-----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, Tky2rHIdpbTFd5oH+IjbzVJzwTyYafpahXZUGfN6eFjGuFrKzraHiEf/2jvjnkxC 82SODaq2OcIlEWiajCpAcQ== 0001016295-99-000143.txt : 19991115 0001016295-99-000143.hdr.sgml : 19991115 ACCESSION NUMBER: 0001016295-99-000143 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19990930 FILED AS OF DATE: 19991112 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: 99750404 BUSINESS ADDRESS: STREET 1: 1216 SOUTH 1580 WEST, #B STREET 2: SUITE 460 CITY: OREM STATE: UT ZIP: 84058 BUSINESS PHONE: (801)434-7250 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, 1999 ---------------------------------------- [ ] 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) 1216 South 1580 West, #B Orem, Utah 84058 (Address of principal executive offices) (Zip Code) Issuer's telephone number, including area code (801) 434-7250 8621 North Seventy Ninth Avenue Peoria, Arizona 85345 - ------------------------------------------------------------------------ (Former Address) (Zip Code) 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, 1999 - ------------------------------------ ------------------------------------ $.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 10KSB FOR THE YEAR ENDED DECEMBER 31, 1998. 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 hardware and electronics. The Company's products fall under two categories, A) Vibration Stress Screening (VSS) and B) Sterling inspection products for on-line printed circuit board workmanship inspection. The vibration test products are used to check the integrity of manufactured items including printed circuit boards eventually used in automotive, computer, and various electronic markets. 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 shakers and amplifiers known in the industry under the trade name "Derritron". Derritron has had an excellent 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. 2 UniDyn's flagship product is called "Sterling". The Sterling product technology was completely acquired from Universal Dynamics in the second quarter of 1998 after the patent search showed 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 Sterling products to the Japanese company under an exclusive, five year OEM arrangement in Japan estimated to be worth over $200,000,000. The quantity is estimated to average approximately 20 Sterling units a month, and relates to the initial model demands and various production options required by the Japanese customers. The Company is in the process of engineering the first of several "Production Models" for delivery beginning in the first quarter of 2000. The Sterling technique has already been tested successfully at IBM and Delco Electronics. The Company is currently structuring additional funding for Sterling product development. The Company also has an agreement in place to purchase Avalon Manufacturing Company for the purpose to provide engineering support, design support, and initial manufacturing commitments for Sterling. 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 discovering workmanship defects through the manufacturing process. Currently the industry is experiencing a 4 to 7% warranty return rate. Sterling is believed to be able to reduce this warranty repair rate down to perhaps 1%. The Company has also disclosed arrangements involving distribution through Singapore for UniDyn Company products. It is estimated to be worth approximately $10,000,000 a year in product shipments. Arrangements are also currently being put into place for limited Sterling distribution in Europe, and Korea. The Company is also arranging for a major OEM placement with a USA based company. 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. Currently this product is manufactured in Orem, Utah in UniDyn's Vibration Products Division, (VPD). 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 received 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 is in the process of looking at a plant in California that will form the operations of the Derritron Products Division (DPD). The Company would like to have this division beginning operations in March 2000. 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. Based on funding, the Company is looking to expand its operations through a strategic acquisition of Avalon Manufacturing Company that will benefit the Sterling product development. The Company has sold its interest in continuing business in England to focus on forming businesses in the USA involving Sterling and Derritron products. The Company has also entered into an agreement Oct 1999, to purchase Avalon Manufacturing Company. Once the acquisition is complete, Avalon will be positioned as the Avalon Products Division (APD) and have Sterling mechanical engineering and initial production responsibilities. For this acquisition and additional capital needs, the 3 Company has allocated up to 3,000,000 shares to be placed in private transactions. The Company would like to have this company in place by the end of 1999. RESULTS OF OPERATIONS For the three months ending September 30, 1999, the Company posted an income of $87,170 on revenues of $446,480 ($129,915 loss and $167,269 revenue for the same period in 1998). Substantially all sales were generated from the NorthStar product. NorthStar is composed of off the shelf items and has minimal assembly requirements. This was the first full quarter of the Vibration Products Division in Orem, Utah. The Directors are very pleased with the continual growth of the VPD division as it forms some of the earlier models that will be used in the Company's 3 other divisions coming on-line. (Avalon (APD), Derritron (DPD), and the newly formed UniDyn Technology Division (UTD) ) 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, 1999 were $126,979 with a resultant gross profit of $319,501 ($84,256 and $83,013 for 1998). Gross margin for the period ended September 30, 1999 was 72% (50% in 1998). As new products are introduced, including the Sterling Process, there is significant uncertainty about future gross margins relative to total sales. Gross margin percentage is highly dependent upon product prices, sales volumes, materials cost and allocation of manufacturing overhead which vary from product to product. Management has estimated the Sterling product at a 50% gross margin. That margin is expected to improve as the order volume increases with product demand. Selling, General and Administrative costs for the three months ended September 30, 1999 were $183,151, ($329,316 in 1998). The Company currently leases a total of about 16 people in the United States. The reduction in G&A expenses reflects management focus on engineering development for Sterling, and less on corporate overhead. Management also believes that by leasing its primary workforce, the Company has substantially reduced 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, 1999, the Company posted income of $163,521 on revenues of $1,199,973 ($92,600 income and $1,418,998 revenue for the same period in 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 nine months is a $101,565 gain from the sale of the Company's European subsidiary. Sales reduction is the result of the Company focusing efforts on "Morning Star" developments for NorthStar, and redirecting efforts toward the Sterling Products. Derritron developments will be mostly put on hold until funding is directed to it through outside funding, or through additional revenues generated by "Morning Star" or Sterling. Cost of Goods Sold for the nine months ended September 30, 1999 were $340,891 with a resultant gross profit of $859,082 ($467,975 and $951,023 for 1998). Gross margin for the period ended September 30, 1999 was 72% (67% in 1998). Until the new products are delivered, including the Sterling Systems, 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. The gross profit percent (%) is up in 1999 due to the Company no longer making sales through its European subsidiary which had lower profit margins than the Company. Selling, General and Administrative costs for the nine months ended September 30, 1999 were $737,323, ($1,075,661 in 1998). 4 For the nine months ending September 30, 1999 the majority of the Company's research was conducted at the Company's Engineering and Development Center in Orem, 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. The Company's NorthStar manufacturing along with NorthStar engineering development are both now located together in Orem, Utah. LIQUIDITY AND CAPITAL RESOURCES The Company is currently seeking additional working capital for the Avalon acquisition, and to meet its short term growth planning 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. As of September 30, 1999, the Company has approximately $356,364 in working capital. The company has current commitments that will increase the working capital another $250,000 in the fourth quarter. The Company is also looking to increase the working capital with additional capital funding. 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. 5 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 mainly involving Avalon capital and initial Sterling production requirements. 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-KSB for the year ended December 31, 1998 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. 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 2000 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 that will certify their products as Y2K compliant. The amount of needed hardware and software depends on the associated production model in question. ITEM 2. LEGAL PROCEEDINGS Not applicable. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits Financial statements as of September 30, 1999 (b) Reports on Form 8-K None 6 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 12, 1999 Ira Gentry, President and Director 7 UNIDYN, CORP. AND SUBSIDIARY CONSOLIDATED BALANCE SHEETS
September 30, December 31, 1999 1998 ASSETS (Unaudited) (Audited) ---------------------- -------------------- CURRENT ASSETS Cash in bank $ 48,904 $ 138,936 Accounts receivable 381,703 245,312 Receivable - shareholder 87,150 0 Deferred tax benefit 14,500 14,500 Prepaid expense 0 17,564 Inventory 37,298 34,173 ---------------------- -------------------- TOTAL CURRENT ASSETS 569,555 450,485 PROPERTY, PLANT & EQUIPMENT 46,201 95,287 OTHER ASSETS Deferred tax benefit 185,500 196,500 Derritron Technology 4,008,400 4,008,400 ---------------------- -------------------- 4,193,900 4,204,900 ---------------------- -------------------- $ 4,809,656 $ 4,750,672 ====================== ==================== LIABILITIES & EQUITY CURRENT LIABILITIES Accounts payable $ 69,722 $ 173,138 Accrued expenses 0 47,285 Payable - related party 105,469 90,670 Income taxes payable 38,000 50 ---------------------- -------------------- TOTAL CURRENT LIABILITIES 213,191 311,143 STOCKHOLDERS' EQUITY Common Stock $.001 par value: Authorized - 100,000,000 shares Issued and outstanding 32,000,000 shares 32,000 32,000 Additional paid-in capital 4,341,832 4,341,832 Retained earnings 229,219 65,697 Accumulated other comprehensive loss (6,586) 0 ---------------------- -------------------- TOTAL STOCKHOLDERS' EQUITY 4,596,465 4,439,529 ---------------------- -------------------- $ 4,809,656 $ 4,750,672 ====================== ====================
F-1 UNIDYN, CORP. AND SUBSIDIARY CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (Unaudited)
Three Months Ended Nine Months Ended September 30, September 30, 1999 1998 1999 1998 ------------------ ----------------- ----------------- ------------------ Net sales $ 446,480 $ 167,269 $ 1,199,973 $ 1,418,998 Cost of sales 126,979 84,256 340,891 467,975 ------------------ ----------------- ----------------- ------------------ GROSS PROFIT 319,501 83,013 859,082 951,023 Other Income: Commissions 0 0 0 212,900 Gain on sale of subsidiary 0 0 101,565 0 ------------------ ----------------- ----------------- ------------------ 0 0 101,565 212,900 Bad debts (adjustment) 0 (30,000) 0 0 Gain on disposal of net assets of Universal 0 (11,388) 0 (11,388) General and administrative expenses 183,151 329,316 737,323 1,075,661 ------------------ ----------------- ----------------- ------------------ 183,151 287,928 737,323 1,064,273 ------------------ ----------------- ----------------- ------------------ NET INCOME (LOSS) BEFORE INCOME TAXES 136,350 (204,915) 223,324 99,650 Income tax expense (benefit) 49,180 (75,000) 59,803 7,050 ------------------ ----------------- ----------------- ------------------ NET INCOME (LOSS) 87,170 (129,915) 163,521 92,600 OTHER COMPREHENSIVE LOSS Foreign currency translation adjustments 0 0 (6,586) 0 ------------------ ----------------- ----------------- ------------------ TOTAL COMPREHENSIVE INCOME (LOSS) $ 87,170 $ (129,915) $ 156,935 $ 92,600 ================== ================= ================= ================== Net income (loss) per weighted average share $ .00 $ (.00) $ .01 $ .00 ================== ================= ================= ================== Weighted average number of common shares used to compute net income (loss) per weighted average share 32,000,000 32,000,000 32,000,000 26,762,667 ================== ================= ================= ==================
F-2 UNIDYN, CORP. AND SUBSIDIARY CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
Nine Months Ended September 30, 1999 1998 ----------------- ----------------- OPERATING ACTIVITIES Net income $ 163,521 $ 92,600 Adjustments to reconcile net income to cash provided by operating activities: Depreciation 15,493 3,230 Gain on Universal disposal 0 (11,388) Bad debts 0 30,000 Gain on subsidiary disposal (5,717) 0 Deferred taxes 11,000 (276,000) Foreign currency translation (6,586) 0 Changes in assets and liabilities: Accounts receivable (190,580) 76,748 Inventory (3,125) 4,335 Prepaid expenses 8,486 (38,791) Accounts payable 831 42,689 Accrued expenses (30,958) 0 Payable - related party 14,799 0 Income taxes payable 37,950 263,000 ----------------- ----------------- NET CASH PROVIDED BY OPERATING ACTIVITIES 15,114 186,423 INVESTING ACTIVITIES Loans (87,150) (28,325) Purchase of equipment 0 (91,119) ----------------- ----------------- NET CASH (USED) BY INVESTING ACTIVITIES (87,150) (119,444) FINANCING ACTIVITIES Cash remaining with Universal 0 (14,300) Cash remaining with former subsidiary (17,996) 0 Loan principal payments 0 (74,775) ----------------- ----------------- NET CASH (USED) BY FINANCING ACTIVITIES (17,996) (89,075) ----------------- ----------------- (DECREASE) IN CASH AND CASH EQUIVALENTS (90,032) (22,096) Cash and cash equivalents at beginning of year 138,936 104,522 ----------------- ----------------- CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 48,904 $ 82,426 ================= ================= Cash paid for income taxes $ 11,772 $ 50 Cash paid for interest 0 2,554
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, 1999 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 September 30, 1999 contain the accounts of the Company and its formerly wholly-owned subsidiary, Unidyn (Europe) Limited. The financial statements for September 30, 1998 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 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. F-4 UNIDYN, CORP. AND SUBSIDIARY NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (continued) September 30, 1999 NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING PRINCIPLES (continued) Income Taxes (continued) In February, 1992, the Financial Accounting Standards Board adopted Statement of Financial Accounting Standards No. 109, Accounting for Income Taxes, which supersedes substantially all existing authoritative literature for accounting for income taxes and requires deferred tax balances to be adjusted to reflect the tax rates in effect when those amounts are expected to become payable or refundable. The Statement was applied in the Company's financial statements for the fiscal year commencing January 1, 1993. NOTE 2: ORGANIZATION AND HISTORY The Company was incorporated under the laws of the State of Utah on May 2, 1986 as Macaw Capital, Inc. On December 30, 1993, the Company was 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: 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 4: 1998 EVENTS STERLING PATENT During the quarter ended September 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. 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 1999 with sales expected in the second quarter of 2000. DERRITRON TECHNOLOGY Effective September 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 2000. With this acquisition, the Company receives patents, products, manufacturing equipment, and an established market presence in England and other parts of Europe. NOTE 5: SEGMENT INFORMATION 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. NOTE 6: SALE OF SUBSIDIARY Effective April 1, 1999, the Company sold its subsidiary to its largest shareholder for $185,933. $98,783 is reflected in accounts receivable representing uncollected sales made to the former subsidiary and $87,150 is reflected as receivable - shareholder. The Company collected the $185,933 in October, 1999. No operations for the subsidiary after March 31, 1999 are reflected in the statement of operations. NOTE 7: 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. F-5 UNIDYN, CORP. AND SUBSIDIARY NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (continued) September 30, 1999 NOTE 7: WARRANTS AND OPTIONS (continued) The Company has granted 100,000 options each to three directors to purchase stock at $.16 per share (market price on grant date). The options vest 20% on April 1, 1999, 20% on April 1, 2000, 20% on April 1, 2001, and 40% on April 1, 2002. The term of the options is ten years. The Company has granted 350,000 options to its technical employees to purchase stock at $.16 per share (market price on grant date). The options have the same vesting schedule as described above and have a term of ten years. The technical employees plan can grant a total of 750,000 options under the plan. F-6 EX-27 2 FDS - 3RD QUARTER
5 This schedule contains summary financial information extracted from UniDyn, Corp. September 30, 1999 financial statements and is qualified in its entirety by reference to such financial statements. 0000894542 UniDyn, Corp. US 9-MOS DEC-31-1999 SEP-30-1999 1.00 48,904 0 468,853 0 37,298 569,555 57,753 (11,552) 4,809,656 213,191 0 0 0 32,000 4,564,465 4,809,656 1,199,973 1,199,973 340,891 340,891 737,323 0 0 223,324 59,803 163,521 0 0 0 163,521 .01 .01
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