United States
Securities and Exchange Commission
Washington, D.C. 20549
Form 10-Q
(Mark One)
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the quarterly period ended October 31, 1998
or
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
Commission File Number: 0-21683
Unity First Acquisition Corp.
(Exact name of registrant as specified in its charter)
Delaware 13-3899021
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
245 Fifth Avenue, Suite 1500
New York, New York 10016
(Address of principal executive offices) (Zip Code)
(212) 696-4282
(Registrant's telephone number, including area code)
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (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
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
Proceeding During the Preceding Five Years:
Indicate by check mark whether the registrant has filed all documents
and reports required to be filed by Sections 12, 13 or 15(d) of the
Securities Exchange Act of 1934 subsequent to the distribution of securities
under a plan confirmed by a court. [ ] Yes [ ] No
Applicable Only to Corporate Issuers:
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
1,875,000 shares of Common Stock at February 1, 1999
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
The condensed financial statements included herein have been
prepared by Unity First Acquisition Corp. (the "Company"), without audit,
pursuant to the rules and regulations of the Securities and Exchange
Commission. While certain information and footnote disclosures normally
included in financial statements prepared in accordance with generally
accepted accounting principles have been condensed or omitted pursuant to
such rules and regulations, the Company believes that the disclosures made
herein are adequate to make the information presented not misleading.
UNITY FIRST ACQUISITION CORP.
(A DEVELOPMENT STAGE ENTITY)
BALANCE SHEETS
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ASSETS
OCTOBER 31, 1998 JULY 31, 1998
---------------- -------------
(Unaudited)
CASH AND CASH EQUIVALENTS $ 1,587 $ 196
RESTRICTED CASH AND INVESTMENTS 6,548,275 6,489,707
----------- -----------
TOTAL ASSETS $ 6,549,862 $ 6,489,903
----------- -----------
----------- -----------
LIABILITIES AND SHAREHOLDERS' EQUITY
LIABILITIES:
ACCRUED EXPENSES $ 639,044 $ 379,082
ADVANCES FROM AFFILIATE 48,000 33,000
----------- -----------
TOTAL LIABILITIES 687,044 412,082
----------- -----------
COMMITMENTS AND CONTINGENCIES:
Common stock, $.0001 par value,
249,875 shares subject to possible
conversion, at conversion value 1,308,995 1,297,301
----------- -----------
STOCKHOLDERS' EQUITY:
Preferred stock, $.01 par value,
5,000 shares authorized, no shares
issued or outstanding -- --
Common stock, $.0001 par value,
20,000,000 shares authorized, 1,625,125
shares issued and outstanding
(excluding 249,875 shares subject to possible conversion) 163 163
Additional paid-in capital 5,093,017 5,104,711
Deficit accumulated during the development stage (539,357) (324,354)
----------- -----------
TOTAL STOCKHOLDERS' EQUITY 4,553,823 4,780,520
----------- -----------
TOTAL LIABILITIES AND SHAREHOLDERS'
EQUITY $ 6,549,862 $ 6,489,903
----------- -----------
----------- -----------
See Selected Notes to Financial Statement.
1
UNITY FIRST ACQUISITION CORP.
(A DEVELOPMENT STAGE ENTITY)
STATEMENTS OF OPERATIONS
(UNAUDITED)
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FOR THE CUMULATIVE
THREE MONTHS ENDED AMOUNTS
OCTOBER 31, FROM INCEPTION
------------------------------- --------------
1998 1997
----------- -----------
REVENUE $ -- $ -- $ --
----------- ----------- -----------
EXPENSES:
General and administrative 289,550 55,956 1,109,276
----------- ----------- -----------
OTHER INCOME:
Interest and dividends 74,547 75,524 573,494
----------- ----------- -----------
OPERATING (LOSS) INCOME (215,003) 19,568 (535,782)
PROVISION FOR INCOME TAXES -- 7,863 3,575
----------- ----------- -----------
NET (LOSS) INCOME $ (215,003) $ 11,705 $ (539,357)
----------- ----------- -----------
----------- ----------- -----------
NET (LOSS) INCOME PER
COMMON SHARE-BASIC
AND DILUTED $ (.11) $ .01
----------- -----------
----------- -----------
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING
BASIC AND DILUTED 1,875,000 1,875,000
----------- -----------
----------- -----------
See Selected Notes to Financial Statement.
2
UNITY FIRST ACQUISITION CORP.
(A DEVELOPMENT STAGE ENTITY)
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE THREE MONTHS ENDED OCTOBER 31, 1998
(UNAUDITED)
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- --------------------------------------------------------------------------------
(DEFICIT)
ACCUMULATED
COMMON STOCK ADDITIONAL DURING THE
---------------------------- PAID-IN DEVELOPMENT
SHARES PAR VALUE CAPITAL STAGE TOTAL
--------- ----------- ----------- ----------- -----------
Balance,
July 31, 1998 1,875,000 $ 163 $ 5,104,711 $ (324,354) $ 4,780,520
Net loss for the
three months ended
October 31, 1998 -- -- -- (215,003) (215,003)
Increase in value
attributable to
common shares
subject to possible
conversion -- -- (11,694) -- (11,694)
--------- ----------- ----------- ----------- -----------
Balance,
October 31, 1998 1,875,000 $ 163 $ 5,093,017 $ (539,357) $ 4,553,823
--------- ----------- ----------- ----------- -----------
--------- ----------- ----------- ----------- -----------
See Selected Notes to Financial Statement.
3
UNITY FIRST ACQUISITION CORP.
(A DEVELOPMENT STAGE ENTITY)
STATEMENTS OF CASH FLOWS
(UNAUDITED)
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- --------------------------------------------------------------------------------
FOR THE
THREE MONTHS CUMULATIVE
ENDED AMOUNTS
OCTOBER 31, FROM INCEPTION
----------------------- --------------
1998 1997
---- ----
CASH FLOWS FROM OPERATING ACTIVITIES:
Net (loss) income $ (215,003) $ 11,705 $ (539,357)
CHANGES IN CERTAIN ASSETS AND LIABILITIES:
Increase (decrease) in accrued expenses
and taxes 259,962 (3,995) 664,044
----------- ----------- -----------
NET CASH PROVIDED BY
OPERATING ACTIVITIES 44,959 7,710 124,687
----------- ----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of common stock -- -- 6,402,175
Advances from affiliate 15,000 -- 143,917
Repayment to affiliate -- -- (95,917)
Deferred registration costs -- -- (25,000)
----------- ----------- -----------
NET CASH PROVIDED BY FINANCING
ACTIVITIES (15,000) -- 6,425,175
----------- ----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
(Increase) in restricted cash and investments (58,568) (72,934) (6,548,275)
----------- ----------- -----------
NET INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS 1,391 (65,224) 1,587
CASH AND CASH EQUIVALENTS,
beginning of period 196 266,533 --
----------- ----------- -----------
CASH AND CASH EQUIVALENTS,
end of period $ 1,587 $ 201,309 $ 1,587
----------- ----------- -----------
----------- ----------- -----------
See Selected Notes to Financial Statement.
4
UNITY FIRST ACQUISITION CORP.
(A DEVELOPMENT STAGE ENTITY)
SELECTED NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
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NOTE 1 - FINANCIAL STATEMENTS
The financial statements have been prepared by Unity First Acquisition
Corp. ("Unity"), without audit. In the opinion of management, all
adjustments (which include only normal recurring adjustments) necessary
to present fairly the financial position, results of operations and
cash flows at October 31, 1998 and for all periods presented have been
made. The results of operations for the period ended October 31, 1998
are not necessarily indicative of the operating results for a full
year.
Certain information and footnote disclosures prepared in accordance with
general accepted accounting principles and normally included in the
financial statements have been condensed or omitted. It is suggested
that these financial statements be read in conjunction with the
financial statements and notes included in Unity's annual report Form
10-k for the year ended July 31, 1998.
NOTE 2 - ORGANIZATION AND OPERATIONS
Unity was incorporated in the State of Delaware on May 30, 1996 to
serve as a vehicle to effect a merger, exchange of capital stock, asset
acquisition or other similar business combination (a "Business
Combination"). Unity is currently in the development stage. All
activity of Unity to date relates to its formation, fund-raising, and
search to effect a Business Combination.
NOTE 3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
UTILIZATION OF 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 and
liabilities and disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amounts of revenues
and expenses during the reporting period. Actual results could differ
from those estimates.
5
UNITY FIRST ACQUISITION CORP.
(A DEVELOPMENT STAGE ENTITY)
SELECTED NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
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NOTE 3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT'D)
NET INCOME (LOSS) PER COMMON SHARE
Net income (loss) per common share is computed based on the weighted
average number of common shares outstanding and common stock
equivalents, if not anti-dilutive.
In 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards ("SFAS") No. 128, "Earnings per Share".
This statement establishes standards for computing and presenting
earnings per share ("EPS"), replacing the presentation of primary EPS
with a presentation of Basic EPS. For entities with complex capital
structures, the statement requires the dual presentation of both Basic
EPS and Diluted EPS on the face of the statement of operations. Under
this new standard, Basic EPS is computed based on the weighted average
number of shares actually outstanding during the year. Diluted EPS
includes the effect of potential dilution from the exercise of
outstanding dilutive stock operations and warrants into common stock
using the treasury stock method. SFAS No. 128 is effective for
financial statements issued for periods ending after December 15, 1997,
and early application is not permitted. The adoption of this statement
did not have a material effect on Unity's financial position or on the
results of its operations.
NOTE 4 - RESTRICTED CASH AND INVESTMENTS
Unity, pursuant to the terms of its initial public offering (the
"Offering"), placed $6,007,500 as of November 19, 1996, in a trust
account which was primarily invested in a short-term U.S. Government
Security. These funds are subject to release upon the earlier of (i)
written notification by the Unity of its need for all or substantially
all of the net proceeds for the purpose of implementing or facilitating
the implementation of a Business Combination or (ii) the liquidation of
the Unity (See note 5).
6
UNITY FIRST ACQUISITION CORP.
(A DEVELOPMENT STAGE ENTITY)
SELECTED NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
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NOTE 5 - PENDING ACQUISITION
On May 6, 1998, Unity entered into a letter of intent to effectuate a
Business Combination ("Merger") with Worlds, Inc. ("Worlds"), a company
engaged in developing music-oriented content applications for its
proprietary 3D Internet technology for consumer markets, as well as
developing select business oriented applications. On June 25, 1998,
Unity and Worlds entered into a definitive Agreement and Plan of Merger
and Reorganization (the "Merger Agreement") to effectuate the Merger.
On October 29, 1998, Unity's stockholders, at a special meeting
convened to consider whether to approve or reject the Merger
contemplated by the Merger Agreement, rejected the Merger.
As a consequence of the rejection of the Worlds Merger by the Unity
Public Stockholders, Article SEVENTH, paragraph (c) of Unity's
Certificate of Incorporation would have required the liquidation and
dissolution of Unity (the "Liquidation") no later than January 11,
1999. Had such Liquidation taken place on that date, the Unity Public
Stockholders, collectively, would have received a liquidating
distribution representing their respective pro rata interest in a trust
fund established for their benefit upon the consummation of the IPO,
which currently approximates $6.5 million.
On December 10, 1998, Unity entered into a letter of intent to
effectuate a Business Combination with GraphOn Corporation ("GraphOn"),
a privately owned developer and marketer of proprietary "thin client"
software that enables a diverse range of desktop computing devices
("desktops") to easily access and utilize UNIX applications from an
location, over both fast networks and slow internet connections.
Unity's Board of Directors has unanimously concluded that a Business
Combination with GraphOn would be in the best interests of both Unity
and its stockholders, including the Unity Public Stockholders.
Consequently, Unity's Board of Directors has sought and obtained an
opinion from special Delaware counsel to the effect that such Article
SEVENTH, paragraph (c), which attempts to waive Unity's statutory right
to amend the Unity Certificate of Incorporation, is contrary to
Delaware law and cannot prevent Unity and its stockholders from
amending the Unity Certificate of Incorporation.
7
UNITY FIRST ACQUISITION CORP.
(A DEVELOPMENT STAGE ENTITY)
SELECTED NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
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NOTE 10 - PENDING ACQUISITION (CONT'D)
Subject to its submission under the Securities Exchange Act of 1934, as
amended, of proxy solicitation material, Unity's Board of Directors
intends to seek the approval of the Unity Public Stockholders to (i)
amend the Unity Certificate of Incorporation to remove the provision
therein that would have required Unity to commence the Liquidation as a
consequence of its inability to consummate a Business Combination
within the period defined by Article SEVENTH, paragraph (c) of the
Unity Certificate of Incorporation and, if such approval is obtained,
to (ii) consider and vote upon a proposal to approve Unity's Business
Combination with GraphOn. There can be no assurance that the Unity
Stockholders will approve the proposed amendment to the certificate of
Incorporation, or the proposed Business Combination with GraphOn
Corporation.
The proposed amendment to the Unity Certificate of Incorporation will
not affect the right of any Unity Public Stockholder to convert his
shares of Unity Common Stock into cash, as provided in Article SEVENTH
of the Unity Certificate of Incorporation, should such Unity Public
Stockholder object to the GraphOn Business Combination and such
Business Combination is approved by a majority in equity interest of
the Unity Public Stockholders and thereafter consummated.
Depending upon the voting of the Unity Public Stockholders as to the
amendment to the Unity Certificate of Incorporation or the Business
Combination with GraphOn, Unity may liquidate. The accompanying
financial statements have not been presented on a liquidation basis of
accounting as Unity has not decided to liquidate. Additionally, it is
not expected that the carrying value of Unity's assets and liabilities
would be materially different if presented under a liquidation basis
based on the nature of such assets and liabilities.
8
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Unity First Acquisition Corp. ("Unity") was incorporated in May 1996 for the
purpose of raising money to fund a vehicle to effect a Business Combination with
an operating business. On November 12, 1996 the Unity's Registration Statement
covering 1,250,000 Units was declared effective by the Securities and Exchange
Commission. Each Unit consists of one share of Unity's Common Stock, one Class A
Redeemable Warrant and one Class B Redeemable Warrant (hereafter the "Units").
Unity, after the Offering, had net proceeds of approximately $6,402,000.
Approximately $6,007,500 was invested in an interest bearing Trust Fund at The
Bank of New York and the balance at the same banking institution in checking and
money market accounts.
For the three months ended October 31, 1998, Unity had a net loss of $215,003
attributable to interest income of $74,547, offset by operating expenses of
$289,550, primarily consisting of unsuccessful deal fees of $205,163, management
and professional fees of $79,137, and taxes of $5,250.
9
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(A) Exhibits
(i) Financial Data Schedule (Exhibit 27)
(B) Reports on Form 8-K
Inapplicable
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf
by the undersigned thereunto duly authorized.
UNITY FIRST ACQUISITION CORP.
(Registrant)
Dated: February 1, 1999 By: /s/ Lawrence Burstein
---------------------------------
Lawrence Burstein
President
(Principal Executive Officer)
By: /s/ Norman Leben
---------------------------------
Norman Leben
Secretary
(Principal Financial and
Accounting Officer)