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 JUNE 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 July 31, 2002 was 9,676,500.
AMPLIDYNE, INC.
FORM 10-QSB
THREE AND SIX MONTHS ENDED JUNE 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
PART II - OTHER INFORMATION
--------------------
Item 1. Legal Proceedings . . . . . . . . . . . . . . . . . . . . . 13
Item 2. Change in Securities . . . . . . . . . . . . . . . . . . . 13
Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Certification of Principal Executive Officer
And Principal Accounting Officer . . . . . . . . . . . . . . . . . 15
AMPLIDYNE, INC.
BALANCE SHEETS
ASSETS
-------
June 30, December 31,
2002 2001
-------------- -------------
CURRENT ASSETS UNAUDITED
Cash and cash equivalents $ 36,287 $ 697,940
Accounts receivable, net of allowance
for doubtful accounts of $131,104 and $131,104
at June 30, 2002 and December 31,
2001, respectively 352,428 449,190
Inventories 930,327 1,181,682
Loan receivable-officer 68,892 55,892
Prepaid expenses and other 4,000 23,464
-------------- -------------
Total current assets 1,391,934 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 712,694 687,260
-------------- -------------
Net property and equipment 129,043 154,477
OTHER ASSETS
Security Deposits and other non-current assets 45,068 52,106
-------------- -------------
TOTAL ASSETS $ 1,566,045 $2,614,751
============== =============
The accompanying notes are an integral part of these financial statements
-1-
AMPLIDYNE, INC.
BALANCE SHEETS
LIABILITIES AND STOCKHOLDERS' EQUITY
-------------------------------------
June 30, December 31,
2002 2001
------------- --------------
UNAUDITED
CURRENT LIABILITIES
Accounts payable $189,733 $121,533
Accrued expenses 98,052 131,308
Current maturities of lease obligations - 9,271
Reserve for litigation loss 495,000 180,000
------------- --------------
Total current liabilities 782,785 442,112
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 June 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 968 790
$.0001 par value; shares 9,676,500 and
7,892,661 shares issued and outstanding at June 30,
2002 and December 31, 2001 respectively.
Additional paid-in-capital 22,465,524 21,921,495
Subscriptions receivable preferred stock - (180,000)
Accumulated deficit (21,683,232) (19,569,652)
------------- --------------
TOTAL STOCKHOLDERS' EQUITY 783,260 2,172,639
------------- --------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $1,566,045 $2,614,751
============= ==============
The accompanying notes are an integral part of these financial statements
-2-
AMPLIDYNE, INC.
STATEMENTS OF OPERATIONS
(UNAUDITED)
Three Three Six Six
Months Months Months Months
Ended Ended Ended Ended
June 30, June 30, June 30, June 30,
2002 2001 2002 2001
--------------- -------------- -------------- --------------
Net Sales $ 252,316 $ 707,314 $ 756,948 $ 1,174,620
Cost of goods sold 649,778 366,134 1,029,890 749,314
--------------- -------------- -------------- --------------
Gross margin (397,462) 341,180 (272,942) 425,306
Operating expenses
Selling, general & administrative 751,467 472,480 1,236,800 865,910
Research, engineering and development 146,719 164,912 290,958 301,191
Equity-based compensation charge - - - 140,000
--------------- -------------- -------------- --------------
Operating loss (1,295,648) (296,212) (1,800,700) (881,795)
Other non operating income (expenses)
Interest income 780 17,083 3,052 39,967
Interest expense (932) (370) (932) (864)
Provision for litigation loss (315,000) - (315,000) (550,000)
--------------- -------------- -------------- --------------
NET LOSS $ (1,610,800) $ (279,499) $ (2,113,580) $ (1,392,692)
=============== ============== ============== ==============
NET LOSS PER SHARE - BASIC AND DILUTED $ (0.17) $ (0.04) $ (0.23) $ (0.19)
=============== ============== ============== ==============
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING 9,673,780 7,469,649 8,999,146 7,469,970
The accompanying notes are an integral part of these financial statements
-3-
AMPLIDYNE, INC.
STATEMENTS OF CASH FLOWS
(UNAUDITED)
Three Three Six Six
Months Months Months Months
Ended Ended Ended Ended
June 30, June 30, June 30, June 30,
2002 2001 2002 2001
----------- ----------- ----------- -----------
Cash flows from operating activities:
Net Loss $ (1,610,800) $ (279,499) $ (2,113,580) $ (1,392,692)
Adjustments to reconcile net loss to net cash
Depreciation and amortization 7,115 32,805 25,434 65,610
Litigation loss 315,000 - 315,000 550,000
Provision for inventory write-down 233,995 - 233,995 -
Stock compensation charge - - - 140,000
Other costs paid with restricted common stock 4,201 - 4,201 -
Changes in assets and liabilities
Accounts receivable 174,852 (146,546) 96,762 (184,036)
Inventories 118,909 (130,127) 17,360 (277,514)
Prepaid expenses and other assets 15,963 13,500 19,464 92,985
Accounts payable and accrued expense 27,781 171 34,944 (96,113)
------------- ------------- ------------- -------------
Total adjustments 897,816 (230,197) 747,160 290,932
------------- ------------- ------------- -------------
Net cash used for operating activities (712,984) (509,696) (1,366,420) (1,101,760)
------------- ------------- ------------- -------------
Cash flows from investing activities:
Loan receivable officer - 11,996 (13,000) (3,003)
Change in security deposits 7,038 - 7,038
Purchase of property and equipment - - - (2,360)
------------- ------------- ------------- -------------
Net cash used for investing activities 7,038 11,996 (5,962) (5,363)
------------- ------------- ------------- -------------
Cash flows from financing activities:
Payment of lease obligations (6,210) (983) (9,271) (6,797)
Subscriptions receivable preferred stock - net - - 180,000 -
Balance due on financing costs (80,000) - - -
Proceeds from issuance of stock and exercise of - -
options and warrants, net of costs - 526,500 540,000 526,500
------------- ------------- ------------- -------------
Net cash provided by financing activities (86,210) 525,517 710,729 519,703
------------- ------------- ------------- -------------
NET INCREASE (DECREASE) IN CASH (792,156) 27,817 (661,653) (587,420)
Cash at beginning of period 828,443 1,350,905 697,940 1,966,142
------------- ------------- ------------- -------------
Cash and cash equivalents at end of period $ 36,287 $ 1,378,722 $ 36,287 $ 1,378,722
============= ============= ============= =============
Supplemental disclosures of cash flow information
Cash paid for: Interest $ 356 $ 370 $ 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 SIX MONTHS ENDED JUNE 30, 2002
Preferred Stock Common Stock Additional
----------------------------- ----------------------------- Paid-in
Shares Par Value Shares Par Value Capital
------------- -------------- ------------- -------------- --------------
Balance at December 31, 2000 - $ - 7,463,841 $ 747 $ 20,212,154
Net loss for the year ended December 31, 2001
Cost of litigation to be settled by
the issuance of common stock 500,000
Financing cost associated with warrants
extended and shares issued 1,820 140,000
Issuance of common stock, net of costs 415,000 42 559,708
Issuance of preferred stock net of costs 55,000 6 494,994
Issuance of common stock for services
rendered by third party 12,000 1 14,639
------------- -------------- ------------- -------------- --------------
Balance at Dec. 31, 2001 55,000 6 7,892,661 790 21,921,495
Net loss for the six months ended June 30, 2002
Collection of subscription receivable
Conversion of preferred stock to common stock (55,000) (6) 701,194 70 (64)
Issuance of common stock in settlement of
class action 324,486 32 (32)
Issuance of restricted common stock
in lieu of expenses 8,159 1 4,200
Issuance of common stock, net of cost 750,000 75 539,925
------------- -------------- ------------- -------------- --------------
Balance at June 30, 2002 - $ - 9,676,500 $ 968 $ 22,465,524
============= ============== ============= ============== ==============
Accumulated Subscriptions
Deficit Receivable Total
-------------- -------------- ----------
Balance at December 31, 2000 $ (17,544,770) $ - $2,668,131
Net loss for the year ended December 31, 2001 (2,024,882) (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 559,750
Issuance of preferred stock net of costs (180,000) 315,000
Issuance of common stock for services
rendered by third party 14,640
-------------- -------------- ----------
Balance at Dec. 31, 2001 (19,569,652) (180,000) 2,172,639
(UNAUDITED)
Net loss for the six months ended June 30, 2002 (2,113,580) (2,113,580)
Collection of subscription receivable 180,000 180,000
Conversion of preferred stock to common stock -
Issuance of common stock in settlement of -
class action
Issuance of restricted common stock 4,201
in lieu of expenses
Issuance of common stock, net of cost 540,000
-------------- -------------- ----------
Balance at June 30, 2002 $ (21,683,232) $ - $ 783,260
============== ============== ===========
The accompanying notes are an integral part of these financial statements
-5-
AMPLIDYNE, INC.
NOTES TO FINANCIAL STATEMENTS
JUNE 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 month periods ended June 30, 2002 and June 30, 2001,
(b) the financial position at June 30, 2002, (c) the statements of cash flows
for the three and six month periods ended June 30, 2002 and June 30, 2001, and
(d) the changes in stockholders' equity for the six month period ended June 30,
2002 have been made. The results of operations for the six months ended June 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 $2,113,580 for the
six-month period ended June 30, 2002 and has limited cash reserves, raising
substantial doubt as to its ability to continue as a going concern.
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 June 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
JUNE 30, 2002
NOTE C - STOCKHOLDERS' EQUITY - CONTINUED
-----------------------------------------------
At June 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
JUNE 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 June
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 and, if the motion is denied,
to file an 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 of the motion for a new trial or
the outcome on appeal. Failure by the Company to succeed on the motion for a new
trial or on 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
JUNE 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 December 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 August 14, 2002, the Company has successfully
negotiated one property and has incurred no liability to pay any additional sums
under the contract.
NOTE G - LIQUIDITY
---------------------
The Company has incurred losses of $(2,113,580) for the six months ended June
30, 2002. 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
JUNE 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:
Six Months Ended June 30,
---------------------------------------- Year Ended
Sales-external 2002 2001 December 31, 2001
----------------- ---------------------- ------------------ -----------------
Amplifier $ 406,708 $ 1,003,677 $1,901,702
Internet
business and
broadband
solutions 350,240 171,443 303,727
---------------------- ------------------ ----------------
$ 756,948 $ 1,174,620 $2,205,429
====================== ================== =================
December
Inventory June 30, 2002 31, 2001
----------------- ------------------ ------------------
Amplifier $ 467,765 $ 802,964
Internet
business and
broadband
solutions 462,562 378,718
------------------- ------------------
Total $ 930,327 $1,181,682
=================== ==================
-10-
AMPLIDYNE, INC.
NOTES TO FINANCIAL STATEMENTS
JUNE 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 JUNE 30, 2002 COMPARED TO THREE
MONTHS ENDED JUNE 30, 2001.
Net sales for the three month period ended June 30, 2002 were $252,316 while net
sales for the three month period ended June 30, 2001 were $756,948. Sales
decreased mainly due to the general business conditions of the
telecommunications industry.
Sales of amplifiers were approximately 57% of total sales. The Ampwave
high-speed wireless Internet products and broadband solutions accounted for
approximately 43% of total sales.
Gross margin for the three months ended June 30, 2002 amounted to a loss of
($397,462), including an inventory write-down of $233,995 (loss of 1.6 times
sales) compared to $341,180 (gross profit of 48% of sales) for the three months
ended June 30, 2001. Excluding the inventory write-down, the gross margin for
the three months ended June 30, 2002 was a loss of ($163,467) or 64.8% 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 $751,467 and $472,480 for the
three months ended June 30, 2002 and 2001, respectively. The increase of
$278,987 (59%) is mainly due to: an increase in bad debts of approximately
$113,000; and increase in professional fees of approximately $41,000; an
increase in staffing at the sales levels (approximately $90,000 increase) and;
commissions paid to outside sales reps (approximately $35,000).
Research, engineering, and development costs remained relatively constant for
the three months ended June 30, 2002 ($146,719) compared to the corresponding
three month period of 2001 ($164,912).
The interest income decreased for the three months ended June 30, 2002
compared to 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 ($1,610,800)
or ($.17) per share and ($279,499) or ($.04) per share for the three months
ended June 30, 2002 and 2001, respectively.
RESULTS OF OPERATIONS - SIX MONTHS ENDED JUNE 30, 2002 COMPARED TO SIX
MONTHS ENDED JUNE 30, 2001.
Net sales for the six month period ended June 30, 2002 were $756,948 while
sales for the six months ended June 30, 2000 were $1,174,620. Sales decreased
due to a decline in the Company's sales of cellular amplifier equipment caused
mainly due to the general business conditions of the telecommunications
industry.
-11-
AMPLIDYNE, INC.
JUNE 30, 2002
Gross margin for the six months ended June 30, 2002 amounted to a loss of
($272,942), including an inventory write-down of $233,995 (a loss of 36% of
sales), compared to $425,306 gross profit (36% of sales) for the corresponding
six months of 2001. Excluding the inventory write-down, the gross margin for
the six months ended June 30, 2002 was a loss of ($38,947) or 5.1% 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 $1,236,800 and $865,910 for
the six months ended June 30, 2002 and 2001, respectively. The increase of
$370,890 (43%) is mainly due to: an increase in bad debts of approximately
$113,000; and increase in professional fees of approximately $53,000; an
increase in staffing at the sales levels (approximately $101,000 increase);
officer salary increases of approximately $30,000; commissions paid to outside
sales reps of approximately $35,000 and; aggregate other expense increases of
$39,000.
Research, engineering, and development costs remained relatively constant for
the six months ended June 30, 2002 ($290,958) from the corresponding six month
period of 2001 ($301,191).
Equity-based compensation primarily represents the value of the modification of
warrants in 2001.
The Company has provided 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 ($2,113,580)
or ($.23) per share and ($1,392,692) or ($.19) per share for the six months
ended June 30, 2002 and 2001, respectively.
LIQUIDITY AND CAPITAL RESOURCES
At June 30, 2002, the Company had cash and cash equivalents of $36,287 and had
working capital of $609,149.
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. Because of this, as
well as the losses and limited cash reserves, there is substantial doubt as to
the Company's ability to continue as a going concern. See also Notes B and G
regarding liquidity matters.
In connection with the complaint brought by High Gain Antenna Co., Ltd. of
Korea, failure by the Company to succeed on the motion for a new trial or on
appeal 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.
JUNE 30, 2002
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
See Note E (Nos. 3 and 4) to the Company's financial statements set forth
in Part I.
ITEM 2. CHANGE IN SECURITIES
During the second quarter ended June 30, 2002, the Company issued 8,159 shares
of common stock to a customer in lieu of cash. The shares were issued in
reliance on Section 4(2) of the Securities Act of 1933, as amended.
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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: August 16, 2002
By: /s/ Devendar S. Bains
------------------------
Name: Devendar S. Bains
Title: Chief Executive
Officer, Treasurer,
Principal Accounting
Officer and Director
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