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 MARCH 31, 2004
Commission File No. 000-50038
ARADYME CORPORATION
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(Exact name of small business issuer as specified in its charter)
Delaware 33-0619254
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(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
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 May 12, 2004, was 22,906,046.
Transitional Small Business Disclosure Format (Check one): Yes [ ] No [X]
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
The accompanying unaudited consolidated 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' equity (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 March 31, 2004, and our
audited consolidated balance sheet at September 30, 2003, and the related
unaudited consolidated statements of operations for the three- and six-month
periods and cash flows for the six-month periods ended March 31, 2004 and 2003,
are attached hereto.
2
ARADYME CORPORATION AND SUBSIDIARY
(A Development Stage Company)
Consolidated Balance Sheets
ASSETS
March 31, September 30,
2004 2003
-------------- --------------
(Unaudited)
CURRENT ASSETS
Cash $ 1,216,839 $ 55,296
Accounts receivable 5,393 -
-------------- --------------
Total Current Assets 1,222,232 55,296
-------------- --------------
PROPERTY AND EQUIPMENT, NET 111,105 121,574
-------------- --------------
OTHER ASSETS
Other assets 184 259
Deposits and prepaid expenses 3,958 3,958
-------------- --------------
Total Other Assets 4,142 4,217
-------------- --------------
TOTAL ASSETS $ 1,337,479 $ 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' EQUITY (DEFICIT)
March 31, September 30,
2004 2003
-------------- --------------
(Unaudited)
CURRENT LIABILITIES
Accounts payable $ 37,442 $ 169,782
Accounts payable - related party - 80,300
Accrued expenses 166,719 146,285
Notes payable - related party - 358,840
Notes payable - 135,000
-------------- --------------
Total Current Liabilities 204,161 890,207
-------------- --------------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY (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, 22,906,046 and 15,135,501 shares issued and
outstanding, respectively 22,906 15,135
Additional paid-in capital 4,403,243 1,733,392
Stock subscription receivable (50,000) -
Deficit accumulated during the development stage (3,242,843) (2,457,659)
-------------- --------------
Total Stockholders' Equity (Deficit) 1,133,318 (709,120)
-------------- --------------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY (DEFICIT) $ 1,337,479 $ 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
For the Three Months Ended For the Six Months Ended February 13,
March 31, March 31, 2001, through
---------------------------------- --------------------------------- March 31,
2004 2003 2004 2003 2004
-------------- -------------- -------------- -------------- --------------
REVENUES $ 2,933 $ 25,255 $ 19,933 $ 41,250 $ 89,664
OPERATING EXPENSES
Depreciation and
amortization 12,758 8,677 24,978 16,345 113,555
Rent 6,812 12,380 19,082 27,854 133,834
Contract services 83,221 301,708 243,649 454,095 1,947,626
General and administrative 392,295 39,356 467,558 73,656 1,005,619
-------------- -------------- -------------- -------------- --------------
Total Operating Expenses 495,086 362,121 755,267 571,950 3,200,634
-------------- -------------- -------------- -------------- --------------
LOSS FROM OPERATIONS (492,153) (336,866) (735,334) (530,700) (3,110,970)
OTHER INCOME (EXPENSE)
Loss on sale of marketable securities - (1,993) - (1,993) (6,804)
Gain on sale of assets - - - - 10,342
Interest expense (25,389) (17,177) (49,850) (17,820) (135,411)
-------------- -------------- -------------- -------------- --------------
Total Other Income (Expense) (25,389) (19,170) (49,850) (19,273) (131,873)
-------------- -------------- -------------- -------------- --------------
NET LOSS (517,542) (356,036) (785,184) (549,973) (3,242,843)
-------------- -------------- -------------- -------------- --------------
OTHER COMPREHENSIVE LOSS
Unrealized loss on
available-for-sale securities - (300) - (22,300) -
-------------- -------------- -------------- -------------- --------------
TOTAL COMPREHENSIVE LOSS $ (517,542) $ (356,336) $ (785,184) $ (572,273) $ (3,242,843)
============== ============== ============== ============== ==============
BASIC AND DILUTED LOSS
PER SHARE $ (0.03) $ (0.03) $ (0.05) $ (0.04)
============== ============== ============== ==============
WEIGHTED AVERAGE
NUMBER OF SHARES
OUTSTANDING 18,176,653 13,080,966 16,773,858 12,947,364
============== ============== ============== ==============
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
For the Six Months Ended February 13,
March 31, 2001, through
-------------------------------- March 31,
2004 2003 2004
-------------- -------------- --------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $ (785,184) $ (549,973) $ (3,242,843)
Adjustments to reconcile net loss to net cash
used by operating activities:
Depreciation and amortization 24,978 16,345 113,555
Bad debt - - 15,247
Loss on sale of marketable securities - 1,993 6,804
Gain on disposal of assets - - (10,342)
Warrants and options issued below market value 17,425 211,012 190,526
Common stock issued for services 16,625 32,001 50,350
Changes in assets and liabilities:
(Increase) in accounts receivable (5,393) (12,788) (5,393)
(Increase) in other assets (184) (1,554) (184)
(Increase) decrease in deposits and prepaids 259 (10,000) (3,958)
Increase (decrease) in accounts payable and
related party payables (212,640) 14,101 107,137
Increase in accrued expenses 107,476 19,288 253,761
(Decrease) in deferred revenue - (5,400) -
-------------- -------------- --------------
Net Cash Used by Operating Activities (836,638) (284,975) (2,525,340)
-------------- -------------- --------------
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from sale of marketable securities - - 50,196
Purchase of fixed assets (14,509) (8,250) (44,916)
-------------- -------------- --------------
Net Cash Provided (Used) by Investing Activities (14,509) (8,250) 5,280
-------------- -------------- --------------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from notes payable 80,000 - 220,000
Payments on notes payable (15,000) - (20,000)
Proceeds from related party payable - 15,000 358,738
Payments on related party payable (15,758) - (173,655)
Preferred stock issued for cash - - 60,000
Common stock issued for cash 1,963,448 232,450 3,329,807
Payments on leases payable - - (27,643)
Stock offering costs - - (10,348)
-------------- -------------- --------------
Net Cash Provided by Financing Activities 2,012,690 247,450 3,736,899
-------------- -------------- --------------
NET INCREASE (DECREASE) IN CASH 1,161,543 (45,775) 1,216,839
CASH AT BEGINNING OF PERIOD 55,296 47,032 -
-------------- -------------- --------------
CASH AT END OF PERIOD $ 1,216,839 $ 1,257 $ 1,216,839
============== ============== ==============
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
For the Six Months Ended February 13,
March 31, 2001, through
-------------------------------- March 31,
2004 2003 2004
-------------- -------------- --------------
CASH PAID FOR:
Interest $ 4,643 $ - $ 35,398
Income taxes $ - $ - $ -
NON-CASH TRANSACTIONS:
Fixed assets acquired under a note payable $ - $ - $ 186,658
Notes payable and accrued interest converted to common stock $ 657,624 $ - $ 657,624
Common stock issued for investment $ - $ - $ 57,000
Common stock issued for services $ 16,625 $ 32,001 $ 50,350
Common stock issued for subscription receivable $ 50,000 $ - $ 50,000
Warrants and options granted below market value $ 17,425 $ 211,012 $ 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
March 31, 2004, 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, and its quarterly report on Form
10-QSB for the quarterly period ended December 31, 2003, filed February
23, 2004. Operating results for the three and six months ended March
31, 2004, are not necessarily indicative of the results that may be
expected for longer periods or the entire year.
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
March 31, 2004, and September 30, 2003
NOTE 3 - MATERIAL EVENTS
In January 2004, the Company issued 1,731,429 shares of restricted
common stock to a related party on exercise of his rights to convert
$242,400 in principal and interest of a note payable owed by the
Company at the conversion price of $0.14 per share.
During the quarter ended March 31, 2004, the Company sold 3,617,456
shares of its restricted common stock for cash of $1,758,728 and a
stock subscription receivable of $50,000, or $0.50 per share.
On March 29, 2004, the Company issued 533,192 shares of restricted
common stock to a related party on exercise of its rights to convert
$221,808 in principal and interest of a note payable owed by the
Company at the conversion price of $0.416 per share.
On March 31, 2004, the Company issued 568,086 shares of restricted
common stock to a related party on exercise of his rights to convert
$79,533 in principal and interest of a note payable owed by the Company
at the conversion price of $0.14 per share.
On March 31, 2004, the Company issued 813,458 shares of restricted
common stock to a related party on exercise of its rights to convert
$113,884 in principal and interest of a note payable owed by the
Company at the conversion price of $0.14 per share.
NOTE 4 - STOCK OPTIONS AND WARRANTS
No stock options or warrants were granted, exercised or canceled in the
quarter ended March 31, 2004.
A summary of the status of the Company's stock options and warrants as
of March 31, 2004, and September 30, 2003, and changes during the
six-month period ended March 31, 2004, and the 12-month period ended
September 30, 2003, is presented below:
2004 2003
------------------------- ------------------------
Weighted Weighted
Average Average
Exercise Exercise
Shares Price Shares Price
--------- --------- --------- ---------
Outstanding, beginning of period 4,305,000 $ 0.43 1,000,000 $ 0.42
Granted 390,384 0.81 3,305,000 0.43
Canceled - - - -
Exercised - - - -
--------- --------- --------- ---------
Outstanding, end of year 4,695,384 $ 0.45 4,305,000 $ 0.43
--------- --------- --------- ---------
Exercisable, end of year 3,922,884 $ 0.46 3,645,000 $ 0.43
--------- --------- --------- ---------
9
ARADYME CORPORATION AND SUBSIDIARY
(A Development Stage Company)
Consolidated Notes to the Financial Statements
March 31, 2004, and September 30, 2003
NOTE 4 - STOCK OPTIONS AND WARRANTS (continued)
Outstanding Exercisable
--------------------------------------- -----------------------
Weighted
Average Weighted Weighted
Number Remaining Average Number Average
Outstanding Contractual Exercise Exercisable Exercise
Option Grants at 3/31/04 Life Price at 3/31/04 Price
--------- --------- --------- --------- ---------
Employee (5/1/02) 1,000,000 3.17 $ 0.42 1,000,000 $ 0.42
Consultant (2/6/03) 325,000 3.17 0.50 325,000 0.50
Officers (9/30/03) 2,100,000 9.49 0.42 2,100,000 0.42
Consultant (9/30/03) 880,000 5.48 0.42 220,000 0.42
Investor warrants
(10/17/03) 240,384 0.54 1.00 240,384 1.00
Consultant (12/2/03) 150,000 5.68 0.50 37,500 0.50
--------- --------- --------- --------- ---------
4,695,384 6.35 $ 0.45 3,922,884 $ 0.46
========= ========= ========= ========= =========
NOTE 5 - SUBSEQUENT EVENTS
Subsequent to March 31, 2004, the Company collected $50,000 on a stock
subscription receivable.
In May 2004, the Company exercised its right to purchase for $1.00 the
software and related intellectual property on which its proprietary
Aradyme Database Management System is based. The Company remains
obligated to pay a fee equal to 10% of all future license fees
collected, up to a maximum fee of $2,000,000, with approximately
$11,000 paid as of May 2004.
10
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 acquired proprietary technology. 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 entire year.
Liquidity and Capital Resources
As of March 31, 2004, we had working capital of $1,018,071, as compared
to negative working capital of $834,911 as of September 30, 2003. As of March
31, 2004, we had a deficit accumulated during the development stage of
$3,242,843 and total stockholders' equity of $1,133,318 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 six months ended March 31, 2004, we used $836,638 in cash for operating
activities and $14,509 for investing activities, which was provided by net cash
of $2,012,690 from financing activities, resulting in a $1,161,543 increase in
cash during the period. Financing activities provided cash of $1,963,448 from
the sale of restricted common stock and proceeds of $80,000 from a note payable.
From inception through March 31, 2004, we required an aggregate of $2,525,342 in
cash to fund our operating activities, provided by $5,282 from investing
activities and $3,736,899 from financing activities, consisting of $3,389,807 in
net proceeds from the sale of restricted common and preferred stock and $578,738
in advances from related parties and others, less $221,298 in debt payments.
Subsequent to March 31, 2004, we received $50,000 in net proceeds from
the sale of 100,000 shares of restricted common stock.
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
In relation to our operating expenses, our revenues from the
commercialization of our database management system were relatively immaterial
in amount at $19,933 and $41,250 for the six months ended March 31, 2004 and
2003, respectively, and at $2,933 and $25,255 for the three months ended March
31, 2004 and 2003, respectively.
Our principal operating expense is for employee and consultant contract
services with those providing principal technical and other services.
Historically, we have obtained required technical and other services primarily
under independent contractor relationships accounted for as consulting services,
but converted most of these independent contractors to employees early in the
most recent quarter ended March 31, 2004, which increased our costs for payroll
burdens and employee benefits but decreased our contract service costs compared
to the prior quarter, and the comparable quarter and six-month periods from the
prior year. General, administrative and contract services expense increased
approximately 39% and 35% for the three- and six-month periods ended March 31,
2004, respectively, as compared to the same periods from a year earlier, as we
increased our efforts to bring our initial products to market and increased our
product development activity.
11
Other operating expenses, including rent and depreciation, did not vary
materially in the three- and six-month periods ended March 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 six months ended March 31, 2004,
consist principally of interest accrued on borrowings from related parties.
Interest expense increased from $17,820 in the six-month period ended March 31,
2003, to $49,850 in the six-month period ended March 31, 2004, and from $17,177
in the quarter ended March 31, 2003, to $25,389 in the quarter ended March 31,
2004, as we increased borrowing levels in the recent six-month period. Interest
expense is expected to decline significantly in future periods as a result of
the pay off or conversion to common stock of all outstanding notes payable
during the quarter.
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 us, 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.
12
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.
13
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
March 31, 2004, pursuant to Rule 13a-15(b) under the Securities Exchange Act.
Based upon that evaluation, our Certifying Officers concluded that, as of March
31, 2004, 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.
14
PART II--OTHER INFORMATION
ITEM 2. CHANGES IN SECURITIES AND SMALL BUSINESS ISSUER
PURCHASES OF EQUITY SECURITIES
During the quarter ended March 31, 2004, we issued an aggregate of
7,263,621 shares of restricted common stock in the following transactions.
We sold an aggregate of 3,617,456 shares of our restricted common stock
for cash of $1,758,728 and a stock subscription receivable of $50,000, or $0.50
per share, in a private offering to several investors. During such quarter, the
market price for our common stock ranged from approximately $0.70 to $4.05 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.
On January 7, 2004, we issued 1,731,429 shares of restricted common
stock to a related party on exercise of his rights to convert $242,400 in
principal and interest of a note payable owed by us at the conversion price of
$0.14 per share. On that day, the market price for our common stock was $0.70
per share.
On March 29, 2004, we issued 533,192 shares of restricted common stock
to a related party on exercise of its rights to convert $221,808 in principal
and interest of a note payable owed by us at the conversion price of $0.416 per
share. On that day, the market price for our common stock was $3.45 per share.
On March 31, 2004, we issued 568,086 shares of restricted common stock
to a related party on exercise of his rights to convert $79,533 in principal and
interest of a note payable owed by us at the conversion price of $0.14 per
share. On that day, the market price for our common stock was $3.80 per share.
On March 31, 2004, we issued 813,458 shares of restricted common stock
to a related party on exercise of its rights to convert $113,884 in principal
and interest of a note payable owed by us at the conversion price of $0.14 per
share. On that day, the market price for our common stock was $3.80 per share.
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. Each
investor was either an accredited investor or a sophisticated investor who was
reasonably believed prior to the investment, either alone or with its purchaser
representative, to have had such knowledge and experience in financial and
business matters that it was capable of evaluating the merits and risks of the
investment. 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.
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ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits. The following exhibits are filed as a part of this
report:
Exhibit Number
Title of Document Location
- ---------------- ---------------------------------------------------- --------
Item 31 Rule 13a-14(a)/15d-14(a) Certifications
- ---------------- ---------------------------------------------------- --------
31.01 Certification of Principal Executive Officer Attached
Pursuant to Rule 13a-14
31.02 Certification of Principal Financial Officer Attached
Pursuant to Rule 13a-14
Item 32 Section 1350 Certifications
- ---------------- ---------------------------------------------------- --------
32.01 Certification Pursuant to 18 U.S.C. Section 1350, Attached
as Adopted Pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002 (Chief Executive
Officer)
32.02 Certification Pursuant to 18 U.S.C. Section 1350, Attached
as Adopted Pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002 (Chief Financial
Officer)
- ----------------
* All exhibits are numbered with the number preceding the decimal indicating
the applicable SEC reference number in Item 601 and the number following
the decimal indicating the sequence of the particular document. Omitted
numbers in the sequence refer to documents previously filed as an exhibit,
but no longer required.
(b) Reports on Form 8-K. We did not report any items on Form 8-K during
the quarter ended March 31, 2004.
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: May 20, 2004 By /s/ James R. Spencer
-------------------------------
James R. Spencer, Chairman
(Chief Executive Officer)
Date: May 20, 2004 By /s/ Merwin D. Rasmussen
-------------------------------
Merwin D. Rasmussen, Secretary
(Chief Financial Officer)
16