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, 1998
                               -----------------------------------

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

For the transition period from ________________ to _______________

Commission File No.     33-55254-31

                                  UNIDYN, CORP.
        (Exact name of Small Business Issuer as specified in its charter)

         NEVADA                                          87-0438639
(State or other jurisdiction of           (I.R.S. Employer Identification
 incorporation or organization)                       Number)


         8621 North Seventy Ninth Avenue
         Peoria, Arizona                                         85345
(Address of principal executive offices)                      (Zip Code)


Issuer's telephone number, including area code     (602) 979-2800

         Indicate  by check mark  whether  the Issuer (1) has filed all  reports
required to be filed by Section 13 or 15(d) of the  Securities  Exchange  Act of
1934 during the preceding 12 months (or for such shorter  period that the Issuer
was  required  to file such  reports),  and (2) has been  subject to such filing
requirements for the past 90 days. [X] Yes [ ] No

         Indicate  the  number of  shares  outstanding  of each of the  Issuer's
classes of common stock, as of the latest practicable date.

             Class                            Outstanding as of June 30, 1998
------------------------------------         ----------------------------------
$.001 PAR VALUE CLASS A COMMON STOCK                 24,144,000 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 10K
FOR THE YEAR ENDED DECEMBER 31ST, 1997.

OVERVIEW
         The  Company  was  incorporated  in the  State of Utah in 1986 as Macaw
Capital, Inc. and was reincorporated in 1993 in the State of Nevada. In December
of 1997,  Macaw  Capital,  Inc.  acquired a portion  of the assets of  Universal
Dynamics,  Inc.,  a private  manufacturer  of  environmental  vibration  testing
equipment  formed in December  1989, and was renamed  UniDyn,  Corp. No material
relationship  exists  between  the  former  management  and  directors  of Macaw
Capital,  Inc. and the current management and directors of UniDyn, Corp. UniDyn,
Corp. shares are currently traded under the symbol UNDY on the NASDAQ Electronic
Bulletin Board System.

         The current company is in the business of providing  products involving
quality  control of  manufactured  electronics.  These  products  fall under two
categories,  A)  Vibration  Stress  Screening  (VSS) and B) Sterling  inspection
products for on-line printed circuit board inspection.

A) The  vibration  test  products  are used to check the  integrity  of  printed
circuit  boards and other  physical  items  eventually  used in  automotive  and
electronics.  This core business primarily consists of 1) the vibration hardware
or "shaker" unit which mechanically vibrates the test platform, 2) the vibration
control system which measures output and regulates shaker intensity,  and 3) the
amplifier unit which provides power to the shaker.  On the production  line, VSS
can identify latent defects not readily  identified through visual inspection or
during the  development  and  design  process.  Vibration  Stress  Screening  of
electronic  and  mechanical  components,  such as printed  circuit  boards saves
rework time during production, reduces warranty exposure and can enhance product
quality and longevity.  VSS is most effective in detecting  intermittent defects
such as loose connections,  broken parts, cracked traces, poor solder joints and
mechanical flaws.

         The Company  currently  markets its Vibration  Control  System  product
under the  NorthStar  brand and to other OEM's to be  repackaged  for use in the
aerospace,  automotive  and  semiconductor  industries.  The  Company  has  also
purchased a complete line of shaker and  amplifiers  known in the industry under
the trade name  "Derritron".  Derritron  has had a 30 year history in the shaker
business,  and is considered a premier  shaker  product.  This combined with the
Company's world class vibration  control system,  puts UniDyn in the position to
become a first tier provider of turn-key vibration test products.

B)  UniDyn's  flagship  in new  products  is a product  called  "Sterling".  The
Sterling product was completely  acquired from Universal  Dynamics in the second
quarter after the patent search showed


                                        2

<PAGE>



no prior art, and open for patent filing.  UniDyn is currently in the process of
filing  patents  on  this  new  testing  process.  The  company  also  has  firm
commitments  with a large  Japanese  company with a 45 year history of providing
various  products  for the printed  circuit  board  industry.  The company  will
provide  product to the Japanese  company under an exclusive OEM  arrangement in
Japan.  The quantity will be  approximately 20 Sterling units a month during the
first  year,  and  relating to the initial  discovered  demands of the  Japanese
customer.  The company is in the process of engineering a "Production Model" for
delivery  in 1999.  The  product  technique  is already  tested at IBM and Delco
Electronics. The Company is constructing the production model for delivery.

The Sterling process provides for completely  automated  on-line quality control
testing of printed circuit boards.  It is expected that the Sterling process can
significantly  reduce warranty liability for a variety of industries,  including
manufacturers  of computers,  consumer  electronic  products,  and aerospace and
military systems, by anticipating hidden defects.

OVERVIEW ACQUISITIONS
         To meet the  objectives  of its  business  plan and reach an economy of
scale in the short-term,  the Company has entered into several asset acquisition
agreements. In December of 1997, the Company closed a transaction with Universal
Dynamics,  Inc.  an Arizona  corporation,  for the  transfer  of certain  assets
including  equipment,   inventory,  accounts  receivable,   software  and  other
intangible  assets related to the NorthStar  vibration  control system business.
These  systems  are  Microsoft  Windows-based  and have been  integrated  in the
Company's proprietary control systems software.

         The Company also  entered into an agreement to acquire a 100%  interest
in the Derritron product of shakers and amplifiers, previously known as a United
Kingdom based  manufacturer  of vibration  shakers and  amplifiers.  The Company
completed that acquisition in the second quarter of 1998. With this acquisition,
the Company will  receive  patents,  products,  manufacturing  equipment  and an
established market presence internationally.  Derritron is currently 1 of only 4
shaker manufacturers  worldwide with a full range of electrodynamic shakers, and
has a full selection of shaker models.

         The Company also finished the  acquisition  of the  "Sterling"  product
rights from  Universal  Dynamics,  Inc., an Arizona  corporation,  in the second
quarter of 1998. This acquisition was completed after the "Sterling" process was
discovered clear on the patent search during the second quarter.

         The Company  also  entered  into an  agreement  to purchase 80% of DVCS
limited  in the UK.  DVCS  was to be  integrated  with the  "Derritron"  product
acquisition.  After review of the DVCS debt and lack of  accounting  compliance,
the Company opted to form a new 100% owned UK subsidiary, "Derritron Limited" to
incorporate the Derritron business for UK operations.

RESULTS OF OPERATIONS
         For the three months ending June 30, 1998, the Company posted  earnings
of $56,620 on revenues of $514,314  ($(57,978)  and $428,703 for the same period
in 1997).  Substantially  all sales were generated  from the NorthStar  product.
NorthStar is composed of off the shelf items


                                        3

<PAGE>



and has minimal assembly requirements.  For the six months ending June 30, 1998,
the Company posted earnings of $222,515 on revenues of $1,251,729  ($126,854 and
$1,200,518 for 1997).

         Sales are  subject to  material  monthly  fluctuations  as the  Company
integrates  recent  acquisitions,  modifies  operations,  introduces new product
lines,  and modifies its existing  customer base. There can be no assurance that
the  Company  will  have  the  capital  resources   necessary  to  complete  the
introduction  of the Sterling  Process in a timely manner in accordance with the
Company's  business plan. The Company is currently involved with various funding
potentials for Sterling.

         Cost of Goods  Sold for the  three  months  ended  June 30,  1998  were
$185,298  with a resultant  gross profit of $329,016  ($105,684 and $323,019 for
1997).  Cost of goods sold for the six months ended June 30, 1998 were  $383,719
with a gross profit of $868,010  ($356,739  and $843,779 in 1997).  Gross margin
for the period ended June 30, 1998 was 69% (70% in 1997). Until new products are
introduced,  including the Sterling  Process,  there is significant  uncertainty
about future gross  margins.  Gross margin  percentage is highly  dependent upon
product prices,  sales volumes,  materials cost and allocation of  manufacturing
overhead.

         Selling,  General and  Administrative  costs for the three months ended
June 30, 1998 were $414,296,  and for the six months were $746,345 ($380,997 and
$635,925 in 1997). The Company  currently employs or leases a total of 24 people
in the United States and the United Kingdom. Of those employed, approximately 18
are on  contract  lease  agreements.  Management  believes  that by leasing  its
primary  workforce,  the Company has substantially  limited fixed overhead costs
and provided for a larger free-cash flow for the Company's growth phase. It also
allows for a better  benefit base through  managed 401K and health plans already
established in the employee leasing companies.

         For the six months  ending June 30, 1998 the majority of the  Company's
research was conducted at the Company's  Engineering and  Development  Center in
American Fork, Utah. Substantial research and development costs were incurred by
Universal  Dynamics for the  development  of the NorthStar and Sterling  Process
products prior to the December, 1997 asset purchase.

LIQUIDITY AND CAPITAL RESOURCES
         The Company is currently seeking additional working capital to meet its
short term growth planning including the acquisition of a potential supplier for
the Sterling system.  Management  believes,  although there can be no assurance,
that the  Company  will  have  sufficient  cash  needs  for the  next 12  months
regardless of its success in attracting additional capital investment.  However,
management  also  believes that a lack of  additional  working  capital over the
remainder of the current fiscal year would substantially curtail the roll-out of
the  Sterling  Process  product  line  and  the  acquisition  of a key  supplier
involving Sterling. As of June 30, 1998, the Company has approximately  $261,139
in working capital.





                                        4

<PAGE>



NEW ACCOUNTING PRONOUNCEMENTS
         The Financial  Accounting  Standards  Board has adopted several notices
with regard to the treatment of interim financial  statements.  These issues are
presented in the Company's  interim  financial  statements.  As discussed in the
notes to the  interim  financial  statements,  the  implementation  of these new
pronouncements  is not  expected  to have a  material  effect  on the  financial
statements.

BUSINESS RISKS
         While  management  believes,  but there can be no  assurance,  that the
Company is sufficiently  capitalized to continue operations for the remainder of
the fiscal year,  management is currently seeking  additional capital investment
to fulfill  inventory  requirements and outstanding  purchase orders which could
have a material impact on short-term growth objectives.

         This  report  contains  a number of  forward-looking  statements  which
reflect the Company's  current views with respect to future events and financial
performance.  These forward-looking  statements are subject to certain risks and
uncertainties  that  could  cause  actual  results  to  differ  materially  from
historical   results  or  those   anticipated.   In  this   report,   the  words
"anticipates",   "believes",   "expects",   "intends",   "future"   and  similar
expressions  identify  forward-looking  statements.  Readers  are  cautioned  to
consider the specific risk factors  described in the Company's  Annual Report on
Form 10-K for the year ended  December 31, 1997 and not to place undue  reliance
on the forward-looking  statements  contained herein, which speak only as of the
date hereof.  The Company  undertakes  no  obligation  to publicly  revise these
forward-looking  statements,  to reflect events or circumstances  that may arise
after the date hereof.

ITEM 2. LEGAL PROCEEDINGS

         Legal  proceedings  of the  previous  officers  and  directors of Macaw
Capital are outlined in detail in the  Company's  10K filing for the year ending
December 31, 1997.

         Management does not feel that the legal problems of the former officers
and  directors of Macaw  Capital will have an adverse  effect on UniDyn Corp. in
the future.  Current management has no past legal problems and intends to comply
with all applicable securities laws.

         Any legal  proceedings  relate  only to the  Company  prior to December
1997.  These  activities  are not a  reflection  of  current  management  and/or
business  strategy.  No  material  relationship  existed or now  exists  between
current  management  and any  former  director,  officer,  or  affiliate  of the
Company. Management does not feel that the legal problems of the former officers
and directors will have any adverse effect on the Company in the future.

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

         (a)      Exhibits
                  Financial statements as of June 30, 1998

         (b)      Reports on Form 8-K
                  None


                                        5

<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:   19 August 1998
                                       Ira Gentry, President and Director



                                        6

<PAGE>



                                  UNIDYN, CORP.
                           CONSOLIDATED BALANCE SHEET
                                   (Unaudited)

<TABLE>
<CAPTION>
                                                                         June 30,
                                                                           1998
                                                                  ----------------------
ASSETS
     CURRENT ASSETS
<S>                                                               <C>                   
         Cash in bank                                             $              144,925
         Accounts receivable (net of allowance
              for doubtful accounts of $60,000)                                  321,734
         Loans receivable                                                         40,500
         Advances - officers                                                      12,325
         Deferred tax benefit                                                     18,000
         Prepaid expense                                                          77,134
         Inventory                                                                64,763
                                                                  ----------------------

                                      TOTAL CURRENT ASSETS                       679,381

PROPERTY, PLANT & EQUIPMENT                                                       62,845

     OTHER ASSETS
         Sterling Patent (Note 7)                                                      0
         Deferred tax benefit                                                    258,000
         Derritron Technology (Note 8)                                         4,008,400
                                                                  ----------------------
                                                                               4,266,400
                                                                  ----------------------

                                                                  $            5,008,626
                                                                  ======================

LIABILITIES & EQUITY
     CURRENT LIABILITIES
         Accounts payable                                         $               80,242
         Income taxes payable                                                    338,000
                                                                  ----------------------

                                 TOTAL CURRENT LIABILITIES                       418,242

     STOCKHOLDERS' EQUITY
         Common Stock $.001 par value:
              Authorized - 100,000,000 shares
              Issued and outstanding
              24,144,000 shares                                                   24,144
         Additional paid-in capital                                            5,135,749
         Treasury stock                                                         (786,227)
         Retained earnings                                                       216,718
                                                                  ----------------------

                                TOTAL STOCKHOLDERS' EQUITY                     4,590,384
                                                                  ----------------------

                                                                  $            5,008,626
                                                                  ======================
</TABLE>


                                       F-1

<PAGE>



                                  UNIDYN, CORP.
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                                   (Unaudited)


<TABLE>
<CAPTION>
                                           Three Months Ended                       Six Months Ended
                                                June 30,                                June 30,
                                        1998                1997                1998               1997
                                 ------------------  ------------------  -----------------   -----------------
<S>                              <C>                 <C>                 <C>                 <C>              
Net sales                        $          514,314  $          428,703  $       1,251,729   $       1,200,518
Cost of sales                               185,298             105,684            383,719             356,739
                                 ------------------  ------------------  -----------------   -----------------

                   GROSS PROFIT             329,016             323,019            868,010             843,779

Other Income                                182,900                   0            212,900                   0

Bad debts                                    30,000                   0             30,000                   0
General and administrative
   expenses                                 414,296             380,997            746,345             635,925
                                 ------------------  ------------------  -----------------   -----------------
                                            444,296             380,997            776,345             635,925
                                 ------------------  ------------------  -----------------   -----------------

                     NET INCOME
            BEFORE INCOME TAXES              67,620             (57,978)           304,565             207,854

Income tax expense                           11,000                   0             82,050              81,000
                                 ------------------  ------------------  -----------------   -----------------

                     NET INCOME  $           56,620  $          (57,978) $         222,515   $         126,854
                                 ==================  =================== =================   =================

Net income per weighted
   average share                 $              .00  $             .(06) $             .01   $             .13
                                 ==================  =================== =================   =================

Weighted average number
   of common shares used to
   compute net income
   per weighted average share            24,144,000           1,000,000         24,144,000           1,000,000
                                 ==================  ==================  =================   =================
</TABLE>


                                       F-2

<PAGE>



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



<TABLE>
<CAPTION>
                                                                                    Six Months Ended
                                                                                        June 30,
                                                                                1998               1997
                                                                         -----------------   -----------------

OPERATING ACTIVITIES
<S>                                                                      <C>                 <C>              
   Net income                                                            $         222,515   $         126,854
   Adjustments to reconcile net income to cash provided
     by operating activities:
       Depreciation                                                                  3,000              (1,974)
       Bad debts                                                                    30,000                   0
       Deferred taxes                                                             (276,000)                  0
   Changes in assets and liabilities:
       Accounts receivable                                                        (160,741)             65,840
       Inventory                                                                     6,103              16,867
       Prepaid expenses                                                            (38,426)             (4,037)
       Accounts payable                                                             34,455             (15,483)
       Income taxes payable                                                        338,000              75,327
                                                                         -----------------   -----------------

                                                   NET CASH PROVIDED BY
                                                   OPERATING ACTIVITIES            158,906             263,394

INVESTING ACTIVITIES
   Loans                                                                           (16,000)                  0
   Purchase of equipment                                                           (27,728)             (1,538)
                                                                         ------------------  ------------------

                                                       NET CASH  (USED)
                                                BY INVESTING ACTIVITIES            (43,728)             (1,538)

FINANCING ACTIVITIES
   Line of credit repayments                                                             0            (151,223)
   Repayments - related parties                                                          0             (21,482)
   Loan principal payments                                                         (74,775)            (14,758)
   Loan proceeds                                                                         0             100,000
                                                                         -----------------   -----------------

                                                     NET CASH (USED) BY
                                                   FINANCING ACTIVITIES            (74,775)            (87,463)
                                                                         ------------------  ------------------

                                                       INCREASE IN CASH
                                                   AND CASH EQUIVALENTS             40,403             174,393

Cash and cash equivalents at beginning of year                                     104,522              72,695
                                                                         -----------------   -----------------

                                              CASH AND CASH EQUIVALENTS
                                                       AT END OF PERIOD  $         144,925   $         247,088
                                                                         =================   =================

Cash paid for income taxes                                               $              50   $           5,673
Cash paid for interest                                                                   0               9,159
</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.
            UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
                         Six months ended June 30, 1997


<TABLE>
<CAPTION>
                                                                               UniDyn            NorthStar           Pro Forma
                                                                         -----------------   -----------------  ------------------
<S>                                                                      <C>                 <C>                <C>               
Net sales                                                                $               0   $       1,200,518  $        1,200,518
Cost of sales                                                                            0             356,739             356,739
                                                                         -----------------   -----------------  ------------------

                                                           GROSS PROFIT                  0             843,779             843,779

General and administrative expenses                                                      0             635,925             635,925
                                                                         -----------------   -----------------  ------------------

                                         NET INCOME BEFORE INCOME TAXES                  0             207,854             207,854

Income tax expense                                                                       0              81,000              81,000
                                                                         -----------------   -----------------  ------------------

                                                             NET INCOME  $               0   $         126,854  $          126,854
                                                                         =================   =================  ==================

Net income per weighted average share                                    $             .00                      $              .13
                                                                         =================                      ==================

Weighted average number of common shares used
   to compute net income per weighted average share                              1,000,000                               1,000,000
                                                                         =================                      ==================
</TABLE>

This pro forma assumes that UniDyn,  Corp. acquired the NorthStar  operations on
January 1, 1997.

NorthStar  provided the majority of  operations  for  Universal  Dynamics,  Inc.
("Universal").  In December of 1997,  Universal sold the NorthStar operations to
UniDyn,  Corp.  in exchange for 1,440,000  shares of restricted  common stock of
UniDyn, Corp.

The pro forma information for NorthStar is derived from the unaudited  statement
of operations for Universal.  Operations not related to NorthStar are immaterial
and have not been removed from the pro forma information.


                                       F-4

<PAGE>



                                  UNIDYN, CORP.
            UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
                        Three months ended June 30, 1997


<TABLE>
<CAPTION>
                                                                               UniDyn            NorthStar           Pro Forma
                                                                         -----------------   -----------------  ------------------
<S>                                                                      <C>                 <C>                <C>               
Net sales                                                                $               0   $         428,703  $          428,703
Cost of sales                                                                            0             105,684             105,684
                                                                         -----------------   -----------------  ------------------

                                                           GROSS PROFIT                  0             323,019             323,019

General and administrative expenses                                                      0             380,997             380,997
                                                                         -----------------   -----------------  ------------------

                                         NET (LOSS) BEFORE INCOME TAXES                  0             (57,978)            (57,978)

Income tax expense                                                                       0                   0                   0
                                                                         -----------------   -----------------  ------------------

                                                             NET (LOSS)  $               0   $         (57,978) $          (57,978)
                                                                         =================   =================  ==================

Net (loss) per weighted average share                                    $             .00                      $             (.06)
                                                                         =================                      ==================

Weighted average number of common shares used
   to compute net (loss) per weighted average share                              1,000,000                               1,000,000
                                                                         =================                      ==================
</TABLE>

This pro forma assumes that UniDyn,  Corp. acquired the NorthStar  operations on
January 1, 1997.

NorthStar  provided the majority of  operations  for  Universal  Dynamics,  Inc.
("Universal").  In December of 1997,  Universal sold the NorthStar operations to
UniDyn,  Corp.  in exchange for 1,440,000  shares of restricted  common stock of
UniDyn, Corp.

The pro forma information for NorthStar is derived from the unaudited  statement
of operations for Universal.  Operations not related to NorthStar are immaterial
and have not been removed from the pro forma information.




                                       F-5

<PAGE>



                                  UNIDYN, CORP.
              NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
                                  June 30, 1998


NOTE 1:           SUMMARY OF SIGNIFICANT ACCOUNTING PRINCIPLES
                  Accounting Methods
                  The  Company  recognizes  income  and  expenses  based  on the
                  accrual method of accounting.

                  Principals of Consolidation
                  The financial  statements  contain the accounts of the Company
                  and Universal Dynamics, Inc. ("Universal"). Universal could be
                  considered an entity under common  control as at one time, the
                  President of the Company and the  president of Universal  were
                  the same  person.  Also the  Company  issued  common  stock to
                  Universal to acquire the NorthStar  operations from Universal.
                  NorthStar  is  currently  the main  line of  business  for the
                  Company. All significant  intercompany  transactions have been
                  eliminated on consolidation.

                  Dividend Policy
                  The Company has not yet adopted any policy  regarding  payment
                  of dividends in cash.

                  Organization Costs
                  The Company amortized its organization  costs over a five year
                  period.

                  Inventory
                  Inventory  consists  of items for  resale and is valued at the
                  lower of cost (first-in, first-out basis) or market.

                  Allowance for Uncollectible Accounts
                  The Company provides an allowance for  uncollectible  accounts
                  based upon prior experience and management's assessment of the
                  collectability of existing accounts.

                  Revenue Recognition
                  Revenue is recognized upon shipment of products.

                  Cash and Cash Equivalents
                  For financial  statement  purposes,  the Company considers all
                  highly liquid  investments with an original  maturity of three
                  months or less when purchased to be cash equivalents.

                  Earnings (loss) per share
                  Earnings  or loss per common and  common  equivalent  share is
                  computed  by  dividing  net  earnings  (loss) by the  weighted
                  average common shares outstanding during each period.

                  Estimates
                  The  preparation  of financial  statements in conformity  with
                  generally accepted  accounting  principles requires management
                  to make  estimates  and  assumptions  that affect the reported
                  amounts of assets, liabilities,  revenues, and expenses during
                  the reporting period.  Estimates also affect the disclosure of
                  contingent assets and liabilities at the date of the financial
                  statements.  Actual results could differ from these estimates.
                  Such  estimates  of  significant  accounting  sensitivity  are
                  allowance for doubtful accounts.

                  Stock Options
                  The Company has elected to follow Accounting  Principles Board
                  Opinion No. 25,  "Accounting  for Stock  Issued to  Employees"
                  (APB 25) and related  interpretations  in  accounting  for its
                  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).

                                       F-6

<PAGE>


                                  UNIDYN, CORP.
        NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (continued)
                                  June 30, 1998

NOTE 1:           SUMMARY OF SIGNIFICANT ACCOUNTING PRINCIPLES (continued)
                  Income Taxes
                  The Company  records the income tax effect of  transactions in
                  the  same  year   that  the   transactions   enter   into  the
                  determination  of income,  regardless of when the transactions
                  are recognized  for tax purposes.  Tax credits are recorded in
                  the year realized.

                  In February,  1992, the Financial  Accounting  Standards Board
                  adopted Statement of Financial  Accounting  Standards No. 109,
                  Accounting for Income Taxes,  which  supersedes  substantially
                  all  existing  authoritative  literature  for  accounting  for
                  income taxes and requires deferred tax balances to be adjusted
                  to  reflect  the tax rates in effect  when those  amounts  are
                  expected to become  payable or  refundable.  The Statement was
                  applied in the Company's  financial  statements for the fiscal
                  year commencing January 1, 1993.

                  At December 31, 1997 a deferred tax asset was not recorded due
                  to the  Company's  lack of  profitable  operations  to provide
                  income to use the net  operating  loss  carryover  of  $10,740
                  which expires as follows:

                      Year Ended                Expires             Amount

                   December 31, 1986       December 31, 2001    $        1,950
                   December 31, 1987       December 31, 2002                10
                   December 31, 1988       December 31, 2003                10
                   December 31, 1989       December 31, 2004                10
                   December 31, 1990       December 31, 2005                10
                   December 31, 1991       December 31, 2006                10
                   December 31, 1997       December 31, 2012             8,740
                                                                --------------

                                                                $       10,740

                  The Company  expects to use the net operating loss on its 1998
                  income tax return.

NOTE 2:           DEVELOPMENT STAGE COMPANY
                  The  Company was  incorporated  under the laws of the State of
                  Utah on May 2, 1986 as Macaw Capital, Inc. and has been in the
                  development stage since  incorporation.  On December 30, 1993,
                  the  Company  was   dissolved  as  a  Utah   corporation   and
                  reincorporated as a Nevada corporation.
                  On December 3, 1997, the name was changed to UniDyn, Corp.

NOTE 3:           CAPITALIZATION
                  On the  date of  incorporation,  the  Company  sold  1,000,000
                  shares of its common stock to Capital General  Corporation for
                  $2,000 cash for an average  consideration  of $.002 per share.
                  The Company's  authorized stock includes 100,000,000 shares of
                  common stock at $.001 par value.
                  See also Note 6.


                                       F-7

<PAGE>


                                  UNIDYN, CORP.
        NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (continued)
                                  June 30, 1998


NOTE 4:           RELATED PARTY TRANSACTIONS
                  During 1998, the Company received $126,000 from Universal. The
                  amount was  reimbursement  for expenses paid by the Company on
                  behalf of Universal. The amount is reflected as a reduction of
                  general and administrative expenses on the Company's books and
                  eliminated on consolidation.

NOTE 5:           1997 EVENTS
                  On December 1, 1997,  the Company  constructed  a  multi-party
                  agreement  with the following  entities;  Universal  Dynamics,
                  Inc.  an  Arizona  Corporation,  and  Unidyn  Inc.  a  company
                  organized  under  the  laws of the  Bahamas.  Pursuant  to the
                  agreement,  the Company acquired from Universal Dynamics, Inc.
                  certain  assets  including  equipment,   inventory,   accounts
                  receivable,   software,   and  other  intangible   assets  all
                  pertaining   to  the   vibration   control   system  known  as
                  "NorthStar". The Company also entered into formal negotiations
                  for the  acquisition  of the  Derritron  shaker  product,  and
                  entered into an agreement for the  acquisition of 80% of DVCS,
                  LTD,  a  UK  company  in  the  business  of  Derritron  shaker
                  remanufacturing and related shaker services in the UK.

                  In  consideration  for the  NorthStar  assets and to  publicly
                  disclose its shares for the pending acquisitions,  the Company
                  issued 3,000,000  authorized but unissued shares of its common
                  stock, with the following  distribution.  Universal  Dynamics,
                  Inc. received 982,000 shares for the NorthStar product and for
                  the Sterling technology.  The structure was concluded December
                  31, 1997 with the remaining  shares being issued in the second
                  quarter of 1998 for all rights in the  Sterling  product.  The
                  Company   also  issued   1,822,000   shares  for  the  pending
                  acquisition  of the  Derritron  product and 80%  ownership  of
                  DVCS,  LTD. Unidyn Inc. agreed to be the trustee of the shares
                  as required for the pending acquisitions of both Derritron and
                  DVCS, LTD and subsequently  returned the shares to the Company
                  as specific share transfer instructions were received pursuant
                  to the  individual  acquisition  agreement.  These shares were
                  issued  in the  second  quarter  of  1998  for  the  Derritron
                  product. Other interested parties received 196,000 shares.

                  The Company also generated a $2,000,000 promissory note in the
                  event it would be required for the pending acquisitions.  This
                  note was  subsequently  destroyed,  and not  required  for the
                  acquisition, and represents no liability to the Company.

NOTE 6:           FORWARD STOCK SPLIT
                  Effective December 3, 1997, pursuant to written action adopted
                  unanimously  by the Board of  Directors  and a majority of the
                  shareholders,  the Company changed its name to UniDyn,  Corp.,
                  and  approved  an  eight-for-one  forward  stock  split on the
                  Company's common stock as follows:  each outstanding share was
                  converted  into eight shares.  Before the change,  the Company
                  was authorized to issue 100,000,000  shares of $.001 par value
                  common stock;  after the forward stock split the Company shall
                  continue to be authorized to issue 100,000,000 shares of $.001
                  par value common stock.  The number of  outstanding  shares of
                  common stock affected by the forward split was 4,000,000.  The
                  number of issued and outstanding shares of common stock of the
                  Company after the forward stock split is 32,000,000.


                                       F-8

<PAGE>


                                  UNIDYN, CORP.
        NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (continued)
                                  June 30, 1998


NOTE 7:           STERLING PATENT
                  During the quarter  ended June 30,  1998,  the Company  issued
                  6,416,000 shares of restricted  common stock,  previously held
                  as treasury stock, to acquire a patent on the Sterling Project
                  from  Universal.  The patent will be  amortized  over  fifteen
                  years.  The Sterling Project will allow the testing of printed
                  circuit  boards.  Sterling will estimate the projected life of
                  each solder  connection on the printed  circuit  board,  which
                  will quantify the  reliability of the  manufactured  part. The
                  Company expects to have a working  production model by the end
                  of 1998 with sales expected in the second quarter of 1999.

NOTE 8:           DERRITRON TECHNOLOGY
                  Effective June 30, 1998, the Company issued  14,576,000 shares
                  of restricted common stock, previously held as treasury stock,
                  to acquire the  technology.  The technology  will be amortized
                  over five years.  The Company will need to spend some money to
                  upgrade  the  technology  and  expects  sales  to begin in the
                  second  quarter of 1999.  With this  acquisition,  the Company
                  receives patents,  products,  manufacturing  equipment, and an
                  established  market  presence  in England  and other  parts of
                  Europe.




                                       F-9