SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
REPORT ON FORM 10-KSB
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 2001
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COMMISSION FILE NO. 0-21931
AMPLIDYNE, INC.
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(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 22-3440510
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(STATE OF OR OTHER JURISDICTION (IRS EMPLOYER IDENTIFICATION NO.)
OF INCORPORATION OR ORGANIZATION)
59 LAGRANGE STREET
RARITAN, NEW JERSEY 08869
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(ADDRESS OF PRINCIPAL (ZIP CODE)
EXECUTIVE OFFICES)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (908) 253-6870
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT: NONE.
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SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
COMMON STOCK, PAR VALUE $.0001 PER SHARE
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(TITLE OF CLASS)
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Sections 13 or 15 (d) of the Securities Exchange Act of
1934 during the preceding 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
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Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of the Regulation S-B is not contained in this form, and no disclosure will
be contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB. [X]
Issuer's revenues for its most recent fiscal year were $2,205,429.
The aggregate market value of the voting stock held by non-affiliates of
the Registrant, computed by reference to the closing price of such stock as of
March 31, 2002, was approximately $7,440,569.
Number of shares outstanding of the issuer's common stock, as of March 31,
2002 was 9,668,341.
Documents Incorporated by Reference: None
PART I
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ITEM 1. BUSINESS
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GENERAL
AMPLIFIER PRODUCTS
Amplidyne, Inc., a Delaware corporation ("Amplidyne" or the "Company")
designs, manufactures and sells ultra linear power amplifiers and related
subsystems to the worldwide wireless, local loop and satellite uplink
telecommunications market. These power amplifiers, which are a key component in
cellular base stations, increase the power of radio frequency ("RF") and
microwave signals with low distortion, enabling the user to significantly
increase the quality and quantity of calls processed by new and existing
cellular base stations. The Company's wireless telecommunications products
consist of solid-state, RF and microwave, single and multi-carrier power
amplifiers that support a broad range of analog and digital transmission
protocols including advanced mobile phone services ("AMPS"), code division
multiple access ("CDMA"), time division multiple access ("TDMA"), total access
communication systems ("TACS"), extended total access communication systems
("ETACS"), nordic mobile telephone ("NMT"), global system for mobile
communications ("GSM"), digital communication service at 1800 MHz ("DCS-1800")
and wideband code division multiple access 3G communications ("W-CDMA"). The
products are marketed to the cellular, wireless local loop and personal
communication systems ("PCS") segments of the wireless telecommunications
industry.
In the year 2001, the Company developed new amplifier products for the IMT
2000 standard for deployment of the 3G (Third Generation) system worldwide. The
Company has also developed amplifier products for the 3.5 GHZ digital data
transmission systems that are presently being deployed by some major OEM's in
North America. The Company also developed new amplifier products such as the ALC
amplifier for its high-speed wireless Internet products. The Company has had
its test site in Sparta New Jersey under continuous operation for more than 2
years. The Company has been able to get reliable and successful service under
various and severe weather including rain and snow.
Amplidyne has several products covered by a patent issued by the United
States Patent and Trademark Office for Pre-Distortion and Pre-Distortion
Linearization which, the Company believes, is more effective in reducing
distortion than other currently available technologies. In addition to
Company's product line of single channel power amplifiers which are currently
utilized by the wireless communications industry, the Company also develops,
designs and manufactures Multi-carrier Linear Power Amplifiers ("MCLPAs").
MCLPAs combine the performance capabilities of many single carrier amplifiers
into one unit, eliminating the need for numerous single carrier amplifiers and
the corresponding unnecessary space occupied by the cavity filters encasing the
amplifiers. Management believes that with its (i) proprietary technology (which
effectively reduces distortion), (ii) technological expertise and (iii)
established product line consisting of ultra linear single channel power
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amplifiers, the Company can achieve similar performance with its MCLPAs. The
Company's linear power amplifiers and MCLPAs utilizes the Company's patented
predistortion and proprietary feed forward technology which amplifies many
channels with minimal distortion at the same time with one product.
HIGH SPEED WIRELESS INTERNET PRODUCTS
In September 1999 the Company announced its entry into the emerging
wireless Internet access market with new products in the ISM license exempt
operating band (2.4 to 2.4835 GHz). The line of spread spectrum radio products
has been expanded to provide complete solutions, with designs for indoor,
outdoor and hybrid indoor/outdoor network coverage including point-to-point and
point-to-multi-point configurations.
These products include ISP Base Stations, PCMCIA radio cards, modular
customer premise equipment (CPE), micro-cells, client base station, amplifiers,
and other network components to provide a turn-key network solution. These
products are IEEE 802.11 compliant and provide high-speed internet access and
private network access from any point in the network. The Company's capabilities
include engineering design to provide coverage over a wide area. Wireless
network elements therefore provide users access from anywhere in the wireless
network. Management believes that this type of design delivers high performance
and lower operating and maintenance costs, compared to a conventional wired
network. An additional value added to a network utility is full roaming access
for portable devices anywhere in the network. The Company installed its own
wireless network in the fourth quarter of 1999 to provide a customer
demonstration system, which has proven to be successful.
The Company designs outdoor solutions specifically targeted to the ISP
market which consist of point-to-point backbones for the networks and
point-to-multi-point access to wireless clients. ISP's can order complete
turn-key systems for various applications or components for expansion and
concentration of existing networks. In 2001, Amplidyne offered its "ISP in a
Box" complete network start-up kit for deployment to ISPs.
The Company also expanded its LAN products to include a new access point,
gateway and high power PCMCIA radio card to support its indoor market
development and penetration into Multi-Dwelling Units ("MDUs"). The use of
discreet antennas and intelligent amplifiers has proved especially effective in
providing ubiquitous coverage in tall buildings, large atriums, and sprawling
campus applications. The SOHO package was also designed in 2001 to quickly and
easily implement simple home and small office networks without professional
installation or maintenance.
The Company opened the Hospitality market for its highs-peed Internet
access products in 2001 with the inauguration of service in the Ritz Carlton in
Jamaica. The breadth of Amplidyne's network elements provides a unique advantage
when designing hybrid indoor/outdoor wireless networks for complete coverage of
hotel rooms, indoor common spaces and outdoor recreation spaces. Making all
spaces in a hotel complex accessible for a full range of access and
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IT services creates new and enhanced revenue opportunities for operators.
Amplidyne acquired certain access to hotels in January 2002 that may accelerate
its penetration into the hospitality market in 2002.
In 2001 the Company began development of two new products for the wireless
security and surveillance market. The first was a wireless camera that has its
own power, completely wireless and disaster resistant for access, recording an
analysis of video and audio communications anywhere in the wireless network.
This camera product is compliant with the 802.11b and IEEE standards to work in
any 802.11b compliant network. The second is a wearable version of the camera
that is fully self-contained and can be concealed under normal clothing. The
Company expects to generate interest in the commercial and residential markets
for wireless security devices in 2002.
NEW PRODUCTS FOR 2002
The Company continues to focus on enhancing its 11Mps line of wireless
access products with new software and cost-reduced hardware. It also is
developing new products with higher speed and greater bandwidth including
point-to-point and point-to-multi-point solutions in the 5.8 GHz band. The
wireless Security Camera line of products has development projects for on-board
compression, functional controls for machinery, and discrete custom packaging.
TIME TO MARKET AND DEMAND
The growth of the Internet has created a demand for faster access
requirements, particularly for business users. The increasing use of T1 and DSL
lines by businesses is a case in point. Whilst the new technology is emerging,
not all parts of the U.S. have access to such technology. Therefore, wireless
internet access continues to be an appropriate area to be addressed by the
Company and accordingly, we have identified ISPs as a principal market for
development in 2002. According to a report by the Yankee group, wireless ISP's
targeting residential users in rural areas are having success. The key
difference between wireless ISP's and the big name wireless providers is that
rural providers are tiny operations focusing on small geographic areas.
Typically, the wireless ISPs, which could number more than 1,000, are serving
third and fourth-tier markets that do not have any other broadband options.
Wireless providers offer a service that is often priced at less than $50 per
month and offers speeds comparable to cable and DSL.
Demand for high-speed Internet access at a reasonable cost exists in major
geographic areas of the U.S., parts of Europe, Asia, Africa, South America and
many other regions of the world. The primary objective of our business is to
provide a turnkey system for Internet service providers (ISP's), the key
objective being the subscriber's end cost to the ISP.
Another sector that has emerged is the "wireless point to point links", in
many cases requiring a high-speed link between buildings. The cost of such a
link can be as much as $1,200 - 1,400 per month with an installation charge of
up to $2,000. A wireless "point-to-point" link can be established using the
Company's system at a one-time fixed cost of under $3,000. The customer
realizes an installation cost savings and a reduction in monthly operating
expenses.
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The Company's entry into this market was a 2 Mbps system in the third
quarter of 1999, which was aimed to fulfill the immediate need of ISP's. The
Company also introduced its 11 Mbps products in the third quarter of 2000. We
intend to continue to explore the possibility of higher speed radios and
software upgrades with additional antennas.
During 2001 the Company continued to add to its list of ISP customers
worldwide and believes that it is well positioned for the growth in the
foreseeable future.
A report from Cahners In-Stat Group deals with the future of the enterprise
wireless market. The report entitled "2000 Enterprise Wireless LAN Market
Update," forecasts that this segment will rise to $3 Billion by 2002. The
report finds that the wireless LAN (WLAN) market became a legitimate enterprise
technology in 2000. The general desire of organizations to give their employees
more mobility has driven sales of the technology introduced during the last two
years following adoption of usable standards. New, improved performance and
lower cost products for the application continue to be introduced. Cahners
expects the wireless LAN market to grow to 4.6 billion by 2005.
The nation's workforce in general is moving in the direction of
self-employment and smaller businesses. Daniel Pink in his recent book "Free
Agent Nation" writes that: the Bureau of Labor Statistics records the
self-employed universe at 16 million. Tom Petzinger of the WSJ reports that
there are more than 12 million home businesses and IDC projects the number will
pass 37 million by 2002. The Company expects to target this market segment with
its WLAN product line.
Growth will be encouraged as existing vendors expand their offerings and
new suppliers enter the field. The Company's entry into the High Speed Wireless
Internet market at the end of 1999 was, in management's belief, well-timed, and
has proven to be so as the Company is now well-positioned with products that
were introduced to provide solutions indoor, outdoor, and hybrid indoor/outdoor
wireless networks that satisfy the needs of ISPs, MDUs, hotels, enterprise and
education companies , and the SOHO (small office/home office) market. ISP's in
various areas of the United States, South America, Eastern Europe and Asia are
utilizing our products. The Company is also developing strategic partnerships
with ISP's to provide high speed wireless internet access to multi-tenant
building owners (without the construction costs of hardwiring buildings) and
began providing solutions to multi-tenant buildings during 2001. The Company
intends to pursue this market segment aggressively during 2002. There can be no
assurance that the Company will be successful since some of the Company's
competitors have vast financial, technical and marketing resources.
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HISTORICAL
The Company was incorporated on December 14,1995 pursuant to the laws of
the State of Delaware as the successor to Amplidyne, Inc., a New Jersey
corporation ("Amplidyne-NJ"), which was incorporated in October 1988. The
Company was organized to effectuate a reincorporation of Amplidyne-NJ with and
into the Company on December 22, 1995. The Company maintains its executive
offices at 59 LaGrange Street, Raritan, NJ 08869 and its telephone number is
(908) 253-6870. The Company completed its initial public offering of 1,610,000
Units (each Unit consisting of one (1) share of Common Stock and one (1)
Redeemable Common Stock Purchase Warrant ("Warrants")) in January 1997 pursuant
to firm commitment underwritten offering. The offering price was $5.10 per
Unit. The Warrants were redeemed in May 2000. Prior to redemption, 124,871
Warrants were exercised. The Common Stock trades on the Nasdaq SmallCap Market
under the symbol AMPD.
FORWARD LOOKING STATEMENTS
Certain information contained in this Annual Report are forward-looking
statements (within the meaning of Section 27A of the Securities Act of 1933, as
amended and Section 21E of the Securities Exchange Act of 1934, as amended).
Factors set forth that appear with the forward-looking statements, or in the
Company's other Securities and Exchange Commission filings, could affect the
Company's actual results and could cause the Company's actual results to differ
materially from those expressed in any forward-looking statements made by, or on
behalf of, the Company in this Annual Report. In addition to statements, that
explicitly describe such risks and uncertainties, readers are urged to consider
statements labeled with the terms "believes," "belief," "expects," "intends,"
"anticipates" or "plans" to be uncertain and forward-looking. The
forward-looking statements contained herein are also subject generally to other
risks and uncertainties that are described from time to time in the Company's
reports and registration statements filed with the Securities and Exchange
Commission. Such potential risks and uncertainties include, but are not limited
to: the ability to increase revenues and reduce operating losses; the successful
deployment and sale of products; the successful distribution of our products in
the marketplace; the successful expansion of business with sales made by ISPs;
managing expansion; dependence on a limited number of customers; reductions,
delays or cancellations in orders from new or existing customers; potential
deterioration of business and economic conditions in the Company's customers
marketplaces; new product development and product obsolescence; potential
deterioration of the Company's customers credit quality due to deteriorating
economic conditions in the Company's customers marketplaces; a limited number of
potential customers; intensely competitive industry with increasing price
competition; successful development of strategic partnerships globally; reliance
on certain key personnel; variability in gross margins on new products and
resulting impacts on operating results; continued success in the design of new
products and the ability to manufacture in quantity such new products; continued
favorable business conditions and growth in the wireless communications market;
and dependence on certain suppliers for single-sourced components. In addition,
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prior financial performance and customer orders are not necessarily indicative
of the results that may be expected in the future and the Company believes that
such comparisons cannot be relied upon as indicators of future performance. Due
to the foregoing factors, the Company believes that period-to-period comparisons
of its operating results are not necessarily meaningful and that such
comparisons cannot be relied upon as indicators of future performance.
Additionally, the Company undertakes no obligation to publicly release the
results of any revisions to these forward-looking statements which may be made
to reflect events or circumstances occurring after the date hereof or to reflect
the occurrence of unanticipated events.
INDUSTRY BACKGROUND
The market for wireless communication services has grown substantially
during the past decade. Cellular and PCS service has been one of the fastest
growing segments of the wireless telecommunications market. The growth in
cellular and PCS communications has required, and will continue to require,
substantial investment by cellular service providers in wireless infrastructure
equipment. Moreover, management believes that intensified competition among
cellular service providers is resulting in declining costs to end-users as well
as new types of service offerings. This demand, coupled with unprecedented
growth, will, in management's belief, require new infrastructure equipment and
technology that will allow better coverage for higher-density networks.
Carriers also need to have the flexibility to place cell sites anywhere, provide
speedier deployment without regard to frequency allocation or planning with
lower installation, maintenance and operational costs. In order for carriers to
meet their demands, new technologies and base station equipment must be
deployed.
According to a report of Strategy Analytics, by 2003 more than 725 million
people worldwide will subscribe to cellular and personal communications
services. Global Systems for Mobil Communications Technology (GSM) will
continue to dominate the worldwide digital cellular market. However CDMA
Systems will capture a 20% share of the subscribers by 2003. The report also
indicates that Southeast Asia will continue to hold a leadership position
through 2003 with total subscribers reaching 250 million. Western Europe is
predicted to grow at a compound annual rate of 18% until 2003. Worldwide
cellular telephone shipments are predicted to grow by 17% annually, to exceed
330 million units by 2003. Southeast Asia will remain the largest market for
cellular phones, representing a 34% market share. The Company intends to pursue
this market segment aggressively during 2002. There can be no assurance that
the Company will be successful since some of the Company's competitors have vast
financial, technical and marketing resources.
Although there has been a slowdown in the deployment of wireless technology
throughout the world, substantial demand still exists for new products, as well
as the upgrade of old products. The Company intends to target sectors within
the market for its amplifier products.
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EMERGING TECHNOLOGY AND WIRELESS INTERNET ACCESS
The Global market for mobile users is forecast to grow from today's figures
of around 200 million users to around 2.4 billion users by 2015, which means
today's market only represents 10% of future demand according to sources at
International Telecommunication Union. With consumers looking for added
features including voice and data and wireless Internet access, new technology
is needed. The evolution of the third generation (3G) of wireless communication
is a fundamental step to the new world. 3G represents the world of multi media
mobile communications where users will have access not just to voice but to
video, image, text, graphics and data communications. The capabilities offered
by 3G will be limitless, offering users services such as video conferencing,
access to the Internet and a host of other applications. The Company intends to
pursue this market segment aggressively during 2002. There can be no assurance
that the Company will be successful since some of the Company's competitors have
vast financial, technical and marketing resources.
The new technology requires wide band ultra liner amplifiers requiring
pre-distortion and feed forward technology. Amplidyne's propriety patented
technology and feed forward correction systems are ideally suited for this new
emerging market. The Company expects to provide solutions in the 3.5GHz and
IMT2000 formats using W-CDMA and similar technologies. Although the deployment
of 3G systems is expected to be somewhat delayed, the Company developed
amplifier products for this market and expects to continue to do so in 2002.
While the Company keeps its research and development efforts focused on its
core amplifier business, the emergence of "wireless Internet access" has given
us the opportunity to vertically integrate our products into this market sector.
We believe that we are in the "knowledge business" and we have gained
considerable know-how of RF amplifiers, filters, RF subsystems, antennas and
digital circuits which are used in our feed-forward control circuits. The use
of sophisticated digital circuits in the transmission of high speed data coupled
with the RF transmission media derives significant synergy from our amplifier
R&D.
A key enabling technology for outdoor wireless Internet access is the tower
top bi-directional amplifier. The Company's personnel were able to design an
excellent product for our AmpDLan system. We have considerable experience in
the role that RF filters and antennas played in RF systems, and this is another
set of components for our AmpDLan system.
The Company has designed new products for the high speed wireless market
and will continue to market these products during the year 2002.
WIRELESS LOCAL LOOP AMPLIFIER PRODUCTS
The Company has continued to refine its wireless local loop amplifier
products during 2001. These products operate in the NMT 450 band and 900 MHz
band. The Company designed a prototype amplifier for the 3.5 GHz band for a
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major North American OEM customer during 2000 and refined the products during
2001, extending the life and contract opportunities into 2002. The Company
expects to obtain future orders for its NMT450 and 900 MHz amplifiers during
2002 as systems get deployed in the South American and Far East markets by our
major OEM customer.
The Company is continuing to work with its OEM customers during 2002 to
develop a new W-CDMA product line. The Company developed a prototype IMT 2000
(3-G Third Generation) amplifier for the Asian and U.S. markets and introduced
its new 3G Amplifier at the CTIA 2002 with a live demonstration.
CELLULAR SYSTEMS
A cellular system consists of a number of cell sites that are networked to
form a cellular system operator's geographic coverage area. Each cell site has
a base station which houses the equipment that transmits and receives telephone
calls between the cellular subscriber within the cell and the switching office
of the local wireline telephone system. Such base station equipment includes an
antenna and a series of transceivers, power amplifiers and cavity filters.
Large cell sites, which generally cover a geographic area of up to five miles in
radius, are commonly referred to as "macrocells."
The ability of cellular system operators to increase system capacity
through the use of microcells is largely dependent on their ability to broadcast
multiple signals with acceptable levels of interference and distortion. In
cellular systems, the amplifier is generally the greatest source of signal
interference and distortion, particularly with multi carrier high power
amplifiers. Consequently, obtaining amplifiers that can transmit and receive
multiple signals with low distortion or interference from adjacent signals
("high spectral purity") is critical to a cellular system operator's ability to
increase system capacity. Substantial resources and technical expertise are
required to design and manufacture multi carrier power amplifiers with high
spectral purity. To achieve high spectral purity, multi carrier amplifier
systems must have high interference cancellation properties.
The Company believes that the potential opportunities for wireless
communication services in countries without reliable or extensive wireline
systems may be even greater than in countries with developed telecommunication
systems. The Company has developed and refined its products for this market
such as the 2.4 ghz and 3.5 ghz wireless local loop amplifiers and the NMT-450
products. As a result of these developments, the Company has continued to
obtain orders for these products from its customers, including major OEMs and
expects to continue to do so in 2002.
The Company's satellite amplifier products are used to amplify the signal
which is being transmitted from the ground up to the satellite. The
manufacturers of satellite communications equipment operate in commercial
markets such as television broadcast services and commercial military
communications. Amplidyne has also provided amplifiers for terrestrial radio
systems which are used for television and audio signal transmission.
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COMPANY STRATEGY
Utilizing its proprietary, patented technology and experience in
interference cancellation, the Company is pursuing a strategy, focused on the
need of cellular, wireless local loop and PCS system operators, to develop
technologically advanced amplifier based products. The Company has recently
developed products which address the technical issues faced by such system
operators as a result of the rapid growth in wireless telephone use (cellular,
NMT-450 and wireless local loop) and the resulting need to increase systems
capacity.
The Company's products have been evaluated and successfully deployed in the
OEM systems. However, due to market conditions, the Company expects the 3.5GHz
products to be given priority in the near future by its OEM customers. The
Company intends to pursue sales to the end-users for the multi-carrier amplifier
since many of providers need to upgrade their systems.
Management believes that with its predistortion technology and the linear
capability of its core amplifier technology, the Company can achieve similar
performance from a multicarrier amplifier which others achieve by using dual
feed forward loops; this results in much higher component count within the
amplifier unit and may result in poor reliability for such products, compared
to predistortion based feed forward amplifiers which use fewer components and
thereby have a high reliability.
The Company's business strategy focuses primarily on the wireless
communication market and consists of the following elements:
Wireless Internet Products. The Company's high-speed wireless Internet
products have been successfully deployed since 1999. Our wireless Internet
products are aimed at five market segments: (a) Hospitality and Multi-Dwelling
Units (MDU) including hotels and condominiums, (b) enterprise, corporate and
education campuses (c) Internet Service Provider (ISP) networks, (d) Small
Office/Home Office (SOHO), and (e) security and surveillance. The Company
intends to keep refining its products to meet the demands of customers in the
above five categories. The Company has had success in providing products for the
high speed wireless internet access in the ISP market. Our products have been
tested in the hospitality industry, as well as, multi-tenant units and for SOHO
customers, and the recent introduction of the intelligent Internet camera is
generating interest in the security market segment. The Company intends to
further pursue these markets throughout 2002 while expanding its networking
products to provide greater bandwidth and reliability. Furthermore, the Company
has expanded its marketing and branding efforts , which include trade shows,
trade publications, direct mail and email campaigns and a new Internet based
contact manager for market development and greater customer care.
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The Company maintains a toll-free Customer Relationship Management (CRM).
The Company intends to provide technical training for its resellers,
distribution channel personnel, sales engineers and sales team through quarterly
workshop updates and on-site training for interested customers.
Increase Penetration of Wireless Equipment Manufacturers. Since 1991, the
Company has positioned itself as a supplier of amplifier products to large
wireless telecommunications OEMs. Amplidyne seeks to capitalize on its existing
customer relationships and become a more significant source of its customers'
amplifiers by working closely with OEM customers to offer innovative solutions
to technical requirements and problems. Amplidyne has demonstrated its 3.5 GHz
and 900 MHz single and multichannel products to OEM's during 2001. The Company
intends to pursue this market segment aggressively during 2002. There can be no
assurance that the Company will be successful since some of the Company's
competitors have vast financial, technical and marketing resources.
Develop Relationships with Emerging Wireless Equipment Manufacturers. The
Company anticipates that emerging wireless equipment manufacturers will make an
increasingly significant contribution to the growth of the wireless
telecommunications industry particularly the 3.5GHz and NMT-450 segments as well
as IMT 2000 system. Management believes that its linear power amplifiers and
MCLPAs will assist these equipment manufacturers in providing high capacity, low
distortion, low cost per channel products and has supplied amplifiers to
wireless equipment manufacturers during 2001.
Develop Products for Multiple Protocols. The Company intends to continue
to invest resources in the research and development of new products for various
protocols. For cellular systems, the Company currently supports the AMPS and
TACS analog protocols, and the CDMA, TDMA, E-TACS, NMT and GSM digital
protocols. For PCS systems, Amplidyne currently supports CDMA, TDMA, DCS-1800
and PCS-1900 digital protocols. The Company is aware of the emerging 3G
technology and is continuing to provide products for the technology either at
W-CDMA or IMT2000 protocols. Amplidyne is continuing to develop products that
incorporate protocols which it believes will address the needs of established
and emerging wireless systems. Management believes the development of products
for multiple protocols will enable Amplidyne to benefit from the continuing
growth of existing wireless systems and other emerging wireless
telecommunications markets while reducing the risks associated with relying on
the success of one or a limited number of existing or emerging industry
protocols.
Maintain a Technology Leadership Position. In management's belief the
Company, with its innovative products, has been addressing the needs of its
customers for products that solve significant technical problems. The Company
believes its interference cancellation technologies are among the most advanced
that are commercially available in the industry, both in performance and
diversity of methodology. The Company utilizes proprietary and patented
pre-distortion technology and proprietary feed forward interference cancellation
technology in its linear power amplifiers and MCLPAs to enable the user to
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significantly increase the quality and quantity of calls processed by new and
existing cellular base stations. The Company intends to continue to invest
substantial resources in research and development associated with its
interference cancellation technologies. The Company has continued its research
and development on 3.5GHz, NMT-450, 3G (Third Generation) amplifiers and
wireless local loop products during 2001, and has launched its 3G W-CDMA
multi-carrier amplifier for U.S. domestic and foreign infrastructure
manufacturers.
Develop Innovative Proprietary Products. To date, the Company has focused
its efforts in the development of amplifier products which are highly
innovative, and which are not the standard "commodity" type product. In
addition, the Company believes that it has compiled an extensive design library
in the solid-state, high power amplifier industry utilizing its proprietary and
patented technology and expertise in interference cancellation. The Company has
developed and intends to continue to develop products which combine basic
components in unique and high performance configuration to command higher prices
in the wireless communications market. In addition, the Company has adapted
this expertise for new commercial market applications and product requirements
and develop products for the NMT-450, 3G (Third Generation) and wireless local
loop markets. The Company has continued to develop amplifier products which can
be used in 900 MHz and wireless local loop systems.
Provide Support from Product Design through Installation and Operation.
The Company works with its customers throughout the design process to assist
them in refining and developing their amplifier specifications. Once the
specifications have been met and the product delivered, Amplidyne continues to
provide technical support to facilitate system integration, start-up and
continued operation. By providing customer support services from the product
design phase through installation and operation, management believes it fosters
increased levels of customer loyalty and satisfaction. In addition, through
this process, the Company believes it will develop new product definitions and
implementations to further enhance the strategic position of the Company in the
wireless market.
Maintain Control of the Manufacturing Process. As part of the transition
to becoming a leading amplifier supplier to the wireless telecommunications
market, Amplidyne has consistently analyzed in house automated manufacturing
versus the use of subcontracted manufacturers in order to control its production
schedule. The Company installed automated manufacturing equipment in the first
quarter of 2000, to enhance its manufacturing process for NMT-450 and wireless
local loop amplifiers and other related products. In certain instances,
Amplidyne has made the strategic decisions to select single or limited source
suppliers in order to obtain lower pricing, receive more timely delivery and
maintain quality control.
THE AMPLIDYNE ADVANTAGE
The Company believes that its products have several features which
differentiate them from those of its competitors, such as:
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The Predistortion Solution. Utilizing its proprietary technology the
Company can obtain significant distortion reduction in its core amplifiers.
This enables the pre-distorted amplifier to have feed forward correction (which
is described below, see "Technology") applied to it to achieve distortion
cancellation. The Company believes that its competitors are only able to obtain
this level of distortion cancellation by use of complex and component intensive
"Dual Feed Forward Loops" resulting in the use of more components within the
amplifier unit. The reliability is generally improved by using fewer
components. The Company has been a pioneer in its use and development of
pre-distortion technology and intends to further enhance its products using such
technology.
Superior Distortion and Spurious Cancellation Resulting in Ultra Linear
High Power Amplifiers. The Company believes the use of MCLPAs is critical in
the implementation of new cellular systems and upgrade of older analog systems.
Cellular systems need to cover large areas with minimum hardware in order to
minimize cost per subscriber. Reduction of the distortion and spurious signals
from the amplifiers is a key enabling technology. Amplidyne has developed
proprietary interference cancellation technology using multiple methods to
achieve high suppression of spurious output and distortion typically associated
with higher power amplifiers. The Company's NMT-450 multi-carrier linear power
amplifier has been well received in the industry and, management believes, is
among the leading products available in the wireless industry. The Company's
single channel amplifiers have also been well received in the industry, however,
the Company has experienced more competition in this area. The Company is
seeking to position itself to be a viable source in this area. The Company
constantly monitors such situations and will employ significant resources to
explore such opportunities, as financing permits.
By utilizing its proprietary and patented predistortion technology and its
proprietary feed forward technology, the MCLPAs amplification capacities of the
Company's amplifiers are, in management's belief, among the best in the
industry.
Linearity, Low Distortion and High Amplification. Wireless service
providers' ability to manage scarce spectrum resources more effectively and
accommodate large numbers of subscribers is largely dependent on their ability
to broadcast signals with high linearity, which pertains to the ability of a
component to amplify a wave form without altering its characteristics in
undesirable ways. Linear amplifiers allow signals to be amplified without
introducing spurious emissions that might interfere with adjacent channels.
Higher linearity increases the capacity of cellular systems by enabling a more
efficient use of digital transmission technologies, micro-cellular architectures
and adaptive channel allocation. In current cellular systems, the power
amplifier is generally the source of the greatest amount of signal distortion.
Consequently, obtaining power amplifiers with high linearity and low distortion
is critical to wireless service providers' ability to improve spectrum
efficiency.
The Company has several products covered by a patent issued by the United
States Patent and Trademark Office which we believe gives us a significant
-13-
advantage over our competitors. These features for Pre-distortion and
Pre-distortion Linearization designs significantly reduce distortion below that
which is currently available in the marketplace.
Multicarrier Designs. Multicarrier amplification, in which all channels
are amplified together by a MCLPA, rather than each channel using a separate
amplifier, allows for instantaneous electronic channel allocation.
Functionally, it combines many single channel power amplifiers, into a single
unit, thereby eliminating the single channel power amplifiers and the
corresponding tunable cavity filters. MCLPAs require significantly higher
linearity compared to single channel designs.
By virtue of the Company's high linearity products which incorporates
pre-distortion and feed forward technology achieving, in management's belief,
among the lowest distortion in the industry, the MCLPA amplified signal remains
within their prescribed band and spectrum with low interference of adjacent
channels thus providing flexibility to accommodate any frequency plan.
Wireless Internet Products. One of the key components in the wireless
Internet access system is the bi-directional tower top amplifier. We also have
considerable experience in the design, development and deployment of fixed
broadband amplifier products. The amplifier has to operate reliably in an
outdoor application. Our expertise in this area is an advantage over
competitors who are required to purchase their amplifiers from outside sources.
We also have considerable know-how of other related products such as
antennas, filters, power supplies and digital control circuits. We are
therefore able to offer a turnkey solution to ISP's, providing indoor and
outdoor networking support using our existing resources. We have a cost
advantage because we manufacture our own amplifiers, which we can, if necessary,
rapidly refine and change.
We intend to refine our products as needed and in a timely fashion in order
to obtain and maintain market share.
During 2001, the Company enhanced its design for ALC bi-directional tower
top amplifiers for its high-speed wireless Internet products. This amplifier
allows an improved system performance, reduced installation time and lower cost
to integrators and network operators. The Company also introduced its
Micro-cell, Client Base station and ISP base station. These products have
enhanced the Company's position in the marketplace. The Company intends to
refine and fine- tune its products for its customers needs, thereby improving
its position as compared to its competitors.
High Quality, Reliability and Customer Support. The Company believes that
the power amplifier in cell sites historically has been the single most common
point of equipment failure in wireless telecommunications networks.
Increasingly reliable power amplifiers, therefore, will improve the level of
-14-
service offered by wireless service providers, while reducing their operating
costs. In addition, MCLPAs eliminate the need for high-maintenance, tunable
cavity filters that should further reduce costs.
The Company works closely with its customers throughout the design process
in refining and developing their amplifier specifications. The Company uses the
latest equipment and computer aided design and modeling, solid-state device
physics, advanced digital signal processing ("DSP") and digital control systems,
in the development of its products in their specialized engineering and research
departments. The integration of the Company's design and production is a factor
in the Company's ability to provide its customers with high reliability, low
distortion and low maintenance amplifiers.
TECHNOLOGY
Wireless Transmit Technology. A typical wireless communications system
comprises a geographic region containing a number of cells, each with a base
station, which are networked to form a service provider's coverage area. Each
base station or cell site houses the equipment that transmits and receives
telephone calls to and from the cellular subscriber within the cell and the
switching office of the local wire line telephone system. Such equipment
includes a series of transceivers, power amplifiers, tunable cavity filters and
an antenna. In a single channel system, each channel requires a separate
transceiver, power amplifier and tunable cavity filter. The power amplifier
within the base station receives a relatively weak signal from the transceiver
and significantly boosts the power of the outgoing wireless signal so that it
can be broadcast throughout the cell. The radio power levels necessary to
transmit the signal over the required range must be achieved without distorting
the modulation characteristics of the signal. The signal must also be amplified
with linearity in order to remain in the assigned channel with low distortion or
interference with adjacent channels.
Because cellular operators are allocated a small RF spectrum and certain
channels, it is necessary to make efficient use of the spectrum to enable
optimum system capacity. By amplifying all channels with minimum distortion at
the same time, rather than inefficient use of single channel amplification, one
obtains better system capacity. A MCLPA combines the performance capabilities
of many single carrier amplifiers into one unit, eliminating the need for
numerous single carrier amplifiers and their corresponding tunable cavity
filters. These MCLPAs require less space than multiple single channel
amplifiers and their corresponding tunable cavity filters which reduce the size
and cost of a base station.
MCLPAs create distortion products which can cause adjacent channel
interference. The minimization of these distortion products requires
sophisticated technology. This is accomplished through interference
cancellation techniques such as "predistortion" and "feed forward" accompanied
by highly advanced control and processing technology. The Company has developed
certain proprietary technology and methods to achieve minimal distortion in its
amplifiers, technically called predistortion and feed forward correction. The
Company uses three distinct technologies (A) Linear class A and AB amplifiers,
(B) Predistorted class A and AB amplifiers and (C) Predistortion feed forward
-15-
amplifiers. The Company's proprietary leading edge products contain patented
predistortion and proprietary feed forward technology combined in a proprietary
automatic correction technique.
All amplifiers create distortion when they are run at a high power level.
In an ideal case the output of the amplifier would faithfully reproduce the
input signal without any distortion. In real life, however, distortion
characteristics are produced. These distortion products can cause interference
with another caller's channel which in turn produces poor call quality. By
using a simple, patented technology, Amplidyne recreates the distortion for the
amplifier in such a manner to cancel the interference signals.
Feed forward cancellation involves taking the distortion created by the
amplifier and processing it in such a way that when it is added back into the
amplifier having been pre-distorted and combined with the feed forward
technology, distortion cancellation occurs. The Company believes that its
patented technology has the most unique and potent technology for distortion
cancellation. Furthermore, Amplidyne has selected linear class AB technology for
its base amplifier which it believes also has superior distortion
characteristics compared to other competitors because it is easier to
pre-distort. Thus the three key ingredients (a) Linear class A and AB
amplifiers, (b) Predistortion technology and (c) Feed forward technology enables
Amplidyne to produce MCLPAs for its major OEM customers.
Emerging Technology and Wireless Internet Access. The Global market for
mobile users is forecasted to grow from today's figures of around 200 million
users to around 2.4 billion users by 2015, which means today's market only
represents 10% of future demand according to sources at International
Telecommunication Union. With consumers looking for added features including
voice and data and wireless Internet access, new technology is needed. The new
technology will require wide band ultra linear amplifiers requiring
predistortion and feed forward technology. Amplidyne's propriety patented
technology and feed forward correction systems are ideally suited for this new
emerging market. The Company expects to provide solutions in the PCS and
IMT2000 formats using W-CDMA and similar technologies. The Company intends to
pursue this market segment aggressively during 2002. There can be no assurance
that the Company will be successful since some of the Company's competitors have
vast financial, technical and marketing resources.
The Company's wireless Internet access products consist of point-to-point
and point to multipoint indoor and outdoor units that can be configured to
provide broad coverage over a city or region or to create coverage in an indoor
space with free roaming access. Systems can be designed for full utilization of
the 2.4 ISM bandwidth to aggregate traffic in eleven channels.
At the remote site an indoor or outdoor LAN system can be connected using a
single channel CPE or Access Point, with various antennae combinations.
Amplifiers are used for range extension purposes.
-16-
MARKETS
The market for wireless communications services has grown substantially
during the past decade as cellular wireless local loop, PCS and other new and
emerging applications (such as W-CDMA) have become increasingly accessible and
affordable to growing numbers of consumers. The growth of these markets has
increased the demand for the Company's products, although the Company cannot
predict trends in these markets.
Cellular Market. The market for cellular communications still accounts for
a fairly large portion of the wireless services. Cellular system operators have
expanded the capacity of their existing cellular systems by splitting macrocells
into smaller microcells. The Company believes that the relatively small size,
high power and performance characteristics of its microcell MCLPAs will be
particularly attractive to major OEMs as well as emerging wireless
telecommunications infrastructure equipment providers when providing
infrastructure equipment for such new cell sites.
Wireless Local Loop. Wireless local loop systems are increasingly being
adopted in developing markets to more quickly implement telephone communication
services. In certain developing countries, such as Indonesia and Brazil,
wireless local loop systems provide an attractive alternative to copper and
fiber optic cable based systems, with the potential to be implemented more
quickly and at lower cost than wireline telephone systems. The Company designs,
manufactures and markets MCLPAs and single channel amplifiers for infrastructure
equipment systems in the wireless local loop market in the 2 and 3.5 GHz bands.
Wireless Internet Access Market. The Company's products are aimed at five
market segments: (a) Hospitality and Multi-Dwelling Units (MDU) including hotels
and condominiums, (b) enterprise, corporate and education campuses (c) Internet
Service Provider (ISP) networks, (d) Small Office/Home Office (SOHO), and (e)
security and surveillance. The wireless Internet network products market has
continued to grow in the depressed telecom period of 2000 and 2001. New demand
for components, systems and subsystems has been fueled by the growing number of
self-employed professionals who demand the same networks and communications
systems in their home offices as they were accustomed to in corporate
environments. IDC estimates that the 12 million self employed families in 2001
will grow to over 30 million by 2003. And AARP research indicates that as the
Baby Boomers begin to retire in 2002, more than half of them will continue to
work in the growing self-employed workforce.
A report from Pulver.Com ("Telephony Unplugged: Wireless Achieves Price
Parity with Wireline"), predicts that the US wireless networks will realize
revenues exceeding those for wireline in 2003 when wireless call charges will
reach the same price point as those for regular phone lines. The report based
its prediction on comparisons between Nextel's wireless and Verizon's wireline
charges.
-17-
According to the report, ever increasing competitive levels have helped
reduce wireless phone charges and the current 10-cents-a-minute airtime plans
from a number of wireless carriers are attracting 67,000 new wireless users each
day. It notes further that in the 16 years since the Federal Communications
Commission (FCC) issued its first cellular license in the US, the cost of
wireless services has been reduced by 92%. During that same period the cost of
local wireline calling has risen 72% along with inflation.
The fact that the wireless industry has erased the 20-fold wire line price
advantage that has existed since 1984 has completely changed the business case
for selecting wireless instead of wire line, in addition, if only 25% of
residential customers convert to wireless, 26 million customers will be added to
the wireless rolls. The Company intends to continue pursuing this market
segment aggressively during 2002. There is no guarantee that the Company will
be successful since some of the Company's competitors have vast financial,
technical and marketing resources.
Custom Communications and Other Markets. The custom communications market
consists of small niche segments within the larger communications market:
long-haul radio communications, land mobile communications, surveillance
communications, ground-to-air communications, microwave communications,
broadband communications and telemetry tracking. The Company sells custom
amplifiers and related products to these segments.
PRODUCTS
The Company designs and sells multi-carrier transmit amplifiers and low
noise receive amplifiers for the cellular communications market, as well as the
PCS and wireless local loop segments of the wireless communications industry.
The Company also provides a large number of catalog and custom amplifiers to
OEMs and to other customers in the communications market in general. In
addition, the Company also sells a complete line of fixed broadband wireless
networking and LAN products for private networks, virtual private networks and
Internet access.
- MULTICARRIER LINEAR POWER AMPLIFIERS (MCLPAS). When a cellular or PCS
user places a call, the call is processed through a base station, amplified, and
then transmitted on to the person receiving the call. Therefore, all base
stations require amplifiers (MCLPAs) whether they are being used for cellular,
PCS or 3G (Third Generation) local loop applications. Amplidyne designs and
manufactures these amplifiers. The objective is to provide a quality product at
a good price and to have exemplary reliability. Management believes that
Amplidyne's products with its patented pre-distortion technology, core linear
amplifier technology and proprietary feed forward technology achieve all of the
objectives mentioned above. Amplidyne's MCLPAs are a unique line of ultra
linear devices, which utilize a proprietary pre-distortion and phase locked feed
forward architecture.
- WIRELESS INTERNET PRODUCTS. The Company's wireless Internet products
operate in the 2.4 GHz ISM band using Direct Sequencing Spread Spectrum
-18-
technology. New Direct Sequencing products at the 5.8GHZ frequency range are
being developed to provide better spectrum utilization and greater bandwidth.
This new technology will become a part of the Company's wireless networking
solution set to provide operators greater capacity at lower cost.
- HIGH POWER LINEAR AMPLIFIERS. Amplidyne's product line of linear
amplifiers have a high third order intercept point which translates to better
call quality. These high power amplifiers are supplied as modules or plug in
enclosures. The communication bands available are NMT-450, AMPS, TACS, ETACS
and PCS. The output power ranges from 1 to 200 Watts. These amplifiers can be
used in instances where service providers only need a single transmit channel.
- 3G (THIRD GENERATION) AMPLIFIER DEVELOPMENT The Company has been
reviewing OEM specifications for these new products and begun to develop
amplifier products for the market. The Company held a live demonstration of its
4channel ultra-linear 3G amplifier at the CTIA expo in March of 2002 and expects
to begin shipping to its customers in 2002.
- LOCAL LOOP AND MINI CELL AMPLIFIERS. Local loop and mini cell amplifiers
are designed with a proprietary circuit to achieve a high IMD specification,
which translates to better call quality through the mini cell. These amplifiers
can be ordered as modules or in a rack configuration.
- LOW NOISE AMPLIFIER, CELLULAR, PCN, PCS, GSM. Amplidyne's low noise
amplifiers are manufactured with a mix of silicon and GaAsFET devices. These
amplifiers offer the user the lowest noise and the highest intercept point,
while maintaining good efficiency. Received calls at a base station are low in
level due to the fact that hand held cellular phones typically operate at half a
watt power level. This weak signal has to be amplified clearly which is done by
using Amplidyne's low noise amplifier. All amplifiers undergo a 72 hour burn-in
period to ensure reliable filed operation.
- COMMUNICATION AMPLIFIERS. These amplifiers are designed for cellular and
PCN/PCS applications and use GaAs or Silicon Bipolar FET devices. The transmit
amplifiers are optimized for low distortion products. Custom configurations are
available for all communication amplifiers. This line of products is aimed at
the single channel base station users employing the digital cellular standards
(CDMA and TDMA).
The Company's wireless telecommunications amplifiers can be configured as
modules separate plug-in amplifier units or integrated subsystems. The
Company's products are integrated into systems by OEM customers, and therefore
must be engineered to be compatible with industry standards and with certain
customer specifications, such as frequency, power, linearity and built-in test
(BIT) for automatic fault diagnostics.
-19-
PRODUCT WARRANTY
The Company warrants new products against defects in materials and
workmanship generally for a period of one (1) year from the date of shipment.
To date, the Company has not experienced a material amount of warranty claims.
BACKLOG/FUTURE ORDERS
The Company regularly reviews its backlog (which includes projected future
orders from customers) that it expects to ship over the next 12-24 months. We
have had to change schedules and delay orders depending on customer needs.
Customer schedules or requirements may frequently change and in some cases
result in cancellation of orders, in response to which the Company has to change
its production schedule. Changes and cancellations exist since, among other
matters, the wireless communications industry is characterized by rapid
technological change, new product development, product obsolescence and evolving
industry standards. In addition, the terrorist attacks of September 11, 2001
have resulted in increased economic uncertainty. This uncertainty may lead to
postponement or cancellation of future or current orders. In addition, as
technology changes, corporations are frequently requested to update and provide
new prototypes in accordance with new specifications if products become obsolete
or inferior. Therefore, the Company has been focusing on strategic partnerships
to provide better quality solutions to our partners with higher margin sales
opportunities.
As of December 31, 2001, the Company had signed orders and contracts (which
include projected future orders from customers) to generate revenues in excess
of $2.5 million and the Company expects to ship these products over the next
fiscal year. The Company would like to stress, although useful for
scheduling production, backlog as of any particular date may not be a reliable
indicator of sales for any future period. The Company expects sales to improve
during the first half of 2002 as compared to the fourth quarter of 2001.
The wireless ISP business is characterized by small entrepreneurial
companies, seeking to reach out to residential and business customers in tier 3
or 4 markets. Their success depends on being able to offer competitive services
and, in certain cases, may require them to compete against cable and DSL
providers. Should these companies not obtain financing for their plans or find
alternative cheaper technologies for their deployment, the Company will be
subject to delayed or cancelled purchase orders. Product obsolence is extremely
rapid in this market sector, and can also result in delays and cancellation of
purchase orders. In December 1999, the Company signed a purchase order with a
local ISP for the sale of our outdoor wireless products. It was expected that
such ISP was going to roll out its network to several thousand customers during
2002- 2003. No orders have or are expected to be filled. This order is not
included in the above mentioned backlog.
The Company expects to continue to ship products to its major OEM customers
during 2002 at the levels or above the
-20-
levels of 2001. Many of our ISP customers are going through their own
expansion, which is subject to financing availability that has proven to be
difficult in the recent downturn. However, as conditions improve these customers
may be able to finance and purchase more equipment from the Company. The Company
is exploring revenue sharing models with various units of the hospitality market
segment in order to continue to develop the market share in the high speed
wireless internet market.
The acquisition of certain of the Darwin assets (which included access to
hotels) and the Company venturing into the "hospitality" market is new to the
Company and turning this venture into a success depends largely on the Company
being able to dispose of some of the assets rapidly in a "bulk" sale. The value
of some of these assets will decrease with time. The Company may have to
renegotiate the timeline to complete its successful deployment.
CUSTOMERS, SALES & MARKETING
Customers. The Company markets its products worldwide generally to wireless
communications manufacturers (OEMs) and communications system operators. The
table below indicates net revenues derived from customers in the Company's
markets in 2001 and 2000.
NET REVENUES BY MARKET CATEGORIES
(IN THOUSANDS)
YEAR ENDED
DECEMBER 31,
---------------
AMPLIFIER MARKETS 2000 2001
----------------- ------ -------
Cellular Analog and digital. . . . . . . . . . . . . $ 19.5 267.5
Wireless Telephony . . . . . . . . . . . . . . . . . 1,944 1,361.3
Satellite Communications, Custom and other
Products . . . . . . . . . . . . . . . . . . . . . 50 170
Digital PCS Products . . . . . . . . . . . . . . . . 116 --
------ -------
AMPWAVE MARKET
--------------
Wireless Internet Products . . . . . . . . . . . . . 455.5 406.2
Total. . . . . . . . . . . . . . . . . . . . $2,595 2,205
====== =====
The Company expects that for future sales the Company will continue to improve
its market share in the cellular digital, wireless telephony, NMT450 and IMT
2000.
* Wireless Telephony. Sales to the wireless telephone segments of the
wireless communications industry have decreased from approximately 75% of total
revenues for fiscal year end 2000 to approximately 62% of total revenue for the
fiscal year end 2001.
-21-
* Wireless Internet. The Company shipped products to its customers in
2001 with total sales for the year of $406,200 which accounts for approximately
18% of total revenues.
* International Sales. Sales of wireless products outside the United
States (primarily to Western Europe Canada and the Far East) represented
approximately 84% and 81.5% of net sales during, fiscal 2000 and fiscal 2001,
respectively.
* Sales and Marketing. The Company's sales and marketing personnel are
involved in all aspects of the Company's relationships with its major OEM and
system operator customers. The Company employs a direct sales approach focused
on providing its wireless industry customers with unique solutions to satisfy
their transmit and receive amplification needs. Sales of the Company's products
to OEM and system operators requires close technical liaison with customer
engineers and purchasing managers. The Company's High Speed Wireless Internet
products generated sales of approximately 18% of total revenues for 2001.
COMPETITION
AMPLIFIER PRODUCTS
The ability of the Company to compete successfully and operate profitably
depends in part upon the rate of which OEM customers incorporate the Company's
products into their systems. The Company believes that a substantial majority of
the present worldwide production of power amplifiers is captive within the
manufacturing operations of a small number of wireless telecommunications OEMs
and offered for sale as part of their wireless telecommunications systems. The
Company's future success is dependent upon the extent to which these OEMs elect
to purchase from outside sources rather than manufacture their own amplification
products. There can be no assurance that OEM customers will incorporate the
Company's products into their systems or that in general OEM customers will
continue to rely, or expand their reliance, on external sources of supply for
their power amplification products. Since each OEM product involves a separate
proposal by the amplifier supplier, there can be no assurance that the Company's
current OEM customers will not rely upon internal production capabilities or a
non-captive competitor for future amplifier product needs. The Company's OEM
customers continuously evaluate whether to manufacture their own amplification
products or purchase them from outside sources. These OEM customers are large
manufacturers of wireless telecommunications equipment who could elect to enter
the non-captive market and compete directly with the Company. Such increased
competition could materially adversely affect the Company's business, financial
condition and results of operations.
-22-
Certain of the Company's competitors have substantially greater technical,
financial, sales and marketing, distribution and other resources than the
Company and have greater name recognition and market acceptance of their
products and technologies. In addition, certain of these competitors are
already established in the wireless amplification market, but the Company
believes it can compete with them effectively. No assurance can be given that
the Company's competitors will not develop new technologies or enhancements to
existing products or introduce new products that will offer superior price or
performance features. To the extent that OEMs increase their reliance on
external sources for their power amplification needs more competitors could be
attracted to the market.
The Company expects its competitors to offer new and existing products at
prices necessary to gain or retain market share. The Company expects to
experience significant price competition, which could have a materially adverse
effect on gross margins. Certain of the Company's competitors have substantial
financial resources which may enable them to withstand sustained price
competition or downturns in the power amplification market. Currently, the
Company competes primarily with non-captive suppliers of power amplification
products. The Company believes that its competition, and ultimately the success
of the Company, will be based primarily upon service, pricing, reputation and
the ability to meet the delivery schedules of its customers.
HIGH SPEED WIRELESS INTERNET PRODUCTS
The Company has targeted its products to five market segments: (a)
Hospitality and Multi-Dwelling Units (MDU) including hotels and condominiums,
(b) enterprise, corporate and education campuses (c) Internet Service Provider
(ISP) networks, (d) Small Office/Home Office (SOHO), and (e) security and
surveillance. The Company first derived significant revenue from these products
during 2000, and this market accounted for approximately 18% of the total sales
for the year 2001.
The Company has relied on being able to work strategically with its
partners and consultants, as well as its own engineers to develop and refine its
products. The Company has taken some risks in introducing products to certain
sectors by providing samples and system trials, which in certain cases may not
result in revenues. The vast majority of ISP's are in need of capital to grow
their businesses and in certain cases looked to the Company for vendor
financing. The Company has maintained a minimal stance relative to this matter.
However, the Company has to seriously consider this in the future to maintain
growth. One area the Company has to explore is revenue sharing with these
customers, which has some inherent business risks. One such instance is the
introduction of these products into the hospitality industry. The Company's
competitors, such as Lucent and Cisco, as well as other large, small and midsize
entities, have substantially greater technical, financial, sales and marketing,
distribution and other resources then the Company. Therefore, the Company, may
not adequately be able to compete with such other companies.
-23-
MANUFACTURING
The Company assembles, tests, packages, and ships its products at its
manufacturing facilities located in Raritan, New Jersey. This facility includes
a separate assembly and test facility for various custom products.
The Company's manufacturing process consists of purchasing components,
assembling and testing components and subassemblies, integrating the
subassemblies into a final product and testing the product. The Company's
amplifiers consist of a variety of subassemblies and components designed or
specified by the Company including housings, harnesses, cables, packaged RF
power transistors, integrated circuits and printed circuit boards. Most of
these components are manufactured by others and are shipped to the Company for
final assembly. Each of the Company's products receives extensive in process
and final quality inspections and tests.
The Company's devices, components and other electrical and mechanical
subcomponents are generally purchased from multiple suppliers. The Company does
not have any written agreement with any of its suppliers. The Company has
followed a general policy of multiple sourcing for most of its suppliers in
order to assure a continuous flow of such supplies. However, the Company does
purchase certain transistors produced by a single manufacturer because of the
high quality of its components. The Company believes it is unlikely that such
transistors would become unavailable, however, if that were to occur, there are
multiple manufacturers of generally comparable transistors. The Company would
require a period of time to "return" its products to function properly with the
replacement transistors. The Company believes that the distributors of such
transistors maintain adequate inventory levels, which would mitigate any adverse
effect on the Company's production in the event unavailability or shortage of
such transistors. If for any reason the Company could not obtain comparable
replacement transistors or could not return its products to operate with the
replacement transistors, the Company's business, financial condition and results
of operations could be adversely affected.
The Company currently utilizes discrete circuit technology on printed
circuit boards which are designed by the Company and provided by suppliers to
the Company's specifications. All transistors and other semiconductor devices
are purchased in sealed packages ready for assembly and testing. Other
components such as resistors, capacitors, connectors or mechanical supported
subassemblies are also manufactured by others. Components are ordered from
suppliers under master purchase orders with deliveries timed to meet the
Company's production schedules. As a result, the Company maintains a low
inventory of components, which could result in delay in production in the event
of delays in such deliveries.
The Company purchased automated surface mount machinery ("SMT") to enhance
its manufacturing ability for amplifiers as well as wireless internet products
which was installed during the first quarter of 2000. The equipment has provided
improved efficiency in production and faster turn around for certain products.
-24-
The Company has started to manufacture some of the products for its High Speed
Wireless Internet products.
The Company manufacturers some of its High Speed Wireless Internet products
and amplifiers in its New Jersey facility and the rest in offshore
facilities which are ISO 9001 certified.
RESEARCH, ENGINEERING AND DEVELOPMENT
The Company's research, engineering and development efforts are focused on
the design of amplifiers for new protocols, the improvement of existing product
performance, cost reductions and improvements in the manufacturability of
existing products.
The Company has historically devoted a significant portion of its resources
to research, engineering and development programs and expects to continue to
allocate significant resources to these efforts. The Company's research,
engineering and development expenses in fiscal 2000 and 2001 were approximately
$590,496 and $593,823, respectively, and represented approximately 23% and 27%,
respectively, of net revenues. These efforts were primarily dedicated to the
development of the linear feed forward, high power, low distortion amplifiers,
resulting in the Company's models for AMPS, TACS, NMT-450, PCS-1900, and PCS
Repeater Amplifier (DCS 1800) and bi-directional amplifier, Client Base Station,
ISP Base Station and Microcell for its wireless internet systems and other high
speed wireless internet products.
The Company was able to maintain its research and development costs by
being able to develop significant products in house, thereby, minimizing
commitments to outside suppliers and consultants. The Company did, however,
incur consulting fees regarding the development of the High Speed Wireless
Internets Products.
The Company uses the latest equipment and computer aided design and
modeling, solid state device physics, advanced digital signal processing ("DSP")
and digital control systems, in the development of its products in the
specialized engineering and research departments.
The Company uses a CAD environment employing networked work stations to
model and test new circuits. This design environment, together with the
Company's experience in interference cancellation technology and modular product
architecture, allows the Company to rapidly define, develop and deliver new and
enhanced products and subsystems sought by its customers.
The markets in which the Company and OEM customers compete are
characterized by rapidly changing technology, evolving industry standards and
continuous improvements in products and services.
-25-
PATENTS, PROPRIETARY TECHNOLOGY AND OTHER INTELLECTUAL PROPERTY
The Company's ability to compete successfully and achieve future revenue
growth will depend, in part, on its ability to protect its proprietary
technology and operate without infringing the rights of others. The Company has
a policy of seeking patents, when appropriate, on inventions resulting from its
ongoing research and development and manufacturing activities.
Presently, the Company has been granted a patent (No. 5,606,286) by the
United States Patent and Trademark Office with respect to its Pre-Distortion and
Pre-Distortion Linearization technology which, the Company believes, is more
effective in reducing distortion then other currently available technology.
There can be no assurance that the Company's patent will not be challenged or
circumvented by competitors. The Company intends to broaden its patent
protection in other countries for its existing patents and file for additional
patent protection relating to products it is currently developing.
Notwithstanding the Company's active pursuit of patent protection, the
Company believes that the success of its amplifier business depends more on its
specifications, CAE/CAD design and modeling tools, technical processes and
employee expertise than on patent protection. The Company generally enters into
confidentiality and non-disclosure agreements with its employees and limits
access to and distribution of its proprietary technology. The Company may in
the future be notified that it is infringing certain patent and/or other
intellectual property rights of others. Although there are no such pending
lawsuits against the Company or unresolved notices that the Company is
infringing intellectual property rights of others, there can be no assurance
that litigation or infringement claims will not occur in the future.
The Company's wireless internet access products are marketed under the
trademark Ampwave and includes the following trademarked products lines:
AmpDLan TM, AmpDNet TM; and AmpAnt TM.
GOVERNMENTAL REGULATIONS
The Company's customers must obtain regulatory approval to operate their
base stations. The United States Federal Communications Commission ("FCC") has
regulations that impose more stringent RF and microwave emissions standards on
the telecommunications industry. There can be no assurance that the Company's
customers will comply with such regulations which could materially adversely
affect the Company's business, financial condition and results of operations.
The Company manufactures its products according to specifications provided by
its customers, which specifications are given to comply with applicable
regulations. The Company does not believe that costs involved with
manufacturing to meet specifications will have a material impact on its
operations. There can be no assurances that the adoption of future regulations
would not have a material adverse affect on the Company's business.
-26-
EMPLOYEES
As of December 31, 2001, the Company had a total of 31 employees, including
15 in operations, 5 in engineering, 5 in sales and marketing, 1 in quality
assurance and 5 in administration. As of December 31, 2001, the Company
employed three consultants, two in sales and marketing and one in engineering,
and engages other consultants for its high speed wireless Internet products from
time to time. The Company believes its future performance will depend in large
part on its ability to attract and retain highly skilled employees. None of the
Company's employees is represented by a labor union and the Company has not
experienced any work stoppages. The Company considers its employee relations to
be good.
ENVIRONMENTAL REGULATIONS
The Company is subject to Federal, state and local governmental regulations
relating to the storage, discharge, handling, emissions, generation, manufacture
and disposal of toxic or other hazardous substances used to manufacture the
Company's products. The Company believes that it is currently in compliance in
all material respects with such regulations. Failure to comply with current or
future regulations could result in the imposition of substantial fines on the
Company, suspension of production, alteration of its manufacturing process,
cessation of operations or other actions which could materially and adversely
affect the Company's business, financial condition and results of operations.
IN ADDITION TO OTHER INFORMATION IN THIS ANNUAL REPORT, THE FOLLOWING
IMPORTANT FACTORS SHOULD BE CAREFULLY CONSIDERED IN EVALUATING THE COMPANY AND
ITS BUSINESS BECAUSE SUCH FACTORS CURRENTLY HAVE A SIGNIFICANT IMPACT ON THE
COMPANY'S BUSINESS, PROSPECTS, FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
RISK FACTORS
You should carefully consider the risks described below before investing in
our company. The risks and uncertainties described below are not the only ones
facing our company. Other risks and uncertainties that we have not predicted or
assessed may also adversely affect our company.
Some of the information in this Annual Report contains forward-looking
statements that involve substantial risks and uncertainties. You can identify
these statements by forward-looking words such as "may," "will," "expect,"
"anticipate," "believe,' "intend," "estimate," and "continue" or other similar
words. You should read statements that contain these words carefully for the
following reasons:
- the statements may discuss our future expectations;
- the statements may contain projections of our future earnings or of our
financial condition; and
- the statements may state other "forward-looking" information.
-27-
We believe it is important to communicate our expectations to our
investors. There may be events in the future, however, that we are not
accurately able to predict or over which we have no control. The risk factors
listed below, as well as any cautionary language in or incorporated by reference
into this Annual Report, provide examples of risks, uncertainties and events
that may cause our actual results to differ materially from the expectations we
describe in our forward-looking statements. Before you invest in our company,
you should be aware that the occurrence of any of the events described in the
risk factors below, elsewhere in or incorporated by reference into this Annual
Report and other events that we have not predicted or assessed could have a
material adverse effect on our earnings, financial condition or business. In
such case, the trading price of our securities could decline and you may lose or
all or part of your investment.
WE HAVE A RECENT HISTORY OF LOSSES. We have incurred net losses of
$2,440,045 and $2,024,882 for the years ended December 31, 2000 and 2001,
respectively. These losses were due, in large part, to the research,
engineering and development costs associated with the creation of our line of
multicarrier linear power amplifiers and high speed wireless internet products
and stock compensation costs for the use of stock or stock options to obtain
services or to obtain financing. We have made commitments to vendors to
purchase hardware for use in our wireless internet systems. We expect to have
increased sales in this area to compensate for the expenses, however, there is
no guarantee that this will happen. The need for high band width products may
lead to rapid product obsolescence. Therefore, we expect to increase our
research and development efforts for more products which could result in higher
operating losses. Further, we have not generated sufficient sales volume to
cover our overhead costs and generate profits. We expect that our losses will
increase and continue until such time, if ever, as we are able to successfully
manufacture and market our products on a larger scale and therefore generate
higher profit margins. We will need to generate a substantial increase in
revenues to become profitable. Accordingly, we cannot assure you that we will
ever become or remain profitable. In addition, we had an accumulated deficit of
$19,569,652 at December 31, 2001.
WE MAY REQUIRE ADDITIONAL FINANCING. We believe that our current cash on
hand, as well as additional funds from the possible exercise of outstanding
options and warrants, together with cash flow from our operations, will be
adequate to fund our operations for at least twelve months. However, we may
require additional financing prior to or after such time. We have issued our
common stock, when available to us, in lieu of cash payment of officer's
salaries, commissions and consulting fees, although we may not be able to
continue this practice. If additional financing is needed, we cannot be sure
that such financing will be available to us on acceptable terms. If adequate
funds are not available, we may be required to delay, scale back or eliminate
our research, engineering and development or manufacturing programs or obtain
funds through arrangements with partners or others that may require us to
relinquish rights to certain of our technologies, potential products or other
assets. Thus, our inability to obtain such financing could have a material
adverse effect on our business, financial condition and operations.
-28-
THE EVENTS OF SEPTEMBER 11 HAVE RESULTED IN INCREASED UNCERTAINTY REGARDING
THE ECONOMIC OUTLOOK. The terrorist attacks on September 11, 2001 have resulted
in increased uncertainty regarding the economic outlook. It is not possible at
this time to project the economic impact of these events, although past
experience suggests there may be a loss in consumer and business confidence and
a reduction in the rate of economic growth or an economic recession. With the
U.S. economy already on the edge of recession before the attacks, any further
deterioration in either the U.S. or international economies would adversely
affect our financial condition and results of operations.
OUR SUCCESS RELIES UPON THE GROWTH OF WIRELESS TELECOMMUNICATIONS SERVICES.
The demand for our products will depend in large part upon continued and growing
demand within the wireless telecommunications industry for power amplifiers and
our high speed wireless internet access products. Although demand for such
products has grown in recent years, we are not sure whether the quantity and
variety of wireless telecommunication services will continue to grow, or that
such services will create a demand for our products.
OUR LIMITED LACK OF AUTOMATED MANUFACTURING PROCESSES AND OUR DEPENDENCE ON
THIRD PARTY MANUFACTURERS COULD ADVERSELY AFFECT OUR BUSINESS. We have
consistently reviewed our automated manufacturing needs in order to control our
production schedule. To date, we have not established a fully automated
manufacturing facility although we have purchased an automated surface mount
machine and reflow process oven. Our wireless internet products are manufactured
at offshore facilities which are our sole suppliers. Until such time as we are
able to establish such facilities, we expect to be dependent on third party
manufacturers. We cannot be sure that these third party manufacturers will be
able to fulfill our production commitment. Furthermore, we do not have written
agreements with these manufacturers. Our inability to obtain timely deliveries
of acceptable assemblies could delay our ability to deliver products to our
customers, and would have a material adverse effect on our business, financial
condition and results of operations. In addition, if these manufacturers
increase their production costs, we may not be able to recover such cost
increases under the fixed price commitments with our customers.
OUR LIMITED NUMBER OF SUPPLIERS COULD ADVERSELY AFFECT OUR BUSINESS. Power
transistors and certain other key components used in our products for our
amplifiers, as well as our wireless internet business are currently available
from only a limited number of suppliers. Certain of our suppliers have limited
operating histories and limited financial and other resources. Our suppliers may
prove to be unreliable sources of certain components. Furthermore, we have no
written agreements with our suppliers. In the past, we have not purchased key
components in large volumes but anticipate that our need for component parts
will increase. If we are unable to obtain sufficient quantities of components,
particularly power transistors, we could experience delays or reductions in
product shipments. Such delays or reductions could have a material adverse
effect on our business, financial condition and results of operations.
Additionally, such delays or reductions may have a material adverse effect on
our relationships with customers and result in the termination of existing
orders and/or a permanent loss in our future sales. Our wireless internet
products are manufactured at offshore facilities. The lack of supply from this
source due to any reason could adversely impact our business.
-29-
OUR SUCCESS WILL RELY ON OUR ABILITY TO ENTER INTO STRATEGIC PARTNERSHIPS.
We are currently developing and expect to continue to develop strategic
partnerships and other relationships in order to expand our business,
particularly relationships with ISPs. The failure to successfully develop such
relationships could have a material adverse effect on our business, financial
condition and result of operations.
OUR SUCCESS RELIES ON A SMALL NUMBER OF CUSTOMERS AND OUR SALES ORDERS HAVE
HAD A HIGH DEGREE OF DELAYS AND CANCELLED ORDERS. In 2000, approximately 75% of
our net revenues were derived from two customers (49% and 26%). In 2001,
approximately 74% of our net revenues were derived from two customers (62% and
12%). In the past few years we have experienced reductions, delays and
cancellations in orders from our new and existing customers, particularly in the
Korean marketplace. We anticipate that sales of our products to relatively few
customers will account for a majority of our 2002 revenues and that sales to
Korea during this period are not expected to be significant. The probability of
a more diverse customer base is higher with the addition of our high speed
wireless internet products, but no assurance can be given that this will happen.
The reduction, delay or cancellation of orders from one or more of our
significant customers would materially and adversely affect our financial
condition and results of operation. Moreover, we may experience significant
fluctuations in net sales, gross margins and operating results in the future as
a result of the uncertainty of such sales. Our wireless internet product sales
are expected to increase through contracts we have with ISPs. If these sales do
not materialize due to any reason, this would have a significant negative impact
on our projected revenues.
OUR LIMITED MARKETING EXPERIENCE (PARTICULARLY FOR OUR HIGH SPEED WIRELESS
INTERNET PRODUCTS), MAY ADVERSELY AFFECT OUR BUSINESS. We have developed a sales
and marketing network, including outside sales agents, which has demonstrated
the advantages of our products over competing products. In order to be
successful, we have to maintain a leading edge position regarding emerging
wireless communication technologies. To this end, we continue to upgrade our
sales and marketing efforts, while maintaining product cost. We may not be able
to recruit effective sales and marketing personnel or agents. We are not sure
whether our marketing efforts will be successful or that we will be able to
maintain competitive sales and distribution capabilities. In addition, we have
limited experience in the marketing and sales of our wireless internet products,
and cannot be certain that this sector will grow in revenue as expected.
MANAGEMENT OF OUR COMPANY OWNS A SIGNIFICANT AMOUNT OF OUR OUTSTANDING
COMMON STOCK. Our officers, directors and persons who may be deemed our
affiliates beneficially own, in the aggregate, and have the right to vote
approximately 24% of our issued and outstanding common stock, not including
common stock options they may own. Accordingly, such holders may be in a
position to affect the election of all of our directors and control our company.
-30-
THE LIMITED PUBLIC MARKET AND TRADING MARKET MAY CAUSE VOLATILITY IN OUR
STOCK PRICE. There has only been a public market for our common stock since
January 1997 and we are not sure whether an active trading market in our common
stock will ever be maintained. In the absence of such a market, you may find it
more difficult to sell our common stock. In addition, the stock market in recent
years has experienced extreme price and volume fluctuations that have
particularly affected the market prices of many smaller and technology based
companies. The trading price of our common stock is expected to be subject to
significant fluctuations in response to variations in our quarterly operating
results; changes in analysts' earnings estimates regarding our Company;
announcements of technological innovations by us or our competitors; and general
conditions in the wireless communications industry and other factors. These
fluctuations, as well as general economic and market conditions, may have a
material adverse effect on the market price of our common stock.
OUR SUCCESS DEPENDS ON OUR ABILITY TO MANAGE THE SIZE OF OUR OPERATIONS. We
downsized some of our operations in order to maintain competitiveness and reduce
our operating losses. We have also explored joint ventures and mergers in order
to achieve these results, but have not consummated any such transaction. If we
do not increase our sales, decrease overhead expenditure or do not adequately
manage the size of our operations, our results of operations will be materially
adversely affected.
DECLINING AVERAGE SALES PRICES COULD ADVERSELY AFFECT OUR BUSINESS. If
wireless internet and telecommunications customers come under increasing price
pressure from service providers, we could expect to experience downward pricing
pressure on our products. In addition, competition among non-captive amplifier
suppliers could increase the downward pricing pressure on our amplifier
products. To date, we have not experienced such pressure. As our customers
frequently negotiate supply arrangements with us far in advance of product
delivery dates, we often must commit to price reductions before we can determine
whether cost reductions can be obtained. If we are unable to achieve cost
reductions, our gross margins will decline and our business, financial condition
and results of operations could be materially and adversely affected.
RAPID TECHNOLOGICAL CHANGE AND INTENSE COMPETITION COULD ADVERSELY AFFECT
OUR BUSINESS. The wireless internet and telecommunications equipment industry is
extremely competitive and is characterized by rapid technological change, new
product development, product obsolescence and evolving industry standards. In
addition, price competition in this market is intense and characterized by
significant price erosion over the life of a product. Currently, we compete
primarily with non-captive suppliers of power amplification products. We believe
that our success will be based primarily upon service, pricing, reputation, and
our ability to meet product delivery schedules. Our existing and potential
customers continuously evaluate whether to manufacture their own amplification
products or to purchase such products from outside sources. These customers and
other large manufacturers of wireless telecommunications equipment could elect
to enter the market and compete directly with us. Many of our competitors have
significantly greater financial, technical, manufacturing, sales and marketing
capabilities and research and development personnel and other resources than us
-31-
and have achieved greater name recognition of their existing products and
technologies. In order for us to successfully compete, we must continue to
develop new products, keep pace with advancing technologies and competitive
innovations and successfully market our products. Our inability to successfully
compete against our larger competitors will have a materially adverse affect on
our business, financial condition and operations.
In addition, we are not sure whether new products or alternative
technology will render our current or planned products obsolete or inferior.
Rapid technological development by others may result in our products becoming
obsolete before we recover a significant portion of the research, development
and commercialization expenses we incurred with respect to those products.
OUR BUSINESS WILL BE ADVERSELY AFFECTED IF WE DO NOT KEEP UP WITH THE
INTERNET'S RAPID TECHNOLOGICAL CHANGE, EVOLVING INDUSTRY STANDARDS AND CHANGING
USER REQUIREMENTS. We are currently developing new products for high speed
internet access. To be successful, we must adapt to our rapidly changing market
by continually enhancing the technologies used for Internet access. If we are
unable, for technical, legal, financial or other reasons, to adapt in a timely
manner in response to changing market conditions or user requirements, our
business could be materially adversely affected. Significant issues concerning
the commercial use of Internet technologies, including security, reliability,
cost, ease of use and quality of service, remain unresolved and may inhibit the
growth of businesses relying on the Internet. Our future success will depend, in
part, on our ability to meet these challenges. Among the most important
challenges facing us are the need to:
- effectively use established technologies;
- continue to develop our technical expertise; and
- respond to emerging industry standards and other technical changes.
All of these changes must be met in a timely and cost-effective manner. We
cannot assure you that we will succeed in effectively meeting these challenges
and our failure to do so could materially and adversely affect our business.
RISKS ASSOCIATED WITH SALES OUTSIDE OF THE UNITED STATES MAY ADVERSELY
AFFECT OUR BUSINESS. International sales represented approximately 83% and 85%
of our net revenues for the years ended December 31, 2000 and 2001,
respectively. We expect that international sales will continue to account for a
significant portion of our net revenues in the future. To the extent that we do
not achieve and maintain substantial international sales, our business, results
of operations and financial condition could be materially and adversely
affected.
Sales of our products outside of the United States are denominated in US
dollars. An increase in the value of the U.S. dollar relative to foreign
-32-
currencies would make our products more expensive and, therefore, potentially
less competitive outside the United States. Additional risks inherent in our
sales abroad include:
- the impact of recessionary environments in economies outside the United
States;
- generally longer receivables collection periods;
- unexpected changes in regulatory requirements;
- tariffs and other trade barriers;
- potentially adverse tax consequences;
- reduced protection for intellectual property rights in some countries;
- the burdens of complying with a wide variety of foreign laws.
These factors may have an adverse effect on our future international sales
and, consequently, on our business, financial condition and results of
operations.
OUR OPERATING RESULTS MAY VARY FROM QUARTER TO QUARTER IN FUTURE PERIODS,
AND AS A RESULT, OUR STOCK PRICE MAY FLUCTUATE OR DECLINE. Our quarterly
operating results may fluctuate significantly in the future due to a variety of
factors that could affect our revenues or our expenses in any particular
quarter. Factors that may affect our quarterly results include:
- our ability to attract and retain customers;
- development of competitive products;
- the short term nature of manufacturing and engineering orders to date;
- unforeseen changes in operating expenses;
- the loss of key employees; and
- unexpected revenue shortfalls.
A substantial portion of our operating expenses is related to personnel
costs and overhead, which we cannot adjust quickly and are therefore relatively
fixed in the short term. Our operating expense levels are based, in significant
part, on our expectations of future revenues on a quarterly basis. If actual
revenues are below our expectations, our results of operations and financial
condition would be materially and adversely affected because a relatively small
amount of our costs and expenses are proportionate with revenues in the short
term.
Due to all of the foregoing factors and the other risks discussed in this
Annual Report, it is possible that in some future periods our results of
operations may be below the expectations of investors and public market analysts
which may cause our stock price to fluctuate or decline.
WE ARE DEPENDENT UPON MANAGEMENT AND TECHNICAL PERSONNEL. Our success is
highly dependent upon the continued services of Devendar Bains, our Chief
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Executive Officer and Michael Lawrence, our President and Chief Operating
Officer. The employment agreements terminate April 30, 2005 and September 12,
2004, respectively, and contain covenants not to compete against our company
following termination of employment with our company. We have obtained key man
insurance on the life of Mr. Bains in the amount of $1,000,000. We cannot be
sure whether we will be able to replace either of Messrs. Bains or Lawrence in
the event their services become unavailable (or, in the case of Mr. Bains,
whether the proceeds of such insurance would be adequate to compensate us for
the loss of his services).
Due to the specialized nature of our business, we are highly dependent on
the continued service of, and on our ability to attract and retain, qualified
technical and marketing personnel, particularly those involved in the
development of new products and processes and the manufacture and enhancement of
our existing products. In addition, as part of our team-based sales approach, we
dedicate specific design engineers to service the requirements of individual
customers. The loss of any such engineer could adversely affect our ability to
obtain future purchase orders from the customers to which such engineer was
dedicated. We have employment or non-competition agreements with most of our
current design engineers and test technicians. The competition for such
personnel is intense, and the loss of any such persons, as well as the failure
to recruit additional key technical personnel in a timely manner, could have a
material adverse effect on our business, financial condition and results of
operations.
WE RELY ON THE ABILITY TO PROTECT PROPRIETARY TECHNOLOGY; RISK OF THIRD
PARTY CLAIMS OF INFRINGEMENT MAY AFFECT OUR BUSINESS. Our ability to compete
successfully and achieve future revenue growth will depend, in part, on our
ability to protect proprietary technology and operate without infringing upon
the rights of others. Although there are no pending lawsuits regarding our
technology or notices that we are infringing upon intellectual property rights
of others, litigation or infringement claims may occur in the future. Such
litigation or claims could result in substantial costs, and diversion of
resources and could have a material adverse effect on our business, financial
condition, and results of operations. We generally enter into confidentiality
and non-disclosure agreements with our employees and limit access to and
distribution of proprietary information. However, we cannot be sure whether such
measures will provide adequate protection for our trade secrets or other
proprietary information, or whether our trade secrets or proprietary technology
will otherwise become known or independently developed by our competitors. Our
failure to protect proprietary technology could have a material adverse effect
on our business, financial condition and results of operations.
WE DO NOT PLAN TO PAY DIVIDENDS ON OUR COMMON STOCK. We have never paid any
dividends on our common stock and do not intend to pay dividends on our common
stock in the foreseeable future. Any earnings which we may realize in the
foreseeable future will be retained to finance our growth.
-34-
GOVERNMENTAL REGULATIONS AND ENVIRONMENTAL REGULATIONS CAN HAVE A LARGE
IMPACT ON OUR BUSINESS. Our customers must obtain regulatory approval to operate
their base stations. The United States Federal Communications Commission has
regulations that impose stringent radio frequency and microwave emissions
standards on the telecommunications industry. Our customers are required to
comply with such regulations. The failure of our customers to comply with these
regulations could materially adversely affect our business, financial condition
and results of operations. We manufacture products according to specifications
provided by our customers, which specifications are required to comply with
applicable regulations. We do not believe that costs involved with manufacturing
to meet specifications will have a material impact on our operations. We cannot
be sure whether the adoption of future regulations would have a material adverse
affect on our business.
We are subject to Federal, state and local governmental regulations
relating to the storage, discharge, handling, emissions, generation, manufacture
and disposal of toxic or other hazardous substances used to manufacture our
products. We believe that we are currently in compliance in all material
respects with such regulations. Failure to comply with current or future
regulations could result in the imposition of substantial fines on our company,
suspension of our production, alteration of our manufacturing process, cessation
of our operations or other actions which could materially and adversely affect
our business, financial condition and results of operations.
WE MAY NOT BE ABLE TO COMPLY WITH NASDAQ CONTINUED LISTING REQUIREMENTS.
For continued listing on The Nasdaq SmallCap Market, a company must have, among
other things:
- $2,000,000 in net tangible assets (which requirement shall be, as of
November 1, 2002, $2,500,000 in net assets);
- $1,000,000 in market value of public float; and
- a minimum bid price of $1.00 per share.
Our common stock is currently listed on The Nasdaq SmallCap Market. If we
were unable to satisfy the requirements for continued listing on The Nasdaq
Small Cap Market, trading of our common stock would be conducted in the
over-the-counter market. Transactions in the over-the-counter market are
commonly referred to as "pink sheet" or NASD OTC Electronic Bulletin Board
transactions. If trading of our common stock in the over-the-counter market were
to occur, the liquidity of our common stock would be materially adversely
affected. Additionally, you may find it more difficult to dispose of, or obtain
accurate quotations as to the price of, our common stock. Our Annual Report on
Form 10-KSB for the period ended December 31, 2001 indicates net tangible assets
of $2,172,639. We cannot be sure whether, and for how long, listing will
continue.
PENNY STOCK REGULATIONS MAY IMPOSE CERTAIN RESTRICTIONS ON MARKETABILITY OF
OUR SECURITIES. The SEC has adopted regulations which generally define a "penny
stock" to be any equity security that has a market price of less than $5.00 per
share or an exercise price of less than $5.00 per share, subject to certain
exceptions. Since our common stock is listed on The Nasdaq SmallCap Market, it
is exempt from the definition of "penny stock." If our common stock is removed
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from listing by The Nasdaq SmallCap Market, our common stock may become subject
to the "penny stock" rules. These rules would impose additional sales practice
requirements on broker-dealers who sell such securities to persons other than
established customers and accredited investors (generally those with assets in
excess of $1,000,000 or annual income exceeding $200,000, or $300,000 together
with their spouse). For transactions covered by these rules, the broker-dealer
must:
- make a special suitability determination with respect to each purchaser of
securities;
- receive the purchaser's written consent to the transaction prior to the
purchase;
- deliver, prior to the purchase, a risk disclosure document mandated by the
SEC relating to the penny stock market;
- disclose the commission payable to both the broker-dealer and the
registered representative;
- disclose current quotations for such securities;
- disclose whether the broker-dealer has control over the particular market;
and
- deliver monthly statements disclosing recent price information for the
securities and information on the limited market in penny stocks.
Consequently, the "penny stock" rules may restrict the ability of
broker-dealers to sell our securities and adversely affect your ability to sell
our securities in the secondary market and the price of our securities in the
secondary market.
ANTI-TAKEOVER PROVISIONS MAY ADVERSELY AFFECT THE VALUE OF OUR OUTSTANDING
SECURITIES. Pursuant to our Certificate of Incorporation, our Board of Directors
may issue up to 1,000,000 shares of preferred stock in the future with such
preferences, limitations and relative rights as they may determine without
stockholder approval. As of December 31, 2001, there were 55,000 shares of our
Series B Preferred Stock outstanding (all of which converted in the first
quarter of 2002). The rights of the holders of our common stock will be subject
to, and may be adversely affected by, the rights of the holders of any preferred
stock outstanding or that may we may issue in the future. The issuance of
preferred stock, while providing flexibility in connection with possible
acquisitions and other corporate purposes, could have the effect of delaying or
preventing a change in control of our company without further action by the
stockholders. In addition, we are subject to the anti-takeover provisions of
Section 203 of the Delaware General Corporation Law. Section 203 prohibits us
from engaging in a "business combination" with an "interested stockholder" for a
period of three years after the date of the transaction in which the persons
became an interested stockholder, unless the business combination is approved in
a prescribed manner. The application of Section 203 also could have the effect
of delaying or preventing a change of control of our company.
ADDITIONAL AUTHORIZED SHARES OF COMMON STOCK AND PREFERRED STOCK AVAILABLE
FOR ISSUANCE MAY ADVERSELY AFFECT THE MARKET. We are authorized to issue
25,000,000 shares of our common stock. As of December 31, 2001, there were
7,892,661 shares of our common stock issued and outstanding, which amount does
not include:
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- the option to purchase up to 140,000 shares of our common stock granted to
the underwriter of our initial public offering at an exercise price of $7.50 per
share;
- 50,000 shares of our common stock issuable upon exercise of warrants at
$4.00 per share;
- 67,500 shares of our common stock issuable upon exercise of warrants at
$2.50 per share;
- 20,000 shares of our common stock issuable upon exercise of warrants at
$1.00 per share;
- 30,000 shares of our common stock issuable upon exercise of warrants at
$6.00 per share;
- 50,000 shares of our common stock issuable upon exercise of warrants at
$2.00 per share;
- 20,000 shares of our common stock issuable upon exercise of warrants at
$7.00 per share;
- 141,000 shares of our common stock issuable upon exercise of warrants at
$1.75 per share;
- 41,500 shares of our common stock issuable upon exercise of warrants at
$1.80 per share;
- 307,500 shares of our common stock issuable upon exercise of warrants at
$3.00 per share;
- 55,000 shares of our common stock issuable upon exercise of warrants at
$1.20 per share;
- 100,000 shares of our common stock issuable upon exercise of warrants at
$5.00 per share; and
- 2,181,000 shares of our common stock issuable upon exercise of options
granted to our employees and Directors at exercise prices ranging between
$1.25 and $4.00 per share.
As of December 31, 2001, after reserving a total of 3,203,500 shares of our
common stock for issuance upon the exercise of all options and warrants
described above and 324,486 freely tradable shares to be issued in connection
with the settlement of our class action lawsuit described in our public filings
(which was issued in March 2002), we will have at least 13,579,353 shares of
authorized but unissued common stock available for issuance without further
shareholder approval (not including the shares of Common Stock that were issued
upon conversion of our Series B Preferred Stock in the first quarter of 2002).
Any issuance of additional shares of our common stock may cause our current
shareholders to suffer significant dilution which may adversely affect the
market for our securities.
In addition, we have 1,000,000 shares of authorized preferred stock. As of
December 31, 2001, 55,000 shares of preferred stock has been issued and
designated as Series B Preferred Stock (all of which was converted in the first
quarter of 2002). There are no other shares of preferred stock currently issued
or outstanding. While we have no present plans to issue any additional shares of
preferred stock, our Board of Directors has the authority, without shareholder
approval, to create and issue one or more series of such preferred stock and to
determine the voting, dividend and other rights of holders of such preferred
stock. The issuance of any of our preferred stock could have an adverse effect
on the holders of our common stock.
-37-
SHARES ELIGIBLE FOR FUTURE SALE MAY ADVERSELY AFFECT THE MARKET. [SN TO
UPDATE] As of December 31, 2001, we had 7,892,661 shares of our common stock
issued and outstanding (not including 324,486 freely tradable shares of common
stock to be issued in connection with the settlement of our class action lawsuit
described in our public filings). Of these 7,892,661 shares of issued and
outstanding common stock, approximately 4,832,790 shares are considered
"restricted securities". These "restricted securities" may be sold pursuant to
Rule 144 of the Securities Act of 1933 as follows:
- 4,405,790 shares of our common stock may currently be sold pursuant to
Rule 144; and
- 427,000 shares of our common stock may be sold pursuant to Rule 144
commencing July 2002.
Rule 144 provides, in essence, that a person holding "restricted
securities" for a period of one year may sell only an amount every three
months equal to the greater of:
(a) one percent of the Company's issued and outstanding shares; or
(b) the average weekly volume of sales during the four calendar weeks
preceding the sale.
The amount of "restricted securities" which a person who is not an
affiliate of our company may sell is not so limited. Non-affiliates may sell
without volume limitation their shares held for two years if there is adequate
current public information available concerning our company.
The sale in the public market of our common stock may adversely affect
prevailing market prices of our common stock.
THE EXERCISE OF OUTSTANDING OPTIONS AND WARRANTS MAY ADVERSELY AFFECT THE
MARKET FOR OUR COMMON STOCK. As of December 31, 2001, we had the following
outstanding stock options and warrants to purchase shares of our common stock:
- warrants to purchase 67,500 shares of our common stock at an exercise
price of $2.50 per share;
- warrants to purchase 50,000 shares of our common stock at an exercise
price of $4.00 per share;
- warrants to purchase 20,000 shares of our common stock at an exercise
price of $1.00 per share;
- warrants to purchase 140,000 shares of our common stock at an exercise
price of $7.50 per share;
-38-
- warrants to purchase 30,000 shares of our common stock at an exercise
price of $6.00 per share;
- warrants to purchase 20,000 shares of our common stock at an exercise
price of $7.00 per share;
- warrants to purchase 50,000 shares of our common stock at an exercise
price of $2.00 per share;
- warrants to purchase 141,000 shares of our common stock at an exercise
price of $1.75 per share;
- warrants to purchase 41,500 shares of our common stock at an exercise
price of $1.80 per share;
- warrants to purchase 307,500 shares of our common stock at an exercise
price of $3.00 per share;
- warrants to purchase 55,000 shares of our common stock at an exercise
price of $1.20 per share; and
- warrants to purchase 100,000 shares of our common stock at an exercise
price of $5.00 per share;
In addition, we have reserved 2,181,000 shares of our common stock for
issuance pursuant to outstanding employee stock options. The exercise of our
outstanding options and warrants will dilute the percentage ownership of our
stockholders. Sales in the public market of our common stock underlying such
options or warrants may adversely affect prevailing market prices for our common
stock. Moreover, the terms upon which we will be able to obtain additional
equity capital may be adversely affected since the holders of such outstanding
securities can be expected to exercise their respective rights therein at a time
when we would, in all likelihood, be able to obtain any needed capital on terms
more favorable to us those provided in such securities.
LIMITATION ON DIRECTOR LIABILITY MAY ADVERSELY AFFECT THE VALUE OF OUR
COMMON STOCK. As permitted by Delaware law, our Certificate of Incorporation
limits the liability of our directors for monetary damages for breach of their
fiduciary duty except for liability in certain instances. As a result of our
charter provision and Delaware law, you may have limited rights to recover
against our directors for breach of their fiduciary duty.
ITEM 2. PROPERTIES.
-----------
The Company leases (from an unaffiliated party) approximately 11,000 square
feet, at 59 LaGrange Street, Raritan, NJ 08869, which serves as the Company's
executive offices and manufacturing facility. The lease term expires on July
13, 2004. The annual rental is $71,250 plus the Company's share of real estate
taxes and other occupancy costs. The Company established a sales office in
India in April 2001. The annual rental is approximately $4,000. This lease
expires in April 2002.
ITEM 3. LEGAL PROCEEDINGS
------------------
The Company is not a party to any material pending litigation or
governmental proceedings that, management believes, would result in judgments or
fines that would have a material adverse effect on the Company.
-39-
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
------------------------------------------------------------
On December 27, 2001, the Company held an annual meeting of stockholders to
vote on the election of directors and the ratification of the Company's
independent auditors. Of the 7,892,661 shares of the Company's Common Stock
entitled to vote at the meeting, holders of 5,986,893 shares were present in
person or were represented by proxy at the meeting.
The directors elected at the meeting and the results of the voting were as
follows:
For Withheld
--- --------
Devendar S. Bains 5,618,639 364,454
Tarlochan Bains 5,618,639 364,454
Charles J. Ritchie 5,618,639 364,454
Manish V. Detroja 5,618,639 364,454
The above represented all of the directors of the Company on December 27,
2001.
The shares voted regarding the Board of Directors' proposal to amend the
Company's 1996 Stock Option Plan, were as follows:
For: 5,818,626
Against: 156,837
Abstain: 10,630
The shares voted regarding the Board of Directors' proposal to select the
accounting firm of Grant Thornton LLP, to serve as independent auditors of the
Company, were as follows:
For: 5,965,938
Against: 9,205
Abstain: 10,950
On February 15, 2002, the Board voted to dismiss Grant Thornton LLP as the
Company's independent auditors and engage Kahn Boyd Levychin LLP as independent
auditors of the Company.
PART II
-------
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
-------------------------------------------------------
STOCKHOLDER MATTERS.
---------------------
The Company's Common Stock and Warrants commenced trading on the Nasdaq
Small Cap Market on January 22, 1997. The Warrants were redeemed in May 2000.
-40-
The Common Stock is regularly quoted and traded on the Nasdaq SmallCap Market
under the symbol AMPD.
The following table sets forth the range of high and low closing prices
for the Company's Common Stock and Warrants for fiscal 1999, fiscal 2000
(through May 16, 2000 for the Warrants), fiscal 2001 and for the period of
January 1, 2002 up to March 31, 2002 as reported by the Nasdaq SmallCap Market.
The trading volume of the Company's securities fluctuates and may be limited
during certain periods. As a result, the liquidity of an investment in the
Common Stock may be adversely affected.
Common Stock
-------------
1999 Calendar Year High Low
-------------------- ---- ---
January 1 - March 31 2.625 1.094
April 1 - June 30 4.500 1.844
July 1 - September 30 12.250 1.344
October 1 - December 31 10.125 5.375
2000 Calendar Year
--------------------
January 1 - March 31 11.500 5.313
April 1 - June 30 7.250 3.063
July 1 - September 30 4.563 2.438
October 1 - December 31 4.000 1.031
2001 Calendar Year
--------------------
January 1 - March 31 2.7813 1.250
April 1 - June 30 1.95 1.13
July 1 - September 30 1.57 .79
October 1 - December 31 1.25 .69
2002 Calendar Year
--------------------
January 1 - March 31 1.37 .86
Warrants
--------
1999 Calendar Year
--------------------
January 1 - March 31 .406 .031
April 1 - June 30 .906 .281
July 31 - September 30 6.000 .313
October 31 - December 31 4.500 1.500
-41-
2000 Calendar Year
--------------------
January 1 - March 31 5.500 1.500
April 1 - May 16 2.125 .0312
On March 31, 2002, the closing price of the Common Stock as reported on the
Nasdaq SmallCap Market was $1.01. On March 31, 2002 there were 9,668,341 shares
of Common Stock outstanding, held of record by approximately 80 record holders
(with over 2,300 beneficial owners).
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
-------------------------------------------
FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
--------------------------------------------------
Results of Operations - Fiscal Year ended December 31, 2001 compared to Fiscal
Year ended December 31, 2000
Revenues for the fiscal year ended December 31, 2001 decreased from
$2,595,090 to $2,205,429, or 15% compared to the fiscal year ended December 31,
2000. The primary reason for the decrease was the general decline in purchasing
of equipment by the telecommunications industry.
The majority of the sales for the year 2001 were obtained from the Wireless
Local Loop amplifier products to a major European customer. The Company has
also supplied 900 MHz cellular multi carrier linear amplifiers to its major
North American customer, as well as 3.5GHz amplifiers for the wireless local
loop products.
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. It is maintaining a more cautious
approach towards the South Korean market due to the significant currency
fluctuations and purchase order cancellations during the past few years in South
Korea.
Cost of sales as a percentage of sales was 58% during the year ended
December 31, 2001, compared to 95% during the same period for 2000. This
decrease can be attributed a reallocation of resources to developing new
products and markets and the maturation of our manufacturing processes resulting
in substantial reductions in production costs. Our fixed overhead costs are
relatively high for our current sales volume. An increase in inventory held at
year-end for production orders is consistent with production runs and order
backlog. The Company is continuing to assess cost reduction of its products and
sales volume increases to improve gross margins in 2002.
Selling, general and administrative expenses decreased in 2001 by $81,680
to $1,904,490 from $1,986,170, in 2000. Expressed as a percentage of sales, the
-42-
selling, general and administrative expenses were 86% in 2001 and 77% in 2000.
The principal factors contributing to the increase in selling, general and
administrative expenses were related to decreases in advertising, depreciation
and professional fees.
Research, engineering and development expenses were 27% of net sales in
2001 compared to 23% in 2000. In 2001 and 2000, 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. 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. Research, engineering and development
expenses remained relatively unchanged from 2000 to 2001. 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 2001 of $50,915 due to
influx of new capital during 2000 and 2001 from our private placements and
exercise of warrants and options. Interest and other income is lower than the
2000 amount due to the consistency of amounts in interest bearing accounts in
2001 compared to 2000. The Company also sold New Jersey Net operating loss
carryforwards pursuant to the New Jersey Technology Certificate Transfer
Program, in both 2001 and 2000.
Interest expense decreased in 2001 because of the decrease in balances due
on capitalized leases on test equipment.
Estimated and actual litigation settlement costs have been provided in both
2001 and 2000, to reflect our estimated or known exposure in litigation against
the Company, as well as the actual cost of the settlement of a class action
lawsuit in 2001 with a cash cost of $50,000 to the Company plus the issuance of
free-trading common shares valued at $500,000.
Stock compensation and financing expenses of $140,000 for the year ended
December 31, 2001 compared to $114,546 for the comparable 2000 period is due to
the financing cost associated with warrants extended and shares issued.
As a result of the foregoing, the Company incurred net losses of
($2,024,882) or ($.26) per share for the year ended December 31, 2001 compared
with net losses of ($2,440,045) or ($.34) per share for the same period in 2000.
Results of operations - Fiscal year ended December 31, 2000 compared to Fiscal
Year ended December 31, 1999.
Revenues for the fiscal year ended December 31, 2000 increased from
$2,150,707 to $2,595,090, or 20% compared to the fiscal year ended December 31,
1999. The primary reason for the increase was greater sales to existing
customers of the NMT-450 multicarrier amplifier for the wireless local loop
amplifiers and the initial sales of our recently introduced High Speed Wireless
Internet Access Products. This was offset by a decrease in 1999 sales of our
Digital PCS Products to a Korean customer which did not occur in 2000.
-43-
The majority of the sales for the year 2000 were obtained from the Wireless
Local Loop amplifier products and filter diplexer products to a major European
customer. The NMT 450 amplifiers were shipped primarily to a major North
American customer. The Company has also supplied 900 MHz cellular multi carrier
linear amplifiers to its major North American customer, as well as prototypes of
its 3.5GHZ amplifier for the wireless local loop products.
The Company received a purchase order to develop an IMT 2000 amplifier for
the South Korean market. The product is under development and is expected to be
shipped sometime in 2001. The Company has focused its sales and marketing
efforts in the more stable United States, European and Canadian markets. It is
maintaining a more cautious approach towards the South Korean market due to the
significant currency fluctuations and purchase order cancellations during the
past few years in South Korea.
Cost of sales as a percentage of sales was 95% during the year ended
December 31, 2000, compared to 93% during the same period for 1999. This
increase can be attributed to a larger diverse product range which was
introduced in 2000, requiring smaller production runs and higher set up costs.
Our fixed overhead costs are relatively high for our current sales volume. A
decrease in inventory held at year end for production orders is consistent with
the smaller scale production runs. The Company is continuing to assess cost
reduction of its products and sales volume increases to improve gross margins in
2001.
Selling, general and administrative expenses increased in 2000 by $382,683
to $1,986,170 from $1,603,487, in 1999. Expressed as a percentage of sales, the
selling, general and administrative expenses were 77% in 2000 and 75% in 1999.
The principal factors contributing to the increase in selling, general and
administrative expenses were related to the increase in advertising and
marketing costs related to new amplifiers and High Speed Wireless products, and
higher professional fees associated with litigation against the Company.
Research, engineering and development expenses were 23% of net sales in
2000 compared to 27% in 1999. In 2000, the principal activity of the business
related to the design and production of product for OEM manufacturers,
particularly for the NMT-450 multichannel 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 increase in 2000 by $10,215 to $590,496 from
$580,281 in 1999 in research, engineering and development expenses, was
principally attributed to the extra cost of components required and to the
testing of the more diverse products related to the High Speed Wireless Internet
Access 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.
-44-
The Company had interest income and other income in 2000 of $116,870 due to
influx of new capital during 1999 and 2000 from our private placements and
exercise of warrants and options. Interest and other income is greater than the
1999 amount due to the consistency of amounts in interest bearing accounts in
2000 compared to 1999. The Company also sold New Jersey Net operating loss
carryforwards pursuant to the New Jersey Technology Certificate Transfer
Program, in both 1999 and 2000.
Interest expense decreased in 2000 because of the repayment of certain
capitalized leases on test equipment.
Estimated litigation settlement costs have been provided in both 1999 and
2000, to reflect our estimated or known exposure in litigation against the
Company.
Stock compensation and financing expenses of $114,545 for the year ended
December 31, 2000 compared to $1,721,450 for the comparable 1999 period is due
to fewer below market issuances of stock options in 2000 and fewer issuances of
stock options or warrants to non-employees.
As a result of the foregoing, the Company incurred net losses of $2,440,045
or ($.34) per share for the year ended December 31, 2000 compared with net
losses of ($3,535,689) or ($.62) per share for the same period in 1999.
LIQUIDITY AND CAPITAL RESOURCES
As of December 31, 2001, the Company had cash and cash equivalents of
$697,940. The Company used $1,268,202 of cash and cash equivalents during 2001
to fund our operating loss.
During 2001, the Company raised $1,054,750 ($180,000 of which was
receivable but not collected at December 31, 2001) from the privately placed
sale of securities and from the exercise of warrants and options, which were
used for working capital purposes. 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 2001, it
may to do so in 2002.
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 arrangements.
There can be no assurance that a strategic relationship can be consummated.
The Company settled a class action lawsuit and another litigation matter.
The class action resulted in a cost to the Company of $550,000, $50,000 of which
was cash and $500,000 in the Company's common stock. The other matter requires a
$25,000 payment per quarter through June 2002.
-45-
The Company believes that the net proceeds of the Company's private
placements in 2001, 2000 and 1999, the planned private placements in 2002 and,
option and warrant exercises, if any, and cash generated from revenues will
permit it to continue to meet its working capital obligations and fund the
further development of its business for the next 12 months. Further, 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 venders 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.
ITEM 7. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
-----------------------------------------------
See financial statements following Item 13 of this Annual Report on Form
10-KSB.
ITEM 8. CHANGES IN AND DISAGREEMENT WITH ACCOUNTANTS
-------------------------------------------------
ON ACCOUNTING AND FINANCIAL DISCLOSURE.
-------------------------------------------
On February 15, 2002, Grant Thornton LLP ("Grant Thornton") was dismissed
as the independent accountant for the Company. The reports of Grant Thornton on
the Company's financial statements within the two most recent fiscal years or
any subsequent interim period, contain no adverse opinion or disclaimer of
opinion and were not qualified or modified as to uncertainty, audit scope or
accounting principles.
The Company's Board of Directors and Audit Committee approved the dismissal
of Grant Thornton. During the two most recent fiscal years and any subsequent
interim period preceding Grant Thornton's dismissal, there were no
disagreement(s) with Grant Thornton on any matter of accounting principles or
practices, financial statement disclosure or auditing scope or procedure, which
disagreement(s), if not resolved to the satisfaction of Grant Thornton, would
have caused it to make reference to the subject matter of the disagreement(s) in
connection with its report.
No "reportable events" (as defined in Item 304 (a) (1) (iv) of Regulation
S-B) occurred during the Company's two most recent fiscal years and any
subsequent interim period, preceding the accounting firm of Grant Thornton's
dismissal.
-46-
--------
PART III
--------
ITEM 9.DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
------------------------------------------------------------------
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT OF THE REGISTRANT
-------------------------------------------------------------------
The names and ages of the directors and executive officers of the Company
as of the date of this filing are set forth below:
NAME AGE POSITION(S) WITH THE COMPANY
---- --- -------------------------------
Devendar S. Bains* 51 Chairman of the Board, Chief Executive Officer,
Treasurer and Director
Michael E. Lawrence 54 President and Chief Operating Officer
Tarlochan Bains 52 Vice President-Operations and Director
Nirmal Bains 44 Secretary
Charles J. Ritchie* 58 Director
Manish V. Detroja* 34 Director
* Member of the Compensation Committee and Audit Committee.
BACKGROUND OF EXECUTIVE OFFICERS AND DIRECTORS
DEVENDAR S. BAINS has been Chairman of the Board, Chief Executive Officer,
Treasurer and a director of the Company since its inception in 1988. He was
also President of the Company from inception through September 2001. From 1983
to 1988 Mr. Bains was Group Project Leader of Amplifier division of Microwave
Semiconductor Corporation. Previously, Mr. Bains was employed at G.E.C. in
Coventry, England. Mr. Bains received a Bachelors Degree in Electronic
Engineering from Sheffield University, England, and a Masters Degree in
Microwave Communications from the University of Leeds and Sheffield, England.
Mr. Bains is the brother of Tarlochan Bains and the husband of Nirmal Bains.
MICHAEL E. LAWRENCE joined the Company in September 2001 as its President and
Chief Operating Officer. Mr. Lawrence has over thirty years of experience in
the international communications industry. From January 2001 through September
2001, he acted as managing partner of Technology Consulting Group, a wireless
engineering and design consulting company. From November 1999 through December
2000, he was president and chief executive officer of Intercontinental Telecom
Corporation, a Brazilian IP network company. From November 1997 through
-47-
November 1999 he was a director of network integration and design at Alcatel
Telecom (Brazil), a telecommunications company. From September 1994 through
November 1997, he worked as technical services director and network wireless
director for AT&T (Brazil) and Lucent Technologies (Brazil). From January 1970
through September 1994, he worked in various management capacities for AT&T.
Mr. Lawrence holds a BS in Management from North Central College.
TARLOCHAN BAINS has been Vice President of Operations since March 2000 and a
director since 1991. From 1991 through March 2000, he was the Company's Vice
President of Sales and Marketing. Previously, Mr. Bains was Technical Manager
at Land Rover in Solihull, England. He has a Higher National Diploma in
Mechanical Engineering from Hatfield Polytechnic, England and a Masters Degree
in Automotive Engineering from Cranfield Institute of Technology, England. Mr.
Bains is the brother of Devendar S. Bains and the brother-in-law of Nirmal
Bains.
NIRMAL BAINS has been Secretary of the Company since 1989. She has a degree in
Computer Programming from Cittone Institute in New Jersey. Mrs. Bains is the
wife of Devendar S. Bains and the sister-in-law of Tarlochan Bains.
CHARLES J. RITCHIE was elected to the Board of Directors of the Company in
February 1998. Mr. Ritchie has had a 32 year career with Lucent Technologies,
formerly AT&T, with assignments that included Product Management, Account
Management, AT&T Divestiture Planning, National Cellular Sales Manager for
non-Wireline Companies, International Wireless Product Support, and many others.
Since 1992, Mr. Ritchie has been an International Business Development director
for Europe, Middle East and Africa for the Network Wireless Division at Lucent
Technologies. Marketing, sales and business development education and
experience were accrued over his business career. Mr. Ritchie received a
Bachelors Degree in Electrical Engineering at Youngstown University and
continued with graduate work in Electrical Engineering at Ohio State University.
MANISH V. DETROJA was elected to the Board of Directors of the Company in
February 1998. Mr. Detroja has been with Current Circuits Inc. ("CCI"), a
private company engaged in the manufacturing of printed circuit boards for the
electric industry, since its inception in May of 1989. From 1989-1993 Mr.
Detroja was the production manager for CCI and from 1993-1996 he was its sales
manager for the entire United States. He is currently the president and chief
executive officer of CCI. Mr. Detroja is a graduate of Temple University and
has a B.S. in Electrical Engineering Technology.
The Company has established an audit committee and a compensation
committee.
The audit committee reviews, among other matters, the professional services
provided by the Company's independent auditors, the independence of such
auditors from management of the Company, the annual financial statements of the
Company and the Company's system of internal accounting controls. The audit
-48-
committee also reviews such other matters with respect to the accounting,
auditing and financial reporting practices and procedures of the Company as it
may find appropriate or as may be brought to its attention. The audit committee
has adopted an audit committee charter.
The audit committee has reviewed and discussed the audited financial
statements included in the Company's Annual Report on Form 10-KSB for the fiscal
year ended December 31, 2001 with management. The audit committee has discussed
with the independent auditors the matters required to be discussed by SAS 61, as
may be modified or supplemented. The audit committee has received the written
disclosures and the letter from the independent auditors required by
Independence Standards Board Standard No. 1, as may be modified or supplemented,
and has discussed with the independent auditors the auditors' independence.
Based on the review and discussions noted above, the audit committee recommended
to the Board of Directors that the audited financial statements be included in
the Company 2001 Annual Report on Form 10-KSB.
The audit committee consists of three members, two of whom (Messrs. Ritchie
and Detroja) are "independent" (as defined in the listing standards maintained
by the Nasdaq Stock Market). Mr. Devendar Bains is the third member of the
committee. The audit committee met four times during fiscal year 2001.
For the year ended December 31, 2001, the Company incurred professional
fees to its auditors in the amount of $62,220, of which $30,000 related to
auditing services and $32,220 related to all other services. No non-audit
services have been provided to the Company by its current auditor.
The compensation committee reviews executive salaries, administers any
bonus, incentive compensation and stock option plans of the Company, and
approves the salaries and other benefits of the executive officers of the
Company. In addition, the compensation committee consults with the Company's
management regarding pension and other benefit plans, and compensation policies
and practices of the Company. The compensation committee consists of Devendar
S. Bains, Charles J. Ritchie and Manish V. Detroja. The compensation committee
met four times during fiscal year 2001.
Each non-employee director of the Company is entitled to receive reasonable
out-of-pocket expenses incurred in attending meetings of the Board of Directors
of the Company. Directors who are employees of the Company are not paid any
fees or other remuneration for service on the Board or any of the committees.
Each non-employee director may receive options to purchase Common Stock or other
remuneration. The members of the Board of Directors intend to meet at least
quarterly during the Company's fiscal year, and at such other times duly called.
-49-
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934 (the "Exchange Act")
requires the Company's directors and executive officers, and persons who own
more than ten percent (10%) of a registered class of the Company's equity
securities, to file with the Securities and Exchange Commission (the "SEC")
initial reports of ownership and reports of changes in ownership of common stock
and other equity securities of the Company. Officers, directors and greater
than ten percent stockholders are required by SEC regulation to furnish the
Company with copies of all Section 16(a) forms they file.
To the Company's knowledge, based solely upon its review of the copies of
such reports furnished to the Company during the year ended December 31, 2001,
all Section 16(a) filing requirements applicable to its officers, directors and
greater than ten percent beneficial owners were satisfied.
ITEM 10. EXECUTIVE COMPENSATION
-----------------------
COMPENSATION OF DIRECTORS AND EXECUTIVE OFFICERS
SUMMARY COMPENSATION TABLE
The following table sets forth the aggregate compensation paid by the
Company for the years ended December 31, 1999, 2000 and 2001 for its Chief
Executive Officer and Vice President, respectively. No other employee received
compensation in excess of $100,000. Each non-employee director of the Company
is entitled to receive reasonable out-of-pocket expenses incurred in attending
meetings of the Board of Directors of the Company.
Long Term Compensation
----------------------
Annual Compensation
-------------------
Awards Payouts
--------------------------- --------------------
Restricted Securities
Name of Individual Other Annual Stock Underlying LTIP All Other
and Principal Position Year Salary Bonus Compensation Awards Options/SARS(#) Payouts Comp.
-------------------------- ---------------------------------------------------------------------------------------------
Davendar S. Bains, 2001 $162,000 --- $20,000(1) --- --- --- ---
Chairman, 2000 $162,000 --- $20,000(1) --- --- --- ---
Chief Executive 1999 $85,000 --- $20,000(1) --- --- --- ---
Officer, $77,000(2)
and Treasurer
Tarlochan Bains, 2001 $125,513 --- --- --- --- --- ---
Vice President 2000 $105,000 --- --- --- --- --- ---
and Director 1999 $62,000 --- $74,000(2) --- --- --- ---
(1) Represents payment for health insurance and automobile insurance lease
payments on behalf of such individual but does not include deferred
compensation.
(2) Represents the fair value of shares of Common Stock in lieu of cash
payment of the amount owed for deferred compensation.
------------------
-50-
EMPLOYMENT AGREEMENTS
----------------------
The Company entered into employment agreements with each of Devendar Bains
(Chairman, Chief Executive Officer and Treasurer), Tarlochan Bains (Vice
President - Operations), and Nirmal Bains (Secretary), which, as extended, now
expire on April 30, 2005. The employment agreements provide for annual base
salaries of $162,000, $100,000 and $50,000 with respect to Devendar Bains,
Tarlochan Bains and Nirmal Bains, respectively. The employment agreements
provide for discretionary bonuses to be determined in the sole discretion of the
Board of Directors and contain covenants not to compete with the Company
following termination of employment.
The Company has entered into a three-year employment agreement, commencing
September 12, 2001, with Mr. Lawrence, its President. The agreement provides
for an annual base salary of $160,000, subject to increase in certain
circumstances. Mr. Lawrence is entitled to receive an incentive bonus of up to
100% of his base salary as determined by the Board. The agreement contains
covenants not to compete with the Company following termination of employment.
Pursuant to the agreement, the Company issued to Mr. Lawrence 300,000 options to
purchase common stock with an exercise price of $1.50 per share, half of which
vested in March 2002 and half of which vest in September 2002. Mr. Lawrence is
also entitled to the grant of additional options in certain circumstances.
In June 1998, the Company issued 40,000 shares of Common Stock to Devendar
S. Bains, the Company's President and Chief Executive Officer, in consideration
of the forgiveness by Mr. Bains of $50,000 of accrued salary owed to him.
On December 31, 1998, accrued and unpaid salary in the aggregate amount of
$195,000 owed as of September 30, 1998 to Devendar S. Bains ($117,000),
Tarlochan Bains ($54,600) and Nirmal Bains ($23,400), were forgiven. In
consideration of such forgiveness of accrued salary, the Company issued 104,000,
48,533 and 20,800 shares, respectively, to such persons (based upon the closing
sales price of the Common Stock as of September 30, 1998).
On March 31, 1999, accrued and unpaid salary in the aggregate amount of
$20,717 owed as of December 31, 1998 to Devendar S. Bains ($10,566), Tarlochan
Bains ($6,629) and Nirmal Bains ($3,522) were forgiven. In consideration of such
forgiveness of accrued salary, the Company issued 4,025, 2,526 and 1,342 shares,
respectively, to such persons (based upon the closing sales price of the Common
Stock as of March 31, 1999).
On March 31, 1999, accrued and unpaid salary in the aggregate amount of
$41,920 owed as of March 31, 1999 to Devendar S. Bains ($14,346), Tarlochan
Bains ($25,474) and Nirmal Bains ($2,100) were forgiven. In consideration of
such forgiveness of accrued salary, the Company issued 5,465, 9,704 and 800
shares, respectively, to such persons (based upon the closing sales price of the
Common Stock as of March 31, 1999).
-51-
On June 30, 1999, accrued and unpaid salary in the aggregate amount of
$57,546 owed as of June 30, 1999 to Devendar S. Bains ($27,424), Tarlochan Bains
($22,822) and Nirmal Bains ($7,300) were forgiven. In consideration of such
forgiveness of accrued salary, the Company issued 15,398, 12,815 and 4,099
shares, respectively, to such persons (based upon the closing sales price of the
Common Stock as of June 30, 1999).
On September 30, 1999, accrued and unpaid salary in the aggregate amount of
$38,541 owed as of September 30, 1999 to Devendar S. Bains ($20,885), Tarlochan
Bains ($12,986) and Nirmal Bains ($4,700), were forgiven. In consideration of
such forgiveness of accrued salary, the Company issued 3,358, 2,088 and 756
shares, respectively, to such persons (based upon the closing sales price of the
Common Stock on September 29, 1999).
On December 31, 1999, accrued and unpaid salary in the aggregate amount of
$22,369 owed as of December 31, 1999 to Devendar S. Bains ($14,346), Tarlochan
Bains ($5,923) and Nirmal Bains ($2,100), were forgiven. In consideration of
such forgiveness of accrued salary, the Company issued 3,566, 1,060 and 376
shares, respectively, to such persons (based upon the closing sales price of the
Common Stock on December 31, 1999).
There were no conversion of unpaid salary into equity during 2000 and 2001.
STOCK OPTION PLANS AND AGREEMENTS
Option Plan - In May 1996, the Directors of the Company adopted and the
stockholders of the Company approved the adoption of the Company's 1996 Stock
Option Plan (as amended, the "Option Plan"). The purpose of the Option Plan is
to enable the Company to encourage key employees and Directors to contribute to
the success of the Company by granting such employees and Directors incentive
stock options ("ISOs") or non-qualified stock options ("NQOs").
The Option Plan will be administered by the Board of Directors or a
committee appointed by the Board of Directors (the "Committee") which will
determine, in its discretion, among other things, the recipients of grants,
whether a grant will consist of ISOs, NQOs or a combination thereof, and the
number of shares to be subject to such options.
The Option Plan provides for the granting of ISOs or NQOs to purchase
Common Stock at an exercise price to be determined by the Board of Directors or
the Committee not less than the fair market value of the Common Stock on the
date the option is granted.
The total number of shares with respect to which options may be granted
under the Option Plan is currently 2,225,000. Options may not be granted to an
individual to the extent that in the calendar year in which such options first
become exercisable the shares subject to such options have a fair market value
-52-
on the date of grant in excess of $100,000. No option may be granted under the
Option Plan after May 2006 and no option may be outstanding for more than ten
years after its grant. Additionally, no option can be granted for more than five
(5) years to a stockholder owning 10% or more of the Company's outstanding
Common Stock and such options must have an exercise price of not less than 110%
of the fair market value on the date of grant.
Upon the exercise of an option, the holder must make payment of the full
exercise price. Such payment may be made in cash or in shares of Common Stock,
or in a combination of both. The Company may lend to the holder of an option
funds sufficient to pay the exercise price, subject to certain limitations.
The Option Plan may be terminated or amended at any time by the Board of
Directors, except that, without stockholder approval, the Option Plan may not be
amended to increase the number of shares subject to the Option Plan, change the
class of persons eligible to receive options under the Option Plan or materially
increase the benefits of participants.
As of December 31, 2001, 1,791,000 options to purchase Common Stock under
the Option Plan were granted and/or reserved to certain employees, including
Devendar Bains (1,000,000 options), Tarlochan Bains (100,000 options), and
Nirmal Bains (50,000 options), the Company's Chief Executive Officer, Vice
President-Operations and Secretary, respectively. The options are exercisable at
$4.00 and expire on May 31, 2004. 30,000 options to purchase Common Stock were
granted to each of Messrs. Detroja and Ritchie, Directors of the Company. These
options are exercisable at $1.25, are fully vested and expire on May 31, 2004.
In addition, 100,000 options to purchase Common Stock were issued to Mr. Momi, a
former officer, which are exercisable at $3-1/8, are fully vested and expire
December 31, 2005. In addition, 85,000 options issued to other employees are
exercisable at $3.25 per share, which vest over a period of time through
December 31, 2002. Such options expire between November 1, 2003 and December 31,
2004. No determinations have been made regarding the persons to whom options
will be granted in the future, the number of shares which will be subject to
such options or the exercise prices to be fixed with respect to any option.
Other Options
As of December 31, 2001, each of Messrs. Detroja and Ritchie also own
45,000 options to purchase Common Stock. These options are exercisable at $1.25
per share, are fully vested and expire on May 31, 2004. In additional, pursuant
to the terms of Mr. Lawrence's employment agreement, the Company issued 300,000
options to purchase Common Stock exercisable at $1.50 per share. The options
vest equally in March 2002 and September 2002 and expire December 31, 2005.
-53-
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
--------------------------------------------
OWNERS AND MANAGEMENT
-----------------------
The following table sets forth certain information, as of March 31, 2002
with respect to the beneficial ownership of the outstanding Common Stock by (i)
any holder of more than five percent (5%); (ii) each of the Company's officers
and directors; and (iii) the directors and officers of the company as a group:
Name of Beneficial Number of Shares Percentage (%) of
Owner* of Common Stock(1) Ownership
------ ------------------ -------------------
Devendar S. Bains(2) 3,272,985 30.54
Michael E. Lawrence(3) 150,000 1.53
Tarlochan Bains(4) 178,456 1.83
Nirmal Bains(2) 3,272,985 30.54
Charles J. Ritchie(5) 75,000 .77
Manish V. Detroja(6) 75,000 .77
Joseph Giamanco(7) 793,858 8.19
Jerome Belson(8) 808,402 8.32
All Officers and Directors
as a group (6 persons)(9) 3,751,441 35.44
* Unless otherwise indicated, the address of all persons listed in this
section is c/o Amplidyne, Inc., 59 LaGrange Street, Raritan, NJ 08869.
(1) Beneficial ownership as reported in the table above has been determined in
accordance with Instruction (4) to Item 403 of Regulation S-B of the
Exchange Act.
(2) Mr. Devendar Bains is the husband of Mrs. Nirmal Bains and the brother of
Mr. Tarlochan Bains. Mr. Devendar Bains is the record holder of 2,194,812
of such shares and Mrs. Nirmal Bains is the record holder of 28,173 of such
shares. Includes 1,000,000 stock options which were granted to Mr. Devendar
Bains. Includes 50,000 stock options which were granted to Ms. Nirmal
Bains. See "Executive Compensation-Stock Option Plans and Agreements."
(3) Represents 150,000 shares of Common Stock that are issuable upon exercise
of stock options that are exercisable at $1.50 per share and expire
December 31, 2005. Does not include 150,000 shares of Common Stock
underlying stock options that are not exercisable until September 2002. See
"Executive Compensation - Employment Agreements."
(4) Mr. Tarlochan Bains is the brother of Mr. Devendar Bains. Mr. Tarlochan
Bains is the record holder of 78,456 of such shares. Includes 100,000 stock
options. See "Executive Compensation - Stock Option Plans and Agreements."
(5) The address for such person is 92 Parker Road, Long Valley, NJ 07853.
Includes 75,000 stock options. See "Executive Compensation - Stock Option
Plans and Agreements."
-54-
(6) The address for such person is 925 Schwal Road, Hatfield, PA 19440.
Includes 75,000 stock options. See "Executive Compensation - Stock Option
Plans and Agreements."
(7) Based upon a Schedule 13G filed with the SEC on February 2, 2001 and other
information provided to the Company by such stockholder. The address for
this stockholder is c/o G.H.M., Inc., 74 Trinity Place, New York, NY 10006.
Includes 25,000 shares of Common Stock that are issuable upon exercise of
warrants owned by such stockholder that are exercisable at $3.00 per share
and expire on July 31, 2004.
(8) Based upon a Schedule 13D filed with the SEC on August 27, 2001 and other
information provided to the Company by such stockholder. The address for
this stockholder is c/o Jerome Belson Associates, Inc., 495 Broadway, New
York, NY 10012. Includes 670,402 shares owned by Mr. Belson and 88,000
shares owned by the Jerome Belson Foundation, a charitable corporation of
which Mr. Belson is the President and, as a result, may be deemed to have
voting and investment power over such shares. Also includes 50,000 shares
that are issuable upon exercise of warrants owned by Mr. Belson that are
exercisable at $3.00 per share and expire on July 31, 2004. Does not
include an additional 135,400 shares of Common Stock held by certain
members of Mr. Belson's family. All of such persons may be deemed to be
members of a group within the meaning of Section 13(d) of the Exchange Act
that owns 9.71% of the Company's outstanding Common Stock.
(9) Includes 1,000,000 options held by Devendar Bains, 50,000 options held by
Nirmal Bains, 100,000 options held by Tarlochan Bains, 75,000 options held
by Mr. Detroja, 75,000 options held by Mr. Ritchie and 150,000 options held
by Mr. Lawrence. See Notes 2, 3, 4, 5 and 6. Does not include 150,000
options issued to Mr. Lawrence which are not currently exercisable. See
Note 3.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
--------------------------------------------------
Between January 1994 and December 1996, Devendar S. Bains, the Company's
President and Chief Executive Officer, loaned the Company an aggregate of
$442,745 without interest, payable on demand. $339,694 was repaid during 1997
and an additional $98,000 was repaid during 1998. In connection with the
Company's settlement of a litigation, Devendar S. Bains, the Company's President
and Chief Executive Officer, loaned the Company $41,000 (in October 1997)
without interest, payable on demand. Through December 31, 1999, substantially
all amounts were settled either by payment or issuance of stock.
As of December 31, 2001, approximately $56,000 was owed to the Company by
Devendar S. Bains, the Company's Chief Executive Officer. No repayment terms
have been set.
Mr. Detroja, a director of the Company, is the president and chief
executive officer of one of the Company's vendors. During fiscal year 2001 and
2000, respectively, the Company made purchases of approximately $79,000 and
$70,000, respectively, from such vendor.
See "Management - Employment Agreement" for issuances to officers and
directors.
-55-
The Company intends to indemnify its officers and directors to the full
extent permitted by Delaware law. Under Delaware law, a corporation may
indemnify its agents for expenses and amounts paid in third party actions and,
upon court approval in derivative actions, if the agents acted in good faith and
with reasonable care. A majority vote of the Board of Directors, approval of
the stockholder or court approval is required to effectuate indemnification.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933, as amended, may be permitted to officers, directors or persons
controlling the Company, the Company has been advised that, in the opinion of
the Securities and Exchange Commission, such indemnification is against public
policy as expressed in such Act and is, therefore, unenforceable. In the event
that a claim for indemnification against such liabilities (other than the
payment by the Company of expenses incurred or paid by an officer, director or
controlling person of the Company in the successful defense of any action, suit
or proceeding) is asserted by such officer, director or controlling person in
connection with the securities being registered, the Company will, unless in the
opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in such Act and will
be governed by the final adjudication of such issue.
Transactions between the Company and its officers, directors, employees and
affiliates will be on terms no less favorable to the Company than can be
obtained from unaffiliated parties. Any such transactions will be subject to
the approval of a majority of the disinterested members of the Board of
Directors.
-56-
-------
PART IV
-------
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K
-------------------------------------
(A)(1) FINANCIAL STATEMENTS.
The following financial statements are included in Part II, Item 7:
Index to Financial Statements F-1
Report of Independent Certified Public Accountants F-2 - F-3
Balance Sheets F-4 - F-5
Statement of Operations F-6
Statement of Stockholders' Equity F-7
Statement of Cash Flows F-8
Notes to Financial Statements F-9 - F-24
(A)(2) EXHIBITS
1.1* Form of Underwriting Agreement
1.2* Form of Selected Dealer Agreement
1.3* Form of Agreement Among Underwriters
3.1* Certificate of Incorporation of the Company
3.2* Certificate of Merger (Delaware)
3.3* Certificate of Merger (New Jersey)
3.4* Agreement and Plan of Merger
3.5* By-Laws of the Company
3.6** Certificate of Designation of Series A Preferred Stock
4.1* Specimen Certificate for shares of Common Stock
4.2* Specimen Certificate for Warrants
4.3* Form of Underwriter's Purchase Option
4.4* Form of Warrant Agreement
10.1* 1996 Incentive Stock Option Plan
10.2* Employment Agreement between the Company and Devendar S. Bains
10.3* Employment Agreement between the Company and Tarlochan Bains
10.4* Employment Agreement between the Company and Nirmal Bains
10.5 Intentionally Omitted
10.6 Intentionally Omitted
10.7* Agreement between the Company and Electronic Marketing
Associates, Inc.
10.8* Agreement between the Company and Link Microtek Limited.
10.9* Agreement between the Company and ENS Engineering.
10.10 Intentionally Omitted
-57-
10.11 Intentionally Omitted
10.12* Form of Lockup Agreement with Officers, Directors and 5% or
Greater Shareholders.
10.13* Form of Lockup Agreement with Selling Securityholders.
23.1 Consent of Kahn Boyd Levychin, LLP, Independent Certified
Public Accountants.
23.2 Consent of Grant Thornton LLP, Independent Certified Public
Accountants.
* Incorporated by Reference to the Company's Registration Statement on Form
SB-2, No. 333-11015.
** Incorporated by Reference to the Company's Form 8-K filed on August 3,
1999.
(b) REPORTS ON FORM 8-K
The Company did not file any reports on Form 8-K during the fourth
quarter of fiscal 2001.
-58-
AMPLIDYNE, INC.
INDEX TO FINANCIAL STATEMENTS
Page
----
Report of Independent Certified Public Accountants F-2 - F-3
Financial Statements
Balance Sheets F-4 - F-5
Statements of Operations F-6
Statement of Stockholders' Equity F-7
Statements of Cash Flows F-8
Notes to Financial Statements F-9 - F-24
F-1
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
BOARD OF DIRECTORS AND STOCKHOLDERS
AMPLIDYNE, INC.
We have audited the accompanying balance sheet of Amplidyne, Inc. as of December
31, 2001, and the related statements of operations, stockholders' equity, and
cash flows for the year then ended. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audit.
We conducted our audit in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Amplidyne, Inc., as of December
31, 2001, and the results of its operations and its cash flows for the year then
ended in conformity with accounting principles generally accepted in the United
States of America.
KAHN BOYD LEVYCHIN, LLP
New York, New York
March 21, 2002
F-2
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
BOARD OF DIRECTORS AND STOCKHOLDERS
AMPLIDYNE, INC.
We have audited the accompanying balance sheet of Amplidyne, Inc. as of December
31, 2000, and the related statements of operations, stockholders' equity, and
cash flows for the year then ended. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audit.
We conducted our audit in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Amplidyne, Inc., as of December
31, 2000, and the results of its operations and its cash flows for the year then
ended in conformity with accounting principles generally accepted in the United
States of America.
GRANT THORNTON LLP
Edison, New Jersey
March 21, 2001
F-3
AMPILDYNE, INC.
BALANCE SHEETS
DECEMBER 31,
ASSETS 2001 2000
---------- ----------
CURRENT ASSETS
Cash and cash equivalents $ 697,940 $1,966,142
Accounts receivable, net of allowance
for doubtful accounts of $131,104 and
$291,000 in 2001 and 2000, respectively 449,190 318,345
Inventories 1,181,682 597,953
Loan receivable - officer 55,892 33,667
Prepaid expenses and other 23,464 101,957
---------- ----------
Total current assets 2,408,168 3,018,064
PROPERTY AND EQUIPMENT - AT COST
Machinery and equipment 723,663 720,818
Furniture and fixtures 43,750 43,750
Autos and trucks 66,183 66,183
Leasehold improvements 8,141 8,141
---------- ----------
841,737 838,892
Less accumulated depreciation and amortization 687,260 588,845
---------- ----------
154,477 250,047
SECURITY DEPOSITS AND OTHER NON-
CURRENT ASSETS 52,106 72,354
---------- ----------
$2,614,751 $3,340,465
========== ==========
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE STATEMENTS.
F-4
AMPLIDYNE, INC.
BALANCE SHEETS
DECEMBER 31,
LIABILITIES AND
STOCKHOLDERS' EQUITY 2001 2000
------------ ------------
CURRENT LIABILITIES
Current maturities of lease obligations $ 9,271 $ 11,385
Accounts payable 121,533 242,289
Accrued expenses 131,308 258,875
Accrued settlement of litigation 180,000 150,000
------------ ------------
Total current liabilities 442,112 662,549
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;
55,000 shares issued and outstanding
at December 31, 2001 (liquidation
preference of $550,000 at December 31, 2001) 6 -
Common stock - authorized, 25,000,000 shares
of $.0001 par value; shares 7,892,661 and
7,463,841 shares issued and outstanding at
December 31, 2001 and 2000, respectively 790 747
Additional paid-in capital 21,921,495 20,212,154
Subscriptions receivable - preferred stock (180,000) -
Accumulated deficit (19,569,652) (17,544,770)
------------ ------------
2,172,639 2,668,131
------------ ------------
$ 2,614,751 $ 3,340,465
============ ============
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE STATEMENTS.
F-5
AMPLIDYNE, INC.
STATEMENTS OF OPERATIONS
YEAR ENDED DECEMBER 31,
2001 2000
----------- -----------
Net sales $ 2,205,429 $ 2,595,090
Cost of goods sold 1,281,009 2,465,072
----------- -----------
Gross profit 924,420 130,018
Operating expenses
Selling, general and administrative 1,904,490 1,986,170
Research, engineering and development 593,823 590,496
Stock compensation and financing costs 140,000 114,545
----------- -----------
Operating loss (1,713,893) (2,561,193)
Nonoperating income (expenses)
Interest income and other income 50,915 116,870
Interest expense (864) (2,169)
Litigation settlement costs (550,000) (175,000)
Sale of New Jersey net operating loss
carryforward 189,744 191,816
----------- -----------
Loss before income taxes (2,024,098) (2,429,676)
Provision for income taxes 784 10,369
----------- -----------
NET LOSS $(2,024,882) $(2,440,045)
=========== ===========
Net loss per share - basic and diluted $ (.26) $ (.34)
=========== ===========
Weighted average number of shares
outstanding 7,706,971 7,276,237
=========== ===========
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE STATEMENTS.
F-6
AMPLIDYNE, INC.
STATEMENT OF STOCKHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 2001 AND 2000
Preferred stock Common stock
---------------------- -------------------------
Shares Par value Shares Par value
------- --------- --------- ---------
Balance at December 31, 1999 6,924,970 $692
Net loss for the year ended December 31, 2000
Issuance of common stock, net of costs 319,000 32
Exercise of warrants 177,121 19
Financing and compensation costs related to
options and warrants issued - -
Exercise of stock options into shares of
common stock 42,750 4
--------- --------- ---------- ---------
Balance at December 31, 2000 - - 7,463,841 747
Net loss for the year ended December 31, 2001 - -
Cost of litigation to be settled by
the issuance of common stock
Financing cost associated with warrants 1,820
extended and shares issued
Issuance of common stock, net of costs 415,000 42
Issuance of Preferred Stock, net of costs 55,000 6
Issuance of Common Stock for services
rendered by third party 12,000 1
--------- ------ ---------- ------
BALANCE AT DECEMBER 31, 2001 55,000 $ 6 7,892,661 $ 790
========= ====== ========== ======
Additional
paid-in Accumulated Subscriptions
capital deficit Receivable Total
----------- ------------ ----------- -------------
Balance at December 31, 1999 $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 1,594,968 - 1,595,000
Exercise of warrants 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 170,995 - 170,999
----------- ------------ ----------- -------------
Balance at December 31, 2000 20,212,154 (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 500,000 500,000
Financing cost associated with warrants
extended and shares issued 140,000 140,000
Issuance of common stock, net of costs 559,708 - 559,750
Issuance of Preferred Stock, net of costs 494,994 - (180,000) 315,000
Issuance of Common Stock for services
rendered by third party 14,639 - 14,640
----------- ------------ ------------ --------------
BALANCE AT DECEMBER 31, 2001 $21,921,495 ($19,569,652) (180,000) $2,172,639
=========== ============ ============ ==============
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THIS STATEMENT.
F-7
AMPLIDYNE, INC.
STATEMENTS OF CASH FLOWS
YEAR ENDED DECEMBER 31,
2001 2000
----------- -----------
Cash flows from operating activities
Net loss $(2,024,882) $(2,440,045)
----------- -----------
Adjustments to reconcile net loss to net cash used in
operating activities
Depreciation and amortization 98,415 125,722
Bad debt expense 67,592 98,520
Write-off of obsolete inventory 20,000 10,291
Settlement of litigation 530,000 150,000
Stock compensation and finance cost 154,640 114,545
Changes in assets and liabilities
Accounts receivable (204,876) 26,719
Inventories (603,728) 309,206
Prepaid expenses and other 105,179 (115,312)
Accounts payable and accrued expenses (248,842) (146,597)
----------- -----------
Total adjustments (81,620) 573,094
----------- -----------
Net cash used in operating activities (2,106,502) (1,866,951)
----------- -----------
Cash flows from investing activities
Loan receivable - officer (22,225) (33,667)
Purchase of property and equipment (2,845) (42,209)
----------- -----------
(25,070) (75,876)
Cash flows from financing activities
Payment of lease obligations (11,380) (15,352)
Proceeds from sale of preferred stock, net of costs 315,000 -
Proceeds from sale of common stock, net of costs 559,750 1,595,000
Proceeds from exercise of options and warrants - 884,266
----------- -----------
Net cash provided by financing activities 863,370 2,463,914
----------- -----------
NET (DECREASE) INCREASE IN CASH AND
CASH EQUIVALENTS (1,268,202) 521,087
Cash and cash equivalents at beginning of year 1,966,142 1,445,055
----------- -----------
Cash and cash equivalents at end of year $ 697,940 $ 1,966,142
=========== ===========
Supplemental disclosures of cash flow information:
Cash paid during the year for
Interest $ 1,000 $ 2,000
Income taxes $ 3,000 $ 3,000
See Notes C, F and G-2 for noncash investing and financing activity
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE STATEMENTS.
F-8
AMPLIDYNE, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2001 AND 2000
NOTE A - NATURE OF OPERATIONS AND LIQUIDITY
Amplidyne, Inc. (the Company) has historically operated in one segment, which is
the design, manufacture and selling of ultra linear power amplifiers and related
subsystems to the worldwide wireless, local loop and satellite uplink
telecommunications market. In 1999 the Company introduced products which
offer high-speed wireless internet connectivity to residential and business
clients of internet service providers. These products are sold under the
AmpWave(TM) name.
The Company has incurred losses of $2,024,882 and $2,440,045 in 2001 and 2000,
respectively. The Company funded operations during this period primarily from
the proceeds from privately placed common and preferred stock and exercise of
warrants and options. 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:
o Increasing sales of its high speed internet connectivity products through
both individual customers and strategic alliances, which are expected to
yield higher profit margins;
o Decreasing the dependency on certain major customers by aggressively
seeking other customers in the multicarrier 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 Investigate potential revenue - sharing partnership in other markets, such
as the hospitality industry and multi-tenant buildings;
o Reducing costs through a more streamlined operation by using automated
machinery to produce components for our products;
o Funding operations in 2002 with the remaining cash that was received from
the 2001 private placements, possible 2002 private placements, and the
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 if necessary.
F-9
AMPLIDYNE, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 2001 AND 2000
NOTE B - SUMMARY OF ACCOUNTING POLICIES
A summary of the significant accounting policies consistently applied in the
preparation of the accompanying financial statements follows.
1. REVENUE RECOGNITION
Revenue is recognized upon shipment of products to customers.
2. INVENTORIES
Inventories are stated at the lower of cost or market; cost is determined using
the first-in, first-out method. At December 31, 2001 and 2000, inventories
consisted of the following:
2001 2000
---------- ---------
Component parts $724,797 $507,199
Work-in-progress 231,150 90,754
Finished Goods 225,735 -
---------- --------
$1,181,682 $597,953
========== ========
3. PROPERTY, PLANT AND EQUIPMENT
Depreciation and amortization are provided for in amounts sufficient to relate
the cost of depreciable assets to operations over their estimated service lives,
which range from three to seven years. Leasehold improvements are amortized over
the lives of the respective leases, or the service lives of the improvements,
whichever is shorter. The straight-line method of depreciation is followed for
substantially all assets for financial reporting purposes, but accelerated
methods are used for tax purposes.
4. VALUATION OF LONG-LIVED ASSETS
The Company reviews long-lived assets held and used for possible impairment
whenever events or changes in circumstances indicate that the carrying amount of
an asset may not be recoverable. The Company has not recorded any provision for
the impairment of long-lived assets at December 31, 2001.
F-10
AMPLIDYNE, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 2001 AND 2000
NOTE B (CONTINUED)
5. INCOME TAXES
The Company accounts for income taxes under the provisions of Statement of
Financial Accounting Standards No. 109, Accounting for Income Taxes. This
statement requires, among other things, an asset and liability approach for
financial accounting and reporting of deferred income taxes. In addition, the
deferred tax liabilities and assets are required to be adjusted for the effect
of any future changes in the tax law or rates. Deferred income taxes arise from
temporary differences resulting in the basis of assets and liabilities for
financial reporting and income tax purposes. A valuation allowance is provided
if the Company is uncertain as to the realization of deferred tax assets.
6. RISKS, UNCERTAINTIES AND CERTAIN CONCENTRATIONS OF CREDIT RISK AND ECONOMIC
DEPENDENCY
The Company's future results of operations involve a number of significant risks
and uncertainties. Factors that could affect the Company's future operating
results and cause actual results to vary materially from expectations include,
but are not limited to, dependence on key personnel, dependence on a limited
number of customers, ability to design new products and product obsolescence,
ability to generate consistent sales, ability to finance research and
development, government regulation, technological innovations and acceptance,
competition, reliance on certain vendors, credit and other risks.
Financial instruments, which potentially subject the Company to concentrations
of credit risk, consist principally of cash and accounts receivable.
The Company maintains cash and cash equivalents in bank deposit and money market
accounts in one bank, which, at times, may exceed federally insured limits or
not be insured. The Company has not experienced any losses in such accounts and
does not believe it is exposed to any significant credit risk on cash and cash
equivalents.
During 2001, two customers accounted for 74% of net sales (62% and 12%) and 49%
of accounts receivable at December 31, 2001. Export sales in 2001 accounted for
approximately 85% of net sales and were primarily to the United Kingdom (62%),
Canada (12%), and Europe.
F-11
AMPLIDYNE, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 2001 AND 2000
NOTE B (CONTINUED)
During 2000, two customers accounted for 75% of net sales (49% and 26%) and 38%
of accounts receivable at December 31, 2001. Export sales in 2000 accounted for
approximately 83% of net sales and were primarily to the United Kingdom (47%),
Canada (25%), and Europe.
In addition, the Company is dependent on a limited number of suppliers for key
components used in the Company's products (primarily power transistors) and
subcontracted manufacturing processes. Management believes that other suppliers
could provide similar components and processes on comparable terms. A change in
suppliers, however, could disrupt manufacturing.
The carrying values of financial instruments potentially subject to valuation
risk, consisting of cash and cash equivalents, accounts receivable, and
officer's loan receivable, approximate fair value, principally because of the
short maturity of these items.
7. USE OF ESTIMATES
In preparing financial statements in conformity with accounting principles
generally accepted in the United States of America, management is required to
make estimates and assumptions that affect the reported amounts of assets and
liabilities and the disclosure of contingent assets and liabilities at the date
of the financial statements and revenues and expenses during the reporting
period. Actual results could differ from those estimates.
8. STOCK-BASED EMPLOYEE COMPENSATION
Stock-based employee compensation is accounted for under the intrinsic value
based method as prescribed by Accounting Principles Board (APB) Opinion No. 25,
Accounting for Stock Issued to Employees, and related interpretations as
clarified by Financial Interpretation No. 44 (FIN 44), Accounting for Certain
Transactions Involving Stock Compensation. Included in these notes to the
financial statements are the pro forma disclosures required by Statement of
Financial Accounting Standards No. 123 (SFAS No. 123), Accounting for
Stock-Based Compensation.
F-12
AMPLIDYNE, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 2001 AND 2000
NOTE B (CONTINUED)
9. CASH AND CASH EQUIVALENTS
The Company considers all highly liquid investments purchased with original
maturities of three months or less to be cash equivalents.
10. ADVERTISING EXPENSES
The Company expenses advertising costs as incurred. Advertising expenses were
approximately $93,000 and $175,000 for the years ended December 31, 2001 and
2000, respectively.
11. RECLASSIFICATIONS
Certain reclassifications were made to the 2000 amounts to conform to the
current presentation.
12. LOSS PER SHARE
Statement of Financial Accounting Standards No. 128 (SFAS No. 128), Earnings per
Share, specifies the computation, 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 shares of common stock outstanding. Net
loss per common share - diluted does not include potential common shares derived
from stock options and warrants because they are antidilutive. The number of
antidilutive securities excluded from the dilutable loss per share calculation
for the years ended December 31, 2001 and 2000 were 2,134,000 shares and
2,062,250 shares, respectively.
F-13
AMPLIDYNE, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 2001 AND 2000
NOTE B (CONTINUED)
13. 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:
2001 2000
---------- ----------
Sales - external for the years ended December 31,
Amplifier $ 1,901,702 $2,139,590
Internet business 303,727 455,500
---------- ----------
$ 2,205,429 $2,595,090
========== ==========
Inventory as of December 31,
Amplifier $802,964 439,953
Internet business 378,718 158,000
---------- ----------
$ 1,181,682 $ 597,953
========== ==========
14. NEW ACCOUNTING PRONOUNCEMENTS
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133 (SFAS No. 133), Accounting for Derivative
Instruments. SFAS No. 133, as amended, is effective for fiscal years beginning
after June 15, 2000. SFAS No. 133 established accounting and reporting standards
for derivative instruments and for hedging activities. SFAS No. 133 requires
that an entity recognize all derivatives as either assets or liabilities and
measure those instruments at fair market value. Under certain circumstances, a
portion of the derivative's gain or loss is initially reported as a component of
income when the transaction affects earnings. For a derivative not designated as
a hedging instrument, the gain or loss is recognized in the period of change. We
believe that the adoption of SFAS No. 133 will not have an impact on our
financial position or results of operations.
In December 1999, the staff of the Securities and Exchange Commission issued
Staff Accounting Bulletin 101, Revenue Recognition. to provide guidance on the
recognition, presentation, and disclosure of revenue in financial statements.
Our policies on revenue recognition are consistent with this bulletin.
F-14
AMPLIDYNE, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 2001 AND 2000
NOTE B (CONTINUED)
In March 2000, the Financial Accounting Standards Board issued Financial
Interpretation No. 44 (FIN 44), Accounting for Certain Transactions Involving
Stock Compensations - and Interpretation of APB No. 25. FIN 44 clarifies the
application of APB No. 25 for certain issues including: (a) the definition of an
employee for purposes of applying APB No. 25, (b) the criteria for determining
whether a plan qualifies as a non-compensatory plan, (c) the definition of the
date of granting employee stock options, and (d) the accounting consequences of
various modifications to the terms of a previously fixed stock option or award.
FIN 44 became effective July 1, 2000, except for the provisions that relate to
modifications that directly or indirectly reduce the exercise price of an award
and the definition of an employee, which became effective after December 15,
1998. The adoption of FIN 44 had no material impact on the accompanying
financial statements.
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.
- 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.
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. In 1997, the Company
received net proceeds from the public offering of approximately $6,782,000,
which included the over allotment of 210,000 units. The proceeds are net of
legal fees, underwriters' fees and other expenses of the offering totaling
approximately $1,429,000. Each warrant originally entitled the holder to
purchase one share for $6.00 during the four-year period ending January 21,
2001. The Company provided notice in April 2000 to redeem the warrants on May
17, 2000 unless the warrants were previously exercised.
On May 1, 2000, the Company reduced the exercise price of the warrants to $5.00
per share. Through May 16, 2000, 124,871 warrants were exercised, yielding
proceeds of $650,454. The remaining unexercised warrants of 1,485,129 were
redeemed at $0.01 per warrant on May 17, 2000, resulting in an aggregate
expenditure of $14,851.
The underwriter received an option to purchase up to 140,000 shares of common
stock and 140,000 warrants under the same terms. All the options remained
outstanding at December 31, 2000 and the warrants were redeemed in May 2000.
F-15
AMPLIDYNE, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 2001 AND 2000
NOTE C (CONTINUED)
PRIVATE PLACEMENTS
In 2000, the Company entered into the following private placements and issuance
of warrants:
o Sale of 319,000 shares of common stock at $5.00 per share, resulting in net
proceeds of $1,595,000.
o Warrants to purchase 141,000 shares of common stock at $1.75 per share were
issued to an investment bank assisting in a prior private placement and to
a consultant. None of these warrants were exercised in 2000.
o Agreed to issue 1,820 shares of restricted stock to a media consultant for
services rendered which were issued in January 2001.
At December 31, 2001, the following 882,500 warrants, remained outstanding:
(1) 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 2002 and (12) 100,000
exercisable at $5.00 through November 2002.
At December 31, 2001, the Company had employee stock options outstanding to
acquire 2,181,000 shares of common stock at exercise prices of $1.25 to $4.00.
In 2001 the Company entered into the following private placements:
o 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.
o In July 2001, the Company issued 25,000 shares of common stock at $1.50 per
share, to accredited investors, resulting in gross proceeds of $37,000. The
Company paid cash commissions of $3,750 in connection with such private
placement.
o In the 3rd and 4th quarters of 2001, the Company issued 55,000 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 $550,000 and paid brokerage commissions of
$55,000 (resulting in net proceeds of $495,000, $180,000 [net] of which was
received in the first quarter of 2002). 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. All shares outstanding at December 31, 2001
converted to common in the first quarter of 2002.
F-16
AMPLIDYNE, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 2001 AND 2000
NOTE C (CONTINUED)
For the year ended December 31, 2001 and 2000, the Company recorded a charge to
operations of $140,000 and $114,000, respectively, reflecting the costs
recognized for warrants issued to consultants of the Company, and employee stock
options granted with a strike price below quoted market value (see Note D).
Under the accounting guidance of FIN 44, a reduction of a warrant's exercise
price or an extension of the exercise date is treated as a variable option, and
therefore requires that a portion of the difference between the market values at
the date of the modification be charged to operations. The extension of the
exercise date of the warrants mentioned above did not result in a charge to
operations because the extension occurred prior to the effective date of FIN 44
and because the exercise price exceeded the market value of the underlying
common stock at the date of the extension.
NOTE D - STOCK OPTION PLANS
An option and stock appreciation rights (SARs) plan was authorized prior to the
public offering whereby options could be granted to purchase no more than
1,500,000 shares of common stock at exercise prices no less than fair market
value as of date of grant. At the 2001 Annual Shareholders' Meeting, the maximum
number of shares set aside for this plan was increased to 2,225,000. Under the
plan, employees and directors may be granted options to purchase shares of
common stock at the fair market value at the time of grant. Options generally
vest in three years and expire in four years from the date of grant. 1,491,000
options remained outstanding at December 31, 2001. The extension of the exercise
date of the warrants mentioned above did not result in a charge to operations
because the extension occurred prior to the effective date of FIN 44 and because
the exercise price exceeded the market value of the underlying common stock at
the date of the extension.
F-17
AMPLIDYNE, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 2001 AND 2000
NOTE D (CONTINUED)
The Company has elected to follow Accounting Principles Board Opinion (APB) No.
25, Accounting for Stock Issued to Employees, and related Interpretations in
accounting for its stock options. Under APB No. 25, if the exercise price of the
Company's employee stock options equals the market price of the underlying stock
on the date of grant, no compensation expense is recognized. SFAS No. 123,
Accounting for Stock-Based Compensation, requires presentation of pro forma net
loss and loss per share as if the Company had accounted for its employee stock
options granted under the fair value method of that statement. For purposes of
pro forma disclosure, the estimated fair value of the options is amortized to
expense over the vesting period. Under the fair value method, the Company's net
loss and loss per share would have been as follows:
2001 2000
----------- -----------
Net loss $(2,061,649) $(2,476,812)
Loss per share $ (.27) $ (.34)
During 2000, 19,000 options were granted at a strike price above quoted market
value at the date of grant, and 91,000 options were granted at a below market
value price. During 2000, 91,000 options were granted at a price equal to the
quoted market value at the date of grant. The fair values were determined using
a Black-Scholes option-pricing model using the following assumptions:
2000
-----------
Dividend -
Risk-free rate 6.0%
Volatility 157.07%
Expected life 4 YEARS
Calculated weighted-average fair value
of options issued during the year $ 2.83
F-18
AMPLIDYNE, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 2001 AND 2000
NOTE D (CONTINUED)
Stock option activity during 2000, is summarized below:
Shares of Weighted-
common stock average
attributable exercise price
to options of options
------------ ------------
Unexercised at December 31, 1999 1,471,000 3.83
Exercise of options (42,750) 4.00
Forfeiture (28,250) 4.00
Issuance to employees and directors 91,000 3.25
-----------
Unexercised at December 31, 2000 and 2001 1,491,000 3.85
==========
The following table summarizes information concerning outstanding and
exercisable options, including warrants issued to officers, at December 31,
2001:
Options outstanding Options exercisable
--------------------------------------------- ---------------------------
Weighted-
Number average Weighted- Number Weighted-
outstanding remaining average exercisable average
at period- contractual exercise at period- exercise
Exercise prices end life price end price
--------------- ------------ ----------- ----------- ----------- ---------
1.25 60,000 1 year $1.25 60,000 $1.25
3.25 85,000 3 years 3.25 56,667 3.25
4.00 1,346,000 3.4 years (1) 4.00 1,346,000 4.00
------------ -----------
1,491,000 1,462,667
============ ===========
(1) Expiration date extended from May 1, 2000 to May 31, 2004.
F-19
AMPLIDYNE, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 2001 AND 2000
NOTE E - INCOME TAXES
Temporary differences and carryforwards give rise to deferred tax assets and
liabilities. The principal components of the deferred tax assets relate to net
operating loss carryforwards. At December 31, 2001, the Federal net operating
loss carryforwards are approximately $12,000,000. The net operating loss
carryforwards expire at various dates through 2021, and because of the
uncertainty in the Company's ability to utilize the net operating loss
carryforwards, a full valuation allowance of approximately $4,426,000 and
$3,688,000 has been provided on the deferred tax asset at December 31, 2001 and
2000, respectively.
The Company participated in the New Jersey Technology Tax Certificate Transfer
Program, whereby net operating loss carryforwards generated in New Jersey can be
sold to other qualified companies. During 2001 and 2000, the Company received
approximately $190,000 and $191,000, respectively, from the sale of such net
operating losses. The Company expects to sell additional New Jersey net
operating losses in 2002, although there can be no assurance a suitable
transaction will be consummated. The New Jersey net operating loss carryforwards
are approximately $3,082,000 at December 31, 2001.
Internal Revenue Code Section 382 places a limitation on the utilization of
Federal net operating loss and other credit carryforwards when an ownership
change, as defined by the tax law, occurs. Generally, this occurs when a greater
than 50 percentage point change in ownership occurs. Accordingly, the actual
utilization of the net operating loss carryforwards and other deferred tax
assets for tax purposes may be limited annually under Code Section 382 to a
percentage (about 5%) of the fair market value of the Company at the time of any
such ownership change.
The Company's tax provision for 2001 and 2000 is principally due to the impact
of state income and minimum taxes.
F-20
AMPLIDYNE, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 2001 AND 2000
NOTE F - CAPITAL LEASE OBLIGATIONS
The Company has capital leases (at interest rates ranging from 8.5% to 14.2%)
for certain equipment for use in its manufacturing and research, engineering and
development activities and a vehicle.
Future minimum lease payments on these leases are as follows:
Year ending December 31,
2002 $10,170
-------
10,170
Less amount representing interest 899
-------
Present value of minimum lease payments $9,271
=======
Short-term portion $9,271
Long-term portion -
-------
$9,271
=======
The cost of assets under capital leases was approximately $24,000 at December
31, 2001 and 2000, and is included in property and equipment. Accumulated
amortization at December 31, 2001 and 2000 was approximately $24,000.
NOTE G - COMMITMENTS
1. OPERATING LEASES
During July 2000, the Company entered into a lease agreement for approximately
11,000 square feet of office and manufacturing space, for a five-year period
ending July 13, 2004. The annual rental is $71,000 plus the Company's share of
real estate taxes, utilities and other occupancy costs.
F-21
AMPLIDYNE, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 2001 AND 2000
NOTE G (CONTINUED)
Future minimum lease payments on non-cancelable operating leases are as follows:
Year ending December 31,
2002 $71,000
2003 71,000
2004 38,000
2005 -
2006 -
--------
$180,000
========
Rent expense, including the Company's share of real estate taxes, utilities and
other occupancy costs, was $87,000 and $85,000 for the years ended December 31,
2001 and 2000, respectively.
2. EMPLOYMENT AGREEMENTS
Commencing May 1, 1996, the Company entered into three five-year employment
agreements with its Chairman, its Vice President of Sales and Marketing and its
Secretary (the Officers). These agreements were extended to expire April 30,
2005. The agreements call for aggregate annual base salaries of $312,000, plus
certain employee benefits.
Commencing September 12, 2001, the Company entered into a three-year employment
agreement with its President. The agreement provides for an annual base salary
of $160,000, subject to increase in certain circumstances. He is entitled to
receive an incentive bonus of up to 100% of his base salary as determined by the
Board. The agreement contains covenants not to compete with the Company
following termination of employment. Pursuant to the agreement, the Company
issued 300,000 options to purchase common stock with an exercise price of $1.50
per share, half of which vest in March 2002 and half of which vest in September
2002 and is also entitled to the grant of additional options in certain
circumstances.
The Officers have deferred a portion of their compensation from 1997 through
1999. In 1999 the Officers converted an aggregate of $181,131 of such deferrals,
principally arising in 1999, into 66,378 shares of common stock of the Company,
representing the estimated fair value of the common stock of the Company at that
time. During 2001 and 2000, no shares were converted in lieu of officers'
deferred compensation and no compensation was deferred.
In December 1995, the Company entered into employment agreements with its
Vice-President of Corporate Communications and Investor Relations and its
Vice-President of Strategic Alliances. At December 31, 1998, the Company had
accrued expenses aggregating $120,000 for these individuals who had since
resigned. In January 2000, these individuals converted an aggregate of $60,000
of such amounts due into 48,000 shares of common stock of the Company,
representing the estimated fair value of the common stock of the Company at that
time. The remaining balance was forgiven and resulted in $60,000 of income
recorded in the 1999 statement of operations.
F-22
AMPLIDYNE, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 2001 AND 2000
NOTE G (CONTINUED)
3. 401(K) PLAN
During 1996, the Company established a defined contribution plan, the Amplidyne,
Inc. 401(k) Plan. The Company makes no contributions. All employees with greater
than six months' service with the Company are eligible to join the plan.
American Funds Service Company administers the plan.
NOTE H - RELATED PARTY TRANSACTIONS
1. STOCKHOLDER LOAN
Approximately $56,000 and $34,000 was owed to the Company by the Company's
president and principal shareholder as of December 31, 2001 and 2000
respectively. No repayment terms have been set.
2. PURCHASES FROM RELATED PARTY
A member of the Company's Board of Directors is President and CEO of one of the
Company's vendors. During 2001 and 2000, the Company made purchases of
approximately $79,000 and $70,000, respectively, from this vendor.
NOTE I - 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.
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 and $150,000 remained
unpaid at December 31, 2001 and 2000 respectively.
F-23
AMPLIDYNE, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 2001 AND 2000
NOTE I (CONTINUED)
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. 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 all purchasers of the Company's common stock
and warrants between September 9, 1999 and September 17, 1999. The 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 had
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) and 324,486 shares of common stock (which was valued at $500,000 as of
May 2, 2001) had been established for the benefit of members of the class. In
March 2002 the Company issued such shares.
NOTE J - SUBSEQUENT EVENTS
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 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 April 8, 2002, the Company has successfully
negotiated one property and has incurred no liability to pay any additional sums
under the contract.
In the first quarter of 2002, the Company privately placed 750,000 shares of
common stock for gross proceeds of $600,000.
F-24
SIGNATURES
----------
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
AMPLIDYNE, INC.
By:/s/ Devendar S. Bains
------------------------
Name: Devendar S. Bains
Title: Chief Executive Officer,
Treasurer, Principal Accounting
Officer and Director
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
Signature Title Date
--------- ----- ----
/s/ Devendar S. Bains Chief Executive Officer, April 15, 2002
------------------------ Treasurer, Principal Accounting
Devendar S. Bains Officer and Director
/s/Michael E. Lawrence President and Chief April 15, 2002
------------------------ Operating Officer
Michael E. Lawrence
/s/ Tarlochan Bains Vice President and Director April 15, 2002
---------------------
Tarlochan Bains
/s/ Nirmal Bains Secretary April 15, 2002
------------------
Nirmal Bains
/s/Charles J. Ritchie Director April 15, 2002
-----------------------
Charles J. Ritchie
/s/Manish V. Detroja Director April 15, 2002
----------------------
Manish V. Detroja
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