UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-QSB
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED December 31, 2003
Commission File No. 000-50038
ARADYME CORPORATION
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(Exact name of small business issuer as specified in its charter)
Delaware
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(State or other jurisdiction of incorporation or organization)
33-0619254
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(IRS Employer Identification No.)
677 East 700 South, Suite 201
American Fork, Utah 84003
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(Address of principal executive offices)
(801) 756-9585
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(Issuer's telephone number)
n/a
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(Former name, former address and former fiscal year,
if changed since last report)
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[ ]
State the number of shares outstanding of each of the issuer's classes
of common equity, as of the latest practicable date. The number of shares of
$0.001 par value common stock outstanding as of February 20, 2004, was
18,765,110.
Transitional Small Business Disclosure Format (Check one): Yes[X] No[ ]
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
The accompanying unaudited financial statements have been prepared in
accordance with the instructions to Form 10-QSB pursuant to the rules and
regulations of the Securities and Exchange Commission and, therefore, do not
include all information and footnotes necessary for a complete presentation of
our financial position, results of operations, cash flows, and stockholders'
deficit in conformity with generally accepted accounting principles. In the
opinion of management, all adjustments considered necessary for a fair
presentation of the results of operations and financial position have been
included and all such adjustments are of a normal recurring nature.
Our unaudited consolidated balance sheet at December 31, 2003, and our
audited consolidated balance sheet at September 30, 2003, and the related
unaudited consolidated statements of operations and cash flows for the
three-month periods ended December 31, 2003 and 2002, are attached hereto.
2
ARADYME CORPORATION AND SUBSIDIARY
(A Development Stage Company)
Consolidated Balance Sheets
ASSETS
December 31, September 30,
2003 2003
--------------- --------------
(Unaudited)
CURRENT ASSETS
Cash $ 89,260 $ 55,296
Accounts receivable 9,625 -
--------------- --------------
Total Current Assets 98,885 55,296
--------------- --------------
PROPERTY AND EQUIPMENT, NET 109,354 121,574
--------------- --------------
OTHER ASSETS
Other assets - 259
Deposits and prepaid expenses 3,958 3,958
--------------- --------------
Total Other Assets 3,958 4,217
--------------- --------------
TOTAL ASSETS $ 212,197 $ 181,087
=============== ==============
The accompanying notes are an integral part of these unaudited consolidated financial statements.
3
ARADYME CORPORATION AND SUBSIDIARY
(A Development Stage Company)
Consolidated Balance Sheets (Continued)
LIABILITIES AND STOCKHOLDERS' DEFICIT
December 31, September 30,
2003 2003
--------------- --------------
(Unaudited)
CURRENT LIABILITIES
Accounts payable $ 144,868 $ 169,782
Accounts payable - related party 62,500 80,300
Accrued expenses 168,981 146,285
Notes payable - related party 358,840 358,840
Notes payable 215,000 135,000
--------------- --------------
Total Current Liabilities 950,189 890,207
--------------- --------------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' DEFICIT
Preferred stock: 1,000,000 shares authorized of $0.001 par value,
12,000 and 12,000 shares issued and outstanding, respectively 12 12
Common stock: 50,000,000 shares authorized of $0.001 par value,
15,642,425 and 15,135,501 shares issued and outstanding, respectively 15,642 15,135
Additional paid-in capital 1,971,655 1,733,392
Deficit accumulated during the development stage (2,725,301) (2,457,659)
--------------- --------------
Total Stockholders' Deficit (737,992) (709,120)
--------------- --------------
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT $ 212,197 $ 181,087
=============== ==============
The accompanying notes are an integral part of these unaudited consolidated financial statements.
4
ARADYME CORPORATION AND SUBSIDIARY
(A Development Stage Company)
Consolidated Statements of Operations and Other Comprehensive Loss
(Unaudited)
From
Inception
February 13,
For the Three Months Ended 2001, Through
December 31, December 31,
2003 2002 2003
-------------- --------------- -----------------
REVENUES $ 17,000 $ 15,995 $ 86,731
-------------- --------------- -----------------
OPERATING EXPENSES
Depreciation and Amortization 12,220 7,668 100,797
Rent 12,270 15,474 127,022
Contract services 160,428 152,387 1,864,405
General and administrative 75,263 34,300 613,324
-------------- --------------- -----------------
Total Operating Expenses 260,181 209,829 2,705,548
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LOSS FROM OPERATIONS (243,181) (193,834) (2,618,817)
-------------- --------------- -----------------
OTHER INCOME (EXPENSE)
Loss on sale of marketable securities - - (6,804)
Gain on sale of assets - - 10,342
Interest expense (24,461) (103) (110,022)
-------------- --------------- -----------------
Total Other Income (Expense) (24,461) (103) (106,484)
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NET LOSS (267,642) (193,937) (2,725,301)
-------------- --------------- -----------------
OTHER COMPREHENSIVE LOSS
Unrealized loss on available-for-sale securities - 22,000 -
TOTAL COMPREHENSIVE LOSS $ (267,642) $ (215,937) $ (2,725,301)
============== =============== =================
BASIC AND DILUTED LOSS PER SHARE $ (0.02) $ (0.02)
============== ===============
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING 15,386,312 12,605,674
-------------- ---------------
The accompanying notes are an integral part of these unaudited consolidated financial statements.
5
ARADYME CORPORATION AND SUBSIDIARY)
(A Development Stage Company)
Consolidated Statements of Cash Flows
(Unaudited)
From
Inception on
February 13,
For the Three Months Ended 2001, Through
December 31, December 31,
2003 2002 2003
---------------- ---------------- ----------------
CASH FLOWS FROM OPERATING ACTIVITIES $ (267,642) $ (193,937) $ (2,725,301)
Net loss
Adjustments to reconcile net loss to net cash used by operating activities:
Depreciation and amortization 12,220 7,668 100,797
Bad debt - - 15,247
Loss on sale of marketable securities - - 6,804
Gain on disposal of assets - - (10,342)
Warrants and options issued below market value 17,425 - 190,526
Common stock issued for services 16,625 - 50,350
Changes in assets and liabilities:
(Increase) in accounts receivable (9,625) (4,100) (9,625)
Decrease in employee advances - 100 -
Decrease in deposits and prepaids 340 - 3,877
Increase (decrease) in accounts payable and related party payables (42,795) (13,056) 269,228
Increase in accrued expenses 22,696 14,316 168,981
(Decrease) in deferred revenue - (5,400) -
---------------- ---------------- ----------------
Net Cash Used by Operating Activities (250,756) (194,409) (1,939,458)
---------------- ---------------- ----------------
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from sale of marketable securities - - 50,196
Purchase of fixed assets - (8,250) (30,407)
---------------- ---------------- ----------------
Net Cash Used by Investing Activities - (8,250) 19,789
---------------- ---------------- ----------------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from notes payable 80,000 - 220,000
Payments on notes payable - - (5,000)
Proceeds from related party notes payable - - 358,738
Payments on related party notes payable - - (157,897)
Preferred stock issued for cash - - 60,000
Common stock issued for cash 204,720 199,450 1,571,079
Payments on leases payable - (525) (27,643)
Stock offering costs - - (10,348)
---------------- ---------------- ----------------
Net Cash Provided by Financing Activities 284,720 198,925 2,008,929
---------------- ---------------- ----------------
NET INCREASE (DECREASE) IN CASH 33,964 (3,734) 89,260
CASH AT BEGINNING OF PERIOD 55,296 47,032 -
---------------- ---------------- ----------------
CASH AT END OF PERIOD $ 89,260 $ 43,298 $ 89,260
================ ================ ================
The accompanying notes are an integral part of these unaudited consolidated financial statements.
6
ARADYME CORPORATION AND SUBSIDIARY
(A Development Stage Company)
Consolidated Statements of Cash Flows (Continued)
(Unaudited)
From
Inception on
February 13,
For the Three Months Ended 2001, Through
December 31, December 31,
2003 2002 2003
---------------- --------------- ----------------
CASH PAID FOR:
Interest $ - $ - $ 30,755
Income taxes $ - $ - $ -
NON-CASH TRANSACTIONS:
Fixed assets acquired under a note payable $ - $ - $ 186,658
Common stock issued for investment $ - $ - $ 57,000
Common stock issued for services $ 16,625 $ - $ 50,350
Warrants and options granted below market value $ 17,425 $ - $ 190,526
The accompanying notes are an integral part of these unaudited consolidated financial statements.
7
ARADYME CORPORATION AND SUBSIDIARY
(A Development Stage Company)
Consolidated Notes to the Financial Statements
December 31, 2003 and September 30, 2003
NOTE 1 - BASIS OF FINANCIAL STATEMENT PRESENTATION
The accompanying unaudited condensed consolidated financial statements
of Aradyme Corporation and Subsidiary (the Company) have been prepared
by the Company pursuant to the rules and regulations of the Securities
and Exchange Commission. Certain information and footnote disclosures
normally included in consolidated financial statements prepared in
accordance with accounting principles generally accepted in the United
States of America have been condensed or omitted in accordance with
such rules and regulations. The information furnished in the interim
condensed consolidated financial statements includes normal recurring
adjustments and reflects all adjustments that, in the opinion of
management, are necessary for a fair presentation of such consolidated
financial statements. Although management believes the disclosures and
information presented are adequate to make the information not
misleading, it is suggested that these interim condensed consolidated
financial statements be read in conjunction with the Company's most
recent audited consolidated financial statements and notes included in
its annual report on Form 10-KSB for the fiscal year ended September
30, 2003, filed January 14, 2004. Operating results for the three
months ended December 31, 2003, are not necessarily indicative of the
results that may be expected for the year ending September 30, 2004.
NOTE 2 - GOING CONCERN
The Company's consolidated financial statements are prepared using
accounting principles generally accepted in the United States of
America applicable to a going concern that contemplates the realization
of assets and liquidation of liabilities in the normal course of
business. The Company has not yet established an ongoing source of
revenues sufficient to cover its operating costs and allow it to
continue as a going concern. The ability of the Company to continue as
a going concern is dependent on the Company obtaining adequate capital
to fund operating losses until it becomes profitable.
In order to continue as a going concern, develop a reliable source of
revenues, and achieve a profitable level of operations, the Company
will need, among other things, additional capital resources. Management
is in the process of negotiating additional contracts to increase
revenues. Management estimates that the Company will require
approximately $1,000,000 in cash to fund its activities through
September 30, 2004, which it will seek to obtain principally through
the sale of securities. The Company expects that additional capital
will be required in future fiscal years if it is unable to generate
sufficient revenues from commercialization of its products. However,
management cannot provide any assurances that the Company will be
successful in accomplishing any of its plans.
The ability of the Company to continue as a going concern is dependent
upon its ability to successfully accomplish the plans described in the
preceding paragraph and eventually secure other sources of financing
and attain profitable operations. The accompanying consolidated
financial statements do not include any adjustments that might be
necessary if the Company is unable to continue as a going concern.
8
ARADYME CORPORATION AND SUBSIDIARY
(A Development Stage Company)
Consolidated Notes to the Financial Statements
December 31, 2003 and September 30, 2003
NOTE 3 - MATERIAL EVENTS
In October through December 2003, the Company issued 371,924 shares of
common stock for cash of approximately $154,720, or $0.416 per share.
In December 2003, the Company issued 100,000 shares of common stock for
cash of $50,000, or $0.50 per share.
The Company granted one-year warrants to purchase 240,384 shares at
$1.00 per share to an investor associated with the issuance of 240,384
shares of common stock for cash in October 2003 at $0.416 per share.
In conjunction with an agreement with an independent contractor to
provide executive services, on December 2, 2003, the Company agreed to
issue such contractor 35,000 shares of common stock and granted him
options to purchase 150,000 shares of common stock at $0.50 per share,
vesting over three years with 25% vested upon issue and 25% vesting on
each of the first three anniversaries, exercisable on or before
December 2, 2009. The Company recorded $16,625 in expense associated
with the issuance of stock and $17,425 associated with the issuance of
options.
NOTE 4 - STOCK OPTIONS AND WARRANTS
In conjunction with an independent contractor agreement, the Company
granted options to purchase 150,000 shares of common stock at $0.50 per
share, vesting over three years with 25% vested upon issue and 25%
vesting on each of the first three anniversaries, exercisable on or
before December 2, 2009.
In conjunction with the sale of stock for cash, the Company issued
warrants to purchase 240,384 shares of common stock at $1.00 per share.
The warrants vested immediately and expire on October 17, 2004.
The Company estimated the fair value of the stock option at the date of
grant by using the Black-Scholes option pricing model based on the
following assumptions: Risk-free interest rate of 1.53%; expected life
of six years; expected volatility of 203%; and dividend yield of 0.00%.
All of the options issued to employees for services were issued either
at or above the fair value of the Company's common stock on the date of
issue, and no compensation expense was recognized. No options were
issued to employees during the periods ended December 31, 2003 and
2002.
9
ARADYME CORPORATION AND SUBSIDIARY
(A Development Stage Company)
Consolidated Notes to the Financial Statements
December 31, 2003 and September 30, 2003
NOTE 4 - STOCK OPTIONS AND WARRANTS (Continued)
A summary of the status of the Company's stock options and warrants as
of December 31, 2003 and 2002, and changes during the periods ending on
those dates is presented below:
2003 2002
---------------------- -------------------------
Weighted Weighted
Average Average
Exercise Exercise
Shares Price Shares Price
--------- ---------- --------- -----------
Outstanding, beginning of period 4,305,000 $ 0.42 1,000,000 $ 0.42
Granted 390,384 0.53 - -
Canceled - - - -
Exercised - - - -
--------- ---------- --------- -----------
Outstanding, end of year 4,695,384 $ 0.45 1,000,000 $ 0.42
--------- ---------- --------- -----------
Exercisable, end of year 3,922,884 $ 0.46 1,000,000 $ 0.42
--------- ---------- --------- -----------
Outstanding Exercisable
----------------------------------------- -------------------------
Weighted
Average Weighted Weighted
Number Remaining Average Number Average
Outstanding Contractual Exercise Exercisable Exercise
Option Grants at 12/31/03 Life Price at 12/31/03 Price
------------- ----------- ----------- --------- ----------- ----------
Employee (5/1/02) 1,000,000 3.42 $ 0.42 1,000,000 $ 0.42
Consultant (2/6/03) 325,000 3.42 0.50 325,000 0.50
Officers (9/30/03) 2,100,000 9.74 0.42 2,100,000 0.42
Consultant (9/30/03) 880,000 5.73 0.42 220,000 0.42
Investor warrants
(10/17/03) 240,384 0.79 1.00 240,384 1.00
Consultant (12/2/03) 150,000 5.93 0.50 37,500 0.50
--------- --------- ---------- --------- -----------
4,695,384 6.60 $ 0.45 3,922,884 $ 0.46
========= ========= ========== ========= ===========
10
ARADYME CORPORATION AND SUBSIDIARY
(A Development Stage Company)
Consolidated Notes to the Financial Statements
December 31, 2003 and September 30, 2003
NOTE 5 - SUBSEQUENT EVENTS
In January 2004, an officer of the Company converted $200,000 of debt,
plus accrued interest, into 1,731,429 shares of common stock in
accordance with the terms of a convertible note.
In February 2004, the Company issued 1,391,256 shares of common stock
for cash of $695,628, or $0.50 per share.
11
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS
General
The Company develops, manufactures, markets and distributes computer
database management software based on proprietary technology that is being
acquired. Because of the relatively short period, results for any given interim
period may not be indicative of comparative results for longer periods or for
the year as a whole.
Liquidity and Capital Resources
As of December 31, 2003, we had negative working capital of $851,304,
as compared to negative working capital of $834,911 as of September 30, 2003. As
of December 31, 2003, we had a deficit accumulated during the development stage
of $2,725,301 and a total stockholders' deficit of $737,992, as compared to a
stockholders' deficit of $709,120 as of September 30, 2003. The auditors' report
for the year ended September 30, 2003, as with previous years, contained an
explanatory paragraph regarding our ability to continue as a going concern.
Since inception, we have relied principally on proceeds from the sale
of securities and advances from related parties to fund our activities. During
the three months ended December 31, 2003, we used $250,756 in cash for operating
activities, which was provided by net cash of $284,720 provided by financing
activities resulting in a $33,964 increase in cash during the period. Financing
activities provided cash of $204,720 from the sale of common stock and $80,000
from proceeds from a note payable. From inception through December 31, 2003, we
required an aggregate of $1,939,458 in cash to fund our operating activities,
provided by $19,789 from investing activities and $2,008,929 from financing
activities, consisting of $1,620,731 in net proceeds from the sale of common and
preferred stock and $578,738 in advances from related parties and others.
We estimate that we will require approximately $1,000,000 in cash to
fund our activities through September 30, 2004, which we will seek to obtain
principally through the sale of securities. We have no commitment from any
person to acquire all or any of such securities or to provide funding through
any other mechanism. We expect that additional capital will be required in
future fiscal years if we are unable to generate sufficient revenues from
commercialization of our database management systems.
Results of Operations
Our revenues from the commercialization of our database management
system were relatively immaterial in amount at $17,000 or less during both the
three months ended December 31, 2003 and 2002, as compared to our ongoing
substantial operating expenses.
Our principal operating expense is for employee and consultant contract
services with those providing principal technical and other services. We obtain
required technical and other services under independent contractor relationships
accounted for as consulting services, but intend to convert some of these
independent contractors to employees, which could increase our costs for payroll
burdens and employee benefits. Contract services increased 5.3% for the three
months ended December 31, 2003, as compared to the same quarter a year earlier,
as we increased our efforts to bring our initial products to market. General and
administrative costs increased 119.4% during the three months ended December 31,
2003, as compared to the previous fiscal year, reflecting increased product
development activity.
12
As noted above, we obtain most of our technical services under
independent contractor agreements with consultants and record the related costs
as contract services separate from general and administrative expenses. If
contract services and general and administrative services were reported
together, the combined amount of $235,691 for the quarter ended December 31,
2003, would be an increase of $49,004, or 26.2%, over the $186,687 for the same
quarter in the preceding fiscal year.
Other operating expenses did not vary materially in the three-month
interim periods ended December 31 in the current fiscal year as compared to a
year earlier.
Because of this early stage of our business development, revenue and
operating expense comparisons between various interim periods may not be
indicative of expected future results of operations. Generally, we expect that
operating expenses will continue to grow during the ongoing initial marketing
efforts as anticipated increased sales will require additional expenditures for
sales and marketing and implementation services. It may be some time before our
sales and marketing and implementation resources are capable of supporting
substantially expanded sales without corresponding increases in operating
expenses.
Other income and expenses during the three months ended December 31,
2003, consist principally of interest accrued on borrowings from a related
party. We had insignificant interest because of an insignificant amount of
borrowings during the first quarter of the preceding fiscal year.
Other Items
We have reviewed all other recently issued, but not yet adopted,
accounting standards in order to determine their effects, if any, on our results
of operations or financial position. Based on that review, we believe that none
of these pronouncements will have a significant effect on current or future
financial position or results of operations.
Critical Accounting Policies
Software Development Costs
Development costs related to software products are expensed as incurred
until technological feasibility of the product has been established. Based on
our product development process, technological feasibility is established upon
completion of a working model. Costs incurred by us between completion of the
working model and the point at which the product is ready for general release
have not been significant. Accordingly, no costs have been capitalized to date.
Revenue Recognition
We recognize revenue in accordance with Statement of Position ("SOP")
97-2, "Software Revenue Recognition," as amended by SOP 98-9, and generally
recognize revenue when all of the following criteria are met as set forth in
paragraph 8 of SOP 97-2: (i) persuasive evidence of an arrangement exists, (ii)
delivery has occurred, (iii) the fee is fixed or determinable, and (iv)
collectibility is probable. We define each of these four criteria as follows:
Persuasive evidence of an arrangement exists. It is our customary
practice to have a written contract, which is signed by both the customer and
the Company, or a purchase order from those customers who have previously
negotiated a standard license arrangement with us.
Delivery has occurred. Our software is physically delivered to the
customer. If an arrangement includes undelivered products or services that are
essential to the functionality of the delivered product, delivery is not
considered to have occurred until these products or services are delivered.
13
The fee is fixed or determinable. Our policy is not to provide
customers the right to a refund of any portion of their license fees paid.
Generally, 100% of the invoiced fees are due within 30 days. Payment terms
extending beyond these customary payment terms are considered not to be fixed or
determinable, and revenues from such arrangements are recognized as payments
become due and payable.
Collectibility is probable. Collectibility is assessed on a
customer-by-customer basis. If it is determined from the outset of an
arrangement that collectibility is not probable, revenues would be recognized as
cash is collected.
For contracts with multiple elements (e.g., license and maintenance),
revenue is allocated to each component of the contract based on vendor specific
objective evidence ("VSOE") of its fair value, which is the price charged when
the elements are sold separately. Since VSOE has not been established for
license transactions, the residual method is used to allocate revenue to the
license portion of multiple-element transactions. Therefore, we recognize the
difference between the total arrangement fee and the amount deferred for the
undelivered items as revenue.
We sell our products to end users under license agreements. The fee
associated with such agreements is allocated between software license revenue
and maintenance revenue based on the residual method. Software license revenue
from these agreements is recognized upon receipt and acceptance of a signed
contract and delivery of the software, provided the related fee is fixed and
determinable, collectibility of the revenue is probable, and the arrangement
does not involve significant customization of the software. If an acceptance
period is required, revenue is recognized upon the earlier of customer
acceptance or the expiration of the acceptance period, as defined in the
applicable software license agreement.
We recognize maintenance revenue ratably over the life of the related
maintenance contract. Maintenance contracts on perpetual licenses generally
renew annually. We typically invoice and collect maintenance fees on an annual
basis at the anniversary date of the license. Deferred revenue represents
amounts received by us in advance of performance of the maintenance obligation.
Professional services revenue includes fees derived from the delivery of
training, installation, and consulting services. Revenue from training,
installation, and consulting services is recognized on a time and materials
basis as the related services are performed.
Forward-Looking Statements
This report contains statements about the future, sometimes referred to
as "forward-looking" statements. Forward-looking statements are typically
identified by the use of the words "believe," "may," "should," "expect,"
"anticipate," "estimate," "project," "propose," "plan," "intend" and similar
words and expressions. We intend that the forward-looking statements will be
covered by the safe harbor provisions for forward-looking statements contained
in Section 27A of the Securities Act of 1933 and Section 21E of the Securities
Exchange Act of 1934. Statements that describe our future strategic plans, goals
or objectives are also forward-looking statements.
14
Although we have attempted to identify important factors that could
cause actual results to differ materially, there may be other factors that cause
the forward-looking statements not to come true as described in this report.
These forward-looking statements are only predictions. Should one or more of
these risks or uncertainties materialize, or should underlying assumptions prove
incorrect, actual results may vary materially. While we believe that the
expectations reflected in the forward-looking statements are reasonable, we
cannot guarantee future results, levels of activity, performance or
achievements.
The forward-looking information is based on present circumstances and
on our predictions respecting events that have not occurred, that may not occur,
or that may occur with different consequences from those now assumed or
anticipated.
ITEM 3. CONTROLS AND PROCEDURES
We maintain disclosure controls and procedures that are designed to
ensure that information required to be disclosed by us in the reports that we
file or submit to the Securities and Exchange Commission under the Securities
Exchange Act of 1934, as amended, is recorded, processed, summarized and
reported within the time periods specified by the Securities and Exchange
Commission's rules and forms, and that information is accumulated and
communicated to our management, including our principal executive and principal
financial officers (whom we refer to in this periodic report as our Certifying
Officers), as appropriate to allow timely decisions regarding required
disclosure. Our management evaluated, with the participation of our Certifying
Officers, the effectiveness of our disclosure controls and procedures as of
December 31, 2003, pursuant to Rule 13a-15(b) under the Securities Exchange Act.
Based upon that evaluation, our Certifying Officers concluded that, as of
December 31, 2003, our disclosure controls and procedures were effective.
There were no changes in our internal control over financial reporting
that occurred during our most recently completed fiscal quarter that have
materially affected, or are reasonably likely to materially affect, our internal
control over financial reporting.
15
PART II--OTHER INFORMATION
ITEM 2. CHANGES IN SECURITIES AND
SMALL BUSINESS ISSUER PURCHASES OF EQUITY SECURITIES
During the quarter ended December 31, 2003, we issued an aggregate of
506,924 shares of common stock in the following transactions:
During the quarter ended December 31, 2003, we sold an aggregate of
371,924 shares of our restricted common stock for cash of $154,720, or $0.416
per share, and an aggregate of 100,000 shares of our common stock for cash of
$50,000, or $0.50 per share, to five people, one of whom was an accredited
investor and one of whom was not a U.S. citizen or resident. During such
quarter, the market price for our common stock ranged from approximately $0.13
to $0.70 per share. Prior to investing, each of the foregoing investors had
access to our periodic reports filed under the Securities Exchange Act and was
provided with information about our business and financial condition, risks and
prospects.
In conjunction with the sale of shares of stock for cash to the
accredited investor as described above, we issued warrants to purchase 240,384
shares of common stock at $1.00 per share. The warrants vested immediately and
expire on October 17, 2004. During such quarter, the market price for our common
stock ranged from approximately $0.13 to $0.70 per share. Prior to investing,
the foregoing investor had access to our periodic reports filed under the
Securities Exchange Act and was provided with information about our business and
financial condition, risks and prospects.
In conjunction with an agreement with an independent contractor to
provide executive services, on December 2, 2003, we agreed to issue such
contractor 35,000 shares of common stock and granted him options to purchase
150,000 shares of common stock at $0.50 per share, vesting over three years with
25% vested upon issue and 25% vesting on each of the first three anniversaries,
exercisable on or before December 2, 2009. On the date this option was granted,
the market price for our common stock was approximately $0.46 per share. Prior
to investing, the foregoing investor had access to our periodic reports filed
under the Securities Exchange Act and was provided with information about our
business and financial condition, risks and prospects.
All of the foregoing transactions were the result of arm's-length
negotiations. Each investor was provided with our business and financial
information, including access to our periodic reports as filed with the
Securities and Exchange Commission, and the opportunity to ask questions
directly of our executive officers. Each purchaser acknowledged in writing that
the securities purchased were restricted securities taken for investment and
that the certificates representing the shares would bear a restrictive legend.
The certificates for the shares issued in the transactions bear a restrictive
legend conspicuously on their face, and stop-transfer instructions are noted
respecting the certificates on our stock transfer records. No underwriter
participated in the foregoing placement of securities. The foregoing
transactions were effected in reliance on the exemption from registration
provided in Section 4(2) of the Securities Act of 1933 as transactions not
involving any public offering and Rule 506 of Regulation D thereunder.
16
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits. The following exhibits are filed as a part of this
report:
SEC
Exhibit Reference
Number Number Title of Document Location
- -------------- -------------- --------------------------------------------------------------- ---------------------
Item 31 Rule 13a-14(a)/15d-14(a) Certifications
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31.01 31 Certification of Principal Executive Officer Pursuant to Rule Attached
13a-14
31.02 31 Certification of Principal Financial Officer Pursuant to Attached
Rule 13a-14
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Item 32 Section 1350 Certifications
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32.01 32 Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Attached
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
(Chief Executive Officer)
32.02 32 Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Attached
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
(Chief Financial Officer)
(b) Reports on Form 8-K. During the quarter ended December 31, 2003, we
did not file any reports on Form 8-K.
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
ARADYME CORPORATION
(Registrant)
Date: February 23, 2004 By /s/ James R. Spencer
--------------------------------
James R. Spencer, Chairman
(Chief Executive Officer)
Date: February 23, 2004 By /s/ Merwin D. Rasmussen
--------------------------------
Merwin D. Rasmussen, Secretary
(Chief Financial Officer)
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