UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2004.
[_] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES AND EXCHANGE
ACT OF 1934.
FOR THE TRANSITION PERIOD FROM ____________ TO _____________
Commission File Number 0-21931
AMPLIDYNE, INC.
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(Exact name of small business issuer as specified in its charter)
DELAWARE 22-3440510
------------------------------- ----------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
59 LaGrange Street
Raritan, New Jersey 08869
(Address of principal executive offices)
(908) 253-6870
---------------------------
(Issuer's telephone number)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the past 12
months (or for such shorter period that the registrant was required to file such
reports), and (2) has been subject to such filing requirements for the past 90
days.
Yes _X_ No ___
The number of shares outstanding of the Issuer's Common Stock, $.0001 Par Value,
as of May 17, 2004 was 10,376,500.
AMPLIDYNE, INC.
FORM 10-QSB
THREE MONTHS ENDED MARCH 31, 2004
TABLE OF CONTENTS
PART I - FINANCIAL INFORMATION
Item 1 FINANCIAL STATEMENTS (UNAUDITED):
Balance Sheets..........................................1-2
Statements of Operations..................................3
Statement of Cash Flows...................................4
Statement of Changes in Stockholder's Equity..............5
Notes to Financial Statements..........................6-10
Item 2 Management's Discussion and Analysis of Financial
Condition and Results of Operations...................11-13
Item 3. Controls and Procedures..................................13
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.........................................14
Item 2. Change in Securities......................................14
Signatures.........................................................15
Certification......................................................16
Exhibit 99.1.......................................................17
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
AMPLIDYNE, INC.
BALANCE SHEETS
ASSETS
March 31 December 31
2004 2003
--------- ---------
CURRENT ASSETS
Cash and cash equivalents $ 20,116 $ --
Accounts receivable, net of allowance for doubtful accounts of
$275,000 and $143,000 in 2004 and 2003, respectively 140,104 91,482
Inventories 378,403 407,709
Loan receivable - officer 1,000 --
Prepaid expenses and other -- 12,307
--------- ---------
Total current assets 539,623 511,498
--------- ---------
PROPERTY AND EQUIPMENT - AT COST
Machinery and equipment 567,906 565,629
Furniture and fixtures 43,750 43,750
Autos and trucks 66,183 66,183
Leasehold improvements 8,141 8,141
--------- ---------
685,980 683,703
Less accumulated depreciation and amortization (656,627) (646,627)
--------- ---------
29,353 37,076
--------- ---------
SECURITY DEPOSITS AND OTHER NON-CURRENT ASSETS 35,625 35,625
--------- ---------
$ 604,601 $ 584,199
========= =========
Note: The balance sheet at December 31, 2003 has been derived from the audited
financial statements at that date but does not include all of the information
and footnotes required by accounting principles generally accepted in the United
States of America for complete financial statements.
The accompanying notes are an integral part of these financial statements
-1-
AMPLIDYNE, INC.
BALANCE SHEETS
LIABILITIES AND STOCKHOLDERS' EQUITY
March 31 December 31,
2004 2003
------------ ------------
CURRENT LIABILITIES
Overdraft $ -- $ 17,855
Advances pursuant to financing agreement 99,220 --
Customer advances 60,000 60,000
Accounts payable 570,120 411,171
Accrued expenses 107,645 81,486
Accrued settlement of litigation 140,000 170,000
Loans payable - officers 305,689 256,997
------------ ------------
Total current liabilities 1,282,674 997,509
Notes payable, convertible into common
stock at the holders' option 21,273 20,973
------------ ------------
TOTAL LIABILITIES 1,303,947 1,018,482
------------ ------------
OTHER COMMENTS - NOTE I
STOCKHOLDERS' EQUITY
Common stock - authorized, 25,000,000 shares
of $.0001 par value; shares 10,376,500
and 10,376,500 shares issued and outstanding
at March 31, 2004 and December 31,
2003, respectively 1,038 1,038
Additional paid-in capital 22,494,854 22,494,854
Accumulated deficit (23,195,238) (22,930,175)
------------ ------------
(699,346) (434,283)
------------ ------------
$ 604,601 $ 584,199
============ ============
Note: The balance sheet at December 31, 2003 has been derived from the audited
financial statements at that date but does not include all of the information
and footnotes required by accounting principles generally accepted in the United
States of America for complete financial statements.
The accompanying notes are an integral part of these financial statements
-2-
AMPLIDYNE, INC.
STATEMENTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31
Three Months Ended
March 31
2004 2003
------------ ------------
Net sales $ 315,367 $ 509,608
Cost of goods sold 288,400 278,857
------------ ------------
Gross profit 26,967 230,751
Operating expenses
Selling, general and administrative 213,004 193,731
Research, engineering and development 79,526 97,142
------------ ------------
Operating loss (265,563) (60,122)
Nonoperating income (expenses)
Interest income and other income -- 2
Interest expense (300) (69)
Gain on sale of property and equipment 4,000 --
------------ ------------
Loss before income taxes (261,863) (60,189)
Provision for income taxes 3,200 --
------------ ------------
NET LOSS $ (265,063) $ (60,189)
============ ============
Net loss per share - basic and diluted $ (0.03) $ (0.01)
============ ============
Weighted average number of shares outstanding 10,376,500 10,143,167
============ ============
The accompanying notes are an integral part of these financial statements
-3-
AMPLIDYNE, INC.
STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED MARCH 31
Three Months Ended
March 31
2004 2003
--------- ---------
Cash flows from operating activities:
Net Loss $(265,063) $ (60,189)
--------- ---------
Adjustments to reconcile net loss to net cash used in operating activities
Depreciation and amortization 10,000 7,400
Gain of sale of property & equipment (4,000) --
Provision for doubtful accounts 28,260
Interest accrued on convertible promissory note 300
Salary deferred, added to officer loans 30,692 20,500
Changes in assets and liabilities
Accounts receivable (76,882) 34,096
Inventories 29,306 1,977
Prepaid expenses and other assets 12,307 (4,243)
Customer advances -- 100,000
Accounts payable and accrued expense 155,108 (95,275)
--------- ---------
Total adjustments 185,091 64,455
--------- ---------
Net cash provided (used) for operating activities (79,972) 4,266
--------- ---------
Cash flows from investing activities:
Loans to officers (1,000) --
Proceeds on sale of property & equipment 4,000 --
Purchase of property and equipment (2,277) --
--------- ---------
Net cash provided by (used for) investing activities 723 --
--------- ---------
Cash flows from financing activities:
Overdraft (17,855) (11,939)
Payment of lease obligations -- (2,041)
Officer loans 18,000 9,500
Proceeds from convertible promissory note -- 20,000
Advances pursuant to financing agreement (Note C. 2.) 99,220 --
--------- ---------
Net cash provided by financing activities 99,365 15,520
--------- ---------
NET INCREASE (DECREASE) IN CASH 20,116 19,786
Cash (overdraft) and cash equivalents beginning of period -- --
--------- ---------
Cash and cash equivalents at end of period $ 20,116 $ 19,786
========= =========
Supplemental disclosures of cash flow information:
Cash paid for: Interest $ -- $ --
Income taxes $ -- $ --
The accompanying notes are an integral part of these financial statements
-4-
AMPLIDYNE, INC.
STATEMENT OF STOCKHOLDERS' EQUITY
YEAR ENDED DECEMBER 31, 2003 AND THREE MONTHS ENDED MARCH 31, 2004
Preferred Stock Common Stock
------------------------- -------------------------
SHARES PAR VALUE SHARES PAR VALUE
---------- ---------- ---------- ----------
BALANCE AT DECEMBER 31, 2002 -- $ -- 9,676,500 $ 968
Net loss for the year ended December 31, 2003
Issuance of common stock in connection with
litigation settled in the year ended December 31, 2002 700,000 70
---------- ---------- ---------- ----------
BALANCE AT DECEMBER 31, 2003 -- -- 10,376,500 1,038
Net loss for the three months ended March 31, 2004
---------- ---------- ---------- ----------
BALANCE AT MARCH 31, 2004 -- $ -- 10,376,500 $ 1,038
========== ========== ========== ==========
ADDITIONAL
PAID-IN ACCUMULATED SUBSCRIPTIONS
CAPITAL DEFICIT RECEIVABLE TOTAL
------------ ------------ ------------ ------------
BALANCE AT DECEMBER 31, 2001 $ 22,494,924 $(21,949,679) $ -- $ 546,213
Net loss for the year ended December 31, 2003 (980,496) (980,496)
Issuance of common stock in connection with
litigation settled in the year ended December 31, 2002 (70) --
------------ ------------ ------------ ------------
BALANCE AT DECEMBER 31, 2003 22,494,854 (22,930,175) -- (434,283)
Net loss for the three months ended March 31, 2004 (265,063) (265,063)
------------ ------------ ------------ ------------
BALANCE AT MARCH 31, 2004 $ 22,494,854 $(23,195,238) $ -- $ (699,346)
============ ============ ============ ============
The accompanying notes are an integral part of these financial statements
-5-
AMPLIDYNE, INC.
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2004
NOTE A - ADJUSTMENTS
In the opinion of management, all adjustments, consisting only of normal
recurring adjustments necessary for a fair statement of (a) results of
operations for the six and three month periods ended March 31, 2004 and 2003 (b)
the financial position at March 31, 2004 (c) the statements of cash flows for
the six and three month period ended March 31, 2004 and 2003 , and (d) the
changes in stockholders' equity for the three month period ended March 31, 2004
have been made. The results of operations for the three months ended March 31,
2004 are not necessarily indicative of the results to be expected for the full
year.
NOTE B - UNAUDITED INTERIM FINANCIAL INFORMATION
The accompanying unaudited financial statements have been prepared in
accordance with generally accepted accounting principles for interim financial
information. Accordingly, they do not include all the information and footnotes
required by generally accepted accounting principles for financial statements.
For further information, refer to the audited financial statements and notes
thereto for the year ended December 31, 2003 included in the Company's Form
10-KSB filed with the Securities and Exchange Commission on April 14, 2004.
The Company's financial statements have been presented on a going concern
basis, which contemplates the realization of assets and the satisfaction of
liabilities in the normal course of business. The liquidity of the Company has
been adversely affected in recent years by significant losses from operations.
As further discussed in Note F, the Company incurred losses of $265,063 for the
three months ended March 31, 2004, has limited cash reserves and has seen its
working capital decline by $257,040 to a deficiency of $(743,051) since the
beginning of the fiscal year. Current liabilities exceed cash and receivables by
$1,122,454 indicating that the Company will have difficulty meetings its
financial obligations for the balance of this fiscal year. These factors raise
substantial doubt as to the Company's ability to continue as a going concern.
Recently, operations have been funded by loans from the Chief Executive Officer
and costs have been cut through substantial reductions in labor and operations.
As further discussed in Note F, management is seeking additional financing
and intends to aggressively market its products, control operating costs and
broaden its product base through enhancements of products. The Company believes
that these measures may provide sufficient liquidity for it to continue as a
going concern in its present form. Accordingly, the financial statements do not
include any adjustments relating to the recoverability and classification of
recorded asset amounts or the amount and classification of liabilities or any
other adjustments that might be necessary should the Company be unable to
continue as a going concern in its present form.
-6-
AMPLIDYNE, INC.
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2004
NOTE C - STOCKHOLDERS' EQUITY
1. WARRANTS AND OPTIONS
At March 31, 2004, the following 945,000 warrants, remained outstanding:
(1) 20,000 exercisable at $1.00 through May 2010
(2) 20,000 exercisable at $7.00 through December 2004
(3) 30,000 exercisable at $6.00 through November 2004
(4) 50,000 exercisable at $2.00 through December 2004
(5) 50,000 exercisable at $4.00 through December 2004
(6) 16,000 exercisable at $1.75 through December 2004
(7) 41,500 exercisable at $1.80 through July 31, 2004
(8) 207,500 exercisable at $3.00 through July 31, 2004
(9) 55,000 exercisable at $1.20 through September 30, 2004
(10) 300,000 exercisable at $2.00 through December 31, 2005
(11) 75,000 exercisable at $.96 through March 2007
(12) 80,000 exercisable at $1.50 through December 2004.
At March 31, 2004, the Company had employee stock options outstanding to
acquire 2,221,000 shares of common stock at exercise prices of $0.15 to $3.25.
2. SERIES C CONVERTIBLE PREFERRED STOCK
On January 28, 2004, the Company closed a $0.1 million financing from
Phoenix and Phoenix Opportunity Fund III, L.P. ("Phoenix III"), which are
managed by Phoenix Capital Holdings. Pursuant to the terms of the subscription
agreement between the Company and Phoenix, Phoenix agreed to make an aggregate
investment of approximately $100,000 in the Company in exchange for 282,700
shares of Series C Convertible Preferred Stock, representing approximately 80%
of the outstanding stock of the Company on a fully diluted basis. As the Company
would need to amend its certificate of incorporation or effect a reverse stock
split in order to have sufficient authorized shares to complete the equity
financing, Phoenix was to make an initial investment of approximately $20,000
intended to be in exchange for 54,325 shares of Series C Convertible Preferred
Stock of the Company, with the remaining portion of the equity investment to be
completed after the recapitalization. The preferred shares were not issued
because the Company is not in good standing with the State of Delaware and could
not amend its certificate of incorporation to authorize the new shares.
Phoenix also entered into a stock restriction agreement with Devendar
Bains, pursuant to which Mr. Bains issued an irrevocable proxy to Phoenix until
the recapitalization is completed, which, together with the shares received in
connection with the initial investment, gives Phoenix effective control over 53%
of the Company's voting stock. In connection with the investment, Phoenix III
has agreed to loan to the Company up to $0.4 million. The loan is secured by
substantially all of the assets of the Company. The Company has drawn down
approximately $99,220 of the loan. $50,000 of the original loan commitment had
been placed into an escrow fund to be made available at such time as the Company
completes its recapitalization, but Phoenix allowed the draw down without the
recapitalization having taken place. The Company has been allowed to draw down
$99,220 (including the $20,000 intended to be in exchange for the Series C
Convertible Preferred Stock) without completing the recapitalization. Generally,
the remaining portion of the commitment is reserved for specific, enumerated
purposes, and Phoenix III retains substantial discretion over the availability
of the funds.
The Company and Phoenix are presently in serious negotiations to rescind
the financing and stock purchase agreements. Pursuant to these negotiations, the
Phoenix principals intend to resign their board and officer positions with the
Company. It is expected that to effectuate the recision, the Company will pay
back to Phoenix $100,000. Phoenix is requesting that the Company be required to
pay for its efforts and expenses, with such amount proposed to be approximately
$40,000, to be satisfied in the form of an interest bearing promissory note with
a tentative maturity date in May 2005. Phoenix has further requested that such
note be substantially secured by Company assets.
The Company has identified a potential replacement investor and
discussions are in advanced stages. Under the terms of a preliminary and
unsigned agreement, the potential new investor would advance the Company an
aggregate of $500,000 initially in the form of loans expected to be in three (3)
installments. The first installment is expected to be $150,000 and is scheduled
to be received upon signing of the agreement. The proposed agreement also
provides for an advance of $50,000 to be received shortly after the initial
installment and $300,000 to be received in October 2004. The entire $500,000
advance is expected to be payable immediately upon written demand for such
payment; provided, however, that a demand cannot be made prior to December 31,
2004, unless the Company is in default of the Note Purchase Agreement between
the Holder and the Company. The proposed agreement also provides for the amount
advanced to be converted into Series C Convertible Preferred Stock which would
be convertible into common stock representing 80% of the issued and outstanding
capital stock of the Company.
-7-
AMPLIDYNE, INC.
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2004
NOTE D - LOSS PER SHARE
The Company complies with the requirements of the Financial Accounting
Standards Board issued Statement of Financial Accounting Standards No. 128,
"Earnings per Share" ("SFAS No. 128"). SFAS No. 128 specifies the compilation,
presentation and disclosure requirements for earnings per share for entities
with publicly held common stock or potential common stock. Net loss per common
share - basic and diluted is determined by dividing the net loss by the weighted
average number of common stock outstanding.
Net loss per common share - diluted does not include potential common
shares derived from stock options and warrants (see Note C) because they are
antidilutive.
NOTE E - LITIGATION
From time to time, the Company is party to what it believes are routine
litigation and proceedings that may be considered as part of the ordinary course
of its business. Except for the proceedings noted below, the Company is not
aware of any pending litigation or proceedings that could have a material effect
on the Company's results of operations or financial condition.
1. A customer 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 that customer at a cost of
$175,000; $25,000 is to be paid quarterly over two years. $95,000 remained
unpaid at March 31, 2004.
2. The Company (as well as an officer and director of the Company) was a
defendant in a complaint brought in the Superior Court of New Jersey, Law
Division, Somerset County, In January 2003, the Company entered into a
Stipulation of Settlement and Release before the Court. A remaining balance of
$45,000 as of March 31, 2004 is payable in full by May 28, 2004. The Company is
delinquent with $20,000 of the balance and, as a result, is in default of the
settelemnt agreement. Default of the agreement could result in an additional
cost to the Company of $95,000 if it remains uncured, which would have a
material adverse financial impact if the default provisions are exercised.
3. In April 2004, a law firm filed a judgment against the Company in the amount
of approximately $40,000 in connection with non-payment of legal fees owed to
it. Inasmuch as this is a perfection of an already recorded liability,
management does not believe that the judgment will have a material impact on the
financial position of the Company.
-8-
AMPLIDYNE, INC.
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2004
NOTE F - LIQUIDITY
The Company's financial statements have been presented on a going concern
basis, which contemplates the realization of assets and the satisfaction of
liabilities in the normal course of business. The liquidity of the Company has
been adversely affected in recent years by significant losses from operations.
The Company has incurred losses of $265,063 and $60,189 for the three months
ended March 31, 2004 and 2003, respectively.
With little remaining cash and no near term prospects of private
placements, options or warrant exercises and reduced revenues, management
believes that the Company will have great difficulty meeting its working capital
and litigation settlement obligations over the next 12 months. The Company is
presently dependent on cash flows generated from sales and loans from officers
to meet our obligations. Our failure to consummate a merger with an appropriate
partner or to substantially improve our revenues will have serious adverse
consequences and, accordingly, there is substantial doubt in our ability to
remain in business over the next 12 months. There can be no assurance that any
financing will be available to the Company on acceptable terms, or at all. If
adequate funds are not available, the Company may be required to delay, scale
back or eliminate its research, engineering and development or manufacturing
programs or obtain funds through arrangements with partners or others that may
require the Company to relinquish rights to certain of its technologies or
potential products or other assets. Accordingly, the inability to obtain such
financing could have a material adverse effect on the Company's business,
financial condition and results of operations.
Management's plans for dealing with the foregoing matters include:
o Increasing sales of its high speed internet connectivity products
through both individual customers, strategic alliances and mergers.
o Decreasing the dependency on certain major customers by aggressively
seeking other customers in the amplifier markets;
o Partnering with significant companies to jointly develop innovative
products, which has yielded orders with multinational companies to date,
and which are expected to further expand such relationships;
o Reducing costs through a more streamlined operation by using automated
machinery to produce components for our products;
o Deferral of payments of officers' salaries, as needed;
o Selling remaining net operating losses applicable to the State of New
Jersey, pursuant to a special government high-technology incentive program
in order to provide working capital, if possible;
o Reducing overhead costs and general expenditures.
o Merging with another company to provide adequate working capital and
jointly develop innovative products.
NOTE G - OFFICER LOANS
As of March 31, 2004, the Company owes $244,908 to the Chief Executive
Officer for loans and unpaid salaries. During the three months ended March 31,
2004, the Chief Executive Officer advanced $18,000 to the Company. Additionally,
salaries of $23,192 were deferred for this quarter
-9-
NOTE H - SEGMENT INFORMATION
The Company commenced its wireless Internet connectivity business in the
summer of 2000. The Company does not measure its operating results, assets or
liabilities by segment. However, the following limited segment information is
available:
Three Months Three Months
Ended Ended Year Ended
March 31 March 31 December 31,
2004 2003 2003
---------- ---------- ----------
Sales - external
Amplifier $ 290,332 445,037 $1,128,453
Internet business 25,035 64,571 222,772
---------- ---------- ----------
$ 315,367 $ 509,608 $1,351,225
========== ========== ==========
Inventory --
Amplifier $ 262,973 $ 442,069 $ 248,575
Internet business 115,430 482,667 159,134
---------- ---------- ----------
$ 378,403 $ 924,736 $ 407,709
========== ========== ==========
NOTE I -- OTHER COMMENTS
1. IMPAIRMENT OF CORPORATE GOOD STANDING
The Company is delinquent with certain franchise taxes and filing fees for
the State of Delaware. Consequently, this delinquency affects the Company's
ability to amend its certificate of incorporation, issue new classes of stock
and, reorganize its capital structure among other potential ramifications.
Additionally, the Company is delinquent in paying its transfer agent, which may
limit transferability of shares.
2. NOTICE OF OPPOSITION ON TRADEMARK
The Company's registration of the Ampwave trademark was opposed at the
U.S. Patent Office. The Company has settled with the opposing party by agreeing
to stop using the Ampwave name after a period of one (1) year from the date of
signing, which has not as yet occurred. Sales under the Ampwave label were
$25,035 for the three months ended March 31, 2004. Management believes that the
settlement will have no material financial effect.
3. PREMISES RENT DELINQUENCY
On May 12, 2004, The Company and an officer entered into an agreement with
the landlord of its premises whereby the landlord agreed not to proceed with a
complaint for the possession of the property due to delinquent rental payments
of $25,200 in exchange for: the payment of $10,000; the personal guarantee of
the officer and his wife and; full payment of the balance of the arrears by June
18, 2004.
-10-
AMPLIDYNE, INC.
MARCH 31, 2004
PART I - FINANCIAL INFORMATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS - THE THREE MONTHS ENDED MARCH 31, 2004 COMPARED TO THREE
MONTHS ENDED MARCH 31, 2003.
Revenues for the three months ended March 31, 2004 decreased by $194,241 from
$509,608 to $315,367, or 38% compared to the three months ended March 31, 2003.
Coupled with the increased production costs, the first quarter losses
significantly increased compared with the first quarter of last year.
The majority of the amplifier sales for the three months ended March 31, 2004
were obtained from the Wireless Local Loop amplifier products to a major
European customer.
The Company has continued to develop its IMT 2000 amplifiers for the worldwide
3G market, however, deployment of this technology has been delayed. The Company
has focused its sales and marketing efforts in the more stable United States,
European and Canadian markets.
Cost of sales was $288,400 or 91% of sales compared to 55% during the same
period for 2003. The decline in gross margin was principally due to pricing
pressures and increased material costs. The Company is continuing to assess cost
reduction of its products and sales volume increases to improve gross margins in
2004.
Selling, general and administrative expenses (excluding stock based
compensation) increased in 2004 by $19,273 to $213,004 from $193,731, in 2003.
Expressed as a percentage of sales, the selling, general and administrative
(SG&A) expenses (excluding stock based compensation) were 68% in 2004 and 38% in
2003. Most of the SG&A expenses are fixed and management has cut costs about as
low as operations can sustain. Increased percentages are due to the sales
decline as the actual dollar increase in SG&A from the previous year was $19,273
or 10%. In the quarter ended March 31, 2004, we continued to maintain the lower
staffing and overhead levels that we instituted in 2002.
Research, engineering and development expenses were 25% of net sales for the
three months ended March 31, 2004 compared to 19% in 2003. In 2004 and 2003, the
principal activity of the business related to the design and production of
product for OEM manufacturers, particularly for the IMT 2000 and 3.5 GHz single
channel products and refinements to the High Speed Internet products. The
research, engineering and development expenses consist principally of salary
cost for engineers and the expenses of equipment purchases specifically for the
design and testing of the prototype products. The Company's research and
development efforts are influenced by available funds and the level of effort
required by the engineering staff on customer specific projects.
We had no appreciable interest income in 2004 and 2003 because our cash balances
which we have historically temporarily invested in interest bearing accounts
have been fully depleted.
As a result of the foregoing, the Company incurred net losses of $265,063 or
$0.03 per share for the year ended March 31, 2004 compared with net losses of
$60,189 or $0.01 per share for the same period in 2003.
-11-
AMPLIDYNE, INC.
MARCH 31, 2004
LIQUIDITY AND CAPITAL RESOURCES
Liquidity refers to our ability to generate adequate amounts of cash to meet our
needs. We have been generating the cash necessary to fund our operations from
continual loans from the President and Chief Executive Officer of the Company,
Devendar Bains. We have incurred a loss in each year since inception. It is
possible that we will incur further losses, that the losses may fluctuate, and
that such fluctuations may be substantial. As of March 31, 2004, we had an
accumulated deficit of $23,195,238. Potential immediate sources of liquidity are
loans from Mr. Bains. Another potential source of liquidity is the sale of
restricted shares of our common stock, but there are no immediate plans for such
sale.
As of March 31, 2004, our current liabilities exceeded our cash and receivables
by $1,122,454. Our current ratio was 0.42 to 1.00, but our ratio of accounts
receivable to current liabilities was only 0.11 to 1.00. This indicates that we
will have difficulty meeting our obligations as they come due. We are carrying
$378,403 in inventory, of which $249,571 represents component parts. Because of
the lead times in our manufacturing process, we will likely need to replenish
many items before we use everything we now have in stock. Accordingly, we will
need more cash to replenish our component parts inventory before we are able
realize cash from all of our existing inventories.
As of March 31, 2004, we had cash of $20,116 compared to an overdraft of $17,855
at December 31, 2003. Overall our cash and cash equivalents increased $20,116
during 2004. Our cash used for operating actives was $79,972 We received loans
and deferred salary payments to officer/stockholders of $18,000 and advances
pursuant to the financing agreement of $99,220.
The allowance for doubtful accounts on trade receivables increased form $143,000
(61% of accounts receivable of $234,482) in 2003 to $275,000 (66% of accounts
receivable of $415,104) in 2004. Because of our relatively small number of
customers and low sales volume, accounts receivable balances and allowances for
doubtful accounts do not reflect a consistent relationship to sales. We
determine our allowance for doubtful accounts based on a specific
customer-by-customer review of collectiblity.
Our inventories decreased by $29,306 to $378,403 in 2004 compared to $407,709 at
December 31, 2003, a decrease of 7%
Although the Company did not convert salaries to officers through the issuance
of Common Stock in 2003 or 2002, it may to do so in 2004. To help alleviate the
cash flow difficulties, the Chief Executive Officer and the Vice President of
Operations agreed to defer salaries of $23,192 and $6,538, respectively.
The Company continues to explore strategic relationships with ISP's, customers
and others, which could involve jointly developed products, revenue-sharing
models, investments in or by the Company, or other arrangements. There can be no
assurance that a strategic relationship can be consummated.
-12-
AMPLIDYNE, INC.
MARCH 31, 2004
In the past, the officers of the Company have deferred a portion of their
salaries or provided loans to the Company to meet short-term liquidity
requirements. Where possible, the Company has issued stock or granted warrants
to certain vendors in lieu of cash payments, and may do so in the future. There
can be no assurance that any additional financing will be available to the
Company on acceptable terms, or at all. If adequate funds are not available, the
Company may be required to delay, scale back or eliminate its research,
engineering and development or manufacturing programs or obtain funds through
arrangements with partners or others that may require the Company to relinquish
rights to certain of its technologies or potential products or other assets.
Accordingly, the inability to obtain such financing could have a material
adverse effect on the Company's business, financial condition and results of
operations.
With little remaining cash and no near term prospects of private placements,
options or warrant exercises and reduced revenues, we believe that we will have
great difficulty meeting our working capital and litigation settlement
obligations over the next 12 months. We are presently dependent on cash flows
generated from sales and loans from officers to meet our obligations. Our
failure to consummate a merger. or substantially improve our revenues will have
serious adverse consequences and, accordingly, there is substantial doubt in our
ability to remain in business over the next 12 months. There can be no assurance
that any financing will be available to the Company on acceptable terms, or at
all. If adequate funds are not available, the Company may be required to delay,
scale back or eliminate its research, engineering and development or
manufacturing programs or obtain funds through arrangements with partners or
others that may require the Company to relinquish rights to certain of its
technologies or potential products or other assets. Accordingly, the inability
to obtain such financing could have a material adverse effect on the Company's
business, financial condition and results of operations.
ITEM 3. CONTROLS AND PROCEDURES
(a) EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES.
Within the 90 days prior to the date of this report, Amplidyne, Inc. carried out
an evaluation, under the supervision and with the participation of the Company's
management, including the Company's Chief Executive and Principal Accounting
Officer, of the effectiveness of the design and operation of the Company's
disclosure controls and procedures pursuant to Exchange Act Rule 13a-14. Based
upon that evaluation, the Chief Executive and Principal Accounting Officer
concluded that the Company's disclosure controls and procedures are effective in
timely alerting him to material information required to be included in the
Company's periodic SEC filings relating to the Company.
(b) CHANGES IN INTERNAL CONTROLS.
There were no significant changes in the Company's internal controls or in other
factors that could significantly affect these internal controls subsequent to
the date of my most recent evaluation.
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AMPLIDYNE, INC.
MARCH 31, 2004
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The Company's registration of the Ampwave trademark was opposed at the U.S.
Patent Office. The Company has settled with the opposing party by agreeing to
stop using the Ampwave name after a period of one (1) year. The agreement has
not been finalized. Management believes that the settlement will have no
material financial effect.
See Note E to the Company's financial statements set forth in Part I.
ITEM 2. CHANGE IN SECURITIES
During the first quarter ended March 31, 2004, the Company issued no securities.
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SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant
has duly caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
AMPLIDYNE, INC.
Dated: May 21, 2004 By: /S/ DEVENDAR S. BAINS
----------------------------
Name: Devendar S. Bains
Title: Chief Executive Officer,
Treasurer,
Principal Accounting
Officer and Director
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