-----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, SSJkDZX4aFnolImMc04UzKnjkO80yGdjPEMbl55w9VIGhY8mTEL6MRhDfAvmVSAI lj6WDFFX86YsgWt7xE3+mQ== 0001016295-98-000150.txt : 19981116 0001016295-98-000150.hdr.sgml : 19981116 ACCESSION NUMBER: 0001016295-98-000150 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19980930 FILED AS OF DATE: 19981113 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: 10QSB SEC ACT: SEC FILE NUMBER: 033-55254-31 FILM NUMBER: 98749278 BUSINESS ADDRESS: STREET 1: 7201 E. CAMELBACK ROAD, SUITE 250 STREET 2: SUITE 460 CITY: SCOTTSDALE STATE: AZ ZIP: 85251 BUSINESS PHONE: 6029705500 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 10QSB 1 QUARTERLY FILING UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-QSB (Mark One) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 1998 ------------------------------------------------ [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ________________ to _______________ Commission File No. 33-55254-31 UNIDYN, CORP. (Exact name of Small Business Issuer as specified in its charter) NEVADA 87-0438639 (State or other jurisdiction of (I.R.S. Employer Identification incorporation or organization) Number) 8621 North Seventy Ninth Avenue Peoria, Arizona 85345 (Address of principal executive offices) (Zip Code) Issuer's telephone number, including area code (602) 979-2800 Indicate by check mark whether the Issuer (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Issuer was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. [X] Yes [ ] No Indicate the number of shares outstanding of each of the Issuer's classes of common stock, as of the latest practicable date. Class Outstanding as of September 30, 1998 - ------------------------------------ ------------------------------------- $.001 PAR VALUE CLASS A COMMON STOCK 32,000,000 SHARES 1 ITEM 1. MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. THE FOLLOWING DISCUSSION INCLUDES FORWARD-LOOKING STATEMENTS WITH RESPECT TO THE COMPANY'S FUTURE FINANCIAL PERFORMANCE. ACTUAL RESULTS MAY DIFFER MATERIALLY FROM THOSE CURRENTLY ANTICIPATED AND FROM HISTORICAL RESULTS DEPENDING UPON A VARIETY OF FACTORS, INCLUDING THOSE DESCRIBED BELOW UNDER THE SUB-HEADING, "BUSINESS RISKS." SEE ALSO THE COMPANY'S ANNUAL REPORT ON FORM 10K FOR THE YEAR ENDED DECEMBER 31ST, 1997. OVERVIEW The Company was incorporated in the State of Utah in 1986 as Macaw Capital, Inc. and was reincorporated in 1993 in the State of Nevada. In December of 1997, Macaw Capital, Inc. acquired a portion of the assets of Universal Dynamics, Inc., a private manufacturer of environmental vibration testing equipment formed in December 1989, and was renamed UniDyn, Corp. No material relationship exists between the former management and directors of Macaw Capital, Inc. and the current management and directors of UniDyn, Corp. UniDyn, Corp. shares are currently traded under the symbol UNDY on the NASDAQ Electronic Bulletin Board System. The current company is in the business of providing products involving quality control of manufactured electronics. These products fall under two categories, A) Vibration Stress Screening (VSS) and B) Sterling inspection products for on-line printed circuit board inspection. A) The vibration test products are used to check the integrity of printed circuit boards and other physical items eventually used in automotive and electronics. This core business primarily consists of 1) the vibration hardware or "shaker" unit which mechanically vibrates the test platform, 2) the vibration control system which measures output and regulates shaker intensity, and 3) the amplifier unit which provides power to the shaker. On the production line, VSS can identify latent defects not readily identified through visual inspection or during the development and design process. Vibration Stress Screening of electronic and mechanical components, such as printed circuit boards saves rework time during production, reduces warranty exposure and can enhance product quality and longevity. VSS is most effective in detecting intermittent defects such as loose connections, broken parts, cracked traces, poor solder joints and mechanical flaws. The Company currently markets its Vibration Control System product under the NorthStar brand and to other OEM's to be repackaged for use in the aerospace, automotive and semiconductor industries. The Company has also purchased a complete line of shaker and amplifiers known in the industry under the trade name "Derritron". Derritron has had a 30 year history in the shaker business, and is considered a premier shaker product. This combined with the Company's world class vibration control system, puts UniDyn in the position to become a first tier provider of turn-key vibration test products. B) UniDyn's flagship in new products is a product called "Sterling". The Sterling product was completely acquired from Universal Dynamics in the second quarter after the patent search showed 2 no prior art, and open for patent filing. UniDyn is currently in the process of filing patents on this new testing process. The company also has firm commitments with a large Japanese company with a 45 year history of providing various products for the printed circuit board industry. The company will provide product to the Japanese company under an exclusive OEM arrangement in Japan. The quantity will be approximately 20 Sterling units a month during the first year, and relating to the initial discovered demands of the Japanese customer. The company is in the process of engineering a "Production Model" for delivery in 1999. The product technique is already tested at IBM and Delco Electronics. The Company is constructing the production model for delivery. The Sterling process provides for completely automated on-line quality control testing of printed circuit boards. It is expected that the Sterling process can significantly reduce warranty liability for a variety of industries, including manufacturers of computers, consumer electronic products, and aerospace and military systems, by anticipating hidden defects. OVERVIEW ACQUISITIONS To meet the objectives of its business plan and reach an economy of scale in the short-term, the Company has entered into several asset acquisition agreements. In December of 1997, the Company closed a transaction with Universal Dynamics, Inc. an Arizona corporation, for the transfer of certain assets including equipment, inventory, accounts receivable, software and other intangible assets related to the NorthStar vibration control system business. These systems are Microsoft Windows-based and have been integrated in the Company's proprietary control systems software. The Company also entered into an agreement to acquire a 100% interest in the Derritron product of shakers and amplifiers, previously known as a United Kingdom based manufacturer of vibration shakers and amplifiers. The Company completed that acquisition in the second quarter of 1998. With this acquisition, the Company will receive patents, products, manufacturing equipment and an established market presence internationally. Derritron is currently 1 of only 4 shaker manufacturers worldwide with a full range of electrodynamic shakers, and has a full selection of shaker models. The Company also finished the acquisition of the "Sterling" product rights from Universal Dynamics, Inc., an Arizona corporation, in the second quarter of 1998. This acquisition was completed after the "Sterling" process was discovered clear on the patent search during the second quarter. The Company also entered into an agreement to purchase 80% of DVCS limited in the UK. DVCS was to be integrated with the "Derritron" product acquisition. After review of the DVCS debt and lack of accounting compliance, the Company opted to form a new 100% owned UK subsidiary, "Derritron Limited" to incorporate the Derritron business for UK operations. RESULTS OF OPERATIONS All operations for 1997 relate to Universal. For the three months ending September 30, 1998, the Company posted a loss of $129,915 on revenues of $167,269 ($(47,136) and $544,474 for the same period in 1997). Included in the loss for the quarter is a loss of about $57,000 from 3 UniDyn (Europe), the Company's European subsidiary. The subsidiary first recorded sales in October, 1998. Substantially all sales were generated from the NorthStar product. NorthStar is composed of off the shelf items and has minimal assembly requirements. For the nine months ending September 30, 1998, the Company posted earnings of $92,600 on revenues of $1,418,998 ($79,718 and $1,744,992 for 1997). Sales are subject to material monthly fluctuations as the Company integrates recent acquisitions, modifies operations, introduces new product lines, and modifies its existing customer base. There can be no assurance that the Company will have the capital resources necessary to complete the introduction of the Sterling Process in a timely manner in accordance with the Company's business plan. The Company is currently involved with various funding potentials for Sterling. Cost of Goods Sold for the three months ended September 30, 1998 were $84,256 with a resultant gross profit of $83,013 ($231,964 and $312,510 for 1997). Cost of goods sold for the nine months ended September 30, 1998 were $467,975 with a gross profit of $951,023 ($588,703 and $1,156,289 in 1997). Gross margin for the period ended September 30, 1998 was 67% (66% in 1997). Until new products are introduced, including the Sterling Process, there is significant uncertainty about future gross margins. Gross margin percentage is highly dependent upon product prices, sales volumes, materials cost and allocation of manufacturing overhead. Selling, General and Administrative costs for the three months ended September 30, 1998 were $329,316, and for the nine months were $1,075,661 ($409,646 and $1,045,571 in 1997). The Company currently employs or leases a total of 24 people in the United States and the United Kingdom. Of those employed, approximately 18 are on contract lease agreements. Management believes that by leasing its primary workforce, the Company has substantially limited fixed overhead costs and provided for a larger free-cash flow for the Company's growth phase. It also allows for a better benefit base through managed 401K and health plans already established in the employee leasing companies. For the nine months ending September 30, 1998 the majority of the Company's research was conducted at the Company's Engineering and Development Center in American Fork, Utah. Substantial research and development costs were incurred by Universal Dynamics for the development of the NorthStar and Sterling Process products prior to the December, 1997 asset purchase. LIQUIDITY AND CAPITAL RESOURCES The Company is currently seeking additional working capital to meet its short term growth planning including the acquisition of a potential supplier for the Sterling system. Management believes, although there can be no assurance, that the Company will have sufficient cash needs for the next 12 months regardless of its success in attracting additional capital investment. However, management also believes that a lack of additional working capital over the remainder of the current fiscal year would substantially curtail the roll-out of the Sterling Process product line and the acquisition of a key supplier involving Sterling. As of September 30, 1998, the Company has approximately $130,911 in working capital. 4 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. BUSINESS RISKS While management believes, but there can be no assurance, that the Company is sufficiently capitalized to continue operations for the remainder of the fiscal year, management is currently seeking additional capital investment to fulfill inventory requirements and outstanding purchase orders which could have a material impact on short-term growth objectives. This report contains a number of forward-looking statements which reflect the Company's current views with respect to future events and financial performance. These forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from historical results or those anticipated. In this report, the words "anticipates", "believes", "expects", "intends", "future" and similar expressions identify forward-looking statements. Readers are cautioned to consider the specific risk factors described in the Company's Annual Report on Form 10-K for the year ended December 31, 1997 and not to place undue reliance on the forward-looking statements contained herein, which speak only as of the date hereof. The Company undertakes no obligation to publicly revise these forward-looking statements, to reflect events or circumstances that may arise after the date hereof. ITEM 2. LEGAL PROCEEDINGS The Company has no current legal proceedings. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits Financial statements as of September 30, 1998 (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: November 13, 1998 -------------------------------------------- Ira Gentry, President and Director 5 UNIDYN, CORP. AND SUBSIDIARY CONSOLIDATED BALANCE SHEET (Unaudited)
September 30, 1998 ---------------------- ASSETS CURRENT ASSETS Cash in bank $ 82,426 Accounts receivable 81,725 Deferred tax benefit 18,000 Prepaid expense 365 Inventory 49,856 ---------------------- TOTAL CURRENT ASSETS 232,372 PROPERTY, PLANT & EQUIPMENT 63,161 OTHER ASSETS Sterling Patent (Note 7) 0 Deferred tax benefit 258,000 Derritron Technology (Note 8) 4,008,400 ---------------------- 4,266,400 ---------------------- $ 4,561,933 ====================== LIABILITIES & EQUITY CURRENT LIABILITIES Accounts payable $ 52,939 Accrued expenses 19,522 Income taxes payable 29,000 ---------------------- TOTAL CURRENT LIABILITIES 101,461 STOCKHOLDERS' EQUITY Common Stock $.001 par value: Authorized - 100,000,000 shares Issued and outstanding 32,000,000 shares 32,000 Additional paid-in capital 4,341,669 Retained earnings 86,803 ---------------------- TOTAL STOCKHOLDERS' EQUITY 4,460,472 ---------------------- $ 4,561,933 ======================
F-1 UNIDYN, CORP. AND SUBSIDIARY CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
Three Months Ended Nine Months Ended September 30, September 30, 1998 1997 1998 1997 ------------------ ------------------ ----------------- ----------------- Net sales $ 167,269 $ 544,474 $ 1,418,998 $ 1,744,992 Cost of sales 84,256 231,964 467,975 588,703 ------------------ ------------------ ----------------- ----------------- GROSS PROFIT 83,013 312,510 951,023 1,156,289 Other Income 0 0 212,900 0 Bad debt adjustment (30,000) 0 0 0 Gain on disposal of net assets of Universal (11,388) 0 (11,388) 0 General and administrative expenses 329,316 409,646 1,075,661 1,045,571 ------------------ ------------------ ----------------- ----------------- 287,928 409,646 1,064,273 1,045,571 ------------------ ------------------ ----------------- ----------------- NET INCOME (LOSS) BEFORE INCOME TAXES (204,915) (97,136) 99,650 110,718 Income tax expense (benefit) (75,000) (50,000) 7,050 31,000 ------------------ ------------------ ----------------- ----------------- NET INCOME (LOSS) $ (129,915) $ (47,136) $ 92,600 $ 79,718 ================== =================== ================= ================= Net income (loss) per weighted average share $ (.00) $ .(05) $ .00 $ .08 ================== =================== ================= ================= Weighted average number of common shares used to compute net income (loss) per weighted average share 32,000,000 1,000,000 26,762,667 1,000,000 ================== ================== ================= =================
F-2 UNIDYN, CORP. AND SUBSIDIARY CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
Nine Months Ended September 30, 1998 1997 ----------------- ----------------- OPERATING ACTIVITIES Net income $ 92,600 $ 79,718 Adjustments to reconcile net income to cash provided by operating activities: Depreciation 3,230 777 Gain on Universal disposal (11,388) 0 Bad debts 30,000 0 Deferred taxes (276,000) 0 Changes in assets and liabilities: Accounts receivable 76,748 (12,339) Inventory 4,335 15,751 Prepaid expenses (38,791) 4,413 Accounts payable and accrued expenses 42,689 10,805 Income taxes payable 263,000 17,990 ----------------- ----------------- NET CASH PROVIDED BY OPERATING ACTIVITIES 186,423 117,115 INVESTING ACTIVITIES Loans (28,325) 0 Purchase of equipment (91,119) (1,538) ----------------- ------------------ NET CASH (USED) BY INVESTING ACTIVITIES (119,444) (1,538) FINANCING ACTIVITIES Line of credit repayments 0 (151,223) Cash remaining with Universal (14,300) 0 Repayments - related parties 0 (21,482) Loan principal payments (74,775) (19,039) Loan proceeds 0 100,000 ----------------- ----------------- NET CASH (USED) BY FINANCING ACTIVITIES (89,075) (91,744) ----------------- ----------------- INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (22,096) 23,833 Cash and cash equivalents at beginning of year 104,522 72,695 ----------------- ----------------- CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 82,426 $ 96,528 ================= ================= Cash paid for income taxes $ 50 $ 5,673 Cash paid for interest 2,544 10,870
SUPPLEMENTAL INFORMATION During the nine months ended September 30, 1998, the Company issued 14,576,000 shares of restricted common stock for Derritron technology with a value of $4,008,400. The value was based on a discounted value of free-trading stock on the date of issuance. F-3 UNIDYN, CORP. AND SUBSIDIARY NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS September 30, 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 financial statements contain the accounts of the Company and Universal Dynamics, Inc. ("Universal"). Universal could be considered an entity under common control as at one time, the President of the Company and the president of Universal were the same person. Also the Company issued common stock to Universal to acquire the NorthStar operations from Universal. NorthStar is currently the main line of business for the Company. All significant intercompany transactions have been eliminated on consolidation. Dividend Policy The Company has not yet adopted any policy regarding payment of dividends in cash. Organization Costs The Company amortized its organization costs over a five year period. Inventory Inventory consists of items for resale and is valued at the lower of cost (first-in, first-out basis) or market. Allowance for Uncollectible Accounts The Company provides an allowance for uncollectible accounts based upon prior experience and management's assessment of the collectability of existing accounts. Revenue Recognition Revenue is recognized upon shipment of products. Cash and Cash Equivalents For financial statement purposes, the Company considers all highly liquid investments with an original maturity of three months or less when purchased to be cash equivalents. Earnings (loss) per share Earnings or loss per common and common equivalent share is computed by dividing net earnings (loss) by the weighted average common shares outstanding during each period. Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, and expenses during the reporting period. Estimates also affect the disclosure of contingent assets and liabilities at the date of the financial statements. Actual results could differ from these estimates. Such estimates of significant accounting sensitivity are allowance for doubtful accounts. Stock Options The Company has elected to follow Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees" (APB 25) and related interpretations in accounting for its 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). F-4 UNIDYN, CORP. AND SUBSIDIARY NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (continued) September 30, 1998 NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING PRINCIPLES (continued) 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. At December 31, 1997 a deferred tax asset was not recorded due to the Company's lack of profitable operations to provide income to use the net operating loss carryover of $10,740 which expires as follows: Year Ended Expires Amount December 31, 1986 December 31, 2001 $ 1,950 December 31, 1987 December 31, 2002 10 December 31, 1988 December 31, 2003 10 December 31, 1989 December 31, 2004 10 December 31, 1990 December 31, 2005 10 December 31, 1991 December 31, 2006 10 December 31, 1997 December 31, 2012 8,740 -------------- $ 10,740 ============== The Company expects to use the net operating loss on its 1998 income tax return. NOTE 2: DEVELOPMENT STAGE COMPANY The Company was incorporated under the laws of the State of Utah on May 2, 1986 as Macaw Capital, Inc. and has been in the development stage since incorporation. 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. NOTE 3: CAPITALIZATION On the date of incorporation, the Company sold 1,000,000 shares of its common stock to Capital General Corporation for $2,000 cash for an average consideration of $.002 per share. The Company's authorized stock includes 100,000,000 shares of common stock at $.001 par value. See also Note 6. F-5 UNIDYN, CORP. AND SUBSIDIARY NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (continued) September 30, 1998 NOTE 4: RELATED PARTY TRANSACTIONS During 1998, the Company received $126,000 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: 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 known as "NorthStar". The Company also entered into formal negotiations for the acquisition of the Derritron shaker product, and entered into an agreement for the acquisition of 80% of DVCS, LTD, a UK company in the business of Derritron shaker remanufacturing and related shaker services in the UK. In consideration for the NorthStar assets and to publicly disclose its shares for the pending acquisitions, the Company issued 3,000,000 authorized but unissued shares of its common stock, with the following distribution. Universal Dynamics, Inc. received 982,000 shares for the NorthStar product and for the Sterling technology. The structure was concluded December 31, 1997 with the remaining shares being issued in the second quarter of 1998 for all rights in the Sterling product. The Company also issued 1,822,000 shares for the pending acquisition of the Derritron product and 80% ownership of DVCS, LTD. 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. Other interested parties received 196,000 shares. 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. NOTE 6: FORWARD STOCK SPLIT Effective December 3, 1997, pursuant to written action adopted unanimously by the Board of Directors and a majority of the shareholders, the Company changed its name to UniDyn, Corp., and approved an eight-for-one forward stock split on the Company's common stock as follows: each outstanding share was converted into eight shares. Before the change, the Company was authorized to issue 100,000,000 shares of $.001 par value common stock; after the forward stock split the Company shall continue to be authorized to issue 100,000,000 shares of $.001 par value common stock. The number of outstanding shares of common stock affected by the forward split was 4,000,000. The number of issued and outstanding shares of common stock of the Company after the forward stock split is 32,000,000. F-6 UNIDYN, CORP. AND SUBSIDIARY NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (continued) September 30, 1998 NOTE 7: 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 a patent on the Sterling Project from Universal. The patent 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. Sterling will estimate the projected life of each solder connection on the printed circuit board, which will quantify the reliability of the manufactured part. The Company expects to have a working production model by the end of 1998 with sales expected in the second quarter of 1999. NOTE 8: 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 technology. The technology will be amortized over five years. The Company will need to spend some money to upgrade the technology and expects sales to begin in the second quarter of 1999. With this acquisition, the Company receives patents, products, manufacturing equipment, and an established market presence in England and other parts of Europe. NOTE 9: 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 10: WARRANTS AND OPTIONS The Company granted warrants to an investment advisory firm to purchase 150,000 shares of the Company's common stock at $.50 per share after September 3, 1998. On September 3, 1998, the exercise price was above market price for the Company's stock. The Company has granted 100,000 options to three directors to purchase stock at $.43 per share. The options vest 25% per year beginning April 1, 1999. The Company has granted a total of 700,000 options for advisory board members at an exercise price of $.43 per share. The options vest 25% per year beginning April 1, 1999. The Company has granted a total of 700,000 options to its engineering staff at an exercise price of $.43 per share. The options vest 25% per year beginning April 1, 1999. No compensation expense has been recorded as the exercise price was equal to or exceeded the market price on the grant dates. F-7 EX-27 2 FDS - 3RD QUARTER
5 This schedule contains summary financial information extracted from UniDyn, Corp. and Subsidiary September 30, 1998 financial statements and is qualified in its entirety by reference to such financial statements. 0000894542 UniDyn, Corp. 9-MOS DEC-31-1998 SEP-30-1998 82,426 0 81,725 0 49,856 232,372 63,391 (230) 4,561,933 101,461 0 0 0 32,000 4,428,472 4,561,933 1,418,998 1,418,998 467,975 467,975 1,064,273 0 2,544 99,650 7,050 92,600 0 0 0 92,600 .00 .00
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