  translating  the  financial  statements  at  the  foreign  subsidiary  are
reflected  in  stockholders'  equity.  Gains  and  losses  on  foreign  currency
transactions are included in the consolidated statements of income.

   Use of Estimates

     In preparing financial statements in conformity with accounting  principles
generally  accepted in the United  States of America,  management is required to
make estimates and  assumptions  that affect the reported  amounts of assets and
liabilities  and the disclosure of contingent  asset and liabilities at the date
of the  financial  statements  and revenues and  expenses  during the  reporting
period. Actual results could differ from those estimates.

                                       F-7
<PAGE>
                UNITED SYSTEMS TECHNOLOGY, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           DECEMBER 31, 2000 AND 1999

2. Acquisitions

     In March 2000, the Company acquired  certain  Municipal Fund Accounting and
Utility billing assets from CPS Systems,  Inc. in exchange for $200,000 in cash.
As a result of the  acquisition,  which was  accounted  for as a  purchase,  the
Company recorded goodwill of approximately  $55,000, which is being amortized on
the straight-line method over 5 years.

     In June 2000, the Company acquired  substantially all of the assets of Auto
Administrator  International,  Inc. in exchange  for  approximately  $239,000 in
cash. As a result of the acquisition, which was accounted for as a purchase, the
Company recorded goodwill of approximately $140,000, which is being amortized on
the straight-line method over 5 years.

     Operating  results of the  acquired  businesses  have been  included in the
consolidated statements of income from the dates of acquisition.

     The  following  unaudited  proforma  information  presents  the  results of
operations  of the  Company  as if  the  acquisitions  had  taken  place  in the
beginning of each period presented (in thousands, except per share data):
<TABLE>
<S>                                             <C>          <C>

                                                   Year ended
                                                   December 31,
                                               2000          1999
                                               ----          ----
                Revenues                      $2,712        $4,077
                Net income                    $  123        $  (94)
                Net income per common share   $  -          $  -
</TABLE>


     The proforma  results of operations  have been  presented  for  comparative
purposes  only and do not purport to be  indicative of the results of operations
which  actually would have occurred had the  acquisitions  been made as of these
dates or of results which may occur in the future.

3. Property and Equipment:
<TABLE>
<S>                                            <C>            <C>
                                               2000           1999
                                               ----           ----

         Leasehold improvements           $   75,431    $   66,416
         Furniture and fixtures               54,080        40,655
         Equipment                         1,024,107       974,789
                                           ---------     ---------
                                           1,153,618     1,081,860
         Less accumulated depreciation
          and amortization                (1,034,323)     (995,288)
                                           ---------     ---------
                                          $  119,295    $   86,572
                                           =========     =========
</TABLE>


                                       F-8
<PAGE>
                UNITED SYSTEMS TECHNOLOGY, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           DECEMBER 31, 2000 AND 1999

4  Other Assets:
<TABLE>
<S>                              <C>           <C>                <C>

                                            Accumulated
                                 Cost       Amortization          Net
                                 ----       ------------          ---
       2000
       ----
       Goodwill              $ 1,881,396    $(1,423,665)     $  457,731
       Purchased software      1,086,977       (633,010)        453,967

       1999
       ----
       Goodwill              $1,692,128     $(1,346,413)     $  345,715
       Purchased software       597,104        (577,226)         19,878

</TABLE>


5. Preferred Stock

     The Series B preferred  stock  provides  for: (I) a cumulative  dividend of
$.07 per share per annum, payable quarterly,;  (II) a liquidation  preference of
$1.00 per share plus  accrued but unpaid  dividends;  (III) the right to convert
each share plus accrued but unpaid  dividends into common stock;  (IV) the right
to vote on all matters  submitted to a vote of stockholders of the Company;  and
(V) redemption at the Company's  option at a redemption price of $1.00 per share
plus all  accrued  and unpaid  dividends.  As of  December  31, 2000 the 500,000
outstanding  shares of Series B preferred  stock were  entitled to be  converted
into  4,643,995  shares of common stock and were entitled to 4,643,995  votes on
all matters submitted to a vote of stockholders. At December 31, 2000 cumulative
dividends of approximately $429,000 were in arrears.

     The Series E preferred  stock  provides  for: (I) a cumulative  dividend of
$.07 per share per annum, payable quarterly,;  (II) a liquidation  preference of
$1.00 per share plus  accrued but unpaid  dividends;  (III) the right to convert
each share plus accrued but unpaid  dividends into common stock;  (IV) the right
to vote on all matters  submitted to a vote of stockholders of the Company;  and
(V) redemption at the Company's  option at a redemption price of $1.00 per share
plus all  accrued  and unpaid  dividends.  As of  December  31, 2000 the 300,000
oustanding shares of Series E preferred stock were entitled to be converted into
2,503,685  shares of common stock and were  entitled to  2,503,685  votes on all
matters  submitted to a vote of stockholders.  At December 31, 2000,  cumulative
dividends of approximately $201,000 were in arrears.

6. Commitments and Contingencies:

   Operating Leases

     The Company leases certain office  facilities under a non-cancelable  lease
agreements,  which expire on June 30, 2002 and  September  30, 2005.  The future
minimum annual lease payments  under these leases are  approximately  $60,000 in
2001,  $55,000 in 2002,  $45,000 in 2003,  $45,000 in 2004 and  $34,000 in 2005.
Rent expense was $66,816 and $54,930 in 2000 and 1999, respectively.

                                       F-9
<PAGE>
                UNITED SYSTEMS TECHNOLOGY, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           DECEMBER 31, 2000 AND 1999

7. Common Staock Options and Warrants:

   Stock Options

     In September 1986, the Board of Directors  approved the adoption of a stock
option plan (the "Plan"),  whereby  12,000,000  shares of the  Company's  common
stock are reserved for options to be granted to employees  and  directors at the
discretion  of the Board of  Directors.  Stock options are granted at the quoted
market price of the Company's stock at the date of the grant, become exercisable
over  period of up to five years and expire on various  dates from 2001 to 2005.
At the December 31, 2000,  approximately  1,000,000  shares of common stock were
reserved for future grants under the Plan..

     Compensation  costs for stock  options  granted to employees is measured as
the excess,  if any, of the quoted  market price of the  Company's  stock at the
date of grant over the amount an employee must pay to acquire the stock.  If the
Company recognized  compensation  expense based upon the fair value at the grant
date,  the Company's 2000 and 1999 net income  allocable to common  shareholders
and net income per common share would have been reduced to the pro forma amounts
indicated as follows:

<TABLE>
<S>                                                   <C>          <C>

                                                      2000         1999
                                                      ----         ----
    Net income allocable to common shareholders
     As reported                                   $ 270,093    $ 340,076
     Pro forma                                     $ 136,486    $ 185,364

    Net income per common share
     As reported                                   $     NIL    $    0.01
     Pro forma                                     $     NIL    $     NIL

</TABLE>


     The fair value of these  options was  estimated  at the date of grant using
the  Black-Scholes  option  pricing  model with the  following  weighted-average
assumptions,  expected  volatility  of 120% in 2000 and 415% in 1999;  risk free
interest rate of 6.0% and 6.32% in 1999; no dividend  yield;  and expected lives
of 5 years.

     Additional  information with respect to options outstanding at December 31,
2000,  and the changes for each of the two years in the period then ended was as
follows:
<TABLE>
<S>                                               <C>             <C>

                                                          2000
                                               ------------------------
                                                                Weighted
                                                                Average
                                                                Exercise
                                                Shares           Price
                                                ------          --------
    Outstanding at beginning of year          10,587,500          $.04
    Granted                                    4,225,000           .07
    Exercised                                 (3,570,000)          .04
    Forfeited                                   (332,500)          .05
                                              ----------           ---
    Oustanding at end of year                 10,910,000          $.05
                                              ----------           ---

    Options exercisable at December 31, 2000   3,610,000          $.04
                                              ----------           ---
    Weighted average fair value per share
     of options granted                                           $.05
                                                                   ---
</TABLE>

                                      F-10
<PAGE>

                UNITED SYSTEMS TECHNOLOGY, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           DECEMBER 31, 2000 AND 1999

7. Common Staock Options and Warrants (Cont'd):
<TABLE>
<S>                                                <C>            <C>

                                                          2000
                                               ------------------------
                                                                Weighted
                                                                Average
                                                                Exercise
                                                Shares           Price
                                                ------          --------

    Outstanding at beginning of year           7,852,500          $.04
    Granted                                    3,950,500           .05
    Exercised                                 (1,000,000)          .04
    Forfeited                                   (215,000)          .05
                                              ----------           ---
    Oustanding at end of year                 10,587,500          $.04
                                              ----------           ---

    Options exercisable at December 31, 1999   5,587,500          $.04
                                               ---------           ---
    Weighted average fair value per share
     of options granted
                                                                  $.05
                                                                   ---
</TABLE>

     Information  about  stock  options  outstanding  at  December  31,  2000 is
summarized as follows:
<TABLE>
<S>        <C>                   <C>              <C>               <C>

                                           Options Outstanding
                             --------------------------------------------------
                                            Weighted Average
                               Number          Remaining       Weighted Average
  Range of Exercise Prices   Outstanding    Contractual Life    Exercise Price
  ------------------------   -----------    ----------------    --------------
      $.01 to $.05            5,700,000         2.3 years           $.04
      $.06 TO $.10            5,210,000         2.7 years           $.06
                             ----------
                             10,910,000
                             ----------
</TABLE>

<TABLE>
<S>     <C>                     <C>              <C>

                                  Options Exercisable
                            --------------------------------
                               Number       Weighted Average
  Range of Exercise Prices  Exercisable      Exercise Price
  ------------------------  -----------      --------------
      $.01 to $.05            2,625,000         $.04
      $.06 TO $.10              985,000         $.06
                              ---------
                              3,610,000
                              ---------
</TABLE>

   Stock Purchase Warrants

     At December  31,  1999,  warrants to  purchase  1,514,585  shares of common
stock,  exercisable  at $.035 to $.05  per  share  and  expiring  in 2000,  were
outstanding.  During fiscal 2000, warrants to 1,039,583 were exercised at prices
ranging  from  $.035 to $.5 per share,  warrants  for  415,002  shares of common
stock,  exercisable  at $.05 per share expired and warrants for 75,000 shares of
common stock  exercisable at $.11 per share and expiring in 2005 were issued. At
December 31, 2000  warrants for 75,000 shares of common  stock,  exercisable  at
$.11 per share and expiring in 2005 were outstanding.

                                      F-11
<PAGE>

                UNITED SYSTEMS TECHNOLOGY, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           DECEMBER 31, 2000 AND 1999

8. Earning per Share

     The  following  table  sets  forth the  computation  of basic  and  diluted
earnings per share
<TABLE>
<S>                                                 <C>          <C>

                                                      Year Ended
                                                      December 31,
                                                   -----------------
                                                   2000         1999
                                                   ----         ----
   Income allocable to common stockholders      $ 270,093     $ 340,076

   Weighted average shares outstanding - basic 54,485,066    48,930,152
   Effect of dilutive stock options             5,190,414     3,681,766
   Effect of dilutive stock warrants              700,107       509,289

   Weighted average shares
     outstanding - diluted                     60,375,587    53,121,207

   Earnings per common share - basic            $    -        $    0.01
   Earnings per common share - diluted          $    -        $    0.01

</TABLE>

     In 2000 and 1999,  the  assumed  conversion  of the  Company's  convertible
preferred stock was excluded from the computation of diluted  earnings per share
because its effect would be antidilutive.  In 2000,  warrants to purchase 75,000
shares of the  Company's  common stock were  excluded  from the  computation  of
diluted earnings per share because the effect would be antidilutive.


9. Income Taxes:

     At December 31, 2000, the Company has net operating loss  carryforwards  of
approximately  $2,360,000.  These carry-forwards  expire from 2001 through 2011.
Additionally,  the Company has approximately  $71,000 in unused general business
tax credits  available to directly  offset  future  income tax  liabilities  and
$624,000 in capital loss carryforwards available to offset future capital gains.

     For the years ended December 31, 2000 and 1999 the  difference  between the
effective  federal  income tax rate and the amounts  determined  by applying the
statutory  federal income tax rate to income before provision for federal income
tax was as follows:
<TABLE>
<S>                                               <C>          <C>

                                                  2000         1999
                                                 Amount       Amount
                                                 ------       ------
     Federal income tax at statutory rate       $110,872     $143,570
     Amortization of goodwill                     21,480       23,100
     Other                                       (29,652)      (7,270)
     change in valuation allowance              (102,700)    (159,400)
                                                 -------      -------
                                                $   -        $   -
                                                 =======      =======
</TABLE>

                                      F-12
<PAGE>

                UNITED SYSTEMS TECHNOLOGY, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           DECEMBER 31, 2000 AND 1999

9. Income Taxes(Cont'd.):

     The compnents of the deferred tax accounts as of December 31, 2000 and 1999
are as follows:
<TABLE>
<S>                                                  <C>          <C>

                                                     2000         1999
                                                    ------       ------
     Deferred Tax Assets:
      Net operating loss carryforward            $  802,100   $  846,600
      Capital loss carryforward                     212,300      212,300
      Deferred revenue                              173,800      174,100
      Accounts payable and accrued expenses          62,200      132,100
      General business tax credits                   71,000       71,000
                                                  ---------    ---------
     Total deferred tax asset                    $1,321,400   $1,435,900
                                                  ---------    ---------
     Deferred Tax Liabilities:
      Accounts receivable                            88,500       88,500
      Purchsed software, property and equipment      14,300       27,900
                                                  ---------    ---------
     Total deferred tax liability                   104,600      116,400
                                                  ---------    ---------
     Net deferred tax asset before valuation
      allowance                                   1,216,800    1,319,500

     Less valuation allowance                     1,216,800    1,319,500
                                                  ---------    ---------

     Net deferred tax asset                      $     -      $    -
                                                  =========    =========
</TABLE>


10.Employee Benefit Plans:

     Effective  January 16, 1992, the Company  established  the USTI  Employee's
401(K)Profit   Sharing  Plan  and  Trust  (the  "Plan"),   which  is  a  defined
contribution  plan that covers  substantially  all  full-time  employees  of the
Compay  eligible to  participate.  The Plan is subject to the  provisions of the
Employee  Retirement  Income  Security  Act of 1974,  as amended  ("ERISA")  and
Section 401(K) of the Internal Revenue Code/ The Company made  contributions for
the benefit of the  participants  in the Plan in the amount of $4,300 and $5,300
for the years ended December 31, 2000 and 1999, respectively.

                                      F-13
<PAGE>

                UNITED SYSTEMS TECHNOLOGY, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           DECEMBER 31, 2000 AND 1999

11.Foreign Operations:

     Information  regarding  foreign  operations  as of and for the years  ended
December 31, 2000 are as follows.  Sales are attributed to countries  based upon
the location of the customer.
<TABLE>
<S>                                              <C>        <C>

                                                  Year Ended
                                                  December 31,
                                               -----------------
                                               2000         1999
                                               ----         ----
         Revenue
           United States                   $ 1,492,534  $ 2,113,197
           Canada                              467,067         -
                                            ----------   ----------
                                           $ 1,959,601  $ 2,113,197
                                            ----------   ----------

                                                  Year Ended
                                                  December 31,
                                               -----------------
                                               2000         1999
                                               ----         ----
         Long-lived assets
           United States                   $   530,346  $   470,989
           Canada                              546,349         -
                                            ----------   ----------
                                           $ 1,076,695  $   470,989
                                            ----------   ----------
</TABLE>

                                      F-14
<PAGE>

ITEM  8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
         ACCOUNTING AND FINANCIAL DISCLOSURE

     The Company has had no  disagreements  with its Independent  Accountants on
accounting and financial disclosure matters.

                                    PART III

ITEM 9.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

     The  information  required  by this  item  is set  forth  in the  Company's
definitive  proxy  statement  relating to the Company's  2001 Annual  Meeting of
Shareholders   under  the  captions   "Election  of  Directors"  and  "Executive
Officers." Such information is incorporated herein by reference therefrom.


ITEM 10. EXECUTIVE COMPENSATION

     The  information  required  by this  item  is set  forth  in the  Company's
definitive  proxy  statement  relating to the Company's  2001 Annual  Meeting of
Shareholders under the caption  "Management  Compensation."  Such information is
incorporated herein by reference therefrom.


ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

     The  information  required  by this  item  is set  forth  in the  Company's
definitive  proxy  statement  relating to the Company's  2001 Annual  Meeting of
Shareholders under the caption "Security  Ownership of Certain Beneficial Owners
and Management." Such information is incorporated herein by reference therefrom.


ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

     The  information  required  by this  item  is set  forth  in the  Company's
definitive  proxy  statement  relating to the Company's  2001 Annual  Meeting of
Shareholders under the caption "Certain Relationships and Related Transactions."
Such information is incorporated herein by reference therefrom.

                                       11
<PAGE>

                                                      PART IV

ITEM 13. XHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K

(a)      Documents filed as part of this Report:

         1. CONSOLIDATED FINANCIAL STATEMENTS

     See  "Index  to  Consolidated   Financial   Statements  and   Supplementary
Schedules" under Item 8 of this Report.

         2. CONSOLIDATED FINANCIAL STATEMENTS SCHEDULES

     See  "Index  to  Consolidated   Financial   Statements  and   Supplementary
Schedules"  under Item 8 of this Report.  All other schedules have been omitted,
as the required  information is  inapplicable or the information is presented in
the financial statements or the notes thereto.

         3. EXHIBITS

     The following  documents are filed as exhibits  herewith,  unless otherwise
specified, and are incorporated herein by this reference:

Exhibit
Number
-------
 3.1  Amended and Restated Articles of Incorporation of the Company as filed on
      November 21, 1986 with the Secretary of State of the State of Iowa.
     (Incorporated by reference, Registration Statement on Form S-1, File No.
      33-9574, Exhibit 3.11)

 3.2  Articles of Merger of Municipal Software Consultants, Inc. into United
      Systems Technology, Inc., as filed on December 31, 1986 with the
      Secretaries of State of the States of Iowa and Texas.  (Incorporated by
      reference, Annual Report on Form 10-K for the fiscal year ended December
      31, 1986, Exhibit 3.2)

 3.3  Statement Establishing and Designating Series B Preferred Stock of the
      Company, as filed on June 13, 1988 with the Secretary of State of the
      State of Iowa. (Incorporated by reference, Quarterly Report on Form 10-Q
      for the quarter ended June 30, 1988, Exhibit 4.1)

 3.4  Statement Establishing and Designating Series C Preferred Stock of the
      Company, as filed on June 13, 1988 with the Secretary of State of the
      State of Iowa. (Incorporated by reference, Quarterly Report on Form 10-Q
      for the quarter ended June 30, 1988, Exhibit 4.2)

                                       12
<PAGE>

Exhibit
Number
-------

 3.5  Articles of Amendment to the Articles of Incorporation of the Company, as
      filed on July 15, 1988 with the Secretary of State of the State of Iowa.
     (Incorporated by reference, Quarterly Report on Form 10-Q for the quarter
      ended June 30, 1988, Exhibit 3.1)

 3.6  By-Laws of the Company, as amended and currently in effect. (Incorporated
      by reference, Registration Statement on Form S-1, File No. 33-9574,
      Exhibit 3.6)

 3.7  Articles of Amendment to the Articles of Incorporation designating the
      Series D Preferred Stock of the Company, as filed on February 23, 1990
      with the Iowa Secretary of State. (Incorporated by reference, Form 8-K
      Current Report dated February 15, 1990, Exhibit 3.1)

 3.8  Statement establishing and designating Series E Preferred Stock of the
      Company, as filed on June 26, 1991, with the Secretary of the State of
      Iowa. (Incorporated by referenced, Annual Report on Form 10-K for the year
      ended December 31, 1991, Exhibit 3.8)

10.1  1986 Stock Option Plan. (Incorporated by reference, Registration Statement
      on Form S-1, File No. 33-9574, Exhibit 10.9)

10.2  Agreement Regarding Preferred Stock Purchase, Warrant Purchase and Loan,
      dated October 16, 1986, by and between the Company and Ventana Growth
      Fund. (Incorporated by reference, Registration Statement on Form S-1,
      File No. 33-9574, Exhibit 10.10)

10.3  Preferred Stock Purchase Agreement, dated October 28, 1986, by and between
      the Company and Ventana Growth Fund.  (Incorporated by reference,
      Registration Statement on Form S-1, File No. 33-9574, Exhibit 10.17)

10.4  Promissory Note, dated October 16, 1986, in the amount of $150,000.00,
      from the Company to Ventana Growth Fund.  (Incorporated by reference,
      Registration Statement on Form S-1, File No. 33-9574, Exhibit 10.19)

10.5  Stock Purchase Agreement, dated June 8, 1988, by and between the Company
      and Farm Bureau Mutual Insurance Company.  (Incorporated by reference,
      Quarterly Report on Form 10-Q for the quarter ended June 30, 1988,
      Exhibit 19.1)

10.6  Preferred Stock Exchange Agreement, dated June 8, 1988, by and between the
      Company and Ventana Growth Fund.  (Incorporated by reference, Quarterly
      Report on Form 10-Q for the quarter ended June 30, 1988, Exhibit 19.2)

10.7  Purchase Agreement, dated February 15, 1990, by and between the Company
      and International Technology Group, Inc. (Incorporated by reference, Form
      8-K Current Report dated February 15, 1990, Exhibit 10.1)

                                       13
<PAGE>

Exhibit
Number
-------
10.8  Assignment and Assumption Agreement, dated February 15, 1990, by and
      between the Company and International Technology Group, Inc. assigning all
      relevant rights and interest in a maintenance agreement with Grumman
      Systems Support Corp. to the Company.  (Incorporated by reference,
      Form 8-K Current Report dated February 15, 1990, Exhibit 10.2)

10.9  Assignment and Assumption Agreement, dated February 15, 1990, by and
      between the Company and International Technology Group, Inc. assigning all
      rights and interest in a Technology Transfer Agreement with AM Computer
      Corporation  and Microvote Partners, Ltd. to the Company.  (Incorporated
      by reference, Form 8-K Current Report dated February 15, 1990, Exhibit
      10.3)

10.10 Assignment and Assumption Agreement, dated February 15, 1990, by and
      between the Company and International Technology Group, Inc. assigning all
      rights and interest in trademark INTEGRITY to the Company.  (Incorporated
      by reference, Form 8-K Current Report dated February 15, 1990,
      Exhibit 10.4)

10.11 Stock Purchase Agreement, dated February 14, 1990, by and between Farm
      Bureau Mutual Insurance Company and the Company.  (Incorporated by
      reference, Form 8-K Current Report dated February 15, 1990, Exhibit 10.5)

10.12 Asset Purchase Agreement, dated June 10, 1991, by and between the Company
      and New Jersey Municipal Data Management, Inc. (Incorporated by reference
      Form 8-K Current Report, dated June 10, 1991)

10.13 Asset Purchase Agreement, dated December 22, 1994, by and between the
      Company and Sequoia Pacific Systems, a division of Smurfit Packaging
      Corporation.  (Incorporated by reference Form 8-K Current Report, dated
      December 22, 1994, Exhibit 10.1)

10.14 Assignment and Assumption Agreement, dated December 22, 1994, by and
      between the Company and Sequoia Pacific Systems, a division of Smurfit
      Packaging Corporation.  (Incorporated by reference Form 8-K Current
      Report, dated December 22, 1994, Exhibit 10.2)

10.15 Asset Purchase Agreement, dated October 17, 1994, by and between the
      Company and Noll Computer Systems, Inc.("NCS").  (Incorporated by
      reference, Annual Report on Form 10-KSB for the year ended December 31,
      1994, Exhibit 10.15)

10.16 Asset Purchase Agreement, dated November 15, 1995, by and between the
      Company, Dralvar Capital Corp. ("Dralvar") and Ken Neff.  (Incorporated
      by reference, Form 8-K Current Report, dated November 15, 1995, Exhibit
      10.1)

10.17 Asset purchase Agreement dated February 21, 1997, by and between the
      Company and Noll Computer Services, Inc. ("NCS").  (Incorporated by
      reference, Annual Report on Form 10-KSB for the year ended December 31,
      1996, Exhibit 10.17)

                                       14
<PAGE>

Exhibit
Number
-------

  (b)  REPORTS ON FORM 8-K

     No reports on Form 8-K were filed  during the last  quarter of the year for
which this report is filed.

  (c)  EXHIBITS

     The response to this portion of Item 14 is submitted as a separate  section
of this report.

  (d)   FINANCIAL STATEMENT SCHEDULES

     The response to this portion of Item 14 is submitted as a separate  section
of this report.

                                       15
<PAGE>

                                   SIGNATURES

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

                                      UNITED SYSTEMS TECHNOLOGY, INC.

DATE: MARCH 29, 2000                  BY:  /S/  THOMAS E. GIBBS
                                           --------------------
                                           Thomas E. Gibbs,
                                           Chief Executive Officer and
                                            Chairman of the Board

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

DATE: MARCH 29, 2000                     BY:  /S/  THOMAS E. GIBBS
                                              --------------------
                                              Thomas E. Gibbs,
                                              Chief Executive Officer and
                                               Chairman of the Board


DATE: MARCH 29, 2000                     BY: /S/  RANDALL L. MCGEE
                                             ----------------------
                                             Randall L. McGee,
                                             Secretary, Treasurer and Director
                                             (Principal Financial &
                                               Accounting Officer)

DATE: MARCH 29, 2000                     BY: /S/  SCOTT BURRI
                                             ----------------
                                             Scott Burri, Director

DATE: MARCH 29, 2000                     BY: /S/  EARL COHEN
                                             -----------------
                                             Earl Cohen, Director


                                       16

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