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 MARCH 31, 2003.
[ ] 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 April 30, 2003 was 10,376,500.
AMPLIDYNE, INC.
FORM 10-QSB
THREE MONTHS ENDED MARCH 31, 2003
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............................6-11
Item 2 Management's Discussion and Analysis of Financial
Condition and Results of Operations.....................12-14
Item 3. Controls and Procedures....................................14
PART II - OTHER INFORMATION
Item 1. Legal Proceedings..........................................15
Item 2. Change in Securities.......................................15
Signatures..........................................................16
Certification.......................................................17
Exhibit 99.1........................................................18
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
AMPLIDYNE, INC.
BALANCE SHEETS (UNAUDITED)
ASSETS
March 31 December 31
2003 2002
----------- -----------
CURRENT ASSETS
Cash and cash equivalents $ 19,786 $ --
Accounts receivable, net of allowance for doubtful accounts of
$143,000 and $143,000 in 2003 and 2002, respectively 406,410 440,506
Inventories 924,736 926,713
Loan receivable - officer -- --
Prepaid expenses and other 28,859 24,616
----------- -----------
Total current assets 1,379,791 1,391,835
PROPERTY AND EQUIPMENT - AT COST
Machinery and equipment 725,629 725,629
Furniture and fixtures 43,750 43,750
Autos and trucks 66,183 66,183
Leasehold improvements 8,141 8,141
----------- -----------
843,703 843,703
Less accumulated depreciation and amortization (768,033) (760,633)
----------- -----------
75,670 83,070
----------- -----------
SECURITY DEPOSITS AND OTHER NON-CURRENT ASSETS 45,068 45,068
----------- -----------
$ 1,500,529 $ 1,519,973
=========== ===========
The accompanying notes are an integral part of these financial statements
-1-
AMPLIDYNE, INC.
BALANCE SHEETS (UNAUDITED)
LIABILITIES AND STOCKHOLDERS' EQUITY
March 31 December 31,
2003 2002
------------ ------------
CURRENT LIABILITIES
Overdraft $ -- $ 11,939
Current maturities of lease obligations -- 2,041
Customer advances 100,000 --
Accounts payable 359,953 410,445
Accrued expenses 185,244 155,027
Accrued settlement of litigation 220,000 295,000
Loans payable - officers 129,308 99,308
------------ ------------
994,505 973,760
Convertible notes payable 20,000 --
STOCKHOLDERS' EQUITY
Common stock - authorized, 25,000,000 shares of $.0001 par value;
shares 10,376,500 and 9,676,500 shares issued and outstanding
at March 31, 2003 and December 31,
2002, respectively 1,038 968
Additional paid-in capital 22,494,854 22,494,924
Accumulated deficit (22,009,868) (21,949,679)
------------ ------------
486,024 546,213
------------ ------------
$ 1,500,529 $ 1,519,973
============ ============
The accompanying notes are an integral part of these financial statements
-2-
AMPLIDYNE, INC.
STATEMENTS OF OPERATIONS (UNAUDITED)
THREE MONTHS ENDED MARCH 31
Three Months Ended
March 31
2003 2002
------------ ------------
Net sales $ 509,608 $ 504,632
Cost of goods sold 278,857 380,112
------------ ------------
Gross profit 230,751 124,520
Operating expenses
Selling, general and administrative 193,731 485,333
Research, engineering and development 97,142 144,239
------------ ------------
Operating loss (60,122) (505,052)
Nonoperating income (expenses)
Interest income and other income 2 2,272
Interest expense (69) --
------------ ------------
Loss before income taxes (60,189) (502,780)
Provision for income taxes -- --
------------ ------------
NET LOSS $ (60,189) $ (502,780)
============ ============
Net loss per share - basic and diluted $ (0.01) $ (0.06)
============ ============
Weighted average number of shares outstanding 10,143,167 8,327,232
============ ============
The accompanying notes are an integral part of these financial statements
-3-
AMPLIDYNE, INC.
STATEMENTS OF CASH FLOWS (UNAUDITED)
THREE MONTHS ENDED MARCH 31
Three Months Ended
March 31
---------------------------
2003 2002
--------- ---------
Cash flows from operating activities:
Net Loss $ (60,189) $(502,780)
--------- ---------
Adjustments to reconcile net loss to net cash used in operating activities
Depreciation and amortization 7,400 18,319
Deferred officer compensation 20,500 --
Changes in assets and liabilities
Accounts receivable 34,096 (78,090)
Inventories 1,977 (101,549)
Prepaid expenses and other assets (4,243) 3,501
Customer advances 100,000 --
Accounts payable and accrued expense (95,275) 7,163
--------- ---------
Total adjustments 64,455 (150,656)
--------- ---------
Net cash provided (used) for operating activities 4,266 (653,436)
--------- ---------
Cash flows from investing activities:
Officer loans -- (13,000)
--------- ---------
Net cash provided by (used for) investing activities -- (13,000)
--------- ---------
Cash flows from financing activities:
Payment of lease obligations (2,041) (3,061)
Officer loans 9,500 --
Proceeds from convertible promissory note 20,000 --
Balance due on financing costs -- 80,000
Proceeds from sale of common stock, net of costs -- 540,000
Subscriptions receivable preferred stock - net -- 180,000
--------- ---------
Net cash provided by financing activities 27,459 796,939
--------- ---------
NET INCREASE (DECREASE) IN CASH 31,725 130,503
Cash (overdraft) and cash equivalents beginning of period (11,939) 697,940
--------- ---------
Cash and cash equivalents at end of period $ 19,786 $ 828,443
========= =========
Supplemental disclosures of cash flow information:
Cash paid for: Interest $ -- $ 576
Income taxes $ -- $ --
The accompanying notes are an integral part of these financial statements
-4-
AMPLIDYNE, INC.
STATEMENT OF STOCKHOLDERS' EQUITY (UNAUDITED)
YEAR ENDED DECEMBER 31, 2002 AND THREE MONTHS ENDED MARCH 31, 2003
Preferred Stock Common Stock
------------------------ ------------------------
Shares Par Value Shares Par Value
-------- ---------- --------- ----------
BALANCE AT DECEMBER 31, 2001 55,000 $ 6 7,892,661 $ 790
-------- ---------- --------- ----------
Net loss for the year ended December 31, 2002
Cost of litigation to be settled by the issuance
of common stock
Collection of subscription receivable
Issuance of common stock in settlement of class action 324,486 32
Issuance of common stock, net of costs 750,000 75
Conversion of preferred stock to common stock (55,000) (6) 701,194 70
Issuance of common stock for services rendered by third party 8,159 1
-------- ---------- --------- ----------
BALANCE AT DECEMBER 31, 2002 -- -- 9,676,500 968
======== ========== ========= ==========
Net loss for the three months ended March 31, 2003
Issuance of common stock in connection with
litigation settlement 700,000 70
-------- ---------- --------- ----------
BALANCE AT MARCH 31, 2003 -- $ -- 10,376,500 $ 1,038
======== ========== ========= ==========
Additional
Paid-In Accumulated Subscriptions
Capital Deficit Receivable Total
------------ ------------ ------------ ------------
BALANCE AT DECEMBER 31, 2001 $ 21,921,495 $(19,569,652) $ (180,000) $ 2,172,639
Net loss for the year ended December 31, 2002 (2,380,027) (2,380,027)
Cost of litigation to be settled by the
issuance of common stock 29,400 29,400
Collection of subscription receivable (180,000) (180,000)
Issuance of common stock in settlement of class action (32) --
Issuance of common stock, net of costs 539,925 540,000
Conversion of preferred stock to common stock (64) --
Issuance of common stock for services rendered
by third party 4,200 -- -- 4,201
------------ ------------ ------------ ------------
BALANCE AT DECEMBER 31, 2002 22,494,924 (21,949,679) -- 546,213
Net loss for the three months ended March 31, 2003 (60,189) (60,189)
Issuance of common stock in connection with
litigation settlement (70) --
------------ ------------ ------------ ------------
BALANCE AT MARCH 31, 2003 $ 22,494,854 $(22,009,868) $ -- $ 486,024
============ ============ ============ ============
The accompanying notes are an integral part of these financial statements
-5-
AMPLIDYNE, INC.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
MARCH 31, 2003
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 March 31, 2003 and 2002 (b) the
financial position at March 31, 2003 (c) the statements of cash flows for the
three month period ended March 31, 2003 and 2002 , and (d) the changes in
stockholders' equity for the three month period ended March 31, 2003 have been
made. The results of operations for the three months ended March 31, 2003 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, 2002 included in the Company's Form
10-KSB filed with the Securities and Exchange Commission on April 15, 2003.
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 F, the Company incurred losses of
$60,189 for the three months ended March 31, 2003, has limited cash reserves and
has seen its working capital decline by $32,789 to $385,286 since the beginning
of the fiscal year. Current liabilities exceed cash and receivables by $568,309
indicating that the Company will have difficulty meetings its financial
obligations for the balance of this 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 F, 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.
-6-
AMPLIDYNE, INC.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
MARCH 31, 2003
NOTE C - STOCKHOLDERS' EQUITY
At March 31, 2003, the following 945,000 warrants, remained
outstanding:
(1) 20,000 exercisable at $1.00 through May 2010
(2) 20,000 exercisable at $7.00 through December 2004
(3) 30,000 exercisable at $6.00 through November 2004
(4) 50,000 exercisable at $2.00 through December 2004
(5) 50,000 exercisable at $4.00 through December 2004
(6) 16,000 exercisable at $1.75 through December 2004
(7) 41,500 exercisable at $1.80 through July 31, 2004
(8) 207,500 exercisable at $3.00 through July 31, 2004
(9) 55,000 exercisable at $1.20 through September 30, 2004
(10) 300,000 exercisable at $2.00 through December 31, 2005
(11) 75,000 exercisable at $.96 through March 2007
(12) 80,000 exercisable at $1.50 through December 2004.
At March 31, 2003, the Company had employee stock options outstanding
to acquire 2,251,000 shares of common stock at exercise prices of $0.15 to
$4.00.
During the first quarter ended March 31, 2003, the Company issued
700,000 shares of the Company's restricted common stock to High Gain Antenna
Co., Ltd. of Korea (see Note E.4.) in connection with the settlement of the
litigation.
In March 2003, two stockholders loaned the Company $10,000 each under a
Convertible Promissory Note due in March 2005, with interest, due at maturity,
of 6%. The note is convertible into restricted common stock at the rate of $.10
per share.
During the first quarter ended March 31, 2003, the Company re-priced
and extended employee stock options to certain employees as follows: officers
and directors, 1,150,000 options re-priced from $4.00 to $0.15 and extended to
May 2006; all other employees 145,000 options re-priced from $4.00 to $0.15 and
extended to May 2006. Additionally, the Vice President of Operations has been
granted an additional 200,000 options at $0.15 and expiring in May 2006.
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.
-7-
AMPLIDYNE, INC.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
MARCH 31, 2003
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 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 March
31, 2003.
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
as of December 31, 2000. The Company has not received any required documents and
releases from ENS. The financial statements do not include any provision for
this settlement.
3. The Company is subject to an SEC formal order of private investigation
relating to the subject matter of the class action lawsuit that was commenced in
1999 and settled in 2001. The Company has responded to the SEC requests. In
April 2003 the SEC indicated that it intends to file a civil complaint against
the Company and Devendar S. Bains. The Company and Mr. Bains are negotiating
with the SEC in an attempt to reach a consensual resolution of the matter.
4. 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 had filed a motion in the Law Division for a new trial, which was denied
and gave notice of appeal to file an appeal of the verdict and judgment to the
Superior Court of New Jersey, Appellate Division. Management latter determined
that pursuing the appeal would not be in the best interest of the Company and
its shareholders.
In January 2003, the Company entered into a Stipulation of Settlement
and Release before the Superior Court of New Jersey, Somerset County. The
settlement stipulates that the Company pay a total of $200,000 plus 700,000
shares of restricted common stock of the Company valued by the agreement at
$105,000 (management has determined that the discounted value of the 700,000
restricted shares was
-8-
AMPLIDYNE, INC.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
MARCH 31, 2003
$29,400 in January 2003 based on quoted market price of $0.07 per share
discounted for lack of marketability). The stipulation calls for an initial
payment of $75,000 (paid in March 2003) with the remaining balance payable in
$25,000 increments on the following dates: June 2, 2003, August 31, 2003,
November 29, 2003, February 27, 2004 and May 28, 2004. The record judgement of
$400,000 shall remain until the payment obligations are made in full. In the
event of default, the plaintiff shall have the right to execute the judgement
after crediting $105,000 for the agreed value of the shares issued plus any
payments made pursuant to the settlement. Accordingly, failure by the Company to
timely meet the settlement terms will have a material adverse effect on the
Company's financial position and prospects.
5. AMPLIDYNE, INC. V. WAYNE FOGEL, DIGITAL COMMUNICATIONS NETWORK, INC. AND
INTERNET NETWORK CORPORATION
On May 30, 2002, the Company filed a two count lawsuit against the
above mentioned defendants in the Superior Court of New Jersey, Law Division,
Somerset 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 United States District Court of New Jersey but
later transferred back to the United States Bankruptcy Court and then
transferred to 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. In January 2003, the matter was transferred to the United
States District Court for the Middle District of Florida. The defendants sought
a further transfer to the United States Bankruptcy Court for the Middle District
of Florida, but such motion was denied. 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.
NOTE F - LIQUIDITY
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. The Company has incurred losses of $60,189 and $502,780 for the
quarters ended March 31, 2003 and 2002, respectively.
With little remaining cash and no near term prospects of private
placements, options or warrant exercises and reduced revenues, management
believes that the Company will have great difficulty meeting its working capital
and litigation settlement obligations over the next 12 months. The Company is
presently dependent on cash flows generated from sales and loans from officers
to meet our obligations. Our failure to consummate a merger with an appropriate
partner or to substantially improve our revenues will have serious adverse
consequences and, accordingly, there is substantial doubt in our ability to
remain in business over the next 12 months. There can be no assurance that any
financing will be available to the Company on acceptable terms, or at all. If
adequate funds are not available, the Company may be required to delay, scale
back or eliminate its research, engineering and development or manufacturing
programs or obtain funds through arrangements with partners or others that may
require
-9-
AMPLIDYNE, INC.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
MARCH 31, 2003
the Company to relinquish rights to certain of its technologies or potential
products or other assets. Accordingly, the inability to obtain such financing
could have a material adverse effect on the Company's business, financial
condition and results of operations.
Management's plans for dealing with the foregoing matters include:
o Increasing sales of its high speed internet connectivity products
through both individual customers, strategic alliances and mergers.
o Decreasing the dependency on certain major customers by aggressively
seeking other customers in the amplifier markets;
o 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;
o Reducing costs through a more streamlined operation by using
automated machinery to produce components for our products;
o Deferral of payments of officers' salaries, as needed;
o 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;
o Reducing overhead costs and general expenditures.
o Merging with another company to provide adequate working capital and
jointly develop innovative products.
NOTE G - OTHER COMMENTS
1. Officer Loans
As of March 31, 2003, the Company owes $88,808 to the Chief Executive
Officer for loans and unpaid salaries. During the three months ended March 31,
2003, the Chief Executive Officer advanced $73,000 to the Company and was repaid
$70,000. Additionally, salaries of $15,500 were deferred for this quarter
2. Advance payments from customer
In March 2003, a customer advanced $100,000 to the Company for future
orders. These orders began shipping in April 2003.
-10-
AMPLIDYNE, INC.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
MARCH 31, 2003
NOTE H - SEGMENT INFORMATION
The Company commenced its wireless Internet connectivity business in the summer
of 2000. The Company does not measure its operating results, assets or
liabilities by segment. However, the following limited segment information is
available:
Three Months Three Months
Ended Ended Year Ended
March 31 March 31 December 31,
2003 2002 2002
---------- ---------- ----------
Sales - external
Amplifier $ 445,037 262,408 $ 992,361
Internet business 64,571 242,224 621,371
---------- ---------- ----------
$ 509,608 $ 504,632 $1,613,732
========== ========== ==========
Inventory
Amplifier $ 442,069 $ 752,152 $ 441,654
Internet business 482,667 531,079 485,059
---------- ---------- ----------
$ 924,736 $1,283,231 $ 926,713
========== ========== ==========
-11-
AMPLIDYNE, INC.
MARCH 31, 2003
PART I - FINANCIAL INFORMATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS - THE THREE
MONTHS ENDED MARCH 31, 2003 COMPARED TO THREE MONTHS ENDED MARCH 31, 2002.
Revenues for the three months ended March 31, 2003 increased by $4,976 from
$504,632 to $509,608, or 1% compared to the three months ended March 31, 2002.
Coupled with the staff reductions and other aggressive cost cuts, the first
quarter losses were significantly reduced compared with the first 3 quarters of
last year.
The majority of the amplifier sales for the three months ended March 31, 2003
were obtained from the Wireless Local Loop amplifier products to a major
European customer. The Company has also supplied 3.5GHz linear amplifiers to its
major North American customer.
The Company has continued to develop its IMT 2000 amplifiers for the worldwide
3G market, however, deployment of this technology has been delayed. The Company
has focused its sales and marketing efforts in the more stable United States,
European and Canadian markets.
Cost of sales was $278,857 or 55% of sales compared to 75% during the same
period for 2002. The improvement in gross margin was principally due to
increased product demand and improved manufacturing efficiencies. The Company is
continuing to assess cost reduction of its products and sales volume increases
to improve gross margins in 2003.
Selling, general and administrative expenses (excluding stock based
compensation) decreased in 2003 by $291,602 to $193,731 from $485,333, in 2002.
Expressed as a percentage of sales, the selling, general and administrative
expenses (excluding stock based compensation) were 38% in 2003 and 96% in 2002.
The principal factors contributing to the decrease in selling, general and
administrative expenses were related to the effects of our cost cutting program
implemented in the 3rd and 4th quarters of 2002. In the quarter ended March 31,
2003, we continued to maintain the lower staffing and overhead levels that we
instituted in 2002.
Research, engineering and development expenses were 19% of net sales for the
quarter ended March 31, 2003 compared to 29% in 2002. In 2003 and 2002, the
principal activity of the business related to the design and production of
product for OEM manufacturers, particularly for the IMT 2000 and 3.5 GHz single
channel products and refinements to the High Speed Internet products. The
research, engineering and development expenses consist principally of salary
cost for engineers and the expenses of equipment purchases specifically for the
design and testing of the prototype products. The Company's research and
development efforts are influenced by available funds and the level of effort
required by the engineering staff on customer specific projects.
The Company had interest income and other income in 2002 of $2,272 due to influx
of new capital during 2000 and 2001 from our private placements and exercise of
warrants and options. Interest income went down to $NIL in 2003 because our cash
balances which we have historically temporarily invested in
-12-
AMPLIDYNE, INC.
MARCH 31, 2003
interest bearing accounts have been fully depleted.
As a result of the foregoing, the Company incurred net losses of $(60,189) or
$(0.01) per share for the year ended March 31, 2003 compared with net losses of
$(502,780) or $(0.06) per share for the same period in 2002.
LIQUIDITY AND CAPITAL RESOURCES
Liquidity refers to our ability to generate adequate amounts of cash to meet our
needs. We have been generating the cash necessary to fund our operations from
continual loans from the President and Chief Executive Officer of the Company,
Devendar Bains. We have incurred a loss in each year since inception. It is
possible that we will incur further losses, that the losses may fluctuate, and
that such fluctuations may be substantial. As of March 31, 2003, we had an
accumulated deficit of $22,009,868. Potential immediate sources of liquidity are
loans from Mr. Bains. Another potential source of liquidity is the sale of
restricted shares of our common stock, but there are no immediate plans for such
sale.
As of March 31, 2003, our current liabilities exceeded our cash and receivables
by $568,309. Our current ratio was 1.39 to 1.00, but our ratio of accounts
receivable to current liabilities was only 0.43 to 1.00. This indicates that we
will have difficulty meeting our obligations as they come due. We are carrying
$924,736 in inventory, of which $639,135 represents component parts. Based on
first quarter usage, we are carrying 356 days worth of parts inventory. Because
of the lead times in our manufacturing process, we will likely need to replenish
many items before we use everything we now have in stock. Accordingly, we will
need more cash to replenish our component parts inventory before we are able
realize cash from all of our existing inventories.
As of March 31, 2003, we had cash of $19,786 compared to an overdraft of $11,939
at December 31, 2002. Overall our cash and cash equivalents increased $31,725
during 2003. Our cash used for operating actives was $4,266 We received loans
and deferred salary payments to officer/stockholders of $9,500 and proceeds from
the issuance of convertible promissory notes of $20,000.
The allowance for doubtful accounts on trade receivables increased form $143,000
(25% of accounts receivable of $583,506) in 2002 to $143,000 (26% of accounts
receivable of $549,410) in 2003. Because of our relatively small number of
customers and low sales volume, accounts receivable balances and allowances for
doubtful accounts do not reflect a consistent relationship to sales. We
determine our allowance for doubtful accounts based on a specific
customer-by-customer review of collectiblity.
Our inventories decreased by $1,977 to $924,736 in 2003 compared to $926,713 at
December 31, 2002, a decrease of NIL%
The Company has several lease obligations for its premises and certain equipment
and an automobile requiring minimum monthly payments of approximately $5,900
through 2004. Although the Company did not convert salaries to officers through
the issuance of Common Stock in 2003 or 2002, it may to do so in 2003. To help
alleviate the cash flow difficulties, the Chief Executive Officer and the Vice
President of Operations agreed to defer salaries of $15,500 and $5,000,
respectively.
The Company continues to explore strategic relationships with ISP's, customers
and others, which could involve jointly developed products, revenue-sharing
models, investments in or by the Company, or other
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AMPLIDYNE, INC.
MARCH 31, 2003
arrangements. There can be no assurance that a strategic relationship can be
consummated.
In the past, the officers of the Company have deferred a portion of their
salaries or provided loans to the Company to meet short-term liquidity
requirements. Where possible, the Company has issued stock or granted warrants
to certain vendors in lieu of cash payments, and may do so in the future. There
can be no assurance that any additional financing will be available to the
Company on acceptable terms, or at all. If adequate funds are not available, the
Company may be required to delay, scale back or eliminate its research,
engineering and development or manufacturing programs or obtain funds through
arrangements with partners or others that may require the Company to relinquish
rights to certain of its technologies or potential products or other assets.
Accordingly, the inability to obtain such financing could have a material
adverse effect on the Company's business, financial condition and results of
operations.
With little remaining cash and no near term prospects of private placements,
options or warrant exercises and reduced revenues, we believe that we will have
great difficulty meeting our working capital and litigation settlement
obligations over the next 12 months. We are presently dependent on cash flows
generated from sales and loans from officers to meet our obligations. Our
failure to consummate a merger. or substantially improve our revenues will have
serious adverse consequences and, accordingly, there is substantial doubt in our
ability to remain in business over the next 12 months. There can be no assurance
that any financing will be available to the Company on acceptable terms, or at
all. If adequate funds are not available, the Company may be required to delay,
scale back or eliminate its research, engineering and development or
manufacturing programs or obtain funds through arrangements with partners or
others that may require the Company to relinquish rights to certain of its
technologies or potential products or other assets. Accordingly, the inability
to obtain such financing could have a material adverse effect on the Company's
business, financial condition and results of operations.
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.
MARCH 31, 2003
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
See Note E to the Company's financial statements set forth in Part I.
ITEM 2. CHANGE IN SECURITIES
During the first quarter ended March 31, 2003, the Company issued 700,000 shares
of the Company's restricted common stock to High Gain Antenna Co., Ltd. of Korea
(see Note E.4.) in connection with the settlement of the litigation.
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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: May 16, 2003 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
May 16, 2003
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