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 JUNE 30, 2004
Commission File No. 000-50038
ARADYME CORPORATION
----------------------------------------------------------------
(Exact name of small business issuer as specified in its charter)
Delaware 33-0619254
-------------------------------- ---------------------------------
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
677 East 700 South, Suite 201
American Fork, Utah 84003
----------------------------------------
(Address of principal executive offices)
(801) 756-9585
--------------------------
(Issuer's telephone number)
n/a
-----------------------------------------------------
(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 August 16, 2004, was 23,151,046.
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 June 30, 2004, our audited
consolidated balance sheet at September 30, 2003, and the related unaudited
consolidated statements of operations for the three- and nine-month periods and
cash flows for the nine-month periods ended June 30, 2004 and 2003, are attached
hereto.
2
ARADYME CORPORATION AND SUBSIDIARY
(A Development Stage Company)
Consolidated Balance Sheets
ASSETS
June 30, September 30,
2004 2003
------------- -------------
(Unaudited)
CURRENT ASSETS
Cash $ 706,015 $ 55,296
Accounts receivable 10,433 -
------------- -------------
Total Current Assets 716,448 55,296
------------- -------------
PROPERTY AND EQUIPMENT, NET 94,506 121,574
------------- -------------
OTHER ASSETS
Other assets - 259
Deposits and prepaid expenses 4,960 3,958
------------- -------------
Total Other Assets 4,960 4,217
------------- -------------
TOTAL ASSETS $ 815,914 $ 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)
June 30, September 30,
2004 2003
------------- -------------
(Unaudited)
CURRENT LIABILITIES
Accounts payable $ 22,233 $ 169,782
Accounts payable - related party - 80,300
Accrued expenses 96,033 146,285
Notes payable - related party - 358,840
Notes payable - 135,000
------------- -------------
Total Current Liabilities 118,266 890,207
------------- -------------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY (DEFICIT)
Preferred stock: 1,000,000 shares authorized of $0.001
par value, 0 and 12,000 shares issued and
outstanding, respectively - 12
Common stock: 50,000,000 shares authorized of $0.001
par value, 23,151,046 and 15,135,501 shares issued and
outstanding, respectively 23,151 15,135
Additional paid-in capital 4,465,510 1,733,392
Deficit accumulated during the development stage (3,791,013) (2,457,659)
------------- -------------
Total Stockholders' Equity (Deficit) 697,648 (709,120)
------------- -------------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY (DEFICIT) $ 815,914 $ 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 For the Nine Months Ended 2001, through
June 30, June 30, June 30,
2004 2003 2004 2003 2004
------------- ------------- ------------- ------------- -------------
REVENUES $ 7,920 $ 5,000 $ 27,853 $ 46,250 $ 97,584
------------- ------------- ------------- ------------- -------------
OPERATING EXPENSES
Depreciation and
amortization 26,388 8,504 51,366 24,849 139,943
Rent 13,668 12,270 32,750 40,124 147,502
Contract services 12,866 314,324 256,515 768,419 1,960,492
General and administrative 502,886 32,703 970,444 106,359 1,508,505
------------- ------------- ------------- ------------- -------------
Total Operating Expenses 555,808 367,801 1,311,075 939,751 3,756,442
------------- ------------- ------------- ------------- -------------
LOSS FROM OPERATIONS (547,888) (362,801) (1,283,222) (893,501) (3,658,858)
OTHER INCOME (EXPENSE)
Other loss - - - (1,993) (6,804)
Gain on sale of assets - 12,335 - 12,335 10,342
Interest expense (282) ( 9,942) (50,132) (27,222) (135,693)
------------- ------------- ------------- ------------- -------------
Total Other Income (Expense) (282) 2,393 (50,132) (16,880) (132,155)
------------- ------------- ------------- ------------- -------------
NET LOSS (548,170) (360,408) (1,333,354) (910,381) (3,791,013)
------------- ------------- ------------- ------------- -------------
OTHER COMPREHENSIVE LOSS
Unrealized loss on
available-for-sale securities - (1,500) - (23,800) -
------------- ------------- ------------- ------------- -------------
TOTAL COMPREHENSIVE LOSS $ (548,170) $ (361,908) $ (1,333,354) $ (934,181) $ (3,791,013)
============= ============= ============= ============= =============
BASIC AND DILUTED LOSS
PER SHARE $ (0.02) $ (0.02) $ (0.07) $ (0.06)
============= ============= ============= =============
WEIGHTED AVERAGE
NUMBER OF SHARES
OUTSTANDING 23,032,365 14,810,239 18,880,773 14,585,715
============= ============= ============= =============
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
Nine Months Ended February 13,
June 30, 2001, through
--------------------------------- June 30,
2004 2003 2004
------------- ------------- -------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $ (1,333,354) $ (910,381) $ (3,791,013)
Adjustments to reconcile net loss to net cash
used by operating activities:
Depreciation and amortization 51,366 24,849 139,943
Bad debt - - 15,247
Loss on sale of marketable securities - 1,993 6,804
Gain on disposal of assets - (12,335) (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 (10,433) (6,468) (10,433)
(Increase) in other assets - 46 -
(Increase) decrease in deposits and prepaids (743) (10,000) (4,960)
Increase (decrease) in accounts payable and
related party payables (227,849) 88,760 91,928
Increase in accrued expenses 14,290 37,436 160,575
(Decrease) in deferred revenue - (5,400) -
------------- ------------- -------------
Net Cash Used by Operating Activities (1,472,673) (548,487) (3,161,375)
------------- ------------- -------------
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from sale of marketable securities - - 50,196
Purchase of fixed assets (24,298) (8,250) (54,705)
------------- ------------- -------------
Net Cash Provided (Used) by Investing Activities (24,298) (8,250) (4,509)
------------- ------------- -------------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from notes payable 80,000 5,372 220,000
Payments on notes payable (15,000) - (20,000)
Proceeds from related party payable - 120,060 358,738
Payments on related party payable (15,758) (20,076) (173,655)
Preferred stock issued for cash - - 60,000
Common stock issued for cash 2,075,948 404,349 3,442,307
Proceeds from subscription receivable 50,000 - 50,000
Payments on leases payable - - (27,643)
Stock offering costs (27,500) - (37,848)
------------- ------------- -------------
Net Cash Provided by Financing Activities 2,147,690 509,705 3,871,899
------------- ------------- -------------
NET INCREASE (DECREASE) IN CASH 650,719 (47,032) 706,015
CASH AT BEGINNING OF PERIOD 55,296 47,032 -
------------- ------------- -------------
CASH AT END OF PERIOD $ 706,015 $ - $ 706,015
============= ============= =============
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
Nine Months Ended February 13,
June 30, 2001, through
--------------------------------- June 30,
2004 2003 2004
------------- ------------- -------------
CASH PAID FOR:
Interest $ 4,925 $ 124 $ 35,680
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
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
June 30, 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 March 31, 2004, filed May 21,
2004. Operating results for the three and nine months ended June 30,
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 $2,000,000 in cash to fund its activities for the next 12
months, 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
June 30, 2004, and September 30, 2003
NOTE 3 - MATERIAL EVENTS
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
$15,000 paid as of June 30, 2004.
During the quarter ended June 30, 2004, the Company collected $50,000
on a stock subscription receivable and issued 125,000 shares of its
restricted common stock for cash of $62,500, or $0.50 per share, to a
shareholder who had subscribed as part of the private offering that
commenced in the first quarter and completed in the third quarter.
On June 30, 2004, upon request, two preferred shareholders converted
12,000 issued and outstanding shares of convertible preferred stock
into 120,000 shares of common stock in the Company.
NOTE 4 - STOCK OPTIONS AND WARRANTS
No stock options or warrants were granted, exercised or cancelled in
the quarter ended June 30, 2004.
A summary of the status of the Company's stock options and warrants as
of June 30, 2004, and September 30, 2003, and changes during the
nine-month period ended June 30, 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 period 4,695,384 $ 0.45 4,305,000 $ 0.43
--------- ---------
Exercisable, end of period 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
June 30, 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 6/30/04 Life Price at 6/30/04 Price
------------- ----------- ----------- --------- ----------- -----------
Employee (5/1/02) 1,000,000 2.84 $ 0.42 1,000,000 $ 0.42
Consultants (2/6/03) 325,000 2.75 0.50 325,000 0.50
Officers (9/30/03) 2,100,000 9.26 0.42 2,100,000 0.42
Consultants (9/30/03) 880,000 5.25 0.42 220,000 0.42
Warrants (10/17/03) 240,384 0.30 1.00 240,384 1.00
Consultant (12/2/03) 150,000 5.43 0.50 37,500 0.50
--------- ---------
4,695,384 6.11 $ 0.45 3,922,884 $ 0.46
========= =========
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.
Management believes that the most notable trend in our financial
performance is the substantial increase in our total operating expenses, which
increased approximately 51% and 40% for the three- and six-month periods ended
June 30, 2004, respectively. These increases are the result of our efforts to
bring our initial products to market and to develop new products.
Liquidity and Capital Resources
As of June 30, 2004, we had working capital of $598,182, as compared to
negative working capital of $834,911 as of September 30, 2003. As of June 30,
2004, we had a deficit accumulated during the development stage of $3,791,013
and total stockholders' equity of $697,648, 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 nine months ended June 30, 2004, we used $1,472,673 in cash for operating
activities and $24,298 for investing activities, which was provided by net cash
of $2,147,690 from financing activities, resulting in a $650,719 increase in
cash during the period. Financing activities provided cash of $2,075,948 from
the sale of restricted common stock, $50,000 from a subscription receivable, and
proceeds of $80,000 from a note payable. From inception through June 30, 2004,
we have required an aggregate of $3,161,375 in cash to fund our operating
activities, used a net amount of $4,509 for investing activities, and raised
$3,871,899 from financing activities, consisting of $3,464,459 in net proceeds
from the sale of restricted common and preferred stock, $50,000 from a
subscription receivable, and $578,738 in advances from related parties and
others, less $221,298 in debt payments.
We estimate that we will require approximately $2,000,000 in cash to
fund our activities for the next 12 months, 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 amounts of $27,853 and $46,250 for the nine months ended June 30, 2004 and
2003, respectively, and of $7,920 and $5,000 for the three months ended June 30,
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 hired most of these independent contractors as employees early in the
11
quarter ended March 31, 2004. This 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 nine-month periods from the prior
year. Total operating expenses increased approximately 51% and 40% for the
three- and nine-month periods ended June 30, 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.
Management expects that operating expenses will continue to increase, as
additional employee resources are hired to support the anticipated growth in
data services.
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 nine months ended June 30, 2004,
consist principally of interest accrued on borrowings from related parties.
Interest expense increased from $27,222 in the nine-month period ended June 30,
2003, to $50,132 in the nine-month period ended June 30, 2004, as a result of
increased total borrowing in the recent nine-month period. Interest expense
declined to $282 in the quarter ended June 30, 2004, from $9,942 in the quarter
ended June 30, 2003, as we paid off or converted to common shares, all
outstanding notes payable as of the end of the second fiscal 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
Revenues are primarily derived from providing data services, custom
software development, and sales of software licenses and related services, which
include maintenance and support, consulting and training services. Revenues from
data services, custom software development, and license arrangements and related
services are recognized in accordance with Statement of Position ("SOP") 97-2,
"Software Revenue Recognition," as amended by SOP 98-9. We 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
12
occurred, (iii) the fee is fixed or determinable, and (iv) collectibility is
probable. The third and fourth criteria may require us to make significant
judgments or estimates. 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, defining services to be provided or software
licenses to be supplied by us, and all other key terms of the
arrangement. In the event of a standard license arrangement that has
been previously negotiated with us, a purchase order from the customer
is required.
Delivery has occurred or services have been rendered. Data
services are provided by us to customer specifications and, in the case
of software licensing, 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.
The fee is fixed or determinable. Our policy is not to provide
customers the right to a refund of any portion of their data services
fees or 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 data services and custom software development contracts, revenue is
generally pre-agreed upon as a fixed price in the customer contract. Some
contracts may include a definition of progress "milestones" or "phases" with
corresponding revenue elements established for each milestone or phase. The
standard contract defines that, if we have met all of the conditions and
requirements of that milestone or phase, then revenue is earned and billable by
us.
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 many of 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
13
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.
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 June
30, 2004, pursuant to Rule 13a-15(b) under the Securities Exchange Act. Based
upon that evaluation, our Certifying Officers concluded that, as of June 30,
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 June 30, 2004, we issued an aggregate of
245,000 shares of restricted common stock in the following transactions.
We sold 125,000 shares of our restricted common stock for cash of
$62,500, or $0.50 per share, to one accredited investor. The closing sales price
for our common stock was $2.10 per share on the date of the transaction. Prior
to investing, the 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 June 2004, two preferred shareholders converted 12,000 shares of
Series A Preferred Stock into 120,000 shares of restricted common stock. Prior
to electing to convert, each preferred shareholder 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.
Each of the above investors was an accredited investor, and each was
provided the opportunity to ask questions directly of our executive officers.
Each investor acknowledged in writing that the securities issued 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.
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.
(b) Reports on Form 8-K. During the quarter ended June 30, 2004, we
reported the following items on Form 8-K:
Date of Event Reported Item(s) Reported
----------------------- ------------------------------------------
April 2, 2004 Item 7. Financial Statements and Exhibits
Item 9. Regulation FD Disclosure
April 20, 2004 Item 5. Other Events
Item 7. Financial Statements and Exhibits
15
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: August 16, 2004 By /s/ James R. Spencer
-----------------------------
James R. Spencer, Chairman
(Chief Executive Officer)
Date: August 16, 2004 By /s/ Scott A. Mayfield
-----------------------------
Scott A. Mayfield
(Chief Financial Officer)
16