UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended: June 30, 2000
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[] 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
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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)
3640 East Roeser Road
Phoenix, Arizona 85040
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(Address of principal executive offices) (Zip Code)
1216 South 1580 West, #A
Orem, Utah 84058
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(Former address of principal executive offices) (former Zip Code)
Issuer's telephone number, including area code: (602) 426-8634
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Indicate by check mark whether the Issuer (1) has filed all reports
required to be filed by Section 13or 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 July 31, 2000
------------------------------------ -----------------------------------
$.001 PAR VALUE CLASS A COMMON STOCK 35,247,000 SHARES
<PAGE>
PART 1. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
<PAGE>
UNIDYN, CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
June 30, December 31,
2000 1999
---------------------- ---------------------
ASSETS (Unaudited) (Audited)
CURRENT ASSETS
<S> <C> <C>
Cash in bank $ 323,814 $ 461,239
Accounts receivable 733,593 431,857
Stock subscription 0 207,000
Deferred tax benefit 14,500 14,500
Prepaid expense 13,750 11,850
Receivable - employees 30,500 0
Inventory 396,382 333,551
Deferred interest expense 22,000 0
---------------------- ---------------------
TOTAL CURRENT ASSETS 1,534,539 1,459,997
PROPERTY, PLANT & EQUIPMENT 679,682 560,642
OTHER ASSETS
Deposits and other 42,349 8,184
Goodwill (less amortization of $42,200) 1,223,905 1,266,105
Deferred tax benefit 181,500 181,500
Derritron Technology (less amortization
of $44,538) 3,963,862 4,008,400
---------------------- ---------------------
5,411,616 5,464,189
---------------------- ---------------------
$ 7,625,837 $ 7,484,828
====================== =====================
LIABILITIES & EQUITY
CURRENT LIABILITIES
Accounts payable $ 96,406 $ 290,485
Accrued expenses 92,375 31,835
Loans payable 16,575 314,680
Deposits 3,292 21,956
Payable - related party 22,984 119,369
---------------------- ---------------------
TOTAL CURRENT LIABILITIES 231,632 778,325
LONG-TERM LIABILITIES
Long-term debt and interest - related party 1,017,300 0
---------------------- ---------------------
TOTAL LIABILITIES 1,248,932 778,325
STOCKHOLDERS' EQUITY
Common Stock $.001 par value:
Authorized - 100,000,000 shares
Issued and outstanding 35,237,000 shares
(34,700,000 in 1999) 35,237 34,700
Additional paid-in capital 6,991,896 6,558,382
Retained earnings (deficit) (643,642) 120,007
Accumulated other comprehensive loss (6,586) (6,586)
---------------------- ---------------------
TOTAL STOCKHOLDERS' EQUITY 6,376,905 6,706,503
---------------------- ---------------------
$ 7,625,837 $ 7,484,828
====================== =====================
</TABLE>
<PAGE>
UNIDYN, CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
AND COMPREHENSIVE INCOME
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
2000 1999 2000 1999
------------- ------------- -------------- -------------
<S> <C> <C> <C> <C>
Net sales $ 823,385 $ 352,293 $ 1,522,031 $ 753,493
Cost of sales 377,754 92,324 718,732 213,912
------------- ------------- -------------- -------------
GROSS PROFIT 445,631 259,969 803,299 539,581
Other Income 0 101,565 0 101,565
General and administrative expenses (735,403) (237,117) (1,566,948) (554,172)
------------- ------------- -------------- -------------
NET INCOME (LOSS)
BEFORE INCOME TAXES (289,772) 124,417 (763,649) 86,974
Income tax expense 0 6,059 0 10,623
------------- ------------- -------------- -------------
NET INCOME (LOSS) (289,772) 118,358 (763,649) 76,351
OTHER COMPREHENSIVE LOSS
Foreign currency translation adjustments 0 0 0 (6,586)
------------- ------------- -------------- -------------
TOTAL COMPREHENSIVE INCOME (LOSS) $ (289,772) $ 118,358 $ (763,649) $ 69,765
============= ============= ============== =============
Net income (loss) per weighted average share $ (.01) $ .00 $ (.02) $ .00
============== ============= ============== =============
Weighted average number of common shares used to
compute net income (loss) per weighted average share 35,155,475 32,000,000 34,985,636 32,000,000
============= ============== ============= =============
</TABLE>
<PAGE>
UNIDYN, CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended
June 30,
2000 1999
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OPERATING ACTIVITIES
<S> <C> <C>
Net income (loss) $ (763,649) $ 76,351
Adjustments to reconcile net income (loss) to cash
provided (required) by operating activities:
Gain on subsidiary 0 (5,717)
Depreciation and amortization 142,450 12,605
Non-cash interest expense 69,500 0
Deferred taxes 0 5,000
Deferred interest 2,000 0
Foreign currency translation 0 (6,586)
Changes in assets and liabilities:
Accounts receivable (301,737) (65,557)
Inventory (62,831) (11,802)
Prepaid expenses (1,900) 7,306
Accounts payable (194,078) 6,674
Accrued expenses 58,340 (30,958)
Payable - related party (30,500) 14,799
Deposits (52,828) 0
Income taxes payable 0 (50)
----------------- -----------------
NET CASH PROVIDED (REQUIRED)
BY OPERATING ACTIVITIES (1,135,233) 2,065
INVESTING ACTIVITIES
Purchase of equipment / cost adjustment (174,753) 0
Loans 0 (87,150)
----------------- -----------------
NET CASH PROVIDED (USED)
BY INVESTING ACTIVITIES (174,753) (87,150)
FINANCING ACTIVITIES
Sale of common stock 617,051 0
Loan principal payments (394,490) 0
Loan proceeds 950,000 0
Cash remaining with former subsidiary 0 (17,996)
----------------- -----------------
NET CASH PROVIDED (USED) BY
FINANCING ACTIVITIES 1,172,561 (17,996)
----------------- -----------------
INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS (137,425) (103,081)
Cash and cash equivalents at beginning of year 461,239 138,936
----------------- -----------------
CASH AND CASH EQUIVALENTS
AT END OF PERIOD $ 323,814 $ 35,855
================= =================
Cash paid for income taxes $ 0 $ 11,870
Cash paid for interest 427 0
</TABLE>
<PAGE>
UNIDYN, CORP. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2000
NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING PRINCIPLES
Accounting Methods
The Company recognizes income and expenses based on the accrual method
of accounting.
Principles of Consolidation
The financial statements for June 30, 2000 contain the accounts of the
Company and its wholly-owned subsidiaries Derritron Vibration Products
and Avalon Manufacturing Company.
The financial statements for June 30, 1999 contain the accounts of the
Company and its former wholly owned subsidiary, Unidyn (Europe)
Limited.
Dividend Policy
The Company has not yet adopted any policy regarding payment of
dividends in cash.
Inventory
Inventory consists of products held 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 share equivalent is computed by
dividing net earnings (loss) by the weighted average number of 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 (SFAS123).
Income Taxes
The Company records the income tax effect of transactions in the same
year that the transactions enter into the determination of income,
regardless of when the transactions are recognized for tax purposes.
Tax credits are recorded in the year realized.
In February, 1992, the Financial Accounting Standards Board adopted
Statement of Financial Accounting Standards No. 109, Accounting for
Income Taxes, which supersedes substantially all existing authoritative
literature for accounting for income taxes and requires deferred tax
balances to be adjusted to reflect the tax rates in effect when those
amounts are expected to become payable or refundable. The Statement was
applied in the Company's financial statements for the fiscal year
commencing January 1, 1993.
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
reincorporated as a Nevada corporation. Effective December 3, 1997, the
name was changed to UniDyn, Corp. The Company manufactures and sells
products that perform testing to assure product workmanship and quality
of equipment used in the circuit board industry.
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
<PAGE>
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 continued 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 4: 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
Dynamics, Inc. The patent rights are being amortized over fifteen years
for income tax purposes. For financial statement purposes, the asset
has no cost basis as it was acquired from Universal, a former related
party.
The Sterling Project will allow the testing of printed circuit boards
and other general electronic devices. Sterling will allow electronics
manufacturers to test the workmanship of their manufactured electronics
and improve the estimated projected life of the printed circuit board
or other items under test. Estimates show that the manufacturer may be
able to reduce the warranty return rate to 1 percent, based on
workmanship errors. The Sterling equipment will quantify the
reliability of the manufactured part and indicate the workmanship areas
of concern, even though the electronics passed functional testing.
NOTE 5: 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
was an established business which manufactured vibration shakers and
other related technology. With this acquisition, Unidyn received
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 This technology
has the capacity to be fully integrated with the NorthStar vibration
control systems acquired from Universal Dynamics. The technology is
being amortized over 15 years.
NOTE 6: OPTIONS
On April 1, 2000, as part of an agreement to provide the Company
investor relations and corporate communication services, Investor
Relations Group (IRG) was issued options to acquire 150,000 shares.
(75,000 are exercisable for two years and 75,000 are exercisable for
three years) of restricted shares assignable to IRG officers and
employees. The issued options have an exercise price of $2.99/share
based on the average sale price of the preceding five trading days
prior to April 1, 2000.
In connection with a $1 million loan received by the Company, during
the first quarter, the lender was paid a loan fee of $50,000 and was
granted warrants to acquire 150,000 shares at an exercise price equal
to 85% of the market price on the date of grant. The difference between
the exercise price and the calculated fair market value of the shares
issuable on exercise of the options was reported as interest expense
and amortized over the period of the loan.
NOTE 7: CONTINGENCIES
On June 7, 2000, Unidyn Corp. signed a letter of intent to purchase a
commercial building in Phoenix, Arizona to relocate the company's
current Avalon division and to provide additional facilities required
for Avalon's anticipated growth due to the Sterling Product. The
transaction is conditioned on a customary due diligence and the
availability of financing, which is currently being sought.
<PAGE>
ITEM 2. MANAGEMENTS 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. SEE ALSO THE COMPANY'S ANNUAL REPORT ON
FORM 10-KSB FOR THE YEAR ENDED DECEMBER 31, 1999.
OVERVIEW
UniDyn, Corp. (referred to as "UniDyn" or 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. The Common Shares of UniDyn, Corp.
are currently traded on the NASDAQ OTCBB under the symbol "UNDY".
The business of the Company is focused on developing, manufacturing,
assembling and distributing specialized engineering products. The current
product lines, including the vibration stress screening ("VSS") machinery
manufactured under the NorthStar and Derritron brands and the on-line inspection
products being developed at the Avalon facility as the Sterling Product are
directed principally to testing electronic and mechanical components and
providing on-line quality control testing for printed circuit boards. In January
2000, the Company introduced and recognized its first revenues from the
Derritron line of products and expects to introduce the Sterling Product line in
2000. In addition to these product introductions, the Company plans to continue
its emphasis on developing and distributing specialized engineering and testing
products and consider ancillary technology opportunities that capitalize on its
existing capacity as a builder of manufacturing equipment as well as its
engineering and testing capacities.
On December 31, 1999, the Company completed the acquisition of Avalon
Manufacturing Company, a private entity based in Phoenix, Arizona, with
significant experience in providing the equipment for the manufacture of printed
circuit boards. The Company is focusing on the development and initial
manufacturing of the Sterling Product line at the Avalon facility. The Avalon
technology, including its automatic board handling machinery, will be integrated
in the Sterling production process. The availability of the Avalon facility,
staff, and assets has been an important factor in allowing the Company to
accelerate the Sterling project and to attract engineers and other technical
personnel for the project.
The Company's traditional core business, through its NorthStar brand
and more recently through the Derritron and Avalon lines, offers vibration
testing and VSS products that are used to check the integrity of printed circuit
boards and other components for automotive and electronics applications. The
NorthStar vibration control system uses a Microsoft-based Windows product
acquired in 1997, which is fully integrated into the Company's proprietary
control system software package. The NorthStar and Derritron products include
the vibration hardware or "shaker" units which mechanically vibrate the test
platform, the vibration control system which measures output and regulates
shaker intensity, and the amplifier unit which provides power to the shaker
unit. The VSS products are marketed directly by the Company under the trade name
Derritron, and are also manufactured by the Company on an OEM basis and offered
for repackaging and sale for use in the aerospace, automotive and semiconductor
industries.
In a production environment, the VSS test equipment can identify latent
defects not readily recognizable through visual inspection or during the
development and design process. The use of on-line VSS testing for 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.
Through 1999, essentially all of the Company's revenues came from its
NorthStar line. Early in 1998, the Company acquired the production, engineering,
patents, drawings and intellectual property and other rights and assets for the
shaker and amplifiers, which had been manufactured in England for more than 30
years under the trade name Derritron. At the time of the Company's acquisition
of Derritron, the active production of the Derritron line had been suspended by
the prior owners. During 1999, the Derritron operations were reorganized at a
facility in Riverside, California; production at the plant commenced on January
2, 2000 and the first shipments of the Company's Derritron products were made in
the first quarter of 2000. During the end of the first quarter and in April
2000, the Company transferred its NorthStar production to the Riverside facility
to allow the Company to offer turnkey vibration test products from its Riverside
facility.
The transfer of the NorthStar product into the Derritron operations in
Riverside, California was completed during the second quarter of 2000 and the
Company is currently finalizing its pre-production and commercial development
efforts for the Sterling Product line at its Avalon facility. Management
anticipates that commercial production of the Sterling
<PAGE>
Product line will be undertaken during 2000. The Sterling Product has been
designed as a stand-alone piece of equipment that will provide for a fully
integrated, on-line quality control testing of printed circuit boards. The
Company expects to offer the product principally on an OEM basis, with first
introductions anticipated to be made through a Japanese consortium. Initial
production commitments are expected to increase to the rate of approximately 20
Sterling Units per month with production to be scaled and maintained, initially
on requirements of the Japanese consortium and subsequently based on a
broader-based market of domestic and foreign customers.
As described above, to date, the Company has acquired a substantial
portion of its technology and its production assets through arrangements with
third parties. The Company intends to continue to consider strategic
acquisitions and to use its expanding internal product development and
production capacity to enhance the assets acquired from third parties. In
addition, the Company will continue to develop new equipment and technology
internally as circumstances warrant and as capital resources and technical
talent are available.
RESULTS OF OPERATIONS
For the quarter ended June 30, 2000 compared to the quarter ended June
30, 1999
For the three months ending June 30, 2000, the Company reported, on a
consolidated basis, a loss of $289,772 on revenues of $823,385 as compared to a
gain of $118,358 on revenues of $352,293 for the same quarter in 1999. The
losses resulted from a combination of the Company's efforts to bring the
Derritron facility to full production and the continuing development,
engineering and other pre-production costs attributable to the Sterling Products
line. The Company recorded revenues of approximately $447,640 and $375,745 from
the shipments and services earned at the Derritron and Avalon facilities
respectively. Management anticipates that during the remainder of the current
fiscal year, the Company will move toward customary production level costs,
revenues and expenses as the Derritron production expands, the NorthStar
production continues and the Sterling Product line is introduced.
While the Company's product lines are not subject to inherent seasonal
shifts, with the relatively low level of sales of the Company's products to
date, the Company's sales have been sensitive to small shifts in revenues and
production which have resulted in material monthly fluctuations. In addition,
the Company's results to date have been impacted by the financial effect of
acquisitions, changes in facilities, modification of operations, introduction of
new product lines and shifts in the existing customer base.
Cost of Goods Sold. For the three months ended June 30, 2000, the costs
of goods sold was $377,754 with a gross profit margin of $445,631 as compared to
$92,324 of costs of goods sold and a $259,969 gross margin for the same period
of 1999, resulting in gross margins for the three month period ended June 30,
2000 of 55% as compared to a 74% gross margin for the same period in 1999 (when
the sales were primarily of the NorthStar product). Management anticipates that
as its production expands and the product mix is diversified, it will achieve a
blended gross margin of approximately 40-50% on its products, including direct
labor and customary allocated manufacturing overhead. However, until the new
product lines have been introduced, and the Company has developed an operating
history, there is significant uncertainty about future gross margins,
particularly since gross margins are highly dependent on product prices, sales
volumes, materials cost and allocation of manufacturing overhead.
Research and Development. For the three months ending June 30, 2000,
the Company's research and development efforts were conducted at the Company's
Engineering and Development Centers in Orem, Utah and Phoenix, Arizona. Although
the NorthStar production activities have been transferred from Utah to the
Derritron facility in Riverside, California, research and development efforts
will continue to be based in Utah and Arizona. Research and Development costs
were approximately $254,916 for the three months ending June 30, 2000, a
significant portion of the total operations at both the Utah and Arizona
facilities, and were recorded as a portion of the selling, general and
administrative costs.
Selling, General and Administrative Costs. For the three months ended
June 30, 2000, selling, general, and administrative costs were $735,403, as
compared to $237,117 in the same period of 1999. The significant increase in
general and administrative cost was attributed to the additional staff and
facilities needed for the Derritron facility, the cost of the efforts for the
development of the Sterling Product line, and principally to the fact that to
date, the Company has included staff, facilities, and related overhead of the
production managers, engineers, research and development efforts and the labor
and overhead costs in Orem, Utah and Riverside, California as selling, general
and administrative costs and has not attributed them to the direct costs of
goods sold or the research and development efforts for the various product
lines.
For the six month period ended June 30, 2000 compared to the six month period
ended June 30, 1999
For the six months ending June 30, 2000, the Company reported, on a
consolidated basis, a loss of $763,649
<PAGE>
on revenues of $1,522,031 as compared to a gain of $69,765 on revenues of
$753,493 for the same period in 1999. The losses resulted from a combination of
the investment, which the Company is continuing to make in bringing the
Derritron facility to full capacity and the continuing development, engineering
and other pre-production costs attributable to the Sterling Products line. The
Company recorded revenues of approximately $816,290 and $705,741 from the
shipments and services earned at the Derritron and Avalon facilities
respectively.
Cost of Goods Sold. For the six months ended June 30, 2000 the costs of
goods sold was $718,732 with a gross profit margin of $803,299 as compared to
$213,912 of costs of goods sold and a $539,581 gross margin for the same period
of 1999, resulting in gross margins for the six month period ended June 30, 2000
of 53% as compared to a 72% gross margin for the same period in 1999 (when the
sales were primarily of the NorthStar product).
Research and Development. For the six months ending June 30, 2000, the
Company's research and development costs were approximately $444,477, a
significant portion of the total operations at both the Utah and Arizona
facilities and were recorded as a portion of the selling, general and
administrative costs.
Selling, General and Administrative Costs. For the six months ended
June 30, 2000, selling, general, and administrative costs were $1,566,948, as
compared to $554,172 in the same period of 1999. The significant increase in
general and administrative cost was attributed to the additional staff and
facilities needed to establish the Derritron facility, the cost of the efforts
for the development of the Sterling Product line, and principally to the fact
that to date, the Company has included staff, facilities, and related overhead
of the production managers, engineers, research and development efforts and the
labor and overhead costs in Orem, Utah and Riverside, California as selling,
general and administrative costs and has not attributed them to the direct costs
of goods sold or the research and development efforts for the various product
lines. The Company expects Selling, General and Administrative costs to remain
at the current level until additional production capacity is needed or the costs
are directly allocated to product lines or research and development.
The Company's workforce consists of 38 leased personnel all located in
the United States. Management believes that by leasing its primary workforce,
the Company has controlled its fixed overhead costs and has been able to provide
its staff with advantages of improved benefits package and access to retirement
plans which can be provided through the larger group status of a leasing
arrangement. Management will continue to review this structure, as conditions
require.
LIQUIDITY AND CAPITAL RESOURCES
At June 30, 2000, the Company had a total cash availability of $323,814
compared to $461,239 available as of December 31, 1999, a $137,245 decrease.
During the second quarter of 2000, the Company issued 134,500 Common Shares for
net cash received of $86,000 of which all were issued on the exercise of
previously outstanding warrants. (See Item 2 below).
During the first six months of 2000 compared to the first six months of
1999, the Company shifted a significant portion of its assets toward the
purchasing of equipment and resources necessary to the development of the
Sterling Product Line and preparing the company for the anticipated growth in
operations as a result of the Sterling Product Line. The Company intends to
continue to seek additional working capital to meet its operating requirements
and to provide further capital for expansion, acquisition of strategic
technologies and direct costs related to the introduction of the Sterling
Product line. The company believes that additional capital will be needed to
maintain the growth plans of the Company, management believes that the working
capital now available to it along with funds generated from operations will be
sufficient to meet capital requirements for the next 12 months even if
substantial additional working capital does not become available.
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.
<PAGE>
YEAR 2000 STATEMENT
The Company has verified that all internal software used in the
operations of the Company and related developments are Year 2000 compliant. The
Company sees no risk at this time pertaining to Year 2000, and internal company
operations. Products currently manufactured by the Company have also been Year
2000 verified. All previous Company customers have the ability to purchase both
hardware and software upgrades from the Company, which will certify their
products as Year 2000 compliant. The amount of needed hardware and software
depends on the associated production model in question.
FORWARD-LOOKING STATEMENTS
Safe Harbor statement under the Private Securities Litigation Reform Act of
1995: Except for historical information contained herein, the matters discussed
in this filing are forward-looking statements that involve risks and
uncertainties, including but not limited to economic, competitive, governmental
and technological factors affecting the Company's operations, markets, products
and prices and other factors discussed in the Company's various filings with the
Securities and Exchange Commission.
PART 2. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Not applicable.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
During the quarter ended June 30, 2000, warrants were exercised at
$.60, $1.20, and $1.25 per share from which cash of $ 75,750, $ 1,500, and $
8,750 were received for 126,250, 1,250, and 7,000 shares of restricted common
stock respectively, resulting in net proceeds to the Company of $ 86,000. The
proceeds were used to meet Unidyn's operational needs and to provide further
capital for direct cost related to the development of the Sterling Product Line.
The transactions were undertaken as private placements without any public
offering to institutions and investors, including current shareholders, who were
accredited investors or had a prior business relationship with the Company. The
issuances were made in reliance on the exemption from registration provided by
rule 506 of Regulation D.
ITEM 3. DEFAULT UPON SENIOR SECURITIES
Not applicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Unidyn Corp. held an annual business meeting on June 6, 2000 in
Phoenix, Arizona. During that meeting the shareholders approved the adoption of
a stock option plan ("2000 Incentive Plan") by a vote of 17,129,705 Common
shares in favor, with 24,700 shares voting against the proposal and 650,600 such
shares abstaining. The plan provides for, among other things, the issuance to
its employees of qualified and non-qualified stock options and incentive stock
options and to its directors and consultants non-qualified stock options.
In addition to the approval of the "2000 Incentive Plan", Ira Gentry, Donald
Leaver, John Provazek and William Leonard were elected as directors by a vote of
17,603,185 Common Shares in favor, 9,000 Common Shares opposed, and 192,820
Common Shares abstaining.
ITEM 5. OTHER INFORMATION
It has come to the Company's attention that the "Security Ownership of Certain
Beneficial Owners and Management" section of the 1998 Form 10KSB filed on April
16, 1999, had erroneously reported that Mearns Assurance Corp. owned 14,576,000
shares of Unidyn's outstanding common stock, however the correct ownership
<PAGE>
as of March 1999 was approximately 1,400,000, or approximately 4.5% of the
Company's outstanding Common Stock. The ownership of common shares was properly
reported on the Company's 1999 Form 10KSB filed on April 13, 2000.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
None
(b) Reports on Form 8-K
None
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: August 14, 2000
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Ira Gentry, President and Director
