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, 1999
-----------------
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)
1216 South 1580 West, #A
Orem, Utah 84058
- ---------------------------------------- ---------
(Address of principal executive offices) (Zip Code)
Issuer's telephone number, including area code (801) 434-7250
--------------
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 1999 were $1,570,548.
As of March 21, 2000, the approximate market value of the voting stock held by
non-affiliates of the registrant was $55,298,875, based on an average bid price
of $3.3125 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 December 31, 1999
- ------------------------------------ -----------------------------------
$.001 PAR VALUE CLASS A COMMON STOCK 34,700,000 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 hydraulic and
electrodynamic shakers.
2
<PAGE>
As a result of the acquisition from Universal Dynamics, the Company
produces a vibration control system known as NorthStar. Vibration testing
improves product reliability and is used in many industries, including the
automotive, aerospace and electronics industries. Companies regularly perform
vibration testing as part of their regimen of environmental simulation and
durability testing. NorthStar is a Microsoft Windows compatible vibration
control system capable of running up to three shakers independently. The Company
markets NorthStar controllers to end users, such as test labs and equipment
producers, and to manufacturers of industrial shakers who package it as an OEM
system. The Company intends to continue to use and devote the acquired assets in
the same business of developing vibration and reliability testing systems.
The Company 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.
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.
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.
Also immediately following the first quarter of 1999, the Company
discontinued its interest in the United Kingdom operation that was selling the
NorthStar Vibration Control systems. The operation had first quarter losses of
about $77,000. This decision was additionally supported in the Company's lack of
getting operational and accounting information out of the UK, and general
difficulties in managing the operation from this country. Immediately following
that divestiture, the Company investigated several possibilities that would put
the Derritron operations here in the USA. In the fourth quarter, the Company had
arranged the startup Derritron in Riverside CA under the direction of George
Pearce, former Vice President of Ling Electronics of California. George Pearce
has over 25 years in the Vibration Test Equipment, and is generally considered
one of the best in producing Vibration Test Equipment.
In the Summer of 1999, the Company was successful in obtaining a 5 year
contract with Japan to deliver the Sterling product. This commitment would
develop to 20 Sterling units a month with the approximate price of $200,000 per
unit. It is believed that the contract could bring approximately $200 Million
dollars in sales for the Company.
On 31 Dec 1999 the Company completed the acquisition of Avalon
Manufacturing Company. The Company intends to have Avalon be the central point
for further development and the initial manufacturing of the Sterling product.
Avalon has key experience in providing like equipment used in the manufacturing
of printed circuit boards. This technology, including that which is used for
automatic board handling, will be integrated as needed in the Sterling
Production model.
3
<PAGE>
Following that 31 Dec 1999 acquisition of Avalon, the Company began full
development of the Sterling product at the Avalon facility in Phoenix, AZ. The
company has attracted some prime engineering talent to the Sterling project. The
product was demonstrated in the first quarter of 2000. The Sterling product is
expected to begin shipments in the summer of 2000.
As of December 31, 1999, the Company did not have any direct employees. The
Company leases approximately 18 personnel for the Phoenix Avalon operation,
approximately 12 personnel for the Derritron Riverside California operation, and
approximately 14 personal for the UniDyn Corp. Orem Utah operations. These
leased employees are not union related and provide full time services to the
Company. Our relationship to the staff is satisfactory, and we do not find
leasing at any extra risk in losing employees.
The leasing relationship allows the company to focus on the product
development with additional engineering talent, where the leasing company has
the human resources and 401K management. Management believes that leasing
employees saves the company at least one senior level position. Leasing allows
the larger group of employees in the leasing company to provide better overall
benefits and health insurance at a better price due to larger overall groups
discounts with the health providers.
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 estate property. The Avalon plant is
approximately 15,000 sqft at approximately $0.45 per sqft. The Derritron
Riverside plant is approximately 10,000 sqft at a cost of approximately $0.42
per sqft. The Utah Orem facility is approximately 10,000 sqft at approximately
$0.42 per sqft.
Due to the nature of the Sterling product contract, the Company intends to
move the Avalon business into a larger facility in the summer or fall of 2000.
This will allow for the additional room required for the Sterling product, and
also room for new business relating to the Avalon core products.
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. At the end of Dec 1999, the following remain: Ira
Gentry as Director and Chairman, John Provazek as Director, and Dr. Don Leaver
as Director. Early in Jan 2000, John Provazek accepted the full time position as
Chief Operating Officer and resigned his 17 year position with United Parcel
Service as Regional Operations Manager.
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 years:
4
<PAGE>
High Low
Sales Price Sales Price
1999 First Quarter $ .41 $ .14
Second Quarter .30 .10
Third Quarter .67 .26
Fourth Quarter 2.49 .43
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
As of March 2000, there were about 900 shareholders of its common stock,
but based on information with respect to the number of shareholders seeking
information or to whom shareholder materials have been distributed, the Company
and its transfer agent estimate that there are 2500 beneficial owners 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.
RESULTS OF OPERATION
For the 12 months ended December 31, 1999, the Company posted earnings of
$47,724 on revenues of $1,570,548 compared with earnings of $71,493 on revenues
of $2,016,779 for the 12 months ended December 31, 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
year is a $101,565 gain from the sale of the Company's European subsidiary.
Cost of goods sold for the 12 months ended December 31, 1999 were $482,824
with a resultant gross profit of $1,087,724 ($609,694 and $1,407,085 in 1998).
Gross margin for the year ended December 31, 1999 was 69.3% (69.8% in 1998).
Selling and general and administrative costs for the 12 months ended
December 31, 1999 were $1,121,025 ($1,523,583 in 1998).
Engineering costs related to product development were $2,412 in 1998.
The Company believes that it will receive a sufficient stream of cash from
its new business operations to meet its cash needs after the launch of its new
Derritron and Sterling products. However, because the Company plans to grow in
order to meet demand of the new products, the Company's capital needs increase.
In the event the Company needs additional cash through this process of
controlled growth and new product introduction, the Company may issue additional
shares or incur indebtedness. The Company
5
<PAGE>
also may incur additional indebtedness in connection with its pending or future
acquisitions or other transactions.
The Company is 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 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, is now beginning to build these
Derritron shakers and offer these high quality technologies as a complete,
integrated, turnkey package, significantly reducing costs to end users, and
completing a total package of vibration products to the end user. The Company is
expecting to patent one or more of the Derritron Vibration technologies.
Actual Derritron operations began in Jan 2000. Actual delivered and
invoiced products for the first quarter of 2000 is expected to approach
$175,000.
The Company completed the acquisition of Avalon Manufacturing Company on 31
Dec 1999. Avalon has a rich background in supplying manufacturing equipment for
the Printed Circuit Board (PCB) industry. The Avalon products have a history of
being supplied to Motorola and other PCB manufacturers. Avalon was purchased by
the Company to provide the required manufacturing for the initial Sterling
systems, and to integrate some key Avalon technology into the Sterling products.
As of the 31 Dec 1999 date, Avalon had approximately $300,000 in order backlog
for existing products.
The Company in early 2000 has now successfully demonstrated key features of
the Sterling technology at Avalon and is now finishing the first production
model and addressing the patenting issues of "Sterling," a revolutionary quality
assurance system ("QAS") for printed circuit board production. The Company has
in place OEM distributors for Sterling representing over $200 million in
commitments to order over the first 5 years. This however is small relative to
the scope of the potential market Sterling addresses, but represents a strong
beginning. Marketing information and analysis report received by the Company in
early 2000 indicates that the market represents a need of over 34,000 units, and
currently has a 5% growth rate. The Sterling units will be sold in the $200,000
per unit range on the average, and the gross margin should be approximately 50%
COGS.
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 can be marketable to most major manufacturers of
printed circuit boards. Sterling represents a significant area of expansion for
the Company.
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 and/or issue shares
during the startup phases of the products. Products are based on strong
technology contained within the company divisions. This should allow the company
to maintain a competitive advantage where nearly all the technology is contained
within the existing divisions.
6
<PAGE>
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 has
experienced no problems as of March 2000 pertaining to Y2K.
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. The Company products has experienced no problems
as of March 2000 pertaining to Y2K.
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.
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 December 31, 1999.
Name Age Position
Ira Gentry 44 President, CEO and Director
Cassie Whitlock 29 Secretary-Treasurer
Dr. Don Leaver 45 Director - Vice President,
Research and Development
John Provazek 46 Director
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.
7
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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.
Cassie Whitlock, Corporate Secretary/Treasurer, earned her Bachelor of
Science degree in Business Management with an Accounting emphasis from Utah
Valley State College. Mrs. Whitlock has had experience in administration
assistance, office management, investor relations, accounting, and human
resource management.
During March 2000, the Company was pleased to announce the additions of
John Healy, formerly of AT&T, and James Corigan, formerly of IBM, to an advisory
board.
ITEM 10. Executive Compensation.
As of December 31, 1999, the Company paid Ira Gentry $ 80,500 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 direct employees, as all personnel are
leased. However, the two highest paid full time leased personnel are George
Pearce, President of the Derritron Division at $ 120,000 per year and John
Provazek, Chief Operations Officer at $ 105,000 per year.
ITEM 11. Security Ownership of Certain Beneficial Owners and Management.
The following table sets forth, as of December 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 Technet, Inc. 3,000,000 8.65
Common Stock Ira Gentry 40,000(1) 0.12
7410 West Peoria, #240
Peoria, Arizona 85345
Common Stock Cassie Whitlock 5,000(2) 0.01
546 East 100 North
Springville, Utah 84663
Common Stock Dr. Don Leaver 40,000(3) 0.12
3702 East Brighton Pt. Dr.
Sandy, Utah 84070
Common Stock John Provazek 345,000(4) 0.99
10119 Davies Road
Lake Stevens, Washington 98258
Common Stock All Officers and 430,000 1.24
Directors as a Group
</TABLE>
(1) Mr. Gentry also has 160,000 options which fully vest between April,
2000 and April, 2002.
(2) Mrs. Whitlock also has 20,000 options which fully vest between April,
2000 and April, 2002.
(3) Dr. Leaver also has 160,000 options which fully vest between April,
2000 and April, 2002.
8
<PAGE>
(4) Mr. Provazek also has 80,000 options which fully vest between April,
2000 and April, 2002.
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.
PART IV
ITEM 13. Exhibits and Reports on Form 8-K.
Financial Statements and Financial Statement Schedules.
Financial Statements - December 31, 1999 and 1998
Reports on Form 8-K.
No reports were filed in the fourth quarter of 1999.
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 11, 2000 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 11, 2000 By:
Ira Gentry, President, CEO and Director
Date: April 11, 2000 By:
John Provazek - Director
Date: April 11, 2000 By:
Don Leaver, Ph.D., Director
Date: April 11, 2000 By:
Cassie Whitlock, Secretary - Treasurer
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Smith
&
Company
A Professional Corporation of Certified Public Accountants
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, 1999 and 1998, and the related consolidated
statements of operations and comprehensive income, changes in stockholders'
equity, and cash flows for the years ended December 31, 1999 and 1998. 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, 1999 and 1998, and the results of their
operations, changes in stockholders' equity, and their cash flows for the years
ended December 31, 1999 and 1998, in conformity with generally accepted
accounting principles.
Smith & Company
CERTIFIED PUBLIC ACCOUNTANTS
Salt Lake City, Utah
March 20, 2000
10 West 100 South, Suite 700o Salt Lake City, Utah 84101-1554
Telephone: (801) 575-8297o Facsimile: (801) 575-8306
E-mail: [email protected]
Members: American Institute of Certified Public Accountants
o Utah Association of Certified Public Accountants
F - 1
<PAGE>
UNIDYN, CORP. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
December 31,
1999 1998
----------------- -----------------
ASSETS
CURRENT ASSETS
<S> <C> <C>
Cash in bank $ 461,239 $ 138,936
Accounts receivable 431,857 245,312
Stock subscription (Note 18) 207,000 0
Deferred tax benefit (Note 7) 14,500 14,500
Prepaid expense 11,850 17,564
Inventory (Note 1) 333,551 34,173
----------------- -----------------
TOTAL CURRENT ASSETS 1,459,997 450,485
PROPERTY, PLANT & EQUIPMENT (Note 3) 560,642 95,287
OTHER ASSETS
Sterling Patent (Note 10) 0 0
Deposits and other 8,184 0
Goodwill (Note 19) 1,266,105 0
Deferred tax benefit (Note 7) 181,500 196,500
Derritron Technology (Note 11) 4,008,400 4,008,400
----------------- -----------------
5,464,189 4,204,900
----------------- -----------------
$ 7,484,828 $ 4,750,672
================= =================
LIABILITIES & EQUITY
CURRENT LIABILITIES
Accounts payable $ 290,485 $ 173,138
Payable - related party (Note 5) 119,369 90,670
Accrued expenses 31,835 47,285
Loans payable (Note 6) 314,680 0
Deposits 21,956 0
Income taxes payable 0 50
----------------- -----------------
TOTAL CURRENT LIABILITIES 778,325 311,143
STOCKHOLDERS' EQUITY
Common Stock $.001 par value:
Authorized - 100,000,000 shares
Issued and outstanding 34,700,000 shares
(32,000,000 in 1998) 34,700 32,000
Additional paid-in capital 6,558,382 4,341,832
Retained earnings 120,007 65,697
Accumulated other comprehensive loss (6,586) 0
----------------- -----------------
TOTAL STOCKHOLDERS' EQUITY 6,706,503 4,439,529
----------------- -----------------
$ 7,484,828 $ 4,750,672
================= =================
</TABLE>
See Notes to Consolidated Financial Statements.
F - 2
<PAGE>
UNIDYN, CORP. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
<TABLE>
<CAPTION>
Year ended
December 31,
1999 1998
------------- --------------
<S> <C> <C>
Net sales $ 1,570,548 $ 2,016,779
Cost of sales 482,824 609,694
------------- --------------
GROSS PROFIT 1,087,724 1,407,085
Other Income
Commissions 0 212,900
Gain on disposal of net assets of subsidiary/Universal 101,565 11,388
------------- --------------
101,565 224,288
General & administrative expenses:
Accounting/legal 41,482 91,705
Advertising/promotion 16,018 33,165
Amortization and depreciation 18,617 8,970
Bad debts 1,000 0
Bank charges 6,166 6,320
Commissions/consulting 17,140 47,888
Engineering 0 2,412
Interest expense 11,318 2,544
Office expense 29,707 14,890
Payroll taxes and benefits 15,225 29,300
Professional services 1,000 16,562
Property taxes 9,846 0
Rent 78,801 49,380
Repairs and maintenance 4,354 26,592
Salaries/employee leasing 758,662 1,006,552
Telephone 22,672 30,453
Travel 46,134 93,438
Utilities 6,826 7,174
Vehicle expense 25,428 43,072
Miscellaneous 10,629 13,166
------------- --------------
1,121,025 1,523,583
NET INCOME BEFORE INCOME TAXES 68,264 107,790
Income tax expense 13,954 36,297
------------- --------------
NET INCOME 54,310 71,493
OTHER COMPREHENSIVE LOSS
Foreign currency translation adjustments (6,586) 0
------------- --------------
TOTAL COMPREHENSIVE INCOME $ 47,724 $ 71,493
============= ==============
Net income per weighted average share $ .00 $ .00
============= ==============
Weighted average number of common shares used to compute
net income per weighted average share 32,014,877 31,280,000
============= ==============
</TABLE>
See Notes to Consolidated Financial Statements.
F - 3
<PAGE>
UNIDYN, CORP. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
Accumulated
Common Stock Additional Retained other
Par Value $0.001 Paid-in Earnings Comprehensive
Shares Amount Capital (Deficit) Loss
------------- ------------- ------------- ------------- ------------------
<S> <C> <C> <C> <C> <C>
Balances at 12/31/97 30,560,000 $ 30,560 $ 509,621 $ (5,796) $ 0
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 0
Issued for services at $.16 130,000 130 20,670
Sold for $.40 1,005,000 1,005 400,995
Sold for $1.00 565,000 565 564,435
Capital raising costs (145,050)
Issued for assets 300,000 300 399,700
Issued for Avalon subsidiary 700,000 700 975,800
Foreign currency translation adjustments (6,586)
Net income for year 54,310
------------- ------------- ------------- ------------- ------------------
Balances at 12/31/99 34,700,000 $ 34,700 $ 6,558,382 $ 120,007 $ (6,586)
============= ============= ============= ============= ==================
</TABLE>
See Notes to Consolidated Financial Statements.
F - 4
<PAGE>
UNIDYN, CORP. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Year ended
December 31,
1999 1998
-------------- --------------
OPERATING ACTIVITIES
<S> <C> <C>
Net income $ 54,310 $ 71,493
Adjustments to reconcile net income to cash
provided by operating activities:
Gain on Universal disposal 0 (11,388)
Gain on subsidiary disposal (5,717) 0
Amortization and depreciation 18,617 8,970
Stock issued for expenses 20,800 0
Bad debts 0 30,000
Foreign currency translation (6,586) 0
Deferred taxes 15,000 (211,000)
Changes in assets and liabilities:
Inventory (11,889) 20,018
Accounts receivable (137,825) (86,839)
Prepaid expense (3,364) (55,990)
Accrued expenses (5,958) 47,285
Income taxes payable (50) 234,050
Payable - related party 28,699 0
Accounts payable 135,531 234,033
-------------- --------------
NET CASH PROVIDED BY OPERATING ACTIVITIES 101,568 280,632
INVESTING ACTIVITIES
Purchase of equipment (7,065) (128,985)
Goodwill (369,970) 0
Avalon acquisition (144,869) 0
Loans 0 (28,325)
-------------- --------------
NET CASH USED BY INVESTING ACTIVITIES (521,904) (157,310)
FINANCING ACTIVITIES
Cash remaining with Universal 0 (14,300)
Cash from subsidiary 635 0
Cash to former subsidiary (17,996) 0
Loan repayments 0 (74,775)
Capital of subsidiary 0 167
Sale of stock 760,000 0
-------------- --------------
NET CASH PROVIDED (USED) BY FINANCING ACTIVITIES 742,639 (88,908)
-------------- --------------
INCREASE IN CASH AND CASH EQUIVALENTS 322,303 34,414
Cash and cash equivalents at beginning of year 138,936 104,522
-------------- --------------
CASH & CASH EQUIVALENTS AT END OF YEAR $ 461,239 $ 138,936
============== ==============
Cash paid for:
Interest $ 468 $ 2,544
Taxes 380 50
</TABLE>
See Notes to Consolidated Financial Statements.
F - 5
<PAGE>
UNIDYN, CORP. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1999 and 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 balance sheet for 1999 contains the accounts of the Company
and its wholly-owned subsidiary, Avalon Manufacturing Co. which
was acquired on December 31, 1999. The statement of operations for
1999 contains the accounts of the Company and its formerly owned
subsidiary, Unidyn (Europe) Limited for the first three months of
1999. Unidyn (Europe) was sold to the Company's major shareholder
on April 1, 1999.
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.
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. At December 31,
1999 finished goods are $173,101, raw materials are $149,933 and
work in process is $10,517.
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 per share
Earnings per common and common equivalent share is computed by
dividing net earnings by the weighted average common shares
outstanding during each year.
Estimates
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts of
assets, liabilities, revenues, and expenses during the reporting
period. Estimates also affect the disclosure of contingent assets
and liabilities at the date of the financial statements. Actual
results could differ from these estimates. Such estimates of
significant accounting sensitivity are allowance for doubtful
accounts.
F - 6
<PAGE>
UNIDYN, CORP. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
December 31, 1999 and 1998
NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING PRINCIPLES (continued)
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 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, 1999 and 1998
are summarized as follows:
<TABLE>
<CAPTION>
Accumulated Net Book Value
Cost Depreciation 1999 1998
------------- ------------------ ------------- -------------
<S> <C> <C> <C> <C>
Vehicles $ 60,358 $ 12,590 $ 47,768 $ 47,840
Computers & Equipment 45,319 1,551 43,768 4,991
Machinery and Equipment 440,000 0 440,000 0
Furniture & Fixtures 26,141 535 25,606 36,001
Leasehold Improvements 3,500 0 3,500 6,455
------------- ------------------ ------------- -------------
$ 575,318 $ 14,676 $ 560,642 $ 95,287
============= ================== ============= =============
</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, 1999 amounted to $18,617, ($8,970 in 1998).
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.
NOTE 5: PAYABLE - RELATED PARTY
At December 31, 1999, the Company owes $119,369 to Universal for
cash advanced to the Company and expenses paid for the Company
after Universal stopped being consolidated with the Company. The
$119,369 includes $10,850 of accrued interest.
NOTE 6: LOANS PAYABLE
Loans payable at December 31, 1999 and 1998 are as follows:
<TABLE>
<CAPTION>
Principal Balances
1999 1998
Interest Long- Long-
Rate Current term Current term
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Capital leases 13.32% $ 2,680 $ 0 $ 0 $ 0
Kenney Ventures(1) 12.0% 312,000 0 0 0
----------- ----------- ----------- -----------
$ 314,680 $ 0 $ 0 $ 0
=========== =========== =========== ===========
(1) repaid in March, 2000.
</TABLE>
F - 7
<PAGE>
UNIDYN, CORP. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
December 31, 1999 and 1998
NOTE 7: INCOME TAXES
Components of income tax are as follows:
1999 1998
------------- -------------
Current
Federal $ (1,096) $ 13,197
State 50 50
------------- -------------
(1,046) 13,247
Deferred 15,000 23,050
------------- -------------
$ 13,954 $ 36,297
============= =============
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>
1999 1998
------------- -------------
<S> <C> <C>
Income tax computed at Federal statutory
tax rate $ 23,210 $ 36,649
Deferred taxes and other (9,306) 0
Tax associated with fiscal tax year for
Universal and graduated federal rates * 0 (402)
State taxes (net of federal benefit) 50 50
------------- -------------
$ 13,954 $ 36,297
============= =============
</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 patent for tax purposes $ 14,500
=============
Long-term deferred tax asset
Basis of patent for tax purposes $ 181,500
=============
NOTE 8: COMMITMENTS AND CONTINGENCIES
The Company has a month-to-month lease on the buildings in Utah
where it operates. The approximate monthly amount is $4,165. The
Company's subsidiary rents office space in Arizona for $5,685 per
month. The lease expires October 31, 2000. The Company also rents
space in California on a month-to-month lease for $4,727 per
month. Future expected lease payments on the buildings are as
follows:
Year ending December 31, 2000 $ 56,850
=============
Rent expense for the buildings in 1999 was $78,801 and $49,380 in
1998.
Included in vehicle expense for 1998 is $21,557 related to the
former subsidiary's leases.
NOTE 9: MAJOR CUSTOMERS
Sales to three customers represented 48.5%, 21.34%, and 13.04%
during the year ended December 31, 1999. As of December 31, 1999,
accounts receivable from these three customers represented 15.37%,
15.07%, and 20.72%, respectively.
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.
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
F - 8
<PAGE>
UNIDYN, CORP. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
December 31, 1999 and 1998
NOTE 10: STERLING PATENT (continued)
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 15
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 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.
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: OPTIONS
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 were issued April 1999 with the first
20% vesture. Under the Black-Sholes model, the granted but
unexercised 240,000 options have a value of about $38,000.
The Company has granted a total of 750,000 options for engineering
and other direct company authorized members. Currently the board
members authorized 350,000 of these shares to be optioned at an
exercise price of $.16 per share (average price between bid and
ask 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 were issued April 1999 with the first 20%
vesture. Under the Black-Sholes model, the granted but unexercised
280,000 options have a value of about $45,000. Compensation
expense of $20,820 has been recorded for the year ended December
31, 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
F - 9
<PAGE>
UNIDYN, CORP. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
December 31, 1999 and 1998
NOTE 14: 1997 EVENTS (continued)
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 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 was 32,000,000.
NOTE 16: SEGMENT INFORMATION
In 1999, 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.
In 1998, 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.
In 1999, the Company had sales in foreign countries of $883,964 as
follows: Europe $62,621, Asia $820,285, and Canada $1,058.
NOTE 17: ACQUISITION OF AVALON
Effective December 31, 1999, the Company acquired Avalon
Manufacturing Co. as a wholly- owned subsidiary in a purchase
transaction. Consideration paid was $1,658,470 which consisted of
cash of $369,970, 700,000 shares of common stock valued at
$976,500, and a promissory note in the amount of $312,000.
F - 10
<PAGE>
UNIDYN, CORP. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
December 31, 1999 and 1998
NOTE 18: 1999 STOCK SALES
During 1999, 1,005,000 units were sold at $.40 per unit. Each unit
consisted of one share of the Company's common stock, one Series A
warrant to purchase .25 shares of common stock at $.60 per share
until May 31, 2000 and one Series B warrant to purchase .25 shares
of common stock at $1.20 per share until November 30, 2000. Using
the Black-Sholes model, the warrants have a value of about
$58,000.
The Company also sold 565,000 units at $1.00 per unit. Each unit
consisted of one share of the Company's common stock, one Series A
warrant to purchase .20 shares of common stock at $1.25 per share
until June 30, 2000 and one Series B warrant to purchase .20
shares of common stock at $1.75 per share until December 31, 2000.
Using the Black-Sholes model, the warrants have a value of about
$85,000.
At December 31, 1999, $207,000 was due from the sale of the above
mentioned units. The $207,000 was received prior to the issuance
of these financial statements.
NOTE 19: GOODWILL
Goodwill relates to the acquisition of Avalon and will be
amortized over fifteen years. The Company assigned some of the
excess purchase price to property, plant, and equipment. The
Company determined there were no other intangible assets to
record, and thus recorded goodwill for the balance of the excess
of purchase price over net assets acquired.
NOTE 20: PRO FORMA INFORMATION
See the following unaudited pro forma consolidated condensed
statement of operations and comprehensive income which assumes the
entities were together as of the beginning of the period
presented.
F - 11
<PAGE>
UNIDYN, CORP. AND SUBSIDIARY
UNAUDITED PRO FORMA CONSOLIDATED CONDENSED
STATEMENT OF OPERATIONS AND
COMPREHENSIVE INCOME
<TABLE>
<CAPTION>
Unidyn Avalon Pro Forma Consolidated
12/31/99 12/31/99(1) Adjustments Pro Forma
------------- ------------- ----------------- ------------------
<S> <C> <C> <C>
Net sales $ 1,570,548 $ 979,654 $ $ 2,550,202
Cost of sales 482,824 377,238 860,062
------------- ------------- ----------------- ------------------
GROSS PROFIT 1,087,724 602,416 1,690,140
Other Income
Gain on disposal of net assets of subsidiary 101,565 0 101,565
------------- ------------- ----------------- ------------------
101,565 0 101,565
General & administrative expenses:
Accounting/legal 41,482 52,951 94,433
Advertising/promotion 16,018 0 16,018
Amortization and depreciation 18,617 26,507 84,407(2) 129,531
Bad debts 1,000 4,500 5,500
Bank charges 6,166 305 6,471
Commissions/consulting 17,140 25,068 42,208
Insurance 0 7,648 7,648
Interest expense 11,318 18,109 29,427
Office expense 29,707 0 29,707
Payroll taxes and benefits 15,225 51,703 66,928
Professional services 1,000 4,070 5,070
Property taxes 9,846 3,595 13,441
Rent 78,801 56,884 135,685
Repairs and maintenance 4,354 3,843 8,197
Salaries/employee leasing 758,662 253,598 1,012,260
Sales and marketing 0 41,765 41,765
Settlement costs 0 40,000 40,000
Supplies 0 16,038 16,038
Telephone 22,672 8,368 31,040
Travel 46,134 0 46,134
Utilities 6,826 8,304 15,130
Vehicle expense 25,428 0 25,428
Miscellaneous 10,629 12,909 23,538
------------- ------------- ----------------- ------------------
1,121,025 636,165 84,407 1,841,597
NET INCOME (LOSS) BEFORE INCOME TAXES 68,264 (33,749) (84,407) (49,892)
Income tax expense 13,954 0 13,954
------------- ------------- ----------------- ------------------
NET INCOME (LOSS) 54,310 (33,749) (84,407) (63,846)
OTHER COMPREHENSIVE LOSS
Foreign currency translation adjustments (6,586) 0 (6,586)
------------- ------------- ----------------- ------------------
TOTAL COMPREHENSIVE INCOME (LOSS) $ 47,724 $ (33,749) $ (84,407) $ (70,432)
============= ============= ================= ==================
Net income (loss) per weighted average share $ .00 $ (112.50) $ (.00)
============= ============= ==================
Weighted average number of common shares used to
compute net income (loss) per weighted average
share 32,014,877 300 32,712,959
============= ============= ==================
</TABLE>
(1) Ten months - Avalon had a February year end
(2) Amortization of goodwill
F - 12
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from
UniDyn, Corp. December 31, 1999 consolidated financial statements and
is qualified in its entirety by reference to such financial statements.
</LEGEND>
<CIK> 0000894542
<NAME> UniDyn, Corp
<CURRENCY> US
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> DEC-31-1999
<EXCHANGE-RATE> 1.00
<CASH> 461,239
<SECURITIES> 0
<RECEIVABLES> 431,857
<ALLOWANCES> 0
<INVENTORY> 333,551
<CURRENT-ASSETS> 1,459,997
<PP&E> 575,318
<DEPRECIATION> 14,676
<TOTAL-ASSETS> 7,484,828
<CURRENT-LIABILITIES> 778,325
<BONDS> 0
0
0
<COMMON> 34,700
<OTHER-SE> 6,671,803
<TOTAL-LIABILITY-AND-EQUITY> 7,484,828
<SALES> 1,570,548
<TOTAL-REVENUES> 1,570,548
<CGS> 482,824
<TOTAL-COSTS> 482,824
<OTHER-EXPENSES> 1,121,025
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 11,318
<INCOME-PRETAX> 68,264
<INCOME-TAX> 13,954
<INCOME-CONTINUING> 54,310
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 47,724
<EPS-BASIC> .00
<EPS-DILUTED> .00
</TABLE>
