SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10KSB
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended December 31, 1998
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 1998 were $2,016,779.
As of March 24, 1999, the approximate market value of the voting stock held by
non-affiliates of the registrant was $2,769,379, based on an average bid price
of $.1446 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 March 25, 1999
- ------------------------------------ --------------------------------
$.001 PAR VALUE CLASS A COMMON STOCK 32,000,000 SHARES
DOCUMENTS INCORPORATED BY REFERENCE
None
1
<PAGE>
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
2
<PAGE>
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 in the second quarter of 1998 completed the acquisition of the
Sterling product from Universal Dynamics. Sterling is a printed circuit board
("PCB") testing technology. Sterling involves a technology for testing
workmanship during the electronic manufacturing inspection process. Sterling
systems will be used for inspecting printed circuit boards and other related
electronic parts in the manufacturing process.
During the fourth quarter of 1998, the Company formed a relationship with
IEC Electronics in New York (IECE) for the purpose of investigating the
manufacturing details pertaining to the Sterling product. However, the
responsibility remains with the Company to develop the production model. The
Company also has discussed sub contracts for several key components of the
Sterling product. These discussions are still currently in process.
The Company also in the second quarter of 1998 completed the acquisition of
the Derritron product, a well respected business involving the manufacturing of
electrodynamic shakers and related equipment. Derritron is also a registered
trademark in both the United Kingdom and United States Trademarks Office. With
this acquisition, the Company will receive patents, products, know how,
drawings, trade name, manufacturing equipment, and an established market
presence in England and other parts of Europe, Asia, South America, India, and
China.
As of April 02, 1999, the Company did not have any direct employees. The
Company leases approximately 40 personnel to provide services to the Company.
ITEM 2. Properties.
The Company is a Nevada corporation. All leasing requirements are arranged
through a separate third party on a month to month basis on an as need 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.
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. No matters were submitted in
1998. During April 1999, a majority of the shareholders elected Ira Gentry, John
Provazek, and Don Leaver 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.
The following table lists the high and low sales prices for the common stock of
the Company during the most recent fiscal year:
High Low
Sales Price Sales Price
1998 First Quarter $ .57 $ .375
Second Quarter 1.29 .45
Third Quarter 1.105 .2175
Fourth Quarter .50 .17
3
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As of February 1999, there were about 346 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.
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 most of 1997 are those of Universal Dynamics, Inc.
RESULTS OF OPERATION
For the 12 months ended December 31, 1998, the Company posted earnings of
$71,493 on revenues of $2,016,779 compared with earnings of $57,411 on revenues
of $2,237,367 for the 12 months ended December 31, 1997.
Cost of goods sold for the 12 months ended December 31, 1998 were $609,694
with a resultant gross profit of $1,407,085 ($769,908 and $1,467,459 in 1997).
Gross margin for the year ended December 31, 1998 was 69.8% (65.6% in 1997).
Selling and general and administrative costs for the 12 months ended
December 31, 1998 were $1,523,583 ($1,407,211 in 1997).
Engineering costs related to product development were $2,412 in 1998 and
$141,617 in 1997.
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 additional shares or incur indebtedness. The Company
also may incur additional indebtedness in connection with its pending or future
acquisitions or other transactions.
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.
In late 1997, and early 1998, the Company announced two important
acquisitions. First was acquisition of 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 acquired 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. The Company is patenting one of the Derritron
Vibration products with orders expected in the second quarter of 1999 and
distribution in the third quarter of 1999.
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 regarding technical
expertise in Windows software, and leveraging off the tens of millions already
invested in recent shaker and amplifier design through the Derritron business
acquired in the second quarter of 1998.
4
<PAGE>
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. Marketing
information received by the Company in fall 1998 indicates that the market
represents a need of over 5000 units, and currently has a 12% growth rate. If
the Company obtained 10% of the market, it would exceed $100 million in annual
revenues.
Sterling is a leap forward for the business of assuring quality and
workmanship in printed circuit board and other related manufacturing. The
Company believes Sterling is marketable to nearly every major manufacturer of
printed circuit boards. Sterling 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 has authorized the ability to acquire debt during the startup
phases of products, but believes over the long run in debt-free operations.
Products are based on strong technology, adaptation to changing markets, joint
efforts through interested parties, positive business strategy, in combination
with a comprehensive global objective to increase shareholder wealth.
IMPACT OF THE YEAR 2000 ISSUE
The "Year 2000 Problem" arose because many existing computer programs use
only the last two digits to refer to a year. Therefore, these computer programs
do not properly recognize a year that begins with "20" instead of the familiar
"19". If not corrected, many computer applications could fail or create
erroneous results. The extent of the potential impact of the Year 200 Problem is
not yet known, and if not timely corrected, it could affect the global economy.
Y2K Statement
The Company has verified that all internal software used in the operations
of the Company and related developments are Y2K compliant. The Company sees no
risk at this time pertaining to Y2K, and internal company operations.
Products currently manufactured by the Company have also been Y2K verified.
All previous Company customers have the ability to purchase both hardware and
software upgrades from the Company which will certify their products as Y2K
compliant. The amount of needed hardware and software depends on the associated
production model in question.
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.
5
<PAGE>
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 April 2, 1999.
Name Age Position
Ira Gentry 43 President, CEO and Director
Lynn Gentry 39 Secretary-Treasurer
Dr. Don Leaver 44 Director - Chief Scientist
John Provazek 45 Director
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
were again elected by the shareholders 02 April, 1999. Lynn Gentry was also
elected at that time as the Company Secretary and Treasurer. The next general
shareholders meeting is scheduled in Provo, Utah the second Friday in April,
2000.
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.
Donald S. Leaver joined the Company as Chief Scientist in April, 1998. He
worked for Concurrent Computer Corporation as a Software Development 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.
6
<PAGE>
Lynn Gentry, 39, joins the Company 02 April 1999 as Company Secretary and
Treasurer. She has previously functioned as corporate Director and Secretary of
Universal Dynamics, Inc. Currently she is an officer of "Tough Love Arizona"
chartered through Tough Love International, an organization involved with
supporting parents through rearing children, both old and young.
ITEM 10. Executive Compensation.
As of December 31, 1998, the Company paid Ira Gentry $52,000 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.
The Company does not have any employees, as all personnel are leased. The
two highest paid leased personnel are Mike Bird, senior engineer at $77,000 per
year and Jeff Wilson, at $77,000 per year.
ITEM 11. Security Ownership of Certain Beneficial Owners and Management.
The following table sets forth, as of March 1999, 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 Mearns Assurance Corp. 14,576,000 45.55
Common Stock Technet, Inc. 3,000,000 9.375
Common Stock Ira Gentry 835,000 2.61
8621 North Seventy Ninth Avenue
Peoria, Arizona 85345
Common Stock Lynn Gentry 0 0.00
8621 North Seventy Ninth Avenue
Peoria, Arizona 85345
Common Stock Dr. Don Leaver 100,000 0.31
8621 North Seventy Ninth Avenue
Peoria, Arizona 85345
Common Stock John Provazek 815,000 2.55
8621 North Seventy Ninth Avenue
Peoria, Arizona 85345
Common Stock All Officers and 1,750,000 5.47
Directors as a Group
</TABLE>
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.
7
<PAGE>
PART IV
ITEM 13. Exhibits and Reports on Form 8-K.
Financial Statements and Financial Statement Schedules.
Financial Statements - December 31, 1998 and 1997
Reports on Form 8-K.
No reports were filed in the fourth quarter of 1998.
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: April 15, 1999 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: April 15, 1999 By:
Ira Gentry, President, CEO and Director
Date: April 15, 1999 By:
John Provazek - Director
Date: April 15, 1999 By:
Don Leaver, Ph.D., Director
Date: April 15, 1999 By:
Lynn Gentry, Secretary - Treasurer
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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. and subsidiary
We have audited the accompanying consolidated balance sheets of UniDyn, Corp.
and subsidiary as of December 31, 1998 and 1997, and the related consolidated
statements of operations, changes in stockholders' equity, and cash flows for
the years ended December 31, 1998 and 1997. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the 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. and
subsidiary as of December 31, 1998 and 1997, and the results of their
operations, changes in stockholders' equity, and their cash flows for the years
ended December 31, 1998 and 1997, in conformity with generally accepted
accounting principles.
Smith & Company
CERTIFIED PUBLIC ACCOUNTANTS
Salt Lake City, Utah
March 19, 1999
F-1
<PAGE>
UNIDYN, CORP. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
December 31,
1998 1997
----------------- -----------------
ASSETS
CURRENT ASSETS
<S> <C> <C>
Cash in bank $ 138,936 $ 104,522
Accounts receivable 245,312 203,318
Loan receivable 0 24,500
Deferred tax benefit (Note 7) 14,500 0
Prepaid expense 17,564 38,708
Inventory (Note 1) 34,173 70,866
----------------- -----------------
TOTAL CURRENT ASSETS 450,485 441,914
PROPERTY, PLANT & EQUIPMENT (Note 3) 95,287 38,117
OTHER ASSETS
Sterling Patent (Note 10) 0 0
Deferred tax benefit (Note 7) 196,500 0
Derritron Technology (Note 11) 4,008,400 0
----------------- -----------------
4,204,900 0
----------------- -----------------
$ 4,750,672 $ 480,031
================= =================
LIABILITIES & EQUITY
CURRENT LIABILITIES
Accounts payable $ 173,138 $ 45,786
Payable - related party (Note 5) 90,670 0
Accrued expenses 47,285 0
Loans payable (Note 6) 0 74,775
Income taxes payable 50 0
----------------- -----------------
TOTAL CURRENT LIABILITIES 311,143 120,561
STOCKHOLDERS' EQUITY
Common Stock $.001 par value:
Authorized - 100,000,000 shares
Issued and outstanding 32,000,000 shares
(30,560,000 in 1997) 32,000 30,560
Additional paid-in capital 4,341,832 509,621
Treasury stock (Note 14) 0 (174,915)
Retained earnings (deficit) 65,697 (5,796)
----------------- -----------------
TOTAL STOCKHOLDERS' EQUITY 4,439,529 359,470
----------------- -----------------
$ 4,750,672 $ 480,031
================= =================
</TABLE>
See Notes to Consolidated Financial Statements.
F-2
<PAGE>
UNIDYN, CORP. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Year ended
December 31,
1998 1997
-------------- --------------
<S> <C> <C>
Net sales $ 2,016,779 $ 2,237,367
Cost of sales 609,694 769,908
-------------- --------------
GROSS PROFIT 1,407,085 1,467,459
Other Income
Commissions 212,900 0
Gain on disposal of net assets of Universal 11,388 0
-------------- --------------
224,288 0
General & administrative expenses:
Accounting / legal 91,705 20,937
Advertising / promotion 33,165 163,338
Amortization and depreciation 8,970 1,767
Bad debts 0 70,000
Bank charges 6,320 5,313
Commissions/consulting 47,888 17,017
Engineering 2,412 141,671
Interest expense 2,544 12,995
Office expense 14,890 3,708
Payroll taxes and benefits 29,300 23,560
Professional services 16,562 10,820
Property taxes 0 33,616
Rent 49,380 41,950
Repairs and maintenance 26,592 7,568
Salaries / employee leasing 1,006,552 735,192
Telephone 30,453 12,972
Travel 93,438 47,677
Utilities 7,174 21,872
Vehicle expense 43,072 34,882
Miscellaneous 13,166 356
-------------- --------------
1,523,583 1,407,211
NET INCOME BEFORE INCOME TAXES 107,790 60,248
Income tax expense 36,297 2,837
-------------- --------------
NET INCOME $ 71,493 $ 57,411
============== ==============
Net income (loss) per weighted average share $ .00 $ .06
============== ==============
Weighted average number of common shares used to compute
net income (loss) per weighted average share 31,280,000 1,016,333
============== ==============
</TABLE>
See Notes to Consolidated Financial Statements.
F-3
<PAGE>
UNIDYN, CORP. AND SUBSIDIARY
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 14) 2,624,000 2,624
Forward stock split*
(Note 15) 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)
Reclassification of treasury
stock 1,440,000 1,440 (176,356)
Former treasury stock issued
for assets 4,008,400
Capital of subsidiary 167
Net income for year 71,493
-------------- -------------- ----------------- --------------
Balances at 12/31/98 32,000,000 $ 32,000 $ 4,341,832 $ 65,697
============== ============== ================= ==============
</TABLE>
* Approved December 3, 1997
See Notes to Consolidated Financial Statements.
F-4
<PAGE>
UNIDYN, CORP. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Year ended
December 31,
1998 1997
-------------- --------------
OPERATING ACTIVITIES
<S> <C> <C>
Net income (loss) $ 71,493 $ 57,411
Adjustments to reconcile net income (loss) to cash
provided by operating activities:
Gain on Universal disposal (11,388) 0
Amortization and depreciation 8,970 1,767
Stock issued for expenses 0 196
Bad debts 30,000 70,000
Deferred taxes (211,000) 0
Changes in assets and liabilities:
Inventory 20,018 88,651
Accounts receivable (86,839) 130,029
Prepaid expense (55,990) (12,121)
Accrued expenses 47,285 0
Income taxes payable 234,050 (5,673)
Accounts payable 234,033 (19,954)
-------------- --------------
NET CASH PROVIDED BY OPERATING ACTIVITIES 280,632 310,306
INVESTING ACTIVITIES
Purchase of equipment (128,985) (1,538)
Loans (28,325) (24,500)
Purchase of treasury stock 0 (152,483)
-------------- --------------
NET CASH USED BY INVESTING ACTIVITIES (157,310) (178,521)
FINANCING ACTIVITIES
Cash remaining with Universal (14,300) 0
Line of credit repayments 0 (151,223)
Repayments - related parties 0 (21,482)
Loan repayments (74,775) (27,253)
Capital of subsidiary 167 0
Borrowings 0 100,000
-------------- --------------
NET CASH (USED) BY FINANCING ACTIVITIES (88,908) (99,958)
-------------- --------------
INCREASE IN CASH AND CASH EQUIVALENTS 34,414 31,827
Cash and cash equivalents at beginning of year 104,522 72,695
-------------- --------------
CASH & CASH EQUIVALENTS AT END OF YEAR $ 138,936 $ 104,522
============== ==============
Cash paid for:
Interest $ 2,544 $ 12,995
Taxes 50 8,510
</TABLE>
See Notes to Consolidated Financial Statements.
F-5
<PAGE>
UNIDYN, CORP. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1998 and 1997
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 for 1998 contain the accounts of the Company,
its wholly-owned subsidiary, Unidyn (Europe) Limited and Universal
Dynamics, Inc. ("Universal") for the first six months of 1998.
The financial statements for 1997 contain the accounts of the Company
and 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.
NorthStar Assets (Other Assets)
The Company balance sheet shows related company values for both
Sterling and Derritron assets. However, no fixed asset value is
indicated for the NorthStar control system product and its related
control system software due to general accounting principals applied
during the acquisition of the asset in December 1997 which presents the
assets at historical cost.
For shareholder information, Universal Dynamics, Inc., had reported to
management a previous written offer from a third party to acquire the
NorthStar product for $10,000,000 during the summer of 1997 just prior
to the Company acquiring this product from Universal Dynamics for
stock.
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.
F-6
<PAGE>
UNIDYN, CORP. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
December 31, 1998 and 1997
NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING PRINCIPLES (continued)
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.
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.
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, 1998 and 1997 are
summarized as follows:
<TABLE>
<CAPTION>
Accumulated Net Book Value
Cost Depreciation 1998 1997
------------- ------------------ ------------- ------------
<S> <C> <C> <C> <C>
Vehicles $ 50,358 $ 2,518 $ 47,840 $ 27,046
Computers & Equipment 5,254 263 4,991 1,053
Furniture & Fixtures 38,850 2,849 36,001 2,900
Leasehold Improvements 6,795 340 6,455 7,118
------------- ------------------ ------------- ------------
$ 101,257 $ 5,970 $ 95,287 $ 38,117
============= ================== ============= ============
</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, 1998 amounted to
$8,970, ($1,767 in 1997).
NOTE 4: RELATED PARTY TRANSACTIONS
During 1998, the Company received $216,000 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.
F-7
<PAGE>
UNIDYN, CORP. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
December 31, 1998 and 1997
NOTE 5: PAYABLE - RELATED PARTY
At December 31, 1998, the Company owes $90,670 to Universal for cash
advanced to the Company and expenses paid for the Company after
Universal stopped being consolidated with the Company.
NOTE 6: LOANS PAYABLE
Loans payable at December 31, 1998 and 1997 are as follows:
<TABLE>
<CAPTION>
Principal Balances
1998 1997
Interest Long- Long-
Rate Current term Current term
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
GMAC 8.5% $ 0 $ 0 $ 0 $ 0
BankOne
Arizona, NA (1) 10.5% 0 0 74,775 0
------------- ------------- ------------- -------------
$ 0 $ 0 $ 74,775 $ 0
============= ============= ============= =============
</TABLE>
(1) Secured by accounts receivable and inventory.
NOTE 7: INCOME TAXES
Components of income tax are as follows:
1998 1997
------------- -------------
Current
Federal $ 13,197 $ 1,773
State 50 1,064
------------- -------------
13,247 2,837
Deferred 23,050 0
------------- -------------
$ 36,297 $ 2,837
============= =============
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>
1998 1997
------------- -------------
<S> <C> <C>
Income tax computed at Federal statutory
tax rate $ 36,649 $ 20,484
Tax associated with fiscal tax year for
Universal and graduated federal rates * (402) (18,349)
State taxes (net of federal benefit) 50 702
------------- -------------
$ 36,297 $ 2,837
============= =============
</TABLE>
* The Company and Universal are not eligible to file consolidated income tax
returns.
The significant component of the Company's deferred tax asset for
income taxes consists of the following:
Current deferred tax asset
Basis of patents for tax purposes $ 14,500
=============
Long-term deferred tax asset
Basis of patent for tax purposes $ 196,500
=============
NOTE 8: COMMITMENTS AND CONTINGENCIES
The Company has a month-to-month lease on the buildings in Arizona and
Utah where it operates. The approximate monthly amount is $6,950. The
Company also rents office space in Utah. The monthly payment is $410
through September 1999. The Company's subsidiary rents office space in
England for $1,638 per month. The lease expires October 31, 2003. The
subsidiary also pays some of the insurance and maintenance. Future
expected lease payments on the building are as follows:
F-8
<PAGE>
UNIDYN, CORP. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
December 31, 1998 and 1997
NOTE 8: COMMITMENTS AND CONTINGENCIES (continued)
Year ending December 31, 1999 $ 19,656
Year ending December 31, 2000 19,656
Year ending December 31, 2001 19,656
Year ending December 31, 2002 19,656
Year ending December 31, 2003 16,380
-------------
$ 95,004
=============
The subsidiary also leases two vehicles with expected payments of
$30,117 for the year ending December 31, 1999.
Rent expense for the buildings in 1998 was $49,380 and $41,950 in 1997.
Included in vehicle expense for 1998 is $21,557 related to the
subsidiary's leases.
NOTE 9: MAJOR CUSTOMERS
Sales to four customers represented 35.2%, 13.9%, 11.3% and 6.9% during
the year ended December 31, 1998. As of December 31, 1998, accounts
receivable from these four customers represented 7.3%, 23.6%, 14.4%,
and 0.0%, respectively.
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.
NOTE 10: 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 the rights to patent the Sterling Project from Universal.
The patent rights will be amortized over fifteen years for income tax
purposes. For financial statement purposes, the asset has no cost basis
as it was acquired from Universal.
The Sterling Project will allow the testing of printed circuit boards
and other general electronic devices. Sterling will allow the
electronics manufacturer to access the workmanship of their
manufactured electronics and improve the estimated projected life of
the printed circuit board or other items under test. Sterling will
reduce the manufacturer warranty return rate. Estimates show that the
manufacturer can improve the warranty return rate down to perhaps 1
percent based on workmanship errors. Sterling will actually quantify
the reliability of the manufactured part and indicate the workmanship
areas of concern, even though the electronics pass functional testing.
The Company has current arrangements with IEC Electronics (IECE) of New
York to review the product for contract manufacturing at one of their
facilities. The Company expects to have a working production model by
the end of 1999 with sales expected in 2000.
NOTE 11: 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 business and associated technology known as Derritron. Derritron is
a well known business involving vibration shakers and other related
technology. This technology is perfectly integrated with the NorthStar
vibration control systems acquired from Universal Dynamics. The
technology will be amortized over five years. The Company will need to
spend some money to arrange for production of such a massive product
line, even in its reduced set. The Company expects sales to begin in
late 1999 or early 2000 pending current negotiations with previous
Derritron suppliers, and various worldwide distributors. With this
acquisition, the Company receives patent, products, know how, drawings,
trade name, manufacturing equipment, and an established market presence
in England and other parts of Europe , Asia, South America, India, and
China.
F-9
<PAGE>
UNIDYN, CORP. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
December 31, 1998 and 1997
NOTE 12: DISCONTINUATION 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.
NOTE 13: WARRANTS AND OPTIONS
The Company granted warrants to an investment advisory firm to purchase
150,000 shares of the Company's common stock at $.50 per share after
September 3, 1998. On September 3, 1998, the exercise price was above
market price for the Company's stock.
The Company has granted 100,000 options to all three directors to
purchase stock at $.16 per share (average price between bid and ask on
02 April 1999). The options vest 20% for the first three years
beginning the first full year 02 April 1999, and 40% for the last year.
Option documents are to be issued April 1999 with the first 20%
vesture.
The Company has granted a total of 700,000 options for advisory board
members at an exercise price of $.43 per share. The options vest 25%
per year beginning April 1, 1999.
The Company has granted a total of 700,000 options for engineering and
other direct company authorized members. Currently the board members
authorized approximately half of these shares to be optioned at an
exercise price of $.16 per share (average price between bid and ask 02
April 1999). The option vest 20% for the first three years beginning
the first full year 02 April 1999, and 40% for the last year. Option
documents are to be issued April 1999 with the first 20% vesture.
No compensation expense has been recorded as the exercise price was
equal to or exceeded the market price on the grant dates, and all
directors and related share options are to be issued in late April
1999.
NOTE 14: 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.
Other interested parties received 196,000 shares.
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.
1998 EVENTS
The Company also issued 1,822,000 shares for the pending acquisition
of the Derritron product and cancelled the pending acquisition of 80%
ownership of DVCS, LTD in favor of a wholly owned company. Unidyn Inc.
agreed to be the trustee of the shares as required for
F-10
<PAGE>
UNIDYN, CORP. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
December 31, 1998 and 1997
NOTE 14: 1998 EVENTS (continued)
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.
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, 1998, the Company was holding no stock as treasury
stock.
Y2K Statement
The Company has verified that all internal software used in the
operations of the Company and related developments are Y2K compliant.
The Company sees no risk at this time pertaining to Y2K, and internal
company operations.
Products currently manufactured by the Company have also been Y2K
verified. All previous Company customers have the ability to purchase
both hardware and software upgrades from the Company which will certify
their products as Y2K compliant. The amount of needed hardware and
software depends on the associated production model in question.
NOTE 15: 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.
NOTE 16: SEGMENT INFORMATION
The Company's subsidiary had sales in Europe of $219,157, cost of sales
of $73,497, general and administrative expenses of $162,245 and a net
loss of $16,585. Included in cost of sales is $58,500 paid to the
Company for inventory to sell.
F-11
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from
UniDyn, Corp. December 31, 1998 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-31-1998
<PERIOD-END> DEC-31-1998
<CASH> 138,936
<SECURITIES> 0
<RECEIVABLES> 245,312
<ALLOWANCES> 0
<INVENTORY> 34,173
<CURRENT-ASSETS> 450,485
<PP&E> 101,257
<DEPRECIATION> (5,970)
<TOTAL-ASSETS> 4,750,672
<CURRENT-LIABILITIES> 311,143
<BONDS> 0
0
0
<COMMON> 32,000
<OTHER-SE> 4,407,529
<TOTAL-LIABILITY-AND-EQUITY> 4,750,672
<SALES> 2,016,779
<TOTAL-REVENUES> 2,016,779
<CGS> 609,694
<TOTAL-COSTS> 609,694
<OTHER-EXPENSES> 1,523,583
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,544
<INCOME-PRETAX> 107,790
<INCOME-TAX> 36,297
<INCOME-CONTINUING> 71,493
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 71,493
<EPS-PRIMARY> .00
<EPS-DILUTED> .00
</TABLE>
