<PAGE>
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------------
FORM 10-K
(MARK ONE)
/X/ ANNUAL REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended JULY 31, 1997
-------------------------------------------------------
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from _____________________ to ________________________
Commission file number 0-21683
-------------------------------------
UNITY FIRST ACQUISITION CORP.
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
DELAWARE 13-3899021
- ------------------------------- -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
245 FIFTH AVENUE, SUITE 1500, NEW YORK, NEW YORK 10016
- -------------------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (212) 696-4282
------------------------------
Securities registered pursuant to Section 12(b) of the Act:
TITLE OF EACH CLASS NAME OF EACH EXCHANGE ON WHICH REGISTERED
------------------- -----------------------------------------
-
- ---------------------------- ---------------------------------------------
Securities registered pursuant to Section 12(g) of the Act:
COMMON STOCK, $.0001 PAR VALUE
- --------------------------------------------------------------------------------
(Title of Class)
CLASS A COMMON STOCK PURCHASE WARRANTS
- --------------------------------------------------------------------------------
(Title of Class)
CLASS B COMMON STOCK PURCHASE WARRANTS
- --------------------------------------------------------------------------------
(Title of Class)
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes /X/ No........
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. /X/
APPLICABLE ONLY TO REGISTRANTS INVOLVED IN BANKRUPTCY
PROCEEDING DURING THE PRECEDING FIVE YEARS:
Indicate by check mark whether the Registrant has filed all documents and
reports required to be filed by Sections 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court. Yes....... No.........
---------------------------
The number of shares outstanding of the Registrant's common stock is
1,875,000 (as of October 27, 1997).
The aggregate market value of the voting stock held by nonaffiliates of the
Registrant is $5,975,000 (as of October 27, 1997).
DOCUMENTS INCORPORATED BY REFERENCE
================================================================================
<PAGE>
PART I
ITEM 1. BUSINESS
(a) GENERAL DEVELOPMENT OF BUSINESS
Unity First Acquisition Corp. ("Unity") was formed in May 1996 to
serve as a vehicle to effect a merger, exchange of capital stock, asset
acquisition or other similar business combination ("Business Combination") with
an operating business (an "Acquired Business").
In November 1996, Unity successfully consummated an initial public
offering of its equity securities (the "IPO") from which it derived net
proceeds of $6,402,112. Reference is made to Unity's Registration Statement
on Form S-1 (File No. 333-11165), declared effective on November 12, 1996,
for more detailed information in these regards.
On September 19, 1997, Unity entered into a letter of intent to
effectuate a Business Combination with Prism Systems, Inc., a Chicago-based
computer systems integrator principally engaged in the development and marketing
of voter registration information management systems for public sector use, in
exchange for an approximately 80% equity interest in Unity.
Consummation of the proposed Business Combination is subject, among
other conditions, to the negotiation and execution of a definitive merger
agreement and approval by Unity's public stockholders. There can be no
assurance that the proposed Business Combination will be successfully
consummated.
Unity was incorporated as a Delaware corporation on May 30, 1996.
Unity's executive offices are located at 245 Fifth Avenue, New York, New York
10016; its telephone number is (212) 696-4282.
(b) FINANCIAL INFORMATION ABOUT INDUSTRY'S SEGMENTS
Not applicable.
(c) NARRATIVE DESCRIPTION OF BUSINESS
See Item 1(a) above.
(d) FINANCIAL INFORMATION ABOUT FOREIGN AND DOMESTIC OPERATIONS AND EXPORT
SALES
Not applicable.
<PAGE>
ITEM 2. PROPERTIES
Unity's executive offices are located at 245 Fifth Avenue, New York,
New York where it uses approximately 500 square feet of office space and
premises occupied by Unity Venture Capital Associates Ltd. ("Unity VCA"), a
concern which is an affiliate of certain of Unity's officers and directors. See
Item 13 hereof.
ITEM 3. LEGAL PROCEEDINGS
Unity is not a party to any legal proceedings which may have a
material adverse effect upon Unity, its assets or its properties.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There were no matters submitted to a vote of security holders during
the fourth quarter of the fiscal year ended July 31, 1997.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON STOCK
AND RELATED STOCKHOLDER MATTERS
(a) Unity's Common Stock, Class A Redeemable Common Stock Purchase
Warrants ("Class A Warrants") and Class B Redeemable Common Stock Purchase
Warrants ("Class B Warrants") are each quoted on the OTC Bulletin Board under
the respective symbols "UFAC", "UFACW" and "UFACZ". The following table sets
forth the range of the high and low bid quotations on the OTC Bulletin Board for
the periods indicated:
<TABLE>
<CAPTION>
CLASS A CLASS B
COMMON STOCK WARRANTS WARRANTS
THREE MONTHS --------------------- ---------------------- -----------------------
ENDED HIGH LOW HIGH LOW HIGH LOW
------------ ---- --- ---- --- ---- ---
<S> <C> <C> <C> <C> <C> <C>
January 31, 1997* 4-3/4 4-3/8 1-1/4 7/8 1-1/4 3/4
April 30, 1997 4-13/16 4-3/8 1-1/8 3/8 7/8 1/4
July 31, 1997 4-7/8 4-7/16 1-1/4 5/16 7/8 1/4
</TABLE>
- -------------------
* Unity's securities began separate trading on November 21, 1996.
2
<PAGE>
The above quotations represent prices between dealers and do not include retail
mark up, markdown or commission. They do not necessarily represent actual
transactions.
(b) As of October 27, 1997, there were 33, 5 and 5 record holders of the
Common Stock, Class A Redeemable Warrants and Class B Redeemable Warrants,
respectively.
(c) Unity has not declared any cash dividends on its Common Stock and has
no intention to pay cash dividends in the foreseeable future.
ITEM 6. SELECTED FINANCIAL DATA
The following tables should be read in conjunction with the financial
statements of Unity and the notes thereto appearing elsewhere in this Annual
Report on Form 10-K. The selected financial data of Unity has been derived from
the financial statements of Unity, which have been audited by Arthur Andersen
LLP, independent public accountants, as indicated in their report included
elsewhere herein.
STATEMENTS OF OPERATIONS DATA:
<TABLE>
<CAPTION>
PERIOD FROM PERIOD FROM
MAY 30, 1996 MAY 30, 1996
(DATE OF INCEPTION) (DATE OF INCEPTION)
YEAR ENDED TO TO
JULY 31, 1997 JULY 31, 1996 JULY 31, 1997
------------- ------------- -------------
<S> <C> <C> <C>
Revenues $ - $ - $ -
Net income (loss) 6,637 (15,000) ( 8,363)
Earnings (loss) .01 ( .02)
per common share
Weighted average
common shares 1,515,000 625,000
BALANCE SHEET DATA:
JULY 31,
-------------------------------
1997 1996
----------- -----------
Total assets $ 6,465,021 $ 250,563
Total liabilities $ 71,209 $ 265,500
Shareholders' equity (deficit) $ 5,154,432 $ ( 14,937)
</TABLE>
3
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Unity was incorporated in May 1996 for the purpose of raising money to
fund a vehicle to effect a Business Combination with an Acquired Business. On
November 12, 1996, Unity's registration statement under the Securities Act of
1933, as amended, covering 1,250,000 units, each unit consisting of one share of
Unity's Common Stock, one Class A Redeemable Warrant and one Class B Redeemable
Warrant at an initial public offering price of $6.00 per unit, was declared
effective by the Securities and Exchange Commission. Unity derived $7,500,000
from the IPO prior to underwriting commissions of $600,000 and expenses of
approximately $497,888, respectively.
For the year ended July 31, 1997, Unity had net income of $6,637,
solely attributable to interest and dividend income of $202,701, offset by
general and administrative expenses of $192,489 and income taxes of $3,575. The
Company incurred a net loss of $15,000 for the period May 30, 1996 (inception)
through July 31, 1996, during which period Unity had no income whatsoever but
had general and administrative expenses of $15,000.
On September 19, 1997, Unity entered into a letter of intent to
effectuate a Business Combination with Prism Systems, Inc., a Chicago-based
computer systems integrator principally engaged in the development and marketing
of voter registration information management systems for public sector use, in
exchange for an approximately 80% equity interest in Unity.
Consummation of the proposed Business Combination is subject, among other
conditions, to the negotiation and execution of a definitive merger agreement
and approval by Unity's public stockholders. There can be no assurance that the
proposed Business Combination will be successfully consummated.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Reference is made to pps. F-1 through F-11 comprising a portion of this
Annual Report on Form 10-K.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not Applicable.
4
<PAGE>
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The current directors and executive officers of Unity are as follows:
NAME AGE POSITION
Lawrence Burstein 54 President, Treasurer and
Director
John Cattier 65 Director
Barry Ridings 45 Director
Norman Leben 37 Secretary and Director
LAWRENCE BURSTEIN has been President, Treasurer and a director of
Unity since its inception. For approximately ten years prior thereto, Mr.
Burstein was the President, a director and principal stockholder of Trinity
Capital Corporation, a private investment banking concern ("Trinity"). Trinity
ceased operations upon the formation of Unity VCA. Since March 1996, Mr.
Burstein has been Chairman of the Board and a principal shareholder of Unity
VCA. Mr. Burstein is a director of four public companies, being, respectively,
THQ Inc., which designs and markets Nintendo and Sega games, Brazil Fast Food
Corp., the owner and operator of the second largest fast food restaurant chain
in Brazil, CAS Medical Systems, Inc., engaged in the manufacture and marketing
of blood pressure monitors and other medical products principally for the
neonatal market, and The MNI Group Inc., engaged in the marketing of specially
formulated medical foods. Mr. Burstein received an L.L.B. from Columbia Law
School.
JOHN CATTIER has been a director of Unity since its inception. Since
May 1996, Mr. Cattier has been a director and shareholder of Unity VCA. Mr.
Cattier has been an independent consultant since January 1985. From 1957 to
December 1984, Mr. Cattier was associated with White Weld & Co., investment
bankers, serving as a general partner, and with Credit Suisse White Weld (which
subsequently became Credit Suisse First Boston), investment bankers, in various
capacities, Mr. Cattier, who was both a director and stockholder of Trinity for
at least five years prior to its cessation of operations, is a director of
Pacific Assets Trust PLC, a United Kingdom investment trust, and Chairman of the
Board of Directors of Heptagon Investments Limited, an investment company
("Heptagon"). Mr. Cattier received a B.A. from Yale University.
5
<PAGE>
BARRY RIDINGS has been a director of Unity since its inception. Since
March 1990, Mr. Ridings has been a Managing Director of BT Alex. Brown
Incorporated, investment bankers. From June 1986 to March
1990, Mr. Ridings was a Managing Director of Drexel
Burnham Lambert, investment bankers. Mr. Ridings is a
director of SubMicron Systems Corporation, a semi-conductor capital equipment
manufacturer, Transcor Waste Services Corp., a waste management company, Noodle
Kidoodle, Inc., an operator of specialty toy stores, New Valley Corp., formerly
known as Western Union, Search Capital Group, an auto finance company, Telemundo
Group, a Spanish language television network, and Norex Industries Inc., a
shipping company. Mr. Ridings received an M.B.A. from Cornell University.
NORMAN LEBEN has been Secretary and a director of Unity since its
inception. Mr. Leben is, and since 1988 has been, a partner of Dalessio Millner
& Leben ("DML"), certified public accountants. Prior thereto and from 1985, Mr.
Leben was engaged in the acquisition, management, syndication and operation of
real estate and other emerging marketing businesses. Prior to 1985, Mr. Leben
was employed by Laventhol & Horwath. Mr. Leben received a B.B.A. from George
Washington University.
All directors hold office until the next annual meeting of
stockholders and the election and qualification of their successors. Directors
receive no compensation for serving on the Board of Directors other than
reimbursement of reasonable expenses incurred in attending meetings. Officers
are elected annually by the Board of Directors and serve at the discretion of
the Board. Mr. Burstein devotes approximately 30% of his time to the affairs of
Unity. Unity has not entered into employment agreements with either of its
officers.
ITEM 11. EXECUTIVE COMPENSATION
(a) CASH COMPENSATION
Unity's officers receive no compensation for serving as officers other
than accountable reimbursement for any reasonable business expenses incurred in
connection with activities undertaken on Unity's behalf.
(b) COMPENSATION PURSUANT TO PLANS
Unity's 1996 Stock Option Plan (the "1996 Plan") was adopted by both
of Unity's Board of Directors and by a majority in interest of Unity's
stockholders on May 30, 1996. The 1996 Plan provides for the granting of
187,500 options which are intended to qualify either as incentive stock options
("Incentive Stock Options") within the meaning of Section 422 of the Internal
Revenue
6
<PAGE>
Code of 1986 or as options which are not intended to meet the requirements of
such section ("Nonstatutory Stock Options"). The total number of shares of
Common Stock reserved for issuance under the 1996 Plan is 187,500. Options to
purchase shares may be granted under the 1996 Plan to persons who, in the case
of Incentive Stock Options, are employees (including officers) of Unity, or, in
the case of Nonstatutory Stock Options, are employees (including officers) or
non-employee directors of Unity. The exercise price of all Incentive Stock
Options granted under the 1996 Plan must be at least equal to the fair market
value of such shares on the date of the grant or, in the case of Incentive Stock
Options granted to the holder of ten percent or more of Unity's Common Stock, at
least 110% of the fair market value of such shares on the date of grant. The
maximum exercise period for which Incentive Stock Options may be granted is ten
years from the date of grant (five years in the case of an individual owning
more than 10% of Unity's Common Stock).
No options have been granted under the 1996 Plan to date.
(c) OTHER COMPENSATION
None.
(d) COMPENSATION OF DIRECTORS
Unity's directors presently receive no compensation for their services
as such.
(e) TERMINATION OF EMPLOYMENT AND CHANGE OF CONTROL
ARRANGEMENTS
None.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT
The following table sets forth information as of October 27, 1997,
based on information obtained from the persons named below, with respect to the
beneficial ownership of shares of Unity's Common Stock by (i) each person known
by Unity to be the owner of more than 5% of its outstanding shares of Common
Stock, (ii) each director and (iii) all officers and directors as a group.
Except as indicated in the footnotes to the table, the persons named in the
table have sole voting and investment power with respect to all shares of Common
Stock shown as beneficially owned by them.
7
<PAGE>
AMOUNT AND
NATURE OF PERCENTAGE
NAME AND ADDRESS OF BENEFICIAL OF OUTSTANDING
BENEFICIAL OWNER OWNERSHIP(1)(2) SHARES OWNED(2)
Lawrence Burstein 175,000(3) 9.3%
245 Fifth Avenue
New York, NY 10016
John Cattier 140,500(3) 7.5%
Achlain Invermoriston
Invernesshire
IV3 6YN, United Kingdom
Barry Ridings 6,000 *
21 Lilac Lane
Princeton, NJ 08540
Norman Leben 40,000(3) 2.1%
245 Fifth Avenue
New York, NY 10016
All officers and 311,500(3)(4) 16.6%
directors as a group
(4 persons)
- -----------------
* Less than 1% of the outstanding Common Stock.
(1) Unless otherwise noted, Unity believes that all persons named in the table
have sole voting and investment power with respect to all shares of Common
Stock beneficially owned by them.
(2) Does not include shares issuable upon exercise of the Directors' Warrants
(as hereinafter defined) which are beneficially owned by each of the
persons named in the above table but which are not exercisable until the
consummation of a Business Combination.
(3) Includes 25,000 shares of Common Stock owned by Unity VCA, over which
shares Messrs. Burstein, Leben and Cattier share voting and investment
power.
(4) Includes (i) 75,000 shares held by Heptagon and (ii) 1,500 shares held by
an affiliate of Heptagon. Mr. Cattier is Chairman of Heptagon's board of
directors and exercises voting and dispositive control over approximately
7.6% of Heptagon's shares of capital stock. Mr. Cattier disclaims any
voting or dispositive power over these shares. Also includes 39,000 shares
owned by Cricket Services, Ltd. ("Cricket"), over which shares Mr. Cattier
exercises voting and dispositive control. Both Heptagon and Cricket are
private investment companies.
8
<PAGE>
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In June 1996, Unity issued an aggregate of 625,000 shares of Common
Stock at a price of $.0001 per share, as follows: 25,000 shares to Unity VCA;
150,000 shares to Mr. Burstein; 15,000 shares to Mr. Leben; an aggregate of
76,500 shares to Heptagon and its affiliate; 39,000 shares to Cricket; 6,000
shares to Barry Ridings; and 313,500 shares to 24 other persons.
In June 1996, the Company issued 58,334, 58,333, 58,333 and 25,000
Class A and Class B Warrants to each of, respectively, Messrs. Burstein, Leben,
Cattier and Ridings (collectively, the "Directors' Warrants"), in consideration
for future services to be rendered by such persons on behalf of Unity. The
Directors' Warrants are identical to the Company's Series A and Series B
Warrants offered and sold in the IPO but are not redeemable by Unity and may not
be transferred until the consummation of a Business Combination.
Unity has been obligated to pay Unity VCA, since June 1, 1996, a
monthly fee of $7,500 for general and administrative services pursuant to an
agreement which may be cancelled by either party upon 30 days' prior written
notice. Such fee includes the use of approximately 500 square feet of office
space in premises occupied by Unity VCA. DML, an accounting firm which is an
affiliate of Mr. Leben, affords Unity VCA the use of such space at a monthly
rental of $2,000. Messrs. Burstein, Cattier and Leben are each directors and
shareholders of Unity VCA.
Unity VCA had made non-interest demand loans aggregating approximately
$50,000 to Unity as of the IPO date to cover expenses incurred by Unity in
connection with the IPO. Unity repaid these loans out of the proceeds of the
IPO.
DML has performed bookkeeping, tax and accounting services for certain
of the "blank check" companies of which Messrs. Burstein, Cattier and Ridings,
have been directors and shareholders from their dates of inception through the
consummation of their respective Business Combinations and performs similar
services for Unity at an aggregate cost of $14,275 for the year ended July 31,
1997. DML may also be paid to engage in financial "due diligence" activities
for Unity in connection with its evaluation of prospective Acquired Businesses
for a Business Combination.
9
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES
AND REPORTS ON FORM 8-K
(a) FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES:
(i) FINANCIAL STATEMENTS
Report of Independent Public Accountants
Balance Sheets - July 31, 1997 and 1996
Statements of Operations for the year ended
July 31, 1997, the period May 30, 1996 (date of inception)
through July 31, 1996 and the cumulative amounts from
inception
Statement of Changes in Stockholders' Equity
(Deficit) for the year ended July 31, 1997, and for the
period May 30, 1996 (date of inception) through July 31, 1996
Statements of Cash Flows for the year ended
July 31, 1997, the period May 30, 1996 (date of inception)
through July 31, 1996 and the cumulative amounts from
inception
Notes to Financial Statements
(ii) FINANCIAL STATEMENT SCHEDULES
All financial statement schedules are omitted because the
conditions requiring their filing do not exist or the information
required thereby is included in the financial statements filed,
including the notes thereto.
(b) REPORTS ON FORM 8-K
None.
(c) EXHIBITS
3.1 Restated Certificate of Incorporation(1)
3.2 By-Laws(1)
4.1 Form of certificate evidencing shares of Common Stock(1)
4.2 Form of certificate evidencing Class A Redeemable Warrants(1)
10
<PAGE>
4.3 Form of certificate evidencing Class B Redeemable Warrants(1)
4.4 Form of Unit Purchase Option between Unity and the Underwriters of the
IPO(1)
4.5 Form of Warrant Agreement between Unity and American Stock Transfer &
Trust Company(1)
10.1 Stock Option Plan(1)
10.2 Form of Trust Agreement by and between Unity and The Bank of New
York(1)
10.3 Form of Insider's Letter(1)
10.4 Form of Escrow Agreement by and among Unity, Lawrence Burstein, John
Cattier, Cricket Services, Ltd., Barry Ridings, Norman Leben, Unity
Venture Capital Associates Ltd. ("Unity") and American Stock Transfer
& Trust Company(1)
10.5 General and Administrative Services Agreement, dated as of May 30,
1996 by and between Unity and Unity Capital Corp.(1)
10.6 Form of Officer/Director Warrant Purchase Agreement with the
Representative of the IPO Underwriters(1)
- -------------------
(1) Incorporated by reference to an exhibit filed as part of Unity's
Registration Statement on Form S-1, File No. 333-11165), declared effective
on November 12, 1996.
11
<PAGE>
Report of Independent Public Accountants
To Unity First Acquisition Corp.:
We have audited the accompanying balance sheets of Unity First Acquisition
Corp. (a Delaware corporation in the development stage) as of July 31, 1997
and 1996, and the related statements of operations, changes in shareholders'
equity (deficit) and cash flows for the year ended July 31, 1997, for the
period from inception (May 30, 1996) to July 31, 1996, and for the period
from inception to July 31, 1997. These financial statements are the
responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
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 Unity First Acquisition
Corp. as of July 31, 1997 and 1996, and the results of its operations and its
cash flows for the year ended July 31, 1997, for the period from inception to
July 31, 1996, and for the period from inception to July 31, 1997, in
conformity with generally accepted accounting principles.
/s/ ARTHUR ANDERSEN LLP
New York, New York
September 19, 1997
F-1
<PAGE>
UNITY FIRST ACQUISITION CORP.
(a development stage entity)
BALANCE SHEETS
================================================================================
ASSETS
------
July 31,
-------------------------
1997 1996
---------- -----------
CASH AND CASH EQUIVALENTS $ 266,533 $ 563
RESTRICTED CASH AND INVESTMENTS 6,198,488 -
DEFERRED REGISTRATION COSTS - 250,000
---------- -----------
TOTAL ASSETS $6,465,021 $ 250,563
========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
----------------------------------------------
LIABILITIES:
Accrued expenses $ 67,634 $ 225,000
Income taxes payable 3,575 -
Advances from affiliate - 40,500
---------- -----------
TOTAL LIABILITIES 71,209 265,500
---------- -----------
COMMITMENTS AND CONTINGENCIES
COMMON STOCK, $.0001 par value,
249,875 shares subject to possible
conversion, at conversion value 1,239,380 -
--------- -----------
STOCKHOLDERS' EQUITY (DEFICIT):
Preferred stock, $.01 par value,
5,000 shares authorized, no shares
issued or outstanding - -
Common stock, $.0001 par value,
20,000,000 shares authorized, 1,625,125
and 625,000 shares issued and outstanding
(excluding 249,875 shares subject
to possible conversion) 163 63
Additional paid-in capital 5,162,632 -
Deficit accumulated during the development stage (8,363) (15,000)
---------- -----------
TOTAL STOCKHOLDERS' EQUITY (DEFICIT) 5,154,432 (14,937)
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY (DEFICIT) $6,465,021 $ 250,563
========== ===========
See Accompanying Notes to Financial Statements
F-2
<PAGE>
UNITY FIRST ACQUISITION CORP.
(a development stage entity)
STATEMENTS OF OPERATIONS
================================================================================
For The From May 30, 1996 Cumulative
Year Ended (Date of Inception) Amounts
July 31, 1997 To July 31, 1996 from Inception
------------- ---------------- --------------
REVENUE $ - $ - $ -
--------- --------- ---------
EXPENSES:
General and
administrative 192,489 15,000 207,489
--------- --------- ---------
OTHER INCOME:
Interest and dividends 202,701 - 202,701
--------- --------- ---------
OPERATING INCOME (LOSS) 10,212 (15,000) (4,788)
PROVISION FOR INCOME TAXES 3,575 - 3,575
--------- --------- ---------
NET INCOME (LOSS) $ 6,637 $ (15,000) $ (8,363)
========= ========= =========
NET INCOME (LOSS) PER
COMMON SHARE $ .01 $ (.02)
========= =========
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING 1,515,000 625,000
========= =========
See Accompanying Notes to Financial Statements
F-3
<PAGE>
<TABLE>
<CAPTION>
UNITY FIRST ACQUISITION CORP.
(a development stage entity)
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)
FOR THE PERIOD MAY 30, 1996
(DATE OF INCEPTION) THROUGH JULY 31, 1996
AND THE YEAR ENDED JULY 31, 1997
==================================================================================================================================
Deficit
Additional Accumulated During
Common Stock Paid-In the Development
Shares Par Value Capital Stage Total
------ --------- ------- ------------------ -----
<S> <C> <C> <C> <C> <C>
Issuance of stock to original
founders for cash, at par value 625,000 $ 63 $ - $ - $ 63
Net loss for the period May 30, 1996
(date of inception) through July
31, 1996 - - - (15,000) (15,000)
--------- ----- ---------- -------- ----------
Balance, July 31, 1996 625,000 63 - (15,000) (14,937)
Issuance of units to public 1,250,000 100 5,162,632 - 5,162,732
Net income for the year ended
July 31, 1997 - - - 6,637 6,637
--------- ----- ---------- -------- ----------
Balance, July 31, 1997 1,875,000 $ 163 $5,162,632 $ (8,363) $5,154,432
========= ===== ========== ======== ==========
</TABLE>
See Accompanying Notes to Financial Statements
F-4
<PAGE>
UNITY FIRST ACQUISITION CORP.
(a development stage entity)
STATEMENTS OF CASH FLOWS
================================================================================
<TABLE>
<CAPTION>
For The From May 20, 1996 Cumulative
Year Ended (Date of Inception) Amounts
July 31, 1997 To July 31, 1996 from Inception
------------- ---------------- --------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 6,637 $ (15,000) $ (8,363)
CHANGES IN CERTAIN ASSETS AND LIABILITIES:
Increase in accrued expenses 92,634 - 92,634
Increase in income taxes payable 3,575 - 3,575
--------- --------- ---------
NET CASH PROVIDED BY (USED IN)
OPERATING ACTIVITIES 102,846 (15,000) 87,846
--------- --------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of common stock, net of
offering expenses 6,402,112 63 6,402,175
Advances from affiliate 55,417 40,500 95,917
Repayment to affiliate (95,917) - (95,917)
Deferred registration costs - (25,000) (25,000)
--------- --------- ---------
NET CASH PROVIDED BY FINANCING
ACTIVITIES 6,361,612 15,563 6,377,175
--------- --------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
(Increase) in restricted cash and
investments (6,198,488) - (6,198,488)
--------- --------- ---------
NET INCREASE IN CASH AND CASH
EQUIVALENTS 265,970 563 266,533
CASH AND CASH EQUIVALENTS, beginning
of period 563 - -
--------- --------- ---------
CASH AND CASH EQUIVALENTS, end
of period $ 266,533 $ 563 $ 266,533
========= ========= =========
</TABLE>
See Accompanying Notes to Financial Statements
F-5
<PAGE>
UNITY FIRST ACQUISITION CORP.
(a development stage entity)
NOTES TO FINANCIAL STATEMENTS
================================================================================
NOTE 1 - ORGANIZATION AND OPERATIONS
- ------------------------------------
Unity First Acquisition Corp. (the "Company") was incorporated in the
State of Delaware on May 30, 1996 to serve as a vehicle to effect a
merger, exchange of capital stock, asset acquisition or other similar
business combination (a "Business Combination"). The Company is
currently in the development stage. All activity of the Company to date
relates to its formation, fund-raising, and search to effect a Business
Combination.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
- ---------------------------------------------------
UTILIZATION OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities
and disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
NET INCOME (LOSS) PER COMMON SHARE
Net income (loss) per common share is computed based on the weighted
average number of common shares outstanding and common stock
equivalents, if not anti-dilutive.
In 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards ("SFAS") No. 128, "Earnings per Share".
This statement establishes standards for computing and presenting
earnings per share ("EPS"), replacing the presentation of currently
required primary EPS with a presentation of Basic EPS. For entities
with complex capital structures, the statement requires the dual
presentation of both Basic EPS and Diluted EPS on the face of the
statement of operations. Under this new standard, Basic EPS is computed
based on the weighted average number of shares actually outstanding
during the year. Diluted EPS includes the effect of potential dilution
from the exercise of outstanding dilutive stock options and warrants
into common stock using the treasury stock method. SFAS No. 128 is
effective for financial statements issued for periods ending after
December 15, 1997, and early application is not permitted. The Company
does not expect the adoption of this statement to have a material effect
on its financial position or on the results of operations.
F-6
<PAGE>
UNITY FIRST ACQUISITION CORP.
(a development stage entity)
NOTES TO FINANCIAL STATEMENTS
================================================================================
NOTE 3 - OFFERING OF SECURITIES
- -------------------------------
On November 12, 1996, the Company completed its initial public offering
(the "Offering") consisting of the sale of 1,250,000 units (the
"Units"). Each Unit consists of one share of the Company's Common Stock
("Common Stock"), $.0001 par value, one Class A Redeemable Warrant (the
"A Warrants") and one Class B Redeemable Warrant (the "B Warrants").
Each A Warrant and B Warrant entitles the holder to purchase from the
Company one share of Common Stock at an exercise price of $5.50 and
$7.50, respectively, commencing on the later of a Business Combination
or November 12, 1997. The A Warrants and B Warrants are redeemable,
each as a class, in whole and not in part, at the option of the Company
and with the consent of the managing underwriter ("Underwriter") upon 30
days notice at any time after the Warrants become exercisable, only in
the event that the reported high bid price of the Common Stock is at
least $8.50 per share, with respect to the Class A Warrants, and $10.50
per share, with respect to the Class B Warrants for the 20 consecutive
trading days immediately prior to notice of redemption, at a price of
$.05 per A Warrant or B Warrant. The Warrants are immediately separable
and transferable. In connection with the Offering, the Company granted
the Underwriter an option, exercisable within 45 business days from
November 12, 1996, to purchase up to 187,500 additional Units at $6.00
per unit. This option, which was solely for the purpose of covering
over-allotments, was not exercised by the Underwriter either in whole or
in part prior to its expiration date. None of the A and B Warrants have
been exercised through July 31, 1997.
Net proceeds of the Offering to the Company including the purchase of
warrants by the Underwriter, discussed below, were $6,402,112, after
deducting related expenses. Ninety percent (90%) of the net proceeds
are held in an interest bearing Trust Fund until the earlier of (i)
written notification by the Company of its need for all or substantially
all of the net proceeds for the purpose of implementing or facilitating
the implementation of a Business Combination or (ii) the liquidation of
the Company.
In the event that the Company does not effect a Business Combination
within eighteen months from the date of the Offering, the Company will
be dissolved and the Company will distribute to all Public Stockholders
in proportion to their respective equity interests in the Company, an
aggregate sum equal to the Company's book value, calculated as of the
approval date of such proposal. In this regard, the Company's Initial
Stockholders, including all of the officers and directors of the
Company, have agreed to waive their respective rights to participate in
any such liquidation distribution.
F-7
<PAGE>
UNITY FIRST ACQUISITION CORP.
(a development stage entity)
NOTES TO FINANCIAL STATEMENTS
================================================================================
NOTE 3 - OFFERING OF SECURITIES (Continued)
All of the Company's Initial Stockholders, including all of the officers
and directors of the Company, have agreed to vote their respective
shares of Common Stock in accordance with the vote of the majority of
all non-affiliated future stockholders of the Company with respect to a
Business Combination. In addition, the Common Stock owned by all of the
executive officers and directors of the Company, their affiliates and by
all persons owning 5% or more of the currently outstanding shares of
Common Stock was placed in escrow until the earlier of (i) the
occurrence of a Business Combination or (ii) 18 months from the date of
the Offering. During the escrow period, such stockholders are not able
to sell or otherwise transfer their respective shares of Common Stock,
but will retain all other rights as stockholders of the Company,
including, without limitation, the right to vote such shares of Common
Stock.
In connection with the Offering, the Company sold to the Underwriter and
its designees, for $100, warrants (the "Underwriter's Warrants") to
purchase up to 125,000 Units at an exercise price of $6.60 per Unit.
The Underwriter's Warrants will be exercisable for a period of five
years commencing on November 12, 1996. The Underwriter's Warrants are
not redeemable and have not been exercised.
NOTE 4 - RESTRICTED CASH AND INVESTMENTS
- ----------------------------------------
The Company, pursuant to the terms of its initial public offering ("the
Offering"), placed $6,007,500 as of November 19, 1996, in a trust
account which was primarily invested in a short-term U.S. Government
Security. These funds are subject to release upon the earlier of (i)
written notification by the Company of its need for all or substantially
all of the net proceeds for the purpose of implementing or facilitating
the implementation of a Business Combination or (ii) the liquidation of
the Company.
F-8
<PAGE>
UNITY FIRST ACQUISITION CORP.
(a development stage entity)
NOTES TO FINANCIAL STATEMENTS
================================================================================
NOTE 5 - CAPITAL STOCK
- ----------------------
The Company's Certificate of Incorporation authorizes the issuance of
20,000,000 shares of Common Stock. There are 14,862,500 authorized but
unissued shares of Common Stock available for issuance (after
appropriate reserves for the issuance of Common Stock in connection with
the Class A Redeemable Warrants and Class B Redeemable Warrants, the
Underwriters' UPOs, the executive officers and director Class A Warrants
and Class B Warrants, and the future grants under the Company's 1996
Stock Option Plan). The Company's Board of Directors has the power to
issue any or all of the future grants under the Company's 1996 Stock
Option Plan. The Company's Board of Directors has the power to issue
any or all of the authorized but unissued Common Stock without
stockholder approval.
The Company currently has no commitments to issue any shares of Common
Stock other than as described in Offering; however, the Company will, in
all likelihood, issue a substantial number of additional shares in
connection with a Business Combination. To the extent that additional
shares of Common Stock are issued, dilution to the interests of the
Company's stockholders participating in the Offering will occur.
The Board of Directors of the Company is empowered, without stockholder
approval, to issue up to 5,000 shares of "blank check" preferred stock
(the "Preferred Stock") with dividend, liquidation, conversion, voting
or other rights which could adversely affect the voting power or other
rights of the holders of the Company's Common Stock. To date, no shares
of preferred stock have been issued.
NOTE 6 - RELATED PARTY TRANSACTIONS
- -----------------------------------
The Chairman of the Board of Directors and the President of the Company
are principal shareholders, officers and directors of Unity Venture
Capital Associates Ltd. ("Unity") which owns shares in the Company.
Beginning June 1, 1996, commensurate with the Company's activities
primarily related to the Offering, the Company agreed to pay Unity a
monthly fee of $7,500 for general and administrative services, including
the use of office space in premises occupied by Unity. At July 31,
1996, the Company owed $15,000 (included in advances from affiliate on
the balance sheet) to Unity for administrative services.
Through July 31, 1996, the Company had obtained advances totaling
$25,500 from Unity to cover expenses related to the Offering which were
included in advances from affiliate on the balance sheet at July 31,
1996. These advances were repaid out of the proceeds of the Offering in
1997.
F-9
<PAGE>
UNITY FIRST ACQUISITION CORP.
(a development stage entity)
NOTES TO FINANCIAL STATEMENTS
================================================================================
NOTE 7 - STOCK OPTION PLAN
- --------------------------
On May 30, 1996, the Company's Board of Directors approved a stock
option plan (the "Plan"). The Plan, which is subject to shareholder
approval, provides for issuance of up to 187,500 options (the "Options")
to acquire shares of the Company's Common Stock.
The Options are intended to qualify either as incentive stock options
("Incentive Stock Options") within the meaning of Section 422 of the
Internal Revenue Code of 1986 or as options which are not intended to
meet the requirements of such section ("Nonstatutory Stock Options").
The Options may be granted under the Plan to persons who, in the case of
Incentive Stock Options, are key employees (including officers) of the
Company, or, in the case of Nonstatutory Stock Options, are key
employees (including officers) and nonemployee directors of the Company,
except that Nonstatutory Stock Options may not be granted to a holder of
more than 10% of the total voting power of the Company.
The exercise price of all Incentive Stock Options granted under the Plan
must be at least equal to the fair market value of such shares on the
date of grant or, in the case of Incentive Stock Options granted to the
holder of 10% or more of the Company's Common Stock, at least 110% of
the fair market value of such shares on the date of grant. The exercise
price of all Nonstatutory Stock Options granted under the Plan shall be
determined by the Board of Directors of the Company at the time of
grant. The maximum exercise period for which the Options may be granted
is ten years from the date of grant (five years in the case of Incentive
Stock Options granted to an individual owning more than 10% of the
Company's Common Stock). The aggregate fair market value (determined at
the date of the option grant) of such shares with respect to which
Incentive Stock Options are exercisable for the first time by the holder
of the option during any calendar year shall not exceed $100,000.
The FASB issued Statement of Financial Accounting Standards No. 123,
"Accounting for Stock Based Compensation" ("SFAS 123"), which will
require companies either to reflect in their financial statements or
reflect as supplemental disclosure the impact on earnings and earnings
per share of the fair value of stock based compensation using certain
pricing models for the option component of stock option plans. The
Company, as permitted, will account for the issuance of Stock options in
accordance with APB 25 in its financial statements. As of July 31, 1997,
no options have been granted under the Plan. Disclosure, as required by
SFAS 123, will be made upon the issuance of options.
F-10
<PAGE>
UNITY FIRST ACQUISITION CORP.
(a development stage entity)
NOTES TO FINANCIAL STATEMENTS
================================================================================
NOTE 8 - INCOME TAXES
- ---------------------
Income taxes are accounted for in accordance with Statement of Financial
Accounting Standards No. 109, "Accounting for Income taxes." Under this
method, deferred income taxes are determined based on differences
between the tax bases of assets and liabilities and their financial
reporting amounts at each year end, and are measured based on enacted
tax rates and laws that will be in effect when the differences are
expected to reverse. Valuation allowances are established, when
necessary, to reduce deferred tax assets to the amount expected to be
realized.
NOTE 9 - CONTINGENCY
- --------------------
The Company has agreed to indemnify the Underwriter against certain
liabilities, including liabilities under the Securities Act.
NOTE 10 - SUBSEQUENT EVENT
- --------------------------
On September 19, 1997, the Company entered into a letter of intent to
effectuate a Business Combination with Prism Systems, Inc. ("Prism"), a
Chicago-based computer systems integrator principally engaged in the
development and marketing of voter registration information management
systems for public sector use, in exchange for an approximately 80%
interest in the Company. The Company anticipates that the merger will be
accounted for as a "reverse merger" which would result in Prism being
treated as the purchaser in the transaction. Prism will use the purchase
method of accounting for the transaction and contemplates no resulting
goodwill.
Consummation of the proposed Business Combination is subject to, among
other conditions, the negotiation and execution of a definitive merger
agreement and approval by the Company's public stockholders. There can
be no assurance that the proposed Business Combination will be
successfully consummated.
F-11
<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, in the City of New
York, State of New York, on the 27th day of October, 1997.
UNITY FIRST ACQUISITION CORP.
By: /s/ Lawrence Burstein
-------------------------------
Lawrence Burstein
President
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.
SIGNATURES CAPACITY DATE
---------- -------- ----
President and
Director (Principal
Executive, Financial
and Accounting
/s/ Lawrence Burstein Officer) October 27, 1997
- ----------------------
Lawrence Burstein
- ---------------------- Director
John Cattier
/s/ Barry Ridings Director October 27, 1997
- ----------------------
Barry Ridings
Secretary and
/s/ Norman Leben Director October 27, 1997
- ----------------------
Norman Leben
