-----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, LCV215MfLGeI4xDDI2L4S/287i+2Ns6QEHvuyS9DteZQmhI6ze7DrJU56ohtoeuc yQpH+I6MYAMFM82+T7FBTA== 0001038838-04-000733.txt : 20040816 0001038838-04-000733.hdr.sgml : 20040816 20040816164949 ACCESSION NUMBER: 0001038838-04-000733 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 20040630 FILED AS OF DATE: 20040816 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ARADYME CORP CENTRAL INDEX KEY: 0001123580 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-PREPACKAGED SOFTWARE [7372] IRS NUMBER: 330619254 STATE OF INCORPORATION: DE FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: 10QSB SEC ACT: 1934 Act SEC FILE NUMBER: 000-50038 FILM NUMBER: 04979447 BUSINESS ADDRESS: STREET 1: 677 EAST 700 SOUTH STREET 2: STE 201 CITY: AMERICAN FORK STATE: UT ZIP: 84003 BUSINESS PHONE: 8017569585 MAIL ADDRESS: STREET 1: 677 EAST 700 SOUTH STREET 2: SUITE 201 CITY: AMERICAN FORK STATE: UT ZIP: 84003 FORMER COMPANY: FORMER CONFORMED NAME: ALBION AVIATION INC DATE OF NAME CHANGE: 20000912 10QSB 1 q063004.txt 10-QSB ENDED JUNE 30, 2004 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 EX-31.01 2 ex3101q063004.txt CEO CERTIFICATION REQUIRED UNDER SECTION 302 Exhibit 31.01 CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER PURSUANT TO RULE 13a-14 I, James R. Spencer, certify that: 1. I have reviewed this Form 10-QSB of Aradyme Corporation; 2. Based on my knowledge, this 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 report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the small business issuer as of, and for, the periods presented in this report; 4. The small business issuer's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the small business issuer and have: (a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the small business issuer, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; (b) evaluated the effectiveness of the small business issuer's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and (c) disclosed in this report any change in the small business issuer's internal control over financial reporting that occurred during the small business issuer's most recent fiscal quarter (the small business issuer's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the small business issuer's internal control over financial reporting; and 5. The small business issuer's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the small business issuer's auditors and the audit committee of the small business issuer's board of directors (or persons performing the equivalent functions): (a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the small business issuer's ability to record, process, summarize and report financial information; and (b) any fraud, whether or not material, that involves management or other employees who have a significant role in the small business issuer's internal control over financial reporting. Date: August 16, 2004 /s/ James R. Spencer - ---------------------------- James R. Spencer Principal Executive Officer EX-32.02 3 ex3102q063004.txt CFO CERTIFICATION REQUIRED UNDER SECTION 906 Exhibit 31.02 CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER PURSUANT TO RULE 13a-14 I, Scott A. Mayfield, certify that: 1. I have reviewed this Form 10-QSB of Aradyme Corporation; 2. Based on my knowledge, this 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 report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the small business issuer as of, and for, the periods presented in this report; 4. The small business issuer's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the small business issuer and have: (a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the small business issuer, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; (b) evaluated the effectiveness of the small business issuer's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and (c) disclosed in this report any change in the small business issuer's internal control over financial reporting that occurred during the small business issuer's most recent fiscal quarter (the small business issuer's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the small business issuer's internal control over financial reporting; and 5. The small business issuer's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the small business issuer's auditors and the audit committee of the small business issuer's board of directors (or persons performing the equivalent functions): (a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the small business issuer's ability to record, process, summarize and report financial information; and (b) any fraud, whether or not material, that involves management or other employees who have a significant role in the small business issuer's internal control over financial reporting. Date: August 16, 2004 /s/ Scott A. Mayfield - ----------------------------- Scott A. Mayfield Principal Financial Officer EX-32.01 4 ex3201q063004.txt CEO CERTIFICATION REQUIRED UNDER SECTION 906 Exhibit 32.01 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 Aradyme Corporation (the "Company") on Form 10-QSB for the quarter ended June 30, 2004, as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, James R. Spencer, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to the best of my knowledge and belief: (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/ James R. Spencer - ------------------------- James R. Spencer Chief Executive Officer August 16, 2004 A signed original of this written statement required by Section 906, or other document authenticating, acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version of this written statement has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request. EX-32.02 5 ex3202q063004.txt CFO CERTIFICATION REQUIRED UNDER SECTION 906 Exhibit 32.02 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 Aradyme Corporation (the "Company") on Form 10-QSB for the quarter ended June 30, 2004, as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Scott A. Mayfield, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to the best of my knowledge and belief: (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/ Scott A. Mayfield - ------------------------ Scott A. Mayfield Chief Financial Officer August 16, 2004 A signed original of this written statement required by Section 906, or other document authenticating, acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version of this written statement has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request. -----END PRIVACY-ENHANCED MESSAGE-----