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 March 31, 1999

             /   /     TRANSITION REPORT PURSUANT TO SECTION 13 or 15 (d) OF THE
                       SECURITIES EXCHANGE ACT OF 1934

For the transition period from:               January 1, 1999 to March 31, 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: 9,335,352 as of March 31, 1999.

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






<PAGE>



                          PART I. FINANCIAL INFORMATION


                ITEM 1. FINANCIAL STATEMENTS UNIDYNE CORPORATION
                           CONSOLIDATED BALANCE SHEETS
                           (UNAUDITED) (In Thousands)

<TABLE>
<CAPTION>
                                                                               March 31,  December 31,
                                ASSETS                                           1999        1998
                                                                               --------    --------
<S>                                                                            <C>         <C>
Current assets:
      Cash                                                                     $     52    $    126
      Accounts receivable, less allowance of $11                                  3,994       3,032
      Inventory                                                                   7,240       7,429
      Prepaid expenses                                                              102         135
      Deferred  taxes                                                               190         190
      Other current assets                                                           25          33
                                                                               --------    --------
                  Total current assets                                           11,603      10,945
Property, plant and equipment
      Land                                                                          160         160
      Leasehold improvements                                                        323         323
      Buildings                                                                   3,639       3,639
      Machinery and equipment                                                     9,759       9,589
                                                                               --------    --------
                  Total property, plant and equipment                            13,882      13,712
      Accumulated depreciation                                                   (5,722)     (5,269)
                                                                               --------    --------
                  Property, plant and equipment, net                              8,159       8,444
                                                                               --------    --------
Deferred income taxes                                                             1,181         986
Goodwill                                                                          2,333       2,341
Patents                                                                           1,287       1,341
Other assets                                                                      1,476       1,291
                                                                               --------    --------
                                                                                  6,277       5,959
                                                                               --------    --------
                  TOTAL  ASSETS                                                $ 26,039    $ 25,348
                                                                               ========    ========
                      LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
      Accounts payable                                                         $  5,393    $  5,262
      Current portion of long-term debt                                             593         565
      Short-term debt                                                             3,541       3,625
      Accrued compensation                                                          149          75
      Income taxes payable                                                           34          87
      Deferred revenue                                                              500         392
      Other accrued liabilities                                                   2,699       1,558
                                                                               --------    --------
                  Total current liabilities                                      12,909      11,564
                                                                               --------    --------
Long-term debt                                                                    3,649       3,797
Post-retirement benefits                                                          4,357       4,491
Preferred dividends payable                                                         787         700
                                                                               --------    --------
                                                                                  8,793       8,988
                                                                               --------    --------
Stockholders' equity:
      Common Stock $.001, par value, 50,000,000 shares authorized, 9,335,352
           shares issued and outstanding                                              9           9
Preferred Stock, $10 per share liquidation value, $10 par value,
           20,000,000 shares authorized, 500,000 issued and outstanding           5,000       5,000
      Additional paid-in capital                                                 13,127      13,127
Treasury stock                                                                       (7)         (7)
Retained deficit                                                                (13,792)    (13,333)
                                                                               --------    --------
                  Total Stockholders' Equity                                      4,337       4,796
                                                                               --------    --------
                  TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                   $ 26,039    $ 25,348
                                                                               ========    ========
</TABLE>

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

                                                                          Page 2

<PAGE>

                               UNIDYNE CORPORATION
                        CONSOLIDATED STATEMENTS OF INCOME
                                   (UNAUDITED)
                 (In Thousands, Except Share and Per Share Data)


<TABLE>
<CAPTION>
                                                                   Three          Three
                                                                   Months         Months
                                                                   Ended          Ended
                                                                  March 31,      March 31,
                                                                    1999           1998

                                                                     (In thousands,
                                                                  except per share data)

<S>                                                             <C>            <C>
Net Sales                                                       $     5,712    $     6,267
Cost of sales                                                         3,885          3,845
                                                                -----------    -----------
Gross income                                                          1,827          2,422
Selling and administrative expense                                    2,210          2,667
Research and development expense                                         71             25
                                                                -----------    -----------
Income (loss) from operations                                          (454)          (270)
Interest expense                                                        165            160
                                                                -----------    -----------
(Loss) before income taxes                                             (619)          (430)
Income tax provision (benefit)                                         (247)          (172)
                                                                -----------    -----------
Net (loss)                                                             (371)          (258)
Preferred Dividends                                                     (87)           (87)
                                                                -----------    -----------
Loss Applicable to Common Stockholders                          ($      458)   ($      345)
                                                                ===========    ===========
Basic and diluted (loss) per share                                    (0.05)         (0.04)
Weighted average number of shares of common stock outstanding     9,335,352      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)




                                                      Three Months  Three Months
                                                         Ended         Ended
                                                        March 31,     March 31,
                                                          1999         1998

                                                            (in thousands)


Cash flows from operating activities:
  Net income (loss)                                     ($  372)     ($  258)
  Adjustments to reconcile net loss to
     cash flows used for operating activities
     Depreciation and amortization                          453          355
     Changes in-
       Accounts receivable, net                            (962)         436
       Inventories                                          189         (806)
       Prepaid expenses and other assets                     41         (704)
       Accounts payable                                     131         (225)
       Accrued compensation                                  74           13
       Other liabilities                                    746          262
                                                        -------      -------
Net cash (used for) operating activities                    300         (927)
                                                        -------      -------
Cash flows for investing activities:
  Purchase of property, plant and equipment                (170)          67
                                                        -------      -------
Cash flows from financing activities:
  Net borrowing  on revolving loans                           0        1,208
  Principal payments on long-term debt                     (204)        (804)
                                                        -------      -------
Net cash provided by financing activities                  (204)         404
                                                        -------      -------
Net increase in cash                                        (74)        (456)
                                                        -------      -------
Cash, beginning of period                                   126          928
                                                        -------      -------
Cash, end of period                                          52          472
                                                        =======      =======
Cash paid for:
Interest                                                    165          160
                                                        -------      -------
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)

NOTE 1 - BASIS OF PRESENTATION

In the opinion of the management of the Company,  the accompanying  consolidated
financial  statements  reflect  all  adjustments  (consisting  only of  normally
recurring accruals) which are necessary for a fair presentation of the Company's
results of operation and changes in financial  position for the interim  periods
presented.  These financial  statements  should be read in conjunction  with the
Company's annual report on Form 10-KSB for the year ended December 31, 1998.

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

The Company's operations are classified into three 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 the Eddy Current Drive operating  principle for
sale  to  customers  in  the  automotive,  transportation,   manufacturing,  and
processing  system  industries.  The motor controls and systems segment produces
motor  controls  utilizing the  alternative  frequency  operating  principle and
integrates control systems for process system designers and large manufacturers.
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 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.

                               Reportable Segments
                                     (000's)


<TABLE>
<CAPTION>
                                Electric motors &             Motor            Dynamometers
                                  variable speed          controls and          and testing
                                      drives                 systems              systems             All Other              Total
--------------------------- -------------------------- ------------------- ---------------------  -------------- ------------------
<S>                                              <C>                 <C>                   <C>              <C>               <C>
External revenue                                 3,287               1,212                 1,211               2              5,712
--------------------------- -------------------------- ------------------- ---------------------  -------------- ------------------
Intersegment revenue                                                                                         165                165
--------------------------- -------------------------- ------------------- ---------------------  -------------- ------------------
Profit (loss)                                       61               (270)                 (144)           (266)              (619)
--------------------------- -------------------------- ------------------- ---------------------  -------------- ------------------
</TABLE>

Following is a reconciliation of profits of operating  segments to income before
income taxes for the three months ended March 31, 1999.

     Total profit (loss) for reportable segments                     ($353)
          All other segments
             Elimination of intersegment profits                       (43)
             Corporate expenses                                       (279)
             Unallocated                                                56
                                                                     -----
     Income (loss) before income taxes                               ($619)


                                                                          Page 5

<PAGE>



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.

All amounts used herein are in thousands.

RESULTS OF OPERATIONS

Net sales.  Net sales were $5,712 for the three  months  ended March 31, 1999, a
decrease of 8.8% as compared with net sales of $6,267 for the three months ended
March 31,  1998.  The decrease in the current year period was due to a 12% sales
decline in the sales of  electric  motors and  variable  speed  drives and a 38%
decline  in the sales of motor  controls  and  systems  in the first  quarter as
compared  to a year ago,  partially  offset by a 92%  increase in  shipments  of
emissions testing systems.

Gross  income.  Consolidated  gross  income  of $1,827 or 32.0% to sales for the
first  quarter of 1999,  compared  with gross income of $2,422 or 38.6% to sales
for the  first  quarter  of 1998.  This  decrease  is  primarily  the  result of
increases in the costs of production of motor controls and electric motors.

Selling and administrative  expense.  Selling and administrative  expense,  as a
percent to net sales,  decreased to 38.7% sales in the first  quarter of 1999 as
compared  with  42.5%  to sales in the  prior  year  quarter.  The  decrease  is
principally  due to the reduction of support  personnel at the Company's  Sabina
subsidiary.

Research and development  expense.  Research and  development  expense of $72 or
1.26% to sales in the current  year  quarter,  as  compared  with $25 or 0.4% to
sales in the  prior  year  quarter.  The  increase  is  primarily  a  result  of
expenditure  relative  to  developing  internal  manufacturing   capability  for
electronic control systems.

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.

At March 31, 1999, the Company's  working  capital was  approximately  ($1,306),
compared to working  capital of  approximately  ($619)  December 31, 1998.  This
decrease is principally due to increases in other accrued liabilities.  At March
31, 1998, the Company had nominal availabilty under its existing  line-of-credit
arrangements.

On April 2, 1998 the Company secured an Operating Line of Credit with Union Bank
of California,  N.A., in the amount of $1,250 for its  subsidiary,  Sabina.  The
maturity is June 1, 1999 and is secured by the Accounts Receivable of Sabina. On
April 2, 1998 the  Company  secured a term loan with Union  Bank of  California,
N.A.,  in the amount of $200 for its  subsidiary,  Sabina.  The maturity date is
June 1, 2001.  In  December,  1998,  the bank  alleged  that the  Company was in
default of its covenants under the agreement.  While the Company maintained that
no default had  occurred,  the Company and Union Bank  negotiated a  Forbearance
Agreement under which all of Sabina's  remaining  obligations to Union Bank will
be paid by May 31, 1999. At May 26, 1999, less than $100 remained to be paid.

The  Company's  subsidiary  Dynamatic  Corporation  has had its  line of  credit
extended to May  31,1999.  This line for $3,000 is through  the Johnson  Bank of
Racine, WI.

Subsequent to year end, the Company  began  discussions  with a major  financial
institution  to  obtain a  $10,000,000  secured,  three-year,  revolving  credit
facility with an additional  line of up to  $15,000,000  for  acquisitions.  The
Company

                                                                          Page 6

<PAGE>



expects to close on this loan in the second quarter of 1999. This financing will
discharge the Company's  obligations  to Union Bank and Johnson Bank and provide
working capital and long-term financing for the Company.

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 are in the final stages of installation
and testing at its Dynamatic  subsidiary,  and is expected to be  operational by
June 1, 1999. 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 $136,000.  Hardware  costs
are estimated to be $20,000.  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.


PART II.  OTHER INFORMATION

ITEM 2.  CHANGES IN SECURITIES.

None

ITEM 3.  LEGAL PROCEEDINGS

The  Company  has been  named as a  defendant  in an action  filed by the former
stockholders of Sabina.  The complaint  alleges fraud and  misrepresentation  in
connection  with the  Company's  September  30, 1997  acquisition  of all of the
outstanding  stock of Sabina.  The complaint  seeks  recission and  compensatory
damages in an  unspecified  amount.  The Company has denied all  allegations  of
wrongdoing and is vigorously defending the action.

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 has  requested  an oral hearing
before the NASDAQ Listing Qualifications Panel, pursuant to procedures set forth
in NASDAQ's  Marketplace  Rules. The hearing date has been set for June 17, 1999
and trading in the  Company's  common  stock will remain  halted until after the
hearing.


ITEM 4.           SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

None

                                                                          Page 7

<PAGE>



ITEM 5. OTHER INFORMATION.

None

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.

         13.1    Form 10-KSB, dated May 20, 1999
         19.5    Form 8-K, dated April 2, 1999
         19.6    Form 8-K/A, dated April 12, 1999
         19.7    Form 8-K/A, dated April 13, 1999
         19.8    Form 8-K/A, dated May 3, 1999

        (b)(1)  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.

        (b)(2)  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.

        (b)(3)  The Company filed a Report on Form 8-K/A,  dated April 13, 1999.
                This modified a Form reference.

        (b)(4)  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.




                                                                          Page 8

<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:   May 28, 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:    May 28, 1999                      /s/ C. Eugene Hutcheson
                                           -------------------------------------
                                           C. Eugene Hutcheson, Chairman and
                                           Chief Executive Officer


Date:    May 28, 1999                      /s/ Wayne R. Lorgus
                                           -------------------------------------
                                           Wayne R. Lorgus, President and
                                           Chief Financial Officer



                                                                          Page 9