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, 2002
         Transition Report Under 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                   (IRS Employer
          of incorporation or organization)             Identification No.)

                 1650 A Gum Branch Road, Jacksonville, NC 28540
                 ----------------------------------------------
               (Address of principal executive offices) (zip code)

                    Issuer's telephone number: (910) 478-0097
                                               --------------

    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
    ---           ---


<PAGE>


State the issuer's revenue for its most recent fiscal year: $8,755,369. 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, 2002: $973,887.

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, 2002
--------------------------------------------------------------------------------

  Common Stock, par value $.001 per share                          16,709,351

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


                                       2
<PAGE>


                                 PALADYNE CORP.
                                   FORM 10-KSB

                                TABLE OF CONTENTS

                                                                           PAGE
                                                                           ----
                                     PART I

ITEM 1.  Description of Business.............................................  4

ITEM 2.  Description of Property.............................................  8

ITEM 3.  Legal Proceedings...................................................  8

ITEM 4.  Submission of Matters to a Vote of Security
         Holders.............................................................  9

                                     PART II

ITEM 5.  Market for Common Equity and Other Shareholder
         Matters.............................................................  9

ITEM 6.  Management's Discussion and Analysis of Financial
         Condition and Results of Operations................................. 11

ITEM 7.  Financial Statements................................................ 16

ITEM 8.  Changes in and Disagreements with Accountants on
         Accounting and Financial Disclosure................................. 41

                                    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............................................... 44

ITEM 12. Certain Relationships and Related Transactions...................... 47

ITEM 13. Exhibits and Reports on Form 8-K.................................... 47

ITEM 14. Controls and Procedures............................................. 51

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


                                       3
<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 that 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, to meet competitive challenges and
technological changes, 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 February 1, 2001, Paladyne Corp. merged with e-commerce support
centers, inc. ("ecom"), a North Carolina corporation. This merger resulted in
significant impacts to all phases of the Company as discussed below. Other
historical issues are as follows: 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. was 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. ("Paladyne" or the "Company"), through its subsidiary e-commerce
support centers, inc. (ecom), provides customer relationship management (CRM)
solutions out of its customer contact center in Jacksonville, NC. ecom serves
the CRM marketplace as well as traditional contact center marketplaces with
telemarketing, professional services, and customer and technical support as an
outsource provider.

On February 1, 2001, Paladyne merged with ecom, which was a privately held
provider of third party customer and technical support. Paladyne brought a
proprietary data cleansing and integration software capability marketed as
Datagration(TM) to enhance the CRM capabilities of ECOM'S state-of-the-art
customer contact center.

The Company's executive offices are at 1650A Gum Branch Road, Jacksonville, NC
28540 and its telephone number is (910) 478-0097.


                                       4
<PAGE>


HISTORY

Paladyne Corp is the surviving Company from a March 5, 1999 merger with Synaptx
Worldwide, Inc., a Utah corporation.

On February 1, 2001, Paladyne Corp. through a wholly-owned subsidiary merged
(the "Merger") with e-commerce support centers, inc., a North Carolina
corporation ("ecom"), pursuant to an Agreement and Plan of Merger, dated as of
December 21, 2000, as amended (collectively, the "Merger Agreement"). Upon the
Merger, ecom became a wholly owned subsidiary of Paladyne.

The merger consideration (the "Merger Consideration") to the ecom shareholders
consisted of 4,100,000 shares of newly created Series B Convertible Preferred
Stock, $.001 par value (the "Series B Preferred Stock"), Anti-Dilution Warrants
and Performance Warrants (as discussed below) and the right to receive
additional shares of Paladyne Common Stock in conjunction with future placements
by Paladyne. The Series B Preferred Stock was converted into 8,200,000 shares of
Common Stock after receiving stockholder approval at a July 10, 2001
stockholders meeting for an increase in the authorized capital stock. To protect
against dilution to the former ecom shareholders upon exercise of outstanding
pre-Merger Paladyne options and warrants (the "Present Options/Warrants"),
Paladyne granted to them Anti-Dilution Warrants to purchase 4,000,000 shares of
Paladyne Common Stock at an exercise price of $1.146 per share (subject to
adjustment), vesting as to 0.6 of a share of Common Stock for each share of
Common Stock issued upon the exercise of Present Options/Warrants, and expiring
30 days after the later of (i) termination or exercise of all Present
Options/Warrants or (ii) notice from Paladyne as to the aggregate number of
Present Options/Warrants that were exercised. At August 31, 2002, these Warrants
were exercisable for 2,646,962 shares of Common Stock, and 1,353,038 warrants
were terminated unexercised.

To give the former ecom shareholders the opportunity to participate more
directly in the future performance of Paladyne resulting from the acquired ecom
business, Paladyne granted to them Performance Warrants to purchase 500,000
shares of Paladyne Common Stock at an exercise price of $1.146 per share
(subject to adjustment), exercisable for five years and vesting in 100,000 share
tranches for each $20 million of net revenue increases, above $50 million
annually, achieved in either year or both of the two (2) year periods ending
January 31, 2002 and 2003. For the purpose of these awards, the measurement will
be on a trailing 12-month basis, and with an acceptable gross margin (20% or
greater) for each tranche to qualify.

In addition, ending upon the earlier to occur of December 20, 2002 or Paladyne's
completion of $6,500,000 in cash from sales of Common Stock or Common Stock
equivalents (the "New Securities"), ecom shareholders will receive, one share
(the "Deferred Shares") of Common Stock for each $1.00 in gross proceeds
received upon the sale of New Securities or issuable upon conversion, exercise
or exchange of New Securities. The former ecom shareholders have waived their
right to new securities with respect to the proceeds from a current placement.

The Merger Agreement provided that Paladyne would grant options, at market
value, to ecom employees for the purchase of an aggregate of 500,000 shares of
Paladyne Common Stock under its 1999 Stock Option Plan. These options have not
yet been granted.

Immediately prior to the Merger, ecom purchased from Gibralter Publishing, Inc.,
a North Carolina corporation ("Gibralter"), all of the tangible and intangible
assets used in ecom's call center operations, subject to related liabilities,
pursuant to an Option Agreement. Prior to the Merger, Gibralter had been
operating the call center on behalf of ecom. The purchase price for these assets
was $5 million which is payable by ecom pursuant to two amended promissory notes
(the "Notes") issued to Gibralter and guaranteed by Paladyne, one Note for
$1,500,000, repayable in two installments of $750,000, the first being due after
completion of a $3,000,000 equity or convertible debt offering and the remaining
payment due no sooner than six months after the first payment and after three


                                       5
<PAGE>


consecutive months of positive cash flow from operations. The second Note for
$3,500,000 is due in equal quarterly principal and interest payments of $377,000
beginning in April 2002 and continuing through January 2005. The Company is in
default of the provisions of these notes. Both Notes bear interest at 10% per
annum and are secured by the purchased assets.


PRODUCTS AND SERVICES:

The Company's products and services were extended with the Merger with ecom in
February 2001. ecom is a fully web-enabled customer contact center. Companies
large and small outsource their customer support and outbound telemarketing
needs to ecom, which provides live agents operating from a 60,000 square foot
facility for those services. Outsourcing customer support and telemarketing has
become a popular option for many companies since the cost of building and
maintaining a state-of-the-art contact center is high and an outsourcer, such as
ecom, can spread those costs over many clients and maintain peak performance
through specialization. Agents answer phones and chat on the Internet with
client customers and provide a variety of services from order entry, problem
solving, order tracking, technical support, and outbound sales or research.
Agents have an array of communications capabilities; these include: live chat,
voice and video over IP, dial-around, instant messaging and other on-line
communications options in addition to traditional telephone support. The contact
center has capacity for 800 representatives with flexibility to utilize
workstations for inbound, outbound or web enabled service as needed. During the
year ended August 31, 2002, the Company concentrated on increasing its outbound
calling activities. This area of service offered the best prospect for efficient
use of resources.

The Company's software product, the Datagration e-Business Suite, is a
component-based data integration and data quality solution built upon an open,
multi-tiered, cross platform architecture. The product is designed to "cleanse"
and integrate disparate customer data sources to form a "single customer view".
Although demand remains high for this type of service, the Company has ceased
development on the product because of lack of funding. In addition to the
aforementioned services, ecom offers application development for trouble
ticketing and billing systems, application hosting in an ASP model, and
fulfillment services.

BUSINESS DEVELOPMENT AND STRATEGY:

Paladyne intends to continue to expand its outbound call center business coupled
with continued marketing of its services and customer base in the Customer
Relationship Management (CRM) and "electronic" Customer Relationship Management
(eCRM) marketplace. CRM is a business strategy that enables any business to gain
new customers, retain existing customers and maximize the most profitable
customer relationships. The Company believes its combining of live on-line and
telephone-based customer support with the essential integration of customer data
for use in customer contact situations, creates a competitive advantage in
pursing this strategy. More specifically,

     a)   ecom is a fully web-enabled support center providing live chat, voice
          and video over IP, dial-around, instant messaging and other on-line
          communications options in addition to traditional phone support. Of
          the 70,000 customer care centers in operation today in North America,
          only 8% have developed this Web-enabled capability.

     b)   Through partnerships, ecom is in the process of extending its CRM
          services to include campaign management, data mining and data
          warehousing to manage and extract customer data in order to maximize
          profitability from customer interactions. Through its contact center
          operations, ecom will deploy contact programs based on data-driven
          strategies and provide feedback from its CSRs into the data warehouse
          for future mining.


                                       6
<PAGE>


The above are the stated future goals of the Company. However, there can be no
assurance that the Company will ever achieve its expressed goals.

STRATEGIC ALLIANCE

As noted above, the Company is extending its service offerings in the areas of
data mining, campaign management and data warehousing. Towards this goal, it has
established strategic partnerships with companies with particular expertise in
these fields. As part of its vision, ecom strives to offer full CRM services
that cover these areas of expertise. The Company seeks to improve its clients'
customer data and use that data to improve each clients' marketing efforts and
to provide customer intelligence to ecom'S own CSRs in order that they can
maximize every customer transaction. Empowered with customer data, CSRs can
effectively cross-sell and up-sell customers during inbound and outbound
situations. This ability to generate incremental revenue, adds to the value of
the services for which ecom would be contracted. In addition, for its core
contact center business, the Company has established partnerships with billing
and fulfillment vendors.

Strategic partners include:

----------------------------------------------   -------------------------------
SERVICE OFFERING                                 PARTNER
----------------------------------------------   -------------------------------
Campaign management                              Yellow Brick Solutions, Inc.
----------------------------------------------   -------------------------------
Data Mining                                      Bridgetree
----------------------------------------------   -------------------------------
Data warehousing                                 Synera Systems S.L.
----------------------------------------------   -------------------------------
Fulfillment services                             APL Logistics
----------------------------------------------   -------------------------------
Customer data integration viewing platform       Innova Solutions
----------------------------------------------   -------------------------------

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. 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. The proposed transaction between the Company and an
investor group, described further in the liquidity and capital resources section
of Item 6, will affect the sources and timing of any additional capital needs.

SALES AND MARKETING

The Company markets and sells its products and services through its employees
and through the cooperative efforts of its business partners. The Company
employs an integrated marketing effort designed to establish market presence and
generate potential clients in both horizontal CRM marketplace and in selected
vertical markets. To date these efforts have generated the annual revenues for
the Company. Current clients representing more than 5% of annual revenue are
Gibralter Publishing representing 35% of revenue, and APL Logistics,
representing 5.4% of revenue. Other significant customers include which
represent less than 5% of annual revenue individually include: Sure Pay and Cox
Communications, Inc.

Lead generation and branding efforts are the responsibility of the Marketing
Department. Sales Department personnel engage prospects and develop new business
from existing clients. Both marketing and sales manage business partner
relationships.


                                       7
<PAGE>


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 segment to market segment; however, there are
several which pursue a similar, full serviced CRM approach. These include:
Harte-Hanks, Inc., Stream.com, Convergys Corporation, and Sykes Enterprises,
Incorporated. Principal competitive factors affecting the market for outsourced
products and services include product reputation, quality, performance, price,
professional service, multiple or backup facilities, 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, 2002, the Company employed 366 individuals, consisting of five
executives, 50 professionals and sales representatives, office staff and 311
customer representatives. The Company believes that its relationship with its
employees is satisfactory.

BUSINESS SEGMENTS

The Company currently operates in one business segment which is the outsource
CRM solutions provider segment. It provides service to many industry segments
including: retail, financial services, telecommunications and technology.


ITEM 2.  DESCRIPTION OF PROPERTY

The Company's principal executive offices are located at 1650A Gum Branch Road,
Jacksonville, NC 28540. The current facility is sub-leased from Gibralter, the
term of the sub-lease extends through May 31, 2003, covers approximately 55,000
square feet at an approximate annual rental rate of $209,000.

In June 2001, the Company closed its offices in suburban Washington D.C., and in
Lake Mary, Florida. In conjunction with the closing of these offices, rent
payments to the landlords were terminated. No formal termination agreements or
payments were made in conjunction with the office closings.

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 fiscal 2002, the Company did not renew the employment contract of its
Executive Vice President. Subsequent to this non-renewal the individual was
terminated. The former employee filed a lawsuit, in the Circuit Court of the
18th Judicial District, Seminole County, Florida, claiming additional
compensation as well as other amounts were owed to him. The employee was awarded
partial summary judgement on his claims for wage compensation of approximately
$34,000. However, the complaint is still outstanding with regard to
approximately $140,000 of other claimed compensation. The Company and the
individual were unsuccessful in mediation and the case is currently in
discovery. The Company intends to defend itself vigorously against this claim
but cannot predict the ultimate outcome of this matter.

The Company is engaged in proceedings in the Circuit Court of the 18th Judicial
District, Seminole County, Florida, with SunTrust bank concerning a $350,000
line of credit that is in default. In September 2002, the bank filed a summary
judgment motion, seeking $360,000 in full restitution of the money owed to it.
The Company is currently in negotiations with the bank regarding repayment of
this money. For additional information regarding the line of credit, see
"Item 6. Management's Discussion and Analysis of Financial Condition and Results
of Operations."


                                       8
<PAGE>


In the ordinary course of business the Company has become subject to litigation
and claims on various matters. These exists the possibility that the Company
will not prevail in all cases. However, barring unanticipated adverse final
determination in these litigation and claims, the Company does not believe that
such litigation and claims would have a material adverse effect on its financial
condition.


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

None



PART II


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

(a) 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.


<TABLE>
<CAPTION>
                                            Fiscal Year
                                     2002                  2001
                                    ------                ------
                               High        Low       High       Low
                              ------      ------    ------     ------
<S>                           <C>        <C>        <C>        <C>
First Quarter                 $  .50     $   .06    $ 1.50     $ 1.03
Second Quarter                   .38         .20      1.33        .38
Third Quarter                    .38         .10      1.25        .50
Fourth Quarter                   .11         .07       .38        .02
</TABLE>


The ability of individual stockholders 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
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 (at least $2 million); or exempted from the


                                       9
<PAGE>


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 of 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 stockholders to sell their shares.

As of November 30, 2002, there were 145 holders of record of the Company's
Common Stock. This amount does not take into account those stockholders whose
certificates are held in the name of broker-dealers or otherwise in street or
nominee name.

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. In addition, the Company has a deficit
stockholders' equity, which would restrict payment of dividends. 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 that 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, 2002, the Company has accrued $190,400 of
preferred stock dividends.

The Company has not declared or paid dividends on its Series C 8% Cumulative
Preferred Stock.

TRANSFER AGENT

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

(b) During the fiscal year ended August 31, 2002, the Company issued 1,000,101
shares of the Series C Preferred Stock. These shares were issued pursuant to an
exemption from the registration requirements of the Securities Act of 1933 under
Section 3 (a) (9) thereof.


                                       10
<PAGE>


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

Cautionary Statement Regarding Forward-Looking Information:
-----------------------------------------------------------

This document includes forward-looking statements. All statements other than
statements of historical fact included in this document, including, without
limitation, the statements under "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and "Liquidity and Sources of
Capital" regarding the Company's strategies, plans, objectives, expectations,
and future operating results are forward-looking statements. Although the
Company believes that the expectations reflected in such forward-looking
statements are reasonable at this time, it can give no assurance that such
expectations will prove to have been correct. Actual results could differ
materially based upon a number of factors including, but not limited to, the
state of the economy, competition, unanticipated business opportunities,
availability of financing, market acceptance, government regulation, dependence
on key personnel, limited public market and liquidity, shares eligible for
future sale, and other risks that may apply to the Company.

     The following is a discussion of the financial condition and results of
operations of the Company as of the date of this Annual Report. This discussion
and analysis should be read in conjunction with the accompanying audited
Consolidated Financial Statements of the Company including the Notes thereto
which are included elsewhere in this Form 10-KSB.

General
-------

The Company is providing customer relationship management (CRM) solutions
through its customer contact center in Jacksonville, NC. ecom serves the CRM
marketplace as well as traditional contact center marketplaces with
telemarketing, professional services, and customer and technical support as an
outsource provider.


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 year ended August 31, 2002 and 2001. The percentages discussed
throughout this analysis are stated on an approximate basis.


                                       11
<PAGE>


<TABLE>
<CAPTION>
                                                      Fiscal Year    Fiscal Year
                                                      Ended          Ended
                                                      August 31,     August 31,
                                                      2002           2001
                                                                     ---------

<S>                                                       <C>           <C>
    Revenues                                              100.0%        100.0%
    Cost of revenues                                       64.5%         52.5%
                                                                     ---------
    Gross profit                                           35.5%         47.5%
    Operating expenses                                     52.8%         80.2%
    Impairment of Goodwill and Capitalized
    Software costs                                          --          138.8%
                                                      ----------     ---------
    Operating loss                                        (17.3%)      (171.5%)
    Other expenses, net                                     7.4%          6.6%
                                                                     ---------
    Net loss from continuing operations                   (24.7%)      (178.1%)
    Loss from discontinued operations                        --         (26.2%)
                                                      ----------     ---------
    Net loss                                              (24.7%)      (204.3%)
</TABLE>
                                                                     ---------

Year Ended August 31, 2002 and 2001

Revenues
--------

The Company's revenues of $8,755,369 and $6,488,865 for the years ended
August 31, 2002 and 2001, respectively reflect an increase of $2,266,504 or 34%.
This increase is due entirely to 2002 including twelve months of operations
while 2001 included only seven months of operations, beginning with the merger
with ecom on February 1, 2001 ("Merger"). Revenue has declined on a monthly
basis as a result of the general economic downturn in the U.S. economy,
reduction in the volume of the Gibralter contract, loss of the Lowe's contract
and reduced marketing activities dictated by cash restraints.

This revenue and all other related operating activity is attributable to
Company's call center activities that were acquired in the Merger with ecom.

Cost of  revenues
-----------------

Cost of revenues increased $2,239,999 or 65.7 % from $3,407,668 in fiscal 2001
to $5,647,667 in fiscal 2002. This increase is attributable to the August 31,
2002 fiscal year containing twelve months of operations rather than the seven
months reflected in the August 31, 2001 fiscal year. The seven months shown in
the 2001 period reflected operations from the February 1, 2001 merger date with
ecom through the end of the year.

The increase in cost of revenues, as a percentage of total revenue, from 52.5%
to 64.5% from August 31, 2001 to August 31, 2002 was due primarily to the
reduction in volume of revenue and the resulting inefficiencies typical with a
decline in monthly volume of approximately 21%. The start-up of new campaigns
and the Company's focus on outbound contracts attributed to this increase in
cost of revenues.

Selling, General and Administrative
-----------------------------------

Selling, general and administrative expenses ("SG&A") during the year ended
August 31, 2002 and 2001, including depreciation and amortization was $4,624,991
and $5,206,460, respectively. This decrease of $581,469 from 2001 to 2002


                                       12
<PAGE>


represents a decrease from 80.2% to 52.8% in SG&A as a percentage of total
revenues. This decrease is due to continuing efforts by management to reduce
expenses. Compensation costs of $2,103,819 and $1,839,944 for the years ended
August 31, 2002 and 2001, respectively comprise 45.5% and 35.3% of total SG&A.
The fiscal year ended August 31, 2002 contains twelve months of operations while
the August 31, 2001 period includes only seven months of operations.

Occupancy costs account for $193,870 and $104,894 or 4.2% and 2% of SG&A for the
years ended August 31, 2002 and 2001, respectively. Depreciation of equipment
and amortization of goodwill and capitalized Software Costs accounted for
$993,809 and $1,313,046 in the fiscal year ended August 31, 2002 and 2001,
respectively.

Impairment Charge

During the year ended August 31, 2001, the Company recorded a charge of
$9,008,713 for goodwill impairment related to its wholly owned ecom subsidiary.
Subsequent to its acquisition in February 2001, the e-commerce and
telecommunications industries experienced significant and rapid contraction. As
a result, the Company conducted a strategic review of its ecom subsidiary, which
was experiencing significant changes in market conditions. In addition, during
the year ended August 31, 2001, the Company ceased the development of the
Company's Datagration software operations and recorded a charge of $338,037 for
unamortized capitalized software costs related to this discontinued operation.
This impairment and resulting charge to operations is attributed to several
factors including the Company's inability to close a private placement of the
Company's stock in conjunction with the Merger, the cessation of the Company's
previous operations due to loss of the customer base and difficulty integrating
the Datagration software into the Company's product line due to limitations and
implementation issues with the Datagration.

Due to the significance of the changes discussed above, management performed an
evaluation of the recoverability of all of the assets of ecom, as described in
Statement of Financial Accounting Standards No. 121, "Accounting for Impairment
of Long-Lived Assets and Long-Lived Assets to be Disposed Of". Management
concluded from the results of this evaluation that a significant impairment
charge was required because estimated fair value was less than the carrying
value of the assets. Considerable management judgment is necessary to estimate
fair value. Accordingly, actual results could vary significantly from
managements' estimates.

Based upon this strategic review, the Company recognized an asset impairment
loss of $9,346,750 or $ .71 per share during the year ended August 31, 2001.

Interest Expense

Interest expense of $654,517 and $462,794 during the years ended August 31, 2002
and 2001, respectively included $499,998 and $291,666, respectively of accrued
interest related to the $5,000,000 in notes to Gibralter Publishing that were
issued in conjunction with the Merger. Remaining interest expense is primarily
attributable to capital leases assumed in conjunction with the Merger.

Provision for Income Taxes

There was no tax provision or benefit recognized in fiscal 2002 and 2001. The
Company incurred losses of $2,171,806 and $13,270,031 in 2002 and 2001,
respectively. At August 31, 2002, 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


                                       13
<PAGE>


such assets. 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.

Discontinued Operations

In fiscal year 2001, the Company discontinued the operations of its data
integration and data quality that were being provided via subcontractor
arrangements with third party vendors. The following table sets forth the
results of operations and loss on disposal from these businesses in fiscal 2001.


<TABLE>
<CAPTION>
                                                           Fiscal 2001
                                                           -----------

<S>                                                         <C>
Revenues                                                    $1,556,765
Cost of revenues                                             1,262,793
                                                           -----------

Gross profit                                                   293,972

General & administrative expenses                            1,995,817
                                                           -----------

Income (loss) from operations                               (1,701,845)
                                                           -----------

Income (loss) from discontinued operations                 ($1,701,845)
                                                           -----------
</TABLE>

NET OPERATING LOSS

The Company has accumulated approximately $11,655,000 of net operating loss
carryforwards as of August 31, 2002, 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 2022. 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 that can be used.

LIQUIDITY AND CAPITAL RESOURCES

The Company is not generating any cash from operations and it has no cash
resources. The Company is in default on the $350,000 loan agreement with a bank
and has been unable to meet its obligations under the $5,000,000 notes to
Gibralter Publishing, Inc. The payments on various capital leases are also in
arrears. This situation and the anticipated need for working capital for the
Company to increase its marketing and revenue base has resulted in the Board of
Directors taking certain actions intended to stabilize the Company and provide
it with a chance to succeed in the future. In December 2002, the Company and
Gibralter Publishing, Inc. agreed to exchange the $5,000,000 in notes for
1,000,000 shares of Series D Preferred shares.

The Board of Directors has also approved the proposed transaction with WAG
Holdings, LLC, Glen H. Hammer and A. Randall Barkowitz ("Investor Group") that
will add sufficient capital to help relieve the Company's short-term cash flow
crisis. The Board anticipates that the Investor Group will be able to locate
sufficient additional funding to address the Company's longer-term financial
needs, although there can be no assurance that such funding will be obtained.
This transaction provides that in exchange for $750,000 the Investor Group will
receive 70% of the Company's fully diluted post transaction common stock.
Although not required, the Company is seeking the approval of the transaction by
the Company's shareholders at a Special Meeting to be held in early 2003. As a
condition to the consummation of the proposed transaction, the Company intends
to effect a 1-for-10 reverse stock split, the approval for which will be sought
at the same Special Meeting of Shareholders.

The independent auditors report on the Company's August 31, 2002 and 2001
financial statements included in this Annual Report states that the Company's
recurring losses raise substantial doubts about the Company's ability to
continue as a going concern.


                                       14
<PAGE>


The Company's principal cash requirements are for selling, general and
administrative expenses, employee costs, funding of accounts receivable and
capital expenditures. The Company's primary sources of cash have been from a
private placement of the Company's Series C Preferred Stock and sale of
Subordinated Convertible Debentures that accounted for $1,533,850 and $300,000
of net proceeds in the fiscal year 2002 and 2001, respectively.

For the year ended August 31, 2002, cash and cash equivalents decreased from
$158,225 at the beginning of the year to an overdraft of $38,856 at the end of
the year.

Net cash used in operating activities in the years ended August 31, 2002 and
2001, respectively was $389,048 and $1,626,344 due to the net loss of
approximately $2,171,806 and $13,270,031. This was comprised of a net decrease
in working capital items of approximately $631,914 and $983,891, and the
losses were offset by non-cash depreciation and amortization expenses of
approximately $993,809 and $1,313,046 during fiscal 2002 and 2001, respectively.
During 2001, the non-cash write off of the Goodwill and Capitalized Software of
$9,346,750 was another offset to the net loss.

Net cash (used in) or provided by investing activities in fiscal 2002 and 2001
was $(311,848) and $484,505, respectively. This use in 2002 was due to the
purchase of certain fixed assets necessary to the operations of the business and
in 2001 cash provided was attributable to a reduction in short-term investments
as required by operating uses during the year.

Cash provided by financing activities in fiscal 2002 and 2001 was $542,671 and
$664,452 due primarily to the sale of Series C Preferred Shares in 2002 and the
issuance of notes of $355,000 and the issuance of $300,000 aggregate principal
amount of Subordinated Convertible Debentures via private placements, resulting
in net proceeds of $300,000 in 2001. The exercise of outstanding options and
warrants during fiscal year 2001 resulted in net proceeds to the Company of
$14,452.

In fiscal year 2002 and 2001, the Company had a revolving line-of-credit with a
bank for $350,000, secured by the receivables of the Company. The entire balance
was outstanding at August 31, 2002 and 2001. The rate is prime plus 1% and the
line expired on December 12, 2001. This line-of-credit is currently in default.


EFFECTS OF RECENT ACCOUNTING PRONOUNCEMENTS

In July 2001, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. ("FAS") 141, "Business Combinations" ("FAS
141") and FAS 142, "Goodwill and Other Intangible Assets" ("FAS 142"). "). The
FASB also issued Statement of Financial Accounting Standards No. 143,
"Accounting for Obligations Associated with the Retirement of Long-Lived Assets"
(SFAS No. 143), and Statement of Financial Accounting Standards No. 144,
"Accounting for the Impairment or Disposal of Long-Lived Assets" (SFAS No. 144),
in August and October 2001, respectively.

SFAS No. 141 requires the purchase method of accounting for business
combinations initiated after June 30, 2001 and eliminates the
pooling-of-interest method. The adoption of SFAS No. 141 had no material impact
on the Company's consolidated financial statements. Effective January 1, 2002,
the Company adopted SFAS No. 142. Under the new rules, the Company will no
longer amortize goodwill and other intangible assets with indefinite lives, but


                                       15
<PAGE>


such assets will be subject to periodic testing for impairment. On an annual
basis, and when there is reason to suspect that their values have been
diminished or impaired, these assets must be tested for impairment, and
write-downs to be included in results from operations may be necessary. SFAS No.
142 also requires the Company to complete a transitional goodwill impairment
test six months from the date of adoption.

Any goodwill impairment loss recognized as a result of the transitional goodwill
impairment test will be recorded as a cumulative effect of a change in
accounting principle no later than the end of fiscal year 2002. The adoption of
SFAS No. 142 had no material impact on the Company's consolidated financial
statements

SFAS No. 143 establishes accounting standards for the recognition and
measurement of an asset retirement obligation and its associated asset
retirement cost. It also provides accounting guidance for legal obligations
associated with the retirement of tangible long-lived assets. SFAS No. 143 is
effective in fiscal years beginning after June 15, 2002, with early adoption
permitted. The Company expects that the provisions of SFAS No. 143 will not have
a material impact on its consolidated results of operations and financial
position upon adoption. The Company plans to adopt SFAS No. 143 effective
January 1, 2003.

SFAS No. 144 establishes a single accounting model for the impairment or
disposal of long-lived assets, including discontinued operations. SFAS No. 144
superseded Statement of Financial Accounting Standards No. 121, "Accounting for
the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of"
(SFAS No. 121), and APB Opinion No. 30, "Reporting the Results of Operations -
Reporting the Effects of Disposal of a Segment of a Business, and Extraordinary,
Unusual and Infrequently Occurring Events and Transactions". The Company adopted
SFAS No. 144 effective January 1, 2002. The adoption of SFAS No. 144 had no
material impact on Company's consolidated financial statements.


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, 2002 and 2001 are included herein in response to
Item 7 of this Form 10-KSB.


                                       16

<PAGE>


                       SECURITIES AND EXCHANGE COMMISSION

                             WASHINGTON, D.C. 20549


                       FINANCIAL STATEMENTS AND SCHEDULES

                            AUGUST 31, 2002 AND 2001


                         FORMING A PART OF ANNUAL REPORT
                 PURSUANT TO THE SECURITIES EXCHANGE ACT OF 1934


                                 PALADYNE CORP.


                                       F-1

<PAGE>


                                 PALADYNE CORP.
                          INDEX TO FINANCIAL STATEMENTS


                                                                       Page No.
                                                                       --------

Report of Independent Certified Public Accountants                       F-3

Consolidated Balance Sheets at August 31, 2002 and 2001                  F-4

Consolidated Statements of Losses for the Two Years Ended
  August 31, 2002 and 2001                                               F-5

Consolidated Statements of Deficiency in Stockholders' Equity
  for the Two Years Ended August 31, 2002 and 2001                       F-6

Consolidated Statements of Cash Flows for the Two Years Ended
  August 31, 2002 and 2001                                               F-7

Notes to Consolidated Financial Statements                           F-8 to F-20


                                      F-2
<PAGE>


                    RUSSELL BEDFORD STEFANOU MIRCHANDANI LLP
                          CERTIFIED PUBLIC ACCOUNTANTS

                                1360 Beverly Road
                                    Suite 305
                              McLean, VA 22101-3621
                                  703-448-9200
                               703-448-3515 (fax)
                                                                Philadelphia, PA
--------------------------------------------------------------------------------


REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS


Board of Directors
Paladyne Corp.
Jacksonville, NC


We have audited the accompanying consolidated balance sheets of Paladyne Corp.
and subsidiary (the "Company") as of August 31, 2002 and 2001 and the related
consolidated statements of losses, deficiency in stockholders' equity, and cash
flows for the two years then ended. These financial statements are the
responsibility of the company's management. Our responsibility is to express an
opinion on these financial statements based upon our audits.

We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatements. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe 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 the
Company and subsidiary as of August 31, 2002 and 2001, and the results of its
operations and its cash flows for the two years ended, in conformity with
accounting principles generally accepted in the United States of America.

The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note O, the Company is
experiencing difficulty in generating sufficient cash flow to meet it
obligations and sustain its operations, which raises substantial doubt about its
ability to continue as a going concern. Management's plans in regard to this
matter are described in Note O. The financial statements do not include any
adjustments that might result from the outcome of this uncertainty.


                                    /s/ RUSSELL BEDFORD STEFANOU MIRCHANDANI LLP
                                    --------------------------------------------
                                        Russell Bedford Stefanou Mirchandani LLP
                                        Certified Public Accountants

McLean, Virginia
November 22, 2002, except for Note N for which the date is December 10, 2002


                                      F-3
<PAGE>


                                 PALADYNE CORP.
                           CONSOLIDATED BALANCE SHEETS
                            AUGUST 31, 2002 AND 2001

<TABLE>
<CAPTION>
                                                                           2002              2001
                                                                           ----              ----
<S>                                                                   <C>               <C>
                          ASSETS
Current Assets:

Cash and Equivalents                                                  $          -      $    158,225

Accounts Receivable (net of allowance for doubtful accounts of
$350,000 and $607,999 at August 31, 2002 and 2001, respectively.           279,883         1,414,473

Due from Related Parties                                                   548,320                 -

Prepaid Expenses and Other Assets                                           77,718           113,960
                                                                      ------------      ------------
          Total Current Assets                                             905,921         1,686,658

Property, Plant and Equipment (Note C):

Furniture and Fixtures                                                     369,028           360,000

Computers and Software                                                   1,943,193         1,643,218

Leasehold Improvement                                                    1,212,812         1,209,967
                                                                      ------------      ------------
                                                                         3,525,033         3,213,185

Less: Accumulated Depreciation and Amortization                          1,777,258           783,449
                                                                      ------------      ------------
          Property, Plant and Equipment, net                             1,747,775         2,429,736

Other Assets                                                                   425            28,685

Total Assets                                                          $  2,654,121      $  4,145,079
                                                                      ============      ============

LIABILITIES AND DEFICIENCY IN STOCKHOLDERS' EQUITY

Current Liabilities:
Cash Disbursed in Excess of Available Funds                           $     38,856      $          -

Accounts Payable and Accrued Expenses                                    2,458,591         2,500,585

Notes Payable (Note D)                                                   5,350,000         2,663,752

Accrued Preferred Stock Dividend                                           190,400           149,600

Current Portion of Capital Lease Obligation (Note G)                       749,809           816,649
                                                                      ------------      ------------
          Total Current Liabilities                                      8,787,656         6,130,586

Notes Payable (Note D)                                                           -         2,986,248

Capital Lease Obligation - Long-term Portion (Note G)                      166,926           634,230

Commitments and Contingencies (Note G)                                           -                 -

Deficiency in Stockholders' Equity:
Preferred Stock, par value $.001 per share; 10,000,000 shares
authorized;
Series A - 137,143 shares issued and outstanding at August 31,
2002 and 2001.                                                                 137               137
Series C - 1,000,101 shares and none issued at August 31, 2002 and
2001, respectively.                                                          1,000                 -
Series D - none issued at August 31, 2002 and 2001                               -                 -
Common Stock, par value $.001 per share; 75,000,000 shares
authorized; 16,709,351 shares issued and outstanding at August 31,
2002 and 2001.                                                              16,709            16,709

Additional Paid-In-Capital                                              14,345,977        12,869,647

Accumulated Deficit                                                    (20,664,284)      (18,492,478)
                                                                      ------------      ------------
          Total Deficiency in Stockholders' Equity                      (6,300,461)       (5,605,985)
                                                                      ------------      ------------
Total Liabilities and Deficiency in Stockholders' Equity              $  2,654,121      $  4,145,079
                                                                      ============      ============
</TABLE>


           See accompanying notes to consolidated financial statements


                                      F-4
<PAGE>


                                 PALADYNE CORP.
                        CONSOLIDATED STATEMENTS OF LOSSES
                  FOR THE YEARS ENDED AUGUST 31, 2002 AND 2001

<TABLE>
<CAPTION>
                                                                     2002            2001
                                                                     ----            ----
<S>                                                             <C>             <C>
Revenues                                                        $  8,755,369    $  6,488,865

Cost of Sales                                                      5,647,667       3,407,668
                                                                ------------    ------------
Gross Profit                                                       3,107,702       3,081,197

Operating Expenses:

Selling, General and Administrative                                3,631,182       3,893,414

Impairment Loss                                                            -       9,008,713

Depreciation and Amortization                                        993,809       1,313,046
                                                                ------------    ------------
Total Operating Expense                                            4,624,991      14,215,173

Operating Loss                                                    (1,517,289)    (11,133,976)

Interest Income (Expenses)                                          (654,517)       (434,210)
                                                                ------------    ------------

Loss from Continuing Operations, before Income Taxes and
Discontinued Operations                                           (2,171,806)    (11,568,186)

Income (taxes) benefit                                                     -               -
                                                                ------------    ------------

Loss from Continuing Operations, before Discontinued Operations   (2,171,806)    (11,568,186)

Loss from Discontinued Operations                                          -      (1,701,845)
                                                                ------------    ------------
Net Loss                                                          (2,171,806)    (13,270,031)
                                                                ============    ============

Cumulative Convertible Preferred Stock Dividend Requirements         (40,800)        (40,800)
                                                                ------------    ------------
Net Loss Attributable to Common Shareholders                    $ (2,212,606)   $(13,310,831)
                                                                ============    ============

Loss Per Common Share (Basic and Assuming Dilution) (Note M)    $      (0.13)   $      (1.01)
                                                                ============    ============
Continuing Operations                                           $      (0.13)   $      (0.88)
                                                                ============    ============
Discontinued Operations                                         $          -    $      (0.13)
                                                                ============    ============

Weighted Average Shares Outstanding (Basic and Diluted)           16,709,351      13,212,599
</TABLE>


         See accompanying notes to the consolidated financial statements


                                      F-5
<PAGE>


                                 PALADYNE CORP.
          CONSOLIDATED STATEMENTS OF DEFICIENCY IN STOCKHOLDERS' EQUITY
                FOR THE TWO YEARS ENDED AUGUST 31, 2002 AND 2001

<TABLE>
<CAPTION>
                              Common Stock                                        Preferred Stock
                              ------------       -----------------------------------------------------------------------------------
                                                            Series A             Series B             Series C              Series D
                            Common     Stock     Series A     Par      Series B    Par      Series C    Par      Series D     Par
                            Shares     Amount     Shares     Value      Shares    Value      Shares    Value      Shares     Value
                            ------     ------     ------     -----      ------    -----      ------    -----      ------     -----
<S>                       <C>          <C>       <C>         <C>     <C>          <C>       <C>        <C>       <C>         <C>
Balance at August 31,
2000                       8,456,599   $ 8,457   137,143     $ 137            -   $    -           -   $    -           -    $   -

Shares and warrants
issued in connection
with acquisition                   -         -         -         -    4,100,000    4,100           -        -           -        -

Conversion of preferred
shares (Series B) for
common stock               8,200,000     8,200         -         -   (4,100,000)  (4,100)          -        -           -        -

Issuance of additional
shares                        52,752        52         -         -            -        -           -        -           -        -


Net loss                           -         -         -         -            -        -           -        -           -        -
                          ----------   -------   -------     -----    ---------   ------   ---------   ------    --------    -----

Balance at August 31,
2001                      16,709,351   $16,709   137,143     $ 137            -   $    -           -   $    -           -    $   -

Issuance of Series C
Preferred Stock in
connection with a
private placement, net
of offering costs                  -         -         -         -            -        -     905,880      906           -        -

Conversion of
Convertible Debenture
Notes to shares of
Series C Preferred Stock           -         -         -         -            -        -      79,221       79           -        -

Issuance of Series C
Preferred Stock for
settlement of lawsuit              -         -         -         -            -        -      15,000       15           -        -

Series A preferred
dividend accrual                   -         -         -         -            -        -           -        -           -        -

Net loss                           -         -         -         -            -        -           -        -           -        -
                          ----------   -------   -------     -----    ---------   ------   ---------   ------    --------    -----

Balance at August 31,
2002                      16,709,351   $16,709   137,143     $ 137            -   $    -   1,000,101   $1,000           -    $   -
                          ==========   =======   =======     =====    =========   ======   =========   ======    ========    =====
</TABLE>


[TABLE CONTINUED]


<TABLE>
<CAPTION>
                             Additional
                              Paid-In-     Accumulated
                              Capital        Deficit         Total
                              -------        -------         -----
<S>                         <C>            <C>            <C>
Balance at August 31,
2000                        $ 7,136,430    $ (5,181,647)  $ 1,963,377

Shares and warrants
issued in connection
with acquisition              5,718,817               -   $ 5,722,917

Conversion of preferred
shares (Series B) for
common stock                          -               -   $     4,100

Issuance of additional
shares                           14,400               -   $    14,452


Net loss                              -     (13,310,831)  (13,310,831)
                            -----------    ------------   -----------

Balance at August 31,
2001                        $12,869,647    $(18,492,478)  $(5,605,985)

Issuance of Series C
Preferred Stock in
connection with a
private placement, net
of offering costs             1,360,189               -     1,361,095

Conversion of
Convertible Debenture
Notes to shares of
Series C Preferred Stock        131,956                       132,035

Issuance of Series C
Preferred Stock for
settlement of lawsuit            24,985                        25,000

Series A preferred
dividend accrual                (40,800)                      (40,800)

Net loss                              -      (2,171,807)   (2,171,807)
                            -----------    ------------   -----------

Balance at August 31,
2002                        $14,345,977    $(20,664,285)  $(6,300,462)
                            ===========    ============   ===========
</TABLE>


         See accompanying notes to the consolidated financial statements


                                      F-6
<PAGE>


                                 PALADYNE CORP.
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                  FOR THE YEARS ENDED AUGUST 31, 2002 AND 2001

<TABLE>
<CAPTION>
                                                                       2002            2001
                                                                       ----            ----
<S>                                                                <C>            <C>
Cash flows from operating activities:

Net loss from continuing operations                                $(2,171,806)   $(11,568,186)

Net loss from discontinued operations                                        -      (1,701,845)

Adjustments to reconcile net loss to net cash provided by
(used in) operating activities:

Depreciation                                                           993,809       1,313,046

Preferred stock issued in exchange for convertible debenture notes     132,035               -

Preferred stock issued in exchange for lawsuit settlement               25,000

Impairment loss                                                              -       9,346,750

(Increase) decrease in:

Accounts receivable                                                    586,270        (259,500)

Other current assets                                                    36,242        (113,093)

Increase (decrease) in:

Accounts payable and accrued expenses                                   37,662       1,333,708

Other non-current assets                                               (28,260)         22,776
                                                                   -----------    ------------
Net cash provided by (used in) operating activities                   (389,048)     (1,626,344)

Cash flows from investing activities:

Disposition of short-term investments                                        -         484,505

Capital expenditures                                                  (311,848)              -
                                                                   -----------    ------------
Net cash provided by (used in) investing activities                   (311,848)        484,505

Cash flows from financing activities:

Proceeds from issuance of Series C Preferred Stock                   1,361,095

Proceeds from notes payable                                                            650,000

Repayment of notes payable and capital leases                         (818,424)             -

Proceeds from exercise of options and warrants                               -          14,452
                                                                   -----------    ------------
Net cash provided by (used in) financing activities                    542,671         664,452

Net increase (decrease) in cash and cash equivalents                  (158,225)       (477,387)

Cash and cash equivalents at beginning of year                         158,225         635,612

Cash and cash equivalents at end of year                           $         -    $    158,225
                                                                   ===========    ============

Supplemental Disclosures of Cash Flow Information:

Cash paid during period for interest                               $   654,517    $    405,220

Common stock issued in exchange for debt                                     -               -

Accrued preferred stock dividend                                        40,800          40,800

Conversion of preferred stock                                                        4,100,000

Non-cash investing and financing activities:

   Assets acquired in merger                                                 -       4,234,636

   Debt assumed in merger                                                    -    5,000,000.00

   Liabilities assumed in merger                                             -    2,375,579.00

   Costs of acquisition                                                      -      467,000.00

   Issuance of preferred stock in merger                                     -       5,765,420
</TABLE>


         See accompanying notes to the consolidated financial statements


                                      F-7
<PAGE>


                                 PALADYNE CORP.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                            AUGUST 31, 2002 AND 2001

NOTE A - SUMARY OF ACCOUNTING POLICIES

A summary of the significant accounting policies applied in the preparation of
the accompanying financial statements follows.

Business and Basis of Presentation
----------------------------------

Paladyne Corp. (the "Company") through a wholly-owned subsidiary, E-commerce
Support Centers, Inc. ("ECOM"), provides customer relationship management (CRM)
solutions at its customer contact center in Jacksonville, NC. Effective with the
merger of ECOM the Company discontinued operations of its data integration
business.

The consolidated financial statements include the accounts of the Company, and
its wholly owned subsidiary, E-commerce Support Centers, Inc. All significant
inter-company transactions and balances have been eliminated.

Revenue Recognition
-------------------

The Company recognizes revenue at the point at which services are provided to
the customer. The contractual terms of the agreements dictate the recognition of
revenue by the Company.

Advertising
-----------

The Company follows the policy of charging the costs of advertising to expenses
incurred. Advertising costs incurred during the years ended August 31, 2002 and
2001 were $254 and $7,437 respectively.

Income Taxes
------------

Income taxes are provided based on the liability method for financial reporting
purposes in accordance with the provisions of Statements of Financial Standards
No. 109, "Accounting for Income Taxes". Under this method deferred tax assets
and liabilities are recognized for the future tax consequences attributable to
differences between the financial statement carrying amounts of existing assets
and liabilities are measured using enacted tax rates expected to apply to
taxable income in the years in which those temporary differences are expected to
be removed or settled. The effect on deferred tax assets and liabilities of a
change in tax rates is recognized in the statement of operations in the period
that includes the enactment date.

Cash Equivalents
----------------

For purposes of the Statements of Cash Flows, the Company considers all highly
liquid debt instruments purchased with a maturity date of three months or less
to be cash equivalents.

Property and Equipment
----------------------

Property and equipment are stated at cost and depreciated over their estimated
useful lives of 27 to 60 months using the straight-line method.

Capitalized Computer Hardware and Software
------------------------------------------

The Company records the purchase of computer hardware at historical cost and
amortizes this cost over a period of three to five years. The Company has
adopted SOP 98-1, "Accounting for the Costs of Computer Software Developed or
Obtained for Internal Use." The Company capitalizes software purchased from
third parties if the related software product under development has reached
technological feasibility or if there are alternative future uses for the
purchased software provided that capitalized amounts will be realized over a
period not exceeding five years.

In addition, the company capitalizes costs of materials, consultants, interest,
and payroll and payroll-related costs for employees incurred in developing
internal-use computer software once technological feasibility is attained. Costs
incurred prior to the establishment of technological feasibility are charged to
general and administrative expense.


                                      F-8
<PAGE>


                                 PALADYNE CORP.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                            AUGUST 31, 2002 AND 2001

NOTE A - SUMARY OF ACCOUNTING POLICIES (CONTINUED)

Long-Lived Assets
-----------------

The Company has adopted Statement of Financial Accounting Standards No. 121
(SFAS 121). The Statement requires that long-lived assets and certain
identifiable intangibles held and used by the Company be reviewed for impairment
whenever events or changes in circumstances indicate that the carrying amount of
an asset may not be recoverable. SFAS No. 121 also requires assets to be
disposed of be reported at the lower of the carrying amount or the fair value
less costs to sell.

Concentrations of Credit Risk
-----------------------------

Financial instruments and related items, which potentially subject the Company
to concentrations of credit risk, consist primarily of cash, cash equivalents
and trade receivables. The Company places its cash and temporary cash
investments with high credit quality institutions. At times, such investments
may be in excess of the FDIC insurance limit.

Stock Based Compensation
------------------------

The Company accounts for stock transactions in accordance with APB Opinion 25,
"Accounting for Stock Issued to Employees." In accordance with statement of
Financial Accounting Standards No. 123, "Accounting for Stock Based
Compensation," the Company has adopted the proforma disclosure requirements.
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.

Liquidity
---------

As shown in the accompanying financial statements, the Company incurred a net
loss of $2,171,806 and $13,310,831 during the year ended August 31, 2002 and
2001, respectively. The Company's current liabilities exceeded its current
assets by $7,881,735 as of August 31, 2002.

Segment Information
-------------------

The Company adopted Statement of Financial Accounting Standards No. 131,
Disclosures about Segments of an Enterprise and Related Information ("SFAS
131"). SFAS establishes standards for reporting information regarding operating
segments in annual financial statements and requires selected information for
those segments to be presented in interim financial reports issued to
stockholders. SFAS 131 also establishes standards for related disclosures about
products and services and geographic areas. Operating segments are identified as
components of an enterprise about which separate discrete financial information
is available for evaluation by the chief operating decision maker, or decision
making group, in making decisions how to allocate resources and assess
performance. The information disclosed herein, materially represents all of the
financial information related to the Company's principal operating segments.

Net Earnings (Losses) Per Share
-------------------------------

The Company has adopted Statement of Financial Accounting Standard No. 128,
"Earnings Per Share," specifying the computation, presentation and disclosure
requirements of earnings per share information.

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 year 2002 and 2001, 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.


                                      F-9
<PAGE>


                                 PALADYNE CORP.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                            AUGUST 31, 2002 AND 2001

NOTE A - SUMARY OF ACCOUNTING POLICIES (CONTINUED)

Comprehensive Income
--------------------

The Company does not have any items of comprehensive income in any of the
periods presented.

Use of Estimates
----------------

The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect certain reported amounts and disclosures. Accordingly actual results
could differ from those estimates.

Reclassifications
-----------------

Certain reclassifications have been made in prior years' financial statements to
conform to classifications used in the current year.

New Accounting Pronouncements
-----------------------------

In July 2001, the Financial Accounting Standards Board (FASB) issued Statement
of Financial Accounting Standards No. 141, "Business Combinations" (SFAS No.
141), and Statement of Financial Accounting Standards No. 142, "Goodwill and
Other Intangible Assets" (SFAS No. 142). The FASB also issued Statement of
Financial Accounting Standards No. 143, "Accounting for Obligations Associated
with the Retirement of Long-Lived Assets" (SFAS No. 143), and Statement of
Financial Accounting Standards No. 144, "Accounting for the Impairment or
Disposal of Long-Lived Assets" (SFAS No. 144), in August and October 2001,
respectively.

SFAS No. 141 requires the purchase method of accounting for business
combinations initiated after June 30, 2001 and eliminates the pooling-of-
interest method. The adoption of SFAS No. 141 had no material impact on the
Company's consolidated financial statements.

Effective January 1, 2002, the Company adopted SFAS No. 142. Under the new
rules, the Company will no longer amortize goodwill and other intangible assets
with indefinite lives, but such assets will be subject to periodic testing for
impairment. On an annual basis, and when there is reason to suspect that their
values have been diminished or impaired, these assets must be tested for
impairment, and write-downs to be included in results from operations may be
necessary. SFAS No. 142 also requires the Company to complete a transitional
goodwill impairment test six months from the date of adoption.

Any goodwill impairment loss recognized as a result of the transitional goodwill
impairment test will be recorded as a cumulative effect of a change in
accounting principle no later than the end of fiscal year 2002. The adoption of
SFAS No. 142 had no material impact on the Company's consolidated financial
statements

SFAS No. 143 establishes accounting standards for the recognition and
measurement of an asset retirement obligation and its associated asset
retirement cost. It also provides accounting guidance for legal obligations
associated with the retirement of tangible long-lived assets. SFAS No. 143 is
effective in fiscal years beginning after June 15, 2002, with early adoption
permitted. The Company expects that the provisions of SFAS No. 143 will not have
a material impact on its consolidated results of operations and financial
position upon adoption. The Company plans to adopt SFAS No. 143 effective
January 1, 2003.

SFAS No. 144 establishes a single accounting model for the impairment or
disposal of long-lived assets, including discontinued operations. SFAS No. 144
superseded Statement of Financial Accounting Standards No. 121, "Accounting for
the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of"
(SFAS No. 121), and APB Opinion No. 30, "Reporting the Results of Operations -
Reporting the Effects of Disposal of a Segment of a Business, and Extraordinary,
Unusual and Infrequently Occurring Events and Transactions". The Company adopted
SFAS No. 144 effective January 1, 2002. The adoption of SFAS No. 144 had no
material impact on Company's consolidated financial statements.


                                      F-10
<PAGE>


                                 PALADYNE CORP.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                            AUGUST 31, 2002 AND 2001

NOTE B - BUSINESS COMBINATION

On February 1, 2001, Paladyne Corp. ("Paladyne") through a wholly-owned
subsidiary ECOM Acquisition Corp. ("Acquisition Sub"), merged (the "Merger")
with E-commerce Support Centers, Inc., a North Carolina corporation ("ECOM"),
pursuant to an Agreement and Plan of Merger, dated as of December 21, 2000, as
amended (collectively, the "Merger Agreement") in a transaction accounted for
using the purchase method of accounting. Upon the Merger, ECOM became a
wholly-owned subsidiary of Paladyne. ECOM is a provider of Customer Relationship
Management (CRM) solutions and customer contact center services as an
outsourcing option to companies from its contact center in Jacksonville, NC. The
merger consideration (the "Merger Consideration") to the ECOM shareholders
consisted of shares of newly-created Series B Convertible Preferred Stock, $.001
par value (the "Series B Preferred Stock"), Anti-Dilution Warrants and
Performance Warrants (as discussed below) and the right to receive additional
shares of Paladyne Common Stock in conjunction with future placements by
Paladyne. Terrence J. Leifheit, the principal shareholder of ECOM, and another
ECOM shareholder, delivered into escrow securities representing approximately
25% of the aggregate Merger Consideration as security for indemnification claims
Paladyne may have under the Merger Agreement.

Upon the Merger, Paladyne issued 4,100,000 shares of Series B Preferred Stock.
Each share of Series B Preferred Stock votes on a two-for-one basis with the
Common Stock on all matters, but with a separate vote on matters directly
affecting such Series, mandatorily converts into two shares of Paladyne Common
Stock immediately following stockholder approval of an increase in the number of
authorized shares of Common Stock, will receive any dividends declared on an
as-converted basis with the Common Stock and will have a liquidation preference
of $5.00 per share. The stockholder approval was obtained at a July 10, 2001
stockholders meeting, accordingly, the shares are deemed converted as of that
date.

To protect against dilution to the former ECOM shareholders upon exercise of
outstanding pre-Merger Paladyne options and warrants (the "Present
Options/Warrants"), Paladyne granted to them Anti-Dilution Warrants to purchase
4,000,000 shares of Paladyne Common Stock at an exercise price of $1.146 per
share (subject to adjustment), vesting as to 0.6 of a share of Common Stock for
each share of Common Stock issued upon the exercise of Present Options/Warrants,
and expiring 30 days after the later of (i) termination or exercise of all
Present Options/Warrants or (ii) notice from Paladyne as to the aggregate number
of Present Options/Warrants that were exercised.

To give the former ECOM shareholders the opportunity to participate more
directly in the future performance of Paladyne resulting from the acquired ECOM
business, Paladyne granted to them Performance Warrants to purchase 500,000
shares of Paladyne Common Stock at an exercise price of $1.146 per share
(subject to adjustment), exercisable for five years and vesting in 100,000 share
tranches for each $20 million of net revenue increases, above $50 million
annually, achieved in either year or both of the two (2) year periods ending
January 31, 2002 and 2003. For the purpose of these awards, the measurement will
be on a trailing 12-month basis, and with an acceptable gross margin (20% or
greater) for each tranche to qualify.

In addition, ending upon the earlier to occur of December 20, 2002 or Paladyne's
completion of $6,500,000 in cash from sales of Common Stock or Common Stock
equivalents (the "New Securities"), ECOM shareholders will receive, one share
(the "Deferred Shares") of Common Stock for each $1.00 in gross proceeds
received upon the sale of New Securities or issuable upon conversion, exercise
or exchange of New Securities.

The Merger Agreement provided that Paladyne would grant options, at market
value, to ECOM employees for the purchase of an aggregate of 500,000 shares of
Paladyne Common Stock under its 1999 Stock Option Plan. The Compensation
Committee of the Board of Directors was authorized to grant such options upon
receipt from former ECOM management of a proposal of the ECOM employees to whom
the options should be granted.


                                      F-11
<PAGE>


                                 PALADYNE CORP.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                            AUGUST 31, 2002 AND 2001

NOTE B - BUSINESS COMBINATION (CONTINUED)

Immediately prior to the Merger, ECOM purchased from Gibralter Publishing, Inc.,
a North Carolina corporation, all of the tangible and intangible assets used in
ECOM 's call center operations, subject to related liabilities, pursuant to an
Option Agreement. Prior to the Merger, Gibralter had been operating the call
center on behalf of ECOM. The purchase price for these assets was $5 million
which is payable by ECOM pursuant to two amended promissory notes issued to
Gibralter and guaranteed by Paladyne, one note for $1,500,000, repayable in two
installments of $750,000, the first being due after completion of a $3,000,000
equity or convertible debt offering and the remaining payment due no sooner than
six months after the first payment and after three consecutive months of
positive cash flow from operations. The second note for $3,500,000, is repayable
in equal quarterly principal and interest payments of $377,000 beginning in
April 2002 and continuing through January 2005. Both notes bear interest at 10%
per annum and are secured by the purchased assets (See Note D).

A portion of these assets used by ECOM in its contact center operations consists
of equipment that is leased by Gibraltar pursuant to various equipment leases.
Pending the receipt by Gibralter of lessor consents to the assignments of these
leases toECOM, and in accordance with an Equipment Use Agreement entered into by
Gibralter and ECOM, Gibralter has granted to ECOM the right to possess and use
the equipment and ECOM has agreed to assume and pay to the lessors the payments
to be made by Gibralter pursuant to the leases.

The total purchase price and carrying value of the net assets acquired and
liabilities assumed of ECOM were as follows:

<TABLE>
<CAPTION>
<S>                                                                 <C>
Debts Assumed                                                       $ 5,000,000
Other Liabilities Assumed                                             2,375,579
Costs of Acquisition                                                    467,000
Preferred Stock Issued                                                5,765,000
Less: Assets Acquired                                                (4,234,636)
                                                                    -----------
Excess of Purchase Price Over Fair Value of Assets Acquired         $ 9,372,943
                                                                    ===========
</TABLE>

The 4,100,000 shares of Series B Preferred Stock issued in the Merger was valued
based upon the underlying 8,200,000 shares of Common Stock at a price of $.7031
(the average the Company's common stock price five days prior to February 1,
2001) for a total consideration of $5,765,000.

The Company has recorded the carryover basis of the net assets acquired, which
did not differ materially from their fair value. The results of operations
subsequent to the date of acquisition are included in the Company's consolidated
statement of operations.

Impairment Charge
-----------------

During the year ended August 31, 2001, the Company recorded a charge of $
9,008,713 for goodwill impairment related to its ECOM subsidiary. Subsequent to
its acquisition in February, 2001, the ECOM subsidiary experienced significant
changes in market conditions. This change caused the subsidiary not to reach the
sales levels the Company originally anticipated at the time of the aquisition.
In addition, the Company's acquisition and related business plan contemplated
the private placement of the Company's equity in order to develop the
subsidiary. Due to adverse capital market conditions the Company was unable to
raise a significant amount of equity financing. Separately, during the year
ended August 31, 2001, the Company ceased the development of the Company's data
integration and data quality software and recorded a charge of $338,037 for
impairment previously of capitalized software related to this discontinued
operation.

Due to the significance of the changes discussed above, management performed an
evaluation of the recoverability of all of the assets of ECOM, as described in
Statement of Financial Accounting Standards No. 121, "Accounting for Impairment
of Long-Lived Assets and Long-Lived Assets to be Disposed Of". Management
concluded from the results of this evaluation that a significant impairment
charge was required because estimated fair value was less than the carrying
value of the assets. Considerable management judgment is necessary to estimate
fair value. Accordingly, actual results could vary significantly from
managements' estimates.


                                      F-12
<PAGE>

                                 PALADYNE CORP.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                            AUGUST 31, 2002 AND 2001

NOTE B - BUSINESS COMBINATION (CONTINUED)

Based upon the evaluation, the Company recognized an asset impairment loss of
$9,346,750 or $.71 per share during the year ended August 31, 2001.

NOTE C- PROPERTY AND EQUIPMENT

Major classes of property and equipment at August 31, 2002 and 2001 consist of
the following:

<TABLE>
<CAPTION>
                                                       2002             2001
                                                       ----             ----
<S>                                                <C>              <C>
Leasehold Improvements                             $ 1,212,812      $ 1,209,967
Furniture and Fixtures                                 369,028          360,000
Computer Equipment and Software                       1,943193        1,643,218
                                                   -----------      -----------
                                                     3,525,033        3,213,185
Less: Accumulated Depreciation and Amortization     (1,777,258)        (783,449)
                                                   -----------      -----------
Net Property and Equipment                         $ 1,747,775      $ 2,429,736
                                                   ===========      ===========
</TABLE>

NOTE D - NOTES PAYABLE

Notes Payable at August 31, 2002 and 2001 are as follows:

<TABLE>
<CAPTION>
                                                                          2002          2001
                                                                          ----          ----
<S>                                                                   <C>          <C>
Note payable in quarterly installments of $377,000, including
interest at 10% per annum, secured by property and equipment.
This note was subsequently converted to equity. See Note N.          $ 3,500,000   $ 3,500,000

Note payable in two installments of $750,000, plus interest at 10%
per annum, secured by property and equipment. The first
installment is due after completion of a $3,000,000 equity or
convertible debt offering by the Company and the remaining
installment payment due the later of six months after the first
installment payment is made and after three consecutive months of
positive cash flow from operations (as defined). This note was
subsequently converted to equity. See Note N.                          1,500,000     1,500,000

Note payable to Bank in monthly installments of interest only at
the Bank's prime lending rate plus 1%, secured by accounts
receivable. This note is currently in default and is currently in
litigation.                                                              350,000       350,000

8% convertible subordinated note payable, unsecured and due
March 31, 2002; Noteholder has the option to convert unpaid note
principal together with accrued and unpaid interest to the
Company's common stock at a rate of $1.00 per share. In the event
the unpaid principal amount of the note, together with any accrued
and unpaid interest, is not converted, or paid in full by March 31,
2002 then interest accrues at 10% per annum until paid in full.                -        50,000

8% Convertible Debenture Convertible into Preferred Shares at
$5.00 per unit; each unit convertible into common stock at the rate
of $.166 per share.                                                            -       250,000
                                                                     -----------   -----------
                                                                       5,350,000     5,650,000
Less: current portion                                                 (5,350,000)   (2,663,752)
                                                                     -----------   -----------
                                                                     $         -   $ 2,986,248
                                                                     ===========   ===========
</TABLE>


                                      F-13
<PAGE>


                                 PALADYNE CORP.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                            AUGUST 31, 2002 AND 2001

NOTE E - INCOME TAXES

The Company has adopted Financial Accounting Standard Number 109(SFAS 109) which
requires the recognition of deferred tax liabilities and assets for the expected
future tax consequences of events that have been included in the financial
statement or tax returns. Under this method, deferred tax liabilities and assets
are determined based on the difference between financial statements and tax
basis of assets and liabilities using enacted tax rates in effect for the year
in which the differences are expected to reverse. Temporary differences between
taxable income reported for financial reporting purposes and income tax purposes
are insignificant.

For income tax reporting purposes, the Company's aggregate unused net operating
losses approximate $11,655,000, which expire through 2022. The deferred tax
asset related to the carryforward is approximately $3,970,000. The Company has
provided a valuation reserve against the full amount of the net operating loss
benefit, since in the opinion of management based upon the earnings history of
the Company, it is more likely than not that the benefits will be realized.
Significant changes in ownership may limit the Company's future use of its
existing net operating losses.

Components of deferred tax assets as of August 31, 2002 are as follows:

<TABLE>
<CAPTION>
<S>                                         <C>
Non-current:
Net operating loss carryforward             $ 3,970,000
Valuation allowance                          (3,970,000)
                                            -----------
Net deferred tax asset                      $         -
                                            ===========
</TABLE>

NOTE F - 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 $0 and $1,500 for
the years ended August 31, 2002 and 2001.

NOTE G - COMMITMENTS AND CONTINGENCIES

Operating Lease Commitments
---------------------------

The Company leases office space, an entertainment facility and equipment under
operating leases in North Carolina for its corporate use. Commitments for
minimum rentals under non-cancelable leases at August 31, 2002 are monthly
payments of $14,550 through May 31, 2003. The Company has the option to extend
the lease for a five-year term at that time.

Capital Lease Obligations
-------------------------

Computer equipment and software includes the following amounts for capitalized
leases at August 31, 2002 and 2001:

<TABLE>
<CAPTION>
                                                        2002           2001
                                                        ----           ----
<S>                                                 <C>            <C>
Computer equipment and software                     $ 1,855,238    $ 1,643,218
Less: accumulated depreciation and amortization        (721,678)      (219,088)
                                                    -----------    -----------
                                                    $ 1,133,560    $ 1,424,130
                                                    ===========    ===========
</TABLE>


                                      F-14
<PAGE>


                                 PALADYNE CORP.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                            AUGUST 31, 2002 AND 2001

NOTE G - COMMITMENTS AND CONTINGENCIES (CONTINUED)

Capital Lease Obligations (Continued)
-------------------------------------

Future minimum lease payments required under the capital leases are as follows:

<TABLE>
<CAPTION>
                                                  Amount
                                                  ------
<S>                                             <C>
2003                                            $ 794,124
2004                                              166,926
2005                                                    -
2006                                                    -
2007 and after                                          -
                                                ---------
                                                $ 961,050
Less: amount representing interest                (44,315)
                                                ---------
                                                  916,735
Less: current portion                            (749,809)
                                                ---------
Long-term portion                               $ 166,926
                                                =========
</TABLE>

The Company had computer equipment and software purchased under non-cancelable
leases with an original cost of $1,643,218 as of August 31, 2002 and 2001.
Amortization of $721,678 has been charged to operations as of August 31, 2002.

Employment and Consulting Agreements
------------------------------------

The Company has employment agreements with five individuals. These agreements
provide for annual base compensation of approximately $840,000 per annum. . In
addition to salary and benefit provisions, the agreement includes defined
commitments should the employee terminate the employment with or without cause.
The agreements provide for additional incentives in the form of bonuses for
performance and also provide for the issuance of stock options.

The Company has consulting agreements with outside contractors, certain of whom
are also Company stockholders. The Agreements are generally for a term of 12
months from inception and renewable automatically from year to year unless
either the Company or Consultant terminates such engagement by written notice.

Litigation
----------

In fiscal 2002, the Company did not renew the employment contract of its
Executive Vice President. Subsequent to this non-renewal the individual was
terminated. The former employee filed a lawsuit, in the State of Florida,
claiming additional compensation was owed as well as other amounts. The Company
and the individual were unsuccessful in mediation and the case is still in
discovery. The Company intends to defend itself vigorously against this claim.

The Company is engaged in proceedings in the Circuit Court of the 18th Judicial
District, Seminole County, Florida, with SunTrust bank concerning a $350,000
line of credit that is in default. In September 2002, the bank filed a summary
judgment motion, seeking $360,000 in full restitution of the money owed to it.
The Company is currently in negotiations with the bank regarding repayment of
this money. For additional information regarding the line of credit, see "Item
6. Management's Discussion and Analysis of Financial Condition and Results of
Operations."

The Company is subject to other legal proceedings and claims, which arise in the
ordinary course of its business. Although occasional adverse decisions or
settlements may occur, the Company believes that the final disposition of such
matters will not have material adverse effect on its financial position, results
of operations or liquidity.


                                      F-15
<PAGE>


                                 PALADYNE CORP.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                            AUGUST 31, 2002 AND 2001

NOTE H - STOCKHOLDERS' EQUITY

The Company is authorized to issue 75,000,000 shares of common stock with $0.001
par value per share and 10,000,000 shares of preferred stock with $.001 par
value per share. On July 10, 2001, the Board of Directors designated 1,800,000
shares as 8 % Cumulative Convertible Series C Preferred Stock and 1,050,000
shares as 8% Cumulative Convertible Series D Preferred Stock. As of August 31,
2002 and 2001, the Company has issued and outstanding 16,709,351 shares of
common stock and 1,371,143 shares of Series A Preferred Stock. As of August 31,
2002, the Company has issued and outstanding 1,000,101 shares of Series C
Preferred Stock and no shares of Series D Preferred Stock (see Note N).

On February 1, 2001, the Board of Directors authorized the issuance of 4,100,000
shares of newly-created Series B Convertible Preferred Stock in connection with
the Merger of ECOM. These shares were converted to 8,200,000 shares of the
Company's Common Stock on July 10, 2001.

On September 24, 2001, the Board of Directors authorized a private placement of
up to 600,000 units priced at $5.00 per unit, with one unit consisting of three
shares of Series C 8% Cumulative Convertible Preferred Stock ("Series C
Preferred Stock") at $.001 par value per share. Each share is convertible into
ten shares of the Company's Common Stock at $.001 par value per share. Net
proceeds from this private placement as of August 31, 2002 were $1,518,130,
which is net of offering expenses of $148,705. This resulted in the issuance of
1,000,101 shares of Series C Preferred Stock.

On February 28, 2002, in connection with the Series C private placement, three
convertible debenture note holders converted their note principal with accrued
and unpaid interest in the total of $107,034 into 79,221 shares of Series C
Preferred Stock. Also, in addition to cash payment, 15,000 shares of Series C
Preferred Stock were issued to settle a lawsuit.


NOTE I - STOCK OPTION PLAN AND WARRANTS

Options
-------

The Company has a stock option plan (the "Plan") adopted by the stockholders on
March 3, 1999, which replaced the Company's previous 1996 Stock Option Plan. The
Plan authorizes the issuance of up to 5,000,000 shares of common stock.


                                      F-16
<PAGE>


                                 PALADYNE CORP.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                            AUGUST 31, 2002 AND 2001

NOTE I - STOCK OPTION PLAN AND WARRANTS (CONTINUED)

Options
-------

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 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 5,000,000 shares of the Company's Common Stock have been reserved
pursuant to the Plan. As of August 31, 2002, 2,077,436 options are outstanding:
2,047,436 shares issued inside the Plan and 30,000 shares issued outside the
Plan.

The following table summarizes the changes in options outstanding and the
related prices for the shares of the Company's common stock issued to
shareholders at August 31, 2002.

<TABLE>
<CAPTION>
                Options Outstanding                                       Options Exercisable
                -------------------                                       -------------------
                                  Weighted Average      Weighted                       Weighted
                      Number      Contractual Life       Average         Number        Average
Exercise prices:    Outstanding       (Years)        Exercise Price   Exercisable   Exercise Price
----------------    -----------       -------        --------------   -----------   --------------
<S>                 <C>                <C>               <C>          <C>               <C>
 $0.20 - $0.95      1,235,332          1.68              $0.58          759,016         $0.56
 $1.02 - $1.56        698,354          2.39              $1.04          236,737         $1.05
 $2.35 - $2.50         73,750          1.25              $2.48           32,084         $2.47
 $3.36 - $3.70         70,000          0.17              $3.51           70,000         $3.51
                    ---------          ----              -----        ---------         -----
                    2,077,436          1.85              $0.90        1,097,837         $0.91
                    =========          ====              =====        =========         =====
</TABLE>

Transactions involving the Company's options issuance are summarized as follows:

<TABLE>
<CAPTION>
                                                               Number        Weighted Average
                                                             of shares        Exercise Price
                                                             ---------        --------------
<S>                                                          <C>                <C>
Outstanding at August 31, 2000                               1,537,311          $   1.20
                                                             =========          ========
Granted                                                        947,104              1.08
Exercised                                                     (318,571)             1.08
Cancelled                                                      (58,905)             1.65
                                                             ---------          --------
Outstanding at August 31, 2001                               2,106,939          $   1.06
                                                             =========          ========
Granted                                                        160,000             $0.01
Exercised                                                            -              0.00
Cancelled                                                     (189,503)             2.48
Outstanding at August 31, 2002                               2,077,436          $   0.90
                                                             =========          ========
</TABLE>

The weighted-average fair value of stock options granted to shareholders during
the years ended August 31, 2002 and 2001 and the weighted-average significant
assumptions used to determine those fair values, using a Black-Scholes option
pricing model are as follows:

<TABLE>
<CAPTION>
                                                                 2002               2001
                                                                 ----               ----
<S>                                                        <C>                <C>
Weighted average grant date fair value per share:               $0.01              $0.03
Significant assumptions (weighted-average):
  Risk-free interest rate at grant date                         1.95%              5.26%
  Expected stock price volatility                                 23%                15%
  Expected dividend payout                                          -                  -
  Expected option life-years (a)                           3.0 to 5.0         2.0 to 4.0

<FN>
  (a) The expected option life is based on contractual expiration dates.
</FN>
</TABLE>


                                      F-17
<PAGE>


                                 PALADYNE CORP.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                            AUGUST 31, 2002 AND 2001

NOTE I - STOCK OPTION PLAN AND WARRANTS (CONTINUED)

Warrants
--------

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.

The following table summarizes the changes in warrants outstanding and the
related prices for the shares of the Company's common stock issued to
shareholders at August 31, 2002.

<TABLE>
<CAPTION>
                Warrants Outstanding                                      WARRANTS EXERCISABLE
                --------------------
                                  Weighted Average      Weighted                       Weighted
                      Number      Contractual Life       Average         Number        Average
Exercise prices:    Outstanding       (Years)        Exercise Price   Exercisable   Exercise Price
----------------    -----------       -------        --------------   -----------   --------------
<S>                 <C>                <C>               <C>          <C>               <C>
 $0.50 - $1.00         448,784         1.86              $0.86          448,784         $0.86
 $1.11 - $1.75       3,617,343         2.56              $1.15        3,617,343         $1.15
 $2.38 - $2.50         350,000         0.92              $2.43          350,000         $2.43
 $3.00 - $3.38       1,608,210         0.73              $3.00        1,608,210         $3.00
                     ---------         ----              -----        ---------         -----
                     6,024,337         1.93              $0.03        6,024,337         $1.70
</TABLE>

Transactions involving the Company's warrants issuance are summarized as
follows:

<TABLE>
<CAPTION>
                                                               Number        Weighted Average
                                                             of shares        Exercise Price
                                                             ---------        --------------
<S>                                                          <C>                <C>
Outstanding at August 31, 2000                                4,216,461         $    2.03
                                                              =========         =========
Granted                                                       4,750,000              0.04
Exercised                                                       (27,408)             0.76
Cancelled                                                      (258,487)             1.15
                                                              ---------         ---------
Outstanding at August 31, 2001                                8,680,566         $    2.56
                                                              =========         =========
Granted                                                               -             $0.00
Exercised                                                             -              0.00
Cancelled                                                    (2,656,229)        $    1.25
                                                              ---------         ---------
Outstanding at August 31, 2002                                6,024,337         $    1.70
                                                              =========         =========
</TABLE>

The weighted-average fair value of stock warrants granted to shareholders during
the years ended August 31, 2002 and the weighted-average significant assumptions
used to determine those fair values, using a Black-Scholes option pricing model
are as follows:

<TABLE>
<CAPTION>
                                                                 2002               2001
                                                                 ----               ----
<S>                                                        <C>                <C>
Weighted average grant date fair value per share:                $0.00             $0.04
Significant assumptions (weighted-average):
  Risk-free interest rate at grant date                          1.95%             5.26%
  Expected stock price volatility                                  23%               15%
  Expected dividend payout                                          -                  -
  Expected warrant life-years (a)                          2.0 to 5.0         3.0 to 5.0

<FN>
  (a) The expected warrant life is based on contractual expiration dates.
</FN>
</TABLE>

If the Company recognized compensation cost for the non-qualified stock option
and warrant plan in accordance with SFAS No. 123, the Company's pro forma net
loss and net loss per share would have been $2,213,632 and $(0.13) in 2002 and
$13,541,762 and $(1.02) in 2001, respectively.


                                      F-18
<PAGE>


                                 PALADYNE CORP.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                            AUGUST 31, 2002 AND 2001

NOTE J - DISCONTINUED OPERATIONS

In connection with the Company's acquisition of E-commerce Support Centers, Inc.
in February 2001, the Company's management ceased developing its seamless data
integration and data quality software business operation. As a result, the
Company's data integration and data quality software segment is accounted for as
a discontinued operation.

Certain information with respect to discontinued operations for the years ended
August 31, 2002 and 2001 is summarized as follows:

<TABLE>
<CAPTION>
                                                  2002            2001
                                                  ----            ----
<S>                                            <C>            <C>
Net Revenue                                    $       -      $ 1,585,349
Cost of Sales                                          -       (1,262,793)
                                               ---------      -----------
Gross Profit                                           -          322,556
Selling, General and Administrative                    -       (2,015,544)
Other                                                  -           (8,857)
                                               ---------      -----------
Income (Loss) from Discontinued Operation      $       -      $(1,701,845)
                                               =========      ===========
</TABLE>

NOTE K - RELATED PARTY TRANSACTIONS

As of August 31, 2002 and 2001 the company was indebted to its largest customer
Gibraltar Publishing to the extent of approximately $5,000,000 and $5,500,000,
respectively. Gibraltar is indebted to the Company for services in the amount of
$548,320 and $710,413 at August 31, 2002 and 2001, respectively. During the
years ended August 31, 2002 and 2001, the Company recognized $3,105,958 and
$3,080,413 of sales in connection with services provided Gibraltar, representing
35% and 47% of the Company's sales for the years ended August 31, 2002 and 2001,
respectively.

NOTE L - MAJOR CUSTOMERS AND VENDORS

Revenue from three (3) major customers approximated $3,921,000 or 45% of sales
and $ 4,769,083 or 73% of sales for the years ended August 31, 2002 and 2001,
respectively.

                        NOTE M - LOSSES PER COMMON SHARE
                        --------------------------------

The following table presents the computation of basic and diluted loss per
share:

<TABLE>
<CAPTION>
                                                      2002              2001
                                                      ----              ----
<S>                                               <C>              <C>
Net loss available for common shareholders        $(2,212,601)     $(13,310,831)
                                                  ===========      ============
Basic and fully diluted loss per share            $     (0.13)     $      (1.01)
                                                  ===========      ============
Weighted average common shares outstanding         16,709,351        13,212,599
                                                  ===========      ============
</TABLE>


                           NOTE N - SUBSEQUENT EVENTS
                           --------------------------

On December 10, 2002, the Company and Gibralter Publishing, Inc. entered into an
agreement to exchange the $5,000,000 in notes payable to Gibralter (see Note D)
for 1,000,000 shares of newly issued Series D Preferred Shares. In addition, on
December 4, 2002, the Company's Board of Directors approved the sale of newly
issued common stock to an investment group for $750,000. The sale of the common
stock is subject to shareholder approval.


                                      F-19
<PAGE>


                                 PALADYNE CORP.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                            AUGUST 31, 2002 AND 2001


NOTE O - GOING CONCERN

The accompanying statements have been prepared on a going concern basis, which
contemplates the realization of assets and the satisfaction of liabilities in
the normal course of business. As shown in the financial statements during the
year ended August 31, 2002, the Company incurred losses from operations of
$2,171,806. This factor among others may indicate that the Company will be
unable to continue as a going concern for a reasonable period of time.

The Company's existence is dependent upon management's ability to develop
profitable operations and resolve its liquidity problems. Management anticipates
the Company will attain profitable status and improve its liquidity through the
continued developing, marketing and selling of its products and additional
equity investment in the Company. The accompanying financial statements do not
include any adjustments that might result should the Company be unable to
continue as a going concern.

In order to improve the Company's liquidity, the Company is actively pursing
additional equity financing through discussions with investment bankers and
private investors. There can be no assurance the Company will be successful in
its effort to secure additional equity financing.

If operations and cash flows continue to improve through these efforts,
management believes that the Company can continue to operate. However, no
assurance can be given that management's actions will result in profitable
operations or the resolution of its liquidity problems.


                                      F-20
<PAGE>


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

On July 17, 2001, the Company received the letter of resignation from BDO
Seidman, LLP, ("BDO") announcing that they were resigning as the Company's
independent accountants.

The BDO report on the Company's financial statements for either of the two
fiscal years ended August 31, 2001 and 2000 did not contain any adverse opinion
or disclaimer of opinion, and was not modified as to uncertainty, audit scope,
or accounting principles. There were no disagreements with BDO on any matter of
accounting principles or practices, financial statement disclosure, or auditing
scope or procedure, during the two fiscal years ended August 31, 2000 and during
the interim period ended July 17, 2001, which, if not resolved to BDO's
satisfaction, would have caused it to make reference to the subject matter of
the disagreement in connection with its report, as required by Item
304(a)(1)(iv) of Regulation S-K.

On September 4, 2001, the Company engaged Stefanou and Company, LLP
("Stefanou"), to act as the Company's independent certified public accountants
for the fiscal year ended August 31, 2001. The Company had not consulted with
Stefanou prior to Stefanou's retention on either the application of accounting
principles or the type of opinion Stefanou might render on the Company's
financial statements.


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 November 30, 2002, the executive officers and directors of the
Company were as follows:

<TABLE>
<CAPTION>
NAME                             AGE     Director    POSITION
                                           Since
---------------------------   ---------  --------    ---------------------------------
<S>                              <C>       <C>       <C>
Terrence J. Leifheit....         40        2001      Director, Chairman, CEO and Pres.
Clifford A. Clark.......         50        2001      Director, CFO
Kenneth Horn............         60        1999      Director, ** ##
James L. McGovern.......         60        1998      Director
William P. O'Reilly.....         56        2001      Director**
William E. Willis, Jr...         48        2001      Director##
William J. Hadel........         37                  V.P. of Sales
Robert W. Hornbuckle....         33                  V.P. of Information Technology
Jan E. Kaster...........         28                  V.P. of Operations
James A. Rapp...........         56                  V.P. of Marketing


                                       40
<PAGE>


<FN>
NOTE: The terms of the directors are divided into three separate three-year
      classes. Each director holds office until the year in which his term
      expires. Willis' terms expire in 2002. Horn, O'Reilly and Clark's
      terms expire in 2003. Leifheit and McGovern's terms expire in 2004.

      ** member of Audit Committee
      ## member of Compensation Committee
</FN>
</TABLE>

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. The Audit Committee oversees the Company's accounting
and financial reporting and internal controls, reviews annual audit reports and
management letters and makes recommendations to the Board regarding appointment
of independent auditors. The principal function of the Compensation Committee is
to recommend to the Board of Directors the compensation of officers and to
oversee the administration of the 1999 Stock Option Plan, at the request of the
Board.

None of the officers and/or directors of the Company have, 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, 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:

TERRENCE J. LEIFHEIT became President, Chief Operating Officer and a Director of
Paladyne upon the ECOM Merger and CEO and Chairman in April 2001. He presides
over all operations of ECOM of which he was the founder and also the Paladyne
operations. In 1993, he co-founded Gibralter and led the evolution of that
company from hardbound reference publishing into an on-line publishing and
membership organization with $20 million in sales to customers in over 150
countries. In 1998, he founded Gibralter Data Services, Inc., an Internet
service provider specializing in Web page development and hosting services.
Prior to these activities, from 1991 to 1992, he served as Vice President of
Florida Safety Corporation and Vice President of Dallas Chemicals Corporation.
Mr. Leifheit attended the University of Texas at El Paso where he majored in
business.

CLIFFORD A. CLARK has been the Company's VP of Finance since February 2001 and a
director since July 10, 2001. From 1999 to 2001, Mr. Clark served as Vice
President of Finance for Gibralter and other entities comprising Gibralter
Publishing, Inc. Mr. Clark served as President of Kane Realty from 1994 through
2001 and was also President of Parallel Corporation from 1991 through June 2002.
Mr. Clark's experience includes more than 25 years in numerous financial and
accounting roles, including 11 years with Price Waterhouse and 5 years in the
venture capital arena. Mr. Clark has a bachelor's degree in Business
Administration from the University of North Carolina at Chapel Hill.


                                       41
<PAGE>


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.

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.

WLLIAM P. O'REILLY is a private investor having been Chairman of Verso
Technology until he retired in December 2000. From August 1995 to September
2000, Mr. O'Reilly served as CEO of Eltrax Systems, a NASDAQ traded information
technology company that was merged into Cereus Technology in September 2000. In
1989, he acquired Military Communications Corporation ("MCC"), which provided
international public switched network services via telephone centers to the U.S.
military worldwide. MCC was sold to WorldCom in 1994. In 1981, Mr. O'Reilly
founded Lexitel Corporation; which merged with Allnet in 1984 to form ALC
Communications, a leading national long distance carrier. He was also a founder
and CEO of Digital Signal, a leading provider of low-cost fiber optic capacity
that is now part of Qwest. Mr. O'Reilly was also a founder and past President of
COMPTEL, the telecommunications industry association.

WILLIAM E. WILLIS, JR. serves as Vice President of Technology Strategy at Cable
and Wireless Global, and serves as a business/technology consultant to the State
of North Carolina, and others. From 1998 to 2000, he was a corporate officer of
Interpath Communications, Inc. where he served in several executive positions,
most recently as CTO and VP of Engineering with responsibility for establishing
technical strategy and system architecture. From 1992 to 1998, he has served as
Vice Provost, Information Technology at North Carolina State University and as a
member of the North Carolina Information Resource Management Committee, which
governed the use of IT for the State, having been appointed by the Governor of
the State to this latter position. In addition, he co-founded engineering
software company where he developed and launched a Unix/Linux-based spreadsheet
product. Mr. Willis holds BS and PhD degrees from North Carolina State
University.


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,
2000, 2001 and 2002 to the Company's Chief Executive Officer or others who
earned a salary greater than $100,000 annually for any of the periods below:


                                       42
<PAGE>


<TABLE>
<CAPTION>
                                                                                        STOCK
                                                                                       WARRANTS
NAME AND PRINCIPAL                                                      ALL OTHER     AND OPTIONS
POSITION                                    YEAR   SALARY     BONUS    COMPENSATION     ISSUED
                                            ----   --------   ------   ------------   -----------
<S>                                         <C>    <C>        <C>         <C>          <C>
Terrence J. Leifheit, President CEO (1)     2001   $ 93,333   None                            (3)
                                            2002   $ 61,400   None

John Foster, CEO (2)                        2000   None       None        None         165,000
                                            2001   None       None        None          75,000

Ronald L. Weindruch, (4)
Executive Vice President, 2001, 2000        2000    137,500   $-0-        36,034       208,784
President, 1999                             2001    123,438    -0-         8,905        50,000
                                                                                             -
William Hadel                               2002   $122,395   None
VP of Marketing

Robert Hornbuckle                           2002   $107,708   None
VP of Information Technology

(All other compensation includes consulting and commission income)

<FN>
(1) Mr. Leifheit's employment began in February 2001 in conjunction with the
    ECOM merger.
(2) Mr. Foster's employment ceased on April 20, 2001.
(3) Does not include warrants issued to Mr. Leifheit upon the ECOM merger.
(4) Mr. Weindruch's employment ceased in January 2002.
</FN>
</TABLE>

In addition to cash compensation, Mr. Leifheit, Mr. Foster and Mr. Weindruch
participate in the Company's stock option plan. The following table details
options granted in fiscal year 2001:

<TABLE>
<CAPTION>
                                           % of
                              # of         total
                              shares      options
                            underlying    granted       Exer.      Exp.
Holder                       options      in FY 01      Price      Date
------                      ----------    --------      -----      ----
<S>                          <C>            <C>         <C>       <C>
Terrence J. Leifheit         515,955        58.4%       $1.02     2/1/05
Ronald L. Weindruch             -0-
John Foster                     -0-
</TABLE>

No stock options held by this individual were exercised in the current fiscal
year whether the options were issued in the current year or in years prior, and
none of those options are "in the money."


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 and July 2001 to increase the number of issuable shares under
the Plan to 5,000,000 shares of common stock 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 who may delegate these duties to the Compensation Committee. The
Board is authorized to select the individual employees to receive options under


                                       43
<PAGE>


the Plan, the number of 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 5,000,000 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, 2002, 2,077,436 options were outstanding:
2,047,436 shares issued inside the Plan, and 30,000 shares issued outside the
Plan. As of August 31, 2002, 1,097,837 shares are exercisable at an option price
per share ranging from $0.38 to $3.70 per share and with expiration dates from
November 20002 through April 2005.

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. Effective June 1, 2001, the Company
modified the plan to eliminate any matching of contributions. No other deferred
compensation plan is currently in place. Contributions totaling $1,500 was made
for Ronald L. Weindruch during the year ended August 31, 2001.

Employment Agreements

The Company has employment agreements with Terrence J. Leifheit, its President
and with four other management personnel. Mr. Leifheit's employment agreement
expires on December 31, 2003, and may be extended for a period of one year, with
an annual base compensation of $300,000, which was deferred to $160,000 pending
the closing of a financing of $3 million on August 1, 2001, which ever is
earlier, for the first year, and to increase to $400,000 during the last two
years. In addition, he is to receive a bonus based upon total revenues billed as
of December 31, 2001, and a bonus equal to 0.5% of revenues for the months of
December 2002 and December 2003. Upon entry into the Agreement, Mr. Leifheit was
granted options to purchase 100,000 shares of Common Stock and is to be granted
options based upon the amount of the Company's EBITDA for future periods. Should
the Company terminate the Employment Agreement for cause or Mr. Leifheit
terminate it without cause, he would be prohibited for a period of one year from
competing with the Company.

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, 2002, with respect to each person known by Company
to own beneficially more than 5% of the outstanding Common Stock, each director
and all directors and executive officers as a group.


                                       44
<PAGE>


<TABLE>
<CAPTION>
                                    AMOUNT AND
                                    NATURE OF
  NAME AND ADDRESS OF               BENEFICIAL
   BENEFICIAL OWNER                 OWNERSHIP(1)          PERCENT OF CLASS(2)
<S>                                <C>                          <C>
Terrence J. Leifheit*               8,692,175(3)                50.5%

Ronald L. Weindruch                 1,865,451(4)                11.0%

Kenneth H. Horn*                      275,417(5)                 1.6%

James L. McGovern*                    130,833(6)                 0.8%

Clifford A. Clark*                    138,053(7)                 0.8%

William Hadel*                        584,229(8)                 3.5%

William E. Willis, Jr.*               216,670(9)                 1.3%

John D. Foster                      1,301,906(10)                7.5%

William P. O'Reilly*                  449,669(11)                2.6%

All directors and                  10,487,046(12)               57.3%
executive officers as a
group (7 persons in group)

<FN>
     Note: Unless otherwise noted, all persons address is 1650A Gum Branch Road,
Jacksonville, NC 28540

*    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 and any
       Preferred Stock convertible into Common Stock which are exercisable or
       convertible within sixty days from August 31, 2002

       (2) Based upon 16,709,351 shares of Common Stock outstanding on August
       31, 2002. Percentage ownership is calculated separately for each person
       on the basis of the actual number of outstanding shares as of August 31,
       2002 and assumes the exercise of certain stock options and warrants held
       by such person (but not by anyone else) exercisable within sixty days.


                                       45
<PAGE>


       (3) Includes (i) 6,821,690 shares owned directly and (ii) 1,378,310
       shares held in a Voting Trust for which Mr. Leifheit is the sole voting
       trustee. Includes 343,987 shares that may be acquired by Mr. Leifheit
       pursuant to the exercise of stock purchase options and warrants
       exercisable within sixty days at exercise prices from $0.70 to $1.14 per
       share. This total also includes 148,188 common shares that could be
       exchanged for the conversion of Series C Preferred Shares at $.1666 per
       share. Does not include (i) 3,743,610 shares of Common Stock underlying
       warrants owned directly, (ii) 311,514 shares of Common Stock underlying
       warrants held in trust for the benefit of Mr. Leifheit's minor children,
       and which warrants are not presently exercisable or (iii) up to 6,500,000
       shares of Common Stock issuable as Deferred Shares upon future
       placements. A portion of the shares and the warrants are being held in
       escrow as security for any indemnification claim the Company may have
       upon the ECOM merger.

       (4) 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 205,451 shares that 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. This total also includes 60,000 common shares that would be
       exchanged for the conversion of Series C Preferred Shares at $.1666 per
       share.

       (5) Includes 92,418 shares held by a corporation controlled by Mr. Horn.
       Includes 123,000 shares which may be acquired by Mr. Horn pursuant to the
       exercise of stock purchase options exercisable within sixty days at
       exercise prices from $0.59 to $2.50 per share. This total also includes
       60,000 common shares that would be exchanged for the conversion of Series
       C Preferred Shares at $.1666 per share.

       (6) Also includes 145,833 shares that 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.

       (7) Includes 78,053 shares that may be acquired by Mr. Clark pursuant to
       the exercise of stock purchase options and warrants exercisable within
       sixty days at exercise prices from $0.70 to $1.14 per share. This total
       also includes 60,000 common shares that could be exchanged for the
       conversion of Series C Preferred Shares at $.1666 per share.

       (8) Includes 29,229 shares that may be acquired by Mr. Hadel pursuant to
       the exercise of stock purchase options and warrants exercisable within
       sixty days at exercise prices from $1.02 to $1.14 per share. This total
       also includes 555,000 shares that Mr. Hadel also owns that are included
       in the voting trust which Mr. Leifheit controls.

       (9) Includes 66,670 shares that may be acquired by Mr. Willis pursuant to
       the exercise of stock purchase options exercisable within sixty days at
       exercise prices from $0.95 per share and this total also includes 150,000
       common shares that could be exchanged for the conversion of Series C
       Preferred Shares at $.1666 per share.

       (10) Includes 433,750 shares that 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. This


                                       46
<PAGE>


       total also includes 322,007 common shares that could be exchanged for the
       conversion of Series C Preferred Shares at $.1666 per share.

       (11) Includes 149,669 shares that may be acquired by Mr. O'Reilly
       pursuant to the exercise of stock purchase options and warrants
       exercisable within sixty days at exercise price of $.167 per share. This
       total also includes 300,000 common shares that could be exchanged for the
       conversion of Series C Preferred Shares at $.1666 per share.

       (12) See notes 3,5,6,7,8,9 and 11
</FN>
</TABLE>


ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Immediately prior to the Merger, ecom purchased from Gibralter Publishing, of
which Mr. Leifheit is a principal shareholder, all of the tangible and
intangible assets used in ecom's call center operations, subject to related
liabilities, pursuant to an Option Agreement. Prior to the Merger, Gibralter
Publishing had been operating the call center on behalf of ecom. The purchase
price for these assets was $5 million which is payable by ecom pursuant to two
promissory Notes issued to Gibralter, by one note for $1,500,000, repayable in
five monthly principal installments of $25,000 commencing March 1, 2001, with
the balance due on August 31, 2001, and the second Note for $3,500,000,
repayable in equal quarterly principal payments through January 1, 2004. Both
Notes bear interest at 10% per annum, are secured by the purchased assets and
are guaranteed by Paladyne. As of April 9, 2001, these notes were amended to
provide that the $1,500,000 Note is due in two equal installments of $750,000,
with the first installment due when the Company raises a minimum of $3,000,000
and the second installment six months later, and in no event until the Company
has had a positive cash flow for any three consecutive calendar months. The
other Note was payable in twelve equal quarterly installments commencing October
1, 2001, however, Gibralter and the Company agreed that the payments may
commence on April 1, 2002.

A portion of the assets used by ecom in its call center operations consists of
equipment, which is leased by Gibralter pursuant to various equipment leases.
Gibralter has granted to ecom the right to possess and use the equipment and
ecom has agreed to assume and pay to the lessors the payments to be made by
Gibralter pursuant to the leases. As of the Merger, the aggregate amount of
these lease obligations was approximately $1,500,000.

ecom also subleases its offices from Gibralter; see Item 2 of this Report.

In addition, Gibralter is the Company's principal customer comprising
approximately 35% of the Company's revenues for the fiscal year ended August 31,
2002.


ITEM 13. EXHIBITS AND REPORTS ON FORM 8-KSB

(a)  EXHIBITS

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


                                       47
<PAGE>


2.2  Articles of Merger filed in North Carolina previously filed as Exhibit 2.2
     to Form 8-K dated February 1, 2001

3.1  Certificate of Incorporation filed in Delaware on January 11, 1999
     previously filed as Exhibit 3.1 to Form 10K dated August 31, 2001

3.2  Certificate of Merger filed in Delaware on March 5, 1999 previously filed
     as Exhibit 3.2 to Form 10K dated August 31, 2001

3.3  Amendment to Certificate of Incorporation dated July 10, 2001 filed in
     Delaware previously filed as Exhibit 3.3 to Form 10K dated August 31, 2001

3.4  Certificate of Designations for Series B Preferred Stock filed in Delaware
     previously filed as Exhibit 2.1 to Form 8-K dated February 1, 2001

3.5  Certificate of Designations for Series C Preferred Stock and Series D
     Preferred Stock filed in Delaware on November 1, 2001 previously filed as
     Exhibit 3.5 to Form 10K dated August 31, 2001

3.6  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
     previously filed as Exhibit 4.2 to Form 10-KSB dated November 28, 2000

4.3  Registration Rights Agreement between Paladyne and Terrence Leifheit
     individually and on behalf of the other ECOM shareholders previously filed
     as Exhibit 4.1 to Form 8-K dated February 2, 2001

4.4  Form of Anti-Dilution Warrant previously filed as Exhibit 4.2 to Form 8-K
     dated February 1, 2001

4.5  Form of Parent Performance Warrant previously filed as Exhibit 4.3 to Form
     8-K dated February 1, 2001

10.1 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

10.2 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

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

10.4 New Lease Agreement on Principal Place of Business previously filed as
     Exhibit 10.7 to Form 10-KSB dated November 28, 2000


                                       48
<PAGE>


10.5 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

10.6 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

10.7.1  Agreement and Plan of Merger, dated December 21, 2000, among Paladyne,
        Acquisition Sub and ecom filed as Exhibit 10.1.1 to Form 8-K dated
        February 1, 2001

10.7.2  Amendment to Agreement and Plan of Merger among Paladyne, Acquisition
        Sub and ecom filed As Exhibit 10.1.2 to Form 8-K Dated February 1, 2001

10.7.3  Second Amendment to Agreement and Plan of Merger, between Paladyne and
        Mr. Leifheit on behalf of himself and as a representative for the former
        shareholders of ecom, dated April 9, 2001, previously filed as Exhibit
        10.1.3 to Form 8K/A dated February 1, 2001

10.8 Indemnification Escrow Agreement among Paladyne, Mr. Leifheit, Clifford A.
     Clark and Thelen Reid & Priest LLP, as escrow agent, previously filed as
     Exhibit 10.2 to Form 8-K dated February 1, 2001

10.9 Form of Lock-up Agreement, previously filed as Exhibit 10.3 to Form 8-K
     dated February 1, 2001

10.10.1 Gibralter Option Agreement, dated as of April 13, 2000, between
        Gibralter and ecom, previously filed as Exhibit 10.4.1 to Form 8-K dated
        February 1, 2001

10.10.2 First Amendment to Gibralter Option Agreement among ecom, Gibralter and
        Paladyne, previously filed as Exhibit 10.4.2 to Form 8-K dated February
        1, 2001

10.10.3 Gibralter Assets Assignment among ecom and Gibralter, previously filed
        as Exhibit 10.4.3 to Form 8-K dated February 1, 2001

10.10.4 Promissory Note A from ecom to Gibralter in the principal amount of
        $1,500,000, previously filed as Exhibit 10.4.4.1 to Form 8-K dated
        February 1, 2001

10.10.5 Amended Promissory Note A from ecom to Gibralter in the principal amount
        of $1,500,000, previously filed as Exhibit 10.4.4.1 to Form 8-K dated
        February 1, 2001

10.10.6 Promissory Note B from ecom to Gibralter in the principal amount of
        $3,500,000, previously filed as Exhibit 10.4.5 to Form 8-K dated
        February 1, 2001

10.10.7 Amended Promissory Note B from ecom to Gibralter in the principal amount
        of $3,500,000, previously filed as Exhibit 10.4.5.1 to Form 8-K/A dated
        February 1, 2001

10.10.8 Gibralter Security Agreement among ecom and Gibralter, previously filed
        as Exhibit 10.4.6 to Form 8-K dated February 1, 2001


                                       49
<PAGE>


10.10.9  Unconditional Guaranty Agreement, among ecom, Paladyne and Gibralter,
         previously filed as Exhibit 10.4.7 to Form 8-K dated February 1, 2001

10.10.10 Gibralter Default and Assignment Agreement among ecom, Gibralter and
         Paladyne, previously filed as Exhibit 10.4.8 to Form 8-K dated February
         1, 2001

10.10.11 Gibralter Secondary Operating Agreement among ecom and Gibralter,
         previously filed as Exhibit 10.4.9 to Form 8-K dated February 1, 2001

10.10.12 Gibralter Escrow Agreement among Gibralter, ecom, Paladyne, and
         Kilpatrick Stockton LLP, as escrow agent, previously filed as Exhibit
         10.4.10 to Form 8-K dated February 1, 2001

10.10.13 Amending Agreement among Gibralter, Paladyne and ecom, previously filed
         as Exhibit 10.4.11 to Form 8-K/A dated February 1, 2001

10.11 Gibralter Equipment Use Agreement among ecom, Gibralter and Paladyne,
      previously filed as Exhibit 10.5 to Form 8-K dated February 1, 2001

10.12 Gibralter Teleservices Agreement between Gibralter and ecom previously
      filed as Exhibit 10.6 to Form 8-K dated February 2, 2001

10.13 Employment Agreement between Paladyne and Mr. Leifheit previously filed as
      Exhibit 10.7 to Form 8-K dated February 1, 2001

10.14 Letter of Intent from Market Central, Inc. to Paladyne Corp. previously
      filed as Exhibit 10.1 to form 8-K dated October 9, 2002

10.15 First Amendment to Letter of Intent from Market Central, Inc. to Paladyne
      Corp. previously filed as Exhibit 10.2 to form 8-K dated October 9, 2002

10.16 Loan and Security Agreement by and among Paladyne, ECOM, and Market
      Central, Inc. previously filed as Exhibit 10.3 to form 8-K dated October
      9, 2002

10.17 Revolving Note from Paladyne Corp. and ECOM to Market Central, Inc. dated
      August 29, 2002 previously filed as Exhibit 10.4 to form 8-K dated October
      9, 2002

21.1  *Subsidiaries of Paladyne Corp.

99.1  *Certification by Paladyne's principal executive officer pursuant to
      Section 906 of the Sarbanes-Oxley Act of 2002.

99.2  *Certification by Paladyne's principal financial officer pursuant to
      Section 906 of the Sarbanes-Oxley Act of 2002.


* Filed herewith


                                       50
<PAGE>


(b)  Reports on 8-K's
     ----------------

9/4/01   Item 4. Change in Certifying Accountant (engagement of Stefanou and
         Company, LLP)

10/9/02  Item 5.  Other Events


ITEM 14. CONTROLS AND PROCEDURES

The registrants' principal executive officers and principal financial officer,
based on their evaluation of the registrants' disclosure controls and procedures
(as defined in Rules 13a-14(C) and 15d-14(C) of the Securities Exchange Act of
1934) as of December 16, 2002 have concluded that the registrants' disclosure
controls and procedures are adequate and effective to ensure that material
information relating to the registrants and their consolidated subsidiaries is
recorded, processed, summarized and reported within the time periods specified
by the SEC's rules and forms, particularly during the period in which this
quarterly report has been prepared.

The registrants' principal executive officers and principal financial officer
have concluded that there were no significant changes in the registrants'
internal controls or in other factors that could significantly affect these
controls subsequent to September 30, 2002, the date of their most recent
evaluation of such controls, and that there were no significant deficiencies or
material weaknesses in the registrants' internal controls.


                                   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/ Terrence J. Leifheit
                                                      --------------------------
Date: December 16, 2002                                   Terrence J. Leifheit
                                                          President, COO and CEO


                                       51
<PAGE>


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.

<TABLE>
<CAPTION>
Name                              Position                               Date
------------------------------    -----------------------------------    ------------------

<S>                               <C>                                    <C>
/s/ Terrence J. Leifheit          President, Director                    December 16, 2002
------------------------------    -----------------------------------    ------------------
Terrence J. Leifheit


------------------------------    -----------------------------------    ------------------


                                  Director
------------------------------    -----------------------------------    ------------------
Kenneth Horn


/s/ William E. Willis, Jr.        Director                               December 16, 2002
------------------------------    -----------------------------------    ------------------
William E. Willis, Jr.


/s/ William P. O'Reilly           Director                               December 16, 2002
------------------------------    -----------------------------------    ------------------
William P. O'Reilly


                                  Director                               December 16, 2002
------------------------------    -----------------------------------    ------------------
James L. McGovern


/s/ Clifford A. Clark             Vice President Finance and Director    December 16, 2002
------------------------------    -----------------------------------    ------------------
Clifford A. Clark
</TABLE>


                                       52
<PAGE>


                                 CERTIFICATION

I, Terrence Leifheit, certify that:

     1.   I have reviewed this annual report on Form 10KSB of Paladyne Corp.,

     2.   Based on my knowledge, this annual report does not contain any untrue
          statement of a material fact or omit to state a material fact
          necessary to make the statements made, in light of the circumstances
          under which such statements were made, not misleading with respect to
          the period covered by this annual report;

     3.   Based on my knowledge, the financial statements, and other financial
          information included in this annual report, fairly present in all
          material respects the financial condition, results of operations and
          cash flows of the resigtrant as of, and for, the periods presented in
          this annual report;

     4.   The registrant's other certifying officers and I are responsible for
          establishing and maintaining disclosure controls and procedures (as
          defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant
          and have:
          a)   Designed such disclosure controls and procedures to ensure that
               material information relating to the registrant, including its
               consolidated subsidiaries, is made known to us by others within
               those entities, particularly during the period in which this
               annual report is being prepared;
          b)   Evaluated the effectiveness of the registrant's disclosure
               controls and procedures as of a date within 90 days prior to the
               filing date of this annual report (the "Evaluation Date"); and
          c)   Presented in this annual report our conclusions about the
               effectiveness of the disclosure controls an procedures based on
               our evaluation as of the Evaluation Date;

     5.   The registrant's other certifying officers and I have disclosed, based
          on our most recent evaluation, to the registrant's auditors and the
          audit committee of registrant's board of directors:
          a)   All significant deficiencies in the design or operation of
               internal controls which could adversely affect the registrant's
               ability to record, process, summarize and report financial data
               and have identified for the registrant's auditors any material
               weaknesses in internal controls, and
          b)   Any fraud, whether or not material, that involves management or
               other employees who have a significant role in the registrant's
               internal controls; and

     6.   The registrant's other certifying officers and I have indicated in
          this annual report whether there were significant changes in internal
          controls or in other factors that could significantly affect internal
          controls subsequent to the date of our most recent evaluation
          including any corrective actions with regard to significant
          deficiencies and material weaknesses.


          Date:  December 16, 2002

                            /s/ Terrence J. Leifheit
                            ------------------------
                              Terrence J. Leifheit
                                    President


                                       53
<PAGE>


                                 CERTIFICATION

I, Clifford A. Clark, certify that:

     1.   I have reviewed this annual report on Form 10KSB of Paladyne Corp.,

     2.   Based on my knowledge, this annual report does not contain any untrue
          statement of a material fact or omit to state a material fact
          necessary to make the statements made, in light of the circumstances
          under which such statements were made, not misleading with respect to
          the period covered by this annual report;

     3.   Based on my knowledge, the financial statements, and other financial
          information included in this annual report, fairly present in all
          material respects the financial condition, results of operations and
          cash flows of the resigtrant as of, and for, the periods presented in
          this annual report;

     4.   The registrant's other certifying officers and I are responsible for
          establishing and maintaining disclosure controls and procedures (as
          defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant
          and have:
          a)   Designed such disclosure controls and procedures to ensure that
               material information relating to the registrant, including its
               consolidated subsidiaries, is made known to us by others within
               those entities, particularly during the period in which this
               annual report is being prepared;
          b)   Evaluated the effectiveness of the registrant's disclosure
               controls and procedures as of a date within 90 days prior to the
               filing date of this annual report (the "Evaluation Date"); and
          c)   Presented in this annual report our conclusions about the
               effectiveness of the disclosure controls an procedures based on
               our evaluation as of the Evaluation Date;

     5.   The registrant's other certifying officers and I have disclosed, based
          on our most recent evaluation, to the registrant's auditors and the
          audit committee of registrant's board of directors:
          a)   All significant deficiencies in the design or operation of
               internal controls which could adversely affect the registrant's
               ability to record, process, summarize and report financial data
               and have identified for the registrant's auditors any material
               weaknesses in internal controls, and
          b)   Any fraud, whether or not material, that involves management or
               other employees who have a significant role in the registrant's
               internal controls; and

     6.   The registrant's other certifying officers and I have indicated in
          this annual report whether there were significant changes in internal
          controls or in other factors that could significantly affect internal
          controls subsequent to the date of our most recent evaluation
          including any corrective actions with regard to significant
          deficiencies and material weaknesses.


          Date:  December 16, 2002

                              /s/ Clifford A. Clark
                              ---------------------
                                Clifford A. Clark
                                  VP of Finance


                                       54