-----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, Fhkshxr9Hekr63e6Znwo6ny6kH7+vsNFfg3q4HNZG5RFC+Ei1PwPUTwaYf/b7r12 NOmx9yQRGPMxtRpR60If1g== 0001016295-99-000047.txt : 19990416 0001016295-99-000047.hdr.sgml : 19990416 ACCESSION NUMBER: 0001016295-99-000047 CONFORMED SUBMISSION TYPE: 10KSB PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19981231 FILED AS OF DATE: 19990415 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: 99594889 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 10KSB 1 YEAR END 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, 1998 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) 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 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 1998 were $2,016,779. As of March 24, 1999, the approximate market value of the voting stock held by non-affiliates of the registrant was $2,769,379, based on an average bid price of $.1446 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 March 25, 1999 - ------------------------------------ -------------------------------- $.001 PAR VALUE CLASS A COMMON STOCK 32,000,000 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 electrodynamic shakers. 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 2 intends to continue to use and devote the acquired assets in the same business of developing vibration and reliability testing systems. The Company also plans to expand into the shaker and vibration testing systems market. 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. 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. 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. As of April 02, 1999, the Company did not have any direct employees. The Company leases approximately 40 personnel to provide services to the Company. 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 property. 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. 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 year: 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 3 As of February 1999, there were about 346 record holders 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. The activities for most of 1997 are those of Universal Dynamics, Inc. RESULTS OF OPERATION For the 12 months ended December 31, 1998, the Company posted earnings of $71,493 on revenues of $2,016,779 compared with earnings of $57,411 on revenues of $2,237,367 for the 12 months ended December 31, 1997. Cost of goods sold for the 12 months ended December 31, 1998 were $609,694 with a resultant gross profit of $1,407,085 ($769,908 and $1,467,459 in 1997). Gross margin for the year ended December 31, 1998 was 69.8% (65.6% in 1997). Selling and general and administrative costs for the 12 months ended December 31, 1998 were $1,523,583 ($1,407,211 in 1997). Engineering costs related to product development were $2,412 in 1998 and $141,617 in 1997. The Company believes that it will receive a sufficient stream of cash from its new business operations to meet its cash needs during the next 12 months. However, because the Company plans to grow and acquire businesses and assets, the Company's needs could change. In the event the Company needs additional cash, the Company may issue additional shares or incur indebtedness. The Company also may incur additional indebtedness in connection with its pending or future acquisitions or other transactions. The Company was recently 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 the best 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, will be able to combine and offer these high quality technologies as a complete, integrated, turnkey package, significantly reducing costs to end users, and completing a total package of products to the end user. The Company is patenting one of the Derritron Vibration products with orders expected in the second quarter of 1999 and distribution in the third quarter of 1999. Only a few companies have combined these technologies before, and none exhibit any significant modern software expertise in Windows. The Company hopes to position itself as perhaps the strongest candidate regarding technical expertise in Windows software, and leveraging off the tens of millions already invested in recent shaker and amplifier design through the Derritron business acquired in the second quarter of 1998. 4 The Company is in the patenting stage of "Sterling," a revolutionary quality assurance system ("QAS") for printed circuit board production. The Company has in place OEM distributors for this QAS representing over 40 million in commitments to order. This however is small relative to the scope of the potential market the QAS addresses, but represents a strong beginning. Marketing information received by the Company in fall 1998 indicates that the market represents a need of over 5000 units, and currently has a 12% growth rate. If the Company obtained 10% of the market, it would exceed $100 million in annual revenues. 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 is marketable to nearly every major manufacturer of printed circuit boards. Sterling represents a significant area of growth for potential business. 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 during the startup phases of products, but believes over the long run in debt-free operations. Products are based on strong technology, adaptation to changing markets, joint efforts through interested parties, positive business strategy, in combination with a comprehensive global objective to increase shareholder wealth. 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 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. 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. 5 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 April 2, 1999. Name Age Position Ira Gentry 43 President, CEO and Director Lynn Gentry 39 Secretary-Treasurer Dr. Don Leaver 44 Director - Chief Scientist John Provazek 45 Director On December 1, 1997, Krista Nielson and Sasha Belliston, the directors of the Company, resigned and Terry W. Neild and Ira Gentry were elected to the Board of Directors of the Company by a majority of the shareholders. Terry Neild resigned on January 29, 1998. Vernon M. Traylor was elected as Secretary and Treasurer December 1997 and resigned on February 23, 1998. The current directors were appointed March 12, 1998 by Ira Gentry as the sole remaining director and were again elected by the shareholders 02 April, 1999. Lynn Gentry was also elected at that time as the Company Secretary and Treasurer. The next general shareholders meeting is scheduled in Provo, Utah the second Friday in April, 2000. 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. 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. Vernon M. Traylor, 49, served as Secretary and Treasurer of the Company from December 1997 to February 23, 1998. For nearly 30 years, Mr. Traylor has served as an independent financial consultant or Chief Financial Officer for companies including LabGlas Corp. and Road Machinery Co. He is a Business Administration/Accounting graduate of Arizona State University. Terry W. Neild, 56, served as Director of the Company from December, 1997 until January 29, 1998. Mr. Neild was a co-founder of Clearly Canadian Beverage Corp. and served that company as its Chairman and CEO. In addition, he has been a Director of Camfrey Resources Ltd., BayWest Capital Corp. and MacNeill International Corp. Mr. Neild has also served as Director of National Scientific Corporation and Chief Operating Officer of Intercell Corporation. He is a Certified Management Accountant. 6 Lynn Gentry, 39, joins the Company 02 April 1999 as Company Secretary and Treasurer. She has previously functioned as corporate Director and Secretary of Universal Dynamics, Inc. Currently she is an officer of "Tough Love Arizona" chartered through Tough Love International, an organization involved with supporting parents through rearing children, both old and young. ITEM 10. Executive Compensation. As of December 31, 1998, the Company paid Ira Gentry $52,000 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 employees, as all personnel are leased. The two highest paid leased personnel are Mike Bird, senior engineer at $77,000 per year and Jeff Wilson, at $77,000 per year. ITEM 11. Security Ownership of Certain Beneficial Owners and Management. The following table sets forth, as of March 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 Mearns Assurance Corp. 14,576,000 45.55 Common Stock Technet, Inc. 3,000,000 9.375 Common Stock Ira Gentry 835,000 2.61 8621 North Seventy Ninth Avenue Peoria, Arizona 85345 Common Stock Lynn Gentry 0 0.00 8621 North Seventy Ninth Avenue Peoria, Arizona 85345 Common Stock Dr. Don Leaver 100,000 0.31 8621 North Seventy Ninth Avenue Peoria, Arizona 85345 Common Stock John Provazek 815,000 2.55 8621 North Seventy Ninth Avenue Peoria, Arizona 85345 Common Stock All Officers and 1,750,000 5.47 Directors as a Group
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. 7 PART IV ITEM 13. Exhibits and Reports on Form 8-K. Financial Statements and Financial Statement Schedules. Financial Statements - December 31, 1998 and 1997 Reports on Form 8-K. No reports were filed in the fourth quarter of 1998. 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 15, 1999 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 15, 1999 By: Ira Gentry, President, CEO and Director Date: April 15, 1999 By: John Provazek - Director Date: April 15, 1999 By: Don Leaver, Ph.D., Director Date: April 15, 1999 By: Lynn Gentry, Secretary - Treasurer 8 SMITH & COMPANY A PROFESSIONAL CORPORATION OF CERTIFIED PUBLIC ACCOUNTANTS MEMBERS OF: 10 WEST 100 SOUTH, SUITE 700 AMERICAN INSTITUTE OF SALT LAKE CITY, UTAH 84101 CERTIFIED PUBLIC ACCOUNTANTS TELEPHONE: (801) 575-8297 UTAH ASSOCIATION OF FACSIMILE: (801) 575-8306 CERTIFIED PUBLIC ACCOUNTANTS E-MAIL: smith&co@smithandcocpa.com - -------------------------------------------------------------------------------- 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, 1998 and 1997, and the related consolidated statements of operations, changes in stockholders' equity, and cash flows for the years ended December 31, 1998 and 1997. 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, 1998 and 1997, and the results of their operations, changes in stockholders' equity, and their cash flows for the years ended December 31, 1998 and 1997, in conformity with generally accepted accounting principles. Smith & Company CERTIFIED PUBLIC ACCOUNTANTS Salt Lake City, Utah March 19, 1999 F-1 UNIDYN, CORP. AND SUBSIDIARY CONSOLIDATED BALANCE SHEETS
December 31, 1998 1997 ----------------- ----------------- ASSETS CURRENT ASSETS Cash in bank $ 138,936 $ 104,522 Accounts receivable 245,312 203,318 Loan receivable 0 24,500 Deferred tax benefit (Note 7) 14,500 0 Prepaid expense 17,564 38,708 Inventory (Note 1) 34,173 70,866 ----------------- ----------------- TOTAL CURRENT ASSETS 450,485 441,914 PROPERTY, PLANT & EQUIPMENT (Note 3) 95,287 38,117 OTHER ASSETS Sterling Patent (Note 10) 0 0 Deferred tax benefit (Note 7) 196,500 0 Derritron Technology (Note 11) 4,008,400 0 ----------------- ----------------- 4,204,900 0 ----------------- ----------------- $ 4,750,672 $ 480,031 ================= ================= LIABILITIES & EQUITY CURRENT LIABILITIES Accounts payable $ 173,138 $ 45,786 Payable - related party (Note 5) 90,670 0 Accrued expenses 47,285 0 Loans payable (Note 6) 0 74,775 Income taxes payable 50 0 ----------------- ----------------- TOTAL CURRENT LIABILITIES 311,143 120,561 STOCKHOLDERS' EQUITY Common Stock $.001 par value: Authorized - 100,000,000 shares Issued and outstanding 32,000,000 shares (30,560,000 in 1997) 32,000 30,560 Additional paid-in capital 4,341,832 509,621 Treasury stock (Note 14) 0 (174,915) Retained earnings (deficit) 65,697 (5,796) ----------------- ----------------- TOTAL STOCKHOLDERS' EQUITY 4,439,529 359,470 ----------------- ----------------- $ 4,750,672 $ 480,031 ================= =================
See Notes to Consolidated Financial Statements. F-2 UNIDYN, CORP. AND SUBSIDIARY CONSOLIDATED STATEMENTS OF OPERATIONS
Year ended December 31, 1998 1997 -------------- -------------- Net sales $ 2,016,779 $ 2,237,367 Cost of sales 609,694 769,908 -------------- -------------- GROSS PROFIT 1,407,085 1,467,459 Other Income Commissions 212,900 0 Gain on disposal of net assets of Universal 11,388 0 -------------- -------------- 224,288 0 General & administrative expenses: Accounting / legal 91,705 20,937 Advertising / promotion 33,165 163,338 Amortization and depreciation 8,970 1,767 Bad debts 0 70,000 Bank charges 6,320 5,313 Commissions/consulting 47,888 17,017 Engineering 2,412 141,671 Interest expense 2,544 12,995 Office expense 14,890 3,708 Payroll taxes and benefits 29,300 23,560 Professional services 16,562 10,820 Property taxes 0 33,616 Rent 49,380 41,950 Repairs and maintenance 26,592 7,568 Salaries / employee leasing 1,006,552 735,192 Telephone 30,453 12,972 Travel 93,438 47,677 Utilities 7,174 21,872 Vehicle expense 43,072 34,882 Miscellaneous 13,166 356 -------------- -------------- 1,523,583 1,407,211 NET INCOME BEFORE INCOME TAXES 107,790 60,248 Income tax expense 36,297 2,837 -------------- -------------- NET INCOME $ 71,493 $ 57,411 ============== ============== Net income (loss) per weighted average share $ .00 $ .06 ============== ============== Weighted average number of common shares used to compute net income (loss) per weighted average share 31,280,000 1,016,333 ============== ==============
See Notes to Consolidated Financial Statements. F-3 UNIDYN, CORP. AND SUBSIDIARY CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
Common Stock Additional Retained Par Value $0.001 Paid-in Earnings Shares Amount Capital (Deficit) -------------- -------------- ----------------- -------------- Balances at 12/31/95 1,000,000 $ 1,000 $ 335,088 $ 37,834 Net loss for year (73,041) -------------- -------------- ----------------- -------------- Balances at 12/31/96 1,000,000 1,000 335,088 (35,207) Issued for services at $.001 12/1/97 196,000 196 Issued to Universal for assets at $.85 12/2/97 153,285 Issued for future acquisitions at $.001 12/1/97 (Note 14) 2,624,000 2,624 Forward stock split* (Note 15) 26,740,000 26,740 21,248 (28,000) Net income for year 57,411 -------------- -------------- ----------------- -------------- Balances at 12/31/97 30,560,000 30,560 509,621 (5,796) 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 ============== ============== ================= ==============
* Approved December 3, 1997 See Notes to Consolidated Financial Statements. F-4 UNIDYN, CORP. AND SUBSIDIARY CONSOLIDATED STATEMENTS OF CASH FLOWS
Year ended December 31, 1998 1997 -------------- -------------- OPERATING ACTIVITIES Net income (loss) $ 71,493 $ 57,411 Adjustments to reconcile net income (loss) to cash provided by operating activities: Gain on Universal disposal (11,388) 0 Amortization and depreciation 8,970 1,767 Stock issued for expenses 0 196 Bad debts 30,000 70,000 Deferred taxes (211,000) 0 Changes in assets and liabilities: Inventory 20,018 88,651 Accounts receivable (86,839) 130,029 Prepaid expense (55,990) (12,121) Accrued expenses 47,285 0 Income taxes payable 234,050 (5,673) Accounts payable 234,033 (19,954) -------------- -------------- NET CASH PROVIDED BY OPERATING ACTIVITIES 280,632 310,306 INVESTING ACTIVITIES Purchase of equipment (128,985) (1,538) Loans (28,325) (24,500) Purchase of treasury stock 0 (152,483) -------------- -------------- NET CASH USED BY INVESTING ACTIVITIES (157,310) (178,521) FINANCING ACTIVITIES Cash remaining with Universal (14,300) 0 Line of credit repayments 0 (151,223) Repayments - related parties 0 (21,482) Loan repayments (74,775) (27,253) Capital of subsidiary 167 0 Borrowings 0 100,000 -------------- -------------- NET CASH (USED) BY FINANCING ACTIVITIES (88,908) (99,958) -------------- -------------- INCREASE IN CASH AND CASH EQUIVALENTS 34,414 31,827 Cash and cash equivalents at beginning of year 104,522 72,695 -------------- -------------- CASH & CASH EQUIVALENTS AT END OF YEAR $ 138,936 $ 104,522 ============== ============== Cash paid for: Interest $ 2,544 $ 12,995 Taxes 50 8,510
See Notes to Consolidated Financial Statements. F-5 UNIDYN, CORP. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 1998 and 1997 NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING PRINCIPLES Accounting Methods The Company recognizes income and expenses based on the accrual method of accounting. Principals of Consolidation The financial statements for 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. The financial statements for 1997 contain the accounts of the Company and 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. 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. 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 (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 year. F-6 UNIDYN, CORP. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) December 31, 1998 and 1997 NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING PRINCIPLES (continued) Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities revenues, and expenses during the reporting period. Estimates also affect the disclosure of contingent assets and liabilities at the date of the financial statements. Actual results could differ from these estimates. Such estimates of significant accounting sensitivity are allowance for doubtful accounts. Stock Options The Company has elected to follow Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees" (APB 25) and related interpretations in accounting for its future employee stock options rather than adopting the alternative fair value accounting provided for under Financial Accounting Standards Board ("FASB") FASB Statement No. 123, Accounting for Stock Based Compensation (SFAS 123). Income Taxes The Company records the income tax effect of transactions in the same year that the transactions enter into the determination of income, regardless of when the transactions are recognized for tax purposes. Tax credits are recorded in the year realized. 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, 1998 and 1997 are summarized as follows:
Accumulated Net Book Value Cost Depreciation 1998 1997 ------------- ------------------ ------------- ------------ Vehicles $ 50,358 $ 2,518 $ 47,840 $ 27,046 Computers & Equipment 5,254 263 4,991 1,053 Furniture & Fixtures 38,850 2,849 36,001 2,900 Leasehold Improvements 6,795 340 6,455 7,118 ------------- ------------------ ------------- ------------ $ 101,257 $ 5,970 $ 95,287 $ 38,117 ============= ================== ============= ============
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, 1998 amounted to $8,970, ($1,767 in 1997). 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. F-7 UNIDYN, CORP. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) December 31, 1998 and 1997 NOTE 5: PAYABLE - RELATED PARTY At December 31, 1998, the Company owes $90,670 to Universal for cash advanced to the Company and expenses paid for the Company after Universal stopped being consolidated with the Company. NOTE 6: LOANS PAYABLE Loans payable at December 31, 1998 and 1997 are as follows:
Principal Balances 1998 1997 Interest Long- Long- Rate Current term Current term ------------- ------------- ------------- ------------- GMAC 8.5% $ 0 $ 0 $ 0 $ 0 BankOne Arizona, NA (1) 10.5% 0 0 74,775 0 ------------- ------------- ------------- ------------- $ 0 $ 0 $ 74,775 $ 0 ============= ============= ============= =============
(1) Secured by accounts receivable and inventory. NOTE 7: INCOME TAXES Components of income tax are as follows: 1998 1997 ------------- ------------- Current Federal $ 13,197 $ 1,773 State 50 1,064 ------------- ------------- 13,247 2,837 Deferred 23,050 0 ------------- ------------- $ 36,297 $ 2,837 ============= ============= 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:
1998 1997 ------------- ------------- Income tax computed at Federal statutory tax rate $ 36,649 $ 20,484 Tax associated with fiscal tax year for Universal and graduated federal rates * (402) (18,349) State taxes (net of federal benefit) 50 702 ------------- ------------- $ 36,297 $ 2,837 ============= =============
* 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 patents for tax purposes $ 14,500 ============= Long-term deferred tax asset Basis of patent for tax purposes $ 196,500 ============= NOTE 8: COMMITMENTS AND CONTINGENCIES The Company has a month-to-month lease on the buildings in Arizona and Utah where it operates. The approximate monthly amount is $6,950. The Company also rents office space in Utah. The monthly payment is $410 through September 1999. The Company's subsidiary rents office space in England for $1,638 per month. The lease expires October 31, 2003. The subsidiary also pays some of the insurance and maintenance. Future expected lease payments on the building are as follows: F-8 UNIDYN, CORP. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) December 31, 1998 and 1997 NOTE 8: COMMITMENTS AND CONTINGENCIES (continued) Year ending December 31, 1999 $ 19,656 Year ending December 31, 2000 19,656 Year ending December 31, 2001 19,656 Year ending December 31, 2002 19,656 Year ending December 31, 2003 16,380 ------------- $ 95,004 ============= The subsidiary also leases two vehicles with expected payments of $30,117 for the year ending December 31, 1999. Rent expense for the buildings in 1998 was $49,380 and $41,950 in 1997. Included in vehicle expense for 1998 is $21,557 related to the subsidiary's leases. NOTE 9: MAJOR CUSTOMERS 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. Sales to three customers represented 50.6%, 14.5% and 12.3% during the year ended December 31, 1997. As of December 31, 1997, accounts receivable from these three customers represented 24.7%, 21.8%, and 20.9%, 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 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 five 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 late 1999 or 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. F-9 UNIDYN, CORP. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) December 31, 1998 and 1997 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: 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 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 are to be issued April 1999 with the first 20% vesture. 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 for engineering and other direct company authorized members. Currently the board members authorized approximately half of these shares to be optioned at an exercise price of $.16 per share (average price between bid and ask 02 April 1999). The option vest 20% for the first three years beginning the first full year 02 April 1999, and 40% for the last year. Option documents are to be issued April 1999 with the first 20% vesture. No compensation expense has been recorded as the exercise price was equal to or exceeded the market price on the grant dates, and all directors and related share options are to be issued in late April 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 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 F-10 UNIDYN, CORP. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) December 31, 1998 and 1997 NOTE 14: 1998 EVENTS (continued) 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 is 32,000,000. NOTE 16: SEGMENT INFORMATION 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. F-11 EX-27 2 FDS - DECEMBER 31, 1998
5 This schedule contains summary financial information extracted from UniDyn, Corp. December 31, 1998 consolidated financial statements and is qualified in its entirety by reference to such financial statements. 0000894542 UniDyn, Corp YEAR DEC-31-1998 DEC-31-1998 138,936 0 245,312 0 34,173 450,485 101,257 (5,970) 4,750,672 311,143 0 0 0 32,000 4,407,529 4,750,672 2,016,779 2,016,779 609,694 609,694 1,523,583 0 2,544 107,790 36,297 71,493 0 0 0 71,493 .00 .00
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