SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10KSB/A
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended December 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 No. 33-55254-31
UNIDYN, CORP.
(Exact name of small business issuer as specified in its charter)
NEVADA 87-0438639
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
8621 North Seventy Ninth Avenue
Peoria, Arizona 85345
(Address of principal executive offices) (Zip Code)
Issuer's telephone number, including area code (602) 979-2800
Securities registered pursuant to Section 12(b) of the Act: NONE
Securities registered pursuant to Section 12(g) of the Act: NONE
Indicate by check mark whether the issuer (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. [X] Yes[ ] 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-KSB or any amendment to
this Form 10-KSB. [X]
Issuer's revenues for 1997 were $2,237,367.
As of September 16, 1998, the approximate market value of the voting stock held
by non-affiliates of the registrant was $2,720,000, based on an average bid
price of $.34 per share.
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Class Outstanding as of September 17, 1998
- ------------------------------------ ------------------------------------
$.001 PAR VALUE CLASS A COMMON STOCK 32,000,000 SHARES
DOCUMENTS INCORPORATED BY REFERENCE
None
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This Report contains, and incorporates by reference, certain
forward-looking statements (as such term is defined in the Private Securities
Litigation Reform Act of 1995 and the rules promulgated pursuant to the
Securities Act of 1933, as amended, and the Securities Exchange Act of 1934, as
amended) that are based on the beliefs of the Company's management, as well as
assumptions made by and information currently available to the Company's
management. Such forward-looking statements are subject to the safe harbor
created by the Private Securities Litigation Reform Act of 1995. When used in
this document and in the documents incorporated herein by reference, the words
"anticipate," "plan," "believe," "estimate," "expect," and similar expressions,
as they relate to the Company or its management, are intended to identify such
forward-looking statements. Such statements reflect the current views of the
Company or its management with respect to future events and are subject to
certain risks or uncertainties and assumptions. Should any of these risks or
uncertainties materialize, or should underlying assumptions prove incorrect, the
Company's actual results, performance or achievements could differ materially
from those expressed in, or implied by, any such forward-looking statements.
Factors that could cause or contribute to such material differences include
those discussed elsewhere in this Report and in the documents incorporated
herein by reference. The use of such forward-looking statements should not be
regarded as Representations by the Company or any other person that the future
events, plans or expectations contemplated by the Company will be achieved. The
Company undertakes no obligation to release any updates or revisions to any such
forward-looking statements that may reflect events or circumstances occurring
after the date of this Report.
PART I
ITEM 1. Business.
The Company was incorporated under the laws of Utah on May 2, 1986 as
Macaw, Inc. The Company was subsequently reorganized under the laws of Nevada on
October 12, 1995 by merging into Macaw Capital, Inc., a Nevada corporation. The
Company's reorganization plan was formulated for the purpose of changing the
state of domicile and provided that the Nevada corporation would acquire all of
the contractual obligations, shareholder rights and identity of the Utah
corporation. Although the Utah corporation was dissolved before the merger date
and the formation of the surviving Nevada corporation, the Company believes that
the Utah corporation continued its corporate existence for purposes of winding
up its business and affairs, which consisted of merging into the Nevada
corporation. However, in the event the Company was not deemed to have succeeded
to the interest of the Utah corporation, such a determination could adversely
impact the shareholders' interests, the Company and the business of the Company.
On December 3, 1997 the Company's name was changed to UniDyn, Corp. The
Company has not engaged in any operations, except as otherwise stated below. Its
activities prior to December 31, 1997 were mostly limited to the sale of shares
to Capital General Corporation, the gifts of shares to giftees, and the issuance
of stock in December to acquire assets of another corporation.
On December 1, 1997, the Company entered an agreement with Universal
Dynamics, Inc., an Arizona corporation. Universal Dynamics agreed to transfer
certain of its assets including equipment, inventory, accounts receivable,
software and other intangible assets related to the business of vibration
testing systems in exchange for the issuance of 180,000 shares of the Company's
common stock.
On December 31, 1997, the Company closed its transaction with Universal
Dynamics. Universal Dynamics designs and manufactures vibration control systems,
which are sold through multiple original equipment manufacturer (OEM) customers.
These systems are Microsoft Windows based and are used with electrodynamic
shakers.
As a result of the acquisition from Universal Dynamics, the Company
produces a vibration control system known as NorthStar. Vibration testing
improves product reliability and is used in many industries, including the
automotive, aerospace and electronics industries. Companies regularly perform
vibration testing as part of their regimen of environmental simulation and
durability testing. NorthStar is a Microsoft Windows compatible vibration
control system capable of running up to three shakers independently. The Company
markets NorthStar controllers to end users, such as test labs and equipment
producers, and to manufacturers of industrial shakers who package it as an OEM
system. The Company intends to continue to use and devote the acquired assets in
the same business of developing vibration and reliability testing systems. The
Company also plans to expand into the shaker and vibration testing systems
market.
The Company is in the process of completing an acquisition of a printed
circuit board ("PCB") testing business. This business involves a technology for
electronic manufacturing inspection systems. These systems will be used for
inspecting freshly assembled printed circuit boards by conducting reliability
testing. The Company has issued letters of intent to provide products to
purchasers.
The Company also has an agreement to acquire a vibration shaker and
amplifier business, known as the Derritron shaker business. Derritron is a
registered trademark in the United Kingdom Trademarks Office. With this
acquisition, the Company will receive patents, product, manufacturing equipment
and an established market presence internationally.
As of April 13, 1998, the Company did not have any employees. The
Company leases approximately 40 personnel to provide services to the Company.
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ITEM 2. Properties.
The principal corporate office and the manufacturing facility of the
Company is located at 8621 North 79th Avenue, Peoria, Arizona 85345. The Company
leases this entire facility on a month to month basis. The Company does not own
any real property.
ITEM 3. Legal Proceedings.
There are no legal proceedings against the Company or its new Directors
or Officers.
Regarding previous Directors of the Company, the reader may refer to
the previous Form 10K for the fiscal year ended December 31, 1996.
ITEM 4. Submission of Matters to a Vote of Security Holders.
December 1997, a written action was adopted unanimously by the Board of
Directors and by a majority of the shareholders by written consent. The action
approved the change of the Company's name to UniDyn, Corp. and approved an
eight-for-one forward split of the Company's stock. During December 1997, a
majority of the shareholders elected Ira Gentry and Terry Nield to the Board of
Directors by written consent. In Nevada, a corporation's shareholders may
approve actions by written consent of a majority of the shareholders.
PART II
ITEM 5. Market for Registrant's Common Equity and Related Stockholders Matters.
The Company's common stock has been traded on the over-the-counter
market and is listed under the symbol UNDY on the NASD's electronic OTC Bulletin
Board. Subsequent to December, 1997, the Company's common stock traded at about
$1.00 per share on a limited basis.
As of March 20, 1998, there were about 356 record holders of the
Company's common stock. The Company has not previously declared or paid any cash
dividends on its common stock. The payment of dividends is within the discretion
of the Board of Directors and will depend, among other factors, on earnings,
capital requirements and the operating and financial condition of the Company.
The Company does not anticipate declaring any cash dividends in the foreseeable
future.
On December 22, 1997, the Company completed an eight to one forward
stock split approved by a majority of the shareholders December 1997.
As stated in Item 1, the Company issued 180,000 shares of common stock
(before the eight-for-one forward split) to Universal Dynamics, Inc. in exchange
for the transfer of certain assets. The Company's records reflect that
14,576,000 shares are held by Unidyn, Inc., and an additional 6,416,000 are held
by Universal Dynamics, Inc. These entries, however, were mistakenly made in
December 1997 and the Company is in the process of having these entries
corrected. The Company anticipates that these 20,992,000 shares will be
transferred to the sellers of assets in pending acquisitions by the Company.
ITEM 6. Management's Discussion and Analysis or Plan of Operation.
The Company has had no operational history and did not engage in
business of any kind until late December 1997. All risks inherent in new and
inexperienced enterprises are inherent in the Company's business.
The activities for 1996 and most of 1997 are those of Universal
Dynamics, Inc.
RESULTS OF OPERATION
For the 12 months ended December 31, 1997, the Company posted earnings
of $57,411 on revenues of $2,237,367 compared with a loss of $73,041 on revenues
of $2,222,743 for the 12 months ended December 31, 1996.
Cost of goods sold for the 12 months ended December 31, 1997 were
$769,908 with a resultant gross profit of $1,467,459 ($1,087,249 and $1,135,494
in 1996). Gross margin for the year ended December 31, 1997 was 65.6% (51.1% in
1996).
Selling and general and administrative costs for the 12 months ended
December 31, 1997 were $1,407,211 ($1,200,931 in 1996).
Engineering costs related to product development were $141,617 in 1997
and $103,461 in 1996.
The Company believes that it will receive a sufficient stream of cash
from its new business operations to meet its cash needs during the next 12
months. However, because the Company plans to grow and acquire businesses and
assets, the Company's needs could change. In the event the Company needs
additional cash, the Company may issue
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additional shares or incur indebtedness. The Company also may incur additional
indebtedness in connection with its pending or future acquisitions or other
transactions. However, the Company believes that the 20,992,000 shares
mistakenly issued to Unidyn, Inc. and Universal Dynamics will be transferred to
the sellers in exchange for the assets in a pending transaction.
The Company was recently listed on the NASD's electronic OTC Bulletin
Board and trades under the symbol UNDY. The Company is generally debt-free,
continues profitable, and aggressively provides the best technology in the
quality assurance industry. The Company has a contract with Renwick Capital New
York, NY for investment banking. This is in support of management's goal to
remain debt-free, yet remain fully capitalized through explosive growth.
The Company recently announced two important acquisitions. First was
the Universal Dynamics business in December 1997. The assets acquired included a
vibration control system technology, software, and engineering development. The
Universal Dynamics acquisition was completed December 31, 1997. April 2, 1998,
the Company announced a second acquisition for assets used in a business known
as Derritron. Upon finalizing the Derritron acquisition, the Company will
acquire a complete business of electrodynamic shakers, amplifiers, and
supporting products. The Company, as a result of such acquisitions, will be able
to combine and offer these high quality technologies as a complete, integrated,
turnkey package, significantly reducing costs to end users, and completing a
total package of products to the end user.
Only a few companies have combined these technologies before, and none
exhibit any significant modern software expertise in Windows. The Company hopes
to position itself as perhaps the strongest candidate through millions
previously invested in the Company's technical expertise in Windows software,
and also tens of millions already invested in recent shaker and amplifier design
through Derritron.
The Company plans to acquire a PCB testing business, as well as the
assets of other businesses in the vibration and reliability testing field as
further described in Item 1. The Company may issue additional shares of its
common stock in exchange for these assets.
The Company is in the patenting stage of "Sterling," a revolutionary
quality assurance system ("QAS") for printed circuit board production. The
Company has in place OEM distributors for this QAS representing over 40 million
in commitments to order. This however is small relative to the scope of the
potential market the QAS addresses, but represents a strong beginning.
The QAS is made possible partly through years of development and
millions already invested in software expertise and through the software
engineering expertise in the Company's engineering development center under the
responsibility of Joseph Spencer, Vice President of Engineering.
The QAS is not a "me too" product. It is a leap forward for the
business of assuring quality in printed circuit board manufacturing. The Company
believes that the QAS process in its quality assurance procedures is marketable
to nearly every major manufacturer of printed circuit boards. This represents a
significant area of growth for potential business.
The Company's business is technology-driven, therefore, the Company may
face competition from other companies, some of which may have greater financial
technical resources. The Company has established customers waiting for product
as the product is engineered through the production model requirements. Hence,
the Company has initial customers for QAS and Derritron products as the Company
obtains patents and engineers the production models.
Management believes debt-free operations, a strong technology base,
adaptation to changing markets, joint efforts through a real customer base, to
be a positive business strategy, in combination with a comprehensive global
objective. The Company is positioned to be able to increase its business
operations, market and customer base.
ITEM 7. Financial Statements and Supplementary Data.
See Item 13.
ITEM 8. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure.
Not Applicable.
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PART III
ITEM 9. Directors and Executive Officers of the Registrant.
The following table shows the positions held by the Company's officers
and directors as of March 20, 1998.
Name Age Position
Ira Gentry 42 President, CEO and Director
Joseph A. Spencer 33 Vice President - Engineering
Dr. Don Leaver 44 Director
John Provazek 44 Director
Lance Mullins 28 Vice President - Operations
On December 1, 1997, Krista Nielson and Sasha Belliston, the directors
of the Company, resigned and Terry W. Neild and Ira Gentry were elected to the
Board of Directors of the Company by a majority of the shareholders. Terry Neild
resigned on January 29, 1998. Vernon M. Traylor was elected as Secretary and
Treasurer December 1997 and resigned on February 23, 1998. The current directors
were appointed March 12, 1998 by Ira Gentry as the sole remaining director and
will serve until the next annual meeting of the Company's stockholders, and
until their successors have been elected and have qualified. The officers were
appointed to their positions, and continue in such positions, at the discretion
of the directors. The office of Treasurer is currently vacant.
Ira Gentry has been President, CEO, and Director of the Company since
December, 1997. He has had a strong career in test system industries including
Universal Dynamics, Inc., Scientific Atlanta, Cranfield and GenRad. He also
worked at Beechcraft designing flight systems. Mr. Gentry graduated from Arizona
State University (ASU) with degrees in both electrical and mechanical
engineering. In addition, he completed over five years of graduate studies at
ASU and the University of Cincinnati.
Joseph A. Spencer, Vice President, Engineering, has been an engineering
manager for the Company since 1997. Mr. Spencer brings nearly 10 years of
software engineering development and management experience to the Company,
including 4 years in a key role on the WordPerfect for Windows development team.
Additionally, he managed software development for Ameritech. He has contributed
significantly to the Company's continued success as team leader and project
manager on numerous projects including the Company's quality assurance system.
Mr. Spencer holds a BSE Bachelors of Science in Engineering from the computer
science department at Weber State University. Mr. Spencer graduated with a
bachelor's degree in Computer Science from Weber State University in 1990. Mr.
Spencer resigned as a director on August 27, 1998.
Donald S. Leaver joined the Company as Chief Scientist in April, 1998. He
worked for Concurrent Computer Corporation as a Field Application Engineer from
1986 to 1998. Mr. Leaver earned his B.A. at the University of Colorado, with a
major in mathematics and a minor in physics. He earned M.A. and Ph.D. degrees
from the University of Washington in Geophysics. While in graduate school he
co-founded a systems integration firm in Seattle which designated automated
systems for monitoring micro-earthquakes in the vicinities of hydro-dams and
nuclear power plants.
John Provazek, UPS Operations Manager, is in charge of a large
metropolitan distribution center in Seattle, Washington. The distribution center
employs approximately 100 people, has annual revenues of $14,000,000.00 and 2.5
million-dollar payroll. Over 3.3 million packages are processed annually either
for delivery or pickup. Mr. Provazek's 15 years at UPS has been spent between
operations (6 years) and Industrial Engineering (9 years). Mr. Provazek has
extensive experience in planning and setting up operation centers and building
and facility projects. He was a member of the project team, which completed
UPS's 50th state territory expansion by opening Alaska and bringing pickup and
delivery service to every deliverable address in the United States. Mr. Provazek
is active in community affairs by being heavily involved with United Way through
volunteer and donation activities. Mr. Provazek did undergraduate work at the
University of Washington and graduated from Western Washington State University
with a BS degree in Political Science.
Vernon M. Traylor, 49, served as Secretary and Treasurer of the Company
from December 1997 to February 23, 1998. For nearly 30 years, Mr. Traylor has
served as an independent financial consultant or Chief Financial Officer for
companies including LabGlas Corp. and Road Machinery Co. He is a Business
Administration/Accounting graduate of Arizona State University.
Terry W. Neild, 56, served as Director of the Company from December, 1997
until January 29, 1998. Mr. Neild was a co-founder of Clearly Canadian Beverage
Corp. and served that company as its Chairman and CEO. In addition, he has been
a Director of Camfrey Resources Ltd., BayWest Capital Corp. and MacNeill
International Corp. Mr. Neild has also served as Director of National Scientific
Corporation and Chief Operating Officer of Intercell Corporation. He is a
Certified Management Accountant.
ITEM 10. Executive Compensation.
As of December 31, 1997, the Company paid Vernon M. Traylor $6,000 for
services rendered. The Company has made no arrangements for the remuneration of
its officers and directors, except that they will be entitled to receive
reimbursement for actual, demonstrable out-of-pocket expenses, including travel
expenses, if any, made on the Company's behalf in the investigation of business
opportunities. There are no agreements or understandings with respect to the
amount of remuneration that officers and directors are expected to receive in
the future.
5
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The Company does not have any employees, as all personnel are leased.
The two highest paid leased personnel are Mike Bird, senior engineer at $67,600
per year and Lance Mullins, head of operations, at $55,000 per year.
ITEM 11. Security Ownership of Certain Beneficial Owners and Management.
The following table sets forth, as of March 20, 1998, information
regarding the beneficial ownership of shares by each person known by the Company
to own five percent or more of the outstanding shares, by each of the directors
and by the officers and directors as a group.
<TABLE>
<CAPTION>
Name and address Amount of Percent
Title of class of beneficial owner beneficial ownership of class
<S> <C> <C> <C>
Common Stock Universal Dynamics, Inc. (1) 1,440,000 4.50%
8621 North 79th Avenue
Peoria, Arizona 85345
Common Stock Lance Mullins 100,000 0.3%
10333 East Cinnabar Avenue
Phoenix, Arizona 85013
Common Stock Joseph A. Spencer 25,000 0.1%
Common Stock All Officers and
Directors as a Group 125,000 0.4%
</TABLE>
(1)Ira Gentry, President, CEO and Director of the Company is a minority
shareholder of Universal Dynamics, Inc.
The Company's current records reflect that Universal Dynamics also
holds an additional 6,416,000 shares and Unidyn, Inc. holds an additional
14,576,000 shares. These entries were mistakenly made and the Company is in the
process of having these entries corrected. The Company anticipates using these
20,992,000 shares for pending acquisitions and anticipates that such shares will
be transferred directly to the sellers. Therefore, the Company's records will
not reflect a change in the current 32,000,000 outstanding shares.
Several of the Company's prior directors and officers own shares of
common stock: Terry Nield (126,000), Vernon Traylor (100,000), Sasha Belliston
(800) and Krista Nielson (90,000). In addition, Capital General Corporation, in
which Krista Nielson and David Yeaman have an ownership interest, holds 810,000
shares of the Company's common stock.
ITEM 12. Certain Relationships and Related Transactions.
No officer, director, nominee for election as a director, or associate
of such officer, director or nominee is or has been in debt to the Company
during the last fiscal year. However, the Company's officers, directors and
major shareholders, have made an oral undertaking to make loans to the Company
in amounts sufficient to enable it to satisfy its reporting requirements and
other obligations incumbent on it as a public company. The Company's status as a
publicly-held corporation may enhance its ability to locate potential business
ventures. The loans will be interest free and repaid at a future date, if or
when the Company shall have received sufficient funds through any business
acquisition. The loans are intended to provide for the payment of filing fees,
professional fees, printing and copying fees and other miscellaneous fees.
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PART IV
ITEM 13. Exhibits and Reports on Form 8-K.
Financial Statements and Financial Statement Schedules.
Financial Statements - December 31, 1997 and 1996
Reports on Form 8-K.
A report on Form 8-K was filed December 1, 1997 to announce an
asset acquisition and a change in the Board of Directors.
A report on Form 8-K was filed January 12, 1998 to change its
year end back to December 31, negating a Form 12b-25 that was
filed December 23, 1997 with the SEC.
Reports on Form 8-K/A.
A report on Form 8-K/A was filed January 21, 1998 to amend 8-K
dated December 1, 1997 with the following corrections:
Universal Dynamics, Inc., an Arizona Corporation
is not a subsidiary of UniDyn, Inc., a company
organized under the laws of the Bahamas. DVCS
Ltd., a company organized under the laws of the
United Kingdom, was not a wholly owned subsidiary
of UniDyn, Inc., but rather 85% owned by UniDyn,
Inc. Ira Gentry, President, CEO and Director of
the Company is not the current President of
Universal Dynamics, Inc., but rather only a
minority shareholder.
A report on Form 8-K/A was filed February 3, 1998 to amend 8-K dated
December 1, 1997 as follows:
UniDyn, Corp. issued 1,822,000 shares of its common stock to
UniDyn, Inc. for the right to purchase 80% of the issued and
outstanding stock of DVCS Ltd. for $500,000 at a future date.
The promissory note to UniDyn, Inc. has been reduced from
$2,000,000 to $1,500,000.
This information, however, reported in this 8-K dated December 1, 1997
was not correct. The Company mistakenly issued the 1,822,000 shares of common
stock to Unidyn, Inc. and is in the process of correcting this mistake. The
Company anticipates using these shares for pending acquisitions. Furthermore, a
promissory note was not issued to Unidyn, Inc.
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.
UNIDYN, CORP.
Date: October 2, 1998 By:
Ira Gentry, President, CEO and Director
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: October 2, 1998 By:
Ira Gentry, President, CEO and Director
Date: October 2, 1998 By:
Joe Spencer, Vice President- Engineering
Date: October 2, 1998 By:
Don Leaver, Ph.D., Director
Date: October 2, 1998 By:
Lance Mullins, Vice President-Operations
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SMITH & COMPANY
A PROFESSIONAL CORPORATION OF
CERTIFIED PUBLIC ACCOUNTANTS
MEMBERS OF: 10 WEST 100 SOUTH, SUITE 700
AMERICAN INSTITUTE OF SALT LAKE CITY, UTAH 84101
CERTIFIED PUBLIC ACCOUNTANTS TELEPHONE: (801) 575-8297
UTAH ASSOCIATION OF FACSIMILE: (801) 575-8306
CERTIFIED PUBLIC ACCOUNTANTS E-MAIL: [email protected]
- --------------------------------------------------------------------------------
INDEPENDENT AUDITOR'S REPORT
Board of Directors
UniDyn, Corp.
We have audited the accompanying consolidated balance sheets of UniDyn, Corp. as
of December 31, 1997 and 1996, and the related consolidated statements of
operations, changes in stockholders' equity, and cash flows for the years ended
December 31, 1997 and 1996. 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. The financial statements for December
31, 1996 have been restated to reflect the accounts and operations of Universal
Dynamics, Inc., whose major operations were acquired by the Company in December
of 1997.
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 consolidated 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 consolidated financial statements referred to above present
fairly, in all material respects, the financial position of UniDyn, Corp. as of
December 31, 1997 and 1996, and the results of their operations, changes in
stockholders' equity, and their cash flows for the years ended December 31, 1997
and 1996, in conformity with generally accepted accounting principles.
/ Smith & Company
CERTIFIED PUBLIC ACCOUNTANTS
Salt Lake City, Utah
July 13, 1998
F-1
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UNIDYN, CORP.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
December 31,
1997 1996
----------------- -----------------
ASSETS
CURRENT ASSETS
<S> <C> <C>
Cash in bank $ 104,522 $ 72,695
Accounts receivable (net of allowance for doubtful
accounts of $30,000 in 1997) 203,318 290,560
Loan receivable 24,500 0
Prepaid expense 38,708 26,587
Inventory (Note 1) 70,866 118,839
----------------- -----------------
TOTAL CURRENT ASSETS 441,914 508,681
PROPERTY, PLANT & EQUIPMENT (Note 3) 38,117 38,346
----------------- -----------------
$ 480,031 $ 547,027
================= =================
LIABILITIES & EQUITY
CURRENT LIABILITIES
Accounts payable $ 45,786 $ 65,740
Line of credit (Note 5) 0 151,223
Payable - officer (Note 4) 0 21,482
Loans payable (Note 6) 74,775 2,028
Income taxes payable 0 5,673
----------------- -----------------
TOTAL CURRENT LIABILITIES 120,561 246,146
STOCKHOLDERS' EQUITY
Common Stock $.001 par value:
Authorized - 100,000,000 shares
Issued and outstanding
30,560,000 shares (1,000,000 in 1996) 30,560 1,000
Additional paid-in capital 509,621 335,088
Treasury stock (Note 10) (174,915) 0
Retained (deficit) (5,796) (35,207)
----------------- -----------------
TOTAL STOCKHOLDERS' EQUITY 359,470 300,881
----------------- -----------------
$ 480,031 $ 547,027
================= =================
</TABLE>
See Notes to Consolidated Financial Statements.
F-2
<PAGE>
UNIDYN, CORP.
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Year ended
December 31,
1997 1996
----------------- -----------------
<S> <C> <C>
Net sales $ 2,237,367 $ 2,222,743
Cost of sales 769,908 1,087,249
----------------- -----------------
GROSS PROFIT 1,467,459 1,135,494
General & administrative expenses:
Accounting / legal 20,937 56,507
Advertising / promotion 163,338 63,576
Amortization and depreciation 1,767 101,215
Bad debts 70,000 0
Bank charges 5,313 5,519
Commissions/consulting 17,017 20,055
Engineering 141,671 103,461
Insurance 0 10,233
Interest expense 12,995 30,133
Office expense 3,708 5,548
Payroll taxes and benefits 23,560 43,627
Professional services 10,820 19,662
Property taxes 33,616 301
Rent 41,950 45,187
Repairs and maintenance 7,568 18,136
Salaries / employee leasing 735,192 518,147
Telephone 12,972 16,133
Travel 47,677 101,071
Utilities 21,872 8,621
Vehicle expense 34,882 26,159
Miscellaneous 356 7,640
----------------- -----------------
1,407,211 1,200,931
NET INCOME (LOSS) BEFORE INCOME TAXES 60,248 (65,437)
Income tax expense 2,837 7,604
----------------- -----------------
NET INCOME (LOSS) $ 57,411 $ (73,041)
================= =================
Net income (loss) per weighted average share $ .06 $ (.07)
================= =================
Weighted average number of common shares used to compute
net income (loss) per weighted average share 1,016,333 1,000,000
================= =================
</TABLE>
See Notes to Consolidated Financial Statements.
F-3
<PAGE>
UNIDYN, CORP.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
Common Stock Additional Retained
Par Value $0.001 Paid-in Earnings
Shares Amount Capital (Deficit)
-------------- -------------- ----------------- --------------
<S> <C> <C> <C> <C>
Balances at 12/31/95 1,000,000 $ 1,000 $ 335,088 $ 37,834
Net loss for year (73,041)
-------------- -------------- ----------------- --------------
Balances at 12/31/96 1,000,000 1,000 335,088 (35,207)
Issued for services at
$.001 12/1/97 196,000 196
Issued to Universal for assets
at $.85 12/2/97 153,285
Issued for future acquisitions
at $.001 12/1/97
(Note 10) 2,624,000 2,624
Forward stock split*
(Note 11) 26,740,000 26,740 21,248 (28,000)
Net income for year 57,411
-------------- -------------- ----------------- --------------
Balances at 12/31/97 30,560,000 $ 30,560 $ 509,621 $ (5,796)
============== ============== ================= ==============
</TABLE>
* Approved December 3, 1997
See Notes to Consolidated Financial Statements.
F-4
<PAGE>
UNIDYN, CORP.
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Year ended
December 31,
1997 1996
-------------- --------------
OPERATING ACTIVITIES
<S> <C> <C>
Net income (loss) $ 57,411 $ (73,041)
Adjustments to reconcile net income (loss) to cash
provided by operating activities:
Book value of disposed assets 0 897
Amortization and depreciation 1,767 101,215
Stock issued for expenses 196 0
Bad debts 70,000 0
Changes in assets and liabilities:
Inventory 88,651 176,270
Accounts receivable 130,029 63,985
Prepaid expense (12,121) (20,787)
Deposits 0 (39,750)
Accrued expenses 0 (175)
Income taxes payable (5,673) 1,556
Accounts payable (19,954) (29,465)
-------------- --------------
NET CASH PROVIDED BY OPERATING ACTIVITIES 310,306 180,705
INVESTING ACTIVITIES
Purchase of equipment (1,538) 0
Loans (24,500) 0
Purchase of treasury stock (152,483) 0
-------------- --------------
NET CASH USED BY INVESTING ACTIVITIES (178,521) 0
FINANCING ACTIVITIES
Borrowings - line of credit 0 40,000
Line of credit repayments (151,223) (141,536)
Repayments - related parties (21,482) (14,411)
Loan repayments (27,253) (6,669)
Borrowings 100,000 0
-------------- --------------
NET CASH (USED) BY FINANCING ACTIVITIES (99,958) (122,616)
-------------- --------------
INCREASE IN CASH AND CASH EQUIVALENTS 31,827 58,089
Cash and cash equivalents at beginning of year 72,695 14,606
-------------- --------------
CASH & CASH EQUIVALENTS AT END OF YEAR $ 104,522 $ 72,695
============== ==============
Cash paid for:
Interest $ 12,995 $ 30,133
Taxes 8,510 2,200
</TABLE>
See Notes to Consolidated Financial Statements.
F-5
<PAGE>
UNIDYN, CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1997 and 1996
NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING PRINCIPLES
Accounting Methods
The Company recognizes income and expenses based on the accrual method
of accounting.
Principals of Consolidation
The financial statements contain the accounts of the Company and
Universal Dynamics, Inc. ("Universal"). Universal could be considered
an entity under common control as at one time, the President of the
Company and the president of Universal were the same person. Also, the
Company issued common stock to Universal to acquire the NorthStar
operations from Universal. NorthStar is currently the main line of
business for the Company. All significant intercompany transactions
have been eliminated on consolidation.
Dividend Policy
The Company has not yet adopted any policy regarding payment of
dividends in cash.
Organization Costs
The Company amortized its organization costs over a five year period.
Inventory
Inventory consists of items for resale and is valued at the lower of
cost (first-in, first-out basis) or market.
Revenue Recognition
Revenue is recognized upon shipment of products.
Allowance for Uncollectible Accounts
The Company provides an allowance for uncollectible accounts based upon
prior experience and management's assessment of the collectability of
existing accounts.
Cash and Cash Equivalents
For financial statement purposes, the Company considers all highly
liquid investments with an original maturity of three months or less
when purchased to be cash equivalents.
Earnings (loss) per share
Earnings or loss per common and common equivalent share is computed by
dividing net earnings (loss) by the weighted average common shares
outstanding during each year.
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,
liabilities, revenues, and expenses during the reporting period.
Estimates also affect the disclosure of contingent assets and
liabilities at the date of the financial statements. Actual results
could differ from these estimates. Such estimates of significant
accounting sensitivity are allowance for doubtful accounts.
Stock Options
The Company has elected to follow Accounting Principles Board Opinion
No. 25, "Accounting for Stock Issued to Employees" (APB 25) and related
interpretations in accounting for its future employee stock options
rather than adopting the alternative fair value accounting provided for
under Financial Accounting Standards Board ("FASB") FASB Statement No.
123, Accounting for Stock Based Compensation (SFAS 123).
Income Taxes
The Company records the income tax effect of transactions in the same
year that the transactions enter into the determination of income,
regardless of when the transactions are recognized for tax purposes.
Tax credits are recorded in the year realized.
F-6
<PAGE>
UNIDYN, CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
December 31, 1997 and 1996
NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING PRINCIPLES (continued) In
February, 1992, the Financial Accounting Standards Board adopted
Statement of Financial Accounting Standards No. 109, Accounting for
Income Taxes, which supersedes substantially all existing authoritative
literature for accounting for income taxes and requires deferred tax
balances to be adjusted to reflect the tax rates in effect when those
amounts are expected to become payable or refundable.
At December 31, 1997, a deferred tax asset was not recorded due to the
Company's lack of profitable operations to provide income to use the
net operating loss carryover of $8,740 which expires December 31, 2012.
The Company expects to use the net operating loss on its 1998 income
tax return.
NOTE 2: ORGANIZATION AND HISTORY
The Company was incorporated under the laws of the State of Utah on May
2, 1986 as Macaw Capital, Inc. On December 30, 1993, the Company was
dissolved as a Utah corporation and reincorporated as a Nevada
corporation. On December 3, 1997, the name was changed to UniDyn, Corp.
The Company manufactures and sells computer products that perform
vibration testing to assure product stability.
NOTE 3: PROPERTY, PLANT, AND EQUIPMENT
Property, plant, and equipment as of December 31, 1997 and 1996 are
summarized as follows:
<TABLE>
<CAPTION>
Accumulated Net Book Value
Cost Depreciation 1997 1996
------------- --------------- ------------- ------------
<S> <C> <C> <C> <C>
Vehicles $ 40,925 $ 13,879 $ 27,046 $ 26,174
Computers & Equipment 12,588 11,535 1,053 631
Furniture & Fixtures 12,832 9,932 2,900 3,985
Leasehold Improvements 10,273 3,155 7,118 7,556
------------- --------------- ------------- ------------
$ 76,618 $ 38,501 $ 38,117 $ 38,346
============= =============== ============= ============
</TABLE>
Depreciation expense is calculated under straight-line and accelerated
methods based on the estimated service lives of depreciable assets.
Depreciation expense for the year ended December 31, 1997 amounted to
$1,767, ($101,109 in 1996).
NOTE 4: RELATED PARTY TRANSACTIONS
At December 31, 1996, the Company owed $21,482 to an officer for
advances to the Company. The amount was repaid in 1997.
NOTE 5: LINE OF CREDIT
The line of credit was with a bank. The interest rate at December 31,
1996 was 10.25% and the principal due at December 31, 1996 was
$151,223. The $151,223 was repaid in 1997. The Company had an available
line of credit with the bank in the amount of $250,000.
NOTE 6: LOANS PAYABLE
Loans payable at December 31, 1997 and 1996 are as follows:
<TABLE>
<CAPTION>
Principal Balances
1997 1996
Interest Long- Long-
Rate Current term Current term
------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
GMAC 8.5% $ 0 $ 0 $ 2,028 $ 0
BankOne
Arizona, NA (1) 10.5% 74,775 0 0 0
------------- ------------- ------------- -------------
$ 74,775 $ 0 $ 2,028 $ 0
============= ============= ============= =============
</TABLE>
(1) Secured by accounts receivable and inventory.
Scheduled principal reductions are as follows:
December 31, 1998 $ 74,775
========
F-7
<PAGE>
UNIDYN, CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
December 31, 1997 and 1996
NOTE 7: INCOME TAXES
Components of income tax are as follows:
1997 1996
------------- -------------
Current
Federal $ 1,773 $ 5,262
State 1,064 2,342
------------- -------------
$ 2,837 $ 7,604
============= =============
A reconciliation of the provision for income tax expense with the
expected income tax computed by applying the federal statutory income
tax rate to income before provision for income taxes is as follows:
<TABLE>
<CAPTION>
1997 1996
------------- -------------
<S> <C> <C>
Income tax computed at Federal statutory
tax rate $ 20,484 $ (22,249)
Tax associated with fiscal tax year for
Universal and graduated federal rates * (18,349) 28,307
State taxes (net of federal benefit) 702 1,546
------------- -------------
$ 2,837 $ 7,604
============= =============
</TABLE>
* The Company and Universal are not eligible to file consolidated income
tax returns.
NOTE 8: COMMITMENTS AND CONTINGENCIES
Prior to January 1, 1998, Universal had a month-to-month lease on the
buildings where it operates. The lease included rent, utilities,
property tax, and other services. Rent expense for 1997 was $41,950 and
$45,187 in 1996. Effective January 1, 1998, the Company is responsible
for paying the rent. The lease continues to be on a month-to-month
basis in the approximate amount of $7,900.
NOTE 9: MAJOR CUSTOMERS
Sales to three customers represented 50.6%, 14.5% and 12.3% during the
year ended December 31, 1997. As of December 31, 1997, accounts
receivable from these three customers represented 24.7%, 21.8%, and
20.9%, respectively. During the year ended December 31, 1996, sales to
one customer represented 19.5% and the accounts receivable from this
customer was 34.5%.
NOTE 10: 1997 EVENTS
On December 1, 1997, the Company constructed a multi-party agreement
with the following entities: Universal Dynamics, Inc., an Arizona
Corporation, and Unidyn , Inc., a company organized under the laws of
the Bahamas. Pursuant to the agreement, the Company acquired from
Universal Dynamics, Inc. certain assets including equipment, inventory,
accounts receivable, software, and other intangible assets all
pertaining to the vibration control system know as "NorthStar". The
Company also entered into formal negotiations for the acquisition of
the Derritron shaker products, and entered into an agreement for the
acquisition of 80% of DVCS, LTD, a UK company in the business of
Derritron shaker remanufacturing and related shaker services in the UK.
In consideration for the NorthStar assets, and to publicly disclose its
shares for the pending acquisitions, the Company issued 3,000,000
authorized but unissued shares of its common stock, with the following
distribution. Universal Dynamics, Inc. received 982,000 shares for the
NorthStar product and for the Sterling technology. The structure was
concluded December 31, 1997 with the remaining shares being issued in
the second quarter of 1998 for all rights in the Sterling product. The
Company also issued 1,822,000 shares for the pending acquisition of the
Derritron product and 80% ownership of DVCS, LTD. Unidyn Inc. agreed to
be the trustee of the shares as required for the pending acquisitions
of both Derritron and DVCS, LTD and subsequently returned the shares to
the Company as specific share transfer instructions were received
pursuant to the individual acquisition agreement. These shares were
issued in the second quarter of 1998 for the Derritron product. Other
interested parties received 196,000 shares.
F-8
<PAGE>
UNIDYN, CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
December 31, 1997 and 1996
NOTE 10: 1997 EVENTS (continued)
The Company also generated a $2,000,000 promissory note in the event it
would be required for the pending acquisitions. This note was
subsequently destroyed, and not required for the acquisition, and
represents no liability to the Company.
At December 31, 1997, the Company was holding 20,992,000 shares of
previously issued stock as treasury stock to use in the future.
Universal also held 1,440,000 shares which are being treated as
treasury stock.
NOTE 11: FORWARD STOCK SPLIT
Effective December 3, 1997, pursuant to written action adopted
unanimously by the Board of Directors and a majority of the
shareholders, the Company changed its name to UniDyn, Corp., and
approved an eight-for-one forward stock split on the Company's common
stock as follows: each outstanding share was converted into eight
shares. Before the change, the Company was authorized to issue
100,000,000 shares of $.001 par value common stock; after the forward
stock split the Company shall continue to be authorized to issue
100,000,000 shares of $.001 par value common stock. The number of
outstanding shares of common stock affected by the forward split was
4,000,000. The number of issued and outstanding shares of common stock
of the Company after the forward stock split is 32,000,000, which
includes 1,440,000 shares held by Universal which is treated as
treasury stock.
NOTE 12: SUBSEQUENT EVENTS
STERLING PATENT
During the quarter ended June 30, 1998, the Company issued 6,416,000
shares of restricted common stock, previously held as treasury stock,
to acquire a patent on the Sterling Project from Universal. The patent
will be amortized over fifteen years. The Sterling Project will allow
the testing of printed circuit boards. Sterling will estimate the
projected life of each solder connection on the printed circuit board,
which will quantify the reliability of the manufactured part. The
Company expects to have a working production model by the end of 1998
with sales expected in the second quarter of 1999.
DERRITRON TECHNOLOGY
Effective June 30, 1998, the Company issued 14,576,000 shares of
restricted common stock, previously held as treasury stock, to acquire
the technology. The technology will be amortized over five years. The
Company will need to spend some money to upgrade the technology and
expects sales to begin in the second quarter of 1999. With this
acquisition, the Company receives patents, products, manufacturing
equipment, and an established market presence in England and other
parts of Europe.
DISCONTINUANCE OF CONSOLIDATION WITH UNIVERSAL
Effective July 1, 1998, the Company acquired the remaining inventory of
Universal. This left Universal with no operations. Universal intends to
explore new business operations apart from the Company and these new
operations will not be consolidated with the Company.
F-9
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from
UniDyn, Corp. December 31, 1997 consolidated financial statements and
is qualified in its entirety by reference to such financial statements.
</LEGEND>
<CIK> 0000894542
<NAME> UniDyn, Corp
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> DEC-31-1997
<CASH> 104,522
<SECURITIES> 0
<RECEIVABLES> 233,318
<ALLOWANCES> (30,000)
<INVENTORY> 70,866
<CURRENT-ASSETS> 441,914
<PP&E> 76,618
<DEPRECIATION> (38,501)
<TOTAL-ASSETS> 480,031
<CURRENT-LIABILITIES> 120,561
<BONDS> 0
0
0
<COMMON> 30,560
<OTHER-SE> 328,910
<TOTAL-LIABILITY-AND-EQUITY> 480,031
<SALES> 2,237,367
<TOTAL-REVENUES> 2,237,367
<CGS> 769,908
<TOTAL-COSTS> 769,908
<OTHER-EXPENSES> 1,407,211
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 12,995
<INCOME-PRETAX> 60,248
<INCOME-TAX> 2,837
<INCOME-CONTINUING> 57,411
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 57,411
<EPS-PRIMARY> .06
<EPS-DILUTED> .06
</TABLE>
