7/25/06
Dear Fellow Shareholders,
It has been my pleasure to speak with many of you recently, and I would
like to provide a brief update of the Company's activities as we continue to
commercialize our advanced data management products, services and technologies.
Many of your questions and concerns are about the decline in
quarter-over-quarter revenues, the Company's level of operating expenses and the
lead times on current revenue opportunities. We share these concerns and are
aggressively working on these and other key aspects of our Company's
fundamentals as we continue to gain traction and move from development stage to
full commercialization of our technologies, products and services. Because we
continue to incur operating losses as we focus on sales expansion and product
development, we are still dependent on the continued support of our current
shareholders and the additional funding from our investors to finalize our "Push
to Profitability."
We are staying intently focused on two objectives, which are 1)
building consistent, predictable, repeatable sales revenues, and 2) enhancing
and protecting our corporate assets. To accomplish our sales objectives, we are
delivering on our current contracts and aggressively working the new sales and
partnering opportunities in our pipeline. For the latter, we have enhanced our
products over the last year and have reached new levels of technological
automation that allow for a more efficient solution for an expanded set of
customers that requires fewer human resources while providing a superior quality
of deliverables. We are also working strategically through the patent process on
many aspects of our products and technologies to protect and enhance the
company's intellectual property. In addition to these objectives we have also
been implementing cost-saving strategies to help streamline our operations. I
would like to touch on some of these activities briefly.
Current Contracts
We have successfully completed work on a number of our
previously-announced projects, which have allowed us to prove our capabilities,
advance our products/technologies and enhance and automate our delivery
processes and procedures. Because our products and solutions are not limited to
the voter-registration solutions we initially deployed, our voter registration
efforts have introduced us to new sales opportunities in state agencies and
private enterprises. These organizations wrestle with similar data extraction,
transformation and loading (ETL) and database migration/conversion projects, and
include public safety, department of motor vehicles, education, independent
software vendors and others.
As we have previously discussed, along with these successes there have
been several voter-registration projects that have been delayed or cancelled
because expected state funding for the projects has not yet materialized and the
maturity of the state-wide voter registration/election management products have
not met the federally-imposed deadlines. These issues have directly affected our
original expectations for revenue growth, which were based on project milestones
and additional sales expectations in voter registrations database conversion.
I'm happy to report that the projects that had been delayed are now
back underway, and we are working to complete our deliverables.
Sales & Partner Opportunities
Despite these setbacks, we have advanced the levels of automation in
our solutions and found new sales opportunities that are very exciting. We are
aggressively pursuing these opportunities and are energized by the reception we
have received. Our contract announcements with companies like Caselle, Inc. and
Syscon Justice Systems are the result of aggressively pursuing new sales
opportunities, and we are anxious to announce others in the near future. Our
sales pipeline is filling and continues to grow from three key areas:
* ETL Solutions for Education: As we announced recently, our ETL
Solution for State Education Reporting is another opportunity
for us to leverage our existing products, services and
relationships to solve a problem that is very real, clearly
defined and well funded. This solution has received great
interest and very positive reactions from state and district
educators who are focusing on how they can deliver on their
new and enhanced reporting requirements. Over the last year of
its development, this solution has also provided some
excellent opportunities to work with established partners and
customers.
* Custom Database Migration/Conversion: This category includes
the projects we have engaged for state and local government
agencies and our continued work with Accenture, Unisys and
Syscon Justice Systems are examples of these types of
projects. These provide larger opportunities for us with
top-tier partners that are able to take advantage of our
advanced solutions for the complex needs of the large-scale
database migrations. Although the sales cycles for these
projects are longer, they provide invaluable exposure and
relationships we hope to leverage for future sales.
* ISV Solution Sales - Standardized Database Conversion: Through
our sales and marketing activities we have identified a very
fertile target market that offers a large number of repeatable
and sustainable sales opportunities. These target customers
are Independent Software Vendors (ISV's) that sell
applications that require some form of database migration or
conversion for their customers to reap the full benefits of
their products. Our recently-announced relationship with
Caselle Inc. is such an ISV, and we have identified numerous
groups of software companies in a variety of industries that
need help providing this vital database conversion to their
clients. By partnering with these entities, we provide them
with a strong competitive advantage and hope to gain
long-term, repeatable sales.
Like many of you we have been extremely concerned about the
longer-than-expected lead times for some of these opportunities to mature and
deliver on their potential. We have learned a great deal about how to manage and
project lead times, but these inherent long lead times of the custom database
migration/conversion and education sales have motivated us to expand our sales
efforts to the ISV businesses.
Cost-Saving Strategies
In light of the delays in our originally-forecasted revenue and the
lead times necessary for new sales, we have reviewed our operations and
implemented a corporate streamlining plan and cost-saving strategy over the last
two months. The plan includes the review of all expenses, trimming the Company's
workforce by 15 employees and adopting a contractor-based personnel model that
will allow the Company to more effectively scale operations to match project
needs and capital resources. The reduction in force and the additional
streamline changes are expected to result in an immediate cost savings of over
$200,000 per quarter and will help bring the Company's expenses more in line
with its current stage of development.
Most of the employees affected by the reduction were originally hired
as part of the Company's ramp up for the state voter registration projects. We
believe we have the finest employees anywhere, so these actions were not easy,
but we believe they were necessary. This streamlining plan provides the Company
with more flexibility for future growth and brings our cost structure more in
line with current revenue and shareholder expectations. As we are expanding our
product offerings and sales focus, we hope to work with many of these former
employees on a contractual and full-time basis in the future.
In closing, I would like to let you know that we will hold our annual
shareholder meeting in early September. This meeting will be held in Orem, Utah
near our corporate offices. Our annual report and proxy statement, which you
should receive shortly, will provide all of the details. We hope that you will
be able to attend that meeting, as we will be discussing the current "state of
the Company" and have several business items to present.
This is a very exciting time to be involved with Aradyme, and I want
you to understand our commitment to making this an extremely successful company
for everyone concerned. When I reflect on the challenges and successes we've had
to date, I'm reminded of the classic "innovator's solution" by Clayton
Christiansen, that so accurately describes companies with profound (or
`disruptive') technologies and their paths to success. To quote from the book:
"Smaller, disruptive companies are actually more capable of pursuing emerging
growth markets...these advantages add up to enormous opportunity."
We appreciate beyond words the continued the support, patience, and
vision of our shareholders as we continue to commercialize this incredibly
dynamic technology. We leave our doors open for any shareholders who happen to
be in Utah to come by and see the operation and hear about our current
activities. We remain extremely excited and encouraged by the activities that
lie before us and the developments the future holds for Aradyme.
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Sincerely,
James R. Spencer
CEO
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This letter 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. Aradyme intends 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 Aradyme's future
strategic plans, goals or objectives are also forward-looking statements.
Although Aradyme has 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 letter. 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 Aradyme believes that the
expectations reflected in the forward-looking statements are reasonable, it
cannot guarantee future results, levels of activity, performance or
achievements. The forward-looking information is based on present circumstances
and on Aradyme's predictions respecting events that have not occurred, that may
not occur, or that may occur with different consequences from those now assumed
or anticipated. For a discussion of additional contingencies and uncertainties
to which information respecting future events is subject, see Aradyme's Annual
Report on Form 10-KSB for the year ended September 30, 2004, and other SEC
reports.
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