<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB/A
(Mark One) / X / QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT of 1934
For the quarterly period ended June 30, 1998
/ / 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 (IRS Employer
jurisdiction 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: 9,335,352 as of June
30, 1998.
Transitional Small Business Disclosure Format (check one ): Yes No X
---- -----
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<PAGE> 2
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
UNIDYNE CORPORATION CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
<TABLE>
<CAPTION>
June 30, December 31,
ASSETS 1998 1997
---- ----
<S> <C> <C>
Current assets:
Cash $ 525 $ 928
Accounts receivable, less allowance of $273 4,185 3,794
Inventory 9,969 9,293
Prepaid expenses 597 415
Other current assets 148 32
Deferred and other refundable taxes 1,094 1,094
-------- --------
Total current assets 16,519 15,556
Property, plant and equipment
Land 160 160
Leasehold improvements 310 304
Buildings 3,677 3,678
Machinery and equipment 9,179 8,788
-------- --------
Total property, plant and equipment 13,326 12,930
Accumulated depreciation (4,321) (3,697)
-------- --------
Property, plant and equipment, net 9,005 9,233
Deferred income taxes 512 282
Goodwill 2,391 2,479
Patents 1,466 1,490
Other assets 613 760
-------- --------
4,982 5,011
TOTAL ASSETS $ 30,506 $ 29,800
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 4,844 $ 4,726
Short-term debt 4,209 3,220
Accrued compensation 513 641
Income taxes payable 575 1,079
Due to funding sources - leases - 0 - 647
Deferred revenue 722 433
Other accrued liabilities 1,874 1,112
-------- --------
Total current liabilities 12,737 11,858
Long-term debt 4,001 4,382
Post-retirement benefits - Pensions 2,287 2,116
Post-retirement benefits - Health 3,732 3,552
-------- --------
10,020 10,050
Stockholders' equity:
Common Stock $.001, par value, 50,000,000 shares authorized, 9,335,352 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 5.525 5,350
Additional paid-in capital 13,127 13,127
Treasury stock (7) (7)
Retained deficit (10,905) (10,587)
-------- --------
TOTAL STOCKHOLDERS' EQUITY 7,749 7,892
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 30,506 $ 29,800
======== ========
</TABLE>
The accompanying notes are an integral part of these financial
statements.
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<PAGE> 3
UNIDYNE CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30 June 30
1998 1997 1998 1997
(in thousands, except per share data)
<S> <C> <C> <C> <C>
Net Sales $7,299 $3,784 $13,566 $7,895
Cost of sales 4,585 2,639 8,430 5,356
------- ------- -------- -------
Gross income 2,714 1,145 5,136 2,539
Selling and administrative expense 2,245 1,503 4,912 2,850
Research and development expense 97 114 122 252
--------- -------- --------- --------
Income (loss) from operations 372 (472) 102 (563)
Interest expense 181 114 340 242
-------- -------- --------- --------
Income (loss) before income taxes 191 (586) (238) (805)
Income tax provision (benefit) 76 (219) (95) (282)
--------- -------- -------- --------
Net income (loss) 115 ($ 367) (143) ($523)
Preferred dividends (88) (88) (175) (175)
-------- -------- -------- --------
Profit (loss) applicable to common stockholders 27 (454) (318) (698)
--------- ------- -------- --------
Basic and diluted earnings (loss) per share $0.00 ($0.05) ($0.03) ($0.08)
Weighted average number shares of common
stock outstanding 9,335,352 8,533,116 9,335,352 8,533,116
</TABLE>
The accompanying notes are an integral part of these financial
statements.
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<PAGE> 4
UNIDYNE CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Six Months Ended
June 30
1998 1997
(in thousands)
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) ($143) ($523)
Adjustments to reconcile net income to
cash flows from operating activities
Depreciation and amortization 721 745
Deferred taxes (387) (62)
Changes in-
Accounts receivable, net (391) (381)
Inventories (677) (482)
Prepaid expenses and other assets (532) (51)
Accounts payable 118 147
Accrued compensation (128) 321
Accrued expenses 460 (394)
Other liabilities 294 451
--- ---
Net cash provided by (used for) operating activities (615) (229)
----- -----
Cash flows for investing activities:
Purchase of property, plant and equipment (397) (225)
----- -----
Cash flows from financing activities:
Net borrowings on revolving loans 1,602 454
Issuance of Common Stock - 0 - 308
Principal payments on long-term debt (993) (179)
----- -----
Net cash provided by (used for) financing activities 609 583
--- ---
Net decrease in cash ($403) $129
------ ----
Cash, beginning of period $928 $46
Cash, end of period $525 $175
Cash paid for:
Interest 341 242
Income taxes - 0 - 2
</TABLE>
The accompanying notes are an integral part of these financial statements.
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<PAGE> 5
UNIDYNE CORPORATION
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
(all $ amounts in 000's)
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, 1997.
NOTE 2 - 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 has implemented 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 were $13,566 for the six months ended June 30,
1998, an increase of $5,671 or 71.8%, as compared with net sales of $7,895 for
the six months ended June 30, 1997. Net sales of $7,299 in the second quarter
of 1998 increased $3,515, or 92.9%, as compared with net sales of $3,784 in the
second quarter of 1997. The increase in the current year period was due
principally to increased sales in the emission testing market and the inclusion
of sales of Sabina Industries Incorporated, which was acquired by the Company,
effective September 30, 1997.
Gross income. Consolidated gross income was $5,136, or 37.9% of
sales, for the six months ended June 30, 1998, compared with consolidated gross
income of $2,539, or 32.2% of sales, for the six months ended June 30, 1997.
In the second quarter of 1998, consolidated gross income was $2,714, or 37.2%
of sales, compared with consolidated gross income of $1,145 or 30.3% of sales,
in the second quarter of 1997. The increase in consolidated gross income
resulted from sales in the emission testing market, the inclusion of the sales
of Sabina Industries Incorporated, and improved manufacturing efficiencies.
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<PAGE> 6
Selling and administrative expense. Selling and administrative
expense, as a percent to net sales, decreased to 30.7% and 36.2% for the second
quarter and first six months of 1998, compared to 39.7% and 36.1% for the
second quarter and first six months of 1997, respectively. The decrease is
principally due to higher net sales combined with lower selling expenses
relative to the Company's emission testing products and the effect of cost
cutting measures instituted by the Company in the first quarter of 1998.
Research and development expense. Research and development expenses
were $122, or 0.1% of sales, for the six months ended June 30, 1998, as
compared with $252, or 3.2% of sales, in the six months ended June 30, 1997.
Research and development expenses relative to development of the Company's
emission testing products, which are now fully developed, decreased
substantially between the periods.
LIQUIDITY AND CAPITAL RESOURCES
The Company has financed its operating requirements and capital
expenditures through cash flows from operations and financing arrangements.
At June 30, 1998 the Company's working capital was approximately
$3,782, compared to working capital of approximately $3,698 at December 31,
1997. The increase in accounts receivables and inventory more than offset
short-term borrowings on revolving debt used to fund repayment of long-term
debt, resulting in a slight increase in working capital. At June 30, 1998, the
Company had approximately $500 available under its existing line-of-credit
arrangements.
On April 2, 1998 the Company secured an Operating Line of Credit with
Union Bank of California, N.A., in the amount of $1,250 for its subsidiary,
Sabina Industries. The maturity is June 1, 1999 and is secured by the Accounts
Receivable of Sabina. On April 2, 1998 the Company also secured a term loan
with Union Bank of California, N.A., in the amount of $200 for its subsidiary,
Sabina Industries. The maturity date is June 1, 2001.
In 1998, the Company expects to purchase up to $300 of machinery and
equipment for use in the manufacture of the ETS product line and the upgrading
of its computer network. These purchases will be funded through a combination
of installment debt, leases and operating cash flow.
The Company's subsidiary, Dynamatic Corporation, has had its line of
credit extended from April 30, 1998 to July 31, 1998. This line for $3,000 is
through Johnson Bank of Racine, Wisconsin.
PART II. OTHER INFORMATION
Item 3. LEGAL PROCEEDINGS
On June 29, 1998 the Company terminated with cause an employee who
subsequently, on June 30, 1998 filed suit against the company for alleged
breach of contract and alleged violations of the Pennsylvania Payment and
Collection Law. The Company has denied allegations of wrongdoing and is
vigorously defending the action.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None
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<PAGE> 7
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: /s/ C. Eugene Hutcheson
------------ ---------------------------------
C. Eugene Hutcheson, Chairman
and Chief Executive Officer
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: /s/ C. Eugene Hutcheson
------------ ---------------------------------
C. Eugene Hutcheson, Chairman
and Chief Executive Officer
Date: /s/ Francis T. Prendergast
------------ ---------------------------------
Francis T. Prendergast, Chief
Financial Officer
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<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> APR-01-1998
<PERIOD-END> JUN-30-1998
<CASH> 525
<SECURITIES> 0
<RECEIVABLES> 4,458
<ALLOWANCES> (273)
<INVENTORY> 9,969
<CURRENT-ASSETS> 16,519
<PP&E> 13,326
<DEPRECIATION> (4,321)
<TOTAL-ASSETS> 30,506
<CURRENT-LIABILITIES> 13,083
<BONDS> 0
0
5,525
<COMMON> 9
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 30,852
<SALES> 7,299
<TOTAL-REVENUES> 7,299
<CGS> 4,585
<TOTAL-COSTS> 4,585
<OTHER-EXPENSES> 2,342
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 181
<INCOME-PRETAX> 191
<INCOME-TAX> 76
<INCOME-CONTINUING> 115
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 115
<EPS-PRIMARY> 0.00
<EPS-DILUTED> 0.00
</TABLE>
