-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, JVt9tbYsJMRC8mmCATzY0IHIDU5ZdoMegO/1z5TA2BHsIlJC0Os3ZOrnaPhCPsLY Sygvsv1+ZiUSq5Mpz1ZfhA== 0001047469-99-002085.txt : 19990127 0001047469-99-002085.hdr.sgml : 19990127 ACCESSION NUMBER: 0001047469-99-002085 CONFORMED SUBMISSION TYPE: 10-K405 PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19980731 FILED AS OF DATE: 19990126 FILER: COMPANY DATA: COMPANY CONFORMED NAME: UNITY FIRST ACQUISITION CORP CENTRAL INDEX KEY: 0001021435 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-PREPACKAGED SOFTWARE [7372] IRS NUMBER: 133899021 STATE OF INCORPORATION: DE FISCAL YEAR END: 0731 FILING VALUES: FORM TYPE: 10-K405 SEC ACT: SEC FILE NUMBER: 000-21683 FILM NUMBER: 99512470 BUSINESS ADDRESS: STREET 1: 245 FIFTH AVENUE CITY: NEW YORK STATE: NY ZIP: 10016 BUSINESS PHONE: 2126964282 MAIL ADDRESS: STREET 1: 245 FIFTH AVENUE CITY: NEW YORK STATE: NY ZIP: 10016 10-K405 1 10-K405 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-K (MARK ONE) |X| ANNUAL REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended JULY 31, 1998 ------------------------------------------------------ OR |_| TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to ---------------------- ----------------------- Commission file number 0-21683 -------------------------------- UNITY FIRST ACQUISITION CORP. - -------------------------------------------------------------------------------- (Exact name of registrant as specified in its charter) DELAWARE 13-3899021 - --------------------------------- ------------------------------------ (State or other jurisdict (I.R.S. Employer Identification No.) of incorporation or organization) 245 FIFTH AVENUE, SUITE 1500, NEW YORK, NEW YORK 10016 - ------------------------------------------------- ---------------- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code (212) 696-4282 ------------------------------ Securities registered pursuant to Section 12(b) of the Act:
TITLE OF EACH CLASS NAME OF EACH EXCHANGE ON WHICH REGISTERED ------------------- -----------------------------------------
- -------------------------------------------------------------------------------- Securities registered pursuant to Section 12(g) of the Act: COMMON STOCK, $.0001 PAR VALUE - -------------------------------------------------------------------------------- (Title of Class) CLASS A COMMON STOCK PURCHASE WARRANTS - -------------------------------------------------------------------------------- (Title of Class) CLASS B COMMON STOCK PURCHASE WARRANTS - -------------------------------------------------------------------------------- (Title of Class) 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........ No |X| Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of Registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. |X| APPLICABLE ONLY TO REGISTRANTS 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......... ---------------------- The number of shares outstanding of the Registrant's common stock is 1,875,000 (as of January 22, 1999). The aggregate market value of the voting stock held by non-affiliates of the Registrant is $ 8,159,515 (as of January 22, 1999). DOCUMENTS INCORPORATED BY REFERENCE PART I ITEM 1. BUSINESS (a) GENERAL DEVELOPMENT OF BUSINESS Unity First Acquisition Corp. ("Unity") was formed in May 1996 to serve as a vehicle to effect a merger, exchange of capital stock, asset acquisition or other similar business combination ("Business Combination") with an operating business (an "Acquired Business"). In November 1996, Unity successfully consummated an initial public offering of its equity securities (the "IPO") from which it derived net proceeds of $6,402,112. Reference is made to Unity's Registration Statement on Form S-1 (File No. 333-11165), declared effective on November 12, 1996, for more detailed information in these regards. 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 to effectuate the Merger. On October 29, 1998, those holders of Unity's common stock who acquired their respective shares ("Public Shares") in Unity's IPO or at any time thereafter (the "Unity Public Stockholders"), at a special meeting of Unity's stockholders, rejected the Worlds Merger by a vote of 317,000 shares in favor of such Merger and 884,000 shares in favor of its rejection. Article SEVENTH, paragraph (c) of Unity's Certificate of Incorporation (the "Unity Charter") states that: In the event that the Corporation does not consummate a Business Combination by the later of (i) 18 months after consummation of the IPO or (ii) 24 months after the consummation of the IPO in the event that an agreement for a Business Combination was executed but was not consummated within such 18 month period (the later of such dates being referred to as the "Termination Date"), the officers of the Corporation shall take all such actions as may be necessary to dissolve and liquidate the Corporation within sixty days of the Termination Date. In the event that the Corporation is so dissolved and liquidated, liquidating distributions shall be made only with respect to the Public Shares and the Corporation shall pay no liquidating distribution with respect to any shares of Common Stock outstanding prior to the consummation of the IPO. Article SEVENTH also states, among other things, that paragraph (c) shall apply during the period commending upon the consummation of the IPO and terminating upon the consummation of any Business Combination and may not be amended during such period. As a consequence of the rejection of the Worlds Merger by the Unity Public Stockholders, Article SEVENTH, paragraph (c) of the Unity Charter 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 Merger with GraphOn Corporation, 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 any location, over both fast networks and slow internet connections. Unity's Board of Directors has unanimously concluded that a Merger 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 2 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 Charter, is contrary to Delaware law and cannot prevent Unity and its stockholders from amending the Unity Charter. Subject to its submission under the Securities Exchange Act of 1934, as amended, of proxy solicitation materials, Unity's Board of Directors intends to seek the approval of the Unity Public Stockholders to (i) amend the Unity Charter 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 Charter and, if such approval is obtained, to (ii) consider and vote upon a proposal to approve Unity's Merger with GraphOn. If either the amendment to the Unity Charter or such Merger is not approved by a majority in equity interest of the Unity Public Stockholders, Unity will immediately commence the Liquidation. The proposed amendment to the Unity Charter 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 Charter, should such Unity Public Stockholder object to the GraphOn Merger and such Merger is approved by a majority in equity interest of the Unity Public Stockholders and thereafter consummated. Unity was incorporated as a Delaware corporation on May 30, 1996. Unity's executive offices are located at 245 Fifth Avenue, New York, New York 10016; its telephone number is (212) 696-4282. (b) FINANCIAL INFORMATION ABOUT INDUSTRY'S SEGMENTS Not applicable. (c) NARRATIVE DESCRIPTION OF BUSINESS See Item 1(a) above. 3 (d) FINANCIAL INFORMATION ABOUT FOREIGN AND DOMESTIC OPERATIONS AND EXPORT SALES Not applicable. ITEM 2. PROPERTIES Unity's executive offices are located at 245 Fifth Avenue, New York, New York where it uses approximately 500 square feet of office space and premises occupied by Unity Venture Capital Associates Ltd. ("Unity VCA"), a concern which is an affiliate of certain of Unity's officers and directors. See Item 13 hereof. ITEM 3. LEGAL PROCEEDINGS Unity is not a party to any legal proceedings which may have a material adverse effect upon Unity, its assets or its properties. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS There were no matters submitted to a vote of security holders during the fourth quarter of the fiscal year ended July 31, 1998. 4 PART II ITEM 5. MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS (a) Unity's Common Stock, Class A Redeemable Common Stock Purchase Warrants ("Class A Warrants") and Class B Redeemable Common Stock Purchase Warrants ("Class B Warrants") are each quoted on the OTC Bulletin Board under the respective symbols "UFAC", "UFACW" and "UFACZ". The following table sets forth the range of the high and low bid quotations on the OTC Bulletin Board for the periods indicated:
CLASS A CLASS B COMMON STOCK WARRANTS WARRANTS THREE MONTHS --------------- ------------ ------------- ENDED HIGH LOW HIGH LOW HIGH LOW ------------ ---- --- ---- --- ---- --- January 31, 1997* 4-3/4 4-3/8 1-1/4 7/8 1-1/4 3/4 April 30, 1997 4-13/16 4-3/8 1-1/8 3/8 7/8 1/4 July 31, 1997 4-7/8 4-7/16 1-1/4 5/16 7/8 1/4 October 31, 1997 N/A N/A 13/16 1/4 7/16 1/8 January 31, 1998 5-1/2 5 1 3/8 9/16 1/4 April 30, 1998 5-3/16 4-7/8 1 5/8 1/2 1/4 July 31, 1998 5-5/16 4-7/8 1-1/4 1/2 7/16 3/8
- ---------- * Unity's securities began separate trading on November 21, 1996. The above quotations represent prices between dealers and do not include retail mark up, markdown or commission. They do not necessarily represent actual transactions. (b) As of January 22, 1999, there were 37, 6 and 5 record holders of the Common Stock, Class A Redeemable Warrants and Class B Redeemable Warrants, respectively. (c) Unity has not declared any cash dividends on its Common Stock and has no intention to pay cash dividends in the foreseeable future. 5 ITEM 6. SELECTED FINANCIAL DATA The following tables should be read in conjunction with the financial statements of Unity and the notes thereto appearing elsewhere in this Annual Report on Form 10-K. The selected financial data of Unity has been derived from the financial statements of Unity, which have been audited by Arthur Andersen LLP, independent public accountants, as indicated in their report included elsewhere herein. STATEMENTS OF OPERATIONS DATA:
PERIOD FROM PERIOD FROM MAY 30, 1996 MAY 30, 1996 (DATE OF (DATE OF YEARS ENDED INCEPTION) TO INCEPTION) TO JULY 31, JULY 31, 1996 JULY 31, 1998 ------------------------- ------------- --------------- 1998 1997 ---- ---- Revenues $ - $ - $ - $ - Net income (loss) (315,991) 6,637 (15,000) ( 324,354) Earnings (loss) (.14) - ( .02) per common share Weighted average common shares 1,875,000 1,515,000 625,000
BALANCE SHEET DATA:
JULY 31, --------------------------------- 1998 1997 ---- ---- Total assets $6,489,903 $ 6,465,021 Total liabilities $ 412,082 $ 71,209 Shareholders' equity $4,780,520 $ 5,154,432
6 ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Unity was incorporated in May 1996 for the purpose of raising money to fund a vehicle to effect a Business Combination with an Acquired Business. On November 12, 1996, Unity's registration statement under the Securities Act of 1933, as amended, covering 1,250,000 units, each unit consisting of one share of Unity's Common Stock, one Class A Redeemable Warrant and one Class B Redeemable Warrant at an initial public offering price of $6.00 per unit, was declared effective by the Securities and Exchange Commission. Unity derived $7,500,000 from the IPO prior to underwriting commissions of $600,000 and expenses of approximately $497,888, respectively. For the year ended July 31, 1998, for the year ended July 31, 1997 and for the period from the date of inception (May 30, 1996) to July 31, 1996, Unity had net income (loss) of $(315,991), $6,637 and $(15,000), respectively. These results of operations were attributable to interest and dividend income offset by general and administrative expenses, primarily consisting of management and professional fees of $346,390, $127,775 and $15,000, respectively, and taxes. Unity was inactive during the period May 30, 1996 (date of inception) through November 19, 1996. At July 31, 1998, Unity had cash and cash equivalents and short-term investments, inclusive of restricted cash and investments of $6,489,707, totaling $6,489,903 and total liabilities of $412,082. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA Reference is made to pps. F-1 through F-12 comprising a portion of this Annual Report on Form 10-K. ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE Not Applicable. 7 PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT The current directors and executive officers of Unity are as follows:
NAME AGE POSITION ---- --- -------- Lawrence Burstein 55 President, Treasurer and Director John Cattier 66 Director Barry Ridings 46 Director Norman Leben 38 Secretary and Director
LAWRENCE BURSTEIN has been President, Treasurer and a director of Unity since its inception. For approximately ten years prior thereto, Mr. Burstein was the President, a director and principal stockholder of Trinity Capital Corporation, a private investment banking concern ("Trinity"). Trinity ceased operations upon the formation of Unity VCA. Since March 1996, Mr. Burstein has been Chairman of the Board and a principal shareholder of Unity VCA. Mr. Burstein is a director of four public companies, being, respectively, THQ Inc., which designs and markets Nintendo and Sega games, Brazil Fast Food Corp., the owner and operator of the second largest fast food restaurant chain in Brazil, CAS Medical Systems, Inc., engaged in the manufacture and marketing of blood pressure monitors and other medical products principally for the neonatal market, and The MNI Group Inc., engaged in the marketing of specially formulated medical foods. Mr. Burstein received an L.L.B. from Columbia Law School. JOHN CATTIER has been a director of Unity since its inception. Since May 1996, Mr. Cattier has been a director and shareholder of Unity VCA. Mr. Cattier has been an independent consultant since January 1985. From 1957 to December 1984, Mr. Cattier was associated with White Weld & Co., investment bankers, 8 serving as a general partner, and with Credit Suisse White Weld (which subsequently became Credit Suisse First Boston), investment bankers, in various capacities, Mr. Cattier, who was both a director and stockholder of Trinity for at least five years prior to its cessation of operations, is a director of Pacific Assets Trust PLC, a United Kingdom investment trust, and Chairman of the Board of Directors of Heptagon Investments Limited, an investment company ("Heptagon"). Mr. Cattier received a B.A. from Yale University. BARRY RIDINGS has been a director of Unity since its inception. Since March 1990, Mr. Ridings has been a Managing Director of BT Alex. Brown & Sons, investment bankers. From June 1986 to March 1990, Mr. Ridings was a Managing Director of Drexel Burnham Lambert, investment bankers. Mr. Ridings is a director of SubMicron Systems Corporation, a semi-conductor capital equipment manufacturer, Transcor Waste Services Corp., a waste management company, Noodle Kidoodle, Inc., an operator of specialty toy stores, New Valley Corp., formerly known as Western Union, Search Capital Group, an auto finance company, Telemundo Group, a Spanish language television network, and Norex Industries Inc., a shipping company. Mr. Ridings received an M.B.A. from Cornell University. NORMAN LEBEN has been Secretary and a director of Unity since its inception. Mr. Leben is, and since 1988 has been, a partner of Dalessio Millner & Leben LLP ("DML"), certified public accountants. Prior thereto and from 1985, Mr. Leben was engaged in the acquisition, management, syndication and operation of real estate and other emerging marketing businesses. Prior to 1985, Mr. Leben was employed by Laventhol & Horwath. Mr. Leben received a B.B.A. from George Washington University. All directors hold office until the next annual meeting of stockholders and the election and qualification of their successors. Directors receive no compensation for serving on the Board of Directors other than reimbursement of reasonable expenses incurred in attending meetings. Officers are elected annually by the Board of Directors and serve at the discretion of the Board. Mr. Burstein devotes approximately 30% of his time to the affairs of Unity. Unity has not entered into employment agreements with either of its officers. 9 ITEM 11. EXECUTIVE COMPENSATION (a) CASH COMPENSATION Unity's officers receive no compensation for serving as officers other than accountable reimbursement for any reasonable business expenses incurred in connection with activities undertaken on Unity's behalf. (b) COMPENSATION PURSUANT TO PLANS Unity's 1996 Stock Option Plan (the "1996 Plan") was adopted by both of Unity's Board of Directors and by a majority in interest of Unity's stockholders on May 30, 1996. The 1996 Plan provides for the granting of 187,500 options which are intended to qualify either as incentive stock options ("Incentive Stock Options") within the meaning of Section 422 of the Internal Revenue Code of 1986 or as options which are not intended to meet the requirements of such section ("Nonstatutory Stock Options"). The total number of shares of Common Stock reserved for issuance under the 1996 Plan is 187,500. Options to purchase shares may be granted under the 1996 Plan to persons who, in the case of Incentive Stock Options, are employees (including officers) of Unity, or, in the case of Nonstatutory Stock Options, are employees (including officers) or non-employee directors of Unity. The exercise price of all Incentive Stock Options granted under the 1996 Plan must be at least equal to the fair market value of such shares on the date of the grant or, in the case of Incentive Stock Options granted to the holder of ten percent or more of Unity's Common Stock, at least 110% of the fair market value of such shares on the date of grant. The maximum exercise period for which Incentive Stock Options may be granted is ten years from the date of grant (five years in the case of an individual owning more than 10% of Unity's Common Stock). No options have been granted under the 1996 Plan to date. (c) OTHER COMPENSATION None. 10 (d) COMPENSATION OF DIRECTORS Unity's directors presently receive no compensation for their services as such. (e) TERMINATION OF EMPLOYMENT AND CHANGE OF CONTROL ARRANGEMENTS None. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT The following table sets forth information as of January 22,1999, based on information obtained from the persons named below, with respect to the beneficial ownership of shares of Unity's Common Stock by (i) each person known by Unity to be the owner of more than 5% of its outstanding shares of Common Stock, (ii) each director and (iii) all officers and directors as a group. Except as indicated in the footnotes to the table, the persons named in the table have sole voting and investment power with respect to all shares of Common Stock shown as beneficially owned by them.
AMOUNT AND NATURE OF PERCENTAGE NAME AND ADDRESS OF BENEFICIAL OF OUTSTANDING BENEFICIAL OWNER OWNERSHIP(1)(2) SHARES OWNED(2) - ------------------- --------------- ---------------- Lawrence Burstein 175,000(3) 9.3% 245 Fifth Avenue New York, NY 10016 John Cattier 140,500(3) 7.5% Achlain Invermoriston Invernesshire IV3 6YN, United Kingdom
11
Barry Ridings 6,000 * 21 Lilac Lane Princeton, NJ 08540 Norman Leben 40,000(3) 2.1% 245 Fifth Avenue New York, NY 10016 All officers and 311,500(3)(4) 16.6% directors as a group (4 persons)
- -------------------- * Less than 1% of the outstanding Common Stock. (1) Unless otherwise noted, Unity believes that all persons named in the table have sole voting and investment power with respect to all shares of Common Stock beneficially owned by them. (2) Does not include shares issuable upon exercise of the Directors' Warrants (as hereinafter defined) which are beneficially owned by each of the persons named in the above table but which are not exercisable until the consummation of a Business Combination. (3) Includes 25,000 shares of Common Stock owned by Unity VCA, over which shares Messrs. Burstein, Leben and Cattier share voting and investment power. (4) Includes (i) 75,000 shares held by Heptagon and (ii) 1,500 shares held by an affiliate of Heptagon. Mr. Cattier is Chairman of Heptagon's board of directors and exercises voting and dispositive control over approximately 7.6% of Heptagon's shares of capital stock. Mr. Cattier disclaims any voting or dispositive power over these shares. Also includes 39,000 shares owned by Cricket Services, Ltd. ("Cricket"), over which shares Mr. Cattier exercises voting and dispositive control. Both Heptagon and Cricket are private investment companies. 12 ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS In June 1996, Unity issued an aggregate of 625,000 shares of Common Stock at a price of $.0001 per share, as follows: 25,000 shares to Unity VCA; 150,000 shares to Mr. Burstein; 15,000 shares to Mr. Leben; an aggregate of 76,500 shares to Heptagon and its affiliate; 39,000 shares to Cricket; 6,000 shares to Barry Ridings; and 313,500 shares to 24 other persons. In June 1996, the Company issued 58,334, 58,333, 58,333 and 25,000 Class A and Class B Warrants to each of, respectively, Messrs. Burstein, Leben, Cattier and Ridings (collectively, the "Directors' Warrants"), in consideration for future services to be rendered by such persons on behalf of Unity. The Directors' Warrants are identical to the Company's Series A and Series B Warrants offered and sold in the IPO but are not redeemable by Unity and may not be transferred until the consummation of a Business Combination. Unity has been obligated to pay Unity VCA, since June 1, 1996, a monthly fee of $7,500 for general and administrative services pursuant to an agreement which may be cancelled by either party upon 30 days' prior written notice. Such fee includes the use of approximately 500 square feet of office space in premises occupied by Unity VCA. DML, an accounting firm which is an affiliate of Mr. Leben, affords Unity VCA the use of such space at a monthly rental of $2,000. Messrs. Burstein, Cattier and Leben are each directors and shareholders of Unity VCA. Unity VCA had made non-interest demand loans aggregating approximately $50,000 to Unity as of the IPO date to cover expenses incurred by Unity in connection with the IPO. Unity repaid these loans out of the proceeds of the IPO. DML has performed bookkeeping, tax and accounting services for certain of the "blank check" companies of which Messrs. Burstein, Cattier and Ridings, have been directors and shareholders from their dates of inception through the consummation of their respective Business Combinations and performs similar services for Unity at an aggregate cost of $15,570 for the year ended July 31, 1998. 13 PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K (a) FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES: (i) FINANCIAL STATEMENTS Page ---- Report of Independent Public Accountants F-1 Balance Sheets - July 31, 1998 and 1997 F-2 Statements of Operations for the years ended July 31, 1998 and 1997, the period May 30, 1996 (date of inception) through July 31, 1996 and the cumulative amounts from inception F-3 Statements of Cash Flows for the years ended July 31, 1998 and 1997, the period May 30, 1996 (date of inception) through July 31, 1996 and the cumulative amounts from inception F-4 Statements of Changes in Stockholders' Equity for the years ended July 31, 1998 and 1997, and for the period May 30, 1996 (date of inception) through July 31, 1996 F-5 Notes to Financial Statements F-6 - F-12 (ii) FINANCIAL STATEMENT SCHEDULES All financial statement schedules are omitted because the conditions requiring their filing do not exist or the information required thereby is included in the financial statements filed, including the notes thereto. (b) REPORTS ON FORM 8-K None.
14 (c) EXHIBITS
2.1 Agreement and Plan of Merger and Reorganization dated as of June 25, 1998 between Unity and Worlds, Inc. (1) 3.1 Restated Certificate of Incorporation(2) 3.2 By-Laws(2) 4.1 Form of certificate evidencing shares of Common Stock(2) 4.2 Form of certificate evidencing Class A Redeemable Warrants(2) 4.3 Form of certificate evidencing Class B Redeemable Warrants(2) 4.4 Form of Unit Purchase Option between Unity and the Underwriters of the IPO(2) 4.5 Form of Warrant Agreement between Unity and American Stock Transfer & Trust Company(2) 10.1 Stock Option Plan(2) 10.2 Form of Trust Agreement by and between Unity and The Bank of New York(2) 10.3 Form of Insider's Letter(2) 10.4 Form of Escrow Agreement by and among Unity, Lawrence Burstein, John Cattier, Cricket Services, Ltd., Barry Ridings, Norman Leben, Unity Venture Capital Associates Ltd. ("Unity") and American Stock Transfer & Trust Company(2) 10.5 General and Administrative Services Agreement, dated as of May 30, 1996 by and between Unity and Unity Capital Corp.(2)
15
10.6 Form of Officer/Director Warrant Purchase Agreement with the Representative of the IPO Underwriters(2)
- -------------------- (1) Incorporated by reference to an exhibit filed as part of Unity's Registration Statement on Form S-4, File No. 333- 59863), declared effective on September 14, 1998. (2) Incorporated by reference to an exhibit filed as part of Unity's Registration Statement on Form S-1, File No. 333- 11165), declared effective on November 12, 1996. 16 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) 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, in the City of New York, State of New York, on the 22nd day of January, 1999. UNITY FIRST ACQUISITION CORP. By: /S/LAWRENCE BURSTEIN --------------------------------- Lawrence Burstein President 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.
SIGNATURES CAPACITY DATE ---------- -------- ---- President and Director (Principal Executive, Financial and Accounting /S/LAWRENCE BURSTEIN Officer) January 22, 1999 - ---------------------------- Lawrence Burstein - ---------------------------- Director John Cattier /S/BARRY RIDINGS Director January 22, 1999 - ---------------------------- Barry Ridings Secretary and /S/NORMAN LEBEN Director January 22, 1999 - ---------------------------- Norman Leben
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS To Unity First Acquisition Corp: We have audited the accompanying balance sheets of Unity First Acquisition Corp. (a Delaware corporation in the development stage) as of July 31, 1998 and 1997, and the related statements of operations, changes in shareholders' equity and cash flows for the years ended July 31, 1998 and 1997, for the period from inception (May 30, 1996) to July 31, 1996, and for the period from inception (May 30, 1996) to July 31, 1998. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Unity First Acquisition Corp. as of July 31, 1998 and 1997, and the results of its operations and its cash flows for the years ended July 31, 1998 and 1997, for the period from inception (May 30, 1996) to July 31, 1996, and for the period from inception (May 30, 1996) to July 31, 1998, in conformity with generally accepted accounting principles. The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the financial statements, the Company is a development stage enterprise with no significant operating results to date and, at July 31, 1998, had $196 of remaining unrestricted assets available to meet its current obligations. These factors raise substantial doubt about the Company's ability to continue as a going concern. Management's plans in regards to these matters are described in Notes 1, 3 and 10. The financial statements do not include any adjustments that might result from the outcome of this uncertainty. New York, New York ARTHUR ANDERSEN LLP December 10, 1998 F-1 UNITY FIRST ACQUISITION CORP. (A DEVELOPMENT STAGE ENTITY) BALANCE SHEETS - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- ASSETS
JULY 31, --------------------- 1998 1997 ---- ---- CASH AND CASH EQUIVALENTS $ 196 $ 266,533 RESTRICTED CASH AND INVESTMENTS 6,489,707 6,198,488 ---------- ---------- ---------- ---------- TOTAL ASSETS $6,489,903 $6,465,021 ---------- ---------- ---------- ---------- LIABILITIES AND STOCKHOLDERS' EQUITY LIABILITIES: ACCRUED EXPENSES $ 379,082 $ 67,634 ADVANCES FROM AFFILIATE 33,000 -- INCOME TAXES PAYABLE -- 3,575 ---------- ---------- TOTAL LIABILITIES 412,082 71,209 ---------- ---------- COMMITMENTS AND CONTINGENCIES Common stock, $.0001 par value, 249,875 shares subject to possible conversion, at conversion value 1,297,301 1,239,380 ---------- ---------- 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 5,104,711 5,162,632 Deficit accumulated during the development stage (324,354) (8,363) ---------- ---------- TOTAL STOCKHOLDERS' EQUITY 4,780,520 5,154,432 ---------- ---------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $6,489,903 $6,465,021 ---------- ---------- ---------- ----------
See Accompanying Notes to Financial Statements. F-2 UNITY FIRST ACQUISITION CORP. (A DEVELOPMENT STAGE ENTITY) STATEMENTS OF OPERATIONS - -------------------------------------------------------------------------------- - --------------------------------------------------------------------------------
For the Year Ended July 31, From May 30, 1996 Cumulative -------------------------- (Date of Inception) Amounts 1998 1997 to July 31, 1996 from Inception ---- ---- ------------------- -------------- REVENUE $ -- $ -- $ -- $ -- ---------- --------- -------- --------- EXPENSES: General and administrative 612,237 192,489 15,000 819,726 ---------- --------- -------- --------- OTHER INCOME: Interest and dividends 296,246 202,701 -- 498,947 ---------- --------- -------- --------- OPERATING (LOSS) INCOME (315,991) 10,212 (15,000) (320,779) PROVISION FOR INCOME TAXES -- 3,575 -- 3,575 ---------- --------- -------- --------- NET (LOSS) INCOME $ (315,991) $ 6,637 $(15,000) $(324,354) ---------- --------- -------- --------- ---------- --------- -------- --------- NET (LOSS) INCOME PER COMMON SHARE - BASIC AND DILUTED $ (.17) $ -- $ (.02) --------- --------- ------- --------- --------- ------- WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING - BASIC AND DILUTED 1,875,000 1,515,000 625,000 --------- --------- ------- --------- --------- -------
See Accompanying Notes to Financial Statements. F-3 UNITY FIRST ACQUISITION CORP. (A DEVELOPMENT STAGE ENTITY) STATEMENTS OF CASH FLOWS - -------------------------------------------------------------------------------- - --------------------------------------------------------------------------------
For the Year Ended July 31, From May 30, 1996 Cumulative ---------------------------- (Date of Inception) Amounts 1998 1997 to July 31, 1996 from Inception -------- -------- ------------------- -------------- CASH FLOWS FROM OPERATING ACTIVITIES: Net (loss) income $ (315,991) $ 6,637 $ (15,000) $ (324,354) ----------- --------- ---------- ----------- CHANGES IN CERTAIN ASSETS AND LIABILITIES: Increase in accrued expenses 311,448 92,634 -- 404,082 (Decrease) increase in income taxes payable (3,575) 3,575 -- -- ----------- --------- ---------- ----------- NET CASH (USED IN) PROVIDED BY OPERATING ACTIVITIES (8,118) 102,846 (15,000) 79,728 ----------- --------- ---------- ----------- CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from issuance of common stock -- 6,402,112 63 6,402,175 Advances from affiliate 33,000 55,417 40,500 128,917 Repayment to affiliate -- (95,917) -- (95,917) Deferred registration costs -- -- (25,000) (25,000) ----------- --------- ---------- ----------- NET CASH PROVIDED BY FINANCING ACTIVITIES 33,000 6,361,612 15,563 6,410,175 ----------- --------- ---------- ----------- CASH FLOWS FROM INVESTING ACTIVITIES: (Increase) in restricted cash and investments (291,219) (6,198,488) -- (6,489,707) ----------- --------- ---------- ----------- NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS (266,337) 265,970 563 196 CASH AND CASH EQUIVALENTS, beginning of period 266,533 563 -- -- ----------- --------- ---------- ----------- CASH AND CASH EQUIVALENTS, end of period $ 196 $ 266,533 $ 563 $ 196 ----------- --------- ---------- ----------- ----------- --------- ---------- -----------
See Accompanying Notes to Financial Statements. F-4 UNITY FIRST ACQUISITION CORP. (A DEVELOPMENT STAGE ENTITY) STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY FOR THE PERIOD MAY 30, 1996 (DATE OF INCEPTION) THROUGH JULY 31, 1996 AND EACH OF THE YEARS ENDED JULY 31, 1998 AND 1997 - -------------------------------------------------------------------------------- - --------------------------------------------------------------------------------
Deficit Additional Accumulated During Common Stock Paid-In the Development Shares Par Value Capital Stage Total ------ --------- ---------- ----------------- ----- Issuance of stock to original founders for cash, at par value 625,000 $ 63 $ -- $ -- $ 63 Net (loss) for the period May 30, 1996 (date of inception) through July 31, 1996 -- -- -- (15,000) (15,000) --------- -------- ---------- --------- ---------- Balance, July 31, 1996 625,000 63 -- (15,000) (14,937) Issuance of units to public, net of shares subject to possible conversion 1,000,125 100 5,162,632 -- 5,162,732 Net income for the year ended July 31, 1997 -- -- -- 6,637 6,637 --------- -------- ---------- --------- ---------- Balance, July 31, 1997 1,625,125 163 5,162,632 (8,363) 5,154,432 Net (loss) for the year ended July 31, 1998 -- -- -- (315,991) (315,991) Increase in value attributable to common shares subject to possible conversion -- -- (57,921) -- (57,921) --------- -------- ---------- --------- ---------- Balance, July 31, 1998 1,625,125 $ 163 $5,104,711 $(324,354) $4,780,520 --------- -------- ---------- --------- ---------- --------- -------- ---------- --------- ----------
See Accompanying Notes to Financial Statements. F-5 UNITY FIRST ACQUISITION CORP. (A DEVELOPMENT STAGE ENTITY) NOTES TO FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- NOTE 1 - ORGANIZATION AND OPERATIONS Unity First Acquisition Corp. ("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 2 - 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. 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 options 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 operations. F-6 UNITY FIRST ACQUISITION CORP. (A DEVELOPMENT STAGE ENTITY) NOTES TO FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- NOTE 3 - OFFERING OF SECURITIES On November 12, 1996, Unity completed its initial public offering (the "Offering") consisting of the sale of 1,250,000 units (the "Units"). Each Unit consisted of one share of Unity's Common Stock ("Common Stock"), $.0001 par value, one Class A Redeemable Warrant (the "A Warrants") and one Class B Redeemable Warrant (the "B Warrants"). Each A Warrant and B Warrant entitles the holder to purchase from Unity one share of Common Stock at an exercise price of $5.50 and $7.50, respectively, commencing on the later of a Business Combination or November 12, 1997. The A Warrants and B Warrants are redeemable, each as a class, in whole and not in part, at the option of Unity and with the consent of the managing underwriter ("Underwriter") upon 30 days notice at any time after the Warrants become exercisable, only in the event that the reported high bid price of the Common Stock is at least $8.50 per share, with respect to the Class A Warrants, and $10.50 per share, with respect to the Class B Warrants for the 20 consecutive trading days immediately prior to notice of redemption, at a price of $.05 per A Warrant or B Warrant. The Warrants are immediately separable and transferable. In connection with the Offering, Unity granted the Underwriter an option, exercisable within 45 business days from November 12, 1996, to purchase up to 187,500 additional Units at $6.00 per unit. This option, which was solely for the purpose of covering over-allotments, was not exercised by the Underwriter either in whole or in part prior to its expiration date. None of the A and B Warrants have been exercised through July 31, 1998. Net proceeds of the Offering to Unity including the purchase of warrants by the Underwriter, discussed below, were $6,402,112, after deducting related expenses. Ninety percent (90%) of the net proceeds are held in an interest bearing Trust Fund until the earlier of (i) written notification by 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 Unity (See Note 10). Unity's Certificate of Incorporation requires that in the event that Unity does not effect a Business Combination within eighteen months from the date of the Offering, Unity will be dissolved and Unity will distribute to all Public Stockholders in proportion to their respective equity interests in Unity, an aggregate sum equal to Unity's book value, calculated as of the approval date of such proposal. In this regard, Unity's Initial Stockholders, including all of the officers and directors of Unity, have agreed to waive their respective rights to participate in any such liquidation distribution (See Note 10). F-7 UNITY FIRST ACQUISITION CORP. (A DEVELOPMENT STAGE ENTITY) NOTES TO FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- NOTE 3 - OFFERING OF SECURITIES (CONTINUED) All of Unity's Initial Stockholders, including all of its officers and directors, have agreed to vote their respective shares of Common Stock in accordance with the vote of the majority of all non-affiliated future stockholders of Unity with respect to a Business Combination. In addition, Unity stock owned by all of the executive officers and directors of Unity, their affiliates and by all persons owning 5% or more of the currently outstanding shares of Common Stock was placed in escrow until the earlier of (i) the occurrence of a Business Combination or (ii) 18 months from the date of the Offering. During the escrow period, such stockholders are not able to sell or otherwise transfer their respective shares of Common Stock, but will retain all other rights as stockholders of Unity, including, without limitation, the right to vote such shares of Common Stock. In connection with the Offering, Unity sold to the Underwriter and its designees, for $100, warrants (the "Underwriter's Warrants") to purchase up to 125,000 Units at an exercise price of $6.60 per Unit. The Underwriter's Warrants will be exercisable for a period of five years commencing on November 12, 1996. The Underwriter's Warrants are not redeemable and have not been exercised. NOTE 4 - RESTRICTED CASH AND INVESTMENTS Unity, pursuant to the terms of 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 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 Unity (See Note 10). NOTE 5 - CAPITAL STOCK Unity's Certificate of Incorporation authorizes the issuance of 20,000,000 shares of Common Stock. There are 14,862,500 authorized but unissued shares of Common Stock available for issuance (after appropriate reserves for the issuance of Common Stock in connection with the Class A Redeemable Warrants and Class B Redeemable Warrants, the Underwriters' Warrants, the executive officers and directors' Class A Warrants and Class B Warrants, and future grants under Unity's 1996 Stock Option Plan). Unity's Board of Directors has the power to issue any or all of the future grants under the Company's 1996 Stock Option Plan. Unity's Board of Directors has the power to issue any or all of the authorized but unissued Common Stock without stockholder approval. F-8 UNITY FIRST ACQUISITION CORP. (A DEVELOPMENT STAGE ENTITY) NOTES TO FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- NOTE 5 - CAPITAL STOCK (CONTINUED) Unity currently has no commitments to issue any shares of Common Stock other than as described in the Offering; however, Unity will, in all likelihood, issue a substantial number of additional shares in connection with a Business Combination (See Note 10). To the extent that additional shares of Common Stock are issued, dilution to the interests of Unity's stockholders participating in the Offering will occur. The Board of Directors of Unity is empowered, without stockholder approval, to issue up to 5,000 shares of "blank check" preferred stock (the "Preferred Stock") with dividend, liquidation, conversion, voting or other rights which could adversely affect the voting power or other rights of the holders of Unity's Common Stock. To date, no shares of preferred stock have been issued. NOTE 6 - RELATED PARTY TRANSACTIONS The Chairman of the Board of Directors and the President of Unity are principal shareholders, officers and directors of Unity Venture Capital Associates Ltd. ("Venture") which owns shares in Unity. Beginning June 1, 1996, commensurate with Unity's activities primarily related to the Offering, Unity agreed to pay Venture a monthly fee of $7,500 for general and administrative services, including the use of office space in premises occupied by Venture. At July 31, 1998, Unity owed $33,000 to Venture for administrative services. Through July 31, 1996, Unity had obtained advances totaling $25,500 from Venture to cover expenses related to the Offering. These advances were repaid out of the proceeds of the Offering in 1997. F-9 UNITY FIRST ACQUISITION CORP. (A DEVELOPMENT STAGE ENTITY) NOTES TO FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- NOTE 7 - STOCK OPTION PLAN On May 30, 1996, Unity's Board of Directors approved a stock option plan (the "Plan"). The Plan, which is subject to shareholder approval, provides for issuance of up to 187,500 options (the "Options") to acquire shares of Unity's Common Stock. The Options are intended to qualify either as incentive stock options ("Incentive Stock Options") within the meaning of Section 422 of the Internal Revenue Code of 1986 or as options which are not intended to meet the requirements of such section ("Nonstatutory Stock Options"). The Options may be granted under the Plan to persons who, in the case of Incentive Stock Options, are key employees (including officers) of the Company, or, in the case of Nonstatutory Stock Options, are key employees (including officers) and nonemployee directors of the Company, except that Nonstatutory Stock Options may not be granted to a holder of more than 10% of the total voting power of Unity. The exercise price of all Incentive Stock Options granted under the Plan must be at least equal to the fair market value of such shares on the date of grant or, in the case of Incentive Stock Options granted to the holder of 10% or more of Unity's Common Stock, at least 110% of the fair market value of such shares on the date of grant. The exercise price of all Nonstatutory Stock Options granted under the Plan shall be determined by the Board of Directors of Unity at the time of grant. The maximum exercise period for which the Options may be granted is ten years from the date of grant (five years in the case of Incentive Stock Options granted to an individual owning more than 10% of Unity's Common Stock.) The aggregate fair market value (determined at the date of the option grant) of such shares with respect to which Incentive Stock Options are exercisable for the first time by the holder of the option during any calendar year shall not exceed $100,000. The FASB issued Statement of Financial Accounting Standards No. 123, "Accounting for Stock Based Compensation" ("SFAS 123"), which requires companies either to reflect in their financial statements or reflect as supplemental disclosure the impact on earnings and earnings per share of the fair value of stock based compensation using certain pricing models for the option component of stock option plans. As of July 31, 1998, no options have been granted under the Plan. Disclosure, as required by SFAS 123, will be made upon the issuance of options. F-10 UNITY FIRST ACQUISITION CORP. (A DEVELOPMENT STAGE ENTITY) NOTES TO FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- NOTE 8 - INCOME TAXES Income taxes are accounted for in accordance with Statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes." Under this method, deferred income taxes are determined based on differences between the tax bases of assets and liabilities and their financial reporting amounts at each year end, and are measured based on enacted tax rates and laws that will be in effect when the differences are expected to reverse. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount expected to be realized. NOTE 9 - CONTINGENCY Unity has agreed to indemnify the Underwriter against certain liabilities, including liabilities under the Securities Act. NOTE 10 - 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. F-11 UNITY FIRST ACQUISITION CORP. (A DEVELOPMENT STAGE ENTITY) NOTES TO FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- NOTE 10 - PENDING ACQUISITIONS (CONT'D) On December 10, 1998, Unity entered into a letter of intent to effectuate a Business Combination with GraphOn Corporation, 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. Subject to its submission under the Securities Exchange Act of 1934, as amended, of proxy solicitation materials, 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 Stockholders 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 Cerficate of Incorporation or the Business Combination with GraphOn, the Company may liquidate. The accompanying financial statements have not been presented on a liquidation basis of accounting as the Company has not decided to liquidate. Additionally, it is not expected that the carrying value of the Company's assets and liabilities would be materially different if presented under a liquidation basis based on the nature of such assets and liabilities. F-12 EX-27 2 FINANCIAL DATA SCHEDULE
5 12-MOS JUL-31-1998 JUL-31-1998 196 0 0 0 0 6,489,903 0 0 6,489,903 412,082 0 0 0 163 6,077,658 6,489,903 0 0 0 612,237 0 0 0 (315,991) 0 (315,991) 0 0 0 (315,991) (.17) (.17)
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