UNITED STATES SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D. C. 20549
                                   FORM 10-KSB

     (Mark one)
          X    Annual Report Pursuant to Section 13 or 15(d) of the Securities
        -----  Exchange Act of 1934
               FOR THE FISCAL YEAR ENDED AUGUST 31,2000
               Transition Report Pursuant to Section 13 or 15(d) of the
        -----  Securities Exchange Act of 1934

                         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.)

          610 Crescent Executive Court, Suite 124, Lake Mary, FL 32746
               (Address of principal executive offices) (Zip Code)

                    Issuer's telephone number: (407) 333-2488

     Securities to be registered under Section 12(b) of the Exchange Act: None

     Securities to be registered under Section 12(g) of the Exchange Act:
          Common Stock, par value $.001 per share
                                (Title of Class)

     Check whether the issuer (1) filed all reports required to be filed under
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
    ---    ---

     Check if there is no disclosure of delinquent filers in response to Item
405 of Regulation SB contained in this form, and no disclosure will be
contained, to the best of the Registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this form 10-KSB. Yes     No  X
                                          ---    ---
State the issuer's revenue for its most recent fiscal year: $5,521,865
State the aggregate market value of the voting stock held by non-affiliates
computed by reference to the price at which the stock was sold, or the average
bid and ask prices of such stock as of November 1, 2000: $8,459,351

     State the number of shares outstanding of each of the issuer's classes of
common equity, as of the latest practicable date.

--------------------------------------------------------------------------
                                                   Outstanding as of
                     Class                          November 1, 2000
--------------------------------------------------------------------------
    Common Stock, par value $.001 per share             8,459,351
--------------------------------------------------------------------------

          Documents Incorporated by Reference: None
Transitional Small business Disclosure Format. Yes     No  X
                                                   ---    ---


<PAGE>


PALADYNE CORP.

FORM 10-KSB

TABLE OF CONTENTS

                                                                         PAGE
                                                                         ----
                                     PART I

ITEM 1.   Description of Business.................................         3

ITEM 2.   Description of Property.................................        10

ITEM 3.   Legal Proceedings.......................................        10

ITEM 4.   Submission of Matters to a Vote of Security
          Holders.................................................        11

                                     PART II

ITEM 5.   Market for Common Equity and Other Shareholder
          Matters.................................................        11

ITEM 6.   Management's Discussion and Analysis of Financial
          Condition and Results of Operations.....................        13

ITEM 7.   Financial Statements. ..................................        19

ITEM 8.   Changes in and Disagreements with Accountants on
          Accounting and Financial Disclosure.....................        40

                                    PART III

ITEM 9.   Directors, Executive Officers, Promoters
          and Control Persons; Compliance with Section
          16(a) of the Exchange Act...............................        41

ITEM 10.  Executive Compensation..................................        43

ITEM 11.  Security Ownership of Certain Beneficial
          Owners and Management...................................        45

ITEM 12.  Certain Relationships and Related Transactions..........        48

ITEM 13.  Exhibits and Reports on Form 8-K........................        49

Signatures  ......................................................        51


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<PAGE>


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 include statements
concerning underlying assumptions and other statements which are other than
statements of historical facts. Forward-looking statements involve risks and
uncertainties that could cause actual results to differ materially from those
expressed or implied by the statements, including, but not limited to, the
following: the ability of the Company to provide for its obligations, to provide
working capital needs from operating revenues, to obtain additional financing
needed for any future acquisitions, and other risks detailed in the Company's
periodic report filings with the Securities and Exchange Commission.

ITEM 1.

The following information relates to Paladyne Corp., a Delaware corporation.
Effective March 5, 1999, Synaptx Worldwide, Inc., (the "predecessor Company") a
Utah Corporation, 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. There were no adjustments to the
historical financial statements of Paladyne Corp. as a result of the merger.

DESCRIPTION OF BUSINESS

Paladyne Corp. (the "Company") provides seamless data integration and data
quality software and services that enable its customers to carryout customer
mailing, marketing and e-commerce initiatives. The Company also provides the
database-related services of customer identification, customer and prospect
database development and management, data integration and marketing campaign
management.

Currently, the Company provides these services by engaging subcontractors to
perform the bulk of the activity, but management has undertaken initiatives to
build these capabilities internally via the acquisition of "Bradas", a company
formed to develop database software tools. In February, 1999, the Company
purchased the intellectual property of Bradas, including the initial framework


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of what has become the Datagration e-Business Suite, a collection of software
tools that enable clients to effectively and efficiently build high data quality
databases, for 60,000 shares of common stock, at a value of approximately
$65,000, and 400,000 warrants (100,000 of which have been issued through August
31, 2000) that will be issued based on the delivery of intellectual property and
attainment of certain predefined milestones. Additionally, the Company assumed
approximately $32,000 of debt incurred by Bradas's founder. The debt was
satisfied through the issuance of 8,475 shares of common stock and 37,881 common
stock warrants. The Company agreed to fund the completion of the product
including providing necessary funding for both equipment and personnel to finish
the product and maintain and upgrade it.

The Company intends to build its business through internal growth as well as
seek acquisitions and mergers, should opportunities become available, of
existing companies. On October 3, 2000 the Company announced it had signed a
Letter of Intent with e-commerce support centers, inc., calling for a merger
with ecom to become a wholly owned subsidiary of Paladyne. The merger
consideration will be Company securities, including stock options and warrants.
The merger is subject to execution of a definitive merger agreement and
customary closing conditions. The parties are currently engaged in the due
diligence process and in negotiating the merger agreement. If and when such
conditions are fulfilled, it is anticipated that the merger will close in the
Company's second quarter of fiscal 2001.

HISTORY

The predecessor Company was incorporated on June 25, 1981 under the laws of the
State of Utah as Calico Gold Properties, Inc. and initially engaged in the
acquisition and development of mineral resource prospects. The predecessor
Company engaged in limited mining operations and subsequently ceased its
operations and became inactive for several years. In 1995, the predecessor
Company began to actively investigate and seek mergers with or acquisitions of
operating businesses. In 1996, the predecessor Company changed its name to
In-Touch Interactive Multimedia, Inc. in connection with a previously planned
merger that was never consummated.

On February 10, 1997, the predecessor Company entered into a merger agreement
(the "Merger") with Worldwide Applied Telecom Technology, Inc., a Delaware
corporation, ("WWATT"). Pursuant to the terms of the Merger, the predecessor
Company effected a reverse stock split of its outstanding shares of common Stock
on a one (1) share for one and three-fourths (1.75)shares basis, and exchanged
3,600,000 shares of authorized but previously unissued shares of the predecessor
Company's Common Stock for all the previously issued and outstanding shares of


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WWATT. An additional 790,000 shares of the predecessor Company's Common Stock
were issued for services related to the Merger. As a result of the Merger, WWATT
was merged with and into the predecessor Company with the predecessor Company
being the surviving corporation, and the predecessor Company changed its
corporate name to Synaptx Worldwide, Inc. Prior to the Merger, there was no
affiliation between the Predecessor Company and WWATT, nor between the officers,
directors or principal shareholders of the two respective entities. For
accounting purposes, the transaction has been treated as a recapitalization of
WWATT, or a reverse merger, with WWATT being treated as the acquirer. All share
information herein gives effect to the 1-for-1.75 reverse stock split, unless
otherwise provided.

Effective March 5, 1999, Synaptx Worldwide, Inc., a Utah Corporation, merged
with and into Paladyne Corp., in a migratory merger, and Paladyne Corp. is the
surviving Company.


The prior strategy was to initially build a nationwide sales force that would be
in place to support the products manufactured by the companies the Company hoped
to someday acquire. In support of that strategy, the Company had acquired three
manufacturers' representative companies, and had opened and staffed an
additional two offices, all between June 1997 and June 1998. Due to the
underperformance of these companies as a whole, and the shift in business focus
and strategy, all of the Company's manufacturers' representative companies were
classified as discontinued operations and subsequently sold in fiscal 1999. A
summary of these transactions, from a chronological standpoint is below.

     Wholly-Owned        Acquired/      Disposed/
     Subsidiaries        Opened         Closed
     ------------        ---------      ---------

     ORAYCOM             June, 1997     November, 1998
     WG Controls         January, 1998  May, 1999
     Primus Marketing    June, 1998     May, 1999

     Offices Opened
     --------------

     dba Advantage
       Technologies      October, 1997  November, 1998
     dba Patterson
       Communications    January, 1998  July, 1999

Throughout financial presentations and discussions in this document, the results
of these businesses are reflected as discontinued operations. The results of
these discontinued operations and the related loss on disposal are reflected in
fiscal year 1999 financial statements.


                                       5
<PAGE>


The Company's principal executive offices are at 610 Crescent Executive Court,
Suite 124, Lake Mary, FL 32746 and its telephone number is (407) 333-2488.

PRODUCTS AND SERVICES:

The Company's products and services fulfill the data integration and data
quality needs of clients in the Telecommunications, Direct Marketing, Internet,
Cable TV and Utility industries. The Company currently offers these services via
subcontractor arrangements with third party vendors. As described above, the
Company is developing these capabilities internally, and began offering the
internally generated product in fiscal 2000.

The Company's software product under development, the Datagration e-Business
Suite, is a component-based data integration and data quality solution built
upon an open, multi-tiered, cross platform architecture. Other significant
services being offered are outsourced marketing and prospecting database
development and management, and customer identification and householding. These
services enable clients to more effectively find new and retain existing
customers.

BUSINESS DEVELOPMENT AND STRATEGY:

Through the development of its internal capabilities to service its clients'
database needs, Paladyne's vision is to help businesses fully realize the
financial rewards of e-commerce by providing enterprise class web-enabled
e-business solutions. Management believes the Company will achieve this vision
by becoming a leading provider of e-business software and services that enable
the enterprise to achieve true customer-centric data integration and data
quality over the Internet.

The Company will fulfill its mission by solving data integration and data
quality business problems initially within the Telecommunications and Direct
Marketing industries. While the Company currently does provide this, it is
provided via outsource arrangements with third party vendors.

The telecommunications ("Telco") industry has grown from a regulated,
monopolistic environment to a government-mandated, competitive environment. As a
result of its regulated history, the Telco Industry is by nature a


                                       6
<PAGE>


network-centric industry since the regulatory environment previously rewarded
high quality universal service. The network providers are, out of necessity,
beginning the movement from a network to a customer focus.

Management believes the market for both network and customer management software
and services will grow tremendously over the next several years as a result of
this shift to a customer-centric industry. In that same period, Management
expects the market for the software and services subset to grow
disproportionately faster. The intended focus will be on developing software and
services that enable the client to correctly identify its customers across the
enterprise and enhance the value of the services the client offers, identify,
target, and acquire prospective customers for the client's services, and
ultimately retain desirable customers of that service.

The Direct Marketing Industry, and more specifically the potential of one-to-one
relationship selling, has grown extraordinarily fast with the general market
acceptance of the Internet as a means to obtain products and services. Direct
marketers must integrate data from disparate sources to complete transactions,
produce contact and mailing lists and build customer and prospect databases. In
addition to managing traditional internal and external data sources, direct
marketers must now obtain and exchange data via the Internet.

The Datagration e-Business Suite solves three business problems for direct
marketers:

1)   Management, control and linkage of data formats, business rules and data
     behavior. This lack of integration causes jobs to be rerun, unnecessary
     errors to be introduced and affects the overall time to run and quality of
     a database or process.

Datagration returns control over data to the user through the software's
proprietary Data Discovery Manager and innovative Metadata Distributed
eNterprise Architecture (DNA) Manager and enhances the results of data
integration and quality initiatives.

2)   Shared Knowledge. Computer programmers must rewrite code every time a new
     job comes in.

A Datagration process can be shared by others in the organization so additional
computer programming time is not required to run the same type of process. This
frees valuable human resources for more productive activities.


                                       7
<PAGE>


3)   E-business applications rely on the Internet as their communications
     backbone.

Datagration's next generation architecture is built for today's demanding
Internet e-business applications and designed to easily integrate internal or
third party products.

The above are the stated future goals of the Company. The existing subsidiaries
and strategic relationships are in place to pursue those goals. However, there
can be no assurance that the Company will ever achieve its expressed goals.

STRATEGIC ALLIANCE

Strategic Alliance: Direct Services, Inc.

The Company has formed a strategic alliance with Direct Services, Inc. of
Miramar, Florida ("DSI"). DSI is currently the key provider of database analysis
services provided by the Company. The companies worked together throughout
fiscal years 1999 and 2000 to provide these services. This vendor represented
approximately 61% and 74% of cost of revenues for fiscal years 1999 and 2000,
respectively. The Company hopes to become less dependent on this supplier as it
develops its own internal capabilities and the potential merger with e-com.
Should this relationship terminate, Management believes that such services can
be readily obtained from other sources as well as provided internally with
minimal interruption in service at a similar cost.

POTENTIAL NEW ACQUISITIONS AND PRODUCT LINES

The Company intends to investigate, should opportunities arise, strategic
acquisitions or mergers that fit its long-term objectives as financing and
business conditions warrant, although there can be no assurance that the Company
will be able to finalize any future acquisitions. The Company anticipates making
future acquisitions or mergers by primarily using its capital stock, employing
tax-free exchanges for the stock of the to-be-acquired companies. If necessary,
the Company plans to finance or seek outside financing for potential
requirements of cash. Although the Company occasionally explores additional
acquisition and merger opportunities, there can be no assurances that financing
for any future acquisitions will be available on terms acceptable to the Company
or at all, or that any future acquisitions or mergers will be consummated.


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<PAGE>


The proposed transaction with e-com is the first potential acquisition sought
under this current strategy (see Item 7 - Note 14).

SALES AND MARKETING

The Company markets and sells its products and services through its professional
employees. All the Company's contractual services and sales relationships are
sold by its professional staff of three sales professionals, based on past and
ongoing relationships with purchasing decision-makers who normally work in the
marketing and sales and information technologies organizations of clients. These
long-term relationships within the Telecommunications and Direct Marketing
industries are the basis for past and future business. From time to time, the
Company utilizes sales consultants to assist in sales. These non-exclusive
independent contractors receive a fee and generally a commission based on
consummating an agreement. These independent contractors are selected for their
specific expertise in an industry.

COMPETITION

The industries to which the Company currently offers and intends to offer its
products and services are highly competitive and characterized by rapidly
changing technologies, evolving industry standards, frequent new product
introductions, and rapid changes in customer requirements. The Company's
competitors vary from market to market. Principal competitive factors affecting
the market for products and services include product reputation, quality,
performance, price, professional service, and customer support. Features such as
adaptability, scalability, ability to integrate with other products,
functionality, and ease of use are key product differentiators.

EMPLOYEES

As of August 31, 2000, the Company employed 19 individuals, consisting of 4
executives, 14 professionals and sales representatives, and 1 office staff
person. In addition to its full-time employees, the Company uses the services of
certain outsourced professionals on an as-needed basis. Management presently
anticipates hiring additional employees as business conditions warrant and as
operating funds become available.


                                       9
<PAGE>


INDUSTRY SEGMENTS

The Company operates in one business segment which is providing software and
services enabling customers to integrate data in a more efficient manner as well
as ensure that the data is cleansed, accurate and current.

ITEM 2.  DESCRIPTION OF PROPERTY

The Company's principal executive offices are located 610 Crescent Executive
Court, Suite 128, Lake Mary, FL 32746. The current lease, the term of which
extends for three years, covers approximately 3,500 square feet at an
approximate annual rental rate of $75,000.

The Company maintains its software and services development center in suburban
Washington D.C., located at 14100 Parke Long Court, Suite H, Chantilly, VA
20151. The lease covers approximately 3,100 square feet of space. The lease
extends for 39 months, from March 1999 to May 2002. Monthly rents start at
$3,645 and have a fixed escalation of approximately three and one-half percent
(3.5%) per year on each anniversary date of the lease. On a straight-line basis,
the monthly cost of the lease is approximately $3,900.

The Company closed its office in suburban Chicago at 168 E. Highland Ave, Suite
300, Elgin, IL 60120 in January, 2000. There was minimal cost to vacate this
space, primarily due to the write-off of unamortized leasehold improvements.

The Company believes its current premises are adequate for current purposes and
if necessary would be able to obtain alternative or additional space.

ITEM 3.  LEGAL PROCEEDINGS

In November 1999, the Company terminated the employment of its Vice President of
Sales. Subsequent to this termination, the former employee filed a lawsuit
claiming additional compensation was warranted in the Superior Court of Fulton
County, in the State of Georgia and is seeking payment of $178,750. The Court
issued a summary judgment order on default in June 2000 to the plaintiff in the
amount of $137,500. The Company appealed the decision, and in July 2000
submitted to the Court a Motion to Open Default. A hearing was held on August 4,
2000 and the Court ordered the summary judgment to be reopened and the Company
may present its defense in this matter. A court date has not been set for this
hearing as of November 6, 2000. The Company does not agree with the assertion


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and fully intends to defend itself vigorously against this claim. As such, no
provision has been accrued in these financial statements as the Company believes
there is no merit to the claim.

ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

There were no matters submitted to a vote of security holders in the fourth
quarter of Fiscal 2000.

PART II

ITEM 5.  MARKET PRICE FOR COMMON EQUITY AND OTHER RELATED
         SHAREHOLDER MATTERS

The Company's Common Stock has been traded on a limited basis in the
over-the-counter market and quotations are published on the OTC Bulletin Board
under the symbol "PLDY", and in the National Quotation Bureau, Inc. "pink
sheets" under Paladyne Corp.

The following table sets forth the range of high and low bid prices of the
Common Stock for each fiscal quarterly period. Prices reported represent prices
between dealers, do not include retail markups, markdowns or commissions and do
not represent actual transactions.

                                         Fiscal Year
                                    2000               1999
                                    ----               ----
                              High       Low      High       Low
                              ----       ---      ----       ---
     First Quarter            $1.06     $0.50     $2.75     $0.88
     Second Quarter           $3.75     $1.25     $2.00     $0.88
     Third Quarter            $3.25     $1.25     $1.13     $0.31
     Fourth Quarter           $1.88     $1.06     $1.00     $0.25

(The price information above was obtained from an independent quotation
service).

The ability of individual shareholders to trade their shares in a particular
state may be subject to various rules and regulations of that state. A number of
states require that an issuer's securities be registered in their state or
appropriately exempted from registration before the securities are permitted to
trade in that state. Presently, the Company has no plans to register its
securities in any particular state. Further, most likely the Company's shares
will be subject to the provisions of Section 15(g) and Rule 15g-9 of the


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Securities Exchange Act of 1934, as amended (the "Exchange Act"), commonly
referred to as the "penny stock" rule. Section 15(g) sets forth certain
requirements for transactions in penny stocks and Rule 15g-9(d)(1) incorporates
the definition of penny stock as that used in Rule 3a51-1 of the Exchange Act.

The Commission generally defines penny stock to be any equity security that has
a market price less than $5.00 per share, subject to certain exceptions. Rule
3a51-1 provides that any equity security is considered to be a penny stock
unless that security is: registered and traded on a national securities exchange
meeting specified criteria set by the Commission; authorized for quotation on
The NASDAQ Stock Market; issued by a registered investment company; excluded
from the definition on the basis of price (at least $5.00 per share) or the
issuer's net tangible assets; or exempted from the definition by the Commission.
If the Company's shares are deemed to be a penny stock, trading in the shares
will be subject to additional sales practice requirements on broker-dealers who
sell penny stocks to persons other than established customers and accredited
investors, generally persons with assets in excess of $1,000,000 or annual
income exceeding $200,000, or $300,000 together with their spouse.

For transactions covered by these rules, broker-dealers must make a special
suitability determination for the purchase of such securities and must have
received the purchaser's written consent to the transaction prior to the
purchase. Additionally, for any transaction involving a penny stock, unless
exempt, the rules require the delivery, prior to the first transaction, of a
risk disclosure document relating to the penny stock market. A broker-dealer
also must disclose the commissions payable to both the broker-dealer and the
registered representative, and current quotations for the securities. Finally,
monthly statements must be sent disclosing recent price information for the
penny stocks held in the account and information on the limited market in penny
stocks. Consequently, these rules may restrict the ability of broker-dealers to
trade and/or maintain a market in the Company's Common stock and may affect the
ability of shareholders to sell their shares.

As of August 31, 2000, there were 170 holders of record of the Company's Common
Stock. This amount does not take into account those shareholders whose
certificates are held in the name of broker-dealers or otherwise in street or
nominee name.


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<PAGE>


DIVIDEND POLICY

The Company has not declared or paid cash dividends on its common stock or made
distributions in the past, and the Company does not anticipate that it will pay
cash dividends or make distributions in the foreseeable future, other than
preferred dividends described below. The Company currently intends to retain and
invest future earnings to finance its operations.

As part of the acquisition of WG Controls in January, 1998, the Company issued
Series A Preferred Stock which provides for annual dividends of $0.2975 per
share or $40,800 per year. If the Company's profits are insufficient to pay such
dividends, they will be cumulative and accrued for payment when Company profits
are adequate to fund payment. Accordingly, the Company must meet this obligation
before any dividends can be declared for the benefit of Common Stock
shareholders. As of August 31, 2000, the Company has accrued $108,800 of
preferred stock dividends.

TRANSFER AGENT

The Company has designated American Stock Transfer and Trust, 59 Maiden Lane,
New York, NY, 10007 as its transfer agent for the common stock.

ITEM 6.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
         CONDITION AND RESULTS OF OPERATIONS

The following information should be read in conjunction with the consolidated
financial statements and notes thereto appearing elsewhere in this Form 10-KSB.


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RESULTS OF OPERATIONS

The following selected financial information has been derived from the Company's
consolidated financial statements. The information set forth below is not
necessarily indicative of results of future operations and cash flows and should
be read in conjunction with the consolidated financial statements and notes
thereto appearing elsewhere in this Form 10-KSB.

The following table sets forth the percentage relationships to revenues of
principal items contained in the Company's Consolidated Statements of Operations
for the fiscal years ended August 31, 2000 and 1999. The percentages discussed
throughout this analysis are stated on an approximate basis. Results for both
periods presented have been stated to reflect discontinued operations.

                                               Fiscal Years
                                                  Ended
                                                August 31,
                                              2000     1999
                                              ----     ----

     Revenues                                100.0%    100.0%
     Cost of revenues                         61.0%     79.5%
                                             ------    ------
     Gross profit                             39.0%     20.5%
     Operating expenses                       38.2%     36.6%
                                             ------    ------
     Operating(loss)income                     0.8%    (16.1%)
     Other expenses, net                       0.6%      1.4%
                                             ------    ------
     Net income(loss)from
        continuing operations                  0.2%    (17.5%)
     Loss from discontinued operations        (0.0%)   (13.9%)
                                             ------    ------
     Net income(loss)                          0.2%    (31.4%)
                                             ======    ======

Year Ended August 31, 2000 Compared to Year Ended August 31, 1999

The Company's revenues increased by $1,156,013 or 26.5%, from $4,365,852 for the
fiscal year ended August 31, 1999 ("1999") to $5,521,865 for the fiscal year
ended August 31, 2000 ("2000"). This increase is reflective of the Company's
expanding software capabilities and its emphasis on obtaining new sales for its
Datagration product. This product generated approximately $3,684,000 of revenue
in 2000.

One multi - divisional customer in the telecommunications industry accounted for
approximately 81% and 87% of revenues in the years ended August 31, 2000 and
1999, respectively. Receivables from this customer represented approximately 76%
and 94% of net accounts receivable at August 31, 2000 and 1999, respectively.


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<PAGE>


Cost of revenues decreased by $106,186 in 2000, or 3.1%, from $3,472,586 in 1999
to $3,366,400 in 2000. This decrease is consistent with the Company's business
which began using in-house efforts to satisfy the requirements of contracts
rather than using more expensive outside services.

The Company is highly reliant on one vendor who performs the bulk of the work
related to database processing activities the Company performs for its clients.
While the Company does intend to develop the capabilities internally to offset
some of the dependence on this vendor, there will be significant need for the
services of this vendor. The vendor represented approximately 74% and 61% of the
cost of revenues for fiscal years 2000 and 1999, respectively.

The Company's gross profit margin, was 39.0% and 20.5% for 2000 and 1999,
respectively. This increase in gross profit margin is consistent with the
re-focus of the Company's strategic direction related to software development.
The revenues generated by the sale of the software have higher margins than the
previous marketing representative sales.

Selling, general and administrative expenses ("SG&A"), including depreciation
and amortization, increased by $514,169 in 2000 or 24.3%, from $1,596,469 in
1999 to $2,110,638 in 2000. This increase in SG&A was expected and the Company
had planned for these levels. As the Company moved from the sales rep business,
in fiscal 1999, to software development and sales, additional expenses were
needed for personnel for software development and additional sales expenses such
as travel and trade shows. In addition, SG&A also includes stock compensation
charges of $82,000 in 2000 and $130,312 in 1999 for warrant and option grants
issued to non-employees.

Interest expense decreased by $37,036 or 60.3% from $61,454 in 1999, or 1.4% of
revenues to $24,418, or 0.4% for 2000. The decrease is consistent with
significantly lower average borrowings throughout the current year. The bank
line of credit and the note payable to a stockholder were paid off in fiscal
2000.

There was no tax provision or benefit recognized in fiscal 2000 and 1999. The
Company generated net income of $12,649 in 2000 compared to a net loss of
$1,369,494 in 1999. At August 31, 2000 and 1999, the Company recorded a
valuation allowance against deferred tax assets due to uncertainties regarding
the Company's ability to generate a sufficient level of taxable income in future
periods to realize such assets. In the event that realization of the deferred


                                       15
<PAGE>


tax assets is considered more likely than not in future periods, the Company may
reduce the valuation allowance.

In fiscal year 1999, the Company discontinued the operations of its
manufacturers' representative companies. The following table sets forth the
results of operations and loss on disposal from these businesses in fiscal 1999.
There is no effect on fiscal 2000, as these operations were disposed of and
reported in fiscal 1999.

                                       Fiscal 1999
                                       -----------

     Revenues                           $2,346,053
     Cost of revenues                    1,723,867
                                        ----------
        Gross profit                       622,186

     General & administrative expenses     551,829
                                        ----------

     Income from operations                 70,357

     Loss on disposal                     (675,194)
                                        -----------

     Loss from discontinued operations  $ (604,837)
                                        ===========

NET OPERATING LOSS

The Company has accumulated approximately $2,200,000 of net operating loss
carryforwards as of August 31, 2000, which may be offset against taxable income
and income taxes in future years. The use of these losses to reduce future
income tax liabilities will depend on the generation of sufficient taxable
income prior to the expiration of the net operating loss carryforwards. The
carryforwards expire in the year 2019. In the event of certain changes in
control of the Company, there will be an annual limitation on the amount of net
operating loss carryforwards which can be used.

LIQUIDITY AND CAPITAL RESOURCES

The Company's principal cash requirements are for software development, selling,
general and administrative expenses, outside consultants (such as independent
contractors) who provide database services, employee costs, funding of accounts
receivable, capital expenditures and funding of acquisitions. The Company's
primary sources of cash have been from private placements of the Company's
Common Stock which raised $1,983,149 of net proceeds in the fiscal year 2000 and
$476,555 in fiscal year 1999. The Company is investigating various sources for
additional financing, including both equity sales and debt facility
arrangements, though no representation is made as to the Company's ability to
secure either.


                                       16
<PAGE>


For the year ended August 31, 2000, cash and cash equivalents increased from
none at the beginning of the year to $635,612 at the end of the year.

Net cash used in operating activities in the year ended August 31, 1999 was
$529,856 due to the net loss of approximately $1,369,000 and a net decrease in
working capital items of approximately $173,000, offset by non-cash depreciation
and amortization expenses of approximately $209,000, and the non-cash loss on
discontinued operations of approximately $675,000.

Net cash used in operating activities in the year ended August 31, 2000 was
$233,482 due primarily to an increase in accounts receivable offset by an
increase in operating accounts payable and non-cash depreciation and
amortization expenses of approximately $63,000.

Net cash provided by investing activities in fiscal 1999 was $53,332
attributable to net cash acquired in business acquisition and asset disposals of
approximately $99,000, and reductions in other assets of approximately $76,000,
offset by fixed asset additions of approximately $122,000.

Net cash used in investing activities in fiscal 2000 was $910,092 attributable
to the capitalization of software development costs of approximately $349,000,
additions to property and equipment of approximately $71,000 and the purchase of
short-term investments of approximately $485,000.

Cash provided by financing activities in fiscal 1999 was $349,992 due primarily
to net proceeds from stock issuance of approximately $477,000 and additions to
short term debt of approximately $19,000, offset by reductions in bank lines of
credit of approximately $42,000 and reductions to long term debt of
approximately $109,000.

Cash provided by financing activities in fiscal 2000 was $1,779,186 due
primarily to net proceeds from stock issuance of approximately $1,983,000 and
proceeds of $189,637 on option/warrant exercises offset by the repayment of the
bank line of credit of $243,600 and the repayment of long term debt of $150,000.

In the year ended August 31, 1999, the Company sold 520,538 shares of its Common
Stock via private placements, resulting in net proceeds of $476,555. The
exercise of outstanding options and warrants during fiscal year 1999 resulted in
net proceeds to the Company of $5,500.

In the year ended August 31, 2000, the Company sold 1,325,129 shares of its
Common Stock via private placements, resulting in proceeds of $1,983,149. The


                                       17
<PAGE>


exercise of outstanding options and warrants during fiscal year 2000 resulted in
net proceeds to the Company of $189,637.

In fiscal year 2000 the Company had a revolving line-of-credit with a bank for
$250,000, which was originally due to expire December 31, 1999. The expiration
date was extended to February 29, 2000 by mutual agreement. The Company paid the
entire $250,000 principal on February 28, 2000. The Company negotiated a new
line of credit with the bank in May, 2000. The line of credit is for $500,000
secured by the receivables of the Company. The rate is prime plus 1.5%. The line
of credit expires on March 15, 2001. As of August 31, 2000, the Company has no
outstanding balance on the line of credit.

The Company also had a note payable to a trust controlled by the President of
the Company (see Note 11 to the financial statements in Part II, Item 7). The
balance due on the note was $150,000 plus interest at 12% per annum. The note
was repaid in its entirety on May 15, 2000. There are no outstanding obligations
to any officer, directors or employees for any loans.

EFFECTS OF RECENT ACCOUNTING PRONOUNCEMENTS

In June 1998, the Financial Accounting Standards Board ("FASB") issued SFAS No.
133, "Accounting for Derivative Instruments and Hedging Activities". SFAS No.
133 requires companies to recognize all derivative contracts as either assets or
liabilities in the balance sheet and to measure them at fair value. If certain
conditions are met, a derivative may be specifically designated as a hedge, the
objective of which is to match the timing of gain or loss recognition on the
hedging derivative with the recognition of (i) the changes in the fair value of
the hedged asset or liability that are attributable to the hedged risk or (ii)
the earnings effect of the hedged forecasted transaction. For a derivative not
designated as a hedging instrument, the gain or loss is recognized in income in
the period of change. SFAS NO. 133, as amended by SFAS NO. 137, is effective for
all fiscal quarters of fiscal years beginning after June 15, 2000.

Historically, the Company has not entered into derivatives contracts either to
hedge existing risks or for speculative purposes. Accordingly, the Company's
adoption of the new standard on September 1, 2000 did not affect its financial
statements.

In March 2000, the FASB issued Interpretation No. 44 ("FIN 44"), "Accounting for
Certain Transactions Involving Stock Compensation, an Interpretation of APB
Opinion No. 25". FIN 44 clarifies the application of APB Opinion No. 25 for (a)


                                       18
<PAGE>


the definition of employee for purposes of applying APB Opinion No. 25, (b) the
criteria for determining whether a plan qualifies as a noncompensatory plan, (c)
the accounting consequences of various modifications to the terms of a
previously fixed stock option or award, and (d) the accounting for an exchange
of stock compensation awards in a business combination. FIN 44 is effective July
1, 2000, but certain conclusions cover specific events that occurred after
either December 15, 1998 or January 12, 2000. The adoption of FIN 44, as of July
1, 2000, did not have a material effect on the Company's historical financial
position or results of operations, but may impact the accounting for grants or
awards in future periods.

On December 3, 1999, the SEC issued Staff Accounting Bulletin 101 ("SAB 101"),
Revenue Recognition in Financial Statements. SAB 101 summarizes some of the
SEC's interpretations of the application of generally accepted accounting
principles to revenue recognition. Revenue recognition under SAB 101 was
initially effective for the Company's first fiscal quarter of fiscal year
beginning after December 15, 1999. However, SAB 101B, which was released June
26, 2000, delayed adoption of SAB 101 until no later than the fourth fiscal
quarter of fiscal years beginning after December 15, 1999. The Company believes
that its revenue recognition practices are in substantial compliance with SAB
101 and that adoption of its provisions would not be material to its prospective
annual or quarterly results of operations.

INFLATION

In the opinion of management, inflation has not had a material effect on the
operations of the Company.

ITEM 7.  FINANCIAL STATEMENTS

The consolidated financial statements for Paladyne Corp. as of and for the
fiscal years ended August 31, 2000 and 1999 are included herein in response to
Item 7 of this Form 10-KSB.


                                       19
<PAGE>


               REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS


To the Board of Directors and Stockholders
Paladyne Corp.
Lake Mary, Florida

     We have audited the accompanying consolidated balance sheets of Paladyne
Corp. and subsidiaries as of August 31, 2000 and 1999, and the related
consolidated statements of operations, stockholders' equity (deficit) and cash
flows for the years then ended. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements based on our audits.

     We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the consolidated financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the consolidated financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
consolidated financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.

     In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position of
Paladyne Corp. and subsidiaries at August 31, 2000 and 1999, and the results of
their operations and their cash flows for the years then ended in conformity
with generally accepted accounting principles.




BDO SEIDMAN, LLP
New York, New York
November 3, 2000


                                       20
<PAGE>


PALADYNE CORP.
CONSOLIDATED BALANCE SHEETS
AUGUST 31, 2000 AND 1999

                                                     2000         1999
                                                     ----         ----
ASSETS
CURRENT ASSETS
  Cash and cash equivalents                     $   635,612    $         -
  Short-term investments                            484,508              -
  Accounts receivable (net of allowance
    for doubtful accounts of $12,555 and
    $9,263)                                       1,037,544        392,933
  Prepaid expenses and deposits                         867         32,641
                                                -----------    -----------
    Total current assets                          2,158,531        425,574
                                                                         -
PROPERTY AND EQUIPMENT, NET                         124,725        128,385

GOODWILL, NET OF AMORTIZATION
  OF $13,388 AND $4,333                             211,012         77,367
CAPITALIZED SOFTWARE DEVELOPMENT COSTS, NET
  OF AMORTIZATION OF $11,034                        338,037              -
OTHER ASSETS                                         51,461         45,669
                                                -----------    -----------
TOTAL ASSETS                                    $ 2,883,766    $   676,995
                                                ===========    ===========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES:
  Accounts payable                              $   680,214    $   330,516
  Accrued expenses                                  131,375        278,137
  Accrued preferred stock dividend                  108,800              -
  Notes payable - line of credit                          -        243,600
  Deferred revenue                                        -         95,700
                                                -----------    -----------
    Total current liabilities                       920,389        947,953

NOTE PAYABLE TO STOCKHOLDER                               -        150,000

COMMITMENTS AND CONTINGENCIES

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,
    8,456,599 and 6,782,229
    issued and outstanding                            8,457          6,783
  Additional paid in capital                      7,136,430      4,766,418
  Accumulated deficit                            (5,181,647)   (5,194,296)
                                                -----------    -----------
    Total stockholders' equity (deficit)          1,963,377      (420,958)
                                                -----------    -----------
TOTAL LIABILITIES AND STOCKHOLDERS'
  EQUITY (DEFICIT)                              $ 2,883,766    $   676,995
                                                ===========    ===========


           See accompanying notes to consolidated financial statements
           ===========================================================


                                       21
<PAGE>


PALADYNE CORP.
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED AUGUST 31, 2000 AND 1999

                                                    2000           1999
                                                    ----           ----

Revenues                                        $ 5,521,865    $ 4,365,852

Cost of revenues                                  3,366,400      3,472,586
                                                -----------    -----------
Gross profit                                      2,155,465        893,266

Selling, general and administrative expenses      2,047,982      1,429,376
Depreciation and amortization                        62,656        167,093
                                                -----------    -----------
Income(loss) from operations                         44,827       (703,203)

Other income (expense):
  Interest income                                     7,594            -
  Interest expense                                  (24,418)       (61,454)
  Loss on disposal of assets                        (31,814)           -
  Other income                                       16,460            -
                                                -----------    -----------
Income(loss) from continuing operations              12,649       (764,657)

Discontinued operations:
  Income from operations of discontinued
    subsidiaries                                        -           70,357
  Loss on disposal                                      -         (675,194)
                                                -----------    -----------
Loss from discontinued operations                       -         (604,837)
                                                -----------    -----------
Net income (loss)                                    12,649     (1,369,494)

Cumulative convertible preferred stock
  dividend requirements                              40,800         40,800
                                                -----------    -----------
Net loss attributable to common
  stockholders                                  $   (28,151)   $(1,410,294)
                                                ===========    ============
Weighted average shares outstanding
          Basic and diluted                       7,958,843      6,555,056
                                                ===========    ============
Basic and diluted net loss per share
  continuing operations                         $       -      $     (0.13)
                                                ===========    ============
Basic and diluted net loss per share
  discontinued operations                       $       -      $     (0.09)
                                                ===========    ============

Basic and diluted net loss per share            $       -      $     (0.22)
                                                ===========    ============


           See accompanying notes to consolidated financial statements
           ===========================================================


                                       22
<PAGE>


PALADYNE CORP.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
FOR THE YEARS ENDED AUGUST 31, 2000 AND 1999

<TABLE>
<CAPTION>
                                                                                                              Total
                                      Common Stock         Preferred Stock     Additional             Stockholders'
                                                  Par                   Par       Paid-in  Accumulated       Equity
                                   Shares       Value       Shares    Value       Capital      Deficit    (Deficit)
<S>                                 <C>           <C>       <C>        <C>    <C>          <C>            <C>
BALANCES, SEPTEMBER 1, 1998         6,378,503     $6,379    137,143    $137   $ 4,284,534  ($3,824,802)   $466,248

Shares retired in business
  dispositions                       (187,143)      (187)                        (159,992)                (160,179)

Options exercised                      55,581         56                            5,444                    5,500

Note holder settlement for stock       15,050         15                           30,085                   30,100

Warrants issued as compensation                                                   130,312                  130,312

Private placement sales, net          520,238        520                          476,035                  476,555

Net loss for the year                                                          (1,369,494)  (1,369,494)
                                    ------------------------------------------------------------------------------
BALANCES, AUGUST 31, 1999           6,782,229      6,783    137,143     137     4,766,418   (5,194,296)   (420,958)

Options exercised                     261,838        262                          172,649                  172,911

Warrants exercised                     18,408         18                           16,708                   16,726

Payable settlement for common stock       520          1                            1,299                    1,300

Common shares and warrants issued
  for acquisition                      68,475         68                          224,332                  224,400

Private placement sales, net        1,325,129      1,325                        1,981,824                1,983,149

Warrants issued for non-employee
  services rendered                                                                82,000                   82,000

Preferred dividend accrual                                                       (108,800)                (108,800)

Net income for the year                                                                         12,649      12,649
                                    ------------------------------------------------------------------------------
BALANCES, AUGUST 31, 2000           8,456,599     $8,457    137,143    $137    $ 7,136,430 ($5,181,647) $1,963,377
                                    ==============================================================================
</TABLE>

           See accompanying notes to consolidated financial statements
           ===========================================================


                                       23
<PAGE>


PALADYNE CORP.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED AUGUST 31, 2000 AND 1999

                                                    2000           1999
                                                    ----           ----

Cash flows from operating activities
  Net income (loss)                             $    12,649    $(1,369,494)
  Adjustments to reconcile net income(loss)
   to cash used in operating activities:
    Depreciation                                     42,567        161,535
    Amortization                                     20,089         47,390
    Loss on disposal of discontinued
     operations                                         -          675,194
    Non-cash warrants issued                         82,000        130,312
    Common stock issued for services                  1,300            -
    Loss on disposal of assets                       31,814            -

Changes in operating assets and liabilities
 (net of assets and liabilities acquired and
 disposed of):
  Accounts receivables                             (644,611)       109,764
  Other current assets                               31,774        174,095
  Accounts payable                                  349,698       (160,210)
  Accrued expenses                                  (65,062)      (243,715)
  Deferred revenue                                  (95,700)      ( 54,727)
                                                -----------    -----------
Net cash used in operating activities              (233,482)      (529,856)
                                                -----------    -----------
Cash flows from investing activities
  Additions to property & equipment                ( 70,721)     ( 121,916)
  Purchase of short-term investments               (484,508)           -
  Capitalized software development costs           (349,071)           -
  Cash acquired in business acquisition
   and disposal, net                                    -           99,078
  Other assets                                     (  5,792)        76,170
                                                -----------    -----------
Net cash provided by (used in)
  investing activities                             (910,092)        53,332
                                                -----------    -----------
Cash flows from financing activities
  Repayment of notes payable                       (243,600)      ( 41,899)
  Repayment of note payable
    to stockholder                                 (150,000)      (109,158)
  Additions/(reductions) in short-term
    debt                                                -           18,994
  Proceeds from issuing of
    common stock, net                             1,983,149        476,555
  Proceeds from exercise of
    options and warrants                            189,637          5,500
                                                -----------    -----------
Net cash provided by financing
  activities                                      1,779,186        349,992
                                                -----------    -----------
Net increase (decrease) in cash
  and cash equivalents                              635,612       (126,532)

Cash and cash equivalents
  at beginning of year                                  -          126,532
                                                -----------    -----------
Cash and cash equivalents
  at end of year                                $   635,612    $       -
                                                ===========    ===========


          See accompanying notes to consolidated financial statements
           ===========================================================


                                       24
<PAGE>


PALADYNE CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1.  SUMMARY OF ACCOUNTING POLICIES

OPERATIONS

     Paladyne Corp. (the "Company") provides seamless data integration and data
     quality software and services that enable its customers to carryout
     customer mailing, marketing and e-commerce initiatives. The Company also
     provides the database-related services of customer identification, customer
     and prospect database development and management, data integration and
     marketing campaign management. The Company's primary offices are in Lake
     Mary, Florida. The Company also has operations in Chantilly, Virginia. Its
     customers are located throughout the continental United States.

     On March 5, 1999, the Company merged with and into Paladyne Corp., its
     wholly owned subsidiary, in a migratory merger, and Paladyne Corp. is the
     successor Company. The purpose of the merger was simply to change the name
     of the Company and re-incorporate the Company in Delaware to utilize more
     favorable corporate taxation regulations.

PRINCIPLES OF CONSOLIDATION

     The Company, as of the beginning of fiscal year 2000 operates as a single
     business entity. In prior fiscal years, the financial statements include
     the accounts of the Company and its wholly owned subsidiaries. All
     intercompany classifications and balances have been eliminated in
     consolidation.

REVENUE RECOGNITION

     The Company recognizes revenue at the point at which the product is
     delivered to the customer, for software, and for services when these
     services are performed. The contractual terms of agreements dictate the
     recognition of revenue by the Company.

DEFERRED REVENUE

     The Company, at times, receives prepayments for professional services to be
     rendered. This revenue is deferred and as the services are provided, a
     proportionate share of the deferred revenue is recognized as revenue.


                                       25
<PAGE>


CASH EQUIVALENTS AND INVESTMENTS

     The Company considers all highly liquid debt instruments and other short
     term investments with an initial maturity date of three months or less from
     the purchase date to be cash equivalents.

     Short-term investments are comprised of investments in a single entity's
     commercial paper with terms of less than one year. The commercial paper is
     classified as held-to-maturity and, accordingly, is carried at historical
     cost.

STOCK BASED COMPENSATION

     The Company accounts for its stock option awards to employees under the
     intrinsic value based method of accounting prescribed by Accounting
     Principles Board Opinion No. 25, "Accounting for Stock Issued to
     Employees". Under the intrinsic value based method, compensation cost is
     the excess, if any, of the fair market value of the stock at the grant date
     over the amount an employee must pay to exercise the option. The Company
     provides pro forma disclosures of net loss attributable to common
     stockholders and loss per share as if the fair value based method of
     accounting had been applied as required by Statement of Financial
     Accounting Standards ("SFAS") No. 123, "Accounting for Stock Based
     Compensation".

     From time to time, the Company grants options or warrants to non employees
     in return for services rendered. The Company recognizes a charge for the
     fair value ascribed to such options and warrants over the service or
     vesting period.

PROPERTY AND EQUIPMENT; DEPRECIATION

     Property and equipment are stated at cost and depreciated over their
     estimated useful lives of three to five years using the straight-line
     method.

LONG - LIVED ASSETS

     Long-lived assets, such as goodwill and property and equipment, are
     evaluated for impairment when events or changes in circumstances indicate
     that the carrying amount of the assets may not be recoverable through the
     estimated undiscounted future cash flows from the use of these assets. When
     such impairment exists, the related assets will be written down to fair
     value.

GOODWILL

     Goodwill related to the Bradas Inc. "(Bradas") acquisition (see Note 2) is
     amortized using the straight line method over an estimated useful life of
     10 years.


                                       26
<PAGE>


CAPITALIZED SOFTWARE DEVELOPMENT COSTS

     Costs incurred to establish the technological feasibility of computer
     software products are charged to expense as incurred. Costs of producing
     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 year ended August 31, 2000 for the
     development of the Datagration product was $349,071. The amortized
     development cost for the year ended August 31, 2000 was $11,034. 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 realizable value are
     expensed.

INCOME TAXES

     The Company accounts for income taxes under an asset and liability
     approach. Accordingly, deferred income taxes are recognized for the tax
     consequences of temporary differences by applying enacted statutory rates
     applicable to future years to differences between the financial statement
     carrying amounts and the tax bases of existing assets and liabilities.
     Valuation allowances are recorded when realization of deferred tax assets
     can not be considered more likely than not.

ESTIMATES

     The preparation of financial statements in conformity with generally
     accepted accounting principles requires the Company to make estimates and
     assumptions that affect the reported amounts of assets, liabilities,
     revenue and expenses during the reporting period. This included the
     allowance for doubtful accounts and the valuation of capitalized software
     development costs.

EFFECTS OF RECENT ACCOUNTING PRONOUNCEMENTS

     In June 1998, the Financial Accounting Standards Board ("FASB") issued SFAS
     No. 133, "Accounting for Derivative Instruments and Hedging Activities".
     SFAS No. 133 requires companies to recognize all derivative contracts as
     either assets or liabilities in the balance sheet and to measure them at
     fair value. If certain conditions are met, a derivative may be specifically
     designated as a hedge, the objective of which is to match the timing of
     gain or loss recognition on the hedging derivative with the recognition of


                                       27
<PAGE>


     (i) the changes in the fair value of the hedged asset or liability that are
     attributable to the hedged risk or (ii) the earnings effect of the hedged
     forecasted transaction. For a derivative not designated as a hedging
     instrument, the gain or loss is recognized in income in the period of
     change.

     SFAS NO. 133, as amended by SFAS NO. 137, is effective for all fiscal
     quarters of fiscal years beginning after June 15, 2000.

     Historically, the Company has not entered into derivative contracts either
     to hedge existing risks or for speculative purposes. Accordingly, the
     Company does not expect adoption of the new standard on September 1, 2000
     to affect its financial statements.

     In March 2000, the FASB issued Interpretation No. 44 ("FIN 44"),
     "Accounting for Certain Transactions Involving Stock Compensation, an
     Interpretation of APB Opinion No. 25". FIN 44 clarifies the application of
     APB Opinion No. 25 for (a) the definition of employee for purposes of
     applying APB Opinion No. 25, (b) the criteria for determining whether a
     plan qualifies as a noncompensatory plan, (c) the accounting consequences
     of various modifications to the terms of a previously fixed stock option or
     award, and (d) the accounting for an exchange of stock compensation awards
     in a business combination. FIN 44 is effective July 1, 2000, but certain
     conclusions cover specific events that occurred after either December 15,
     1998 or January 12, 2000. The adoption of FIN 44, as of July 1, 2000, did
     not have a material effect on the Company's historical financial position
     or results of operations but may impact the accounting for grants or awards
     in future periods.

     On December 3, 1999, the SEC issued Staff Accounting Bulletin 101 ("SAB
     101"), Revenue Recognition in Financial Statements. SAB 101 summarizes some
     of the SEC's interpretations of the application of generally accepted
     accounting principles to revenue recognition. Revenue recognition under SAB
     101 was initially effective for the Company's first fiscal quarter of
     fiscal years beginning after December 15, 1999. However, SAB 101B, which
     was released June 26, 2000, delayed adoption of SAB 101 until no later than
     the fourth fiscal quarter of fiscal years beginning after December 15,
     1999. The Company believes that its revenue recognition practices are in
     substantial compliance with SAB 101 and that adoption of its provisions
     would not be material to its prospective annual or quarterly results of
     operations.

FINANCIAL INSTRUMENTS

     Financial instruments which potentially subject the Company to
     concentrations of risk consist principally of temporary cash, equivalents,


                                       28
<PAGE>


     investments and accounts receivable (see Note 12). The Company invests its
     temporary cash balances in financial instruments of large financial
     institutions with maturities of six months or less.

     The carrying values reflected in the balance sheets reasonably approximate
     the fair values for cash, accounts receivable, payables and debt.

NET LOSS PER SHARE

     Basic net loss per share is computed by dividing net income or loss by the
     weighted average number of common shares outstanding, after giving effect
     to the stock dividend. Diluted loss per share includes the assumed exercise
     of stock options and warrants using the treasury stock method and the
     effects of convertible preferred stock. In fiscal 2000 and 1999, there were
     no differences between basic and diluted loss per common share because the
     assumed exercise was anti-dilutive. The assumed exercise of stock options
     and warrants and conversion of preferred stock could potentially dilute
     basic earnings per share amounts in the future.

NOTE 2.  BUSINESS COMBINATION AND DISPOSITIONS

     Business Combination
     --------------------

     In February 1999, the Company agreed to purchase intellectual property,
     including the initial framework of what has become the Datagration
     e-Business Suite, from Bradas for 60,000 shares of common stock, all of
     which has been issued and valued at approximately $65,000, and 400,000
     stock warrants that will be issued based on the delivery of intellectual
     property and attainment of certain predefined milestones. The Company's
     August 31, 1999 balance sheet reflects an accrued liability for the
     contemplated issuance of these shares. Such shares were issued in fiscal
     2000. Through August 31, 2000, 100,000 of these stock warrants had been
     issued. The fair values ascribed to these warrants ($125,000), using the
     Black - Scholes option pricing model, have been included in the cost of the
     acquisition. The issuance of the remaining warrants (and related accounting
     treatment) is contingent upon future events, facts and circumstances.
     Additionally, the Company agreed to assume approximately $32,000 of debt
     incurred by Bradas' founder. The Company agreed to fund the completion of
     the product including providing necessary funding for both equipment and
     personnel to complete the product and maintain and upgrade it. As of August
     31, 2000 the Company has goodwill of $224,400 for the Bradas purchase of
     which approximately $13,400 has been amortized. The ascribed life is 10
     years.


                                       29
<PAGE>


     Dispositions
     ------------

     Subsequent to the close of business on November 30, 1998, the Company sold
     all the capital stock in ORAYCOM, Inc. ("ORAYCOM") to O. Ray Strickland and
     O. Ray Strickland IRA, (collectively, the "Strickland Group"). Mr.
     Strickland was an employee of the Company and the General Manager of
     ORAYCOM. He was the sole shareholder of ORAYCOM when the Company acquired
     it from him in June 1997. The agreement called for Strickland Group to
     convey to the Company, 80,000 shares of the Company's Common Stock in
     exchange for all of the issued and outstanding shares of ORAYCOM and waiver
     of the non-compete agreement in place with Mr. Strickland. As a result, the
     Company took a charge in the fourth quarter of fiscal 1998 of $428,054 to
     write off the remaining balance of the goodwill related to the purchase of
     ORAYCOM. ORAYCOM was not considered a material subsidiary to the Company's
     consolidated business. Upon closing, the Company recognized a gain on the
     transaction of $63,501 in fiscal 1999.

     On May 31, 1999, the Company closed an agreement to sell the assets of WG
     Controls, Inc. to the management of WG. The terms of the transaction were
     $250,000 in cash, $25,000 in a long-term note receivable, and the
     assumption of approximately $196,000 in debt. The total sale price was
     approximately $471,000.

     Effective May 31, 1999, the Company sold the assets of Primus to the
     management of Primus. The terms of the transaction were $12,500 in cash,
     the return of 107,143 shares of the Company's stock, valued at $40,179, and
     a 1% override on commission receipts for a period of twenty four months
     following the transaction. The total sale price was approximately $53,000.

     Due to the distinct nature of their operations, management has treated the
     Oraycom, Primus and WG Controls businesses as discontinued operations and,
     accordingly, previous financial statements have been restated to reflect
     the results of these sold businesses. Fiscal 1999 results include the
     results of these businesses prior to their disposal dates. Capsule
     financial data of these discontinued operations for fiscal 1999 are as
     follows:


                                       30
<PAGE>


                                                               1999
                                                            ----------

          Revenues                                          $2,346,053
          Cost of revenues                                   1,723,867
                                                            ----------
             Gross profit                                      622,186
          General and administrative expenses                  551,829
                                                            ----------
          Income from operations                                70,357
          Loss on disposal                                    (675,194)
                                                            ----------
          Loss from discontinued operations                 $ (604,837)
                                                            ==========

     The following summarizes the losses on the dispositions of these
     businesses:

                          ORAYCOM        WG      Primus       Total
                          -------        --      ------       -----

     Stock redeemed     $ 120,000         -     $ 40,179   $ 160,179
     Cash(paid) received     (922)   $100,000       -         99,078
     Note receivable           -      175,000     12,500     187,500
     Debt assumed              -      195,764        -       195,764
     Net assets disposed  (55,577)   (249,120)  (187,192)   (491,889)
     Goodwill written off      -     (623,556)  (176,436)   (799,992)
                        --------------------------------------------
     Gain(loss) on
       Disposal           $63,501   $(401,912) $(310,949)   (649,360)
                        --------------------------------------------
     Additional amortization
       of covenants
      not to compete                                        ( 25,834)
                                                           ---------
     Net loss on disposal                                  $(675,194)
                                                           =========

NOTE 3.  PROPERTY AND EQUIPMENT

     Major classes of property and equipment consist of the following:

                                                        2000           1999
                                                        ----           ----
               Leasehold improvements              $    1,387     $   51,182
               Furniture and fixtures                  55,073         98,994
               Computer equipment                     159,349        279,244
                                                   ----------     ----------
                                                      215,809        429,420
               Less accumulated depreciation           91,084        301,035
                                                   ----------     ----------
               Net property and equipment          $  124,725     $  128,385
                                                   ==========     ==========


                                       31
<PAGE>


NOTE 4.  NOTES PAYABLE

     Notes payable consisted of the following:

     Description    % Rate    Payment Terms(a)    2000      1999
     -----------    ------    ----------------    ----      ----

     $250,000 Line  Prime     Due on demand       $  -   $ 243,600
     of Credit      plus      or Dec 31,1999
                    1.25%

     Stockholder      12%     Due Jan 1, 2001        -     150,000
     Loan

     $500,000 Line  Prime     Due March 15, 2001     -        -
     of Credit      plus 1.5%                     ----   ---------

       Total                                         -     393,600

       Less current maturities                       -     243,600
                                                  ----   ---------

       Long-term portion                          $  -   $ 150,000
                                                  ====   =========

     a) On February 28, 2000, the Company repaid and terminated the $250,000
     line of credit. The Company also repaid the $150,000 owed to a trust
     controlled by the President of the Company on May 15, 2000. As of August
     31, 2000, the Company has no short term or long term notes payable. The
     $500,000 line of credit is secured by accounts receivable.

     The Company previously guaranteed the personal and commercial debt of a
     certain former Director and shareholder (who are husband and wife) of the
     Company with this bank. The Company was released from all guarantees in
     fiscal 1999.

NOTE 5.  INCOME TAXES

     Provisions (benefits) for Federal and state income taxes consist of the
     following:


                                       32
<PAGE>


                                                  2000              1999
                                                  ----              ----

       Current:
         Federal                                $      -          $      -
         State                                         -                 -
                                           ---------------   ---------------
         Total current                                 -                 -

       Deferred:
         Federal                                  18,000          (246,000)
         State                                     2,000           (28,000)
         Valuation allowance                     (20,000)          274,000
                                           ---------------   ---------------
         Total deferred                                -                 -
                                           ---------------   ---------------
       Provision (benefit) for
         income taxes                           $      -          $      -
                                           ===============   ===============

     The Company's effective tax rate differs from the statutory federal tax
     rate in 2000 and 1999 as shown in the following table:

                                                  2000              1999
                                                  ----              ----

       U.S. federal income taxes at the
         statutory rate                         $  4,000         $(260,000)
       State taxes, net                            2,000           (28,000)
       Nondeductible expenses                     14,000            14,000
       Changes in valuation allowance            (20,000)          274,000
                                           ---------------   ---------------

                                               $      -          $      -
                                           ===============   ===============

     The tax effects of temporary differences that give rise to a significant
     portion of the deferred tax assets and liabilities as of August 31, 2000
     and 1999 are presented below:

                                                  2000              1999
                                                  ----              ----

      Allowance for doubtful accounts          $  5,000          $  3,000
      Net operating loss carryforwards          858,000           912,000
      Stock option compensation                  80,000            49,000
      Other                                       2,000             1,000
      Valuation allowances                     (945,000)         (965,000)
                                           ---------------   ---------------

                                               $      -          $      -
                                           ===============   ===============

     The Company has recorded a valuation allowance against deferred tax assets
     due to uncertainties regarding the Company's ability to generate a
     sufficient level of taxable income in future periods. In the event that
     realization of the deferred tax assets is considered more likely than not
     in future periods, the Company may reduce the valuation allowance. The
     Company has approximately $2,200,000 of net operating loss carryforwards as
     of August 31, 2000 which expire through 2019.


                                       33
<PAGE>



NOTE 6.  EMPLOYEE BENEFIT PLAN

     The Company sponsors a qualified employee savings plan for all eligible
     employees, commonly referred to as a 401-K plan. Participants may make
     contributions from their gross pay (limited to 15% of the employee's
     compensation, as defined), with the Company matching such contributions
     (subject to certain limitations) at the rate of 25% of the first 6% of each
     participant's contribution.

     Employer matching contributions to the plan were approximately $12,000 and
     $8,000 for the years ended August 31, 2000 and 1999, respectively.

NOTE 7.  COMMITMENTS AND CONTINGENCIES

     Lease Obligations
     -----------------

     The Company leases office space and equipment under operating leases which
     expire at various dates. As of August 31, 2000, the Company's future
     minimum lease payments under operating leases are as follows:

                    Year ending August 31,                Amount
                                                          ------
                    2001                              $   128,634
                    2002                                  116,253
                    2003                                   27,375
                                                          -------
     Total minimum rent commitments                   $   272,262
                                                          =======

     Total rental expense for the Company's facilities and equipment was
     approximately $110,000 and $231,000 for the years ended August 31, 2000 and
     1999, respectively.

     Legal Proceedings
     -----------------

     The Company has been named a party in a lawsuit filed by a former employee
     claiming additional compensation is due. The Company's position is that the
     lawsuit has no merit and intends to vigorously defend its position. No
     amounts have been accrued relating to this lawsuit as of August 31, 2000.

NOTE 8.  STOCKHOLDERS' EQUITY

     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


                                       34
<PAGE>


     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 $287,000 and
     574,000 units in fiscal 2000, for a total of $412,000 and 824,000 shares
     being issued in total. Of the $412,000 raised, $187,000 was invested by
     Management and Directors of the Company.

     On January 21, 2000, the Board of Directors authorized a private placement
     of up to 500,000 units prices at $2.375 per unit, with a unit consisting of
     one share of the Company's Common Stock and a callable 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. Net proceeds from
     this private placement as of August 31, 2000 were $1,696,149, (which is net
     of offering expenses of $85,130). This resulted in the issuance of 751,129
     shares of Common Stock and the same number of warrants.

     The Series A Preferred Stock issued in the 1998 acquisition of WG Controls
     provides for annual dividends of $0.2975 per share or $40,800 per year. If
     the Company's profits are insufficient to pay such dividends, they will be
     cumulative and accrued for payment when Company profits are adequate to
     fund payment. The conversion provision on the preferred stock calls for the
     137,143 preferred shares to be converted into .67361 shares of the
     Company's Common Stock or 92,381 shares of Common Stock when the Company's
     Common Stock achieves an average closing price of $5.25 per share for a
     consecutive 60 day trading period. The preferred shares have the same
     voting rights as common shares and have preference to the common shares in
     the event of any liquidation, dissolution or winding up of the Company,
     whether voluntary of involuntary.

NOTE 9.  STOCK OPTION PLAN AND WARRANTS

     The Company has a stock option plan (the "Plan") adopted by the
     shareholders on March 3, 1999 which replaced the Company's previous 1996
     Stock Option Plan. The Plan authorizes the issuance of up to 2,500,000
     shares of common stock.

     The Plan provides for the issuance of both qualified and nonqualified
     incentive stock options at an exercise price approximating the fair market
     value of the Company's stock at the date of grant (or 110% of such fair
     market value in the case of substantial stockholders). Options generally
     vest over two years, with one-third being vested immediately, one-third
     vesting on the one year anniversary of the issuance, and the final
     one-third vesting on the two year anniversary date of the issuance. The


                                       35
<PAGE>


     maximum life of the options is five years in the case of qualified
     incentive stock options and ten years in the case of non-qualified
     incentive stock options.

     A total of 2,500,000 shares of the Company's Common Stock have been
     reserved pursuant to the Plan. As of August 31, 2000, 1,537,311 options are
     outstanding: 1,458,805 shares issued inside the Plan and 78,506 shares
     issued outside the Plan.

     Information regarding the options outstanding and exercisable at August 31,
     2000 are as follows:

<TABLE>
<CAPTION>
                                        Options Outstanding                 Options Exercisable
                                --------------------------------------  ---------------------------
                                               Weighted
                                                Average
                                               Remaining     Weighted                     Weighted
                                              Contractual    Average                      Average
                                   Number        Life        Exercise      Number         Exercise
                                Outstanding     (Years)       Price      Exercisable       Price
                                ------------  -----------  -----------  ------------  -------------
     Exercise prices:
     <S>                        <C>            <C>          <C>         <C>            <C>
     $0.38 - $1.00                 1,058,561      2.9          $0.62       720,980        $0.63
     $1.17 - $1.85                   100,000      3.3           1.48        55,001         1.46
     $2.18 - $2.99                   318,750      2.6           2.58       217,757         2.61
     $3.36 - $3.70                    60,000      2.2           3.53        60,000         3.53
                                ------------                            ----------

                                   1,537,311      2.9          $1.20     1,053,738        $1.25
                                ============                            ==========
</TABLE>

     Transactions under the stock option plans and individual non-qualified
     options not under the plans are summarized as follows:

<TABLE>
<CAPTION>
                                                            Years Ended
                                           --------------------------------------------------
                                              August 31, 2000           August 31, 1999
                                           -----------------------   ------------------------
                                                          Weighted                  Weighted
                                                          Average                   Average
                                                          Exercise                  Exercise
                                              Shares       Price       Shares        Price
                                           ------------  ---------   ------------   ---------
<S>                                          <C>            <C>       <C>            <C>
     Outstanding at beginning of year        2,194,357      $1.21     1,677,788      $2.49
     Granted                                   325,000       1.81     1,604,750        .73
     Exercised                                (261,838)       .66       (55,581)       .10
     Canceled                                 (720,208)      1.71    (1,032,600)      2.60
                                           ------------             ------------
     Outstanding at end of year              1,537,311      $1.20     2,194,357      $1.21
                                           ============             ============
     Options available for grant             1,041,195                  384,149
                                           ============             ============
</TABLE>

     The weighted-average fair value of stock options and warrants granted to
     employees and directors during the year and the weighted-average
     significant assumptions used to determine those fair values, using a
     Black-Scholes option pricing model are as follows:

                                                     2000      1999
                                                     ----      ----
     Grant-date fair value per share                $ 1.05     $ .93
     Significant assumptions (weighted-average):
       Risk-free interest rate at
         grant date                                   6.24%    5.01%
       Expected stock price
         volatility                                 140.00%   80.00%
       Expected dividend payout                          -        -
       Expected option life-years(a)                   4.3      2.9


                                       36
<PAGE>


     (a) The expected option life is based on contractual expiration dates.

     In addition to the options described above, the Company has issued warrants
     to its Chief Executive Officer and in conjunction with private placements,
     private placement support, and acquisitions.

     Information regarding the warrants outstanding and exercisable at August
     31, 2000 are as follows:

<TABLE>
<CAPTION>
                                    Warrants Outstanding           Warrants Exercisable
                            ----------------------------------   ------------------------
                                          Weighted
                                           Average
                                          Remaining   Weighted                  Weighted
                                         Contractual  Average                   Average
                              Number        Life      Exercise     Number       Exercise
                            Outstanding    (Years)     Price     Exercisable     Price
                            ------------ ----------- ---------   ------------  ----------
     Exercise prices:
     <S>                    <C>            <C>        <C>        <C>             <C>
     $0.45 - $1.00            1,764,364      2.3        $0.97      1,764,364       $0.97
     $1.18 - $2.00              293,887      2.9         1.54        293,887        1.54
     $2.38 - $3.00            2,045,710      2.8         2.90      2,045,710        2.90
     $3.38 - $4.00              112,500      2.0         3.93        112,500        3.93
                            ------------                         ------------
                              4,216,461      2.6        $2.03      4,216,461       $2.03
                            ============                         ============
</TABLE>

     Transactions involving warrants are summarized as follows:

<TABLE>
<CAPTION>
                                                             Years Ended
                                           -----------------------------------------------
                                                August 31, 2000        August 31, 1999
                                           ------------------------ ----------------------
                                                          Weighted               Weighted
                                                          Average                Average
                                                          Exercise               Exercise
                                              Shares       Price      Shares       Price
                                           ------------  ---------- ----------- ----------
<S>                                          <C>            <C>      <C>           <C>
     Outstanding at beginning of year        1,932,359      $2.18    1,068,994     $2.62
     Granted                                 2,302,510       1.89      863,365      1.51
     Exercised                                 (18,408)       .91            -         -
                                           ------------             -----------
     Outstanding at end of year              4,216,461      $2.03    1,932,359     $2.18
                                           ============             ===========
</TABLE>

     Under the accounting provisions of SFAS No. 123, the Company's pro forma
     net income (loss) and earnings (loss) per share would have been:

                                                   Years Ended
                                       -------------------------------------
                                       August 31, 2000     August 31, 1999
                                       ----------------    ----------------
     Net loss                                $(898,761)        $(2,074,119)
     Net loss per share:
       Basic and diluted                       $ (0.11)            $ (0.32)

     In October 1998 the Board of Directors modified the terms of 78,506 options
     held by the former CFO of the Company to be fully vested and be options
     outside the plan as part of a severance arrangement. These options were
     priced from $0.91 - $3.36 per share. These options remain outstanding.

     The Company recognized expenses related to the granting of certain stock
     options and warrants to non-employees and non-directors. These options and
     warrants were granted in lieu of cash compensation for services performed.
     These options and warrants were valued using a Black-Scholes pricing model.


                                       37
<PAGE>


     The amount of the expense was $82,000 and $130,312 during 2000 and 1999
     respectively.

NOTE 10.  EMPLOYMENT AGREEMENTS

     The Company has an employment agreement with its President. The aggregate
     commitment for future salaries, excluding bonuses, under this employment
     agreement is approximately $137,500. This agreement shall be automatically
     renewed for successive one-year terms unless canceled by either party at
     least 30 days prior to the current term's expiration. The agreement also
     contains a severance provision ranging up to one year of salary in case of
     early termination without cause.

NOTE 11.  RELATED PARTY TRANSACTIONS

     As of August 31, 1999, the Company had a $150,000 note payable to a trust
     controlled by the President of the Company which bore interest at 12% per
     annum, and was due June 30, 2001. On May 15, 2000, the Company repaid this
     entire obligation. Interest expense on this note was approximately $13,000
     and $17,000 in 2000 and 1999, respectively.

NOTE 12.  SIGNIFICANT CUSTOMERS AND VENDORS

     One multi - divisional customer in the telecommunications industry
     accounted for approximately 81% and 87% of revenues in the years ended
     August 31, 2000 and 1999, respectively. Receivables from this customer
     represented approximately 76% and 94% of net accounts receivable at August
     31, 2000 and 1999, respectively.

     One product generated approximately $3,684,000 of net revenues for fiscal
     2000.

     The Company is highly reliant on one vendor who performs the bulk of the
     work related to database processing activities the Company performs for its
     clients. While the Company does intend to develop the capabilities
     internally to offset some of the dependence on this vendor, there will be
     significant need for the services of this vendor. The vendor represented
     approximately 74% and 61% of the cost of revenue for fiscal years 2000 and
     1999 respectively.

NOTE 13.  SUPPLEMENTAL CASH FLOW DISCLOSURES

     Cash paid during the year for interest was approximately $24,400 and
     $72,400 for the years ended August 31, 2000 and 1999, respectively.


                                       38
<PAGE>


     In fiscal 1999, the Company received and retired 187,143 shares of common
     stock in connection with the sale of discontinued operations. Liabilities
     with carrying values of $30,100 and $1,300 were settled through the
     issuance of common stock in fiscal 2000 and 1999, respectively. In fiscal
     1999, the Company assumed liabilities of $99,400 in connection with the
     Bradas acquisition (see Note 2); in fiscal 2000 the Company issued 68,475
     shares of common stock to settle these liabilities and issued stock
     warrants valued at $125,000. During fiscal 2000, the Company accrued
     preferred stock dividends payable of $108,800.

NOTE 14.  SUBSEQUENT EVENTS

     On October 3, 2000 the Company announced it had signed a Letter of Intent
     with e-commerce support centers, inc. ("ecom"), calling for a merger with
     ecom to become a wholly-owned subsidiary of the Company. The merger
     consideration will be Company securities, including stock options and
     warrants. The merger is subject to execution of a definitive merger
     agreement and customary closing conditions. If and when such conditions are
     fulfilled, it is anticipated that the merger will close in the second
     quarter of the Company's year ending August 31, 2001.


                                       39
<PAGE>


ITEM 8.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
         FINANCIAL DISCLOSURE

     There have been no changes in or disagreements with the Company's
     accountants on accounting or financial disclosure during the past two
     fiscal years.


                                       40
<PAGE>


PART III

ITEM 9.  DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
         COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT

Executive Officers and Directors

     As of August 31, 2000, the executive officers and directors of the Company
     were as follows:

           NAME                 AGE     POSITION
           ----                 ---     --------
     John D. Foster..........   56      Director,CEO, ##
     Ronald L. Weindruch.....   52      President, Director
     Peter B. Atwal..........   43      Director
     Stewart B. Harris.......   58      Director, ** ##
     Kenneth Horn............   59      Director, ** ##
     William N. Kashul, Sr...   66      Director
     James L. McGovern.......   57      Director, **
     Joseph H. Landis........   48      CFO, Corporate Secretary

     NOTE:  ATWAL AND KASHUL TERM EXPIRES IN 2001.
            WEINDRUCH, HARRIS, AND MCGOVERN TERM EXPIRES IN 2002.
            FOSTER AND HORN TERM EXPIRES IN 2003.

     ** member of Audit Committee
     ## member of Compensation Committee

     All directors hold office until the year that their term expires. The Board
     is a staggered Board with respect to their terms of office. There are no
     agreements with respect to the election of directors. The Company has not
     compensated its directors in cash for service on the Board of Directors or
     any committee thereof, but directors are reimbursed for expenses incurred
     for attendance at meetings of the Board of Directors and any committee of
     the Board of Directors. Certain directors have been compensated with
     options in recognition of their service on the Board, as described further
     below. Officers are appointed annually by the Board of Directors and each
     executive officer serves at the discretion of the Board of Directors. The
     Board of Directors has two standing committees: an audit committee and a
     compensation committee.

     None of the officers and/or directors of the Company are officers or
     directors of any other publicly traded corporation, except for John Foster
     who is a Director of Aerial Communications, nor have any of the directors
     and/or officers, nor have any of the affiliates or promoters of the Company
     filed any bankruptcy petition, been convicted in or been the subject of any
     pending criminal proceedings, or the subject or any order, judgment, or


                                       41
<PAGE>


     decree involving the violation of any state or federal securities laws
     within the past five years.

     The business experience of each of the persons listed above during the past
     five years is as follows:

     RONALD L. WEINDRUCH is the President, and former Chairman and Chief
     Executive Officer of Paladyne as well as the founder of Access, in 1994.
     Mr. Weindruch was the Chairman of the Sanford Airport Authority in Sanford,
     Florida from 1993 to 1996. Prior thereto, he held a variety of senior
     management positions with Siemens, including senior vice-president of
     operations at Siemens Stromberg-Carlson. Prior to beginning with Siemens in
     1984, Mr. Weindruch served as director of marketing for the Nortel
     (formerly Northern Telecom) DMS 100 switching system and was also group
     director of business development for Nortel's digital switching group. Mr.
     Weindruch holds an M.B.A. degree from George Washington University and a
     B.S. degree from the University of Illinois.

     JOHN D. FOSTER has been Chairman and Chief Executive Officer of the Company
     since January 2000. He is also President of Vedra International Associates,
     Inc., which he founded in 1996. In 1996, Mr. Foster retired from AT&T where
     he was a Corporate Officer. He had served as Vice President-Marketing and
     Sales, Southeast Region, President and CEO of AT&T American Transtech, and
     as President and Managing Director of AT&T Communications Services
     Group-Europe. Mr. Foster is also a board member of Aerial Communications.
     He holds a B.S. degree from Purdue University and a Masters from the
     University of Illinois.

     WILLIAM N. KASHUL, SR. is President of Kashul Consulting, Inc., a
     Chicago-based telecommunications consulting firm. From 1994 to 1997, he was
     an independent consultant for a variety of companies in the
     telecommunications industry. From 1972 to 1994, Mr. Kashul was a Regional
     Vice President of Strategic Account Development, North America, for
     Northern Telecom, Inc. Mr. Kashul began his telecommunications career in
     the U.S. Army in 1953. He joined BTE Automated Electric as an engineer in
     1956 and went to ITT Kellogg as a project engineer in 1959. He joined
     Stromberg-Carlson as a senior sales engineer in 1967 before going to
     Northern Telecom in 1972. Mr. Kashul is a member of the International
     Engineering Consortium's Executive Advisory Council and holds an M.B.A.
     from the University of Chicago.

     PETER B. ATWAL has been a Vice President of Business Development for
     Milcomm Communications since August 1999. From 1992 to July 1999, Mr. Atwal
     was Chief Technology Officer for ISR Global Telecom, a network management
     provider. From 1985 to 1991, Mr. Atwal previously worked as a research and
     development manager for Siemens, and from 1977 to 1985, and as a consultant


                                       42
<PAGE>


     for Logica, Inc. Mr. Atwal holds a BSC degree in computer science from
     London University.

     JAMES L. MCGOVERN has been President of McGovern & Associates since 1996.
     In 1996, he retired from Norstan where he was President of Norstan
     Communications from 1985 to 1996. Prior, he was Chief Operating Officer of
     Electronic Engineering Co. which was acquired by Norstan in 1985. McGovern
     also held a number of key sales and management positions with Xerox
     Corporation. He was Chairman of Virtual Hold Corporation, and a Director
     for Paknetx which was acquired by Aspect Telecommunications. Mr. McGovern
     holds a B.S. from Northeastern University.

     STEWART B. HARRIS is currently President and Chief Executive Officer of SGH
     Services, Inc., a management consulting firm. He was an Executive Vice
     President of Carlson Marketing Group from January 1998 through December
     1999. Mr. Harris was President and Chief Executive Officer of S&H Citadel,
     an incentive marketing company, and its predecessors from 1982 until 1998
     when it was acquired by Carlson Marketing. Prior thereto, Mr. Harris also
     held various sales, marketing, and executive positions with IBM
     Corporation, HERS Apparel Industries, and MDB Holding.

     KENNETH W. HORN has been Managing Director of KNH Associates since April
     1999. In 1999, he retired as a Corporate Officer of Nortel Networks where
     he worked for 18 years and had served as Vice President. Prior thereto, Mr.
     Horn was employed by Huyck Corporation for 10 years where he held various
     positions including Vice President and General Manager of its largest
     division. Mr. Horn holds a B.S. degree from Villanova University and a
     M.B.A. from Iona University.

     JOSEPH H. LANDIS is Paladyne's Corporate Vice President and Chief Financial
     Officer, as well as its Corporate Secretary. Mr. Landis has been employed
     with Paladyne since November 1999. Prior to Paladyne, Mr. Landis was the
     Controller for Sparks Exhibits and Environments from January 1999 to his
     employment at Paladyne. From August 1996 to December 1998, he was CFO and
     President for Stratcomm Media, Ltd. Mr. Landis was employed by The Boeing
     Company from January 1981 to March 1996 where he served as its Controller
     for the Helicopter Division.

ITEM 10.  EXECUTIVE COMPENSATION

     Compensation

     The following table sets forth all compensation actually paid or accrued by
     the Company for services rendered to the Company for the years ended August
     31, 1998, 1999 and 2000 to the Company's Chief Executive Officer and
     President. No other executive officer of the Company has earned a salary
     greater than $100,000 annually for any of the periods depicted.


                                       43
<PAGE>


    Summary Compensation Table                               ALL
                                                           OTHER  STOCK WARRANTS
     NAME AND PRINCIPAL                                  COMPEN-     AND OPTIONS
     POSITION                 YEAR     SALARY     BONUS   SATION          ISSUED
                              ----     ------     -----  -------         -------
     John Foster, CEO         1999      None      None      None        106,250
                              2000      None      None      None        165,000

     Ronald L. Weindruch,     1998   $122,292   $3,000   $ 81,700        67,500
     President                1999   $137,500   $  -0-   $ 36,034       208,784
                              2000   $137,500   $  -0-   $  8,905        50,000

    (All other compensation includes consulting and commission income)

     In addition to cash compensation, Mr. Foster and Mr. Weindruch participate
     in the Company's stock option plan. The following table details options
     granted in fiscal year 2000:

                                             % of
                                            total
                          # of shares     options
                           underlying     granted    Exer.     Exp.
     Name                     options    in FY 00    Price     Date
     -------------------      -------    --------    -----     ----
     John Foster                2,500         .4%    $1.56   11/12/03
     John Foster              150,000       25.5%    $2.50     2/1/05
     John Foster               12,500        2.1%    $3.38     3/1/05
     Ronald L. Weindruch       50,000        8.5%    $2.50     1/4/04

     No stock options held by these individuals were exercised in the current
     fiscal year whether the options were issued in the current year or in years
     prior.

     Employee Stock Option Plan

     The Company's 1999 Stock Option Plan (the "Plan"), assumed the 1996 Stock
     Option Plan, as amended on the migratory merger, which was adopted in 1996
     and amended in October, 1997 to increase the number of issuable shares
     under the Plan and to clarify the basis for determining fair market value
     of shares in conjunction with setting the exercise price of options at
     issuance. The purpose of the Plan is to encourage stock ownership by
     management and employees of the Company, to provide an additional incentive
     for those employees to contribute to the success of the Company and to
     provide the Company with the opportunity to use stock options as a means of
     recruiting new managerial personnel where appropriate.

     The Plan authorizes the grant of options which qualify as incentive stock
     options under Section 422A of the Internal Revenue Code ("qualified
     options"), as well as stock options which do not qualify under that section
     of the Code ("nonqualified options"). The Plan is administered by the Board
     of Directors of the Company. The Board is authorized to select the
     individual employees to receive options under the Plan, the number of


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<PAGE>


     shares subject to each option, the option term and other matters specified
     in the Plan.

     The Plan provides that the exercise price of any option may not be less
     than 100% of the fair market value of the Company's stock at the date of
     grant, defined as the average bid and ask price over the prior five days'
     trading in which at least 1,000 shares have traded. Options must be granted
     within ten years from the date the Plan was approved by the Company's
     shareholders.

     A maximum of 2,500,000 shares of the Company's Common Stock are authorized
     for issuance pursuant to options granted under the Plan, subject to
     adjustments to prevent dilution or enlargement of rights of participants in
     certain circumstances. As of August 31, 2000, 1,890,378 options were
     outstanding: 1,815,206 shares issued inside the Plan, and 75,172 shares
     issued outside the Plan. As of August 31, 2000, 991,900 shares are
     exercisable at an option price per share ranging from $0.38 to $3.36 per
     share and with expiration dates from October 2000 through July 2004.

     Profit Sharing Plan

     The Company sponsors a qualified employee savings plan (commonly referred
     to as a "401K plan") for all eligible employees, including all the officers
     of the Company. Participants may make contributions from their gross pay
     (limited to 15% of the employee's compensation, as defined), with Paladyne
     matching such contributions (subject to certain limitations) at the rate of
     25% of the first 6% of each participant's contribution. No other deferred
     compensation plan is currently in place.

     Employment Agreements

     The Company has an employment agreement with Ronald Weindruch, its
     President. The aggregate commitment for future salaries, excluding bonuses,
     under this employment agreement is approximately $137,500. This agreement
     shall be automatically renewed for successive one-year terms unless
     canceled by either party at least 30 days prior to the current term's
     expiration. The agreement also contains a severance provision ranging up to
     one year in case of early termination without cause.

ITEM 11.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

     The following table sets forth information, to the best of the Company's
     knowledge, as of August 31, 2000, with respect to each person known by the


                                       45
<PAGE>


     Company to own beneficially more than 5% of the outstanding Common Stock,
     each director and all directors and executive officers as a group.

                                                             PERCENT
     NAME AND ADDRESS         AMOUNT AND NATURE OF             OF
     OF BENEFICIAL OWNER      BENEFICIAL OWNERSHIP(1)       CLASS(2)

     Ronald L. Weindruch *         1,924,340(3)              22.76%

     Kenneth H. Horn *               225,668(4)               2.67%

     William N. Kashul, Sr. *        221,957(5)               2.62%

     Peter B. Atwal *                 76,667(6)                0.9%

     James L. McGovern  *            177,835(7)               2.10%

     John D. Foster  *               492,933(8)               5.83%

     Stewart B. Harris *             158,751(9)               1.87%

     All directors and
     executive officers as a          3,278,151              38.76%
     group (7 persons in group)

     Webbmont Holdings            1,011,567(10)              11.96%


     Note:  Unless otherwise noted, all persons address is 610 Crescent
            Executive Court, Lake Mary, Florida 32746.

     *    Director and/or executive officer

     Note:  Unless otherwise indicated in the footnotes below, the Company has
            been advised that each person above has sole voting and investment
            power over the shares indicated above.

          (1) Share amounts include, where indicated, Common Stock issuable upon
          the exercise of certain stock options and stock warrants held by the
          Company's directors and executive officers at exercise prices ranging
          from $0.38 to $3.70 per share which are exercisable within sixty days.

          (2) Based upon 8,456,599 shares of Common Stock outstanding on August
          31, 2000. Percentage ownership is calculated separately for each
          person on the basis of the actual number of outstanding shares as of


                                       46
<PAGE>


          November 19, 1998 and assumes the exercise of certain stock options
          and warrants held by such person (but not by anyone else) exercisable
          within sixty days.

          (3) Includes 100,000 shares of stock held in the names of Mr.
          Weindruch's children, and 1,500,000 held in trusts for which Mr.
          Weindruch acts as trustee. Includes 324,340 shares which may be
          acquired by Mr. Weindruch pursuant to the exercise of stock purchase
          options and warrants exercisable within sixty days at exercise prices
          from $0.42 to $3.70 per share.

          (4) Includes 92,418 shares held by a corporation controlled by Mr.
          Horn. Includes 123,250 shares which may be acquired by Mr. Horn
          pursuant to the exercise of stock purchase options and warrants
          exercisable within sixty days at exercise prices from $0.38 to $2.50
          per share.

          (5) Includes 77,084 shares which may be acquired by Mr. Kashul
          pursuant to the exercise of stock purchase options exercisable within
          sixty days at the exercise prices from $0.38 to $3.36 per share.

          (6) Includes 76,667 shares which may be acquired by Mr. Atwal pursuant
          to the exercise of stock purchase options exercisable within sixty
          days at the exercise prices from $0.38 to $3.36 per share.

          (7) Includes 6,604 shares held in the names of Mr. McGovern's
          children. Also includes 154,088 shares which may be acquired by Mr.
          McGovern pursuant to the exercise of stock purchase options and
          warrants exercisable within sixty days at exercise prices from $0.38
          to $1.00 per share.

          (8) Includes 415,418 shares which may be acquired by Mr. Foster
          pursuant to the exercise of stock purchase options and warrants
          exercisable within sixty days at the exercise prices from $0.67 to
          $3.375 per share.

          (9) Includes 108,751 shares which may be acquired by Mr. Harris
          pursuant to the exercise of stock purchase options and warrants
          exercisable within sixty days at the exercise prices from $0.88 to
          $2.50 per share.(10) Includes 496,429 shares which may be acquired by
          Webbmont Holdings pursuant to the exercise of stock purchase warrants
          exercisable within sixty days at exercise prices from $1.00 to $3.00
          per share.


                                       47
<PAGE>


ITEM 12.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

     As of August 31, 1999, the Company had a $150,000 note payable to a trust
     controlled by the President of the Company, and bore interest at 12% per
     annum. All outstanding obligations have been satisfied as of August 31,
     2000.


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<PAGE>


ITEM 13.  EXHIBITS AND REPORTS ON FORM 8-KSB

(a)  EXHIBITS

Exhibit No.                        Exhibit Name
-----------                        ------------

2.1       Merger Agreement and Plan of Reorganization previously filed as
          Exhibit 2.1 to Form 10-SB/A dated December 31, 1997

3.1       Articles of Incorporation and all amendments thereto previously filed
          as Exhibit 3.1(i) to Form 10-SB/A dated December 31, 1997

3.2       By-Laws of Registrant previously filed as Exhibit 3.2(ii) to Form
          10-SB/A dated December 31, 1997

4.1       Specimen of Common Stock Certificate previously filed as Exhibit 4.1
          to Form 10-SB/A dated December 31, 1997

4.2       Certificate of Series A Cumulative Convertible Preferred Stock
          Certificate

10.1      Lease Agreement on registrant's previous principal place of business
          previously filed as Exhibit 10.1 to Form 10-SB/A dated December 31,
          1997

10.2      Purchase Agreement of Synaptx Access, Inc. f.k.a. North American Telco
          / Cable Representatives, Inc. previously filed as Exhibit 10.2 to Form
          10-SB/A dated December 31, 1997

10.3      Purchase Agreement for Synaptx Impulse, Inc., f.k.a. Maxwell Partners,
          Inc. previously filed as Exhibit 10.3 to Form 10-SB/A dated December
          31, 1997

10.4      Purchase Agreement for ORAYCOM, Inc. previously filed as Exhibit 10.4
          to Form 10-SB/A dated December 31, 1997

10.5      Employment Agreement for Ronald L. Weindruch previously filed as
          Exhibit 10.5 to Form 10-SB/A dated December 31, 1997


                                       49
<PAGE>


10.6      Employment Agreement for D. Mike Maxwell previously filed as Exhibit
          10.6 to Form 10-SB/A dated December 31, 1997

10.7      New Lease Agreement on Principal Place of Business

10.8      Agreement and Plan of Merger for WG Controls, Inc. between Synaptx
          Worldwide, Inc. and the WG Controls, Inc. shareholders as follows:
          James M. Gleason, Shirley Gleason, Michael Concialdi, and James Gammon
          previously filed as Exhibit 10.1 to Form 8-K dated March 23, 1998

10.9      Employment Agreement, dated January 1, 1998, between WG Controls, Inc.
          and James M. Gleason previously filed as Exhibit 10.2 to Form 8-K
          dated March 23, 1998

10.10     Agreement and Plan of Stock for Stock Exchange, dated June 1, 1998
          between Synaptx Worldwide, Inc. (the "Company") and John Primus and
          Jannine Primus previously filed as Exhibit 10.1 to Form 8-K dated
          August 14, 1998

10.11     Employment Agreement, dated June 1, 1998, between Primus Marketing
          Associates, Inc. and John E. Primus previously filed as Exhibit 10.2
          to Form 8-K dated August 14, 1998

10.12     Non-compete Agreement, dated June 1, 1998, between the Company and
          John E. Primus previously filed as Exhibit 10.3 to Form 8-K dated
          August 14, 1998

10.13     Non-compete Agreement, dated June 1, 1998, between the Company and
          Jannine E. Primus previously filed as Exhibit 10.4 to Form 8-K dated
          August 14, 1998

10.14     Letter Agreement to Sell 100% of ORAYCOM stock to O. Ray Strickland
          and O. Ray Strickland IRA ("Strickland Group") previously filed as
          Exhibit 10.14 to Form 10-KSB for fiscal year ended August 31, 1998.

27        Financial Data Schedule

(b)  Reports on From 8-K

               None


                                       50
<PAGE>


                                   SIGNATURES

In accordance with Section 13 or 15(d) of the Securities Exchange Act of 1934,
the registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly organized.

                                                PALADYNE CORP.
                                                  (Registrant)


                                        By:  /S/  JOSEPH H. LANDIS
                                           -----------------------------
Date: November 28, 2000                           Joseph H. Landis
                                             Vice President, Controller
                                             (Chief Accounting Officer)

In accordance with the Securities Exchange Act of 1934, this report has been
signed below by the following persons on behalf of the registrant and in the
capacities and on the dates indicated.

Name                          Position                 Date
----                          --------                 ----


/S/ Ronald L. Weindruch       President,Director       November 28, 2000
----------------------        ----------------------   ----------------------
Ronald L. Weindruch


                              Director
----------------------        ----------------------   ----------------------
William N. Kashul, Sr


/S/ Kenneth Horn              Director                 November 28, 2000
----------------------        ----------------------   ----------------------
Kenneth Horn


/S/ John D. Foster            Director                 November 28, 2000
----------------------        ----------------------   ----------------------
John D. Foster


                              Director
----------------------        ----------------------   ----------------------
Peter B. Atwal


/S/ James L. McGovern         Director                 November 28, 2000
----------------------        ----------------------   ----------------------
James L. McGovern


/S/ Stewart Harris            Director                 November 28, 2000
----------------------        ----------------------   ----------------------
Stewart Harris


                                       51