-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, HY+fWxnaMNriHtP4xMOnE0bhizGkd72AVZ+9vRnJgm6E/eLg5CceyoyjBEffEWw7 Reb8b8V8NqNaLb7JLogzQg== 0001016295-00-000061.txt : 20000414 0001016295-00-000061.hdr.sgml : 20000414 ACCESSION NUMBER: 0001016295-00-000061 CONFORMED SUBMISSION TYPE: 10KSB PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19991231 FILED AS OF DATE: 20000413 FILER: COMPANY DATA: COMPANY CONFORMED NAME: UNIDYN CORP CENTRAL INDEX KEY: 0000894542 STANDARD INDUSTRIAL CLASSIFICATION: BLANK CHECKS [6770] IRS NUMBER: 870438639 STATE OF INCORPORATION: NV FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10KSB SEC ACT: SEC FILE NUMBER: 033-55254-31 FILM NUMBER: 600569 BUSINESS ADDRESS: STREET 1: 1216 SOUTH 1580 WEST, #B STREET 2: SUITE 460 CITY: OREM STATE: UT ZIP: 84058 BUSINESS PHONE: 8014347250 MAIL ADDRESS: STREET 1: 3098 S HIGHLAND DR STE 460 CITY: SALT LAKE CITY STATE: UT ZIP: 84106 FORMER COMPANY: FORMER CONFORMED NAME: MACAW CAPITAL INC DATE OF NAME CHANGE: 19940706 10KSB 1 ANNUAL FILING 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 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 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 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 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 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 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 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.
Name and address Amount of Percent Title of class of beneficial owner beneficial ownership of class - ---------------------- ------------------------------- ---------------------- ------------------ 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
(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 (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 9 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: smith&co@smithandcocpa.com Members: American Institute of Certified Public Accountants o Utah Association of Certified Public Accountants F - 1 UNIDYN, CORP. AND SUBSIDIARY CONSOLIDATED BALANCE SHEETS
December 31, 1999 1998 ----------------- ----------------- ASSETS CURRENT ASSETS 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 ================= =================
See Notes to Consolidated Financial Statements. F - 2 UNIDYN, CORP. AND SUBSIDIARY CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
Year ended December 31, 1999 1998 ------------- -------------- 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 ============= ==============
See Notes to Consolidated Financial Statements. F - 3 UNIDYN, CORP. AND SUBSIDIARY CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
Accumulated Common Stock Additional Retained other Par Value $0.001 Paid-in Earnings Comprehensive Shares Amount Capital (Deficit) Loss ------------- ------------- ------------- ------------- ------------------ 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) ============= ============= ============= ============= ==================
See Notes to Consolidated Financial Statements. F - 4 UNIDYN, CORP. AND SUBSIDIARY CONSOLIDATED STATEMENTS OF CASH FLOWS
Year ended December 31, 1999 1998 -------------- -------------- OPERATING ACTIVITIES 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
See Notes to Consolidated Financial Statements. F - 5 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 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:
Accumulated Net Book Value Cost Depreciation 1999 1998 ------------- ------------------ ------------- ------------- 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 ============= ================== ============= =============
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:
Principal Balances 1999 1998 Interest Long- Long- Rate Current term Current term ----------- ----------- ----------- ----------- ----------- 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.
F - 7 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:
1999 1998 ------------- ------------- 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 ============= =============
* 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 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 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 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 UNIDYN, CORP. AND SUBSIDIARY UNAUDITED PRO FORMA CONSOLIDATED CONDENSED STATEMENT OF OPERATIONS AND COMPREHENSIVE INCOME
Unidyn Avalon Pro Forma Consolidated 12/31/99 12/31/99(1) Adjustments Pro Forma ------------- ------------- ----------------- ------------------ 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 ============= ============= ==================
(1) Ten months - Avalon had a February year end (2) Amortization of goodwill F - 12 EX-27 2 FDS - DECEMBER 31, 1999
5 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. 0000894542 UniDyn, Corp US YEAR DEC-31-1999 DEC-31-1999 1.00 461,239 0 431,857 0 333,551 1,459,997 575,318 14,676 7,484,828 778,325 0 0 0 34,700 6,671,803 7,484,828 1,570,548 1,570,548 482,824 482,824 1,121,025 0 11,318 68,264 13,954 54,310 0 0 0 47,724 .00 .00
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