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 February 29, 2000
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.)
Paladyne Corp.
610 Crescent Executive Court, Suite 124, Lake Mary, FL 32746
(Address of Principal Executive Offices)
(407)333-2488
(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
April 2, 2000
Common Stock, $.001 PAR VALUE 8,192,580
Transitional Small Business Disclosure Format (check one): Yes No X
--- ---
1
<PAGE>
TABLE OF CONTENTS
Page
----
PART I. FINANCIAL INFORMATION
Item 1. Condensed Consolidated Financial Statements 3
Condensed Consolidated Balance Sheet - February 29, 2000 4
Condensed Consolidated Statements of Operations -
three months ended February 29, 2000 and 1999 5
Condensed Consolidated Statements of Operations -
six months ended February 29, 2000 and 1999 6
Condensed Consolidated Statements of Cash Flows -
six months ended February 29, 2000 and 1999 7
Notes to Condensed Consolidated Financial Statements 8
Item 2. Management's Discussion and Analysis
and Results of Operations 11
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 15
Item 2 Changes in Securities and Use of Proceeds 15
Item 6. Exhibits and Reports 15
SIGNATURES 16
2
<PAGE>
PART I.
ITEM 1. FINANCIAL STATEMENTS
The following unaudited Condensed Consolidated Financial Statements for the
three and six month periods ended February 29, 2000 and 1999 have been prepared
by Paladyne Corp., a Delaware corporation. Effective March 5, 1999, Synaptx
Worldwide, Inc., a Utah Corp., merged with and into Paladyne Corp., in a
migratory merger, and Paladyne Corp. is the successor registrant pursuant to
Rule 12g-3 under the Securities Exchange Act of 1934. The financial statements
in this report are of Synaptx Worldwide Inc., for all periods through the date
of the migratory merger, and of Paladyne Corp. since that date. February 29,
2000 financial data is for Paladyne Corp.
3
<PAGE>
PALADYNE CORP.
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
FEB 29, 2000 AUG 31, 1999
(UNAUDITED)
------------ ------------
<S> <C> <C>
ASSETS
Current Assets:
Cash ............................................... $ 847,739 $ --
Short Term Investments ............................. 484,508 --
Accounts Receivable (net of
allowance for doubtful accounts
of $12,263 and $37,736) ......................... 475,039 392,933
Prepaid expenses and deposits ...................... 2,546 32,641
----------- -----------
Total Current Assets ......................... 1,809,832 425,574
Property and equipment ................................ 471,793 429,420
Less accumulated depreciation ......................... (333,675) (301,035)
----------- -----------
Net Property and Equipment ......................... 138,118 128,385
Costs in excess of net assets acquired ................ 90,982 77,367
Capitalized Software Development Costs ................ 66,207 --
Other Assets .......................................... 46,073 45,669
----------- -----------
Total Assets .......................................... $ 2,151,212 $ 676,995
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts Payable ................................... $ 532,065 $ 330,516
Accrued expenses and taxes ......................... 153,497 278,137
Notes Payable ...................................... -- 243,600
Deferred revenue ................................... -- 95,700
----------- -----------
Total Current Liabilities .................... 685,562 947,953
Note Payable to Stockholder ........................... 150,000 150,000
----------- -----------
Total Liabilities ..................................... 835,562 1,097,953
Stockholders' equity (deficit)
Cumulative, convertible preferred stock;
$.001 par value; 10,000,000 shares
authorized, 137,143 issued and outstanding ..... 137 137
Common stock; $.001 par value; 25,000,000
Shares authorized, 8,192,580 and
6,782,229 outstanding .......................... 8,192 6,783
Additional paid in capital ......................... 6,505,428 4,766,418
Deficit ............................................ (5,198,107) (5,194,296)
----------- -----------
Total Stockholders' Equity (Deficit) ............... 1,315,650 (420,958)
----------- -----------
Total Liabilities and Stockholders' Equity ......... $ 2,151,212 $ 676,995
=========== ===========
</TABLE>
4
<PAGE>
PALADYNE CORP.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED FEBRUARY 29, 2000 AND FEBRUARY 28, 1999
2000 1999
(UNAUDITED) (UNAUDITED)
----------- -----------
Total Revenues .................................... $ 1,268,755 $ 618,400
Cost of revenues .................................. 460,838 457,022
----------- -----------
Gross Profit ...................................... 807,917 161,378
Selling, general and administrative expenses ...... 638,680 157,192
Depreciation and amortization ..................... 28,565 21,500
----------- -----------
Income (Loss) From Operations ..................... 140,672 (17,314)
Other expense:
Interest expense ......................... 13,249 14,065
----------- -----------
Net Income (Loss) from Continuing Operations ...... 127,423 (31,379)
Discontinued Operations
Income (Loss) from operations
of sales rep subsidiaries ................ -- (27,653)
Gain on disposal ......................... -- 63,501
----------- -----------
Gain from Discontinued Operations ........ -- 35,848
----------- -----------
Net Income ........................................ 127,423 4,469
Preferred Stock Dividends ......................... (10,200) (10,200)
----------- -----------
Net Income (Loss) applicable to common stockholders $ 117,223 $ (5,731)
=========== ===========
Weighted average shares outstanding:
Basic 7,403,658 6,608,080
Diluted 10,059,106 6,608,080
Net Earnings per share
Basic $ .02 $ .00
Diluted $ .01 $ .00
5
<PAGE>
PALADYNE CORP.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE SIX MONTHS ENDED FEBRUARY 29, 2000 AND FEBRUARY 28, 1999
2000 1999
(UNAUDITED) (UNAUDITED)
----------- -----------
Total Revenues ................................... $ 2,246,961 $ 1,437,271
Cost of Revenues ................................ 1,218,798 1,065,322
----------- -----------
Gross Profit ..................................... 1,028,163 371,949
Selling, general and administrative expenses ..... 885,281 367,118
Depreciation and amortization .................... 38,825 40,301
----------- -----------
Income (Loss) from Operations .................... 104,057 (35,470)
Other expense:
Interest expense ........................ 19,468 26,150
----------- -----------
Net Income (Loss) from Continuing Operations ..... 84,589 (61,620)
Discontinued Operations
Income (Loss) from operations
of sales rep subsidiaries ............... -- (66,228)
Gain on disposal ........................ -- 63,501
----------- -----------
Gain (Loss) from discontinued
operations ........................... -- (2,727)
----------- -----------
Net Income (Loss) ................................ 84,589 (64,347)
Preferred Stock Dividends ........................ (20,400) (20,400)
----------- -----------
Net Income (Loss) applicable to
common stockholders...................... $ 64,189 $ (84,747)
=========== ===========
Weighted average shares outstanding
Basic 7,428,587 6,516,990
Diluted 9,615,589 6,516,990
Net Earnings (Loss) per share
Basic $ .01 $ ( .01)
Diluted $ .01 $ ( .01)
6
<PAGE>
PALADYNE CORP.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED FEBRUARY 29, 2000 AND 1999
2000 1999
(UNAUDITED) (UNAUDITED)
----------- -----------
Net cash used in operating activities ............ $ (21,095) $ (74,728)
Cash flows from investing activities
Purchase of short term investments .......... (484,508) ---
Additions to property, plant & equipment .... (42,373) (25,755)
Reductions in (additions to) other assets ... (404) 46,083
----------- -----------
Net cash provided by (used in) investing
activities .................................. (527,285) 20,328
Cash flows from financing activities
Repayments of bank lines of credit .......... (243,600) (135,499)
Repayments of long-term debt ................ -- (116,005)
Additions/(Reductions) in short-term debt ... -- 44,842
Sale of common stock ........................ 1,639,719 383,154
----------- -----------
Net cash provided by financing activities ........ 1,396,119 176,492
Net increase in cash ............................. 847,739 122,092
Cash at beginning of period ...................... -- 126,532
----------- -----------
Cash at end of period ............................ $ 847,739 $ 248,624
=========== ===========
Supplemental Cash Flow Information
Cash paid for interest .................. $ 19,468 $ 38,000
Issuance of common stock as payment
of debt ............................. 99,400 ---
Accrual of preferred stock dividend 88,400 ---
7
<PAGE>
NOTES TO CONDENSED CONSOLIDATED FINANCIAL SATATEMENTS
UNAUDITED
NOTE 1. BASIS OF PRESENTATION
The financial information included herein is unaudited; however, such
information reflects all adjustments (consisting solely of normal recurring
adjustments) which, in the opinion of management, are necessary for a fair
statement of results for this interim period. The accompanying financial
statements include estimated amounts and disclosures based on management's
assumptions about future events. Actual results may differ from those estimates.
The results of operations for the interim period are not necessarily indicative
of the results to be expected for the full year.
The condensed consolidated financial statements have been prepared by the
Company, without audit, pursuant to the rules and regulations of the Securities
and Exchange Commission. Certain information and footnote disclosures normally
included in financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted pursuant to such rules and
regulations, although the Company believes that the disclosures are adequate to
make information presented not misleading.
These financial statements should be read in conjunction with the financial
statements included in the Company `s Form 10-KSB for the fiscal year ended
August 31, 1999, and the Company's 10-QSB for the first quarter ended November
30, 1999 as filed with the Securities and Exchange Commission and available
under the EDGAR reporting system or from the Company.
The Company's 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 financial statements do not include, nor does management
feel it necessary, any adjustments to reflect any possible future effects on the
recoverablilty 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 recognizes revenue as it is earned, not necessarily when it is
billed or collected. The contractual relationship with its clients dictates the
recognition of revenue by the Company. The Company classifies any revenue billed
but not yet earned as deferred revenue on its balance sheet.
During Fiscal Year 1999, the Company changed its strategy from one of acquiring
and growing mainly distribution companies to one of building upon internal
strengths and acquiring organizations focused on developing technology that
enables the rapid development of high data integrity databases within the
customer relationship management segment. Customer relationship management in
the context of what the Company does, is broadly defined as processes that
enable companies to identify, acquire, and maintain desirable customers. This
shift is a result of what management feels is greater opportunity and a greater
opportunity to achieve profitable operations on a long-term basis.
In pursuit of this shift in strategy, the Company has discontinued its focus on
manufacturer's representative firms. The Company has either closed or sold the
five firms of this type and disclosed losses from disposal of these operations
in the August 31, 1999 10-KSB. In addition, the Company acquired Bradas in
February, 1999 as part of its strategic plan to enter into the above mentioned
markets.
NOTE 2. PRINCIPLES OF CONSOLIDATION
The condensed consolidated financial statements include the accounts of the
Company. The Company has no active subsidiaries as of September 1, 1999.
8
<PAGE>
NOTE 3. CAPITAL STOCK
On August 19, 1999 the Board of Directors authorized a private placement of up
to $400,000 priced at $0.50 per unit, with a unit consisting of one share of the
Company's Common Stock and a callable stock warrant to purchase the Company's
Common Stock at $1.00 per share but callable at $0.05 per share if the closing
trading price of the Company's Common Stock closes at or above $2.00 per share
for sixty consecutive trading days when 25,000 shares trade. The period of this
offering extended through September 30, 1999. This offering resulted in proceeds
of $125,000, for which 250,000 units were issued, through August 31, 1999, and
an additional $286,000 and 604,000 units subsequent to year-end 1999, for a
total of $412,000 and 824,000 units being issued in total. On January 21, 2000
the Board of Directors authorized a private placement of up to 500,000 units
priced at $2.375 per unit, with a unit consisting of one share of the Company's
Common Stock and a callable stock warrant to purchase the Company's Common Stock
at $3.00 per share but callable at $0.05 per share if the closing trading price
of the Company's Common Stock closes at or above $6.00 per share for 20
consecutive trading days.
The Company recorded preferred stock dividends of $88,400 during the six months
ended February 29, 2000 which is included in accrued expenses as of February 29,
2000.
NOTE 4. DISCONTINUED OPERATONS
After evaluating the Company's sales representative subsidiaries and their
relation to the overall strategic direction of the Company, given the change to
a customer relationship management, database driven strategy, the Board of
Directors made the decision to discontinue the sales representative line of
business in the third quarter of fiscal 1999. Prior to this decision in the
third quarter of fiscal 1999, the Company had already disposed of two divisions
that were under performing. The disposition of discontinued operations which
were written off in fiscal 1999 are discussed and the financial impact are shown
in the Company's August 31, 1999 year-end 10-KSB. This discontinued business and
any gain (loss) on disposal is reflected as discontinued operations for the
three and six months ended February 29, 2000.
NOTE 5. EARNINGS PER SHARE
The reconciliation of basic earnings per share to diluted earnings per share is
shown below. Diluted earnings per share for the three and six months ended
February 28, 1999 is not presented since the effects of potential common shares
is antidilutive.
Weighted Net Income Earnings
Average Applicable to Per
Shares Common Stock Share
--------- ------------- -------
Six months ended February 29, 2000:
- ----------------------------------
Basic Earnings Per Share 7,428,587 $ 64,189 $ .01
Dilutive Stock Options 933,177
Dilutive Stock Warrants 1,253,825
---------- --------- -------
Diluted Earnings Per Share 9,615,589 $ 64,189 $ .01
========== ========= =======
9
<PAGE>
Weighted Net Income Earnings
Average Applicable to Per
Shares Common Stock Share
--------- ------------- -------
Three months ended February 29, 2000:
- ------------------------------------
Basic Earnings Per Share 7,403,658 $ 117,223 $ .02
Dilutive Stock Options 1,066,425
Dilutive Stock Warrants 1,589,023
---------- --------- -------
Diluted Earnings Per Share 10,059,106 $ 117,223 $ .01
========== ========= =======
NOTE 6. CAPITALIZED SOFTWARE DEVELOPMENT COSTS
Cost incurred to establish the technological feasibility of computer software
products are charged to expense as incurred. Costs of producing product masters
subsequent to establishing technological feasibility, including coding and
testing, are capitalized. Capitalization of computer software costs ceases when
the product is available for general release to customers. Capitalized costs for
the six months ended February 29, 2000 for the development of the Datagration
product was $66,207 which was released in March 2000. There has been no
amortization of these capitalized costs as the product was not available for
market as of February 29, 2000. These capitalized software development costs
will be amortized using either the straight-line method over the estimated
economic life of the product (which is estimated to be three years) or the ratio
of current revenues to current and anticipated revenues for the product
whichever results in the greater amount of amortization. Unamortized capitalized
costs of a computer software product in excess of its estimated net realized
value are expensed. No such expense has been recorded for the six months ended
February 29, 2000.
10
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Overview
- --------
Paladyne Corp. (the "Company") provides software products and ancillary services
that enable companies to quickly build databases with high data integrity, thus
cutting long implementation times and eliminating the risk of building the
database with poor quality data. Paladyne data quality solutions and services
support desktop marketers and developers of data warehouses and data marts.
Paladyne software is based on an open, multi-tiered, cross-platform architecture
within the customer relationship management segment. The Company intends to
build its business through internal growth as well as seek acquisitions of
existing companies. Currently, the Company has no agreements or understandings
regarding possible future acquisitions. The Company acquired Bradas in February,
1999 as part of its strategic plan to enter into this segment.
The Company's 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 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.
During Fiscal Year 1999, the Company changed its strategy from one of acquiring
and growing mainly distribution companies to one of building upon internal
strengths and acquiring organizations focused on developing technology that
enables the rapid development of high data integrity databases within the
customer relationship management segment. Customer relationship management in
the context of what the Company does, is broadly defined as processes that
enable companies to identify, acquire, and maintain desirable customers. This
shift is a result of what management feels is greater opportunity and a greater
opportunity to achieve profitable operations on a long-term basis. In pursuit of
this shift in strategy, the Company has discontinued its focus on manufacturer's
representative firms. The Company has either closed or sold the five firms of
this type and disclosed losses from disposal of these operations in the
August 31, 1999 10-KSB. The results of operations for the three and six months
ended February 29, 2000 discussed herein exclude the discontinued operations.
11
<PAGE>
RESULTS OF OPERATIONS
- ---------------------
The following table sets forth the percentage relationship to the total revenues
of principal items contained in the Company's Condensed Consolidated Statements
of Operations for the three and six months ended February 29, 2000 and 1999,
respectively. The percentages discussed throughout this analysis are stated on
an approximate basis.
Three Months Ended Six Months Ended
February 29 February 29
2000 1999 2000 1999
-------------------- -----------------
(UNAUDITED) (UNAUDITED)
Net sales and revenues ...... 100% 100% 100% 100%
Cost of sales ............... 36% 74% 54% 74%
---- ---- ---- ----
Gross Profit (loss) ......... 64% 26% 46% 26%
Selling, general and admin... 53% 29% 41% 28%
---- ---- ---- ----
Operating (loss) income .... 11% (3%) 5% (2%)
Interest expense ............ 1% 2% 1% 2%
---- ---- ---- ----
Net income (Loss) from
continuing operations .... 10% (5%) 4% (4%)
COMPARISON OF SIX MONTHS ENDED FEBRUARY 29, 2000 TO SIX MONTHS ENDED
- --------------------------------------------------------------------
FEBRUARY 28, 1999.
- ------------------
For the six month period ended February 29, 2000 gross revenues from continuing
operations increased by $809,690 to $2,246,961, representing a 63% increase for
the corresponding comparative six month period. The increase was attributable to
an increased focus on the customer relationship management database segment and
the discontinued focus of the sales representative segments which were
discontinued in the third quarter of fiscal 1999.
Gross profits increased by $656,214 for the six month period from $371,949 to
$1,028,163. As a percentage of sales, gross profit increased to 46% during the
six month period ended February 29, 2000 compared to 26% for the same period in
1999. This increase is attributable to the higher margin obtained in the current
software database projects.
During the six months ended February 29, 2000 the Company capitalized $66,207 of
costs related to the development of the Datagration product which was released
in March 2000. The Company plans to significantly advance development of the
next version of Datagration and will continue to focus on major upgrades.
Selling, general and administrative expenses, including depreciation and
amortization, increased as a percentage of sales to 41% through the first six
months of 2000 from 28% for the corresponding comparative six month period. This
increase is due to additional personnel hired in sales, marketing, and customer
support to introduce the Datagration product in the market. The Company has
closed its Elgin, IL office in November 1999 and moved all administrative
functions to its Lake Mary, FL Corporate Offices which will have the effect of
reducing facility costs in future reporting periods.
12
<PAGE>
The reduction in interest expense for the first six months of 2000 as compared
to the same period in 1999 can be attributed to a decrease in the average debt
outstanding. On February 28, 2000, the Company repaid the entire line of credit
of $250,000 to The Huntington National Bank thereby reducing future interest
expense.
The Company has accumulated significant net operating loss carry forwards as of
February 29, 2000, which may be offset against taxable income and income taxes
in future years. The use of these losses to reduce future income taxes will
depend on the generation of sufficient taxable income prior to the expiration of
the net operating loss carry forwards. The carry forwards expire at various
dates through 2019. No defined tax benefit has been reported in the financial
statements for the six months ended February 29, 2000 since it is reduced by a
valuation allowance due to the uncertainty associated with the realization of
the net deferred tax asset.
COMPARISON OF THE THREE MONTHS ENDED FEBRUARY 29, 2000 TO THREE MONTHS ENDED
- ----------------------------------------------------------------------------
FEBRUARY 28, 1999
- -----------------
Revenues for the three months ended February 29, 2000 from continuing operations
increased $605,355 to $1,268,755 from the same corresponding three month period
in fiscal 1999. This increase is due to increased focus on the software database
products previously discussed.
Gross profits increased by $646,539 for the three month period ended
February 29, 2000 from $161,378 to $807,917. As a percentage of sales, gross
profit increased to 64% during the three months ended February 29, 2000 from 26%
for the same period in 1999. This increase is attributable to revenues generated
by new customer orders that have greater contribution margins.
Selling, general and administrative costs have increased as percentage of
revenue from 29% to 53% for the three months ended February 29, 2000 from the
three months ended February 28, 1999. This increase is attributable to those
costs associated with the selling and marketing expenses associated with
bringing the Datagration product to the market.
LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
The Company's principal cash requirements are for operating expenses, including
employee costs, outside consultants such as independent contractors who provide
database and professional marketing and sales consulting services, funding of
accounts receivable, capital expenditures and funding of the operations in
Chantilly, VA. The Company's primary sources of cash have been from private
placements of the Company's common stock, a bank line of credit, and cash
derived from operations. The Company believes there is sufficient cash on hand
to stabilize the operation for the foreseeable future. There is no assurance
that the Company will not look for any additional financing or that any
additional equity infusion will not be dilutive to stockholders. Management
believes that internal cash flows, its current cash position, proposed expanded
credit facility and possible private equity infusions should be adequate to meet
the Company's capital needs for the next twelve months.
In April 1999, the Company entered into an expanded credit facility providing a
line of credit up to $250,000 at a rate of prime plus 1 1/4% and renewable six
months from the date of the original agreement. The line of credit was extended
to December 31, 1999. On February 28, 2000 the Company repaid the entire line of
credit of $250,000. The Company is in negotiations to initiate a new line of
credit. It is anticipated that the Company will obtain a new line of credit, for
approximately $500,000, within the next two months. The interest rate and the
period of repayment has not be determined as of this time.
13
<PAGE>
YEAR 2000 ISSUE
- ---------------
The Company evaluated all its computer systems in the later half of 1999. It was
determined and reported in the August 31, 1999 10-KSB that the Company believed
that the computer systems utilized were Y2K compliant. There have been no known
Y2K problems as of March 24, 2000 with the Company's vendors and customers and
management believes that none will be encountered.
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.
PART II
ITEM 1. LEGAL PROCEEDINGS
In November 1999, the Company terminated its relationship with its Vice
President of Sales. Subsequent to this termination, the employee has filed a
lawsuit claiming additional compensation is warranted in the Superior Court of
Fulton County, in the State of Georgia and is seeking payment of $178,750. The
Company does not agree with the assertion and is defending itself against this
claim. No reserve has been accrued in these financial statements as the Company
believes there is no merit to the claim.
ITEM 3. CHANGES IN SECURITIES AND USE OF PROCEEDS
(c) During the six months ended February 29, 2000, the Company engaged in
private placements of its securities described in Note 3 to the
Condensed Consolidated Financial Statements elsewhere in this filing.
These placements were claimed exempt from the registration
requirements of the Securities Act of 1933 by reason of Section 4(2)
thereof.
ITEM 6. EXHIBITS AND REPORTS
(a) Exhibits
Exhibit 27 - Financial Data Schedule
14
<PAGE>
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: April 14, 2000 By /s/ Ronald L. Weindruch
-------------------------------------
Ronald L. Weindruch
President
Date: April 14, 2000 By /s/ Joseph H. Landis
-------------------------------------
Joseph H. Landis
Vice President - Controller
15
<PAGE>
EXHIBIT INDEX
-------------
Exhibit Description
- ------- -----------
27 Financial Data Schedule
16
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANACIAL INFORMATION EXTRACTED FROM PALADYNE
CORP. FORM 10-QSB FOR THE PERIOD ENDED FEBRUARY 29, 2000 AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> AUG-31-2000
<PERIOD-END> FEB-29-2000
<CASH> 848
<SECURITIES> 485
<RECEIVABLES> 487
<ALLOWANCES> 12
<INVENTORY> 0
<CURRENT-ASSETS> 1810
<PP&E> 472
<DEPRECIATION> 334
<TOTAL-ASSETS> 2151
<CURRENT-LIABILITIES> 635
<BONDS> 0
0
0
<COMMON> 8
<OTHER-SE> 6488
<TOTAL-LIABILITY-AND-EQUITY> 2151
<SALES> 2247
<TOTAL-REVENUES> 2247
<CGS> 1219
<TOTAL-COSTS> 1219
<OTHER-EXPENSES> 944
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 19
<INCOME-PRETAX> 85
<INCOME-TAX> 0
<INCOME-CONTINUING> 85
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 64
<EPS-BASIC> $ .01
<EPS-DILUTED> $ .01
</TABLE>
