-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, SgdrxrvStPaann++WEZa92sO/gqai4jvE9s/KEQebEXclIoMzbPkGv39ruWwMdZh JeqEeLEs+gGOKfB1VaFSrQ== 0000950120-03-000042.txt : 20030121 0000950120-03-000042.hdr.sgml : 20030120 20030121154958 ACCESSION NUMBER: 0000950120-03-000042 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20021130 FILED AS OF DATE: 20030121 FILER: COMPANY DATA: COMPANY CONFORMED NAME: PALADYNE CORP CENTRAL INDEX KEY: 0001043933 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-PREPACKAGED SOFTWARE [7372] IRS NUMBER: 593562953 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10QSB SEC ACT: 1934 Act SEC FILE NUMBER: 000-22969 FILM NUMBER: 03519570 BUSINESS ADDRESS: STREET 1: 1650A GUM BRANCH RD CITY: JACKSONVILLE STATE: NC ZIP: 32830 BUSINESS PHONE: 4079091723 MAIL ADDRESS: STREET 1: 1650A GUM BRANCH ROAD CITY: JACKSONVILLE STATE: NC ZIP: 32746 FORMER COMPANY: FORMER CONFORMED NAME: SYNAPTX WORLDWIDE INC DATE OF NAME CHANGE: 19970807 10QSB 1 form10qsb_0121.txt FORM 10-QSB - 3RD QTR. 2002 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 FORM 10-QSB [x] QUARTERLY REPORT UNDER SECTION 13 0R 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Quarter Ended November 30, 2002 OR [ ] TRANSITION REPORT UNDER SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANCE ACT OF 1934 For the transition period from _____________ to ________________ Commission File Number 0-22969 Paladyne Corp. (Name of Small Business Issuer in its charter) Delaware 59-3562953 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 1650A Gum Branch Road, Jacksonville, NC 28540 (Address of Principal Executive Offices) 910-478-0097 (Issuer's Telephone Number) N/A (Former name, former address and former fiscal year, if changed since last report) Checked whether the issuer (1) filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 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 --- --- APPLICABLE ONLY TO CORPORATE ISSUERS State the number of shares outstanding of each of the issuer's classes of common equity, as of the latest practicable date. Class Outstanding as of December 31, 2002 Common Stock, $.001 PAR VALUE 16,709,351 Transitional Small Business Disclosure Format (check one): Yes No X --- --- 1 TABLE OF CONTENTS Page ---- PART I. CONSOLIDATED FINANCIAL INFORMATION Item 1. Condensed Consolidated Financial Statements 3 Condensed Consolidated Balance Sheets - November 30, 2002 and August 31, 2002 4 Condensed Consolidated Statements of Operations - three months ended November 30, 2002 and November 30, 2001 5 Condensed Consolidated Statements of Cash Flows - three months ended November 30, 2002 and November 30, 2001 6 Notes to Condensed Consolidated Financial Statements 7 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 9 Item 3. Controls and Procedures 12 PART II. OTHER INFORMATION Item 1. Legal Proceedings 13 Item 2. Changes in Securities and Use of Proceeds 13 Item 6. Exhibits and Reports on Form 8-K 13 SIGNATURES 14 2 PART I. ITEM 1. FINANCIAL STATEMENTS The following unaudited Condensed Consolidated Financial Statements for the three months ended November 30, 2002 and November 30, 2001 have been prepared by Paladyne Corp., a Delaware corporation. 3
PALADYNE CORP. CONDENSED CONSOLIDATED BALANCE SHEETS NOVEMBER 30, 2002 AUGUST 31, 2002 --------------- (Unaudited) (Audited) ----------- --------- ASSETS Current Assets: Cash and cash equivalents ................... $ 172,043 $ -- Accounts receivable, net of allowance for doubtful accounts of $350,000 at November 30, 2002 and August 31, 2002 ....... 770,509 279,883 Due from related parties .................... 600,675 548,320 Prepaid expenses and other current assets ... 72,999 77,718 ------------ ------------ Total Current Assets ..................... 1,616,226 905,921 Furniture and fixtures ............................ 369,028 369,028 Computers and software ............................ 1,945,749 1,943,193 Leasehold improvements ............................ 1,223,352 1,212,812 Accumulated depreciation .......................... (2,025,712) (1,777,258) ------------ ------------ Property and equipment, net .............. 1,512,417 1,747,775 Other assets ...................................... -- 425 ------------ ------------ $ 3,128,643 $ 2,654,121 ============ ============ LIABILITIES AND DEFICIENCY IN STOCKHOLDERS' EQUITY Current Liabilities: Cash disbursed in excess of available funds . -- $ 38,856 Accounts payable and accrued expenses ....... $ 2,816,443 2,458,591 Notes payable ............................... 5,720,000 5,350,000 Accrued preferred stock dividends ........... 200,600 190,400 Current portion of capital lease obligations 780,124 749,809 ------------ ------------ Total current liabilities ....... 9,517,167 8,787,656 Capital lease obligations ......................... 50,730 166,926 ------------ ------------ Total liabilities ............... 9,567,897 8,954,582 COMMITMENTS AND CONTINGENCIES DEFICIENCY IN STOCKHOLDERS' EQUITY Preferred stock; Series A ............................. 137 137 Series C ............................. 1,000 1,000 Common stock ............................. 16,709 16,709 Additional paid-in capital ............... 14,335,777 14,345,977 Accumulated deficit ...................... (20,792,877) (20,664,284) ------------ ------------ Total deficiency in stockholders' equity ............................. (6,439,254) (6,300,461) ------------ ------------ $ 3,128,643 $ 2,654,121 ============ ============
See accompanying notes to unaudited condensed consolidated financial statements 4
PALADYNE CORP. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE THREE MONTHS ENDED NOVEMBER, 30 NOVEMBER, 30 2002 2001 (Unaudited) (Unaudited) ----------- ----------- Total Revenues ............................. $ 2,475,050 $ 2,440,276 Cost of Revenues ........................... 1,426,876 1,316,794 ------------ ------------ Gross Profit ............................... 1,048,174 1,123,482 Selling, general and administrative expenses 776,798 1,250,829 Depreciation and amortization .............. 248,454 252,446 ------------ ------------ Total operating expense .................... 1,025,252 1,503,275 Income (loss) from operations .............. 22,922 (379,793) Other income (expense): Interest expense .................. (151,514) (173,166) ------------ ------------ Loss from operations, before income taxes ............................ (128,592) (552,959) Income tax benefits ........................ -- -- ------------ ------------ Loss ....................................... (128,592) (552,959) Cumulative Convertible Preferred Stock Dividend Requirement ........ (10,200) (10,200) ------------ ------------ Loss attributable to common stockholders ... $ (138,792) $ (563,159) ============ ============ Weighted average common shares outstanding: Basic .................... 16,709,351 16,709,351 Diluted .................. 16,709,351 16,709,351 Earnings (loss) per share: Basic .................... $ (.01) $ (.03) Diluted .................. $ (.01) $ (.03)
See accompanying notes to unaudited condensed consolidated financial statements 5
PALADYNE CORP. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE THREE MONTHS ENDED NOVEMBER, 30 NOVEMBER, 30 2002 2001 (Unaudited) (Unaudited) ----------- ----------- Cash flows used in operating activities ............. $ (99,405) $ (13,225) Cash flows provided by (used in) investing activities (12,671) (292,892) Cash flows provided by financing activities ......... 284,119 435,963 --------- --------- Net increase (decrease) in cash and cash equivalents ................................. 172,043 129,846 Cash and cash equivalents at beginning of period .... -- 158,225 --------- --------- Cash and cash equivalents at end of period .......... $ 172,043 $ 288,071 ========= ========= Supplemental Cash Flow Information: Cash paid for interest ..................... $ 151,514 $ 173,166 Non cash investing and financing activities: Accrual of preferred stock dividend ........ 10,200 10,200 Preferred shares issued in exchange for debt ................................ 300,000
See accompanying notes to unaudited condensed consolidated financial statements 6 PALADYNE CORP. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS UNAUDITED NOTE 1. BASIS OF PRESENTATION General - ------- The accompanying unaudited consolidated financial statements have been prepared in accordance with the instructions to Form 10-QSB, and therefore, do not include all the information necessary for a fair presentation of financial position, results of operations and cash flows in conformity with generally accepted accounting principles. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Accordingly, the results from operations for the three-month period ended November 30,2002 are not necessarily indicative of the results that may be expected for the year ended August 31, 2002. The unaudited consolidated financial statements should be read in conjunction with the consolidated August 31, 2002 financial statements and footnotes thereto included in the Company's SEC Form 10-KSB. Business and Basis of Presentation - ---------------------------------- Paladyne Corp. (the "Company") through a wholly-owned subsidiary, e-commerce support centers, inc., provides customer relationship management (CRM) solutions at its customer contact center in Jacksonville, NC. The consolidated financial statements include the accounts of the Company, and its wholly owned subsidiary, e-commerce support centers inc. All significant inter-company transactions and balances have been eliminated. Reclassification - ---------------- Certain reclassifications have been made to conform to prior periods' data to the current presentation. These reclassifications had no effect on reported losses. NOTE 2. SERIES A DIVIDEND The holders of the Company's Series A cumulative convertible preferred stock are entitled to receive, out of the net profits of the Company, annual dividends at the rate of $.2975 per share. If the net profits of the Company are not sufficient to pay the preferred dividend, then any unpaid portion of the dividend will be included in accrued expenses. The Company had accrued cumulative preferred stock dividends of $200,600 and $190,400 at November 30, 2002 and August 31, 2002, respectively. NOTE 3. STOCKHOLDERS' DEFICIT On September 24, 2001, the Board of Directors authorized a private placement of up to 600,000 units priced at $5.00 per unit, with a unit consisting of three shares of the Company's Series C 8% Cumulative Convertible Preferred Stock. Each Series C Preferred share is convertible into 10 shares of the Company's Common Stock at $3.00 per share. Net proceeds from this private placement as of August 31, 2002 were $1,518,130, which is net of offering expenses of $148,705. This resulted in the issuance of 1,000,101 shares of Series C Preferred Stock. 7 NOTE 4. NOTES PAYABLE Notes Payable at November 30, 2002 and August 31, 2002 are as follows:
November 30, August 31, ------------ ---------- 2002 2002 ---- ---- Note payable in quarterly installments of $377,000, including interest at 10% per annum, secured by property and $3,500,000 $ 3,500,000 equipment. This note was subsequently converted to equity. Note payable in two installments of $750,000, plus interest at 10% per annum, secured by property and equipment. The first installment is due after completion of a $3,000,000 equity or convertible debt offering by the Company and the remaining installment payment due the later of six months after the first installment payment is made and after three consecutive months of positive cash flow from operations (as defined). This note was 1,500,000 1,500,000 subsequently converted to equity. Note payable to Bank in monthly installments of interest only at the Bank's prime lending rate plus 1%, secured by accounts receivable. This note is currently in default and is currently in litigation. 350,000 350,000 Note payable to an individual and a company bearing interest at prime plus 4%, secured by all the assets of the Company and repayable on February 28, 2003 370,000 - ----------- ----------- 5,720,000 5,350,000 Less: current portion (5,720,000) (5,350,000) ----------- ----------- $ -- $ -- =========== ===========
NOTE 5. CONTINGENCY Litigation - ---------- The Company is engaged in proceedings in the Circuit Court of the 18th Judicial District, Seminole County, Florida, with SunTrust bank concerning a $350,000 line of credit that is in default. In September 2002, the bank filed a summary judgment motion, seeking $360,000 in full restitution of the money owed to it. The Company is currently in negotiations with the bank regarding repayment of this money. The Company is subject to other legal proceedings and claims, which arise in the ordinary course of its business. Although occasional adverse decisions or settlements may occur, the Company believes that the final disposition of such matters will not have material adverse effect on its financial position, results of operations or liquidity. NOTE 6. SUBSEQUENT EVENTS On December 10, 2002, the Company and Gibralter Publishing, Inc. entered into an agreement to exchange the $5,000,000 in notes payable to Gibralter for 1,000,000 shares of newly issued Series D Preferred Shares and 10,000,000 warrants for purchase of common shares of the Company. In addition, on December 4, 2002, the Company's Board of Directors approved the sale of newly issued common stock to an investment group for $750,000. The sale of the common stock is subject to shareholder approval. 8 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Overview - -------- Since the February 2001 merger with e-commerce support centers, inc. ("ecom"), Paladyne Corp. (the "Company") has provided CRM-based customer and tech support, and outbound telemarketing for business-to-business and business-to-customer needs. The Company's unaudited condensed consolidated financial statements are presented on a going concern basis, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business. As with any new venture, concerns must be considered in light of the normal problems, expenses and complications encountered by entrance into established markets and the competitive environment in which the Company operates. The unaudited condensed consolidated financial statements do not include, nor does management feel it necessary, any adjustments to reflect any possible future effects on the recoverability and classification of assets or the amounts and classification of liabilities that may result from the possible inability of the Company to continue as a going concern. The Company's independent accountant's report contained a going concern qualification for the year ended August 31, 2002. The Company maintains substantial business relationships with Gibralter Publishing, Inc. ("Gibralter"), from which it has acquired or leased a substantial portion of the ecom assets in exchange for the installment notes. Gibralter continues to be the Company's principal customer, accounting for approximately 43% of the revenues for the three-month period ended November 30, 2002. During the three months ended November 30, 2002, the Company has continued to reduce or eliminate non-critical expenses and operations. Certain personnel continue to defer all or a portion of their compensation RESULTS OF OPERATIONS - --------------------- The following table sets forth the percentage relationship to the total revenues of principal items contained in the Company's Unaudited Condensed Consolidated Statements of Operations for the three months ended November 30, 2002 and November 30, 2001, respectively. The percentages discussed throughout this analysis are stated on an approximate basis.
Three months Ended November 30, 2002 2001 ------------------- (UNAUDITED) Total revenues ........ 100% 100% Cost of revenues ...... 57.7% 53.9% ----- ----- Gross profit .......... 42.3% 46.1% Operating expenses .... 41.4% 61.6% ----- ----- Operating income (loss) .9% (15.5%) Interest expense ...... 6.1% 7.1% ----- ----- Net loss .............. (5.2%) (22.6%) ----- ----- ----- -----
9 COMPARISON OF THE THREE MONTHS ENDED NOVEMBER 30, 2002 TO THE THREE MONTHS ENDED - -------------------------------------------------------------------------------- NOVEMBER 30, 2001 - ----------------- Revenue for the three months ended November 30, 2002 and 2001 were $2,475,050, and $2,440,276, respectively; this represents an increase of 1.4% in sales. All of these revenues were derived entirely from the Company's CRM-based customer and tech support, and outbound telemarketing for business-to-business to business-to-customer operations. This slight increase is attributable to increased traditional outbound calling contracts and a reduction in revenue from the Company's inbound or non-traditional outbound contracts. Two customers, Gibralter Publishing, Inc. and Lowes Home Improvement accounted for a decline of $105,208 and $408,291, respectively during the three-month period ended November 30, 2002 compared to the same period in 2001. Cost of revenues of $1,426,876 and $1,316,794, respectively for the three months ended November 30, 2002 and 2001 were 57.7% and 53.9% of revenue for the periods. The increase in cost of sales of $110,082 or 8.3% from 2001 to 2002 is attributable to slightly higher supervisory costs associated with contracts that comprise revenue during the three months ended November 30, 2002 compared to 2001. Gross profit was $1,048,174 and $1,123,482, respectively for the three months ended November 30,2002 and 2001 and was 42.3% and 46.1% of revenue for the periods. The decrease in gross profit percentage is due to the slightly higher costs associated with the 2002 revenue. Operating expenses, including depreciation and amortization, have decreased as a percentage of revenue from 61.6% for the three months ended November 30, 2001 to 41.4% for the three months ended November 30, 2002. This decrease as a percentage of revenue is due primarily to the significant reduction in all areas of the Company's general and administrative costs. These reductions were necessitated by the Company's continued operating losses. The reduction in depreciation and amortization expenses was only $3,992 or less than 1% of revenue for the three months ended November 30,2002. Interest expense, as percentage of revenue, decreased from 7.1% to 6.1% during the three months ended November 30,2001 as compared to the three months ended November 30,2002. The decrease from $173,166 to $151,514 is due to continued reduction in the interest expense related to the Company's capital leases. LIQUIDITY AND CAPITAL RESOURCES - ------------------------------- The Company is not generating any cash from operations and it has no cash resources. The Company is in default on the $350,000 loan agreement with a bank and has been unable to meet its obligations under the $5,000,000 notes to Gibralter Publishing, Inc. The payments on various capital leases are also in arrears. This situation and the anticipated need for working capital for the Company to increase its marketing and revenue base has resulted in the Board of Directors taking certain actions intended to stabilize the Company and provide it with a chance to succeed in the future. On December 10, 2002, the Company and Gibralter Publishing, Inc. agreed to exchange the $5,000,000 in notes for 1,000,000 shares of Series D Preferred shares and 10,000,000 warrants for purchase of common shares of the Company. On December 4, 2002, the Board of Directors has also approved the proposed transaction with WAG Holdings, LLC, Glen H. Hammer and A. Randall Barkowitz ("Investor Group") that will add sufficient capital to help relieve the Company's short-term cash flow crisis. The Board anticipates that the Investor Group will be able to locate sufficient additional funding to address the Company's longer-term financial needs, although there can be no assurance that such funding will be obtained. This transaction provides that in exchange for $750,000 the Investor Group will receive 70% of the Company's fully diluted post transaction common stock. Although not required, the Company is seeking the approval of the transaction by the Company's shareholders at a Special Meeting to be held February 4, 2003. As a condition to the consummation of the proposed transaction, the Company intends to effect a 1-for-10 reverse stock split, the approval for which will be sought at the same Special Meeting of Shareholders. The Company's independent certified public accountants have stated in their report included in the Company's August 31, 2002 Form 10-KSB, that the Company has incurred operating losses in the last two years, and that the Company is dependent upon management's ability to develop profitable operations. These factors among others may raise substantial doubt about the Company's ability to continue as a going concern. 10 The Company's principal cash requirements are for selling, general and administrative expenses, employee costs, funding of accounts receivable and capital expenditures. During the three month period ended November 30, 2002, the Company obtained $370,000 in loans from individuals who were principals in the proposed transaction described above. The Company's primary sources of cash prior to the three month period ended November 30, 2002 have been from a private placement of the Company's Series C Preferred Stock and sale of Subordinated Convertible Debentures that accounted for $1,518,130 and $300,000 of net proceeds in the fiscal year 2002 and 2001, respectively. Cash used in operating activities was $99,405 for the three months ended November 30, 2002. This was due primarily as a result of operating losses, caused by the revenue levels that are at less than a breakeven volume. Increasing revenues or further cost cutting will be required in the future. The Company invested $12,671 in computers and leasehold improvements during this period. The Company met its cash requirements during the three months ended November 30, 2002 through the receipt of $370,000 in loan proceeds from the principals who are party to the proposed transaction that the Board of Directors approved on December 4, 2002, as discussed above. While the Company has raised capital to meet its working capital requirements in the past, additional financing is required, in order to meet current and projected cash flow deficits from operations. The Company is seeking financing in the form of equity and debt. There are no assurances the Company will be successful in raising the funds required and any equity raises would be substantially dilutive to existing shareholders. In prior periods, the Company has borrowed funds from significant shareholders of the Company to satisfy certain obligations. INFLATION - --------- In the opinion of management, inflation has not had a material effect on the operations of the Company. RISK FACTORS AND CAUTIONARY STATEMENTS - -------------------------------------- Forward-looking statements in this report are made pursuant to the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995. The Company wishes to advise readers that actual results may differ substantially from such forward-looking statements. Forward-looking statements involve risks and uncertainties that could cause actual results to differ materially from those expressed in or implied by the statements, including, but not limited to, the following: the ability of the Company to provide for its debt obligations and to provide for working capital needs from operating revenue, and other risks detailed in the Company's periodic report filings with the Securities and Exchange Commission. 11 ITEM 3. CONTROLS AND PROCEDURES (a) On November 30, 2002, we made an evaluation of our disclosure controls and procedures. In our opinion, the disclosure controls and procedures are adequate because the systems of controls and procedures are designed to assure, among other items, that 1) recorded transactions are valid; 2) valid transactions are recorded; and 3) transactions are recorded in the proper period in a timely manner to produce financial statements which present fairly the financial condition, results of operations and cash flows for the respective periods being presented. Moreover, the evaluation did not reveal any significant deficiencies or material weaknesses in our disclosure controls and procedures. (b) There have been no significant changes in our internal controls or in other factors that could significantly affect these controls since the last evaluation. 12 PART II ITEM 1. Legal Proceedings The Company is engaged in proceedings in the Circuit Court of the 18th Judicial District, Seminole County, Florida, with SunTrust bank concerning a $350,000 line of credit that is in default. In September 2002, the bank filed a summary judgment motion, seeking $360,000 in full restitution of the money owed to it. The Company is currently in negotiations with the bank regarding repayment of this money. For additional information regarding the line of credit, see "Item 6. Management's Discussion and Analysis of Financial Condition and Results of Operations." ITEM 2. Changes in Securities and Use of Proceeds (a) None (b) None (c) Sale of Securities ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits No. Description --- ----------- 99.1 Certification of Terrence Leifheit Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (filed herewith). 99.2 Certification of Clifford A. Clark Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (filed herewith). (b) Reports on Form 8-K filed during the three months ended November 30, 2002. 13 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. PALADYNE CORP. Date: January 21, 2003 By /s/ Terrence Leifheit ---------------------- Terrence Leifheit President Date: January 21, 2003 By /s/ Clifford Clark ------------------- Clifford Clark Chief Financial Officer 14 CERTIFICATION I, Terrence Leifheit, certify that: 1. I have reviewed this quarterly report on Form 10QSB of Paladyne Corp., 2. Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annual report; 3. Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this annual report; 4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and have: a) Designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual report is being prepared; b) Evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this annual report (the "Evaluation Date"); and c) Presented in this annual report our conclusions about the effectiveness of the disclosure controls an procedures based on our evaluation as of the Evaluation Date; 5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors: a) All significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls, and b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and 6. The registrant's other certifying officers and I have indicated in this annual report whether there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation including any corrective actions with regard to significant deficiencies and material weaknesses. Date: January 21, 2003 /s/ Terrence J. Leifheit ------------------------ Terrence J. Leifheit President 15 CERTIFICATION I, Clifford A. Clark, certify that: 1. I have reviewed this quarterly report on Form 10QSB of Paladyne Corp., 2. Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annual report; 3. Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this annual report; 4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and have: a) Designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual report is being prepared; b) Evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this annual report (the "Evaluation Date"); and c) Presented in this annual report our conclusions about the effectiveness of the disclosure controls an procedures based on our evaluation as of the Evaluation Date; 5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors: a) All significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls, and b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and 6. The registrant's other certifying officers and I have indicated in this annual report whether there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation including any corrective actions with regard to significant deficiencies and material weaknesses. Date: January 21, 2003 /s/ Clifford A. Clark ----------------------------- Clifford A. Clark Chief Financial Officer 16 EX-99 3 ex99_1.txt EX. 99.1 - SARBANES-OXLEY CERT.-LEIFHEIT Exhibit 99.1 CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the Quarterly Report of Paladyne Corp. (the "Company") on Form 10-QSB for the period ending November 30, 2002 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Terrence J. Leifheit President and Chief Executive Officer, certify, pursuant to 18 U.S.C. ss.1350, as adopted pursuant to ss.906 of the Sarbanes-Oxley Act, that: (1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and (2) The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company. /s/ Terrence J. Leifheit - ------------------------ Terrence J. Leifheit President and Chief Executive Officer January 21, 2003 EX-99 4 ex99_2.txt EX. 99.2 - SARBANES-OXLEY CERT.-CLARK Exhibit 99.2 CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the Quarterly Report of Paladyne Corp. (the "Company") on Form 10-QSB for the period ending November 30, 2002 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Clifford A. Clark, VP of Finance, certify, pursuant to 18 U.S.C. ss.1350, as adopted pursuant to ss.906 of the Sarbanes-Oxley Act, that: (1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and (2) The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company. /s/ Clifford A. Clark - --------------------- Clifford A. Clark Chief Financial Officer January 21, 2003 -----END PRIVACY-ENHANCED MESSAGE-----