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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
(Mark One) / X / QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT of 1934
For the quarterly period ended March 31, 1997
/ / 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: 0-10372
UNIDYNE CORPORATION
(EXACT NAME OF SMALL BUSINESS ISSUER
AS SPECIFIED IN ITS CHARTER)
DELAWARE 23-2154902
(State or other jurisdiction (IRS Employer Identification No.)
of incorporation or organization)
118 PICKERING WAY, SUITE 104, EXTON, PA 19341
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
(610) 363-8237
(ISSUER'S TELEPHONE NUMBER)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 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
--- ---
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS
Check whether the registrant filed all documents and reports required
to be filed by Section 12, 13 or 15(d) of the Exchange Act after the
distribution of securities under a plan confirmed by court.
Yes No
----- -----
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's
classes of common equity, as of latest practicable date: 8,615,314 AS OF MARCH
31, 1997
Transitional Small Business Disclosure Format (check one ): Yes No X
---- ----
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<CAPTION>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
UNIDYNE CORPORATION
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
ASSETS
MARCH 31, DECEMBER 31,
1997 1996
(IN THOUSANDS)
<S> <C> <C>
Current assets:
Cash $237 $46
Accounts receivable 1,993 1,799
Inventory 3,416 3,583
Prepaid expenses 63 57
Deferred income taxes 198 136
--- ---
Total current assets 5,907 5,621
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Property, plant and equipment
Land 160 160
Buildings 3,760 3,800
Machinery and equipment 6,864 6,666
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Total property, plant and equipment 10,784 10,626
Accumulated depreciation (2,007) (1,711)
------- -------
Property, plant and equipment, net 8,777 8,915
Deferred income taxes 221 221
Patents 1,623 1,676
Other assets 801 804
--- ---
Total assets $17,329 $17,237
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $1,728 $2,268
Current portion of long-term debt 530 530
Accrued compensation 598 711
Other accrued liabilities 451 661
Income taxes payable 374 374
--- ---
Total current liabilities 3,681 4,544
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Long-term debt 5,246 4,767
Pension benefit obligations 2,118 2,033
Post retirement benefits other than pensions 3,309 3,238
Deferred revenue 131 ---
Stockholders' equity
Common Stock, $.001 par value, 50,000,000 shares authorized,
8,615,314 shares issued and outstanding 9 9
Preferred Stock, $10 per share liquidation value, $10 par value,
20,000,000 shares authorized, 500,000 issued and outstanding 5,000 5,000
Additional paid-in capital 6,765 6,420
Retained deficit (8,930) (8,774)
------- -------
Total stockholders' equity 2,844 2,655
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Total liabilities and stockholders' equity $17,329 $17,237
======= =======
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The accompanying notes are an integral part of these financial statements.
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<TABLE>
<CAPTION>
UNIDYNE CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
THREE THREE
MONTHS MONTHS
ENDED ENDED
MARCH 31, MARCH 31,
1997 1996
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C>
Net Sales $4,111 $5,126
Cost of sales 2,716 2,820
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Gross income 1,395 2,306
Selling and administrative expense 1,347 1,415
Research and development expense 138 68
--- --
Income (loss) from operations (90) 823
Interest expense 128 275
--- ---
Income (loss) before income taxes (218) 548
Income tax provision (benefit) (62) 271
---- ---
Net income (loss) ($156) $277
====== ====
Primary earnings (loss) per share ($0.03) $0.04
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Weighted average number of Common
Stock and equivalents outstanding 8,533,116 7,240,590
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</TABLE>
The accompanying notes are an integral part of these financial statements.
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<TABLE>
<CAPTION>
UNIDYNE CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
Three Months Three Months
Ended Ended
March 31, March 31,
1997 1996
---- ----
(in thousands)
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) ($156) $278
Adjustments to reconcile net income to
cash flows from operating activities
Depreciation and amortization 369 307
Deferred income taxes (62) -
Changes in-
Accounts receivable, net (195) (53)
Inventories 167 (263)
Prepaid expenses and other assets (22) 24
Accounts payable (540) (9)
Accrued compensation 233 222
Accrued expenses (211) 29
Other liabilities 287 172
--- ---
Net cash provided by (used for) operating activities (130) 707
----- ---
Cash flows for investing activities:
Purchase of property, plant and equipment (159) (56)
Cash flows from financing activities:
Net borrowings on revolving loans 554 ---
Principal payments on long-term debt (74) (457)
---- -----
Net cash provided by (used for) financing activities 480 (457)
--- -----
Net increase in cash 191 194
Cash, beginning of period 46 197
-- ----
Cash, end of period $237 $391
==== ====
Cash paid for:
Interest $126 $136
---- ----
Income taxes 2 68
= ==
</TABLE>
The accompanying notes are an integral part of these financial statements.
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UNIDYNE CORPORATION
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1 - BASIS OF PRESENTATION
In the opinion of the management of the Company, the accompanying
consolidated financial statements reflect all adjustments (consisting only of
normally recurring accruals) which are necessary for a fair presentation of the
Company's results of operation and changes in financial position for the interim
periods presented. These financial statements should be read in conjunction with
the Company's annual report on Form 10-KSB for the year ended December 31, 1996.
NOTE 2 - EQUITY
In 1997 and 1996, the Company established stock option plans (the "Plans")
for certain management and directors, pursuant to which the Company granted
750,000 and 1,100,000 options, respectively. In March 1997, the Company issued
89,954 shares of its Common Stock, par value $.001 per share ("Common Stock")
upon the exercise of a portion of the options under the Plans in exchange for
accrued salaries and fees totaling approximately $345,000.
NOTE 3 - EARNINGS PER SHARE
Earnings (loss) per share is computed on the basis of the weighted average
number of common shares outstanding during the periods. The assumed exercise of
all outstanding stock options has been excluded from the computation of
earnings (loss) per share because the result was antidilutive. Also, the
computation of earnings (loss) per share includes preferred stock dividends of
$87,500 for the three months ended March 31, 1997.
NOTE 4 - NEW ACCOUNTING PRONOUNCEMENTS
In March 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 128 ("SFAS 128") "Earnings Per Share." The
Company will implement the disclosure requirements of SFAS 128 as required.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
ALL AMOUNTS USED HEREIN ARE IN THOUSANDS.
RESULTS OF OPERATIONS
NET SALES. Net sales of $4,111 for the three months ended March 31, 1997
decreased $1,015 or 19.8% as compared with net sales of $5,126 for the three
months ended March 31, 1996. The decrease in the current year period was due
principally to the lower volume of large press drive sales, combined with
decreased net selling prices at the Company's Dynamatic subsidiary as compared
with the prior year period.
GROSS INCOME. Consolidated gross income of $1,395 or 33.9% to sales for the
first quarter of 1997 decreased 39.5% compared with consolidated gross income of
$2,306 or 45.0% to sales for the first quarter of 1996. The decrease is
primarily due to lower sales in the current year quarter which resulted in
higher unabsorbed burden and lower net selling prices in the current year
period.
SELLING AND ADMINISTRATIVE EXPENSE. Selling and administrative expense, as a
percent to net sales, increased to 32.8% to sales in the first quarter of 1997
as compared with 27.6% to sales in the prior year quarter. The increase is
principally due to lower net sales, partially offset by a slight decrease in
administrative expenses.
RESEARCH AND DEVELOPMENT EXPENSE. Research and development expense of $138
or 3.4% to sales in the current year quarter increased $70 or 102.9% as compared
with $68 or 1.3% to sales in the prior year quarter. The
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increase is primarily a result of expenditures relative to development of the
Company's emission testing products.
LIQUIDITY AND CAPITAL RESOURCES
The Company has financed its operating requirements and capital expenditures
through cash flows from operations and financing arrangements.
At March 31, 1997, the Company's working capital was approximately $2,226,
compared to working capital of approximately $1,077 at December 31, 1996. This
increase is principally due to borrowings on long-term debt which were used to
reduce current liabilities and the exchange of accrued salaries and fees for
shares of the Company's Common Stock. At March 31, 1997, the Company had
approximately $63 available under its existing line-of-credit arrangements.
PART II. OTHER INFORMATION
ITEM 2. CHANGES IN SECURITIES.
Effective March 10, 1997, the Company granted to certain officers,
directors and employees options to purchase a total of 750,000 shares of the
Company's Common Stock at a price of $6.00 per share. The options are
exercisable at any time during the five years after grant. During the first
quarter of 1997, two officers exercised options to purchase a total of 39,856
shares of Common Stock in exchange for approximately $129,500 in accrued
salary. In addition, three directors who were owed approximately $216,000 in
legal fees and consulting fees exercised options to purchase a total of 50,098
shares of Common Stock in exchange for such fees owed.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) EXHIBIT NO. DESCRIPTION
- --------------- -----------
19.6* The Company filed a report on Form 8-K on January 15, 1997
describing the Company's acquisition of Maxwell Dynamometer
Systems, Inc. The Company filed the report on Form 8-KA on
March 31, 1997 providing financial information relating to
that acquisition
27.1 Financial data schedule
*Filed previously and incorporated herein by reference
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SIGNATURES
In accordance with the requirements of the Securities Exchange Act of 1934, the
registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
UNIDYNE CORPORATION
Date: May 15, 1997 /s/ C. Eugene Hutcheson
------------------------------------------
C. Eugene Hutcheson, Chairman,
Chief Executive Officer and 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.
Date: May 15, 1997 /s/ C. Eugene Hutcheson
------------------------------------------
C. Eugene Hutcheson, Chairman,
Chief Executive Officer and President
Date: May 15, 1997 /s/ Timothy M. Flynn
------------------------------------------
Timothy M. Flynn, Senior Vice President
and Chief Financial Officer
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> MAR-31-1997
<CASH> 237
<SECURITIES> 0
<RECEIVABLES> 2,004
<ALLOWANCES> 11
<INVENTORY> 3,416
<CURRENT-ASSETS> 5,907
<PP&E> 10,784
<DEPRECIATION> 2,007
<TOTAL-ASSETS> 17,329
<CURRENT-LIABILITIES> 3,681
<BONDS> 5,246
0
5,000
<COMMON> 9
<OTHER-SE> (2,165)
<TOTAL-LIABILITY-AND-EQUITY> 17,329
<SALES> 4,111
<TOTAL-REVENUES> 4,111
<CGS> 2,716
<TOTAL-COSTS> 1,347
<OTHER-EXPENSES> 138
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 128
<INCOME-PRETAX> (218)
<INCOME-TAX> (62)
<INCOME-CONTINUING> (156)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (156)
<EPS-PRIMARY> (.03)
<EPS-DILUTED> 0
</TABLE>
