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  April 1, 1999 to June 30, 1999

                         Commission file number: 0-10372

                               UNIDYNE CORPORATION
                      (Exact name of small business issuer
                          as specified in its charter)

              DELAWARE                                   23-2154902
    (State or other jurisdiction              (IRS Employer Identification No.)
  of incorporation or organization)

                  118 PICKERING WAY, SUITE 104, EXTON, PA 19341
                    (Address of principal executive offices)
                                 (610) 363-8237
                           (Issuer's telephone number)

Check  whether the issuer (1) filed all reports  required to be filed by Section
13 or 15(d) of the  Exchange  Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports),  and (2) has been
subject to such filing requirements for the past 90 days. Yes _X_ No __

                APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
                   PROCEEDINGS DURING THE PRECEDING FIVE YEARS

Check whether the  registrant  filed all  documents  and reports  required to be
filed by Section 12, 13 or 15(d) of the Exchange Act after the  distribution  of
securities under a plan confirmed by court.
Yes ___    No __

                      APPLICABLE ONLY TO CORPORATE ISSUERS

State the number of shares outstanding of each of the issuer's classes of common
equity , as of latest practicable date: 9,755,352 as of June 30, 1999.

Transitional Small Business Disclosure Format (check one):  Yes ___  No  _X_


                                                                          Page 1
<PAGE>


                          PART I. FINANCIAL INFORMATION

Item 1.  FINANCIAL STATEMENTS.

                 UNIDYNE CORPORATION CONSOLIDATED BALANCE SHEETS
                                   (UNAUDITED)

<TABLE>
<CAPTION>
                                                                             June 30,   December 31,
                                                ASSETS                         1999        1998
                                                                             --------    --------
<S>                                                                          <C>         <C>
Current assets:
         Cash                                                                $    167    $    126
         Accounts receivable, less allowance of $116                            2,726       3,032
         Inventory                                                              7,672       7,429
         Prepaid expenses                                                         105         135
         Deferred and other refundable taxes                                      190         190
         Other current assets                                                      65          33
                                                                             --------    --------
                  Total current assets                                         10,925      10,945
Property, plant and equipment
         Land                                                                     160         160
         Leasehold improvements                                                   323         323
         Buildings                                                              3,640       3,639
         Machinery and equipment                                                9,781       9,589
                                                                             --------    --------
                  Total property, plant and equipment                          13,904      13,712
         Accumulated depreciation                                              (6,197)     (5,269)
                                                                             --------    --------
                  Property, plant and equipment, net                            7,707       8,444
Deferred income taxes                                                           1,140         986
Goodwill                                                                        2,329       2,341
Patents                                                                         1,237       1,341
Other assets                                                                    1,038       1,291
                                                                             --------    --------

                                                                                5,744       5,959
                                                                             --------    --------
                  TOTAL  ASSETS                                              $ 24,376    $ 25,348
                                                                             ========    ========
                               LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
         Accounts payable                                                    $  4,339    $  5,262
         Current portion of long-term debt                                        423         565
         Short-term debt                                                        2,965       3,625
         Accrued compensation                                                     192          75
         Income taxes payable                                                     219          87
         Deferred revenue                                                         589         392
         Other accrued liabilities                                              1,749       1,558
                                                                             --------    --------
                  Total current liabilities                                    10,473      11,564
                                                                             --------    --------
Long-term debt                                                                  3,568       3,797
Post-retirement benefits - Pensions                                             4,751       4,491
Preferred dividends payable                                                       625         700
                                                                             --------    --------
                                                                                8,944       8,988
                                                                             --------    --------
Stockholders' equity:
         Common Stock $.001, par value, 50,000,000 shares authorized,
         9,755,352 shares issued and outstanding                                   10           9
Preferred Stock, $10 per share liquidation value, $10 par value,
         20,000,000 shares authorized                                               0       5,000
         Additional paid-in capital                                            18,497      13.127
Treasury stock                                                                     (7)         (7)
Retained deficit                                                              (13,541)    (13,333)
                                                                             --------    --------
                  Total Stockholders' Equity                                    4,959       4,796
                                                                             --------    --------
                  TOTAL  LIABILITIES  AND  STOCKHOLDERS'  EQUITY             $ 24,376    $ 25,348
                                                                             ========    ========
</TABLE>

The accompanying notes are an integral part of these financial statements.


                                                                          Page 2
<PAGE>


                               UNIDYNE CORPORATION
                        CONSOLIDATED STATEMENTS OF INCOME
                                   (UNAUDITED)

<TABLE>
<CAPTION>
                                                         Three Months Ended               Six Months Ended
                                                              June 30                         June 30
                                                       1999            1998             1999             1998
                                                    -----------     -----------     -----------      -----------
                                                    (in thousands, except per share data)
<S>                                                 <C>             <C>             <C>              <C>
Net sales                                           $     5,558     $     7,299     $    11,270      $    13,566
Cost of sales                                             2,551           4,585           6,436            8,430
                                                    -----------     -----------     -----------      -----------
Gross income                                              3,007           2,714           4,834            5,136
Selling and administrative expense                        2,205           2,245           4,415            4,912
Research and development expense                             66              97             137              122
                                                    -----------     -----------     -----------      -----------
Income (loss) from operations                               736             372             282              102
Interest expense                                            170             181             335              340
                                                    -----------     -----------     -----------      -----------
Income (loss) before income taxes                           566             191             (53)            (238)
Income tax provision (benefit)                              226              76              21               95
                                                    -----------     -----------     -----------      -----------
Net income (loss)                                           340             115             (32)            (143)
Preferred dividends                                          88              88             175              175
                                                    -----------     -----------     -----------      -----------
Profit (loss) applicable to common stockholders             252              27            (207)            (318)
                                                    -----------     -----------     -----------      -----------
Basic and diluted earnings (loss) per share         $      0.03     $      0.00     ($     0.02)     ($     0.03)
Weighted average number shares of common
Stock outstanding                                     9,782,019       9,335,352       9,558,685        9,335,352
</TABLE>


The accompanying notes are an integral part of these financial statements.



                                                                          Page 3
<PAGE>


                               UNIDYNE CORPORATION
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (UNAUDITED)


                                                            Six Months Ended
                                                                 June 30
                                                           1999          1998
                                                          -------       -------
                                                             (in thousands)

Cash flows from operating activities:

  Net income (loss)                                       ($   32)      ($  143)
  Adjustments to reconcile net income to
     cash flows provided by (used for)
     operating activities
      Depreciation and amortization                         1,181           721
      Changes in:
         Accounts receivable, net                             306          (391)
         Inventories                                         (243)         (677)
         Prepaid expenses and other assets                     (1)         (532)
         Accounts payable                                    (922)          118
         Accrued compensation                                 116          (128)
         Accrued expenses                                     156           460
         Other liabilities                                    702           (93)
                                                          -------       -------
Net cash provided by (used for) operating
     activities                                             1,263          (615)
                                                          -------       -------
Cash flows for investing activities:
    (Purchase) of property, plant and equipment              (191)         (397)
                                                          -------       -------
Cash flows from financing activities:
    Net borrowings  on revolving loans                       (660)        1,602
    Principal payments on long-term debt                     (371)         (993)
                                                          -------       -------
Net cash provided by (used for) financing
     activities                                            (1,031)          609
                                                          -------       -------
Net increase (decrease) in cash                                41          (403)
                                                          -------       -------
Cash, beginning of period                                     126           928
Cash, end of period                                       $   167       $   525
                                                          =======       =======
Cash paid for:
    Interest                                              $   292       $   341
    Income taxes                                            - 0 -         - 0 -


The accompanying notes are an integral part of these financial statements.


                                                                          Page 4
<PAGE>


                               UNIDYNE CORPORATION
                          NOTES TO FINANCIAL STATEMENTS
                                   (UNAUDITED)
                            (all $ amounts in 000's)

These Notes to Financial  Statements  reflect events subsequent to May 14, 1999,
the date of the most recent Report of Independent  Public  Accountants,  through
the date of this Quarterly  Report on Form 10-QSB for the quarter ended June 30,
1999.  These Notes to Financial  Statements  should be read in conjunction  with
Financial  Information and Other Information required to be furnished as part of
this Report, in particular (1) Management's Discussion and Analysis of Financial
Condition  and Results of  Operations  for the six months  ended June 30,  1999,
respecting the Company's capital  requirements and liquidity,  (2) Part II, Item
6, Reports on Form 8-K and (3) the  Company's  quarterly  reports on Form 10-QSB
for the  quarter  ended  March 31, 1999 and in  conjunction  with the  Company's
Annual Report on Form 10-KSB for the year ended December 31, 1998,  incorporated
herein by reference.

The financial statements furnished are unaudited. However, in the opinion of the
management of the Company,  the accompanying  consolidated  financial statements
include  all  adjustments,  consisting  only  of  normally  recurring  accruals,
necessary  for a fair  presentation  of the  Company's  results of operation and
changes in  financial  position  for the interim  periods  presented.  Operating
results for these interim periods are not  necessarily  indicative of results to
be expected for the entire year, due to seasonal, operating, and other factors.

NOTE 2 - NEW ACCOUNTING PRONOUNCEMENTS

The  Company  adopted  the  provisions  of  Statement  of  Financial  Accounting
Standards No. 131,  "Disclosures  about  Segments of an  Enterprise  and Related
Information"  for the year ended December 31, 1998.  Since the effective date of
the Statement was for years beginning  after December 15, 1997,  information for
1997 has not been presented.

NOTE 3 - REPORTABLE SEGMENTS

During the first quarter of 1999, the Company consolidated its operations in the
area of electric  motors and variable speed drives.  As a result,  the Company's
operations  are now  classified  into two  principal  reportable  segments  that
provide different  products or services.  The electric motors and variable speed
drives segment produces  proprietary,  specialized  electric motors and variable
speed drives  utilizing  either the Eddy current drive or  adjustable  frequency
operating  principles for sale to customers in the  automotive,  transportation,
manufacturing,  and processing systems industries.  The dynamometers and testing
systems  segment  produces  engine and chassis  dynamometers  and emissions test
stands for the heavy-duty truck,  bus, and automobile  manufacturers and for the
automotive  testing and repair markets.  Separate  management of each segment is
required  because  each  business  unit  is  subject  to  different   marketing,
production, and technology strategies.



                                                                          Page 5
<PAGE>



                               Reportable Segments
                                     (000's)

<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------------
                           Electric motors & variable      Dynamometers and
                           speed drives and controls        testing systems           All Other            Total
----------------------------------------------------------------------------------------------------------------
<S>                                   <C>                        <C>                     <C>             <C>
External revenue                      7,153                      4,102                   ---             11,270
----------------------------------------------------------------------------------------------------------------
Intersegment revenue                  2,150                        124                   345              2,289
----------------------------------------------------------------------------------------------------------------
Profit (loss)                           711                        653                    83              1,447
----------------------------------------------------------------------------------------------------------------
</TABLE>

Following is a reconciliation of profits of operating  segments to income before
income taxes for the six months ended June 30, 1999.


     Total profit (loss) for reportable segments              1,447
            All other segments                                  (54)
             Elimination of intersegment profits               (375)
             Corporate expenses                              (1,071)
             Unallocated
     Income (loss) before income taxes                          (53)


There  have  been no  differences  from the last  annual  report in the basis of
measuring  segment  profit or loss.  There have been no material  changes in the
amount of assets for any operating segment since the last annual report.

ITEM 2. MANAGEMENT'S  DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
        OF OPERATIONS.

                     For the Six Months Ended June 30, 1999
                   (All amounts used herein are in thousands)

Results of Operations

Earnings

Earnings  for common  stock for the quarter  ended June 30,  1999 were $252,  or
$0.03 per common  share  ($0.03  fully  diluted),  compared to $27, or $0.00 per
common share,  for the same period last year.  For the six months ended June 30,
1999,  earnings (loss) for common stock were ($207) or ($0.02) per common share,
compared  to a loss of $318 or ($0.03)  per common  share for the same period in
1998.

The  change in  earnings  for the  quarter  and six months  ended June 30,  1999
resulted from an increase in sales of dynamometers and emission testing systems,
higher  gross  margins from cost  cutting  efforts,  and a reduction in selling,
general, and administrative expense.



                                                                          Page 6
<PAGE>

Net Sales

Net sales were  $11,270 for the six months  ended June 30,  1999,  a decrease of
$2,296 or 17%,  compared with net sales of $13,566 for the six months ended June
30, 1998. Net sales of $5,558 in the second quarter of 1999 decreased $1,741, or
24%,  compared  with net sales of  $7,299 in the  second  quarter  of 1998.  The
decrease in the current year period was due  principally to declines in sales of
the Company's  electric  motors and variable speed drives and controls  business
and was  partially  offset by higher sales of emissions  testing  equipment  and
dynamometers.

Gross Income

Consolidated  gross income was $4,834 or 43% of sales,  for the six months ended
June 30, 1999,  compared  with  consolidated  gross income of $5,136,  or 38% of
sales,  for the six months ended June 30, 1998.  In the second  quarter of 1999,
consolidated gross income was $3,007 or 54% of sales, compared with consolidated
gross  income of $2,714,  or 37% of sales,  in the second  quarter of 1998.  The
increase in consolidated  gross income resulted from higher sales of dynamometer
and emissions testing units and cost control programs.

Selling and Administrative Expense

     Selling and administrative expense, as a percent to net sales, increased to
40% and 39% for the second quarter and first six months of 1999, compared to 31%
and 36% for the second quarter and first six months of 1998,  respectively.  The
increase is principally due to a 2% and 10% decrease in expense on a 24% and 17%
decrease  in sales in the  three  and six  month  periods  compared  to the same
periods last year.

Research and Development Expense

Research  and  development  expenses  were $137,  or 1.2% of sales,  for the six
months ended June 30, 1999,  compared  with $122,  or 0.1% of sales,  in the six
months ended June 30, 1998. While research and development expenses decreased in
the current quarter by 31% versus last year,  research and development  expenses
in the first three  months of 1999 were higher than the  comparable  period last
year  as  a  result  of  completing   emissions   testing   software  for  state
certification.

Income Taxes

Income  taxes for the three and six months  were $226 and $21,  or 40% of pretax
income in both  periods,  compared to $76 and ($95),  or 40% of pretax income in
both periods for the prior year.

Liquidity and Capital Resources

The  Company's  primary  sources  of  long-term  and  short-term  liquidity  are
projected cash from operations and borrowing capacity. The Company believes that
these  sources  are  sufficient  to fund the  anticipated  future  growth of the
Company.




                                                                          Page 7
<PAGE>

At June 30, 1999, the Company's  working  capital was $452,  compared to working
capital of ($619) at December 31, 1998.  This increase is  principally  due to a
reduction of trade payables and bank loans.

On  July  8,  1999,  the  Company  obtained  Credit  Committee  approval  for  a
three-year,  $10,000  revolving  line of  credit  and term  loan  from  Congress
Financial  Corporation,  a subsidiary of First Union Bank,  N.A. This  agreement
will provide advances against eligible receivables and inventory,  and a $1,932,
60-month term loan secured by the Company's  machinery and equipment.  The loans
will bear interest at 1.25% over the prime lending rate.

During the  quarter,  the Company  repaid  revolving  credit and term loans from
Union Bank of California,  in the amount of $851.  The Company  intends to repay
its revolving line of credit and equipment term notes to Johnson Bank of Racine,
WI, in the current  amount of $4,292 when the new credit  facility with Congress
Financial is completed.

On June 30, 1999,  the holder of the  Company's  500,000  shares of  outstanding
preferred  stock agreed to convert its shares to 500,000 shares of common stock.
The Company has agreed to pay the remaining  accrued but unpaid dividends on the
preferred stock over the next 12 months.

Y2K

The  Company  has  undertaken  a survey of its Year 2000  problem  exposure.  In
undertaking  this survey,  the Company  considered both  Information  Technology
("IT")  systems and non-IT systems such as imbedded  microchips.  As a result of
this survey,  the Company  identified  measures  which needed to be taken,  most
significantly,  the upgrade of computer  systems at all of its major  locations.
Year  2000  compliant  enterprise  resource  planning  (ERP)  systems  have been
implemented at its Sabina subsidiary and its Dynamatic subsidiary. The Company's
other  subsidiaries have upgraded their accounting and financial systems to Year
2000 compliant versions of their software.

The Company uses a variety of digital controls in its products. All of the major
suppliers of  microprocessors  to the Company have provided assurance that their
systems are in compliance.  To the best of the Company's knowledge,  none of the
digital controls supplied to its customers include  microprocessors  or software
which are not Year 2000 compliant.

The cost of  acquiring,  installing,  converting,  and  testing  new  Year  2000
compliant  software is estimated by the Company to be $136.  Hardware  costs are
estimated  to be  $20.  As of  December  31,  1998,  the  Company  has  incurred
substantially  all of these  total  estimated  costs for Year 2000  remediation.
These costs were funded by internally generated funds and leases. No significant
IT projects have been deferred due to Year 2000 remediation efforts.

The Company is developing contingency plans to deal with reasonably likely worst
case  scenarios,  and expects to have a  contingency  plan in place by the third
quarter of 1999.



                                                                          Page 8
<PAGE>

PART II.  OTHER INFORMATION

ITEM 1. Legal Proceedings

Trading in the  Company's  stock on NASDAQ was halted on April 7, 1999,  pending
responses to questions by NASDAQ  regarding  the  resignation  of the  Company's
former auditors. Subsequently, the Company received notice from the NASDAQ Stock
market that its common  stock may be delisted for failure to comply with certain
of NASDAQ's  listing  requirements.  The Company made a presentation  at an oral
hearing  on June 17,  1999  before  the  NASDAQ  Listing  Qualifications  Panel,
pursuant to procedures set forth in NASDAQ's  Marketplace  Rules. The Company is
awaiting the results of the panel's decision as to whether trading on NASDAQ may
resume.

ITEM 2. Changes in Securities

On April 14, 1999,  the Company  issued  210,000 shares of common stock in stock
grants to  attract  and  retain  certain  key  employees.  The  stock  issued is
restricted,  and  resale  is  subject  to the  restrictions  of Rule  144 of the
Securities and Exchange Act of 1933.

On June 17, 1999, a major  stockholder and two other holders of accounts payable
of the Company converted $185,000 in trade accounts payable to common stock. For
purposes  of the  conversion,  a value of $0.88 per  share  was used.  The stock
issued is restricted,  and resale is subject to the  restrictions of Rule 144 of
the Securities and Exchange Act of 1933.

On June 30, 1999, the holder of the Company's outstanding preferred stock agreed
to convert all of its preferred shares to 500,000 shares of common stock.

ITEM 3. Defaults upon Senior Securities

None

ITEM 4. Submission of Matters to a Vote of Security Holders

None

ITEM 5. Other Information

None



                                                                          Page 9
<PAGE>

ITEM 6. Exhibits and Reports

a.   Exhibits

     None

b.   Reports on Form 8-K

The Company filed a Report on Form 8-K, dated April 2 1999.  Item 4 of such Form
8-K reported that the Company's auditors had resigned as of March 26, 1999.

The Company filed a Report on Form 8-K/A,  dated April 12, 1999.  Item 4 of such
Form 8-K/A  reported that the  Accountant's  Report for the years ended December
31, 1996 and 1997 did not contain any adverse  opinion or  disclaimer of opinion
and for the year ended December 31, 1997 had been modified for an uncertainty as
to going concern.

The Company filed a Report on Form 8-K/A,  dated April 13, 1999. This modified a
Form reference.

The Company filed a Report on Form 8-K/A, dated May 3, 1999. Item 4 of such Form
8-K/A reported that the Company had hired the firm of Strouss, Hui & Ellis, P.C.
of Jenkintown, Pennsylvania, as its auditors.

No other reports on Form 8-K were filed in the second quarter of 1999.



                                                                         Page 10
<PAGE>


                                   SIGNATURES


In accordance with the requirements of the Securities  Exchange Act of 1934, the
registrant  caused  this  report to be signed on its behalf by the  undersigned,
thereunto duly authorized.


                               UNIDYNE CORPORATION


Date:   July 29, 1999                              /s/ C. Eugene Hutcheson
                                                   -----------------------------
                                                   C. Eugene Hutcheson, Chairman
                                                   and Chief Executive Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following  persons on behalf of the  registrant and
in the capacities and on the dates indicated.


Date:   July 29, 1999                              /s/ C. Eugene Hutcheson
                                                   -----------------------------
                                                   C. Eugene Hutcheson, Chairman
                                                   and Chief Executive Officer



Date:    July 29, 1999                             /s/ Wayne R. Lorgus
                                                   -----------------------------
                                                   Wayne R. Lorgus, President
                                                   and Chief Financial Officer





                                                                         Page 11