UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                   FORM 10-QSB
                                   (Mark One)

[X]  QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
     ACT OF 1934

For the quarterly period ended                       June 30, 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 June 30, 1999
------------------------------------         ----------------------------------
$.001 PAR VALUE CLASS A COMMON STOCK                 32,000,000 SHARES





                                        1

<PAGE>



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

<PAGE>



         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 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.

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.



                                        3

<PAGE>



         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   strategic   acquisitions   that  will  benefit  the  Sterling  product
development. The Company has sold its interest in continuing business in England
to focus on the business  involving Sterling and focus resources on the Sterling
product.

RESULTS OF OPERATIONS
         For the three months ending June 30, 1999, the Company posted an income
of $118,358 on revenues of $352,293 ($56,620 income and $514,314 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  quarter is a $101,565  gain from the
sale of the Company's European subsidiary.

         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  June 30,  1999  were
$92,324  with a resultant  gross profit of $259,969  ($185,298  and $329,016 for
1998). Gross margin for the period ended June 30, 1999 was 74% (64% 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
June 30, 1999 were $237,117,  ($414,296 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 six months ending June 30, 1999,  the Company  posted income of
$76,351 on revenues of $753,493  ($222,515 income and $1,251,729 revenue for the
same period in 1998).

          Substantially  all sales were  generated  from the NorthStar  product.
NorthStar is composed of off


                                        4

<PAGE>



the shelf items and has minimal  assembly  requirements.  Included in income for
the  quarter  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 six months ended June 30, 1999 were $213,912
with a resultant  gross  profit of $539,581  ($383,719  and  $868,010 for 1998).
Gross margin for the period ended June 30, 1999 was 72% (69% 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.

         Selling, General and Administrative costs for the six months ended June
30, 1999 were $554,172, ($746,345 in 1998).

         For the six months  ending June 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 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.  As of June 30,  1999,  the  Company  has
approximately $255,305 in working capital.

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.


                                        5

<PAGE>



         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  which 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 June 30, 1999

                  (b)      Reports on Form 8-K
                           None




                                        6

<PAGE>



                                   SIGNATURES

         Pursuant to the  requirements  of the  Securities  and  Exchange Act of
1934,  the Issuer has duly  caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.

                                     UNIDYN, CORP.



Dated:   August 13, 1999
                                     Ira Gentry, President and Director



                                        7

<PAGE>



                                            UNIDYN, CORP. AND SUBSIDIARY
                                             CONSOLIDATED BALANCE SHEETS
                                                     (Unaudited)

<TABLE>
<CAPTION>
                                                                         June 30,                 December 31,
                                                                           1999                       1998
ASSETS                                                                  (Unaudited)                 (Audited)
                                                                  ----------------------     --------------------
     CURRENT ASSETS
<S>                                                               <C>                        <C>
         Cash in bank                                             $               35,855     $            138,936
         Accounts receivable                                                     256,680                  245,312
         Receivable - shareholder                                                 87,150                        0
         Deferred tax benefit                                                      9,500                   14,500
         Prepaid expense                                                           1,180                   17,564
         Inventory                                                                45,975                   34,173
                                                                  ----------------------     --------------------

                                      TOTAL CURRENT ASSETS                       436,340                  450,485

PROPERTY, PLANT & EQUIPMENT                                                       49,089                   95,287

OTHER ASSETS
         Deferred tax benefit                                                    196,500                  196,500
         Derrition Technology                                                  4,008,400                4,008,400
                                                                  ----------------------     --------------------
                                                                               4,204,900                4,204,900
                                                                  ----------------------     --------------------
                                                                  $            4,690,329     $          4,750,672
                                                                  ======================     ====================

LIABILITIES & EQUITY
     CURRENT LIABILITIES
         Accounts payable                                         $               75,566     $            173,138
         Accrued expenses                                                              0                   47,285
         Payable - related party                                                 105,469                   90,670
         Income taxes payable                                                          0                       50
                                                                  ----------------------     --------------------

                                 TOTAL CURRENT LIABILITIES                       181,035                  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                                                       142,048                   65,697
         Accumulated other comprehensive loss                                     (6,586)                       0
                                                                  ----------------------     --------------------

                                TOTAL STOCKHOLDERS' EQUITY                     4,509,294                4,439,529
                                                                  ----------------------     --------------------

                                                                  $            4,690,329     $          4,750,672
                                                                  ======================     ====================
</TABLE>


                                       F-1

<PAGE>



                          UNIDYN, CORP. AND SUBSIDIARY
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                            AND COMPREHENSIVE INCOME
                                   (Unaudited)


<TABLE>
<CAPTION>
                                                               Three Months Ended                      Six Months Ended
                                                                    June 30,                               June 30,
                                                            1999                1998               1999                1998
                                                     ------------------  -----------------   -----------------  ------------------
<S>                                                  <C>                 <C>                 <C>                <C>
Net sales                                            $          352,293  $         514,314   $         753,493  $        1,251,729
Cost of sales                                                    92,324            185,298             213,912             383,719
                                                     ------------------  -----------------   -----------------  ------------------

                                       GROSS PROFIT             259,969            329,016             539,581             868,010

Other Income:
   Commissions                                                        0            182,900                   0             212,900
   Gain on sale of subsidiary                                   101,565                  0             101,565                   0
                                                     ------------------  -----------------   -----------------  ------------------
                                                                101,565            182,900             101,565             212,900

Bad debts                                                             0             30,000                   0              30,000
General and administrative expenses                             237,117            414,296             554,172             746,345
                                                     ------------------  -----------------   -----------------  ------------------
                                                                237,117            444,296             554,172             776,345
                                                     ------------------  -----------------   -----------------  ------------------

                                  NET INCOME (LOSS)
                                BEFORE INCOME TAXES             124,417             67,620              86,974             304,565

Income tax expense                                                6,059             11,000              10,623              82,050
                                                     ------------------  -----------------   -----------------  ------------------

                                  NET INCOME (LOSS)             118,358             56,620              76,351             222,515

OTHER COMPREHENSIVE LOSS
   Foreign currency translation
   adjustments                                                        0                  0              (6,586)                  0
                                                     ------------------  -----------------   -----------------  ------------------

                                TOTAL COMPREHENSIVE
                                      INCOME (LOSS)  $          118,358  $          56,620   $          69,765  $          222,515
                                                     ==================  =================   =================  ==================

Net income (loss) per weighted
   average share                                     $              .00  $             .00   $             .00  $              .01
                                                     ==================  =================   =================  ==================

Weighted average number of common
   shares used to compute net income
   (loss) per weighted average share                         32,000,000         24,144,000          32,000,000          24,144,000
                                                     ==================  =================   =================  ==================
</TABLE>


                                       F-2

<PAGE>



                          UNIDYN, CORP. AND SUBSIDIARY
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (Unaudited)



<TABLE>
<CAPTION>
                                                                                    Six Months Ended
                                                                                        June 30,
                                                                                1999               1998
                                                                         -----------------   -----------------
OPERATING ACTIVITIES
<S>                                                                      <C>                 <C>
   Net income                                                            $          76,351   $         222,515
   Adjustments to reconcile net income to cash provided
     by operating activities:
       Depreciation                                                                 12,605               3,000
       Bad debts                                                                         0              30,000
       Gain on subsidiary disposal                                                  (5,717)                  0
       Deferred taxes                                                                5,000            (276,000)
       Foreign currency translation                                                 (6,586)                  0
   Changes in assets and liabilities:
       Accounts receivable                                                         (65,557)           (160,741)
       Inventory                                                                   (11,802)              6,103
       Prepaid expenses                                                              7,306             (38,426)
       Accounts payable                                                              6,674              34,455
       Accrued expenses                                                            (30,958)                  0
       Payable - related party                                                      14,799                   0
       Income taxes payable                                                            (50)            338,000
                                                                         -----------------   -----------------

                                                      NET CASH PROVIDED
                                                BY OPERATING ACTIVITIES              2,065             158,906

INVESTING ACTIVITIES
   Loans                                                                           (87,150)            (16,000)
   Purchase of equipment                                                                 0             (27,728)
                                                                         -----------------   -----------------

                                              NET CASH PROVIDED  (USED)
                                                BY INVESTING ACTIVITIES            (87,150)            (43,728)

FINANCING ACTIVITIES
   Cash remaining with former subsidiary                                           (17,996)                  0
   Loan principal payments                                                               0             (74,775)
                                                                         -----------------   -----------------


                                                     NET CASH (USED) BY
                                                   FINANCING ACTIVITIES            (17,996)            (74,775)
                                                                         -----------------   -----------------

                                            INCREASE (DECREASE) IN CASH
                                                   AND CASH EQUIVALENTS           (103,081)             40,403

Cash and cash equivalents at beginning of year                                     138,936             104,522
                                                                         -----------------   -----------------

                                              CASH AND CASH EQUIVALENTS
                                                       AT END OF PERIOD  $          35,855   $         144,925
                                                                         =================   =================

Cash paid for income taxes                                               $          11,870   $              50
Cash paid for interest                                                                   0                   0
</TABLE>

SUPPLEMENTAL INFORMATION
During the six months ended June 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

<PAGE>



                          UNIDYN, CORP. AND SUBSIDIARY
              NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
                                  June 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 June 30, 1999 contain the accounts of the
        Company  and  its  formerly  wholly-owned  subsidiary,  Unidyn  (Europe)
        Limited.

        The financial  statements  for June 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

<PAGE>


                          UNIDYN, CORP. AND SUBSIDIARY
        NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (continued)
                                  June 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 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.  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.

        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  third  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 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 expects to collect
        the entire $185,933 within the next twelve months. No operations for the
        subsidiary  after  March 31,  1999 are  reflected  in the  statement  of
        operations.



                                       F-5