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 September 30, 1999
----------------------------------------
[ ] 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)
1216 South 1580 West, #B
Orem, Utah 84058
(Address of principal executive offices) (Zip Code)
Issuer's telephone number, including area code (801) 434-7250
8621 North Seventy Ninth Avenue
Peoria, Arizona 85345
- ------------------------------------------------------------------------
(Former Address) (Zip Code)
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 September 30, 1999
- ------------------------------------ ------------------------------------
$.001 PAR VALUE CLASS A COMMON STOCK 32,000,000 SHARES
1
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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
10KSB FOR THE YEAR ENDED DECEMBER 31, 1998.
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 hardware and electronics. The Company's products
fall under two categories, A) Vibration Stress Screening (VSS) and B) Sterling
inspection products for on-line printed circuit board workmanship inspection.
The vibration test products are used to check the integrity of manufactured
items including printed circuit boards eventually used in automotive, computer,
and various electronic markets. 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 shakers and amplifiers known in the industry under
the trade name "Derritron". Derritron has had an excellent 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.
2
<PAGE>
UniDyn's flagship product is called "Sterling". The Sterling product
technology was completely acquired from Universal Dynamics in the second quarter
of 1998 after the patent search showed 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 Sterling products to the Japanese company
under an exclusive, five year OEM arrangement in Japan estimated to be worth
over $200,000,000. The quantity is estimated to average approximately 20
Sterling units a month, and relates to the initial model demands and various
production options required by the Japanese customers. The Company is in the
process of engineering the first of several "Production Models" for delivery
beginning in the first quarter of 2000. The Sterling technique has already been
tested successfully at IBM and Delco Electronics. The Company is currently
structuring additional funding for Sterling product development. The Company
also has an agreement in place to purchase Avalon Manufacturing Company for the
purpose to provide engineering support, design support, and initial
manufacturing commitments for Sterling.
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 discovering workmanship defects through the
manufacturing process. Currently the industry is experiencing a 4 to 7% warranty
return rate. Sterling is believed to be able to reduce this warranty repair rate
down to perhaps 1%.
The Company has also disclosed arrangements involving distribution
through Singapore for UniDyn Company products. It is estimated to be worth
approximately $10,000,000 a year in product shipments. Arrangements are also
currently being put into place for limited Sterling distribution in Europe, and
Korea. The Company is also arranging for a major OEM placement with a USA based
company.
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. Currently this product is
manufactured in Orem, Utah in UniDyn's Vibration Products Division, (VPD).
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 received 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 is in the process of looking
at a plant in California that will form the operations of the Derritron Products
Division (DPD). The Company would like to have this division beginning
operations in March 2000.
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.
Based on funding, the Company is looking to expand its operations
through a strategic acquisition of Avalon Manufacturing Company that will
benefit the Sterling product development. The Company has sold its interest in
continuing business in England to focus on forming businesses in the USA
involving Sterling and Derritron products.
The Company has also entered into an agreement Oct 1999, to purchase
Avalon Manufacturing Company. Once the acquisition is complete, Avalon will be
positioned as the Avalon Products Division (APD) and have Sterling mechanical
engineering and initial production responsibilities. For this acquisition and
additional capital needs, the
3
<PAGE>
Company has allocated up to 3,000,000 shares to be placed in private
transactions. The Company would like to have this company in place by the end of
1999.
RESULTS OF OPERATIONS
For the three months ending September 30, 1999, the Company posted an
income of $87,170 on revenues of $446,480 ($129,915 loss and $167,269 revenue
for the same period in 1998). Substantially all sales were generated from the
NorthStar product. NorthStar is composed of off the shelf items and has minimal
assembly requirements. This was the first full quarter of the Vibration Products
Division in Orem, Utah. The Directors are very pleased with the continual growth
of the VPD division as it forms some of the earlier models that will be used in
the Company's 3 other divisions coming on-line. (Avalon (APD), Derritron (DPD),
and the newly formed UniDyn Technology Division (UTD) )
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 September 30, 1999 were
$126,979 with a resultant gross profit of $319,501 ($84,256 and $83,013 for
1998). Gross margin for the period ended September 30, 1999 was 72% (50% in
1998). As new products are introduced, including the Sterling Process, there is
significant uncertainty about future gross margins relative to total sales.
Gross margin percentage is highly dependent upon product prices, sales volumes,
materials cost and allocation of manufacturing overhead which vary from product
to product. Management has estimated the Sterling product at a 50% gross margin.
That margin is expected to improve as the order volume increases with product
demand.
Selling, General and Administrative costs for the three months ended
September 30, 1999 were $183,151, ($329,316 in 1998). The Company currently
leases a total of about 16 people in the United States. The reduction in G&A
expenses reflects management focus on engineering development for Sterling, and
less on corporate overhead. Management also believes that by leasing its primary
workforce, the Company has substantially reduced 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 nine months ending September 30, 1999, the Company posted
income of $163,521 on revenues of $1,199,973 ($92,600 income and $1,418,998
revenue for the same period in 1998). Substantially all sales were generated
from the NorthStar product. NorthStar is composed of off the shelf items and has
minimal assembly requirements. Included in income for the nine months is a
$101,565 gain from the sale of the Company's European subsidiary. Sales
reduction is the result of the Company focusing efforts on "Morning Star"
developments for NorthStar, and redirecting efforts toward the Sterling
Products. Derritron developments will be mostly put on hold until funding is
directed to it through outside funding, or through additional revenues generated
by "Morning Star" or Sterling.
Cost of Goods Sold for the nine months ended September 30, 1999 were
$340,891 with a resultant gross profit of $859,082 ($467,975 and $951,023 for
1998). Gross margin for the period ended September 30, 1999 was 72% (67% in
1998). Until the new products are delivered, including the Sterling Systems,
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. The gross profit percent (%) is
up in 1999 due to the Company no longer making sales through its European
subsidiary which had lower profit margins than the Company.
Selling, General and Administrative costs for the nine months ended
September 30, 1999 were $737,323, ($1,075,661 in 1998).
4
<PAGE>
For the nine months ending September 30, 1999 the majority of the
Company's research was conducted at the Company's Engineering and Development
Center in Orem, 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. The Company's NorthStar
manufacturing along with NorthStar engineering development are both now located
together in Orem, Utah.
LIQUIDITY AND CAPITAL RESOURCES
The Company is currently seeking additional working capital for the
Avalon acquisition, and to meet its short term growth planning 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. As of September 30, 1999, the Company has approximately
$356,364 in working capital.
The company has current commitments that will increase the working capital
another $250,000 in the fourth quarter. The Company is also looking to increase
the working capital with additional capital funding.
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.
5
<PAGE>
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 mainly involving Avalon
capital and initial Sterling production requirements.
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-KSB for the year ended December 31, 1998 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.
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 2000 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 that will certify their products
as Y2K compliant. The amount of needed hardware and software depends on the
associated production model in question.
ITEM 2. LEGAL PROCEEDINGS
Not applicable.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
Financial statements as of September 30, 1999
(b) Reports on Form 8-K
None
6
<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: November 12, 1999
Ira Gentry, President and Director
7
<PAGE>
UNIDYN, CORP. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
September 30, December 31,
1999 1998
ASSETS (Unaudited) (Audited)
---------------------- --------------------
CURRENT ASSETS
<S> <C> <C>
Cash in bank $ 48,904 $ 138,936
Accounts receivable 381,703 245,312
Receivable - shareholder 87,150 0
Deferred tax benefit 14,500 14,500
Prepaid expense 0 17,564
Inventory 37,298 34,173
---------------------- --------------------
TOTAL CURRENT ASSETS 569,555 450,485
PROPERTY, PLANT & EQUIPMENT 46,201 95,287
OTHER ASSETS
Deferred tax benefit 185,500 196,500
Derritron Technology 4,008,400 4,008,400
---------------------- --------------------
4,193,900 4,204,900
---------------------- --------------------
$ 4,809,656 $ 4,750,672
====================== ====================
LIABILITIES & EQUITY
CURRENT LIABILITIES
Accounts payable $ 69,722 $ 173,138
Accrued expenses 0 47,285
Payable - related party 105,469 90,670
Income taxes payable 38,000 50
---------------------- --------------------
TOTAL CURRENT LIABILITIES 213,191 311,143
STOCKHOLDERS' EQUITY
Common Stock $.001 par value:
Authorized - 100,000,000 shares
Issued and outstanding
32,000,000 shares 32,000 32,000
Additional paid-in capital 4,341,832 4,341,832
Retained earnings 229,219 65,697
Accumulated other comprehensive loss (6,586) 0
---------------------- --------------------
TOTAL STOCKHOLDERS' EQUITY 4,596,465 4,439,529
---------------------- --------------------
$ 4,809,656 $ 4,750,672
====================== ====================
</TABLE>
F-1
<PAGE>
UNIDYN, CORP. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
AND COMPREHENSIVE INCOME
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
1999 1998 1999 1998
------------------ ----------------- ----------------- ------------------
<S> <C> <C> <C> <C>
Net sales $ 446,480 $ 167,269 $ 1,199,973 $ 1,418,998
Cost of sales 126,979 84,256 340,891 467,975
------------------ ----------------- ----------------- ------------------
GROSS PROFIT 319,501 83,013 859,082 951,023
Other Income:
Commissions 0 0 0 212,900
Gain on sale of subsidiary 0 0 101,565 0
------------------ ----------------- ----------------- ------------------
0 0 101,565 212,900
Bad debts (adjustment) 0 (30,000) 0 0
Gain on disposal of net assets of Universal 0 (11,388) 0 (11,388)
General and administrative expenses 183,151 329,316 737,323 1,075,661
------------------ ----------------- ----------------- ------------------
183,151 287,928 737,323 1,064,273
------------------ ----------------- ----------------- ------------------
NET INCOME (LOSS)
BEFORE INCOME TAXES 136,350 (204,915) 223,324 99,650
Income tax expense (benefit) 49,180 (75,000) 59,803 7,050
------------------ ----------------- ----------------- ------------------
NET INCOME (LOSS) 87,170 (129,915) 163,521 92,600
OTHER COMPREHENSIVE LOSS
Foreign currency translation
adjustments 0 0 (6,586) 0
------------------ ----------------- ----------------- ------------------
TOTAL COMPREHENSIVE
INCOME (LOSS) $ 87,170 $ (129,915) $ 156,935 $ 92,600
================== ================= ================= ==================
Net income (loss) per weighted
average share $ .00 $ (.00) $ .01 $ .00
================== ================= ================= ==================
Weighted average number of common
shares used to compute net income
(loss) per weighted average share 32,000,000 32,000,000 32,000,000 26,762,667
================== ================= ================= ==================
</TABLE>
F-2
<PAGE>
UNIDYN, CORP. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
1999 1998
----------------- -----------------
OPERATING ACTIVITIES
<S> <C> <C>
Net income $ 163,521 $ 92,600
Adjustments to reconcile net income to cash provided
by operating activities:
Depreciation 15,493 3,230
Gain on Universal disposal 0 (11,388)
Bad debts 0 30,000
Gain on subsidiary disposal (5,717) 0
Deferred taxes 11,000 (276,000)
Foreign currency translation (6,586) 0
Changes in assets and liabilities:
Accounts receivable (190,580) 76,748
Inventory (3,125) 4,335
Prepaid expenses 8,486 (38,791)
Accounts payable 831 42,689
Accrued expenses (30,958) 0
Payable - related party 14,799 0
Income taxes payable 37,950 263,000
----------------- -----------------
NET CASH PROVIDED
BY OPERATING ACTIVITIES 15,114 186,423
INVESTING ACTIVITIES
Loans (87,150) (28,325)
Purchase of equipment 0 (91,119)
----------------- -----------------
NET CASH (USED)
BY INVESTING ACTIVITIES (87,150) (119,444)
FINANCING ACTIVITIES
Cash remaining with Universal 0 (14,300)
Cash remaining with former subsidiary (17,996) 0
Loan principal payments 0 (74,775)
----------------- -----------------
NET CASH (USED) BY
FINANCING ACTIVITIES (17,996) (89,075)
----------------- -----------------
(DECREASE) IN CASH
AND CASH EQUIVALENTS (90,032) (22,096)
Cash and cash equivalents at beginning of year 138,936 104,522
----------------- -----------------
CASH AND CASH EQUIVALENTS
AT END OF PERIOD $ 48,904 $ 82,426
================= =================
Cash paid for income taxes $ 11,772 $ 50
Cash paid for interest 0 2,554
</TABLE>
SUPPLEMENTAL INFORMATION
During the nine months ended September 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. AND SUBSIDIARY
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
September 30, 1999
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 September 30, 1999 contain the
accounts of the Company and its formerly wholly-owned
subsidiary, Unidyn (Europe) Limited.
The financial statements for September 30, 1998 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).
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-4
<PAGE>
UNIDYN, CORP. AND SUBSIDIARY
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (continued)
September 30, 1999
NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING PRINCIPLES (continued)
Income Taxes (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. The Statement was
applied in the Company's financial statements for the fiscal
year commencing January 1, 1993.
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: 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 4: 1998 EVENTS
STERLING PATENT
During the quarter ended September 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 1999 with sales expected in the second quarter of 2000.
DERRITRON TECHNOLOGY
Effective September 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
2000. With this acquisition, the Company receives patents,
products, manufacturing equipment, and an established market
presence in England and other parts of Europe.
NOTE 5: SEGMENT INFORMATION
The Company's subsidiary had sales in Europe of $36,145, cost
of sales of $23,926, general and administrative expenses of
$90,779, and a net loss of $78,560. Included in cost of sales
is $16,533 paid to the Company for inventory to sell.
NOTE 6: SALE OF SUBSIDIARY
Effective April 1, 1999, the Company sold its subsidiary to
its largest shareholder for $185,933. $98,783 is reflected in
accounts receivable representing uncollected sales made to the
former subsidiary and $87,150 is reflected as receivable -
shareholder. The Company collected the $185,933 in October,
1999. No operations for the subsidiary after March 31, 1999
are reflected in the statement of operations.
NOTE 7: 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.
F-5
<PAGE>
UNIDYN, CORP. AND SUBSIDIARY
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (continued)
September 30, 1999
NOTE 7: WARRANTS AND OPTIONS (continued)
The Company has granted 100,000 options each to three
directors to purchase stock at $.16 per share (market price on
grant date). The options vest 20% on April 1, 1999, 20% on
April 1, 2000, 20% on April 1, 2001, and 40% on April 1, 2002.
The term of the options is ten years.
The Company has granted 350,000 options to its technical
employees to purchase stock at $.16 per share (market price on
grant date). The options have the same vesting schedule as
described above and have a term of ten years. The technical
employees plan can grant a total of 750,000 options under the
plan.
F-6
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted
from UniDyn, Corp. September 30, 1999 financial statements and
is qualified in its entirety by reference to such financial
statements.
</LEGEND>
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<NAME> UniDyn, Corp.
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