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, 2001.
[ ] 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, 2001 was 7,892,661.
AMPLIDYNE, INC.
FORM 10-QSB
NINE MONTHS ENDED SEPTEMBER 30, 2001
TABLE OF CONTENTS
-----------------
PART 1 - 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 6-12
Item 2 Management's Discussion and Analysis of Financial
Condition and Results of Operations 13-14
PART II - OTHER INFORMATION
--------------------
Item 1. Legal Proceedings 15
Item 2. Change in Securities 15
Signatures 16
PART 1 - FINANCIAL INFORMATION
Item 1. Financial Statements
AMPLIDYNE, INC.
BALANCE SHEETS
ASSETS
------
September 30, December 31,
2001 2000
(Unaudited)
CURRENT ASSETS
Cash and cash equivalents $1,148,168 $1,966,142
Accounts receivable, net of allowance
for doubtful accounts of $359,000 and $291,000 at
September 30, 2001 and December 30, 2000, respectively 557,449 318,345
Inventories, principally raw materials 1,053,857 597,953
Loan receivable-officer 46,892 33,667
Prepaid expenses and other 22,122 101,957
---------- ----------
Total current assets 2,828,488 3,018,064
---------- ----------
PROPERTY AND EQUIPMENT - AT COST
Machinery and equipment 723,664 720,818
Furniture and fixtures 43,750 43,750
Autos and trucks 66,185 66,183
Leasehold improvements 8,138 8,141
---------- ----------
Total 841,737 838,892
Less: Accumulated depreciation and amoritization 687,260 588,845
---------- ----------
Net property and equipment 154,477 250,047
---------- ----------
OTHER ASSETS
Security Deposits and other non-current assets 57,518 72,354
---------- ----------
TOTAL ASSETS $3,040,483 $3,340,465
========== ==========
The accompanying notes are an integral part of these financial statements
-1-
AMPLIDYNE, INC.
BALANCE SHEETS
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
September 30, December 31,
2001 2000
(Unaudited)
CURRENT LIABILITIES
Current maturities of lease obligations $ 11,312 $ 11,385
Accounts payables 342,966 242,289
Accrued expenses 162,543 258,875
Settlement of litigation 180,000 150,000
-------------- --------------
Total current liabilities 696,821 662,549
LONG-TERM LIABILITIES
Lease obligations, less current maturities - 9,785
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY
Convertible Preferred stock - authorized 100,000 shares
of $.0001 par value; 20,000 shares issued and outstanding
at September 30, 2001 (liquidation preference of $200,000
at September 30, 2001) 2 -
Common stock - authorized, 25,000,000 shares
Of $.0001 par value; shares 7,892,661, and 7,463,841 shares
issued and outstanding at September 30, 2001 and
December 31, 2000, respectively. 790 747
Additional paid-in-capital 21,610,099 20,212,154
Accumulated deficit (19,267,229) (17,544,770)
-------------- --------------
Total stockholders' equity 2,343,662 2,668,131
-------------- --------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 3,040,483 $ 3,340,465
============== ==============
The accompanying notes are an integral part of these financial statements
-2-
AMPLIDYNE, INC.
STATEMENTS OF OPERATIONS
(UNAUDITED)
Three Three Nine Nine
Months Months Months Months
Ended Ended Ended Ended
September 30, September 30, September 30, September 30,
2001 2000 2001 2000
--------------- --------------- ---------------- -----------------
Net Sales $ 663,899 $ 474,128 $ 1,838,519 $ 1,902,204
Cost of goods sold 409,384 564,949 1,158,698 1,734,631
--------------- --------------- ---------------- -----------------
Gross profit 254,515 (90,821) 679,821 167,573
Operating expenses
Selling, general & administrative 449,697 454,606 1,315,607 1,407,292
Research, engineering and
development 138,480 133,799 439,671 380,638
Equity-based compensation charge - - 140,000 100,000
--------------- --------------- ---------------- -----------------
Operating loss (333,662) (679,226) (1,215,457) (1,720,357)
Other non operating income (expenses)
Interest income 7,495 39,085 47,462 69,887
Interest expense (3,600) 179 (4,464) (550)
Cost of litigation settlement - - (550,000) -
--------------- --------------- ---------------- -----------------
NET LOSS $ (329,767) $ (639,962) $ (1,722,459) $ (1,651,020)
=============== =============== ================ =================
Net loss per share - basic and diluted $ (.04) $ (.09) $ (.23) $ (.23)
=============== =============== ================ =================
Weighted average number of shares outstanding 7,883,672 7,430,448 7,609,173 7,211,546
=============== =============== ================ =================
The accompanying notes are an integral part of these financial statements
-3-
AMPLIDYNE, INC.
STATEMENTS OF CASH FLOWS
(UNAUDITED)
Nine Nine
Months Months
Ended Ended
Sept. 30, 2001 Sept. 30, 2000
---------------- ----------------
Cash flows from operating activities:
Net Loss $ (1,722,459) $ (1,651,020)
Adjustments to reconcile net loss to net cash
used in operating activities
Depreciation and amortization 98,415 99,152
Stock compensation charge - 100,000
Changes in assets and liabilities
Accounts receivable (239,104) (9,381)
Inventories (455,904) 201,606
Prepaid expenses and other assets 94,671 (25,209)
Accounts payable and accrued expenses 34,345 (247,115)
---------------- ----------------
Total adjustments (467,577) 119,053
---------------- ----------------
Net cash used for operating activities (2,190,036) (1,531,967)
---------------- ----------------
Cash flows from investing activities:
Loan receivable - officer (13,225) -
Purchase of property and equipment (2,845) (6,692)
---------------- ----------------
Net cash used for investing activities (16,070) (6,692)
---------------- ----------------
Cash flows from financing activities:
Payment of lease obligations (9,858) (13,910)
Proceeds from issuance of stock and exercise of
options and warrants, net of costs 1,397,990 2,469,266
---------------- ----------------
Net cash provided by financing activities 1,388,132 2,455,356
---------------- ----------------
NET INCREASE (DECREASE) IN CASH (817,974) 916,697
Cash at beginning of period 1,966,142 1,445,055
---------------- ----------------
Cash and cash equivalents at end of period $ 1,148,168 $ 2,361,752
================ ================
Supplemental disclosures of cash flow information
Cash paid for: Interest $ 4,464 $ 729
Income taxes - 2,700
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, 2000
AND NINE MONTHS ENDED SEPTEMBER 30, 2001
Preferred Stock Common Stock
---------------- -------------
Additional Accumulated
Shares Par Value Shares Par Value Paid-In-Capital (Deficit) Total
-------- ---------- ---------- ------------ ------------ ------------- -------------
Balance at
December 31, 1999 $ - 6,924,970 $ 692 $17,618,398 $(15,104,725) $ 2,514,365
Net loss for the year ended
December 31, 2000 - - - (2,440,045) (2,440,045)
Issuance of common stock
net of costs 319,000 32 1,594,968 - 1,595,000
Exercise of warrants 177,121 19 713,248 - 713,267
Financing and
compensation costs related
to options and warrants
issued - - 114,545 - 114,545
Exercise of stock options
into shares of common
stock 42,750 4 170,995 - 170,999
-------- ---------- ---------- ------------ ------------ ------------- -------------
Balance at Dec. 31, 2000 - - 7,463,841 747 20,212,154 (17,544,770) 2,668,131
Unaudited:
Cost of
litigation to be
settled by the issuance
of common stock 500,000 500,000
Financing cost associated
with warrants extended
and shares issued 1,820 140,000 140,000
Issuance of common stock
net of costs 415,000 42 559,708 559,750
Issuance of Preferred Stock
net of costs 20,000 2 179,998 180,000
Beneficial Conversion
cost relating to
convertible Preferred
Stock 3,600 3,600
Issuance of Common Stock
for services rendered by
third party 12,000 1 14,639 14,640
Net loss for nine months
ended September 30, 2001 (1,722,459) (1,722,459)
-------- ---------- ---------- ------------ ------------ ------------- -------------
Balance at Sept. 30, 2001 20,000 $ 2 7,892,661 $ 790 $ 21,610,099 $(19,267,229) $2,343,662
======== ========== ========== ============ ============= ============= =============
The accompanying notes are an integral part of these financial statements
-5-
AMPLIDYNE, INC.
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2001
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, 2001 and
September 30, 2000 (b) the financial position at September 30, 2001 (c) the
statements of cash flows for the nine-month period ended September 30, 2001 and
September 30, 2000, and (d) the changes in stockholders' equity for the
nine-month period ended September 30, 2001 have been made. The results of
operations for the nine months ended September 30, 2001 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, 2000, included in the Company's Form 10-KSB filed with
the Securities and Exchange Commission on April 16, 2001.
NOTE C - PUBLIC OFFERING AND PRIVATE PLACEMENTS
Public Offering
A registration statement covering an underwritten public offering of 1,610,000
units at a price of $5.10 per unit, prior to underwriters' commissions, was
declared effective by the Securities and Exchange Commission on January 21,
1997. Each unit consisted of one share of common stock, par value $.0001 per
share and one redeemable common stock purchase warrant. Each warrant entitles
the holder to purchase one share for $6.00 during the four-year period ending
January 21, 2001. The Company provided notice on May 1, 2000 to reduce the
exercise price of the warrants to $5.00 per share. The Company previously
provided notice in April 2000 to redeem the warrants on May 17, 2000 unless the
warrants were previously exercised. Through May 16, 2000, 124,871 warrants were
exercised for proceeds of $650,454. The remaining 1,485,129 were redeemed at
$.01 per warrant on May 17, 2000.
-6-
AMPLIDYNE, INC.
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2001
NOTE C - PUBLIC OFFERING AND PRIVATE PLACEMENTS-(CONTINUED)
Private Placements
At September 30, 2001, the following 792,500 warrants remain outstanding: (1)
67,500 exercisable at $2.50 originally through January 20, 2001 but extended to
December 31, 2001, (2) 145,000 exercisable at $4.00 originally through January
20, 2001 but extended to December 31, 2001, (3) 20,000 exercisable at $1.00
through May 2010, (4) 20,000 exercisable at $7.00 through December 2004, (5)
30,000 exercisable at $6.00 through November 2004, (6) 50,000 exercisable at
$2.00 through December 2004 and (7) 50,000 exercisable at $4.00 through December
2004, (8) 141,000 exercisable at $1.75 (16,000 of which expire December 2004 and
125,000 of which expire December 2002), (9) 41,500 exercisable at $1.80 through
July 31, 2004, (10) 207,500 exercisable at $3.00 through July 31, 2004 and (11)
20,000 exercisable at $1.20 through September 30, 2004. At September 30, 2001,
the Company had employee stock options outstanding to acquire 2,136,000 shares
of common stock at exercise prices of $1.25 to $4.00.
During the second quarter ended June 30, 2001, the Company issued 390,000 shares
of common stock at $1.50 per share, to accredited investors, resulting in gross
proceeds of $585,000. The Company paid cash commissions of $58,500 in connection
with such private placement.
During the third quarter ended September 30, 2001, the Company issued 25,000
shares of common stock at $1.50 per share, to accredited investors, resulting in
gross proceeds of $37,500. The Company paid cash commissions of $3,750 in
connection with such private placement.
In September 2001, the Company issued 20,000 shares of Series B Preferred Stock
to accredited investors pursuant to Rule 506 of Regulation D of the Act. The
Company sold such shares at $10.00 per share, received gross proceeds of
$200,000 and paid brokerage commissions of $20,000 (resulting in net proceeds of
$180,000). The Preferred Stock: (i) are entitled to dividends at the annual rate
of 10%, payable semi-annually, in cash or in shares of Common Stock; (ii) has a
liquidation preference of $10.00 per share, (iii) is convertible into shares of
Common Stock at the lesser of (A) 100% of the average closing sales price of the
Common Stock on the five trading days prior to issuance or (B) 85% of the
average closing sale price of the Common Stock for the five trading days prior
to conversion, in each case not less than $.75 per share; (iv) is non-voting,
(v) is subject to redemption (at the option of the Company) at a rate of 110% of
the original issuance price and (vi) shall automatically convert into Common
Stock on September 30, 2004 (if not previously converted). The Company shall
also have the right, at its option, to convert the Preferred Stock (at a
conversion rate of $1.00 per share) if the average closing sales price per share
of Common Stock, for a consecutive 20 trading day period, is $3.00 or greater.
-7-
AMPLIDYNE, INC.
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2001
NOTE C - PUBLIC OFFERING AND PRIVATE PLACEMENTS-(CONTINUED)
During the third quarter ended September 30, 2001, the Company issued 12,000
shares of Common Stock to an investor relations firm. An expense
amounting to $14,600 was charged to operations as a result of the stock issue.
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.
The Company is involved in 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 the next two years. The Company has made
partial payments of the required quarterly amount. At September 30, 2001,
$95,000 remained unpaid.
-8-
AMPLIDYNE, INC.
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2001
NOTE E - LITIGATION-(CONTINUED)
2. ENS ENGINEERING VS AMPLIDYNE, INC.
--------------------------------------
The Company is 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 as of
September 30, 2001. The Company has not received any required documents and
Releases from ENS.
3. CLASS ACTION LITIGATION
-------------------------
The Company was served with class action complaints on behalf of all purchasers
of the Company's common stock and warrants between September 9, 1999 and
September 14, 1999. By orders of the District Court for the District of New
Jersey, the actions were consolidated and lead plaintiffs were appointed. On or
about March 24, 2000, the Company was served with a consolidated and amended
class action complaint on behalf of purchasers of the Company's common stock and
warrants between September 9, 1999 and September 17, 1999. That complaint
alleged that the Company and other individuals violated the federal securities
laws by, among other things, the issuance of a press release on September 9,
1999. Although the Company believed that the complaint had no merit and
vigorously contested it, the Company and the other parties to the class action
reached a settlement on May 2, 2001, which was approved by the District Court
for the District of New Jersey on August 14, 2001 (which became effective on
September 14, 2001) Pursuant to the settlement agreement, a settlement fund
consisting of $750,000 in cash ($50,000 of which was paid directly by the
Company) was established for the benefit of members of the class. In addition,
the Company is obligated to issue 324,486 freely tradable shares of its common
stock (which was valued at $500,000 as of May 2, 2001) on behalf of the class
members. As of September 30, 2001, the Company had not been given instructions
regarding the issuance of such shares. The Company has recorded the cost of the
litigation, including a credit to Additional Paid-In Capital for the value
of the settlement that has been settled by the issuance of common stock.
-9-
AMPLIDYNE, INC.
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2001
NOTE F - LIQUIDITY
The Company has incurred a loss of $1,722,459 for the nine months ended
September 30, 2001. The Company funded operations during this period primarily
from the proceeds from privately placed common and preferred stock and exercise
of warrants and options during the fiscal years ended December 31, 2000 and
2001. The Company has also historically 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, which are expected to
yield higher profit margins;
- Decreasing the dependency on certain major customers by aggressively
seeking other customers in the multicarrier amplifier markets;
- Partnering with significant companies to jointly develop innovative
products, which has yielded orders with multinational companies to date,
and which are expected to further expand such relationships;
- Investigate potential revenue - sharing partnership in other markets, such
as the hospitality industry and multi-tenant buildings;
- Reducing costs through a more streamlined operations by using automated
machinery to produce components for our products;
- Funding operations in 2001 with the remaining cash that was received from
the 2000 and 2001 private placements, possible additional 2001 private
placements, and the deferral of payments of officers' salaries, as needed;
- 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 if necessary.
-10-
AMPLIDYNE, INC.
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2001
NOTE G - 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
Sales-external 2001 2000 December 31, 2000
---- ---- -----------------
Amplifier $ 1,564,512 $ 1,579,153 $ 2,139,590
Internet business 274,007 323,051 455,500
------------ ----------- -----------------
$ 1,838,519 $ 1,902,204 $ 2,595,090
============ =========== ================
September 30, December 31,
Inventory: 2001 2000
---- ----
Amplifier $ 714,953 $ 439,953
Internet business 338,904 158,000
---------- ---------
$ 1,053,857 $ 597,953
========= =========
NOTE H - RECENT ACCOUNTING PRONOUNCEMENTS
On July 20, 2001, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards (SFAS) 141, Business Combinations,
and SFAS 142, Goodwill and Intangible Assets. SFAS 141 is effective for all
business combinations completed after June 30, 2001. SFAS 142 is effective for
fiscal years beginning after December 15, 2001; however, certain provisions of
this Statement apply to goodwill and other intangible assets acquired between
July 1, 2001 and the effective date of SFAS 142. Major provisions of these
Statements and their effective dates for the Company are as follows:
- all business combinations initiated after June 30, 2001 must use the
purchase method of accounting. The pooling of interest method of accounting
is prohibited except for transactions initiated before July 1, 2001.
-11-
AMPLIDYNE, INC.
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2001
NOTE H - RECENT ACCOUNTING PRONOUNCEMENTS (CONTINUED)
- intangible assets acquired in a business combination must be recorded
separately from goodwill if they arise from contractual or other legal
rights or are separable from the acquired entity and can be sold,
transferred, licensed, rented or exchanged, either individually or as part
of a related contract, asset or liability
- goodwill, as well as intangible assets with indefinite lives, acquired
after June 30, 2001, will not be amortized. Effective January 1, 2002, all
previously recognized goodwill and intangible assets with indefinite lives
will no longer be subject to amortization.
- effective January 1, 2002 goodwill and intangible assets with indefinite
lives will be tested for impairment annually and whenever there is an
impairment indicator
- all acquired goodwill must be assigned to reporting units for purposes of
impairment testing and segment reporting.
Although it is still reviewing the provisions of these Statements, management's
preliminary assessment is that these Statements will not have a material impact
on the Company's financial position or results of operations.
-12-
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, 2001 COMPARED TO THREE
MONTHS ENDED SEPTEMBER 30, 2000.
Net sales for the three month period ended September 30, 2001 were $663,899
while net sales for the three month period ended September 30, 2000 were
$474,128. Sales increased in both the Company's amplifier and wireless internet
products. In addition, the period reflected continued deliveries of orders to
Harris Corporation and other large OEM's.
Gross profit for the three months ended September 30, 2001 amounted to $254,515
(38% of sales) compared to ($90,281) (-19% of sales) for the three months ended
September 30, 2001 and 2000, respectively. Gross profit improved in 2001, due to
higher profit margins on amplifier products and improvements in the
manufacturing process. The wireless internet products also produced some of the
gross profit, however, the set-up time to develop manufacturing processes and
small order quantities decreased the overall gross profit margin. Further, in
the third quarter of 2000, the sales volume was particularly low thereby
reducing the opportunity to recover fixed manufacturing costs.
Selling, general and administrative expenses were $449,697 and $454,606 for the
three months ended September 30, 2001 and 2000, respectively. Overall the costs
have remained relatively unchanged.
Research, engineering, and development costs remained relatively constant for
the three months ended September 30, 2001 from the corresponding three month
period of 2000.
The interest income decreased for the three months ended September 30, 2001
compared to the corresponding period of 2000. The decrease is due to funds
available for short term investment.
As a result of the foregoing, the Company incurred net losses of ($329,767) or
($.04) per share and ($639,962) or ($.09) per share for the three months ended
September 30, 2001 and 2000, respectively.
RESULTS OF OPERATIONS-NINE MONTHS ENDED SEPTEMBER 30, 2001 COMPARED TO NINE
MONTHS ENDED SEPTEMBER 30, 2000.
Net sales for the nine month period ended September 30, 2001 were $1,838,519
while sales for the nine months ended September 30, 2000 were $1,902,204. Sales
decreased due to the Company's decline in the wireless internet products
marketplace caused in part by difficulties incurred by customers and potential
customers in obtaining funding to build their telecommunications network. In
addition, the period reflects continued deliveries of amplifier products to
Harris Corporation and other large OEM's.
-13-
RESULTS OF OPERATIONS-NINE MONTHS ENDED SEPTEMBER 30, 2001 COMPARED TO NINE
MONTHS ENDED SEPTEMBER 30, 2000 - (CONTINUED)
Gross profit for the nine months ended September 30, 2001 amounted to $679,821
(37% of sales), compared to gross profit of $167,573 (9% of sales) for the
corresponding nine months of 2000. Gross profit improved in 2001, especially in
the second and third quarters of 2001 due to higher profit margins on amplifier
products and improvements in the manufacturing process. The wireless internet
products also produced some of the gross profit, however, the set-up time to
develop manufacturing processes and small order quantities decreased the overall
gross profit margin.
Selling, general and administrative expenses were $1,315,607 and $1,407,292 for
the nine months ended September 30, 2001 and 2000, respectively. Overall the
costs have remained relatively unchanged.
Research, engineering, and development costs increased by $59,033 for the first
nine months of 2001 from the corresponding nine month period of 2000. This
increase was primarily due to increased costs of testing and development of new
products.
Stock compensation charges of $140,000 recorded in 2001 related to the
extension of certain outstanding warrants and stock issued to consultants.
The interest income decreased for the first nine months of 2001 compared to the
corresponding period of 2000. The decrease is due to a reduction of funds
available for short term investment as funds have been used for operations.
A $550,000 charge was allocated to the class action lawsuit settlement in
May 2001.
As a result of the foregoing, the Company incurred net losses of ($1,722,459) or
($.23) per share for the nine months ended September 30, 2001 compared to net
losses of ($1,651,020) or ($.23) per share for the same period in 2000.
LIQUIDITY AND CAPITAL RESOURCES
At September 30, 2001, the Company had cash and cash equivalents of $1,148,168
principally due to the injection of private placement funds and exercise of
warrants in 1999, 2000, and 2001. The Company issued its common stock in lieu
of cash payments for compensation, commissions, and consulting fees where
possible during 2000 and 2001. This trend is expected to continue in the fourth
quarter of 2001.
The Company believes that the net proceeds of the Company's private placements
will meet its working capital obligations and fund further development of its
business for the next twelve months. However, in order to execute our business
plans to expand product offerings and revenue generating opportunities, we will
likely require additional working capital. There can be no assurance that any
additional financing will be available to the Company on acceptable terms, or at
all. See also Note F regarding liquidity matters.
-14-
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Although the Company believed that the class action complaint (See Part I - Note
E) had no merit and vigorously contested it, the Company and the other parties
to the class action reached a settlement on May 2, 2001, which was approved by
the District Court for the District of New Jersey on August 14, 2001 (which
became effective on September 14, 2001). Pursuant to the settlement agreement, a
settlement fund consisting of $750,000 in cash ($50,000 of which was paid
directly by the Company) was established for the benefit of members of the
class. In addition, the Company is obligated to issue 324,486 freely tradable
shares of its common stock (which was valued at $500,000 as of May 2, 2001) on
behalf of the class members. As of September 30, 2001, the Company had not been
given instructions regarding the issuance of such shares.
ITEM 2. CHANGE IN SECURITIES
In July 2001, the Company issued 25,000 shares of Common Stock, at $1.50 per
share (resulting in gross proceeds of $37,500), to accredited investors pursuant
to Rule 506 of Regulation D of the Securities Act of 1933, as amended (the
"Act). In connection with such private offering, the investors were issued
12,500 warrants (one warrant for each two shares purchased), which are
exercisable at $3.00 per share and expire July 31, 2004. The Company paid
commissions to NASD broker-dealers in the amount of $3,750 and issued to such
persons 2,500 warrants, which are exercisable at $1.80 per share and expire July
31, 2004.
In September 2001, the Company issued 20,000 shares of Series B Preferred Stock
to accredited investors pursuant to Rule 506 of Regulation D of the Act. The
Company sold such shares at $10.00 per share, received gross proceeds of
$200,000 and paid brokerage commissions of $20,000 (resulting in net proceeds of
$180,000). See Part I - Note C.
During the third quarter ended September 30, 2001, the Company issued 12,000
shares of Common Stock to an investor relations firm. The sale was made in
reliance on Section 4(2) of the Act.
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SIGNATURES
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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 14, 2001
By: /s/ Devendar S. Bains
------------------------
Name: Devendar S. Bains
Title: Chief Executive Officer,
Treasurer, Principal Accounting
Officer and Director
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