UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2002.
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES AND
EXCHANGE ACT OF 1934.
FOR THE TRANSITION PERIOD FROM ____________ TO _____________
Commission File Number 0-21931
AMPLIDYNE, INC.
---------------
(Exact name of small business issuer as specified in its charter)
DELAWARE 22-3440510
-------- ----------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
59 LaGrange Street
Raritan, New Jersey 08869
--------------------------
(Address of principal executive offices)
(908) 253-6870
--------------
(Issuer's telephone number)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the past 12
months (or for such shorter period that the registrant was required to file such
reports), and (2) has been subject to such filing requirements for the past 90
days.
Yes X No
--- ---
The number of shares outstanding of the Issuer's Common Stock, $.0001 Par Value,
as of October 31, 2002 was 9,676,500.
AMPLIDYNE, INC.
FORM 10-QSB
THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2002
TABLE OF CONTENTS
-----------------
PART I - FINANCIAL INFORMATION
----------------------
Item 1 Financial Statements (Unaudited):
---------------------
Balance Sheets. . . . . . . . . . . . . . . . . . . . . .1-2
Statements of Operations . . . . . . . . . . . . . . . . .3
Statement of Cash Flows . . . . . . . . . . . . . . . . 4
Statement of Changes in Stockholder's Equity . . . . .5
Notes to Financial Statements. . . . . . . . . . . . .6-10
Item 2 Management's Discussion and Analysis of Financial
Condition and Results of Operations . . . . . . . 11-12
Item 3 Controls and Procedures. . . . . . . . . . . . . . . . . 13
PART II - OTHER INFORMATION
------------------
Item 1. Legal Proceedings. . . . . . . . . . . . . . . . . . . . . . . . .14
Item 6. Exhibits and Reports on Form 8-K. . . . . . . . . . . . . . . 14
Signatures. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .15
Certification. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Exhibit 99.1. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
AMPLIDYNE, INC.
BALANCE SHEETS
ASSETS
-------
September 30, December 31,
2002 2001
--------------- --------------
CURRENT ASSETS
Cash and cash equivalents $ - $ 697,940
Accounts receivable, net of allowance
for doubtful accounts of $143,000 and $131,104 at
September 30, 2002 and December 31, 2001,
respectively 168,502 449,190
Inventories 904,402 1,181,682
Loan receivable-officer 38,892 55,892
Prepaid expenses and other 4,000 23,464
--------------- --------------
Total current assets 1,115,796 2,408,168
PROPERTY AND EQUIPMENT - AT COST
Machinery and equipment 723,663 723,663
Furniture and fixtures 43,750 43,750
Autos and trucks 66,183 66,183
Leasehold improvements 8,141 8,141
--------------- --------------
Total 841,737 841,737
Less: Accumulated depreciation and amortization 725,411 687,260
--------------- --------------
Net property and equipment 116,326 154,477
OTHER ASSETS
Security Deposits and other non-current assets 45,068 52,106
--------------- --------------
TOTAL ASSETS $ 1,277,190 $ 2,614,751
=============== ==============
The accompanying notes are an integral part of these financial statements
-1-
BALANCE SHEETS
LIABILITIES AND STOCKHOLDERS' EQUITY
-------------------------------------
September 30, December 31,
2002 2001
------------- -------------
CURRENT LIABILITIES
Overdraft $ 13,939 $ -
Accounts payable 256,077 121,533
Accrued expenses 150,342 131,308
Current maturities of lease obligations - 9,271
Reserve for litigation loss 495,000 180,000
------------- -------------
Total current liabilities 915,358 442,112
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY
Convertible Preferred stock - authorized 100,000
shares of $.0001 par value; 0 and 55,000 shares issued
and outstanding at September 30, 2002 and December 31,
2001, respectively (liquidation preference of $550,000
at December 31, 2001) - 6
Common stock - authorized, 25,000,000 shares of
$.0001 par value; shares 9,676,500 and 7,892,661 shares
issued and outstanding at September 30, 2002 and
December 31, 2001, respectively. 968 790
Additional paid-in-capital 22,465,524 21,921,495
Subscriptions receivable - preferred stock - (180,000)
Accumulated deficit (22,104,660) (19,569,652)
------------ -------------
Total stockholders' equity 361,832 2,172,639
------------ -------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 1,277,190 $ 2,614,751
============ =============
The accompanying notes are an integral part of these financial statements
-2-
AMPLIDYNE, INC.
STATEMENTS OF OPERATIONS
Three Three Nine Nine
Months Months Months Months
Ended Ended Ended Ended
September 30, September 30, September 30, September 30,
2002 2001 2002 2001
------------ ------------ ------------- -----------
Net Sales $ 325,584 $ 663,899 $ 1,082,532 $ 1,838,519
Cost of goods sold 213,226 409,384 1,243,116 1,158,698
------------ ------------ ------------- -----------
Gross margin 112,358 254,515 (160,584) 679,821
Operating expenses
Selling, general & administrative 435,058 449,697 1,671,858 1,315,607
Research, engineering and development 98,846 138,480 389,804 439,671
Equity-based compensation charge - - - 140,000
Provision for litigation loss - operating - - 315,000 -
------------ ------------ ------------- -----------
Operating loss (421,546) (333,662) (2,537,246) (1,215,457)
Other non operating income (expenses)
Interest income 118 7,495 3,170 47,462
Interest expense - (3,600) (932) (4,464)
Provision for litigation loss - non-operating - - - (550,000)
------------ ------------ ------------- ------------
NET LOSS $ (421,428) $ (329,767) $ (2,535,008) $ (1,722,459)
============ ============ ============= ============
Net loss per share - basic and diluted $ (0.04) $ (0.04) $ (0.27) $ (0.23)
============ ============ ============= ============
Weighted average number of shares outstanding 9,676,500 7,883,672 9,224,931 7,609,173
The accompanying notes are an integral part of these financial statements
-3-
AMPLIDYNE, INC.
STATEMENTS OF CASH FLOWS (UNAUDITED)
Three Three Nine Nine
Months Months Months Months
Ended Ended Ended Ended
September 30, September 30, September 30, September 30,
2002 2001 2002 2001
------------ ------------ ------------ ------------
Cash flows from operating activities:
Net Loss $ (421,428) $ (329,767) $ (2,535,008) $ (1,722,459)
Adjustments to reconcile net loss to net cash used
in operating activities
Depreciation and amortization 12,717 32,805 38,151 98,415
Litigation loss - (550,000) 315,000 -
Provision for inventory write-down - - 233,995 -
Stock compensation charge - (140,000) - -
Other costs paid with restricted common stock 138,799 - 143,000 -
Changes in assets and liabilities
Accounts receivable 183,926 (55,068) 280,688 (239,104)
Inventories 25,925 (178,390) 43,285 (455,904)
Prepaid expenses and other assets - 1,686 19,464 94,671
Accounts payable and accrued expense 118,634 130,458 153,578 34,345
------------ ------------ ------------ ------------
Total adjustments 480,001 (758,509) 1,227,161 (467,577)
------------ ------------ ------------ ------------
Net cash used for operating activities 58,573 (1,088,276) (1,307,847) (2,190,036)
------------ ------------ ------------ ------------
Cash flows from investing activities:
Loan receivable officer 30,000 (10,222) 17,000 (13,225)
Change in security deposits - - 7,038 -
Purchase of property and equipment - (485) - (2,845)
------------ ------------ ------------ -----------
Net cash used for investing activities 30,000 (10,707) 24,038 (16,070)
------------ ------------ ------------ -----------
Cash flows from financing activities:
Payment of lease obligations - (3,061) (9,271) (9,858)
Subscriptions receivable preferred stock - net - - 180,000 -
options and warrants, net of costs (138,799) 871,490 401,201 1,397,990
------------ ------------ ------------ -----------
Net cash provided by financing activities (138,799) 868,429 571,930 1,388,132
------------ ------------ ------------ -----------
NET INCREASE (DECREASE) IN CASH (50,226) (230,554) (711,879) (817,974)
Cash at beginning of period 36,287 1,378,722 697,940 1,966,142
------------ ------------ ------------ -----------
Cash (overdraft) and cash equivalents at end of period $ (13,939) $1,148,168 $ (13,939) $ 1,148,168
============ ============ ============ ===========
Supplemental disclosures of cash flow information
Cash paid for: Interest $ - $ - $ 932 $ 864
Income taxes - - - -
The accompanying notes are an integral part of these financial statements
-4-
AMPLIDYNE, INC.
STATEMENT OF CHANGES IN STOCKHOLDER'S EQUITY
FOR THE YEAR ENDED DECEMBER 31, 2001
AND NINE MONTHS ENDED SEPTEMBER 30, 2002
Preferred Stock Common Stock
------------------------------- --------------------------
Shares Par Value Shares Par Value
-------------- --------------- -------------- ----------
Balance at December 31, 2000 - $ - 7,463,841 $ 747
Net loss for the year ended December 31, 2001
Cost of litigation to be settled by
the issuance of common stock
Financing cost associated with warrants
extended and shares issued 1,820
Issuance of common stock, net of costs 415,000 42
Issuance of preferred stock net of costs 55,000 6
Issuance of common stock for services
rendered by third party 12,000 1
-------------- --------------- -------------- ----------
Balance at Dec. 31, 2001 55,000 6 7,892,661 790
Net loss for the nine months ended September 30, 2002
Collection of subscription receivable
Conversion of preferred stock to common stock (55,000) (6) 701,194 70
Issuance of common stock in settlement of
class action 324,486 32
Issuance of restricted common stock
in lieu of expenses 8,159 1
Issuance of common stock, net of cost 750,000 75
-------------- --------------- -------------- ----------
Balance at September 30, 2002 - $ - 9,676,500 $ 968
============== ================ ============= ==========
Additional
Paid-in Accumulated Subscriptions
Capital Deficit Receivable Total
-------------- --------------- -------------- ----------
Balance at December 31, 2000 $ 20,212,154 $ (17,544,770) $ - $ 747
Net loss for the year ended December 31, 2001 (2,024,882) -
Cost of litigation to be settled by
the issuance of common stock 500,000 -
Financing cost associated with warrants
extended and shares issued 140,000 -
Issuance of common stock, net of costs 559,708 42
Issuance of preferred stock net of costs 494,994 (180,000) 6
Issuance of common stock for services
rendered by third party 14,639 1
-------------- --------------- -------------- ----------
Balance at Dec. 31, 2001 21,921,495 (19,569,652) (180,000) 796
Net loss for the nine months ended September 30, 2002 (2,535,008) -
Collection of subscription receivable 180,000 -
Conversion of preferred stock to common stock (64) 64
Issuance of common stock in settlement of
class action (32) 32
Issuance of restricted common stock
in lieu of expenses 4,200 1
Issuance of common stock, net of cost 539,925 75
-------------- --------------- -------------- ----------
Balance at September 30, 2002 $ 22,465,524 $ (22,104,660) $ - $ 968
============== =============== ============== ===========
The accompanying notes are an integral part of these financial
statements
-5-
AMPLIDYNE, INC.
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2002
NOTE A - ADJUSTMENTS
-----------------------
In the opinion of management, all adjustments, consisting only of normal
recurring adjustments necessary for a fair statement of (a) results of
operations for the three and nine month periods ended September 30, 2002 and
September 30, 2001, (b) the financial position at September 30, 2002, (c) the
statements of cash flows for the three and nine month periods ended September
30, 2002 and September 30, 2001, and (d) the changes in stockholders' equity
for the nine month period ended September 30, 2002 have been made. The results
of operations for the nine months ended September 30, 2002 are not necessarily
indicative of the results to be expected for the full year.
NOTE B - UNAUDITED INTERIM FINANCIAL INFORMATION
------------------------------------------------------
The accompanying unaudited financial statements have been prepared in accordance
with generally accepted accounting principles for interim financial information.
Accordingly, they do not include all the information and footnotes required by
generally accepted accounting principles for financial statements. For further
information, refer to the audited financial statements and notes thereto for the
year ended December 31, 2001, included in the Company's Form 10-KSB filed with
the Securities and Exchange Commission on April 15, 2002.
The Company's financial statements have been presented on a going concern basis,
which contemplates the realization of assets and the satisfaction of liabilities
in the normal course of business. The liquidity of the Company has been
adversely affected in recent years by significant losses from operations. As
further discussed in Note G, the Company incurred losses of $2,535,008 for the
nine-month period ended September 30, 2002, has no cash reserves and has seen
its working capital deteriorate by $1,765,619 to $200,437 since the beginning of
the fiscal year. These factors raise substantial doubt as to the Company's
ability to continue as a going concern. Recently, operations have been funded by
loans from the Chief Executive Officer and costs have been cut through
substantial reductions in labor and operations.
As further discussed in Note G, management is seeking additional financing and
intends to aggressively market its products, control operating costs and broaden
its product base through enhancements of products. The Company believes that
these measures may provide sufficient liquidity for it to continue as a going
concern in its present form. Accordingly, the financial statements do not
include any adjustments relating to the recoverability and classification of
recorded asset amounts or the amount and classification of liabilities or any
other adjustments that might be necessary should the Company be unable to
continue as a going concern in its present form.
NOTE C - STOCKHOLDERS' EQUITY
---------------------------------
At September 30, 2002, the following 1,337,500 warrants, remained outstanding:
67,500 exercisable at $2.50 through December 31, 2002, (2) 20,000
exercisable at $1.00 through May 2010, (3) 20,000 exercisable at $7.00
through December 2004, (4) 30,000 exercisable at $6.00 through November
2004, (5) 50,000 exercisable at $2.00 through December 2004, (6) 50,000
exercisable at $4.00 through December 2004, (7) 141,000 exercisable at
$1.75 (16,000 of which expire December 2004 and 125,000 of which expire
December 2002), (8) 41,500 exercisable at $1.80 through July 31, 2004, (9)
207,500 exercisable at $3.00 through July 31, 2004, (10) 55,000 exercisable
at $1.20 through September 30, 2004, (11) 100,000 exercisable at $3.00
through November 30, 2002, (12) 100,000 exercisable at $5.00 through
November 30, 2002, (13) 300,000 exercisable at $2.00 through December 31,
2005, (14) 75,000 exercisable at $.96 through March 2007, and (15) 80,000
shares exercisable at $1.50 through December 2004.
-6-
AMPLIDYNE, INC.
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2002
NOTE C - STOCKHOLDERS' EQUITY - CONTINUED
-----------------------------------------------
At September 30, 2002, the Company had employee stock options outstanding to
acquire 2,001,000 shares of common stock at exercise prices of $1.04 to $4.00.
During the first quarter ended March 31, 2002, the Company issued 750,000 shares
of Common Stock, at $.80 per share (resulting in gross proceeds of $600,000), to
accredited investors. In connection with such private offering, the Company
paid commissions to NASD broker-dealers in the amount of $60,000 and issued to
such persons 75,000 warrants, which are exercisable at $.96 per share and expire
March 31, 2007.
During the first quarter ended March 31, 2002, the Company issued 701,194 shares
of Common Stock in connection with the conversion of all of the Company's Series
B Preferred Stock (which included shares of Common Stock issued in lieu of
accrued dividends thereon).
During the first quarter ended March 31, 2002, the Company issued 324,486 shares
of Common Stock to the members of the class action compliant, which was settled
in September 2001.
During the second quarter ended June 30, 2002, the Company issued 8,159 shares
of common stock to a customer in lieu of cash.
NOTE D - LOSS PER SHARE
----------------------------
The Company complies with the requirements of the Financial Accounting Standards
Board issued Statement of Financial Accounting Standards No. 128, "Earnings per
Share" ("SFAS No. 128"). SFAS No. 128 specifies the compilation, presentation
and disclosure requirements for earnings per share for entities with publicly
held common stock or potential common stock. Net loss per common share - basic
and diluted is determined by dividing the net loss by the weighted average
number of common stock outstanding.
Net loss per common share - diluted does not include potential common shares
derived from stock options and warrants (see Note C) because they are
antidilutive.
NOTE E - LITIGATION
----------------------
From time to time, the Company is party to what it believes are routine
litigation and proceedings that may be considered as part of the ordinary course
of its business. Except for the proceedings noted below, the Company is not
aware of any pending litigation or proceedings that could have a material effect
on the Company's results of operations or financial condition.
-7-
AMPLIDYNE, INC.
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2002
The Company is a party to the following matters:
1. AIRNET COMMUNICATIONS CORPORATION VS AMPLIDYNE, INC.
AirNet filed a complaint in the Circuit Court of the Eighteenth Judicial
District of the State of Florida on January 23, 1997 alleging breach of
contract. During 2000, the Company settled with AirNet at a cost of $175,000;
$25,000 is to be paid quarterly over two years. $95,000 remained unpaid at
September 30, 2002.
2. ENS ENGINEERING VS AMPLIDYNE, INC.
The Company was also a defendant in a complaint filed in the United States
District Court for the District of New Jersey on May 13, 1998. The complaint
alleges breach of contract of a representative agreement between the Company and
ENS Engineering of South Korea. The Company reached oral settlement terms and,
based upon such oral settlement, the court dismissed the case in the first
quarter of 2000. The terms of the oral settlement called for the Company to pay
$85,000 in twelve equal monthly installments, none of which has been paid to
date. The Company has not received any required documents and releases from ENS.
3. HIGH GAIN ANTENNA CO., LTD. OF KOREA
The Company (as well as an officer and director of the Company) was a defendant
in a complaint brought in the Superior Court of New Jersey, Law Division,
Somerset County, by High Gain Antenna Co., Ltd. of Korea in November 2000. The
complaint sought damages for an alleged breach of a contract for the repair of
certain equipment purchased by plaintiff from a distributor of the Company's
products and the Company. A trial commenced on May 7, 2002, and on May 13, 2002,
the jury brought in a verdict against the Company for $400,000. The Company has
filed a motion in the Law Division for a new trial, which was denied, and has
given notice of appeal of the verdict and judgment to the Superior Court of New
Jersey, Appellate Division. The Company, in its appeal, will argue that the
verdict was against the weight of the evidence and that the Court made a number
of errors of law in the conduct of the trial. Although the Company is confident
in its position, it cannot predict the outcome on appeal. The Company is in
settlement negotiations before the Superior Court of New Jersey, Appellate
Division. Although a tentative settlement has been reached, there can be no
assurance this matter will be settled on terms favorable to the Company. Failure
by the Company to either settle this matter or have a successful appeal, will
have a material adverse effect on the Company's financial position and
prospects.
4. AMPLIDYNE, INC. V. WAYNE FOGEL, DIGITAL COMMUNICATIONS NETWORK, INC. AND
INTERNET NETWORK CORPORATION
On May 30, 2002, the Company sued defendants in the Superior Court of New
Jersey, Law Division, Sommerset County, seeking, among other things, declaratory
relief that the Company is not obligated to pay a finders fee (in connection
with the Company's purchase of the Darwin Assets), and that the Company is
entitled to monetary damages as a result of defendant's false
misrepresentations. On July 10, 2002, the matter was removed to the federal
bankruptcy court for the United States District Court of New Jersey. On July 29,
2002, defendants filed a counterclaim seeking $200,000 in damages as a result of
a finders fee agreement. Although the Company is confident in its position, it
cannot predict the outcome of the case and any negative outcome may have a
material adverse effect on the Company's financial position or prospects.
-8-
AMPLIDYNE, INC.
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2002
NOTE F - ASSET ACQUISITION
------------------------------
In January 2002, the Company entered into an agreement to acquire certain assets
of Darwin Networks, Inc. ("Darwin") for $175,000 plus additional contingent
payments not to exceed $340,000. Darwin was in the business of installing and
maintaining high-speed Internet structures for hotels and residential
properties. The assets acquired included equipment not yet installed as well as
completed installations in a specified number of hotel properties. Pursuant to
the agreement, the Company has the sole and exclusive right (through July 31,
2002, verbally extended through October 31, 2002) to contact and negotiate with
each property to either activate or remove the equipment. After a specified
number of locations are successfully negotiated (which are covered in the
initial purchase price) the Company may continue to contact additional
properties and must pay a specified sum for each successful negotiation up to
the $340,000 maximum. As of November 14, 2002, the Company has successfully
negotiated and closed 11 properties and has incurred no liability to pay any
additional sums under the contract. In accordance with the terms of the
agreement, the Company may continue to negotiate with additional properties up
to the limit specified, but may not add additional properties after the
expiration date.
NOTE G - LIQUIDITY
---------------------
The Company has incurred losses of $(2,535,008) for the nine months ended
September 30, 2002. Additionally, working capital declined by $1,765.619 to
$200,437 at September 30, 2002 from $1,966,056 at December 31, 2001. The Company
funded operations during this period primarily from the proceeds from privately
placed common and preferred stock. Historically, the Company has also funded
certain operating expenses through borrowings (in the form of deferring salaries
and cash advances) from officers and principal shareholders. The Company has in
the past issued its stock in lieu of cash payments for compensation, sales
commissions and consulting fees, wherever possible.
Management's plans for dealing with the foregoing matters include:
Increasing sales of its high-speed Internet connectivity products through
both individual customers and strategic alliances;
Decreasing the dependency on certain major customers by aggressively
seeking other customers in the multicarrier amplifier markets;
Investigate potential revenue - sharing partnership in other markets, such
as the hospitality industry and multi-tenant buildings;
Reducing costs through a more streamlined operation by using automated
machinery to produce components for our products;
Obtaining financing through private placements, if possible;
Selling remaining net operating losses applicable to the State of New
Jersey, pursuant to a special government high-technology incentive program
in order to provide working capital, if possible;
Reducing overhead costs and general expenditures.
-9-
AMPLIDYNE, INC.
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2002
NOTE H - SEGMENT INFORMATION
--------------------------------
The Company does not measure its business activities by segment. Information on
the Company's product lines are as follows:
Nine Months Ended September 30,
------------------------------------ Year Ended
December 31, 2001
-------------------
Sales-external 2002 2001
-------------- ---- ----
Amplifier $ 559,643 $1,564,512 $ 1,901,702
Internet
business and
broadband solutions 522,889 274,007 303,727
---------- ------------ -------------
$1,082,532 $1,838,519 $ 2,205,429
========== ============ =============
September 30, December
------------- -------------
2002 31, 2001
Inventory ------- ---------
---------
Amplifier $ 313,575 $ 802,964
Internet
business and
broadband solutions 590,827 378,718
-------------- -------------
Total $ 906,402 $ 1,181,682
============== =============
NOTE I - SUBESEQUENT EVENT
Between October 1, 2002 and November 13, 2002, the Chief Executive Officer
loaned $90,000 to the Company.
-10-
AMPLIDYNE, INC.
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2002
PART I - FINANCIAL INFORMATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
RESULTS OF OPERATIONS - THREE MONTHS ENDED SEPTEMBER 30, 2002 COMPARED TO THREE
MONTHS ENDED SEPTEMBER 30, 2001.
Net sales for the three month period ended September 30, 2002 were $325,584
while net sales for the three month period ended September 30, 2001 were
$663,899. Sales decreased mainly due to the general business conditions of the
telecommunications industry.
Sales of amplifiers were approximately 47% of total sales. The Ampwave
high-speed wireless Internet products and broadband solutions accounted for
approximately 53% of total sales.
Gross margin for the three months ended September 30, 2002 amounted to
$112,538(35% of sales) compared to $254,515 (38% of sales) for the three months
ended September 30, 2001. The decline in gross margin was principally
attributable to pricing pressures caused by business conditions in the
telecommunications industry. Gross margin decreased from the year ended December
31, 2001 because of lower amplifier sales resulting in higher fixed direct costs
and lower margins for the high-speed wireless Internet products.
Selling, general and administrative expenses were $435,058 and $449,697 for the
three months ended September 30, 2002 and 2001, respectively. The decrease of
$14,639 (3%) is mainly due to: an increase in bad debts of approximately
$228,000 offset by substantial staff reductions and reductions in professional
fees.
Research, engineering, and development costs declined substantially for the
three months ended September 30, 2002 ($98,846) from the corresponding three
month period of 2001 ($138,480) with the decrease of approximately $40,000
principally related to staff cutbacks.
The interest income decreased for the three months ended September 30, 2002
($118) compared to $7,495 for the corresponding period of 2001. The
decrease is due to a reduction of funds available for short term investment.
As a result of the foregoing, the Company incurred net losses of ($421,428) or
($.04) per share and ($329,767) or ($.04) per share for the three months ended
September 30, 2002 and 2001, respectively.
RESULTS OF OPERATIONS - NINE MONTHS ENDED SEPTEMBER 30, 2002 COMPARED TO
NINE MONTHS ENDED SEPTEMBER 30, 2001.
Net sales for the nine month period ended September 30, 2002 were $1,082,532
while sales for the nine months ended September 30, 2000 were $1,838,529.
Sales decreased due to a decline in the Company's sales of cellular amplifier
equipment caused mainly by the general business conditions of the
telecommunications industry.
-11-
AMPLIDYNE, INC.
SEPTEMBER 30, 2002
Gross margin for the nine months ended September 30, 2002 amounted to a loss of
($160,584), including an inventory write-down of $233,995 (a loss of 15% of
sales), compared to $679,821 gross profit (37% of sales) for the corresponding
nine months of 2001. Excluding the inventory write-down, the gross margin for
the nine months ended June 30, 2002 was $73,411 or 6.8% of sales. The decline in
gross margin was principally attributable to pricing pressures caused by
business conditions in the telecommunications industry. Gross margin decreased
from the year ended December 31, 2001 because of lower amplifier sales resulting
in higher fixed direct costs and lower margins for the high-speed wireless
Internet products.
Selling, general and administrative expenses were $1,671,858 and $1,315,607 for
the nine months ended September 30, 2002 and 2001, respectively. The increase
of $356,251 (27%) is mainly due to: an increase in bad debts of approximately
$324,000 with year to date increases in certain expenses prior to the 3rd
quarter, offset by staffing cutbacks and other overhead reductions in the 3rd
quarter.
Research, engineering, and development costs declined for the nine months ended
September 30, 2002 ($389,804) from the corresponding nine month period of 2001
($439,671) with the decrease of approximately $51,000 principally related to
staff cutbacks.
Equity-based compensation primarily represents the value of the modification of
warrants in 2001.
The Company has provided for the cost of the lawsuit by High Gain Antenna Co.,
Ltd. of Korea (see note E-3) jury verdict of $400,000 in the quarter ended June
30, 2002.
As a result of the foregoing, the Company incurred net losses of ($2,535,008)
or ($.27) per share and ($1,722,549) or ($.23) per share for the nine months
ended September 30, 2002 and 2001, respectively.
LIQUIDITY AND CAPITAL RESOURCES
At September 30, 2002, the Company had no cash or cash equivalents and working
capital has declined to $200,437 from $1,966,056 at December 31, 2001, a
decrease of $1,765,619. These factors raise substantial doubt as to the
Company's ability to continue as a going concern. Recently, operations have been
funded by loans from the Chief Executive Officer and costs have been cut through
substantial reductions in labor and operations.
The Company needs to obtain additional financing through private placements in
order meet its working capital obligations and fund further development of its
business. There can be no assurance that any additional financing will be
available to the Company on acceptable terms, or at all. See also Note G
regarding liquidity matters.
In connection with the complaint brought by High Gain Antenna Co., Ltd. of
Korea, failure by the Company to favorably settle with the plaintiff for an
amount substantially lower than the jury verdict judgment will have a material
adverse effect on the Company's financial position and prospects. See Part I -
Note E 3.
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AMPLIDYNE, INC.
SEPTEMBER 30, 2002
ITEM 3 CONTROLS AND PROCEDURES.
(a) Evaluation of Disclosure Controls and Procedures.
-----------------------------------------------------
Within the 90 days prior to the date of this report, Amplidyne, Inc. carried out
an evaluation, under the supervision and with the participation of the Company's
management, including the Company's Chief Executive and Principal Accounting
Officer, of the effectiveness of the design and operation of the Company's
disclosure controls and procedures pursuant to Exchange Act Rule 13a-14. Based
upon that evaluation, the Chief Executive and Principal Accounting Officer
concluded that the Company's disclosure controls and procedures are effective in
timely alerting him to material information required to be included in the
Company's periodic SEC filings relating to the Company.
(b) Changes in Internal Controls.
-------------------------------
There were no significant changes in the Company's internal controls or in other
factors that could significantly affect these internal controls subsequent to
the date of my most recent evaluation.
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AMPLIDYNE, INC.
SEPTEMBER 30, 2002
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
See Note E to the Company's financial statements set forth in Part I.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(b) The Registrant filed a Current Report of Form 8-K on July 17, 2002,
disclosing the resignation of Michael Lawrence, the Registrant's former
President and Chief Operating Officer.
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SIGNATURES
----------
In accordance with the requirements of the Exchange Act, the registrant has
duly caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized.
AMPLIDYNE, INC.
Dated: November 18, 2002
By: /s/ Devendar S. Bains
------------------------
Name: Devendar S. Bains
Title: Chief Executive
Officer, Treasurer,
Principal Accounting
Officer and Director
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CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER AND PRINCIPAL ACCOUNTING OFFICER
PURSUANT TO 18 U.S.C 1350, AS ADOPTED, AND
THE REQUIREMENTS OF SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Devendar S. Bains, Chief Executive Officer and Principal Accounting
Officer of Amplidyne, Inc. (the "Company") do hereby certify that:
1. I have reviewed this quarterly report on Form 10-QSB of the Company;
2. Based on my knowledge, this quarterly 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 quarterly
report; and
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
Company as of, and for, the period presented in this quarterly report.
4. I am responsible for establishing and maintaining disclosure controls
and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the
Company and have:
(a) designed such disclosure controls and procedures to ensure that
material information relating to the Company, is made known to me by others
within the Company, particularly during the period in which this quarterly
report is being prepared;
(b) evaluated the effectiveness of the Company's disclosure controls
and procedures as of a date within 90 days prior to the filing date of this
quarterly report (the "Evaluation Date"); and
(c) presented in this quarterly report my conclusions about the
effectiveness of the disclosure controls and procedures based on my
evaluation as of the Evaluation Date;
5. I have disclosed, based on my most recent evaluation, to the Company's
auditors and the audit committee of the Company's board of directors (or persons
performing the equivalent functions):
(a) all significant deficiencies in the design or operation of
internal controls which could adversely affect the Company'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 Company's internal
controls; and
6. I have indicated in this quarterly report whether or not there were
significant changes in internal controls or in other factors that could
significantly affect internal controls subsequent to the date of my most recent
evaluation, including any corrective actions with regard to significant
deficiencies and material weaknesses.
/s/Devendar S. Bains
-----------------------
Devendar S. Bains
Chief Executive Officer and Principal Accounting
Officer
November 18, 2002
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