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 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 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 Identification
incorporation or organization) 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
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 Issuer
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. [X] Yes [ ] No
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 June 30, 1998
- ------------------------------------ ----------------------------------
$.001 PAR VALUE CLASS A COMMON STOCK 24,144,000 SHARES
1
<PAGE>
ITEM 1. MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS.
THE FOLLOWING DISCUSSION INCLUDES FORWARD-LOOKING STATEMENTS WITH
RESPECT TO THE COMPANY'S FUTURE FINANCIAL PERFORMANCE. ACTUAL RESULTS MAY DIFFER
MATERIALLY FROM THOSE CURRENTLY ANTICIPATED AND FROM HISTORICAL RESULTS
DEPENDING UPON A VARIETY OF FACTORS, INCLUDING THOSE DESCRIBED BELOW UNDER THE
SUB-HEADING, "BUSINESS RISKS." SEE ALSO THE COMPANY'S ANNUAL REPORT ON FORM 10K
FOR THE YEAR ENDED DECEMBER 31ST, 1997.
OVERVIEW
The Company was incorporated in the State of Utah in 1986 as Macaw
Capital, Inc. and was reincorporated in 1993 in the State of Nevada. In December
of 1997, Macaw Capital, Inc. acquired a portion of the assets of Universal
Dynamics, Inc., a private manufacturer of environmental vibration testing
equipment formed in December 1989, and was renamed UniDyn, Corp. No material
relationship exists between the former management and directors of Macaw
Capital, Inc. and the current management and directors of UniDyn, Corp. UniDyn,
Corp. shares are currently traded under the symbol UNDY on the NASDAQ Electronic
Bulletin Board System.
The current company is in the business of providing products involving
quality control of manufactured electronics. These products fall under two
categories, A) Vibration Stress Screening (VSS) and B) Sterling inspection
products for on-line printed circuit board inspection.
A) The vibration test products are used to check the integrity of printed
circuit boards and other physical items eventually used in automotive and
electronics. This core business primarily consists of 1) the vibration hardware
or "shaker" unit which mechanically vibrates the test platform, 2) the vibration
control system which measures output and regulates shaker intensity, and 3) the
amplifier unit which provides power to the shaker. On the production line, VSS
can identify latent defects not readily identified through visual inspection or
during the development and design process. Vibration Stress Screening of
electronic and mechanical components, such as printed circuit boards saves
rework time during production, reduces warranty exposure and can enhance product
quality and longevity. VSS is most effective in detecting intermittent defects
such as loose connections, broken parts, cracked traces, poor solder joints and
mechanical flaws.
The Company currently markets its Vibration Control System product
under the NorthStar brand and to other OEM's to be repackaged for use in the
aerospace, automotive and semiconductor industries. The Company has also
purchased a complete line of shaker and amplifiers known in the industry under
the trade name "Derritron". Derritron has had a 30 year history in the shaker
business, and is considered a premier shaker product. This combined with the
Company's world class vibration control system, puts UniDyn in the position to
become a first tier provider of turn-key vibration test products.
B) UniDyn's flagship in new products is a product called "Sterling". The
Sterling product was completely acquired from Universal Dynamics in the second
quarter after the patent search showed
2
<PAGE>
no prior art, and open for patent filing. UniDyn is currently in the process of
filing patents on this new testing process. The company also has firm
commitments with a large Japanese company with a 45 year history of providing
various products for the printed circuit board industry. The company will
provide product to the Japanese company under an exclusive OEM arrangement in
Japan. The quantity will be approximately 20 Sterling units a month during the
first year, and relating to the initial discovered demands of the Japanese
customer. The company is in the process of engineering a "Production Model" for
delivery in 1999. The product technique is already tested at IBM and Delco
Electronics. The Company is constructing the production model for delivery.
The Sterling process provides for completely automated on-line quality control
testing of printed circuit boards. It is expected that the Sterling process can
significantly reduce warranty liability for a variety of industries, including
manufacturers of computers, consumer electronic products, and aerospace and
military systems, by anticipating hidden defects.
OVERVIEW ACQUISITIONS
To meet the objectives of its business plan and reach an economy of
scale in the short-term, the Company has entered into several asset acquisition
agreements. In December of 1997, the Company closed a transaction with Universal
Dynamics, Inc. an Arizona corporation, for the transfer of certain assets
including equipment, inventory, accounts receivable, software and other
intangible assets related to the NorthStar vibration control system business.
These systems are Microsoft Windows-based and have been integrated in the
Company's proprietary control systems software.
The Company also entered into an agreement to acquire a 100% interest
in the Derritron product of shakers and amplifiers, previously known as a United
Kingdom based manufacturer of vibration shakers and amplifiers. The Company
completed that acquisition in the second quarter of 1998. With this acquisition,
the Company will receive patents, products, manufacturing equipment and an
established market presence internationally. Derritron is currently 1 of only 4
shaker manufacturers worldwide with a full range of electrodynamic shakers, and
has a full selection of shaker models.
The Company also finished the acquisition of the "Sterling" product
rights from Universal Dynamics, Inc., an Arizona corporation, in the second
quarter of 1998. This acquisition was completed after the "Sterling" process was
discovered clear on the patent search during the second quarter.
The Company also entered into an agreement to purchase 80% of DVCS
limited in the UK. DVCS was to be integrated with the "Derritron" product
acquisition. After review of the DVCS debt and lack of accounting compliance,
the Company opted to form a new 100% owned UK subsidiary, "Derritron Limited" to
incorporate the Derritron business for UK operations.
RESULTS OF OPERATIONS
For the three months ending June 30, 1998, the Company posted earnings
of $56,620 on revenues of $514,314 ($(57,978) and $428,703 for the same period
in 1997). Substantially all sales were generated from the NorthStar product.
NorthStar is composed of off the shelf items
3
<PAGE>
and has minimal assembly requirements. For the six months ending June 30, 1998,
the Company posted earnings of $222,515 on revenues of $1,251,729 ($126,854 and
$1,200,518 for 1997).
Sales are subject to material monthly fluctuations as the Company
integrates recent acquisitions, modifies operations, introduces new product
lines, and modifies its existing customer base. There can be no assurance that
the Company will have the capital resources necessary to complete the
introduction of the Sterling Process in a timely manner in accordance with the
Company's business plan. The Company is currently involved with various funding
potentials for Sterling.
Cost of Goods Sold for the three months ended June 30, 1998 were
$185,298 with a resultant gross profit of $329,016 ($105,684 and $323,019 for
1997). Cost of goods sold for the six months ended June 30, 1998 were $383,719
with a gross profit of $868,010 ($356,739 and $843,779 in 1997). Gross margin
for the period ended June 30, 1998 was 69% (70% in 1997). Until new products are
introduced, including the Sterling Process, there is significant uncertainty
about future gross margins. Gross margin percentage is highly dependent upon
product prices, sales volumes, materials cost and allocation of manufacturing
overhead.
Selling, General and Administrative costs for the three months ended
June 30, 1998 were $414,296, and for the six months were $746,345 ($380,997 and
$635,925 in 1997). The Company currently employs or leases a total of 24 people
in the United States and the United Kingdom. Of those employed, approximately 18
are on contract lease agreements. Management believes that by leasing its
primary workforce, the Company has substantially limited fixed overhead costs
and provided for a larger free-cash flow for the Company's growth phase. It also
allows for a better benefit base through managed 401K and health plans already
established in the employee leasing companies.
For the six months ending June 30, 1998 the majority of the Company's
research was conducted at the Company's Engineering and Development Center in
American Fork, Utah. Substantial research and development costs were incurred by
Universal Dynamics for the development of the NorthStar and Sterling Process
products prior to the December, 1997 asset purchase.
LIQUIDITY AND CAPITAL RESOURCES
The Company is currently seeking additional working capital to meet its
short term growth planning including the acquisition of a potential supplier for
the Sterling system. Management believes, although there can be no assurance,
that the Company will have sufficient cash needs for the next 12 months
regardless of its success in attracting additional capital investment. However,
management also believes that a lack of additional working capital over the
remainder of the current fiscal year would substantially curtail the roll-out of
the Sterling Process product line and the acquisition of a key supplier
involving Sterling. As of June 30, 1998, the Company has approximately $261,139
in working capital.
4
<PAGE>
NEW ACCOUNTING PRONOUNCEMENTS
The Financial Accounting Standards Board has adopted several notices
with regard to the treatment of interim financial statements. These issues are
presented in the Company's interim financial statements. As discussed in the
notes to the interim financial statements, the implementation of these new
pronouncements is not expected to have a material effect on the financial
statements.
BUSINESS RISKS
While management believes, but there can be no assurance, that the
Company is sufficiently capitalized to continue operations for the remainder of
the fiscal year, management is currently seeking additional capital investment
to fulfill inventory requirements and outstanding purchase orders which could
have a material impact on short-term growth objectives.
This report contains a number of forward-looking statements which
reflect the Company's current views with respect to future events and financial
performance. These forward-looking statements are subject to certain risks and
uncertainties that could cause actual results to differ materially from
historical results or those anticipated. In this report, the words
"anticipates", "believes", "expects", "intends", "future" and similar
expressions identify forward-looking statements. Readers are cautioned to
consider the specific risk factors described in the Company's Annual Report on
Form 10-K for the year ended December 31, 1997 and not to place undue reliance
on the forward-looking statements contained herein, which speak only as of the
date hereof. The Company undertakes no obligation to publicly revise these
forward-looking statements, to reflect events or circumstances that may arise
after the date hereof.
ITEM 2. LEGAL PROCEEDINGS
Legal proceedings of the previous officers and directors of Macaw
Capital are outlined in detail in the Company's 10K filing for the year ending
December 31, 1997.
Management does not feel that the legal problems of the former officers
and directors of Macaw Capital will have an adverse effect on UniDyn Corp. in
the future. Current management has no past legal problems and intends to comply
with all applicable securities laws.
Any legal proceedings relate only to the Company prior to December
1997. These activities are not a reflection of current management and/or
business strategy. No material relationship existed or now exists between
current management and any former director, officer, or affiliate of the
Company. Management does not feel that the legal problems of the former officers
and directors will have any adverse effect on the Company in the future.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
Financial statements as of June 30, 1998
(b) Reports on Form 8-K
None
5
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of
1934, the Issuer has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
UNIDYN, CORP.
Dated: 19 August 1998
Ira Gentry, President and Director
6
<PAGE>
UNIDYN, CORP.
CONSOLIDATED BALANCE SHEET
(Unaudited)
<TABLE>
<CAPTION>
June 30,
1998
----------------------
ASSETS
CURRENT ASSETS
<S> <C>
Cash in bank $ 144,925
Accounts receivable (net of allowance
for doubtful accounts of $60,000) 321,734
Loans receivable 40,500
Advances - officers 12,325
Deferred tax benefit 18,000
Prepaid expense 77,134
Inventory 64,763
----------------------
TOTAL CURRENT ASSETS 679,381
PROPERTY, PLANT & EQUIPMENT 62,845
OTHER ASSETS
Sterling Patent (Note 7) 0
Deferred tax benefit 258,000
Derritron Technology (Note 8) 4,008,400
----------------------
4,266,400
----------------------
$ 5,008,626
======================
LIABILITIES & EQUITY
CURRENT LIABILITIES
Accounts payable $ 80,242
Income taxes payable 338,000
----------------------
TOTAL CURRENT LIABILITIES 418,242
STOCKHOLDERS' EQUITY
Common Stock $.001 par value:
Authorized - 100,000,000 shares
Issued and outstanding
24,144,000 shares 24,144
Additional paid-in capital 5,135,749
Treasury stock (786,227)
Retained earnings 216,718
----------------------
TOTAL STOCKHOLDERS' EQUITY 4,590,384
----------------------
$ 5,008,626
======================
</TABLE>
F-1
<PAGE>
UNIDYN, CORP.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
1998 1997 1998 1997
------------------ ------------------ ----------------- -----------------
<S> <C> <C> <C> <C>
Net sales $ 514,314 $ 428,703 $ 1,251,729 $ 1,200,518
Cost of sales 185,298 105,684 383,719 356,739
------------------ ------------------ ----------------- -----------------
GROSS PROFIT 329,016 323,019 868,010 843,779
Other Income 182,900 0 212,900 0
Bad debts 30,000 0 30,000 0
General and administrative
expenses 414,296 380,997 746,345 635,925
------------------ ------------------ ----------------- -----------------
444,296 380,997 776,345 635,925
------------------ ------------------ ----------------- -----------------
NET INCOME
BEFORE INCOME TAXES 67,620 (57,978) 304,565 207,854
Income tax expense 11,000 0 82,050 81,000
------------------ ------------------ ----------------- -----------------
NET INCOME $ 56,620 $ (57,978) $ 222,515 $ 126,854
================== =================== ================= =================
Net income per weighted
average share $ .00 $ .(06) $ .01 $ .13
================== =================== ================= =================
Weighted average number
of common shares used to
compute net income
per weighted average share 24,144,000 1,000,000 24,144,000 1,000,000
================== ================== ================= =================
</TABLE>
F-2
<PAGE>
UNIDYN, CORP.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended
June 30,
1998 1997
----------------- -----------------
OPERATING ACTIVITIES
<S> <C> <C>
Net income $ 222,515 $ 126,854
Adjustments to reconcile net income to cash provided
by operating activities:
Depreciation 3,000 (1,974)
Bad debts 30,000 0
Deferred taxes (276,000) 0
Changes in assets and liabilities:
Accounts receivable (160,741) 65,840
Inventory 6,103 16,867
Prepaid expenses (38,426) (4,037)
Accounts payable 34,455 (15,483)
Income taxes payable 338,000 75,327
----------------- -----------------
NET CASH PROVIDED BY
OPERATING ACTIVITIES 158,906 263,394
INVESTING ACTIVITIES
Loans (16,000) 0
Purchase of equipment (27,728) (1,538)
------------------ ------------------
NET CASH (USED)
BY INVESTING ACTIVITIES (43,728) (1,538)
FINANCING ACTIVITIES
Line of credit repayments 0 (151,223)
Repayments - related parties 0 (21,482)
Loan principal payments (74,775) (14,758)
Loan proceeds 0 100,000
----------------- -----------------
NET CASH (USED) BY
FINANCING ACTIVITIES (74,775) (87,463)
------------------ ------------------
INCREASE IN CASH
AND CASH EQUIVALENTS 40,403 174,393
Cash and cash equivalents at beginning of year 104,522 72,695
----------------- -----------------
CASH AND CASH EQUIVALENTS
AT END OF PERIOD $ 144,925 $ 247,088
================= =================
Cash paid for income taxes $ 50 $ 5,673
Cash paid for interest 0 9,159
</TABLE>
SUPPLEMENTAL INFORMATION
During the six months ended June 30, 1998, the Company issued 14,576,000 shares
of restricted common stock for Derritron technology with a value of $4,008,400.
The value was based on a discounted value of free-trading stock on the date of
issuance.
F-3
<PAGE>
UNIDYN, CORP.
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
Six months ended June 30, 1997
<TABLE>
<CAPTION>
UniDyn NorthStar Pro Forma
----------------- ----------------- ------------------
<S> <C> <C> <C>
Net sales $ 0 $ 1,200,518 $ 1,200,518
Cost of sales 0 356,739 356,739
----------------- ----------------- ------------------
GROSS PROFIT 0 843,779 843,779
General and administrative expenses 0 635,925 635,925
----------------- ----------------- ------------------
NET INCOME BEFORE INCOME TAXES 0 207,854 207,854
Income tax expense 0 81,000 81,000
----------------- ----------------- ------------------
NET INCOME $ 0 $ 126,854 $ 126,854
================= ================= ==================
Net income per weighted average share $ .00 $ .13
================= ==================
Weighted average number of common shares used
to compute net income per weighted average share 1,000,000 1,000,000
================= ==================
</TABLE>
This pro forma assumes that UniDyn, Corp. acquired the NorthStar operations on
January 1, 1997.
NorthStar provided the majority of operations for Universal Dynamics, Inc.
("Universal"). In December of 1997, Universal sold the NorthStar operations to
UniDyn, Corp. in exchange for 1,440,000 shares of restricted common stock of
UniDyn, Corp.
The pro forma information for NorthStar is derived from the unaudited statement
of operations for Universal. Operations not related to NorthStar are immaterial
and have not been removed from the pro forma information.
F-4
<PAGE>
UNIDYN, CORP.
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
Three months ended June 30, 1997
<TABLE>
<CAPTION>
UniDyn NorthStar Pro Forma
----------------- ----------------- ------------------
<S> <C> <C> <C>
Net sales $ 0 $ 428,703 $ 428,703
Cost of sales 0 105,684 105,684
----------------- ----------------- ------------------
GROSS PROFIT 0 323,019 323,019
General and administrative expenses 0 380,997 380,997
----------------- ----------------- ------------------
NET (LOSS) BEFORE INCOME TAXES 0 (57,978) (57,978)
Income tax expense 0 0 0
----------------- ----------------- ------------------
NET (LOSS) $ 0 $ (57,978) $ (57,978)
================= ================= ==================
Net (loss) per weighted average share $ .00 $ (.06)
================= ==================
Weighted average number of common shares used
to compute net (loss) per weighted average share 1,000,000 1,000,000
================= ==================
</TABLE>
This pro forma assumes that UniDyn, Corp. acquired the NorthStar operations on
January 1, 1997.
NorthStar provided the majority of operations for Universal Dynamics, Inc.
("Universal"). In December of 1997, Universal sold the NorthStar operations to
UniDyn, Corp. in exchange for 1,440,000 shares of restricted common stock of
UniDyn, Corp.
The pro forma information for NorthStar is derived from the unaudited statement
of operations for Universal. Operations not related to NorthStar are immaterial
and have not been removed from the pro forma information.
F-5
<PAGE>
UNIDYN, CORP.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
June 30, 1998
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.
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.
Revenue Recognition
Revenue is recognized upon shipment of products.
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 period.
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).
F-6
<PAGE>
UNIDYN, CORP.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (continued)
June 30, 1998
NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING PRINCIPLES (continued)
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.
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. The Statement was
applied in the Company's financial statements for the fiscal
year commencing January 1, 1993.
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 $10,740
which expires as follows:
Year Ended Expires Amount
December 31, 1986 December 31, 2001 $ 1,950
December 31, 1987 December 31, 2002 10
December 31, 1988 December 31, 2003 10
December 31, 1989 December 31, 2004 10
December 31, 1990 December 31, 2005 10
December 31, 1991 December 31, 2006 10
December 31, 1997 December 31, 2012 8,740
--------------
$ 10,740
The Company expects to use the net operating loss on its 1998
income tax return.
NOTE 2: DEVELOPMENT STAGE COMPANY
The Company was incorporated under the laws of the State of
Utah on May 2, 1986 as Macaw Capital, Inc. and has been in the
development stage since incorporation. 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.
NOTE 3: CAPITALIZATION
On the date of incorporation, the Company sold 1,000,000
shares of its common stock to Capital General Corporation for
$2,000 cash for an average consideration of $.002 per share.
The Company's authorized stock includes 100,000,000 shares of
common stock at $.001 par value.
See also Note 6.
F-7
<PAGE>
UNIDYN, CORP.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (continued)
June 30, 1998
NOTE 4: RELATED PARTY TRANSACTIONS
During 1998, the Company received $126,000 from Universal. The
amount was reimbursement for expenses paid by the Company on
behalf of Universal. The amount is reflected as a reduction of
general and administrative expenses on the Company's books and
eliminated on consolidation.
NOTE 5: 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 known as
"NorthStar". The Company also entered into formal negotiations
for the acquisition of the Derritron shaker product, 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.
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.
NOTE 6: 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.
F-8
<PAGE>
UNIDYN, CORP.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (continued)
June 30, 1998
NOTE 7: 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.
NOTE 8: 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.
F-9
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted
from UniDyn, Corp. June 30, 1998 financial statements and is
qualified in its entirety by reference to such financial
statements.
</LEGEND>
<CIK> 0000894542
<NAME> UniDyn, Corp.
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> JUN-30-1998
<CASH> 144,925
<SECURITIES> 0
<RECEIVABLES> 381,734
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0
0
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</TABLE>
