<PAGE>
As filed with the Securities and Exchange Commission on October 10, 1996
Registration No. 333-11015
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C.
--------------
AMENDMENT NO. 1
TO
FORM SB-2
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
--------------
AMPLIDYNE, INC.
(Name of small business issuer in its charter)
Delaware 3679 22-3440510
- ------------------------ ---------------------------- -------------------
(State or other juris- (Primary Standard Industrial (I.R.S. Employer
diction of organization) Classification Code No.) Identification No.)
144 Belmont Drive
Somerset, New Jersey 08873
(908) 271-8473
(Address and telephone number
of principal executive offices and principal place of business)
Devendar S. Bains
Chief Executive Officer
144 Belmont Drive
Somerset, New Jersey 08873
(908) 271-8473
(Name, address and telephone number of agent for service)
Copies to:
Stuart Neuhauser, Esq. Gerald A. Kaufman, Esq.
Bernstein & Wasserman, LLP 33 Walt Whitman Road
950 Third Avenue Suite 233
New York, NY 10022 Huntington Station, NY 11746
(212) 826-0730 (516) 271-2055
(212) 371-4730 (Fax) (516) 271-2488(Fax)
Approximate date of proposed sale to the public: As soon as reasonably
practicable after the effective date of this Registration Statement.
If any of the securities being registered on this Form are to be offered
on a delayed or continuous basis, pursuant to Rule 415 under the Securities Act
of 1933, check the following box: |X| (continued overleaf)
<PAGE>
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
<PAGE>
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
============================================================================================
Title of Each Proposed Proposed
Class of Maximum Maximum
Securities to be Amount to be Offering Price Aggregate Offering Amount of
Registered Registered(1) per Security(2) Price Registration Fee
============================================================================================
<S> <C> <C> <C> <C>
Common Stock, 1,380,000 $ 5.00 $ 6,900,000 $2,379.12
$.0001 par value
per Share(3)
- --------------------------------------------------------------------------------------------
Warrants to 1,380,000 $ 0.10 $ 138,000 $ 47.58
purchase Common
Stock (3)
- --------------------------------------------------------------------------------------------
Common Stock 1,380,000 $ 6.00 $ 8,280,000 $2,854.94
issuable upon
exercise of
Warrants
- --------------------------------------------------------------------------------------------
Representative's 120,000 $ .001 $ 120 $ .04
Purchase
Option(4)
- --------------------------------------------------------------------------------------------
Common Stock 120,000 $ 6.00 $ 720,000 $ 248.26
underlying
Representative's
Purchase
Option(4)
- --------------------------------------------------------------------------------------------
Warrants 120,000 $ 0.12 $ 14,400 $ 4.97
underlying
Representative's
Purchase Option
- --------------------------------------------------------------------------------------------
Common Stock 120,000 $ 6.00 $ 720,000 $ 248.26
issuable upon
exercise of
Warrants
underlying
Representative's
Purchase Option
- --------------------------------------------------------------------------------------------
Common Stock 550,000 $ 5.00 $ 2,750,000 $ 948.20
underlying
Options Offered
by Selling
Securityholders(5)
- --------------------------------------------------------------------------------------------
Total Registration $19,522,520 $6,731.37(6)
and Fee
============================================================================================
</TABLE>
(1) Pursuant to Rule 416 under the Securities Act of 1933 (the "Act"), this
Registration Statement covers such additional indeterminate number of
shares of Common Stock as may be issued by reason of adjustments in the
number of shares of Common Stock pursuant to anti-dilution provisions
contained in the Warrant Agreement governing the Warrants and
Representative's Purchase Option (defined below). Because such additional
shares of Common Stock will, if issued, be issued for no additional
consideration, no registration fee is required.
<PAGE>
(2) Estimated solely for purposes of calculating registration fee. It is
anticipated that the initial public offering prices of the Common Stock
and Warrants will be $5.00 per share and $.10 per Warrant.
The exercise price of the Warrants will be $6.00.
(3) Includes 180,000 shares of Common Stock and 180,000 Warrants subject to
the Underwriters' over-allotment option (the "Over-Allotment Option").
(4) The Representative's Purchase Option entitles the Representative to
purchase up to 120,000 shares of Common Stock at 120% of the public
offering price per share of Common Stock and 120,000 Warrants at 120% of
the public offering price per Warrant (the Representative's Purchase
Option").
(5) Common Stock underlying options owned by stockholders of the Company.
(6) Previously paid.
The registrant hereby amends this registration statement on such date or
dates as may be necessary to delay its effective date until the registrant shall
file a further amendment which specifically states that this registration
statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the registration statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
Explanatory Note
This registration statement covers the primary underwritten offering
("Offering") of shares of Common Stock, par value $.0001 ("Common Stock") and
Redeemable Common Stock Purchase Warrants ("Warrants") of Amplidyne, Inc. (the
"Company"), and the concurrent offering of securities by certain selling
securityholders ("Selling Securityholders"). The primary prospectus ("Company
Prospectus"), covers the 1,380,000 shares of Common Stock and 1,380,000 Warrants
being offered by the Company. An alternate prospectus ("Selling Securityholders
Prospectus"), will be used by the Selling Securityholders in connection with an
offering by them for their accounts of up to 550,000 shares of Common Stock
underlying certain options ("Selling Securityholders Options"). The Selling
Securityholders Prospectus is identical to the Company Prospectus, except for:
alternative cover and back pages (to be substituted for the cover and back pages
of the Company Prospectus), and the sections entitled "Selling Securityholders"
and "Plan of Distribution" (to be inserted in lieu of the section entitled
"Underwriting" in the Company Prospectus) all which substitute sections follow
the Company Prospectus. All references contained in the Selling Securityholders
Prospectus to "the Offering" or "this Offering" shall refer to the Company's
Offering as referenced in the Company Prospectus.
<PAGE>
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH AN OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL
PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY STATE.
SUBJECT TO COMPLETION, DATED OCTOBER 10, 1996
PROSPECTUS
AMPLIDYNE, INC.
1,200,000 Shares of Common Stock
1,200,000 Redeemable Common Stock Purchase Warrants
--------------
Amplidyne, Inc., a Delaware corporation (the "Company" or "Amplidyne"), is
hereby offering ("Offering") 1,200,000 shares of common stock, par value $.0001
per share ("Common Stock" or "Shares") and 1,200,000 Redeemable Common Stock
Purchase Warrants ("Warrants" , collectively with the Common Stock, the
"Securities"). The Securities may be purchased in the Offering only together, on
the basis of one Share and one Warrant. Each Warrant entitles the holder to
purchase one (1) Share for $6.00 during the four (4) year period commencing one
(1) year from the date of this Prospectus. Commencing one (1) year from the date
of this Prospectus , the Company may redeem the Warrants at a price of $.01 per
Warrant, at any time upon not less than 30 days prior written notice if the
average closing price or bid price of the Common Stock as reported by the
principal exchange on which the Common Stock is traded, the Nasdaq SmallCap
Market or the National Quotation Bureau, Incorporated, as the case may be,
equals or exceeds $9.00 per Share for any twenty (20) consecutive trading days
ending within five (5) days prior to the date on which notice of redemption is
given. See "Description of Securities."
Prior to this Offering, there has been no public market for the Securities
and there can be no assurance that any such market will develop. It is currently
anticipated that the initial public offering price per share will be $5.00 and
that the initial offering price per Warrant will be $0.10. For information
regarding the factors considered in determining the initial public offering
prices of the Securities and the exercise price of the Warrants, see
"Underwriting." The Company has applied to have the Common Stock and Warrants
approved for quotation on the Nasdaq SmallCap Market under the symbols "AMPD"
and "AMPDW", respectively, although there can be no assurances that an active
trading market will develop even if the Securities are accepted for quotation or
that the Company will maintain certain minimum criteria established by Nasdaq
for continued quotation.
The registration statement of which this prospectus forms a part also
relates to the resale of 550,000 shares of Common Stock underlying options
("Selling Securityholder Options") exercisable at $2.50 per share which were
issued to certain persons ("Selling Securityholders") in connection with the
Company's Bridge Financings in January 1996 and April 1996 (sometimes
collectively referred to as "Bridge Financing"). See "Selling Securityholders."
The Underwriters are not offering any of the 550,000 Shares in this Offering and
the Company will not receive any of the proceeds derived from the resale of the
securities by the Selling Securityholders. The Selling Securityholders have
agreed not to sell their securities until twelve months from the date of this
Prospectus without the sole consent of Patterson Travis, Inc., as representative
("Representative") of the several underwriters of this Offering
("Underwriters"). Such consent may not be given for a period of six months from
the date of this Prospectus.
--------------
AN INVESTMENT IN THE SECURITIES OFFERED HEREBY INVOLVES A HIGH
DEGREE OF RISK AND IMMEDIATE SUBSTANTIAL DILUTION. SEE "RISK
<PAGE>
FACTORS" WHICH BEGIN ON PAGE ___ AND " DILUTION."
--------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
- --------------------------------------------------------------------------------
Price Proceeds
To Underwriting Discounts To
Public And Commissions (1) Company (2)
- --------------------------------------------------------------------------------
Per Share........ $5.00 $ .50 $4.50
- --------------------------------------------------------------------------------
Per Warrant...... $ .10 $ .01 $ .09
- --------------------------------------------------------------------------------
Total (3)........ $6,120,000 $612,000 $5,508,000
- --------------------------------------------------------------------------------
- ----------
(1) Does not reflect additional compensation to be received by the
Representative in the form of: (i) a non-accountable expense allowance
equal to 3% of the gross proceeds of the Offering in the amount of
$183,600 ($211,140 if the Over-Allotment Option (defined below) is
exercised in full), and (ii) an option to purchase 120,000 shares of
Common Stock at $6.00 per Share and 120,000 Warrants at $.12 per Warrant
(the "Representative's Purchase Option"). The Company and the
Representative have agreed to indemnify each other against certain
liabilities, including liabilities under the Securities Act of 1933, as
amended (the "Act"). See "Underwriting."
(2) Before deducting expenses of the Offering payable by the Company
(including the Representative's non-accountable expense allowance)
estimated at $483,600 ($511,140 if the Over-Allotment Option is exercised
in full).
(3) The Company has granted the Underwriters an option exercisable within 30
days of the date of this Prospectus ("Over-Allotment Option") to purchase
up to 180,000 additional Shares and 180,000 Warrants on the same terms as
set forth above solely to cover over-allotments, if any. If the
Over-Allotment Option is exercised in full, the total Price to the Public,
Underwriting Discounts and Commissions and Proceeds to the Company will be
$7,038,000, $703,800, and $6,334,200, respectively. See "Underwriting."
The Securities are being offered hereby by the Underwriters on a "firm
commitment" basis, when, as and if delivered to and accepted by the
Underwriters, and subject to their right to reject orders in whole or in part,
to the approval of certain legal matters by counsel and to certain other
conditions. It is expected that the delivery of the certificates representing
the Securities will be made against payment therefor at the offices of the
Representative on or about _______ __, 1996.
PATTERSON TRAVIS, INC.
The date of this Prospectus is ___________, 1996
2
<PAGE>
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR
EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE
SECURITIES AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN
MARKET. SUCH TRANSACTIONS MAY BE EFFECTED IN THE NASDAQ SMALLCAP MARKET. SUCH
STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
SPECIAL STANDARDS FOR SECURITIES SOLD IN CALIFORNIA
EACH CALIFORNIA INVESTOR, AND EACH TRANSFEREE THEREOF WHO ALSO IS A
CALIFORNIA INVESTOR, MUST HAVE AN ANNUAL GROSS INCOME OF AT LEAST $65,000 AND A
NET WORTH, EXCLUSIVE OF HOME, FURNISHINGS AND AUTOMOBILES, OF AT LEAST $250,000,
OR IN THE ALTERNATIVE, A NET WORTH, EXCLUSIVE OF HOME, FURNISHINGS AND
AUTOMOBILES, OF AT LEAST $500,000. IN ADDITION, AN INVESTOR'S TOTAL PURCHASE MAY
NOT EXCEED 10% OF SUCH INVESTOR'S NET WORTH.
3
<PAGE>
PROSPECTUS SUMMARY
The following is a summary of certain information (including financial
statements and notes thereto) contained in this Prospectus and is qualified in
its entirety by the more detailed information appearing elsewhere herein. In
addition, unless otherwise indicated to the contrary, the information appearing
herein does not give effect to (a) the exercise of the Over-Allotment Option,
the Representative's Purchase Option, Selling Securityholders Options or the
Warrants offered hereby, (b) 350,000 Shares reserved for issuance upon exercise
of warrants exercisable at $2.50 per share ("701 Warrants"), (c) 187,500 shares
of Common Stock reserved for issuance upon exercise of warrants exercisable at
$2.50 per share ("Bridge Warrants"), (d)1,267,000 Shares reserved for issuance
upon the exercise of options exercisable at $4.00 per Share ("Employee Options")
granted pursuant to the Company's 1996 Incentive Option Plan ("Incentive Option
Plan"), (e) 233,000 Shares reserved for issuance upon the exercise of options
which may be granted pursuant to the Incentive Option Plan, and (f) 30,000
Shares reserved for issuance upon the exercise of options exercisable at $1.00
per Share ("Key Employee Options") . See "Description of
Securities","Underwriting" and "Certain Transactions." See "Glossary of Terms"
for the definition of certain terms used in this Prospectus. Each prospective
investor is urged to read this Prospectus in its entirety.
The Company
Amplidyne 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. The products are marketed to the cellular, wireless local loop and
personal communication systems ("PCS") segments of the wireless
telecommunications industry. The Company's largest wireless telecommunications
customers are AT&T, DSC Communications, Samsung and Goldstar, each of which is
an OEM.
Amplidyne has several products with a patent application pending (for
which a notice of allowance has been 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 technology. In addition to its presence in the wireless
telecommunications industry, the Company designs and manufactures products for
uplink satellite communications and for audio and TV transmission links.
In addition to the Company's product line of single channel power
amplifiers which are currently utilized by the wireless communications industry,
the Company has developed a Multicarrier Linear Power Amplifier ("MCLPA"). MCLPA
combines the performance capabilities of up to 25 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
amplifiers, the Company can achieve similar performance with its MCLPAs. The
Company's MCLPAs utilizes the Company's patent pending predistortion and
proprietary feed forward technology which amplifies many channels with minimal
4
<PAGE>
distortion at the same time with one product.
The market for wireless communication services has grown substantially
during the past decade. Cellular service has been one of the fastest growing
segments of the wireless telecommunications market. The worldwide wireless
revolution exploded in 1994, adding 24 million new subscribers bringing the
total global subscriber count in 1995 to approximately 55 million, a growth rate
of more than 70%. However, this represents a worldwide penetration of only
1.35%. Industry officials project a worldwide market penetration of 8% going
into the next century, a 50% compounded annual growth rate ("CAGR"). The growth
in cellular communications has required, and will continue to require,
substantial investment by cellular service providers in wireless infrastructure
equipment.
In addition to cellular system operators' need for base station equipment,
in many developing countries, where access to the public switch telephone
network ("PSTN") by the general population is significantly less than in
developed countries, the Company believes that wireless telecommunications
systems are the most economic means to provide basic telephone service. The
expense, difficulty and time requirements of building and maintaining a cellular
network is generally less than the cost of building and maintaining a comparable
wireline network. Thus, in many less developed countries, wireless service may
provide the primary service platform for both mobile and fixed
telecommunications applications.
The Company's business strategy focuses primarily on the wireless
communication market and consists of the following elements:
Increase Penetration of Wireless Equipment Manufacturers. Since 1991, the
Company has positioned itself as a supplier of amplifier products to large
wireless telecommunications OEMs, such as AT&T, DSC Communications, Samsung and
Goldstar. 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.
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. Management believes that its MCLPAs will assist
these equipment manufacturers in providing high capacity, low distortion low
cost per channel products and has already begun to sell amplifiers to several
emerging wireless equipment manufacturers.
Develop Products for Multiple Protocols. The Company intends to continue
to invest resources in the research and development of new products for various
protocols. Amplidyne is continuing to develop products that incorporate
protocols which it believes will address the needs of established and emerging
wireless systems.
Maintain a Technology Leadership Position. 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 intends to continue to invest substantial resources in research and
development associated with its interference cancellation technologies. See
"Technology".
The Company believes that its products, particularly the ultra linear
MCLPAs have several features
5
<PAGE>
which differentiate them from those of its competitors, such as:
The Predistortion Solution. Utilizing its proprietary technology the
Company can obtain significant distortion reduction in its core amplifiers. This
enables the predistorted amplifier to have feed forward correction (See
"Business-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.
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.
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.
High Quality and Reliability. Amplidyne believes that it has consistently
provided high quality, reliable products to its customers. Management believes
that its reputation for quality and reliability will enable Amplidyne to attract
new customers and maintain existing customers for all its products.
Linearity, Low Distortion and High Amplification. Wireless service
providers' ability to manage scarce spectrum resources more effectively and
accommodate a larger number 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. The Company has several products with a patent pending (for
which a notice of allowance has been issued by the United States Patent and
Trademark Office) which it believes gives it a significant advantage over its
competitors. These features for Pre-distortion and Pre-Distortion Linearization
designs significantly reduces 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. By virtue of
the Company's very high linearity products which incorporates pre-distortion and
feed forward technology achieving, in management's belief, 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. Management believes
that its leading technology in MCLPAs will enable Amplidyne to attract new
customers.
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 144 Belmont Drive, Somerset, New Jersey 08873 and its telephone
number is (908) 271-8473.
6
<PAGE>
The Offering
Securities Offered by the 1,200,000 shares of Common Stock, and
Company (1)................... 1,200,000 Warrants which may be
purchased only together on the basis of
one share of Common Stock and one
Warrant. Each Warrant entitles the
registered holder thereof to purchase,
at any time during the four (4) year
period commencing one (1) year from the
date of this Prospectus, one share of
Common Stock at a price of $6.00 per
share. At any time after one (1) year
from the date of this Prospectus, the
Company may redeem the Warrants at a
price of $.01 per Warrant on 30 days
prior written notice if the average
closing price or bid price of the Common
Stock as reported by the principal
exchange on which the Common Stock is
traded, the Nasdaq SmallCap Market or
the National Quotation Bureau,
Incorporated, as the case may be, equals
or exceeds $9.00 per Share for any
twenty (20) consecutive trading days
ending within five (5) days prior to the
date on which notice of redemption is
given. See "Description of Securities."
Securities Outstanding
Prior to the Offering......... 2,850,000 shares
Securities Outstanding
Subsequent to the Offering.... 4,050,000 Shares
1,200,000 Warrants
Use of Proceeds.................. Purchase of test equipment, research and
development, the purchase of
manufacturing machinery, the repayment
of indebtedness, and for working capital
purposes. See "Use of Proceeds."
Risk Factors..................... The Common Stock offered hereby involves
a high degree of risk and immediate and
substantial dilution. See "Risk Factors"
and "Dilution."
Proposed Nasdaq SmallCap
Market Symbols.................. Shares - AMPD; Warrants - AMPDW
- ----------
(1) Concurrently with this Offering, the Company is registering the resale of
the 550,000 shares of Common Stock underlying the Selling Securityholder
Options, which may not be sold until twelve (12) months from the date of
this Prospectus without the sole consent of the Representative. Such
consent may not be given for a period of six months from the date of this
Prospectus. See "Selling Securityholders."
7
<PAGE>
Summary Financial Information
(in thousands except per share data)
The following table sets forth certain summary information concerning
the Company and is qualified by reference to the financial statements and notes
thereto included elsewhere in this Prospectus. The results for the six months
ended June 30, 1996 are not necessarily indicative of the results to be expected
for the full year.
Statement of Operations Data:
Year ended December 31 Six Months ended June 30,
---------------------- -------------------------
1994 1995 1995 1996
---- ---- ---- ----
Net sales $ 3,575 $ 1,810 $ 1,049 $ 1,272
Cost of goods sold 2,713 1,756 893 1,106
Gross profit 862 54 156 166
Selling, general and
administrative 722 527 298 529
Research, engineering
and development 333 372 85 531
------- ------- ------- -------
Operating Loss (193) (845) (227) (894)
Stock compensation and
financing costs 1,180 1,383
Net loss $ (178) $(2,025) $ (227) $(2,277)
======= ======= ======= =======
Net loss per share $ (.05) $ (.64) $ (.07) $ (.71)
======= ======= ======= =======
Shares outstanding(1) 3,188 3,188 3,188 3,188
Balance Sheet Data:
December 31, 1995 June 30, 1996 June 30, 1996
----------------- ------------- --------------
As Adjusted (2)
---------------
Working capital (deficit) $ (578) $ (760) $4,264
Total assets 722 1,485 5,380
Total liabilities 1,276 2,238 1,109
Stockholders' equity
(deficit) (554) (753) 4,271
(1) All shares, warrants and options issued or granted within the past twelve
months from the most current period presented are considered to be
outstanding for all periods presented.
(2) Adjusted for the sale of 1,200,000 shares of Common Stock at an assumed
offering price of $5.00 per share and 1,200,000 Warrants at an offering
price of $ 0.10 per Warrant and the application of the estimated net
proceeds therefrom as described under "Use of Proceeds."
8
<PAGE>
RISK FACTORS
An investment in the securities offered hereby is speculative and involves
a high degree of risk. Prospective purchasers, prior to making an investment,
should carefully consider the following risks as well as other information set
forth elsewhere in this Prospectus.
Recent History of Losses; Working Capital Deficit; Stockholder Deficit.
The Company incurred a net loss of $2,025,000 in the year ended December 31,
1995 and a net loss of $2,277,000 for the six months ended June 30, 1996,
although a substantial portion of the net loss for the year ended December 31,
1995 and the six months ended June 30, 1996 is due to a nonoperating charge to
earnings and research, engineering and development costs. The Company expects
that losses will increase and continue until such time, if ever, as the Company
can manufacture and market a new line of multicarrier linear power amplifiers
(sometimes referred to as "MCLPA"). In addition, the Company had a working
capital deficit of $578,000 and $760,000 at December 31, 1995 and June 30, 1996,
respectively, and a stockholders deficit of $554,000 and $753,000 at December
31, 1995 and June 30, 1996, respectively. In addition, the Company had an
accumulated deficit of $1,739,126 at December 31, 1995 and $4,016,855 at June
30, 1996, respectively. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations - Liquidity and Capital Resources."
Uncertainty of Future Revenues; Limited Experience in the Multicarrier
Linear Power Amplifier Business; Uncertainty of Market Acceptance. Revenues for
the first six months of 1996 increased 21% compared to the first six months of
1995 and revenues for the year ended December 31, 1995 decreased 49% compared to
the year ended December 31, 1994. The Company believes that the decrease was due
primarily to the Company's shift in product emphasis from single power
amplifiers to MCLPAs . The Company anticipates that a substantial portion of the
Company's future revenues will be derived from sale of its new MCLPAs. Even
though the Company has substantial experience in the commercial cellular
amplifier business, having been involved in the business since 1989, the MCLPA
is a relatively recent development in the marketplace and the Company has
focused on the business only since early 1995. As a result, the Company is
subject to all of the risks associated with a new business enterprise, including
without limitation, failed product development efforts, the lack of market
acceptance and duplication of the Company's proprietary technology. The Company
has sold prototypes of its MCLPAs and believes that it will commence production
orders in the fourth quarter of 1996, although no assurances can be made that
the Company will be successful in these endeavors. Market acceptance of the
Company's MCLPAs will depend in large part upon the public demand for power
amplifiers in general and the Company's ability to demonstrate its MCLPAs
advantages, including its performance features and cost-effectiveness. There can
be no assurance that the MCLPAs will be accepted by the market, and if so
accepted, whether it will result in increased revenues for the Company in the
future. See "Business-Products."
Possible Need For Additional Financing. The Company believes that the
proceeds of this Offering together with cash flow from operations will be
adequate to fund its operations for at least twelve months following this
Offering. There can be no assurance, however, that the Company will not require
additional financing prior to or after such time. 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,
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financial condition and results of operations. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations - Liquidity and
Capital Resources."
Reliance upon Growth of Wireless Telecommunications Services. Demand for
the Company's products will depend in large part upon continued and growing
demand within the wireless telecommunications industry for power amplifiers.
Although demand for power amplifiers has grown in recent years, there can be no
assurance that the quantity and variety of wireless telecommunications services
will continue to grow, or that such services will create a demand for the
Company's products. See "Business - Industry."
Need to Implement Automated Manufacturing Processes; Dependence on
Contract Manufacturers; Limited Number of Suppliers. The Company is in the
process of establishing a fully automated manufacturing facility so that it can
manufacture its products. The Company believes that such manufacturing facility
will be completed in the second quarter of 1997, although no assurances can be
made that the Company will be successful in these endeavors. The Company has
allocated $600,000 from the proceeds of this Offering towards the establishment
of such facility. See "Use of Proceeds." Until the manufacturing facilities are
completed, the Company expects to be dependent on contract manufacturing. There
can be no assurance that the Company's contract manufacturers will be able to
fulfill the Company's production commitments. There are no written agreements
with such contract manufacturers. Any inability to obtain timely deliveries of
finished assemblies of acceptable quality could delay the Company's ability to
deliver its products to its customers, which in turn would have a material
adverse effect on the Company's business, financial condition and results of
operations. In addition, in the event that production costs for the Company's
contract manufacturers increase, the Company may suffer losses due to an
inability to recover such cost increases under its fixed price commitments with
its original equipment manufacturer ("OEM") customers. See "Business -
Manufacturing."
Power transistors and certain other key components used in the Company's
products are currently available from only a limited number of sources. Certain
of the Company's limited source suppliers have limited operating histories and
limited financial and other resources and, therefore, they may prove to be
unreliable sources of supply. The Company's principal suppliers of components
are NEC, Ericcson, Mini Circuits and Penny Technologies. The Company has no
written agreements with such suppliers. Further, the Company has generally not
previously purchased key components in large volume. If the Company were unable
to obtain sufficient quantities of components, particularly power transistors,
delays or reductions in product shipments could occur which would have a
material adverse effect on the Company's business, financial condition and
results of operations. Furthermore, delays in filling orders may have a material
adverse effect on the Company's relationships with its OEM customers, which may
result in the termination of material orders from its OEM customers and/or cause
a permanent loss of future sales. See "Business Manufacturing."
Reliance on a Small Number of Customers; Possible Fluctuations in
Operating Results. In 1994, approximately 66% of net revenues were derived from
sales to one customer (AT&T). In 1995, approximately 61% of net revenues were
derived from four customers (Allen Telecom - 18%; Kentrox Industries - 17%; DSC
Communications - 15%; and AT&T - 11%). For the period ended June 30, 1996,
approximately 33% of net revenues were derived from sales to one customer (DSC
Communications). The Company anticipates that sales of its products to
relatively few customers (wireless telecommunications
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OEMs) will account for a majority of the Company's revenues in 1996. The
reduction, delay or cancellation of orders from one or more significant
customers would materially and adversely affect the Company's financial
condition and results of operation. Moreover, as a result of the uncertainty of
such sales, the Company may in the future experience significant fluctuations in
net sales, gross margins and operating results. See "Business - Markets."
Limited Marketing Experience. The Company will be required to develop a
marketing and sales network that will effectively demonstrate the advantages of
its products over competing products. The Company's marketing experience with
its new products is limited as the Company has only sold prototypes of MCLPAs (a
product which the Company believes will represent a majority of its future
revenues). The Company is engaged actively in expanding its in-house marketing
forces. There can be no assurance that the Company will be successful in its
marketing efforts or that it will be able to establish sales and distribution
capabilities. See "Business - Customers, Sales and Marketing."
Substantial Portion of Proceeds To Satisfy Indebtedness, Including
Indebtedness Owed to Executive Officer and Director. Approximately 29% of the
net proceeds of the Offering will be used to repay indebtedness, including
approximately 7% to repay the Company's President for loans extended by him to
the Company. See "Use of Proceeds."
Broad Discretion in Application of Proceeds. Approximately 1,929,400 or
38% of the net proceeds of this Offering, have been allocated to working capital
of the Company, which funds will be utilized for general corporate purposes. The
allocation of proceeds described in "Use of Proceeds" represents the Company's
best estimate of its allocation based upon the current state of its business,
operations and plans, current business conditions and the Company's evaluation
of its industry. Future events, including problems, delays, expenses and
complications which may be encountered, changes in economic or competitive
conditions and the results of the Company's sales and marketing activities may
make shifts in the allocation of funds necessary or desirable. Management of the
Company will have broad discretion in the application of such proceeds. See "Use
of Proceeds."
Control by Management; Compensation and Audit Committees. Upon completion
of this Offering, officers and directors and persons who may be deemed
affiliates will beneficially own, in the aggregate, and will have the right to
vote approximately 79% of the then issued and outstanding Common Stock of the
Company (approximately 56% if the Over-Allotment Option is exercised in full).
The Chairman and Chief Executive Officer of the Company will own approximately
49% of the issued and outstanding Common Stock after the Offering. Accordingly,
such holders will be in a position to elect all of the directors and thereby
control the Company. See "Principal Stockholders".
Currently, the Board of Directors consist of three members, two of which
(Devendar S. Bains and Tarlochan Bains) are insiders and principal stockholders.
In addition, such individuals comprise a majority of the Compensation Committee
and Audit Committee. Accordingly, such individuals will be in a position to
control the actions and decisions of the Board of Directors and such committees.
See "Management."
No Prior Public Market; Potential Limited Trading Market; Possible
Volatility of Stock Price. Prior to this Offering, there has been no public
market for the Securities and there can be no assurance that an active trading
market in the Company's Securities will develop or be maintained. In the absence
of such a market, an investor may find it more difficult to sell the Securities
offered
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hereby. The initial public offering price of the Common Stock and Warrants and
the exercise price of the Warrants were determined by negotiation between the
Company and the Representative, and may not be indicative of the market price
for such securities in the future, and does not necessarily bear any
relationship to the Company's assets, book value, net worth or results of
operations of the Company or any other established criteria of value. 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 companies. The trading price of the Securities is expected to be subject
to significant fluctuations in response to variations in quarterly operating
results, changes in analysts' earnings estimates, announcements of technological
innovations by the Company or its competitors, 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 the Company's Securities. See "Underwriting - Determination
of Public Offering Price," "Description of Securities" and "Financial
Statements."
Dilution. This Offering involves immediate substantial dilution to
investors of $3.95 per share (or approximately 79% of the assumed per-Share
Offering price of $5.00), representing the difference between the pro forma net
tangible book value per Share immediately after the completion of this Offering
and the Offering price per Share. See "Dilution".
No Assurance of Successful Expansion of Operations. Recently, the Company
has substantially increased the scale of its operations significantly increasing
its operating expenses. The Company anticipates that its operating expenses will
continue to increase significantly after the Offering as a result of expansion
of its operations in anticipation of the full scale production of its MCLPAs and
to meet customers' orders. If the Company's net sales do not correspondingly
increase or the Company does not adequately manage the growth of its operations,
the Company's results of operations will be materially adversely affected. See
"Business - Company Strategy."
Declining Average Sales Prices. If wireless telecommunications OEMs come
under increasing price pressure from cellular and PCS service providers, the
Company could expect to experience downward pricing pressure on its products. In
addition, competition among non-captive amplifier suppliers could increase the
downward pricing pressure on the Company's products. To date, such pressure has
not been experienced. As these manufacturers frequently negotiate supply
arrangements far in advance of delivery dates, the Company often must commit to
price reductions for its products before it is aware of how, or if, cost
reductions can be obtained. If the Company is unable to achieve cost reductions,
the Company's gross margins will decline, which will have a material adverse
effect on the Company's business, financial condition and results of operations.
Rapid Technological Change and Intense Competition. The wireless
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, 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 delivery schedules of
its customers. The Company's existing and potential OEM customers continuously
evaluate whether to manufacture their own amplification
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products or to purchase such products from outside sources. These customers and
other large manufacturers of wireless telecommunications infrastructure
equipment could elect to enter the market and compete directly with the Company.
Many of the Company's competitors have significantly greater financial,
technical, manufacturing, sales and marketing capabilities and research and
development personnel and other resources than the Company and have achieved
greater name recognition of their existing products and technologies. In order
for the Company to successfully compete it must continue to develop new
products, keep pace with advancing technologies and competitive innovations and
successfully market its products to OEM customers that will incorporate the
Company's products into their systems. There can be no assurance that the
Company will be able to compete successfully. See "Business - Competition."
In addition, there can be no assurance that new products or alternative
amplifier technology will not be developed that render the Company's current or
planned products obsolete or inferior. Rapid technological development by others
may result in the Company's products becoming obsolete before the Company
recovers a significant portion of the research, development and
commercialization expenses incurred with respect to those products.
Risks Associated with Sales Outside of the United States. International
sales represented approximately 8%, 30%, and 58% of the Company's net revenues
for the years ended December 31, 1994 and 1995 and for the six months ended June
30, 1996, respectively. The Company expects that international sales will
continue to account for a significant portion of its net revenues in the future.
To the extent that the Company does not achieve and maintain substantial
international sales, the Company's business, results of operations and financial
condition could be materially and adversely affected. There can be no assurance
that the Company will be able to maintain or increase its current level of
international sales. See "Management's Discussion and Analysis of Financial
Condition and Results of Operation."
Sales of the Company's products outside of the United States are
denominated in US dollars. An increase in the value of the U.S. dollar relative
to foreign currencies would make the Company's products more expensive and,
therefore, potentially less competitive outside the United Sates. Additional
risks inherent in the Company's 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,
restrictions on the repatriation of earnings, reduced protection for
intellectual property rights in some countries, and the burdens of complying
with a wide variety of foreign laws. There can be no assurance that such factors
will not have an adverse effect on the Company's future international sales and,
consequently, on the Company's business, financial condition and results of
operations. See "Management's Discussion and Analysis of Financial Condition and
Results of Operation."
Dependence Upon Management and Technical Personnel. The success of the
Company is highly dependent upon the continued services of Devendar Bains, the
Company's President and Chief Executive Officer. The Company has entered into a
five year employment agreement with Mr. Bains which terminates April 30, 2001
and contains a covenant not to compete against the Company for a two year period
following termination of employment. The Company is in the process of obtaining
key man insurance on the life of Mr. Bains in the amount of $1,000,000. There
can be no assurances that the Company will be able to replace Mr. Bains in the
event his services become unavailable or that the proceeds of such insurance
would be adequate to compensate the Company for the loss of his services. See
"Management."
Due to the specialized nature of the Company's business, the Company is
highly dependent on the
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continued service of, and on its ability to attract and retain, qualified
technical and marketing personnel, particularly highly skilled radio-frequency
("RF") and microwave design engineers involved in the development of new
products and processes and test technicians involved in the manufacture and
enhancement of existing products. In addition, as part of the Company's
team-based sales approach, the Company dedicates specific design engineers to
service the requirements of individual customers. The loss of any such engineer
could adversely affect the Company's ability to obtain future purchase orders
from the customers to which such engineer is dedicated. The Company has
employment or non-competition agreements with most of its current design
engineers or 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, would have a material adverse effect
on the Company's business, financial condition and results of operations.
Proprietary Technology; Risk of Third Party Claims of Infringement. 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 upon the rights of others. Although there are no
pending lawsuits against the Company regarding its technology or notices that
the Company is infringing upon intellectual property rights of others, there can
be no assurance that litigation or infringement claims will not 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 the Company's
business, financial condition, and results of operations. The Company generally
enters into confidentiality and non-disclosure agreements with its employees and
limits access to and distribution of its proprietary information. However, there
can be no assurance that such measures will provide adequate protection for the
Company's trade secrets or other proprietary information, or that the Company's
trade secrets or proprietary technology will not otherwise become known or be
independently developed by competitors. The failure of the Company to protect
its proprietary technology could have a material adverse effect on its business,
financial condition and results of operations.
Presently, the Company has a patent application pending (No. 081508,163)
with respect to its Pre-Distortion and Pre-Distortion Linearzation technology
used in its products (for which a notice of allowance has been issued by the
United States Patent and Trademark Office. Such proprietary technology, the
Company believes, is more effective in reducing distortion than other currently
available technology. No assurance can be made that the Company's patent
application will be fully granted or, if granted, will protect the Company's
technology. The Company believes that the success of its amplifier business,
however, depends more on its specifications, computer-aided engineering design,
modeling tools, technical processes and employee expertise than on patent
protection.
No Dividends. The Company has not paid any dividends on its Common Stock
since its inception and does not intend to pay dividends on its Common Stock in
the foreseeable future. Any earnings which the Company may realize in the
foreseeable future will be retained to finance the growth of the Company.
See "Dividend Policy."
Governmental Regulations and Environmental Regulations. The Company's
customers must obtain regulatory approval to operate their base stations. The
United States Federal Communications
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Commission ("FCC") recently adopted new 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. See "Business Governmental 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. See "Business - Environmental Regulations."
Nasdaq Listing and Continued Listing Requirements. Under prevailing rules
of the National Association of Securities Dealers, Inc ("NASD"), in order to
qualify for initial quotation of securities on The Nasdaq Small Cap Market, a
company, among other things, must have at least $4,000,000 in total assets,
$2,000,000 in total capital and surplus, $1,000,000 in market value of public
float and a minimum bid price of $3.00 per share. Although the Company may upon
the completion of this Offering qualify for initial quotation of its securities
on The Nasdaq Small Cap Market, for continued listing on The Nasdaq Small Cap
Market, a company, among other things, must have $2,000,000 in total assets,
$1,000,000 in total capital and surplus, $1,000,000 in market value of public
float and a minimum bid price of $1.00 per share. If the Company is unable to
satisfy the requirements for quotation on The Nasdaq Small Cap Market, trading,
if any, in the Common Stock and Warrants offered hereby would be conducted in
the over-the-counter market in what are commonly referred to as the "pink
sheets" or on the NASD OTC Electronic Bulletin Board. As a result, an investor
may find it more difficult to dispose of, or to obtain accurate quotations as to
the price of, the securities offered hereby. The above-described rules may
materially adversely affect the liquidity of the market for the Company's
securities. See "Underwriting."
Penny Stock Regulations May Impose Certain Restrictions on Marketability
of Securities. The Securities and Exchange Commission (the "Commission") has
adopted regulations which generally define a "penny stock" to be any equity
security that has a market price (as defined) of less than $5.00 per share or an
exercise price of less than $5.00 per share, subject to certain exceptions.
Since it is intended that the shares of Common Stock and Warrants offered hereby
will be authorized for quotation on The Nasdaq Small Cap Market, such securities
will initially be exempt from the definition of "penny stock." If the shares of
Common Stock and Warrants offered hereby are removed from listing by The Nasdaq
Small Cap Market at any time following the Effective Date, the Company's Common
Stock and Warrants may become subject to rules that 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 for the purchase of
such securities and have received the purchaser's written consent to the
transaction prior to the purchase.
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Additionally, for any transaction involving a penny stock, unless exempt, the
rules require the delivery, prior to the transaction, of a risk disclosure
document mandated by the Commission relating to the penny stock market. The
broker-dealer must also disclose the commission payable to both the
broker-dealer and the registered representative, current quotations for the
securities and, if the broker-dealer is the sole market maker, the broker-dealer
must disclose this fact and the broker-dealer's presumed control over the
market. Finally, monthly statements must be sent disclosing recent price
information for the penny stock held in the account and information on the
limited market in penny stocks. Consequently, the "penny stock" rules may
restrict the ability of broker-dealers to sell the Company's securities and may
affect the ability of purchasers in this Offering to sell the Company's
securities in the secondary market and the price at which such purchasers can
sell any such securities.
Current Prospectus and State Blue Sky Registration Required to Exercise
Warrants. The Company will be able to issue shares of its Common Stock upon
exercise of the Warrants only if there is then a current prospectus relating to
such Common Stock and only if such Common Stock is qualified for sale or exempt
from qualification under applicable state securities laws of the jurisdictions
in which the various holders of the Warrants reside. The Company has undertaken
and intends to file and keep current a prospectus which will permit the purchase
and sale of the Common Stock underlying the Warrants, but there can be no
assurance that the Company will be able to do so. Although the Company intends
to seek to qualify for sale the shares of Common Stock underlying the Warrants
in those states in which the securities are to be offered, no assurance can be
given that such qualification will occur . The Warrants may be deprived of any
value and the market for the Warrants may be limited if a current prospectus
covering the Common Stock issuable upon the exercise of the Warrants is not kept
effective or if such Common Stock is not qualified or exempt from qualification
in the jurisdictions in which the holders of the Warrants then reside. See
"Underwriting"
Potential Adverse Effect of Redemption of Warrants. The Warrants may be
redeemed by the Company at any time at a redemption price of $.01 per Warrant
upon not less than 30 days prior written notice if the average closing price or
bid price of the Common Stock as reported by the principal exchange on which the
Common Stock is traded, the Nasdaq SmallCap Market or the National Quotation
Bureau, Incorporated, as the case may be, equals or exceeds $9.00 per Share for
any twenty (20) consecutive trading days ending within five (5) days prior to
the date on which notice of redemption is given. Notice of redemption of the
Warrants could force the holders to exercise the Warrants and pay the exercise
price at a time when it may be disadvantageous for them to do so, to sell the
Warrants at the current market price when they might otherwise wish to hold the
Warrants, or to accept the redemption price which would be substantially less
than the market value of the Warrants at the time of redemption. See
"Description of Securities - Warrants."
Anti-Takeover Provisions. Pursuant to the Company's Certificate of
Incorporation, the 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 the Board may determine without stockholder approval. The rights of
the holders of Common Stock will be subject to, and may be adversely affected
by, the rights of the holders of any Preferred Stock that may be issued 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 the Company without
further action by the stockholders. The Company has no present plans to issue
any shares of Preferred Stock. See "Description of Securities - Preferred
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Stock." In addition, following this Offering the Company will become subject to
the anti-takeover provisions of Section 203 of the Delaware General Corporation
Law, which will prohibit the Company 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 the Company. See "Description of Securities - Delaware Anti-Takeover
Law Provisions."
Restrictions on Marketmaking Activities During Warrant Solicitation May
Affect Liquidity of Securities. Although they have no legal obligation to do so,
the Underwriters from time to time may act as market makers and may otherwise
effect and influence transactions in the Company's securities. However, there is
no assurance that the Underwriters will continue to effect and influence
transactions in the Company's securities. The prices and liquidity of the
Company's securities may be significantly affected by the degree, if any, of the
Underwriters' participation in the market. The Underwriters may voluntarily
discontinue such participation at any time. Further, the market for, and
liquidity of, the Company's securities may be adversely effected by the fact
that a significant amount of the securities may be sold to customers of the
Underwriters.
To the extent that the Underwriters solicit the exercise of Class A
Warrants, the Underwriters may be prohibited pursuant to the requirements of
Rule 10b-6 under the Exchange Act from engaging in marketmaking activities
during such solicitation and for a period of up to nine days preceding such
solicitation. As a result, the Underwriters may be unable to continue to provide
a market for the Company's securities during certain periods while the Class A
Warrants are exercisable. The Underwriters are not obligated to act as a
marketmaker. See "Underwriting."
Additional Authorized Shares of Common Stock and Preferred Stock Available
for Issuance May Adversely Affect the MarkeThe Company is authorized to issue
25,000,000 shares of its Common Stock, $.0001 par value. If all of the 1,200,000
Shares offered hereby are sold, there will be a total of 4,050,000 shares of
Common Stock issued and outstanding. However, the total number of shares of
Common Stock issued and outstanding does not include the exercise of up to
1,200,000 Warrants to purchase up to 1,200,000 shares of Common Stock, 180,000
Shares included in the Over-Allotment Option to purchase 180,000 shares of
Common Stock, 180,000 Warrants to purchase up to 180,000 shares of Common Stock
included in the Over-Allotment Option, the option granted to the Representative
to purchase up to 120,000 Shares and 120,000 Warrants to purchase 120,000 shares
of Common Stock in connection with this offering, 550,000 shares of Common Stock
issuable upon exercise of the Selling Securityholder Options, 350,000 shares of
Common Stock issuable upon exercise of the 701 Warrants, 187,500 shares of
Common Stock issuable upon exercise of the Bridge Warrants, 1,500,000 shares of
Common Stock issubale upon exercise of options granted pursuant to the Incentive
Option Plan (1,267,000 of which have been granted) and 30,000 shares of Common
Stock issuable upon exercise of Key Employee Options. After reserving a total of
2,887,500 shares of Common Stock for issuance upon the exercise of all options
and warrants, the Company will have at least 18,062,500 shares of authorized but
unissued Common Stock available for issuance without further shareholder
approval. As a result, any issuance of additional shares of Common Stock may
cause current shareholders of the Company to suffer significant dilution which
may adversely affect the market. The Company has no present plans to issue any
shares of Comomn Stock. The Company has agreed with the Representative that it
will not issue any of its capital stock for a period of 18 months from the
Effective Date without the prior written consent of the Representative.
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In addition to the above-referenced shares of Common Stock which may be
issued without shareholder approval, the Company has 1,000,000 shares of
authorized preferred stock, the terms of which may be fixed by the Board of
Directors. The Company presently has no issued and outstanding shares of
preferred stock and while it has no present plans to issue any shares of
preferred stock, the 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 such series of preferred stock could have an
adverse effect on the holders of Common Stock. See "Description of Securities."
Shares Eligible for Future Sale May Adversely Affect the Market.
Immediately prior to the Effective Date, the Company will have 2,850,000 shares
of its Common Stock issued and outstanding all of which are "restricted
securities" and all of which are subject to lock-up restrictions described
below. 2,000,000 of such Shares may be sold pursuant to Rule 144 as described
below commencing 90 days after the date of this Prospectus, subject to an
18-month restriction against transfer described below; 300,000 Shares may be
sold pursuant to Rule 144 commencing December 1997, subject to an 18-month
restriction against transfer; and the remaining 550,000 Shares, which were
issued in the Bridge Financings, may be sold pursuant to Rule 144 commencing
January 1998, subject to a 12-month restriction against transfer described
below. The President of the Company (who owns 2,000,000 of the 2,850,000
outstanding Shares) and the directors and/or 5% stockholders of the Company who
own 250,000 of the 300,000 above-referenced Shares have agreed not to sell,
assign or transfer any securities of the Company owned by them for a period of
eighteen (18) months from the date of this Prospectus without the prior consent
of the Representative. The entity that owns the remaining 50,000 of the
above-referenced 300,000 Shares together with the Selling Securityholders who
own the above-referenced 550,000 Shares have agreed not to sell, assign or
transfer any securities of the Company owned by them for a period of eighteen
(18) months and twelve (12) months, respectively, from the date of this
Prospectus without the prior consent of the Representative. In the case of the
Selling Securityholders, such consent may not be given for a period of six (6)
months from the date of this Prospectus.
Rule 144 provides, in essence, that a person holding "restricted
securities" for a period of two years 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 the Company may sell is not so limited, since non-affiliates
may sell without volume limitation their shares held for three years if there is
adequate current public information available concerning the Company. In such an
event, "restricted securities" would be eligible for sale to the public at an
earlier date. The sale in the public market of such shares of Common Stock may
adversely affect prevailing market prices of the Common Stock.
Effect of Outstanding Options and Warrants. As of the date of this
Prospectus, there are outstanding stock options and warrants to purchase an
aggregate of 1,087,500 shares of Common Stock at an exercise price of $2.50 per
Share, and the Company has reserved 1,297,000 Shares of Common Stock for
issuance pursuant to outstanding Employee Options and Key Employee Options. The
550,000 Shares underlying Selling Securityholders Options are being registered
for resale by the Selling Securityholders as part of the Registration Statement
of which this Prospectus forms a part, subject to a twelve (12) month lock-up
restriction. The 350,000 Shares underlying the 701 Warrants (which were issued
pursuant to Rule 701 of the Act) are available for sale in the public market
commencing 90 days
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after the date of the Prospectus pursuant to Rule 701, subject to an eighteen
(18) month lock-up. The 187,500 shares of Common Stock underlying the Bridge
Warrants are exercisable for a period of three years commencing one year from
the date of this Prospectus. See "Principal Stockholders" , "Certain
Transactions" and "Description of Securities." The exercise of such outstanding
options and warrants will dilute the percentage ownership of the Company's
stockholders, and any sales in the public market of shares of Common Stock
underlying such securities may adversely affect prevailing market prices for the
Common Stock. Moreover, the terms upon which the Company 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 the Company would, in all likelihood, be able to obtain
any needed capital on terms more favorable to the Company than those provided in
such securities. See "Management -- Stock Option Plans and Agreements", "Certain
Transaction", "Description of Securities" and "Selling Securityholders".
Limitation on Director Liability. As permitted by Delaware law, the
Company's Certificate of Incorporation limits the liability of directors to the
Company or its stockholders for monetary damages for breach of a director's
fiduciary duty except for liability in certain instances. As a result of the
Company's charter provision and Delaware law, stockholders may have limited
rights to recover against directors for breach of fiduciary duty. See
"Description of Securities."
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<PAGE>
USE OF PROCEEDS
The net proceeds to the Company from the sale of the 1,200,000 shares of
Common Stock and 1,200,000 Warrants offered hereby, are estimated to be
$5,024,400 ($5,823,060 assuming exercise of the Over-Allotment Option in full).
The Company will not receive any proceeds from the sale of securities by the
Selling Securityholders.
The Company intends to utilize such proceeds approximately as follows:
Approximate Approximate
Amount of Percentage(%)
Proceeds of Net Proceeds
-------- ---------------
Purchase of
Test Equipment (1) $ 410,000 8.16%
Research, Engineering
and Development(2) 550,000 10.95
Purchase of Manufacturing
Machinery(3) 600,000 11.94
Repayment of Indebtedness(4) 1,535,000 29.49
Working Capital(5) 1,929,400 38.40
---------- ------
Total.................... $5,024,400 100%
- ----------
(1) Represents expenditures on test equipment which enables the Company to
adjust its products in order to meet customer specifications.
(2) Represents expenditures on software, computers and other material to
further develop the Company's products and to develop the Company's next
generation of products. See "Business - Research and Development."
(3) Represents expenditures on equipment necessary to manufacture the
Company's products and mechanically assemble components of the Company's
products for the establishment of the Company's fully automated
manufacturing facility.
(4) Represents the repayment of indebtedness incurred in the Bridge Financings
consisting of promissory notes in the aggregate principal amount of
$550,000 bearing interest at 8% per annum (or approximately $25,000 on the
date of this Prospectus) which is payable upon the earlier of (i) March
15, 1997 or (ii) the closing of the Company's initial public offering.
Also represents the repayment of indebtedness incurred in September 1996
consisting of promissory notes in the aggregate principal amount of
$375,000 bearing
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<PAGE>
interest at 8% per annum (or approximately $5,000 on the date of this
Prospectus) which is payable upon the earlier of (i) March 15, 1997 or
(ii) the closing of the Company's initial public offering. The proceeds of
the Bridge Financings were used for working capital and as a source of
funds to pay expenses associated with this Offering. See "Certain
Transactions." Also includes payment to Devendar S. Bains, the Company's
President, in the amount of $350,000, which funds were loaned to the
Company between January 1994 and June 1996. These loans were made interest
free and are payable on demand. Such funds were used for working capital
purposes. See "Certain Transactions." Also includes payment of $230,000 to
Chemical Bank bearing interest at 1% over such bank's prime rate,
representing the amount outstanding on the Company's line of credit as of
the date of this Prospectus. Such funds were used for working capital
purposes. See Financial Statements.
(5) Represents expenditure for general corporate purposes.
The foregoing represents the Company's best estimate of its allocation of
the net proceeds of this offering based upon the current state of its business,
operations and plans, current business conditions and the Company's evaluation
of its industry. Future events, including problems, delays, expenses and
complications which may be encountered, changes in economic or competitive
conditions and the results of the Company's sales and marketing activities may
make shifts in the allocation of funds necessary or desirable. Management will
have broad discretion to determine the use of proceeds.
The Company believes that the net proceeds of this Offering, together with
the cash generated from operations, will be sufficient to support the Company's
anticipated growth, expansion and marketing efforts for at least 12 months
following the completion of this Offering. The Company may be required to obtain
additional equity or debt financing or otherwise fund its operations after such
12-month period. There can be no assurances that the Company will be able to
obtain such financing on a timely basis, on acceptable terms, or at all. In such
event, the Company may be unable to complete its current plans for expansion. If
the Company requires such financing and is unable to obtain it, the Company's
operations will be materially adversely effected. See "Risk Factors - Need for
Additional Financing."
Pending application of the net proceeds for the purposes described above,
the Company intends to invest the net proceeds primarily in the United States
government securities, short-term certificates of deposit, money market funds or
other short-term, interest-bearing, investment grade securities. All funds
received through the exercise of warrants and options will be applied towards
working capital.
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DILUTION
At June 30, 1996, the net tangible book value of the Company was
$(753,014) or $(.26) per share. Net tangible book value per share is determined
by dividing the net tangible book value of the Company (total tangible assets
less total liabilities) by the number of outstanding shares of Common Stock.
Assuming the sale of the Securities offered hereby of 1,200,000 shares of Common
Stock and 1,200,000 Warrants (at an assumed initial public offering price of
$5.00 per share and $.10 per Warrant) (less underwriting discounts and
commissions and estimated expenses of this Offering) the net tangible book value
of the Company at June 30, 1996 would have been $4,271,386 or $1.05 per share,
representing an immediate increase in net tangible book value of $1.31 per share
to the existing stockholders and an immediate dilution of $3.95 per share (or
79%) to new investors.
The following table illustrates the foregoing information with respect to
dilution to new investors on a per share basis:
Initial Public offering price per share.............. $5.00
Net tangible book value deficit per share
before Offering............................. (.26)
Increase per share attributable to new investors 1.31
As adjusted net tangible book value after Offering 1.05
Dilution to new investors............................ $3.95
The following table sets forth, at June 30, 1996, with respect to the
Company's existing stockholders, including the Selling Securityholders, and new
investors, a comparison of the number of Shares of Common Stock acquired from
the Company and its former stockholders, the amount and percentage of total
consideration paid and the average price per share of Common Stock (at an
assumed initial public offering price of $5.00 per share).
Shares Purchased Total Consideration Average Price
---------------- ------------------- -------------
Number Percent Amount Percent Per Share
------ ------- ------ ------- ---------
Existing Stockholders 2,850,000 70.37 $1,275,000 17.53% $ .45
New Investors 1,200,000 29.63 $6,000,000 82.47% $5.00
--------- ----- ---------- ------
Total 4,050,000 100% $7,275,000 100%
========= ==== ========== ======
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CAPITALIZATION
The following table sets forth the capitalization of the Company as of
June 30, 1996, on an as adjusted basis to give effect to the sale of 1,200,000
shares of Common Stock and 1,200,000 Warrants offered by the Company (at an
assumed public offering prices of $5.00 per share and $0.10 per Warrant) in this
Offering, and the application of the estimated net proceeds to the Company from
this Offering. This table should be read in conjunction with the financial
statements and notes thereto included elsewhere in this Prospectus.
June 30, 1996
------------------------
Actual As Adjusted (1)
------ ---------------
(in thousands)
Debt:
Bank Line of Credit 230
Notes Payable 550
Stockholders' Loan 350
Stockholders' equity:
Preferred stock, no stated value, 1,000,000
shares authorized, no shares issued or
outstanding
Common stock, $.0001 par value, 25,000,000
shares authorized, 2,850,000 shares
actual outstanding and 4,050,000 shares
outstanding, as adjusted ----- -----
Additional paid-in capital 4,361 9,385
Deferred Financing Costs (1,097) (1,097)
Accumulated deficit (4,017) (4,017)
Total stockholders' equity (deficit) $ (753) $4,271
----- -----
Total capitalization $ 377 $4,271
===== =====
(1) Adjusted for the sale of 1,200,000 shares of common stock and 1,200,000
Warrants and the application of the estimated net proceeds therefrom as
described under "Use of Proceeds."
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DIVIDEND POLICY
Holders of the Company's Preferred Stock or Common Stock are entitled to
dividends when, as and if declared by the Board of Directors out of funds
legally available therefore. The Company has not in the past and does not
currently anticipate the declaration or payment of any dividends in the
foreseeable future. The Company intends to retain earnings, if any, to finance
the development and expansion of its business. Future dividend policy will be
subject to the discretion of the Board of Directors and will be contingent upon
future earnings, if any, the Company's financial condition, capital
requirements, general business conditions and other factors. Therefore, there
can be no assurance that any dividends of any kind will ever be paid.
24
<PAGE>
SELECTED FINANCIAL DATA
(in thousands except per share data)
The selected financial data set forth below for the six months ended June
30, 1995 and 1996 are derived from the unaudited financial statements of the
Company, which include all adjustments which management of the Company considers
necessary for a fair presentation of the data for such periods. The selected
financial data set forth below for the years ended December 31, 1994 and 1995
are derived from the audited financial statements of the Company appearing
elsewhere in the Prospectus. The results for the six months ended June 30, 1996
are not necessarily indicative of the results to be expected for the full year.
The data presented below should be read in conjunction with such financial
statements, including the notes thereto, appearing elsewhere in this Prospectus.
See "Experts."
Statement of Operations Data
Year ended December 31 Six Months ended June 30,
---------------------- -------------------------
1994 1995 1995 1996
---- ---- ---- ----
Net sales $ 3,575 $ 1,810 $ 1,049 $ 1,272
Cost of goods sold 2,713 1,756 893 1,106
Gross profit 862 54 156 166
Selling, general and 722 527 298 529
administrative
Research, engineering
and development 333 372 85 531
Operating loss (193) (845) (227) (894)
Stock compensation and
financing costs 1,180 -- 1,383
Loss before taxes (193) (2,025) (227) (2,277)
Provision for income taxes (15)
Net loss(1) $ (178) $(2,025) $ (227) $(2,277)
======= ======= ======= =======
Net loss per share $ (.05) $ (.64) $ (.07) $ (.71)
Shares outstanding (2) 3,188 3,188 3,188 3,188
======= ======= ======= =======
Balance Sheet Data
Year ended December 31 June 30,
---------------------- -------- As Adjusted
1995 1996 June 30, 1996(3)
---- ---- ----------------
Working capital (deficit) $ (578) $ (760) $4,264
Total assets 722 1,485 5,380
Total liabilities 1,276 2,238 1,109
Stockholders' equity (deficit) (554) (753) 4,271
(1) Net loss for the year ended 1995 and six months ended June 30, 1996
include non-cash stock compensation expenses of $1,180,000 and $1,383,125,
respectively.
(2) All shares, warrants and options issued or granted within the past twelve
months from the most current period presented are considered to be
outstanding for all periods presented.
(3) Adjusted for the sale of 1,200,000 shares of Common Stock at an assumed
offering price of $5.00 per share and 1,200,000 Warrants at an offering
price of $0.10 per Warrant and the application of the estimated net
proceeds therefrom as described under "Use of Proceeds."
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<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATION
Results of Operations
The following table sets forth certain operating data as percentage of
total revenue:
Percentage of Total Net Sales
Years ended Six months ended
December 31, June 30,
1994 1995 1995 1996
------------------- -------------------
Net sales 100.0% 100.0% 100.0% 100.0%
Cost of goods sold 75.9 97.0 85.1 87.0
Gross profit 24.1 3.0 14.9 13.0
Selling, general and
administrative 20.2 29.1 28.4 41.6
Research, engineering and
development 9.3 20.6 8.2 41.8
Total operating expenses 29.5 49.7 36.6 83.4
Stock compensation and
financing costs 65.2 108.7
Loss before income taxes (5.4) (111.9) (21.7) (179.1)
Provision (credit) for
income taxes (0.4)
Net loss (5.0)% (111.9)% (21.7)% (179.1)%
Results of operations - Six months ended June 30, 1996 compared to six months
ended June 30, 1995
Revenues for the first six months of 1996 increased 21% compared to the
first six months of 1995. The Company's principal business strategy since 1995
has been devoted to the engineering production of the Multicarrier Linear Power
Amplifiers (MCLPA) prototypes for major international OEM manufactures. As a
result, the production of commercial cellular amplifiers decreased significantly
in 1995 replaced with minimal revenues relating to the MCLPA. During the first
six months of 1996, the Company's revenues relating to the MCLPA as compared to
the same period in 1995 increased significantly as the MCLPA is further
developed and nearing acceptance by OEM manufacturers. During the first six
months of 1996, approximately 19% of all product shipments were prototypes
compared to about 7% for the same period in 1995.
Cost of sales as a percentage of sales was 87% during the six months ended
June 30, 1996, compared to 85% during the same period for 1995. This increase
can be attributed to the extensive engineering and direct labor costs associated
with the production of MCLPA prototypes.
Selling, general and administrative expenses increased in 1996 by $230,710
to $529,021 from
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<PAGE>
$298,311 in 1995. Expressed as a percentage of sales, the selling, general and
administrative expenses were 42% in 1996 and 28% in 1995. The principle factors
contributing to the increase in selling, general and administrative expenses
relate to consulting and professional fees in 1996 that did not exist in 1995
and increased rent expense due to the Company leasing a new larger facility. In
addition, interest expense was higher in the second quarter of 1996 because of
the outstanding bank debt and lease obligations.
Research, engineering and development expenses increased to 42% of net
sales in 1996 compared to 8% in 1995. For the first six months of 1996, the
principal activity of the business related to the design and production of
product prototypes for OEM manufacturers. The research, engineering and
development expenses consist principally of salary costs for engineers and the
expenses of equipment purchased specifically for the design and testing of the
prototype products.
Stock compensation expense in 1996 of $1,383,125 relates to the March and
April 1996 issuance of stock and options at prices substantially lower than the
contemplated initial public offering price.
As a result of the foregoing, the Company incurred net losses of
($2,227,729) or ($.71) per share for the six months ended June 30, 1996 compared
with net losses of ($227,638) or ($.07) per share for the same period in 1995.
1995 Compared with 1994
In 1995 the Company began focusing its business on the MCLPA, a relatively
recent outgrowth in the market place. Since 1989 the Company had concentrated in
the commercial cellular amplifier business. The transition in the Company's
focus from a supplier of single channel amplifiers to the design of MCLPA
prototypes for large OEM wireless telecommunications manufacturers resulted in a
decrease in revenues of $1,764,910, or 49%, to $1,810,222 in 1995 from
$3,575,132 in 1994. Shipments of prototype products accounted for about 7% of
all shipments in 1994 whereas in 1995 they accounted for 21%. During 1995
approximately 61% of net sales were to four customers and (AllenTelecom - 18%,
Kentrox Industries - 17%, DSC Communications - 15% and AT&T - 11%) 30% of total
sales were export sales.
Cost of sales as a percentage of sales was 97% in 1995 compared to 76% in
1994. The increase is principally due to the change in the business. The
Company's focus on the MCLPA has required a substantial amount of direct labor
costs, principally engineering, to develop the MCLPA technology.
Selling, general and administrative expenses decreased in 1995 by $194,843
to $527,150 from $721,993 in 1994. Expressed as a percentage of sales, the
selling, general and administrative expenses were 29% in 1995 and 20% in 1994.
Selling, general and administrative expenses decreased as a result of lower
sales commissions, reduction in management bonuses and fewer staff. The
percentage increase in 1995 is attributed to fixed costs, such as rent, etc.,
representing a higher portion of net sales.
Research, engineering and development expenses as a percentage of net
sales increased to 21% in 1995 compared to 9% in 1994. This increase reflects
the changes in the business to design and production of prototypes for OEM
manufacturers. The research and development expenses consist principally of
salary costs for engineers and the expensing of equipment purchases acquired
specifically for the design and testing of the prototype products.
Stock compensation and financing costs of $1,180,000 in 1995 relates to
the assignment of stock
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<PAGE>
from the principal stockholder to a director and a law firm.
Liquidity and Capital Resources
As of June 30, 1996, the Company had a current ratio of 0.59 to 1. The
bank line of credit outstanding totaled $230,000 in addition to stockholders
loans of $350,000. The funds from the credit line and stockholder's loan have
been used for working capital purposes. Additional loans totaling $550,000 were
incurred during the first six months of 1996 as a result of the Bridge
Financings. The loans bear interest at 8% and are payable on the earlier of
March 1997 or the completion of the contemplated initial public offering. The
Company intends to use a portion of the proceeds from this Offering to repay all
of the stockholder loans outstanding and the aggregate amount outstanding under
the bank line of credit. See "Use of Proceeds."
The Company has several lease obligations for certain research,
engineering and development equipment used in the production processes requiring
minimum monthly payments of $23,831 through 2001.
The Company believes that the net proceeds of this Offering will permit it
to repay the outstanding short-term debt, to continue to meet its working
capital obligations and fund the further development of its business for the
next 12 months. 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.
A substantial amount of the proceeds from this Offering will be used to
purchase manufacturing and test equipment ($1,010,000) and research, engineering
and development related expenditures ($550,000).
28
<PAGE>
BUSINESS
Amplidyne 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 multicarrier 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") and digital communication service at 1800 MHz
("DCS-1800"). The products are marketed to the cellular, wireless local loop and
personal communication systems ("PCS") segments of the wireless
telecommunications industry. The Company's largest wireless telecommunications
customers are AT&T, DSC Communications, Samsung and Goldstar, each of which is
an OEM.
Amplidyne has several products with a patent application pending (for
which a notice of allowance has been 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 technology. In addition to its presence in the wireless
telecommunications industry, the Company designs and manufactures products for
uplink satellite communications and for audio and TV transmission links. The
Company also believes that its products have great potential opportunity for the
wireless communication industry in developing countries.
In addition to the Company's product line of single channel power
amplifiers which are currently utilized by the wireless communications industry,
the Company has developed a Multicarrier Linear Power Amplifier ("MCLPA"). MCLPA
combines the performance capabilities of up to 25 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
amplifiers, the Company can achieve similar performance with its MCLPAs. The
Company's MCLPAs utilizes the Company's patent pending predistortion and
proprietary feed forward technology which amplifies many channels with minimal
distortion at the same time with one product.
The Company intends to capitalize on its vast management experience
developing power amplifiers for worldwide markets by introducing more
sophisticated amplifiers for commercial applications. Amplidyne believes that
its core technological expertise should continue to enhance its ability to
introduce new products for the wireless telecommunications industry.
Industry Background
The market for wireless communication services has grown substantially
during the past decade. Cellular service has been one of the fastest growing
segments of the wireless telecommunications market. The worldwide wireless
revolution exploded in 1994, adding 24 million new subscribers bringing the
total global subscriber count in 1995 to approximately 55 million, a growth rate
of more than 70%. However, this represents a worldwide penetration of only
1.35%. Industry officials project a worldwide market penetration of 8% going
into the next century, a 50% compounded annual growth rate ("CAGR"). The
29
<PAGE>
growth in cellular 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 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.
A cellular system consists of a number of cell sites which 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."
Cellular system operators in densely populated areas are able to expand
the capacity of their existing cellular systems by incorporating smaller cells,
commonly referred to as "microcells," that divide macrocells into several
smaller cell sites, typically one to three miles in radius. The base stations
for microcells are substantially smaller physically than base stations for
macrocells. Microcells require less expensive equipment at each base station,
but require greater numbers of these smaller base stations to maintain service
quality and system capacity.
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 which 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.
In addition to cellular system operators' need for base station equipment,
in many developing countries, where access to the public switch telephone
network ("PSTN") by the general population is significantly less than in
developed countries, the Company believes that wireless telecommunications
systems are the most economic means to provide basic telephone service. The
expense, difficulty and time requirements of building and maintaining a cellular
network is generally less than the cost of building and maintaining a comparable
wireline network. Thus, in many less developed countries, wireless service may
provide the primary service platform for both mobile and fixed
telecommunications applications. In a wireless local loop system, use is made of
wireless radio systems instead of wireline networks to connect telephone
subscribers to the PSTN. 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'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
30
<PAGE>
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.
Company Strategy
Utilizing its proprietary, patent-pending technology and experience in
interference cancellation, the Company is pursuing a strategy, focused on the
need of cellular system operators, to develop technologically advanced amplifier
based products. The Company has recently developed products which address the
technical issues faced by cellular system operators as a result of the rapid
growth in cellular telephone use and the resulting need to increase systems
capacity.
Since early 1995 the Company has been involved in research, design and
development of MCLPAs for the wireless communications industry and most recently
for the emerging personal communications systems (PCS) industry. The Company has
a patent pending (for which a notice of allowance has been issued by the United
States Patent and Trademark Office) on its predistortion technology which has
enabled the Company to provide ultra linear amplifiers with its proprietary feed
forward technology.
Management believes that with its predistortion technology and the
linearity 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:
Increase Penetration of Wireless Equipment Manufacturers. Since 1991, the
Company has positioned itself as a supplier of amplifier products to large
wireless telecommunications OEMs, such as AT&T, DSC Communications, Samsung and
Goldstar. 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. Based on the performance characteristics and
functionality of its products, Amplidyne believes it will be able to more
rapidly penetrate the infrastructure equipment market by initially focusing its
marketing efforts on large OEMs rather than system operators.
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. Management believes that its MCLPAs will assist
these equipment manufacturers in providing high capacity, low distortion low
cost per channel products and has already begun to sell amplifiers to several
emerging wireless equipment manufacturers.
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. 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
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<PAGE>
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 patent-pending
predistortion technology and proprietary feed forward interference cancellation
technology in its MCLPAs to enable the user to 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. See "Technology".
Develop Innovative Proprietary Products. To date, the Company has focused
its efforts in the development of amplifier products which are highly innovative
and 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 patent-pending
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 also plans to adopt
this expertise for new commercial market applications and product requirements.
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 is in the process of implementing in-house automated
manufacturing in order to control its production schedule. 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, particularly the ultra linear
MCLPAs have several features which differentiate them from those of its
competitors, such as:
The Predistortion Solution. Utilizing its proprietary technology the
Company can obtain significant distortion reduction in its core amplifiers. This
enables the predistorted amplifier to have feed forward correction (which is
described below, see "Business-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
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of more components within the amplifier unit. In general, the fewer components
that an amplifier uses, the better its reliability.
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.
By utilizing its proprietary and patent-pending predistortion technology
and its proprietary feed forward technology, the MCLPAs amplification capacity
of the Company's amplifiers are, in management's belief, among the best in the
industry. Standard MCLPAs currently support 25 channels with approximately 25
watts composite power, resulting in approximate 1 watt per channel. The
Company's MCLPAs support up to 25 channels at 4 watts per channel, an
approximate 400% increase over industry standard MCLPAs.
High Quality and Reliability. Amplidyne believes that it has consistently
provided high quality, reliable products to its customers. The Company has many
thousands of its amplifiers in the field. Management believes that its
reputation for quality and reliability will enable Amplidyne to attract new
customers and maintain existing customers for all its products.
Linearity, Low Distortion and High Amplification. Wireless service
providers' ability to manage scarce spectrum resources more effectively and
accommodate a larger number 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, microcellular 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 with a patent pending (for which a notice
of allowance has been issued by the United States Patent and Trademark Office)
which it believes gives it a significant advantage over its competitors. These
features for Pre-distortion and Pre-distortion Linearization designs
significantly reduces 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 multiple single channel power amplifiers, typically 16, 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,
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. Management
believes that its technology in MCLPAs will enable Amplidyne to attract new
customers.
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Low Noise Amplifier. Since 1991, the Company has been manufacturing low
noise amplifiers (LNA) which are used in the receiver section of the base
station (digital and analogue). With this technology, the Company has the
ability to offer "booster amplifiers" to the wireless industry which incorporate
LNAs, MCLPAs and receive / transmit filters. Management believes that there is a
significant market for "booster amplifiers" which it intends to pursue. The
Company has recently received orders for small quantities of its low noise PCS
products. Management believes that this line of products have tremendous growth
potential.
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 service offered
by wireless service providers, while reducing their operating costs. In
addition, MCLPAs eliminate the need for high-maintenance, tunable cavity filters
which 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 cellular communications system
comprises a geographic region containing a number of cells, each with a base
station, which are networked to form a cellular 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 wireline 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
up to 25 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. See Figure 1 below.
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<PAGE>
[Figure 1]
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
amplifiers. The Company's proprietary leading edge products contain patent
pending 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.
For example, Figure 2 below shows two calls being processed through a linear
class A / AB amplifier. In an ideal case the output of the amplifier would
faithfully reproduce the input signal without any distortion.
[Figure 2]
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<PAGE>
In real life, however, distortion characteristics are produced. See Figure
3 below.
[Figure 3]
These distortion products can cause interference with another caller's
channel which in turn produces poor call quality. By using a simple, patent
pending technology, Amplidyne recreates the distortion for the amplifier in such
a manner to cancel the interference signals. See Figure 4 below.
[Figure 4]
Amplidyne believes that this cancellation technique is superior to any
other predistortion technology available at present. See Figure 5. 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-
36
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distorted and combined with the feed forward technology, distortion
cancellation occurs. The Company believes that its patent pending 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 with what it believes to
be the best distortion cancellation available on the market. See Figure 6 below.
[Figure 5]
[Figure 6]
Analog v. Digital Technology. Cellular system operators are increasing
their system capacity by transitioning from analog to digital technology.
Cellular systems based on analog technology are capable of carrying only one
call per channel. Current analog standards and formats include AMPS and TACS.
Digital systems allow a given channel of spectrum to carry multiple calls
simultaneously thereby increasing system capacity. Conversion to digital
transmission is expected to allow three to eight times as many voice
conversations to occupy the same frequency bands. Current digital standards and
formats include TDMA and CDMA in North America and GSM and DCS-1800 in Europe.
An additional cellular system operating
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in the specialized mobile radio ("SMR") spectrum is in the early stages of
deployment in the United States. This system uses digital techniques that
include Frequency Hopping Multiple Access ("FHMA").
Wireless Receive Technology. The receiving section of a cellular base
station frequently uses two antennas for efficient spectrum usage. The
deployment of complex circuitry and techniques, including the use of GaAsFET
(Gallium Arsenide Field Effect Transistors) enhances the systems performance,
enabling the weak "noisy" signal to be amplified with a significant reduction in
the level of noise. Amplidyne has been manufacturing low noise amplifiers since
1991, with thousands currently in service.
Markets
The market for wireless communications services has grown substantially
during the past decade as cellular wireless local loop, SMR and other new and
emerging applications 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 is currently the
largest of the wireless services. See " Industry Background." 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 companies like AT&T, DSC
Communications, Samsung, Goldstar as well as emerging wireless
telecommunications infrastructure equipment providers when providing
infrastructure equipment for such new cell sites.
Wireless Local Loop and SMR Markets. 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 for infrastructure
equipment systems in the wireless local loop market.
SMR, like cellular communications, is a two-way service for both speech
and data. SMR originally was designed as a private network for closed groups
communicating between a base station and a large number of users, mainly for
dispatching taxis, delivery and public safety vehicles. SMR system operators are
subject to certain limitations which make the use of SMR frequencies more
appropriate for short dispatch messages. The success of SMR as a new type of
wireless service will depend in part on whether infrastructure manufacturers and
service providers can reduce costs so as to gain greater market penetration than
cellular service providers.
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. See " Customers, Sales and
Marketing".
Potential Markets. The Company believes that new types of wireless systems
will be introduced in the near future. For example, in 1994 and 1995, the FCC
auctioned RF spectrum in the 1.85 to 1.99
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gigahertz range for the provision of PCS. The Company has recently obtained
purchase orders for PCS products indicating rapid growth in this area. Like SMR,
the success of PCS will depend in part on whether manufacturers and service
providers can reduce system manufacturing and service costs sufficiently. The
Company believes that cellular, SMR and PCS will share future markets. The
Company is currently developing products and has already shipped prototype
products for the PCS market.
Products
The Company designs and sells multicarrier transmit amplifiers and low
noise receive amplifiers for the cellular communications market, as well as the
wireless local loop and special mobile radio (SMR) 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.
o 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 local loop
applications. Amplidyne 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 patent pending predistortion technology (for which a notice
of allowance has been issued by the United States Patent and
Trademark Office), core linear amplifier technology and proprietary
feed forward technology achieve all of the above mentioned
objectives. Amplidyne's MCLPAs are a unique line of ultra linear
devices which utilize a proprietary predistortion and phase locked
feed forward architecture. MCLPAs typically amplify up to 25
carriers at 4 watts of output power.
AMPLIDYNE'S MULTICARRIER LINEAR POWER AMPLIFIER
[PICTURE No. 1]
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The following table provides certain information regarding the Company's
MCLPAs. The key item in this table is the IMD specification, which management
believes is among the best available in the industry.
AMPLIDYNE'S MCLPA PRODUCT SUMMARY
- --------------------------------------------------------------------------------
OUTPUT
Product POWER
Model No. FREQUENCY STANDARD WATTS IMD (dBc)*
- --------------------------------------------------------------------------------
AMP461/466-N-100 463-467.5 NMT-450 100 -70
- --------------------------------------------------------------------------------
AMP651/866-SE-100 851-866 SETACS 100 -70
- --------------------------------------------------------------------------------
AMP869-896-100 869-894 AMPS/CDMA 100 -70
CDPD, TDMA
- --------------------------------------------------------------------------------
AMP917/950-E-100 917-960 ETACS/CDMA 100 -70
- --------------------------------------------------------------------------------
AMP1819-D-100 1805-1880 DCS-1800 100 -70
- --------------------------------------------------------------------------------
AMP1990-P-100 1930-1990 PCS-1900 100 -70
- --------------------------------------------------------------------------------
AMP1855-K-100 1840-1870 PCS-CDMA 100 -70
- --------------------------------------------------------------------------------
* Carrier to Intermodulation Distortion Radio (the industry's standard measure)
and spurious emissions.
o 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.
[PICTURE No. 2]
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The following table lists the Company's high power linear amplifiers:
- --------------------------------------------------------------------------------
Model No. FREQUENCY MHz STANDARD POWER WATTS IMD (dBc)
- --------------------------------------------------------------------------------
AMP0861-50 869-894 CDMA 25 -50
AMPS/TDMA 50 -40
AMP/CDPD 65 -25
- --------------------------------------------------------------------------------
AMP0935-16 925-960 GSM 65 -25
- --------------------------------------------------------------------------------
AMP0933-50 917-960 ETACS 65 -25
- --------------------------------------------------------------------------------
AMP0450-25 463-468 NMT-450 50 -40
- --------------------------------------------------------------------------------
AMP1855-25 1840-1870 DCS-1800 30 -30
- --------------------------------------------------------------------------------
AMP1990-25 1930-1990 PCS-1900 30 -30
TDMA 50 -40
CDMA 25 -40
- --------------------------------------------------------------------------------
o 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 supplied by the Company as modules or in a
rack configuration.
[PICTURE No. 3]
o 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 72 hour burn-in period to ensure reliable filed
operation.
o Communication Amplifiers. These amplifiers are designed for cellular and
PCN/PCS applications and use GaAs or Silicon Bipolar FET devices.
Management believes that this product provides the
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industry's best performance per dollar. 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). Management believes by marketing this product in this
format a distinct, large market can be addressed by these products.
o Receive Multi-Coupler Amplifiers. Amplidyne supplies dual receiver
multi-carriers for cellular and PCS bands. Management believes that this
product line offers high performance and reliability. Receive
multi-coupler amplifiers consist of low noise amplifiers, as described
above, filters and other components used as a receiving subsystem within
the base station. Management believes by offering this product line,
Amplidyne has more value added to its low noise amplifiers and at the same
time can satisfy the requirements of its customers.
The Company has used its technological expertise to improve the linearity
of its amplifiers by introducing pre-distortion and compensation techniques.
Several of the Company's single-channel amplifiers include linearity correction
and compensation networks. These techniques are combined with automatic error
correction circuits to enhance the linearity and performance of the Company's
feed-forward amplifiers. Amplidyne has also used its technological expertise to
design and manufacture new products, such as the first 200 watt average power
multi-channel pre-distortion amplifier, and a PCS single-channel CDMA amplifier
being used in an overseas CDMA base station evaluation.
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. The Company intends to utilize a portion
of the net proceeds of this Offering ($410,000) for the purchase of test
equipment which enables the Company to adjust its products in order to meet
customer specifications. See "Use of Proceeds."
Product Warranty
The Company warrants new products against defects in materials and
workmanship for a period of one (1) year from the date of shipment. To date, the
Company has not experienced a material line of warranty claims.
Backlog
As of December 31, 1994 and 1995 the Company has a backlog of $1.1 million
and $3.5 million, respectively. As of June 30, 1996, the Company had a backlog
of approximately $3,000,000. It is anticipated that this backlog and any orders
received by October 1, 1996 will be filled during the balance of fiscal 1996 and
1997 fiscal year ending December 31, 1997.
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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 since 1994.
Net Revenues By Market Categories
(in thousands)
Year Ended Six Months Ended
December 31, June 30,
--------------- ---------------
Markets 1994 1995 1995 1996
- -------
Cellular Analog .................... $2,780 $ 308 $ 308 $ 35
Cellular Digital ................... 143 591 305 353
Wireless Telephony ................. 187 435 166 537
Satellite Communications,
Custom and other Products ....... 465 476 270 105
Digital PCS Products ............... -- -- -- 242
Total ...................... $3,575 $1,810 $1,049 $1,272
Historically, the Company has derived a substantial percentage of its net
revenues from single customers during certain fiscal periods and until fiscal
1994 the Company derived substantially all of its net revenues from cellular
analog products. However, since 1995 the Company has focused primarily on
digital cellular and wireless telephony and therefore the sales in those areas
have substantially increased. The Company expects that for future sales the
Company will have substantial market share in the cellular digital, wireless
telephony and digital PCS products.
* Cellular Analog. Since 1989 the Company has been working closely
with AT&T Bell Labs to develop products for analog base stations
primarily in the AMPS Band. These products consist primarily of high
linearity pre-amp amplifiers and low noise amplifiers for the
receive section of the base station. In subsequent years the Company
shipped thousands of the amplifiers to its OEM customers. However,
with the transition of digital technology the sales of the products
decreased substantially in 1995 and the Company concentrated its
efforts in developing MCLPAs. In February 1995 the Company received
prototype orders for its wireless MCLPAs. Sales to the digital
cellular industry have increased from less than 4% in 1994 to
approximately 28% of total sales in 1995. For the first six months
of 1996 sales in this area are approximately 23% of total revenues.
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* Wireless Telephony. As a result of the shift in the Company's
research, engineering and development and marketing efforts, sales
to the wireless telephone segments of the wireless communications
industry have increased from approximately 5% of total revenues for
fiscal year end 1994 to 42% of total revenue for the six months
ended June 30, 1996.
* Digital PCS. The Company has shipped prototype amplifiers to its OEM
customers as of April 1996 accounting for 19% of sales in the period
ended June 1996. Management expects this sector of the market to
show substantial growth during fiscal 1996. The Company believes it
is one of the pioneers for low noise, and single channel high power
MCLPAs for the worldwide OEM and system operators.
* International Sales. Sales of wireless products outside the United
States (primarily to Western Europe and the Far East) represented
approximately 4%, 20% and 45% of net sales during fiscal 1994,
fiscal 1995 and the six month period ended June 30, 1996,
respectively. The Company believes that cellular and wireless
telephony growth worldwide is going to far exceed growth rate
experienced in the U.S. The Company is positioning itself with
strategic alliances with key OEM's overseas to be a prime source of
base station, low noise and multi carrier power amplifiers.
* Sales and Marketing. The Company's executive officers 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 has entered into technical sales
representative agreements for the territories of Maryland, Virginia,
Pennsylvania, Washington, D.C., Delaware, New Jersey, Korea, England
and parts of Western Europe. By having sales representatives in
selected areas the Company can better serve its key customers in
these areas and continue to have good relationships with them by
providing technical support as well as strong individual based
customer service.
The Company intends to utilize a portion of the net proceeds of this
Offering ($410,000) for the purchase of test equipment which enables the Company
to adjust its products in order to meet customer specifications. See "Use of
Proceeds."
Competition
The ability of the Company to compete successfully and sustain
profitability 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
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<PAGE>
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. See "Risk
Factors- Rapid Technological Change and Intense Competition."
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.
There is no present potential that the Company may acquire or merge with a
business or company in which the Company's mangement or their affiliates or
associates directly or indirectly have an ownership interest. If such potential
arises, transactions between the Company and such persons will be on terms no
less favorable to the Company that 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. Management is not aware of any
circumstances under which this policy may be changed.
Manufacturing
The Company assembles, tests, packages, and ships its products at its
manufacturing facilities located in Somerset, New Jersey. This facility includes
a separate assembly and test facility for various custom products.
Manufacturing Process. 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
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<PAGE>
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 is in the process of integrating automated equipment to place
surface mount components on printed circuit boards.
Microwave Integrated Circuit Manufacturing Facility. The Company is
planning to install a facility to support assembly and testing of custom RF and
microwave amplifiers and other passive components for which miniaturization is
particularly important. Handling of all components, assembly and testing is
undertaken in environmentally controlled surroundings. The Company believes that
this approach may be used as a core technology for PCS products in the future
and the Company may use its capability and technology in conceptualization and
implementation of PCS amplifiers and related products. However, the Company to
date has not manufactured PCS products utilizing the approach and no assurance
can be made that the Company will be able to make such products utilizing the
approach. There currently are adequate and readily available sources for all
components used in the Company's custom products.
In connection with the Company's transition to an automated manufacturing
process, the Company intends to introduce computerized surface-mount machinery
and related process equipment to support automated assemblies. The Company
anticipates the transition to commence in the second quarter of 1997. See "Risk
Factors - Need to Implement Automated Manufacturing Processes; Dependence on
Contract Manufacturers; Limited Number of Suppliers."
46
<PAGE>
The Company intends to utilize a portion of the net proceeds of this
Offering ($600,000) for the purchase of manufacturing equipment necessary to
manufacture the Company's products and mechanically assemble components of the
Company's products. See "Use of Proceeds."
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 1994 and 1995 were
approximately $330,000 and $370,000, respectively, and represented approximately
9% and 21%, respectively, of net revenues. The Company's research, engineering
and development expenses for the six months ended June 30, 1996 were
approximately $531,000 representing 45% 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 and PCS-1900. The Company intends to utilize a portion of the net
proceeds of this Offering ($550,000) for research, engineering and development
to further develop the Company's products and to develop the Company's next
generation of products. See "Use of Proceeds."
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.
See "Risk Factors- Rapid Technological Change and Intense Competition."
Patents Pending, 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 a patent application pending (No. 08/508,163)
(for which a notice of allowance has been issued by the United States Patent and
Trademark Office) with respect to its Pre-Distortion and Pre-Distortion
Linearzation 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 pending patent application will be allowed or
issued or that issued or pending patents will not be challenged
47
<PAGE>
or circumvented by competitors.
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. See "Risk
Factors-Proprietary Technology; Risk of Third Party Claims of Infringement."
Governmental Regulations
The Company's customers must obtain regulatory approval to operate their
base stations. The United States Federal Communications Commission ("FCC")
recently adopted new 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.
Employees
As of June 30, 1996, the Company had a total of 51 employees, including 28
in operations, 16 in engineering, 2 in sales and marketing, 3 in quality
assurance and 2 in administration. 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.
Facilities
The Company leases (from an unaffiliated party) approximately 21,000
square feet at 144 Belmont Drive, Somerset, New Jersey 08873 which serves as the
Company's executive offices and manufacturing facility. The lease term commenced
on May l, 1996 and expires on April 30, 1999. The annual rental is $168,000. The
Company has the option to extend the term of the lease for a three (3) year
period so long as it exercises the option for the entire building (36,405 square
feet) less space leased to third parties. Management believes that such lease
contains fair and reasonable terms.
The Company leases (from an unaffiliated party) approximately 6,000 square
feet at Building 7, Unit 9, Ilene Court, Belle Mead, New Jersey 08502 which
until April 1996 served as the Company's executive offices and now are utilized
as its mechanical operations. The lease term expires on October 31,
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<PAGE>
1997. The annual rental increases to a maximum of $40,500. Total rental expenses
for the years ended December 31, 1994 and 1995 were $34,295 and $37,000,
respectively. Management believes that such lease contains fair and reasonable
terms.
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.
Legal Proceedings
The Company is not a party to any material litigation or governmental
proceeding that management believes would result in judgments or fines that
would have a material adverse effect on the Company.
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<PAGE>
MANAGEMENT
The following persons are the directors and the executive officers of the
Company. All Directors are elected annually by the stockholders to serve until
the next annual meeting of the stockholders and until their successors are duly
elected and qualified. Officers are elected annually by the Board of Directors
to serve at the pleasure of the Board.
Name Age Position Held
---- --- -------------
Devendar S. Bains* 45 Chairman of the Board, President, Chief Executive
Officer, Treasurer and Director
Tarlochan Bains* 47 Vice President-Sales & Marketing and Director
Nirmal Bains 39 Secretary
Robert S. Benou* 60 Director
William A. Suter 45 RF Design Manager
Harris Freedman 61 Vice President - Strategic Alliances
Sharon Will 36 Vice President - Corporate Communications and
Investor Relations
* Member of the Compensation Committee and Audit Committee.
Devendar S. Bains has been Chairman of the Board, President, Chief Executive
Officer, Treasurer and a director of the Company since its inception in 1988.
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 Bachelor's Degree in
Electronic Engineering from Sheffield University, England, and a Masters Degree
from the University of Leeds and Sheffield, England. Mr. Bains is the brother of
Tarlochan Bains and the husband of Nirmal Bains.
Tarlochan Bains has been Vice President of Sales and Marketing since 1991.
Previously, Mr. Bains was Technical Manager at Land Rover in Solihull, England.
He has a Masters Degree in Mechanical Engineering from Hatfield Polytechnic,
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.
Robert S. Benou has been a Director of the Company since December 1995. Since
1968 Mr. Benou has been the Chairman of the Board, President and Chief Executive
Officer of Conolog Corporation, a publicly traded company on Nasdaq. Conolog is
engaged in the design, manufacture and distribution of electronic and
electromagnetic components and subassemblies for use in telephones, radio and
microwave transmission and reception and communication. Mr. Benou is a graduate
of Victoria College and has a Bachelor of
50
<PAGE>
Science from Kingston College, England and a Bachelor of Science in Electronic
Engineering from Newark College of Engineering.
William A. Suter is the RF Design Manager of the Company responsible for the
design and development of the Company's products. Previously he was Senior
Design Engineer for Amplifonix, Inc. from August 1993 to November 1995, Plessey
SA from November 1989 to June 1993, BH Electronics from February 1989 to October
1989, and Communication Techniques, Inc. from February 1986 to February 1987.
Mr. Suter has published various articles on amplification methods and technology
in several industry publications. Mr. Suter has a Bachelors of Science in
Electronic Engineering from the University of Cape Town, South Africa.
Harris Freedman has served as Vice President - Strategic Alliances of the
Company since July 1996. Since August 1994 he has been Vice President of
Hemispherx Biopharma, Inc., a publicly traded company listed on Nasdaq. He is
the Secretary of SMACS Holdings Corp. a private company which provides
strategic-alliance services to emerging technology companies in the private and
public markets. His business experience has encompassed developing significant
business contacts and acting as an officer or director of several companies in
the pharmaceutical, health care and entertainment fields. Mr. Freedman was Vice
President of U.S. Alcohol Testing of America, Inc., from August 1990 to February
1991. Additionally, he was Vice President - East Coast Marketing for MusicSource
U.S.A., Inc from October 1992 to January 1994. Mr. Freedman attended New York
University from 1951 to 1954.
Sharon Will has been Vice President - Corporate Communications and Investor
Relations of the Company since July 1996. Since November 1994 she has been Vice
President of Hemispherx Biopharma, Inc., a publicly traded company listed on
Nasdaq. She was a registered sales representative and Senior Vice President for
Institutional Sales at Westfield Financial Corporation from September 1994 to
October 1994. She was a registered sales representative with Marsh Block
Corporation from July 1994 to September 1994. From October 1993 to July 1994 she
served as a registered sale representative at Seaboard Securities Corp. From
October 1991 to present, Ms. Will has been President of Worldwide Marketing Inc.
a manufacturers' representative of various companies selling to the retail trade
markets. Ms. Will was the National Sales Manager of Innovo, Inc., a domestic
manufacturer of textiles, from October 1989 to November 1991. She attended
Baylor College as an undergraduate for two years with a primary focus on
chemistry.
The Company has established a compensation committee and an audit
committee. The compensation committee reviews executive salaries, administers
any bonus, incentive compensation and stock option plans of the Company,
including the Amplidyne, Inc. 1996 Incentive Stock Option and Stock Appreciation
Rights Plan, 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 audit committee reviews 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 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.
Executive Compensation
The following table sets forth the aggregate compensation paid by the
Company for the years ended December 31, 1994 and 1995 to its Chief Executive
Officer. No other employee received compensation in excess of $100,000.
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<PAGE>
Name Year Salary Bonus Other Compensation
- ---- ---- ------ ----- ------------------
Devendar S. Bains,
Chairman, 1995 $85,000 -0- $20,000(1)
Chief Executive 1994 $85,000 $200,000 $10,000(1)
Officer, President
and Treasurer
(1) Represents payment for health insurance and automobile lease payments on
behalf on such individual.
Employment Agreements
The Company has entered into five-year employment agreements commencing
May 1, 1996 with each of Devendar Bains (Chairman, Chief Executive Officer,
President and Treasurer), Tarlochan Bains (Vice President - Sales & Marketing),
and Nirmal Bains (Secretary). 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 for a
two year period following termination of employment.
The Company has entered into a two-year agreement commencing December 1995
and ending December 1997 with Robert Benou. Mr. Benou is to provide the Company
with such services as requested by the Company. Under such agreement, Mr. Benou
will receive compensation of $30,000 per year for a minimum of two years.
In December 1995 the Company entered into three-year employment agreements
with each of Harris Freedman and Sharon Will, Vice President for Strategic
Alliances and Vice President for Corporate Communications and Investor
Relations, respectively. Under the terms of each agreement they are to be paid
$60,000 per annum through December 1998.
Stock Option Plans and Agreements
Incentive 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
Incentive Stock Option Plan (" Incentive Option Plan"). The purpose of the
Incentive 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").
The Incentive 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 or a combination thereof, and the number of
shares to be subject to such options.
The Incentive Option Plan provides for the granting of ISOs 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.
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The total number of shares with respect to which options may be granted
under the Incentive Option Plan is 1,500,000. ISOs may not be granted to an
individual to the extent that in the calendar year in which such ISOs first
become exercisable the shares subject to such ISOs have a fair market value on
the date of grant in excess of $100,000. No option may be granted under the
Incentive 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 Incentive Option Plan may be terminated or amended at any time by the
Board of Directors, except that, without stockholder approval, the Incentive
Option Plan may not be amended to increase the number of shares subject to the
Incentive Option Plan, change the class of persons eligible to receive options
under the Incentive Option Plan or materially increase the benefits of
participants.
In May 1996, 1,267,000 options to purchase Common Stock under the
Incentive Option Plan were granted to 40 employees ("Employee Options") ,
including Dave Bains (1,000,000 options), Tarlochan Bains (100,000 options) and
Nirmal Bains (50,000 options), the Company's Chief Executive Officer, Vice
President-Sales and Marketing and Secretary, respectively. See "Principal
Stockholders." 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. The Employee Options are exercisable at $4.00 which will vest, as to
33.33%, one year from the date of grant (May 1997) and, as to the remainder,
ratably over the following two-year period (33.33% in May 1998 and 33.33% in May
1999).
In addition, in May 1996, 30,000 options were granted to 1 employee ("Key
Employee Options") which are exercisable at $1.00 which will vest, as to 33.33%,
one year from the date of grant (May 1997) and, as to the remainder, ratably
over the following two-year period (33.33% in May 1998 and 33.33% in May 1999).
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<PAGE>
PRINCIPAL STOCKHOLDERS
The following table sets forth certain information regarding shares of
Common Stock beneficially owned as of the date of this Prospectus by (i) each
person, known by the Company to be the beneficial owner of five percent (5%) or
more of the outstanding shares of Common Stock, (ii) each of the Company's
directors and (iii) all of the Company's officers and directors as a group.
<TABLE>
<CAPTION>
Name of Beneficial Number of Shares Percentage Ownership Percentage Ownership
Owner* of Common Stock(1) Prior to the Offering After Offering
- ------------------ ------------------ --------------------- --------------------
<S> <C> <C> <C>
Devendar S. Bains(2) 2,000,000 70.18 49.38
Tarlochan Bains(3) -- -- --
Nirmal Bains(2)(4) 2,000,000 70.18 49.38
Robert S. Benou 50,000 1.75 1.23
Harris Freedman(5) 151,667 5.21 3.75
Sharon Will(6) 165,000 5.68 4.02
All Officers and
Directors as a group
(6 persons) 2,366,667 79.76 56.80
</TABLE>
- ----------
* Unless otherwise indicated, the address of all persons listed in this
section is c/o Amplidyne, Inc., 144 Belmont Drive, Somerset, NJ 08873.
(1) A person is deemed to be the beneficial owner of securities that can be
acquired by such person within 60 days from the date of this Prospectus
upon the exercise of options. Each beneficial owner's percentage ownership
is determined by assuming those options that are held by such person and
that are exercisable within 60 days from the date of the Prospectus have
been exercised.
(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 such
Shares. Does not include 1,000,000 Employee Options. See "Management-Stock
Option Plans and Agreements."
(3) Does not include 100,000 Employee Options. See "Management - Stock Option
Plans and Agreements."
(4) Does not include 50,000 Employee Options. See "Management - Stock Option
Plans and Agreements."
(5 The address for such person is 1241 Gulf of Mexico Drive, Longboat Key,
Florida 34228. Mr. Freedman is the Vice President - Strategic Alliances of
the Company. Includes 90,000 shares of Common Stock and 61,667 warrants to
purchase Common Stock at $2.50 per share. Does not include an additional
123,333 of such warrants. See "Management" and "Description of
Securities."
(6) The address for such person is RRI Box 132, Millerton, New York 12546. Ms.
Will is the Vice President - Corporate Communications and Investor
Relations of the Company. Includes 110,000 shares of Common Stock and
55,000 warrants to purchase Common Stock at $2.50 per share. Does not
include an additional 110,000 of such warrants. See " Management" and
"Description of Securities."
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<PAGE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
All of the sales of securities prior to the date hereof were made in
reliance upon Section 4(2) of the 1933 Act, which provides exemption for
transactions not involving a public offering.
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.
Between January 1994 and April 1996, Devendar S. Bains, the Company's
President and Chief Executive Officer, loaned the Company an aggregate of
$350,000 without interest, payable on demand, all of which will be repaid at the
closing of this Offering. See "Use of Proceeds."
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.
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<PAGE>
DESCRIPTION OF SECURITIES
General
The Company is authorized to issue up to 25,000,000 shares of Common
Stock, $.0001 par value per share, of which 2,850,000 Shares were issued and
outstanding as of the date of this Prospectus (which were held by 34 persons).
After giving effect to this Offering, 4,050,000 shares of Common Stock and
1,200,000 Warrants will be issued and outstanding. The Company's Certificate of
Incorporation authorizes 1,000,000 shares of "blank check" Preferred Stock, none
of which are outstanding.
Common Stock
Subject to the rights of holders of Preferred Stock, if any, holders of
shares of Common Stock of the Company are entitled to share equally on a per
share basis in such dividends as may be declared by the Board of Directors out
of funds legally available therefor. There are presently no plans to pay
dividends with respect to the shares of Common Stock. See "Dividend Policy."
Upon liquidation, dissolution or winding up of the Company, after payment of
creditors and the holders of any senior securities of the Company, including
Preferred Stock, if any, the assets of the Company will be divided pro rata on a
per share basis among the holders of the shares of Common Stock. The Common
Stock is not subject to any liability for further assessments. There are no
conversion or redemption privileges nor any sinking fund provisions with respect
to the Common Stock and the Common Stock is not subject to call. The holders of
Common Stock do not have any pre-emptive or other subscription rights.
Holders of shares of Common Stock are entitled to cast one vote for each
share held at all stockholders' meetings including the Annual Meeting, for all
purposes, including the election of directors. The Common Stock does not have
cumulative voting rights.
All of the issued and outstanding shares of Common Stock are and the
shares of Common Stock offered hereby when issued against the consideration set
forth in this Prospectus, will be, fully paid, validly issued and
non-assessable. The Company has agreed with the Representative that it will not
issue any shares of Common Stock for a period of 18 months from the Effective
Date without the written consent of the Representative.
Preferred Stock
None of the 1,000,000 "blank check" preferred shares are currently
outstanding. The Board of Directors of the Company have the authority, without
further action by the holders of the outstanding Common Stock, to issue shares
of Preferred Stock from time to time in one or more classes or series, to fix
the number of shares constituting any class or series and the stated value
thereof, if different from the par value, and to fix the terms of any such
series or class, including dividend rights, dividend rates, conversion or
exchange rights, voting rights, rights and terms of redemption (including
sinking fund provisions), the redemption price and the liquidation preference of
such class or series. The Company has agreed with the Representative that it
will not issue any shares of Preferred Stock for a period of 18 months from the
Effective Date without the written consent of the Representative.
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<PAGE>
Warrants
Each Warrant will entitle the registered holder to purchase one share of
the Company's Common Stock at an exercise price of $6.00 per share during the
four year period commencing one year from the date of this Prospectus. No
fractional shares of Common Stock will be issued in connection with the exercise
of Warrants. Upon exercise, the Company will pay the holder the value of any
such fractional shares in cash, based upon the market value of the Common Stock
at such time.
Unless extended by the Company at its discretion, the Warrants will expire
at 5:00 p.m., New York time, on the fifth anniversary of the date of this
Prospectus. In the event a holder of Warrants fails to exercise the Warrants
prior to their expiration , the Warrants will expire and the holder thereof will
have no further rights with respect to the Warrants.
The Company may redeem the Warrants at a price of $.01 per Warrant, at any
time once they become exercisable upon not less than 30 days prior to written
notice if the average closing price or bid price of the Common Stock as reported
by the principal exchange on which the Common Stock is traded, the Nasdaq
SmallCap Market or the National Quotation Bureau, Incorporated, as the case may
be, equals or exceeds $9.00 per Share for any twenty (20) consecutive trading
days ending within five (5) days prior to the date on which notice of redemption
is given.
No Warrants will be exercisable unless at the time of exercise there is a
current prospectus covering the shares of Common Stock issuable upon exercise of
such Warrants under an effective registration statement filed with the
Commission and such shares have been qualified for sale or are exempt from
qualification under the securities laws of the state or residence of the holder
of such Warrants. Although the Company intends to have all shares so qualified
for sale in those states where the Securities are being offered and to maintain
a current prospectus relating thereto until the expiration of the Warrants,
subject to the terms of the Warrant Agreement there can be no assurance that it
will be able to do so.
A holder of Warrants will not have any rights, privileges or liabilities
as a shareholder of the Company prior to exercise of the Warrants. The Company
is required to keep available a sufficient number of authorized shares of Common
Stock to permit exercise of the Warrants.
The exercise price of the Warrants and the number of shares issuable upon
exercise of the Warrants will be subject to adjustment to protect against
dilution in the event of stock dividends, stock splits, combinations,
subdivisions and reclassifications. No assurance can be given that the market
price of the Company's Common Stock will exceed the exercise price of the
Warrants at any time during the exercise period.
In connection with this Offering, the Company will issue to Patterson
Travis, Inc. a Representative's Purchase Option to purchase 120,000 shares of
Common Stock ("Representative's Common Stock") and warrants to purchase an
additional 120,000 shares of Common Stock ("Representative's Warrants"). The
Representative's Common Stock and Representative's Warrant are being registered
under the Registration Statement to which this Prospectus is a part.
701 Warrants
In December 1995, the Company issued 701 Warrants to purchase 350,000
Shares at $2.50 per share
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<PAGE>
pursuant to Rule 701 under the Act to Harris Freedman and Sharon Will, the
Company's Vice President for Strategic Alliances and Vice President for
Corporate Communications and Investor Relations, respectively, of the Company.
See "Management" and "Principal Stockholders." The 701 Warrants vest in
one-third increments (commencing June 1996) over a three (3) year period and are
exercisable until June 30, 1999.
Options and Warrants
Between January and February 1996 the Company sold an aggregate of 250,000
shares of Common Stock. The sales of these shares of Common Stock were in
connection with a $500,000 private financing in which the Company issued
promissory notes in the aggregate amount of $250,000, 250,000 shares of Common
Stock and 250,000 options to purchase Common Stock at $2.50 per share. The
promissory notes accrue interest at 8% per annum. The principal and accrued
interest are payable on the earlier of (i) March 15, 1997 or (ii) the closing of
this Offering. See "Use of Proceeds." The options are immediately exercisable
until December 31, 1998. The shares of Common Stock underlying the options are
being registered hereunder. See "Selling Securityholders."
In April 1996 the Company sold an aggregate of 300,000 shares of Common
Stock. The sales of these shares of Common Stock were in connection with a
$600,000 private financing in which the Company issued promissory notes in the
aggregate amount of $300,000, 300,000 shares of Common Stock and 300,000 options
to purchase Common Stock at $2.50 share. The promissory notes accrue interest at
8% per annum. The principal and accrued interest are payable on the earlier of
(i) March 15, 1997 or (ii) the closing of this Offering. See "Use of Proceeds."
The options are immediately exercisable until December 31, 1998. The shares of
Common Stock underlying the options are being registered hereunder.
See "Selling Securityholders."
In connection with a $375,000 bridge financing in September 1996 in which
the Company issued promissory notes in the aggregate of $375,000, the Company
issued, for no additional consideration, 187,500 Bridge Warrants to purchase
Common Stock at $2.50 per share. The Bridge Warrants are exercisable for a three
year period commencing one year from the date of this Prospectus. The promissory
notes accrue interest at 8% per annum. The principal and accrued interest are
payable on the earlier of (i) March 15, 1997 or (ii) the closing of this
Offering. See "Use of Proceeds."
Delaware Anti-Takeover Law Provisions
As a Delaware corporation, the Company is subject to Section 203 of the
General Corporation Law. In general, Section 203 prevents an "interested
stockholder" (defined generally as a person owing 15% or more of a Delaware
corporation's outstanding voting stock) from engaging in a "business
combination" (as defined) with such Delaware corporation for three years
following the date such person became an interested stockholder unless (i)
before such person became an interested stockholder, the board of directors of
the corporation approved the transaction in which the interested stockholder
became an interested stockholder or approved the business combination, (ii) upon
consummation of the transaction that resulted in the interested stockholder's
becoming an interested stockholder, the interested stockholder owned at least
85% of the voting stock of the corporation outstanding at the time the
transaction commenced (excluding stock held by the directors who are also
officers of the corporation and by certain employee stock plans), or (iii)
following the transaction in which such person became an interested stockholder,
the business combination is approved by the board of directors of the
corporation and authorized at a meeting of stockholders by the
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<PAGE>
affirmative vote of the holders of two-thirds of the outstanding voting stock of
the corporation not owned by the interested stockholder. Under section 203, the
restrictions described above also do not apply to certain business combinations
proposed by an interested stockholder following the public announcement or
notification of one of certain extraordinary transactions involving the
corporation and a person who had not been an interested stockholder during the
previous three years or who became an interested stockholder with the approval
of the corporation's board of directors and if such business combination is
approved by a majority of the board members who were directors prior to any
person's becoming an interested stockholder. The provisions of Section 203
requiring a super-majority vote to approve certain corporate transactions could
have the effect of discouraging, delaying or preventing hostile takeovers,
including those that might result in the payment of a premium over market price
or changes in control or management of the Company.
Limitation on Liability of Directors
The Company's Certificate of Incorporation provides that a director of the
Company will not be personally liable to the Company or its stockholders for
monetary damages for breach of the fiduciary duty of care as a director,
including breaches which constitute gross negligence. By its terms and in
accordance with the Delaware General Corporation Law, however, this provision
does not eliminate or limit the liability of a director of the Company (i) for
breach of the director's duty of loyalty to the Company or its stockholders,
(ii) for acts or omissions not in good faith or which involve international
misconduct or a knowing violation of law, (iii) under Section 174 of the
Delaware General Corporation Law, (relating to unlawful payments or dividends or
unlawful stock repurchases or redemptions), (iv) for any improper benefit or (v)
for breaches of a director's responsibilities under the Federal Securities laws.
Transfer Agent & Registrar
The transfer agent and registrar for the Company's securities is American
Stock Transfer and Trust Company, 40 Wall Street, New York, NY 10005.
Shares Eligible for Future Sale
Upon the consummation of this Offering, the Company will have 4,050,000
shares of Common Stock outstanding. Only those sold in this Offering (1,200,000
shares of Common Stock) will be freely tradeable without restriction or further
registration under the Securities Act of 1933, as amended, except for any shares
purchased by an "affiliate" of the Company (in general, a person who has a
control relationship with the Company) which will be subject to the limitations
of Rule 144 adopted under the Securities Act of 1933, as amended. All of the
remaining 2,850,000 shares are deemed to be "restricted securities", as that
term is defined under Rule 144 promulgated under the Securities Act of 1933, as
amended, in that such shares were issued and sold by the Company in private
transactions not involving a public offering, all of which are subject to
lock-up restrictions described below. 2,000,000 of such Shares may be sold
pursuant to Rule 144 as defined below, commencing 90 days after the date of this
Prospectus, subject to an 18-month restriction against transfer described below;
300,000 Shares may be sold pursuant to Rule 144 commencing December 1997 subject
to an 18-month restriction against transfer; and the remaining 550,000 Shares
which were issued in the Bridge Financings may be sold pursuant to Rule 144
commencing January 1998, subject to a 12-month restriction against transfer. The
President of the Company (who owns 2,000,000 of the 2,850,000 outstanding
Shares) and the directors and/or 5% stockholders of the Company who own 250,000
of the 300,000 above-referenced Shares have agreed not to sell, assign or
transfer any securities of the Company owned by them for a period of eighteen
(18) months from the date of this Prospectus without the prior consent of the
Representative. The entity that owns the remaining 50,000 of the
above-referenced 300,000 Shares together with the Selling Securityholders who
own the above-referenced 550,000 Shares have agreed not to sell, assign or
transfer any securities of the Company owned by them for a period of eighteen
(18) months and twelve (12) months, respectively, from the date of this
Prospectus without the prior consent of the Representative. In the case of the
Selling Securityholders, such consent may not be given for a period of six (6)
months from the date of this prospectus.
59
<PAGE>
All of the Company's outstanding options and warrants and the Shares
reserved for issuance upon exercise of such convertible securities are subject
to restrictions against transfer. See "Risk Factors - Shares Eligible For Future
Sale May Adversely Affect The Market" and "Effect of Outstanding Options and
Warrants."
In general, under Rule 144 as currently in effect, subject to the
satisfaction of certain other conditions, a person, including an affiliate of
the Company (or other persons whose shares are aggregated), who has owned
restricted shares of Common Stock beneficially for at least two years is
entitled to sell, within any three month period, a number of shares that does
not exceed the greater of one percent of the total number of outstanding shares
of the same class or the average weekly trading volume during the four calendar
weeks preceding the sale. A person who has not been an affiliate of the Company
for at least the three months immediately preceding the sale and who has
beneficially owned shares of Common Stock for at least three years is entitled
to sell such shares under Rule 144 without regard to any of the limitations
described above.
Prior to this Offering, there has been no market for the Common Stock and
no prediction can be made as to the effect, if any, that market sales of shares
of Common Stock or the availability of such shares for sale will have on the
market prices prevailing from time to time. Nevertheless, the possibility that
substantial amounts of Common Stock may be sold in the public market may
adversely affect prevailing market prices for the Common Stock and could impair
the Company's ability to raise capital through the sale of its equity
securities.
SELLING SECURITYHOLDERS
The registration statement of which this Prospectus forms a part also
covers the registration and sale of 550,000 shares of Common Stock underlying
550,000 options issued to certain stockholders (the "Selling Securityholders")
in connection with the Company's Bridge Financings. See "Certain Relationships
and Related Transactions" and "Description of Securities." The Company will not
receive any of the proceeds from the sale of the securities by the Selling
Securityholders. The securities held by the Selling Securityholders may not be
sold until twelve (12) months from the date of this Prospectus, subject to
earlier release at the sole discretion of the Representative. Such earlier
release may not be granted during the six (6) month period commencing on the
date of this Prospectus. The resale of the securities of the Selling
Securityholders are subject to Prospectus delivery and other requirements of the
Securities Act of 1933, as amended (the "Act"). Sales of such securities or the
potential of such sales at any time may have an adverse effect on the market
prices of the securities offered hereby. See "Risk Factors - Effect of
Outstanding Options and Warrants."
The securities offered may be sold from time to time directly by the
Selling Securityholders. Alternatively, the Selling Securityholders may from
time to time offer such securities through underwriters (including the
Representative) dealers or agents. The distribution of securities by the Selling
Securityholders may be effected in one or more transactions that may take place
on the over-the-counter market, including ordinary broker's transactions,
privately-negotiated transactions or through sales to one or more broker-dealers
for resale of such shares as principals, at market prices prevailing at the time
of sale, at prices related to such prevailing market prices or at negotiated
prices. Usual and customary or specifically negotiated brokerage fees or
commissions may be paid by the Selling Securityholders in connection with such
sales of securities. The securities offered by the Selling Securityholders may
be sold by one or more of the following
60
<PAGE>
methods, without limitations: (a) a block trade in which a broker or dealer so
engaged will attempt to sell the shares as agent but may position and resell a
portion of the block as principal to facilitate the transaction; (b) purchases
by a broker or dealer as principal and resale by such broker or dealer for its
account pursuant to this Prospectus; (c) ordinary brokerage transactions and
transactions in which the broker solicits purchasers, and (d) face-to-face
transactions between sellers and purchasers without a broker-dealer. In
effecting sales, brokers or dealers engaged by the Selling Securityholders may
arrange for other brokers or dealers to participate. The Selling Securityholders
and intermediaries through whom such securities are sold may be deemed
"underwriters" within the meaning of the Act with respect to the securities
offered, and any profits realized or commissions received may be deemed
underwriting compensation.
At the time a particular offer of securities is made by or on behalf of a
Selling Securityholders, to the extent required, a Prospectus will be
distributed which will set forth the number of shares being offered and the
terms of the Offering, including the name or names of any underwriters, dealers
or agents, if any, the purchase price paid by any underwriter for sales
purchased from the Selling Securityholders and any discounts, commissions or
concessions allowed or reallowed or paid to dealers and the proposed selling
price to the public.
Sales of securities by the Selling Securityholders or even the potential
of such sales would likely have an adverse effect on the market prices of the
securities offered hereby.
UNDERWRITING
Subject to the terms and conditions of the Underwriting Agreement between
the Company and the Underwriters ("Underwriting Agreement") the Underwriters
have agreed to purchase from the Company and the Company has agreed to sell to
the Underwriters, 1,200,000 shares of Common Stock and 1,200,000 Warrants
(collectively the "Securities") offered hereby on a "firm commitment" basis, if
any are purchased. The Underwriters have agreed to purchase the number of
Securities set forth opposite their names in the table below:
Underwriters Number of Securities
- ------------ --------------------
Patterson Travis, Inc.
- -----------------
- -----------------
- ----------------- --------------------
Total 1,200,000
The Securities offered hereby is being offered by the several Underwriters
named herein subject to prior sale, when, as and if delivered to and accepted by
the Underwriters and subject to certain other conditions. The Underwriters
reserve the right to withdraw, cancel or modify the offer and to reject any
order in whole or in part.
61
<PAGE>
The Underwriters have advised the Company that they propose to offer the
Securities to the public at the initial public offering prices as set forth on
the cover page of this Prospectus and that they may allow to certain dealers who
are NASD members concessions not to exceed $____ per Share at $___ per Warrant,
of which not in excess of $____ per Share and $___ per Warrant may be reallowed
to other dealers who are members of the NASD. After the Offering, the public
offering prices, concession and reallowance may be changed by the
Representative.
The Company has granted an option to the Representative, exercisable
during the thirty (30) day period from the date of this Prospectus, to purchase
up to a maximum of 180,000 additional Shares and 180,000 additional Warrants at
the Offering prices, less the underwriting discount, to cover over-allotments,
if any.
The Underwriting Agreement provides for reciprocal indemnification between
the Company and the Underwriters against certain liabilities in connection with
the Registration Statement, including liabilities arising under the Act. Insofar
as indemnification for liabilities arising under the Act may be provided to
officers, directors or persons controlling the Company, the Company has been
informed that in the opinion of the Securities and Exchange Commission, such
indemnification is against public policy and is therefore unenforceable.
The Company has agreed to pay to the Representative a non-accountable
expense allowance of three percent (3%) of the gross proceeds derived from the
sale of the Securities offered hereby (less $43,000 for costs and expenses
incurred by another underwriter), including any Securities purchased pursuant to
the Over-Allotment Option.
The Company has agreed to sell to the Representative, and to its
designees, for an aggregate purchase price of $120, an option (the
"Representative's Purchase Option") to purchase up to an aggregate of 120,000
Shares and 120,000 Warrants. The Representative's Purchase Option shall be
exercisable during a four (4) year period commencing one (1) year from the
Effective Date of this Prospectus. The Representative's Purchase Option may not
be assigned, transferred, sold or hypothecated by the Representative until
twelve (12) months after the Effective Date of this Prospectus, except to
officers of the Representative or to officers and partners of the selling group
members in this Offering. The Representative's Purchase Option grant to the
holders thereof certain piggyback and demand registration rights. The
Representative's Purchase Option is exercisable at one hundred twenty percent
(120%) of the initial public offering prices of the Securities. The exercise of
the Representative's Purchase Option and the number of Securities covered
thereby are subject to adjustment in certain events to prevent dilution.
The Company has engaged the Representative, on a non-exclusive basis, as
its agent for the solicitation of the exercise of the Warrants. Additionally,
other NASD members may be engaged by the Representative in its solicitation
efforts. To the extent not inconsistent with the guidelines of the NASD and the
rules and regulations of the Commission, the Company has agreed to pay the
Representative for bona fide services rendered a commission equal to 8% of the
exercise price for each Warrant exercised if the exercise was solicited by the
Representative. In addition to soliciting, either orally or in writing, the
exercise of the Warrants, such services may also include disseminating
information, either orally or in writing, to warrantholders about the Company or
the market for the Company's securities, and assisting in the processing of the
exercise of Warrants. No compensation will be paid to the Representative in
connection with the exercise of the Warrants if the market price of the
underlying shares of Common Stock is lower than
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<PAGE>
the exercise price, the Warrants are held in a discretionary account, the
Warrants are exercised in an unsolicited transaction, the warrantholder has not
confirmed in writing that the Representative solicited such exercise or the
arrangement to pay the commission is not disclosed in the prospectus provided to
warrantholders at the time of exercise. In addition, unless granted an exemption
by the Commission from Rule 10b-6 under the Exchange Act, while it is soliciting
exercise of the Warrants, the Representative will be prohibited from engaging in
any market activities or solicited brokerage activities with regard to the
Company's securities unless the Representative has waived its right to receive a
fee for the exercise of the Warrants.
Prior to the date of this Prospectus, all of the officers, directors and
principal stockholders of the Company's Common Stock have agreed in writing not
to sell, assign or transfer any of their shares of the Company's securities
without the Representative's prior written consent for a period of eighteen (18)
months from the Effective Date. The remaining stockholders have agreed to a
twelve (12) month restriction.
The Representative may designate a non-director observer to attend
meetings of the Company's Board of Directors for a three (3) year period
commencing on the Effective Date.
The Representative has informed the Company that no sales will be made to
any account over which the Underwriters exercise discretionary authority.
The foregoing is a summary of certain provisions of the Underwriting
Agreement and Representative's Purchase Option which have been filed as exhibits
hereto.
Determination of Public Offering Price
Prior to this Offering, there has been no public market for the
Securities. The initial public offering prices for the Securities has been
determined by negotiations between the Company and the Representative. Among the
factors considered in the negotiations were the market price of the Company's
Common Stock, an analysis of the areas of activity in which the Company is
engaged, the present state of the Company's business, the Company's financial
condition, the Company's prospects, an assessment of management, and the general
condition of the securities market at the time of this Offering. The public
offering prices of the Securities does not necessarily bear any relationship to
assets, earnings, book value or other criteria of value applicable to the
Company.
The Company anticipates that the Common Stock and Warrants will be listed
for quotation on The Nasdaq Small Cap Market under the symbols "AMPD" and
"AMPDW", respectively, but there can be no assurances that an active trading
market will develop, even if the securities are accepted for quotation. The
Representative intends to make a market in all of the publicly-traded securities
of the Company.
EXPERTS
The financial statements of the Company appearing in this Prospectus and
Registration Statement at December 31, 1995 and December 31, 1994 and for the
years then ended have been audited by Grant Thornton LLP, Independent Certified
Public Accountants, as set forth in its report thereon appearing elsewhere
herein and in the Registration Statement, and is included in reliance upon such
report given upon the authority of such firm as experts in accounting and
auditing.
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<PAGE>
LEGAL MATTERS
The validity of the Securities being offered hereby will be passed upon
for the Company by Bernstein & Wasserman, LLP, 950 Third Avenue, New York, NY
10022. Bernstein & Wasserman, LLP, is the record owner of 50,000 shares of
Common Stock. Bernstein & Wasserman, LLP, has served, and continues to serve, as
counsel to the Representative in matters unrelated to this Offering. Legal
matters for the Representative will be passed upon by Gerald A. Kaufman, Esq.,
33 Walt Whitman Road, Suite 233, Huntington, NY 11746.
AVAILABLE INFORMATION
The Company does not presently file reports and other information with the
Securities and Exchange Commission (the "Commission"). However, following
completion of this Offering, the Company intends to furnish its stockholders
with annual reports containing audited financial statements examined and
reported upon by its independent public accounting firm and such interim
reports, in each case as it may determine to furnish or as may be required by
law. After the effective date of this Offering, the Company will be subject to
the reporting requirements of the Securities Exchange Act of 1934, as amended
(the "Exchange Act") and in accordance therewith will file reports, proxy
statements and other information with the Commission.
Reports and other information filed by the Company can be inspected and
copied at the public reference facilities maintained at the Commission at Room
1024, 450 Fifth Street, N.W., Washington, DC 20549. Copies of such material can
be obtained upon written request addressed to the Commission, Public Reference
Section, 450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed rates.
The Commission maintains a web site on the Internet (http://www.sec.gov) that
contains reports, proxy and information statements and other information
regarding issuers that file electronically with the Commission through the
Electronic Data Gathering, Analysis and Retrieval System ("EDGAR"). The Company
has filed, through EDGAR, with the Commission a registration statement on Form
SB-2 (herein together with all amendments and exhibits referred to as the
"Registration Statement") under the Act of which this Prospectus forms a part.
This Prospectus does not contain all of the information set forth in the
Registration Statement, certain parts of which have been omitted in accordance
with the rules and regulations of the Commission. For further information
reference is made to the Registration Statement.
64
<PAGE>
GLOSSARY OF TERMS
AMPS: Advanced Mobile Phone Services.
AMPS is the current cellular Air Interface
standard in the U.S., and pillar of analog
cellular network.
Analog transmission
protocols: Transmission of information using analog
modulation of signals.
CAD: Computer Aided Design.
CAE: Computer Aided Engineering.
CAGR: Compounded Annual Growth Rate.
Cavity Filters: Large metallic structures which filter out
unwanted signals, but allow the required signal to
be transmitted.
CDMA: Code Division Multiple Access. A relatively new
generation of Digital Cellular Systems; offers
more captivity than the AMPS System.
Communication Amplifiers: Amplifier used in telecommunication systems.
DCS-1800: Digital Communication Service at 1800 Mhz.
Digital Control Systems: Control system based on a microprocessor which
uses digital signals to achieve control.
Digital Signal Processing
(DSP): A means of processing information in a digital
format.
Distortion Cancellation: A means of canceling distortion by using
pre-distortion, feed forward or both.
Dual Feed Forward Loops: Consists of two feed forward loops to minimize
distortion.
ETACS: Extended Total Access Communications Systems.
Feed Forward: A means of canceling distortion in an amplifier.
FHMA: Frequency Hopping Multiple Access. A transmission
reducer in which the frequency of transmission
frequently changes.
GaAsFET: Galium Arsenide Field Effect Transistors.
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Gigahertz (Ghz): Transmission frequency at the rate of
1,000,000,000 cycles per second.
GSM: Global System for Mobile Communications.
High Power Linear Amplifier: Amplifiers used for single channel linear
amplification.
IMD: Measure of Intermodulation Distortion below
carrier level.
Interference Cancellation: A means of canceling interference in an amplifier
by using pre- distortion or feed forward or both.
Linear Class A Amplifiers: Classical design for minimal distortion.
Linear Class AB Amplifiers: Amplifiers designed for better efficiency; the
linearity performance is not as good as Class A.
Linearity: A measure of linear performance of an amplifier
(ie., the more linear an amplifier the better the
quality of the signal amplified through it).
Local Loop: Interconnection of phone lines (ie., such as an
apartment complex to a public switched network).
Low Noise Amplifier (LNA): An amplifier used in the receive section of a base
station which amplifies a weak, noisy signal with
minimal additional noise.
Megahertz (Mhz): A unit of frequency equal to 1,000,000 cycles per
second.
Mini Cell Amplifier: Small base station used in highly urbanized areas
requiring physically small amplifiers called "Mini
Cell Amplifiers."
Multicarrier Linear Power
Amplifier (MCLPA): Amplifier that will transmit multiple signals with
minimal distortion.
NMT: Nordic Mobile Telephone. System widely used in
Denmark, Finland, Norway, & Sweden.
OEM: Original Equipment Manufacturer.
PCS: Personal Communications Systems.
PCS Band: Personal Communications Systems, which use
transmit and receive frequency bands as allocated
by the FCC.
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Pre-distortion: A means of reducing distortion in an amplifier.
Pre-distortion Feed
Forward Amplifiers: Amplifiers used to minimize distortion by the use
of pre-distortion and feed forward.
Pre-distortion Linearization: A means of linearizing an amplifier by the use of
pre-distortion.
PSTN: Public Switch Telephone Network.
RF: Radio Frequency.
Silicon Bipolar FET: Type of transistor based on silicon technology.
Single Channel
Power Amplifier: Amplifier that amplifies one channel or one signal
without creating excessive distortion.
SMR: Specialized Mobile Radio, widely expected to be
used by Cab Services.
TACS: Total Access Communications Systems, widely used
in the United Kingdom.
TDMA: Time Division Multiple Access. System which allow
transmissions by allocated time slots.
Terrestrial Radio Systems: Radio systems consisting of tower mounted antennas
at distances in excess of 10 miles, used to
transmit radio signals.
Transceiver: Equipment that transmits and receives information
simultaneously.
Transistor: A small electronic semiconductor device used
extensively in the electronic industry.
Ultra Linear Power
Amplifiers: Amplifiers used to transmit multicarrier signals
with minimal distortion.
Wave Form: All signals transmitted by an amplifier can be
analyzed by looking at the shape of the waves and
its output. This composite signal is called a wave
form.
Watt: A metric unit of power equal to the work done at
the rate of one joule per second or to the power
produced by a current of one ampere across a
potential difference of one volt.
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Amplidyne, Inc.
INDEX TO FINANCIAL STATEMENTS
Page
----
Report of Independent Certified Public Accountants F-2
Financial Statements
Balance Sheets F-3
Statements of Operations F-5
Statement of Stockholders' Equity F-6
Statements of Cash Flows F-7
Notes to Financial Statements F-8 - F-19
F-1
<PAGE>
REPORT OF INDEPENDENT CERTIFIED
PUBLIC ACCOUNTANTS
Board of Directors and Stockholders
Amplidyne, Inc.
We have audited the accompanying balance sheets of Amplidyne, Inc. as of
December 31, 1995 and 1994, and the related consolidated statements of
operations, stockholders' equity, and cash flows for the years 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 audits.
We conducted our audits in accordance with generally accepted auditing
standards. 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 audits provide 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., and
Subsidiaries as of December 31, 1995 and 1994, and the consolidated results of
their operations and their consolidated cash flows for the years then ended, in
conformity with generally accepted accounting principles.
/s/ Grant Thornton LLP
- ----------------------
GRANT THORNTON LLP
Parsippany, New Jersey
May 17, 1996, except for Note K as to
which the date is September 30, 1996
F-2
<PAGE>
Amplidyne, Inc.
BALANCE SHEETS
December 31, June 30,
------------------------
ASSETS 1994 1995 1996
---------- ---------- -----------
(unaudited)
CURRENT ASSETS
Cash $ 3,337 $ 153,747 $ 13,393
Accounts receivable, net of
allowance for doubtful
accounts of $10,000 in
1995 and 1996 408,835 165,702 585,307
Inventory 285,366 281,078 469,235
Refundable income taxes 19,479 28,235 5,665
---------- ---------- ----------
Total current assets 717,017 628,762 1,073,600
PROPERTY AND EQUIPMENT
Machinery and equipment 99,697 132,067 381,988
Furniture and fixtures 9,444 13,144 37,240
Autos and trucks 19,923 19,923 19,923
Leasehold improvements 16,070 21,220 24,876
---------- ---------- ----------
145,134 186,354 464,027
Less accumulated depreciation
and amortization 73,940 103,951 132,179
---------- ---------- ----------
71,194 82,403 331,848
DEFERRED REGISTRATION COSTS 45,000
OTHER ASSETS 26,245 11,100 35,000
---------- ---------- ----------
$ 814,456 $ 722,265 $1,485,448
========== ========== ==========
The accompanying notes are an integral part of these statements.
F-3
<PAGE>
Amplidyne, Inc.
BALANCE SHEETS
<TABLE>
<CAPTION>
LIABILITIES AND December 31,
------------------------- June 30,
STOCKHOLDERS' EQUITY 1994 1995 1996
----------- ----------- -----------
(unaudited)
<S> <C> <C> <C>
CURRENT LIABILITIES
Bank line of credit $ 230,000 $ 230,000
Notes payable 550,000
Current maturities of lease obligations $ 9,425 78,365 157,936
Accounts payable 196,010 287,498 420,620
Accrued expenses 150,928 184,429 113,651
Customer advances 35,980 155,932 11,800
Stockholders' loan 120,716 270,716 350,000
----------- ----------- -----------
Total current liabilities 513,059 1,206,940 1,834,007
LONG-TERM LIABILITIES
Lease obligations 9,846 69,451 404,455
STOCKHOLDERS' EQUITY
Preferred stock - authorized, 1,000,000
shares of no stated value; no shares
issued and outstanding
Common stock - authorized, 25,000,000
shares of $.0001 par value; 2,850,000
shares issued and outstanding at June 30,
1996 and 2,100,000 shares
issued and outstanding
at December 31, 1995 and 1994 210 210 285
Additional paid-in capital 4,790 1,184,790 4,360,431
Deferred financing costs (1,096,875)
Retained earnings (accumulated deficit) 286,551 (1,739,126) (4,016,855)
----------- ----------- -----------
291,551 (554,126) (753,014)
----------- ----------- -----------
$ 814,456 $ 722,265 $ 1,485,448
=========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these statements.
F-4
<PAGE>
Amplidyne, Inc.
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Year ended December 31, Six months ended June 30,
-------------------------- --------------------------
1994 1995 1995 1996
----------- ----------- ----------- -----------
(unaudited) (unaudited)
<S> <C> <C> <C> <C>
Net sales $ 3,575,132 $ 1,810,222 $ 1,049,441 $ 1,272,207
Cost of goods sold 2,712,960 1,756,365 893,401 1,106,426
----------- ----------- ----------- -----------
Gross profit 862,172 53,857 156,040 165,781
Operating expenses
Selling, general and administrative 721,993 527,150 298,311 529,021
Research, engineering and development 333,306 372,334 85,367 531,364
----------- ----------- ----------- -----------
Operating loss (193,127) (845,627) (227,638) (894,604)
Other nonoperating expense
Stock compensation and financing
costs 1,180,000 1,383,125
----------- ----------- ----------- -----------
Loss before income taxes (193,127) (2,025,627) (227,638) (2,277,729)
Provision for income taxes (benefit) (15,260) 50
----------- ----------- ----------- -----------
NET LOSS $ (177,867) $(2,025,677) $ (227,638) $(2,277,729)
=========== =========== =========== ===========
Net loss per share $ (.05) $ (.64) $ (.07) $ (.71)
=========== =========== =========== ===========
Weighted average number of shares
outstanding 3,187,500 3,187,500 3,187,500 3,187,500
=========== =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these statements.
F-5
<PAGE>
Amplidyne, Inc.
STATEMENT OF STOCKHOLDERS' EQUITY
Years ended December 31, 1994 and 1995
<TABLE>
<CAPTION>
Common stock Additional Deferred Retained
------------------------- paid-in financing earnings
Shares Par value capital cost (deficit) Total
----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1993 2,100,000 $ 210 $ 4,790 $ 464,418 $ 469,418
Net loss for 1994 (177,867) (177,867)
----------- ----------- ----------- ----------- -----------
Balance at December 31, 1994 2,100,000 210 4,790 286,551 291,551
Net loss for 1995 (2,025,677) (2,025,677)
Assignment of common stock 400,000 400,000
Stock-related compensation expense 780,000 780,000
----------- ----------- ----------- ----------- -----------
Balance at December 31, 1995 2,100,000 210 1,184,790 (1,739,126) (554,126)
Net loss for the period (unaudited) (2,277,729) (2,277,729)
Private placement 550,000 55 549,945 550,000
Financing expense 2,480,000 $(1,096,875) 1,383,125
Contributed capital 125,716 125,716
Exercise of options 200,000 20 19,980 20,000
----------- ----------- ----------- ----------- ----------- -----------
Balance at June 30, 1996 (unaudited) 2,850,000 $ 285 $ 4,360,431 $(1,096,875) $(4,016,855) $ (753,014)
=========== =========== =========== =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of this statement.
F-6
<PAGE>
Amplidyne, Inc.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Year ended December 31, Six months ended June 30,
-------------------------- ---------------------------
1994 1995 1995 1996
----------- ----------- ----------- -----------
(unaudited) (unaudited)
<S> <C> <C> <C> <C>
Cash flows from operating activities
Net loss $ (177,867) $(2,025,677) $ (227,638) $(2,277,729)
----------- ----------- ----------- -----------
Adjustments to reconcile net loss to net cash
(used in) provided by operating activities
Depreciation and amortization 22,676 30,011 16,146 28,228
Stock compensation expense 1,180,000 1,383,125
Changes in assets and liabilities
Accounts receivable (14,247) 243,133 204,062 (419,605)
Inventories 45,914 4,288 92,607 (188,157)
Prepaid expenses and other assets (18,633) 6,389 (8,806) (46,330)
Accounts payable and accrued
expenses 97,674 124,989 (19,034) 62,344
Income taxes payable (8,259)
Customer advances 35,980 119,952 (35,980) (144,132)
----------- ----------- ----------- -----------
Total adjustments 161,105 1,708,762 248,995 675,473
----------- ----------- ----------- -----------
Net cash (used in) provided by
operating activities (16,762) (316,915) 21,357 (1,602,256)
----------- ----------- ----------- -----------
Cash flows from investing activities
Purchase of fixed assets (40,443) (41,220) (22,029) (79,563)
----------- ----------- ----------- -----------
Cash flows from financing activities
Proceeds from bank line of credit 230,000 50,000
Proceeds from notes payable 550,000
Lease obligations 19,271 128,545 (4,550) 216,465
Proceeds from (repayment to) stockholder (14,700) 150,000 205,000
Stock issuance 570,000
----------- ----------- ----------- -----------
Net cash provided by (used in)
financing activities 4,571 508,545 45,450 1,541,465
----------- ----------- ----------- -----------
NET INCREASE (DECREASE)
IN CASH AND CASH
EQUIVALENTS (52,634) 150,410 44,778 (140,354)
Cash and cash equivalents at beginning of year 55,971 3,337 3,337 153,747
----------- ----------- ----------- -----------
Cash and cash equivalents at end of year $ 3,337 $ 153,747 $ 48,115 $ 13,393
=========== =========== =========== ===========
Supplemental disclosures of cash flow
information:
Cash paid during the year for
Interest $ 229 $ 11,426 $ 1,629 $ 19,377
Income taxes 14,479 9,496 7,596 --
</TABLE>
The accompanying notes are an integral part of these statements.
F-7
<PAGE>
Amplidyne, Inc.
NOTES TO FINANCIAL STATEMENTS
December 31, 1994 and 1995
(Amounts and information applicable to June 30, 1995 and 1996 are unaudited)
NOTE A - REORGANIZATION AND NATURE OF BUSINESS
Amplidyne, Inc. (the "Company") was originally incorporated on October 24,
1988 as a New Jersey corporation. Its principal line of business is the
custom manufacturing of amplifiers for wireless communication products.
Many of its customers are large, international telecommunications original
equipment manufacturers ("OEM") for which products are manufactured to
their specifications.
On December 14, 1995, Amplidyne, Inc. was incorporated as a Delaware
corporation and authorized to issue 25,000,000 shares of common stock with
a par value of $.0001, and 1,000,000 shares of preferred stock with no
stated value.
On December 22, 1995, Amplidyne, Inc. (the predecessor company) was merged
into Amplidyne, Inc., the Delaware corporation. Each share of the
predecessor company, 100 shares outstanding, was exchanged for 21,000
shares of the new entity. As a result, the sole shareholder of the
predecessor owned 2,100,000 shares of the new entity after the merger.
On December 22, 1995, the Company's principal shareholder entered into
stock assignment agreements with an individual and a law firm, which
assigned without cost 50,000 shares each for services previously rendered
to the Company. For financial reporting purposes, the difference between
the cost to the assignees (zero) and $4.00 (the estimated fair market value
per share), which aggregates $400,000, is considered to be a contribution
to capital by the principal stockholder and consulting expense charged to
operations in 1995.
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. Under the terms of each agreement,
the officers will be paid $60,000 per year (paid monthly) each for
thirty-six months beginning in January 1996. The aggregate compensation
will be charged ratably to operations beginning in January 1996. In
addition, the officers were given the opportunity to purchase an aggregate
of 200,000 shares at $.10 per share upon execution of the agreements and
purchased such shares in April 1996. For financial reporting purposes, the
difference between the $.10 per share and $4.00 (the estimated fair market
value per share) is considered to be compensation ($780,000), which was
charged to operations in December 1995 with a corresponding amount credited
to paid-in capital.
F-8
<PAGE>
Amplidyne, Inc.
NOTES TO FINANCIAL STATEMENTS (continued)
December 31, 1994 and 1995
(Amounts and information applicable to June 30, 1995 and 1996 are unaudited)
NOTE A (continued)
Also in December 31, 1995, the Company granted warrants to the officers
whereby they have the option to purchase up to 350,000 shares of stock at
$2.50 per share. The warrants are exercisable one-third after June 30,
1996, two-thirds after June 30, 1997 and 100% on June 30, 1998. For
financial reporting purposes, the difference between the $2.50 per share
and $4 (the estimated fair market value per share) aggregates $525,000 and
will be charged to operations ratably over the period from July 1, 1996 to
June 30, 1998. The corresponding credit will be to paid-in capital.
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.
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.
F-9
<PAGE>
Amplidyne, Inc.
NOTES TO FINANCIAL STATEMENTS (continued)
December 31, 1994 and 1995
(Amounts and information applicable to June 30, 1995 and 1996 are unaudited)
NOTE B (continued)
4. Income Taxes
The Company accounts for income taxes under SFAS No. 109. This
statement requires, among other things, an asset and liability
approach for financial accounting and reporting for 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 laws or rates. Deferred income taxes arise from temporary
differences resulting in the basis of assets and liabilities for
financial reporting and income tax purposes.
5. Concentrations of Credit Risk and Economic Dependency
Statement of Financial Accounting Standards No. 105 ("SFAS No. 105")
requires the disclosure of significant concentrations of credit risk,
regardless of the degree of such risk. Financial instruments, as
defined by SFAS No. 105, which potentially subject the Company to
concentrations of credit risk, consist principally of cash and
accounts receivable.
The Company's customers are generally large, international, original
equipment manufacturers (OEM's). A relatively few customers account
for a substantial portion of the Company's revenues and accounts
receivable.
During 1994, one customer accounted for approximately 66% of net
sales, whereas in 1995 four customers accounted for 61% of net sales
(18%, 17%, 15% and 11%). Export sales in 1995 accounted for
approximately 30% of net sales and were primarily to the United
Kingdom and Spain. In 1994, export sales were less than 10%. For the
six months ended June 30, 1996, one customer accounted for 33% of net
sales. Export sales for the same period were 58%.
In addition, the Company is dependent on a limited number of suppliers
for key components used in the Company's products (primarily power
transistors). If the Company is unable to obtain sufficient quantities
of these components, it could have a materially adverse effect on the
Company's business, financial condition, results of operations and
ability to fulfill customer orders.
F-10
<PAGE>
Amplidyne, Inc.
NOTES TO FINANCIAL STATEMENTS (continued)
December 31, 1994 and 1995
(Amounts and information applicable to June 30, 1995 and 1996 are unaudited)
NOTE B (continued)
6. Accounting Estimates
In preparing financial statements in conformity with generally
accepted accounting principles, 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.
7. Accounting Pronouncements Not Yet Adopted
SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and
for Long-Lived Assets to Be Disposed Of," is required to be
implemented in 1996. SFAS No. 121 requires that long-lived assets and
certain identifiable intangibles held and used by the entity be
reviewed for impairment whenever events or changes in circumstances
indicate that the carrying amount of an asset may not be recoverable.
If the sum of the expected future cash flows (undiscounted and without
interest) is less than the carrying amount of the asset, an impairment
loss is recognized. Measurement of that loss would be based on the
fair value of the asset. The Company believes that implementation of
this statement will not have any material effect on its financial
position.
SFAS No. 123, "Accounting for Stock-Based Compensation," is also
required to be implemented in 1996 and introduces a choice of the
method of accounting used for stock-based compensation. Entities may
use the "intrinsic value" method currently based on APB No. 25 or the
new "fair value" method contained in SFAS No. 123. The Company has
selected the intrinsic value method.
8. Unaudited Interim Financial Data
The accompanying unaudited financial statements as of June 30, 1996
and 1995 have been prepared in accordance with generally accepted
accounting principles for interim financial information. In the
opinion of management, all adjustments (consisting of normal recurring
accruals) considered necessary for a fair presentation have been
included. The results for interim periods are not necessarily
indicative of results to be expected for the year.
F-11
<PAGE>
Amplidyne, Inc.
NOTES TO FINANCIAL STATEMENTS (continued)
December 31, 1994 and 1995
(Amounts and information applicable to June 30, 1995 and 1996 are unaudited)
NOTE B (continued)
9. Deferred Registration Costs
Deferred registration costs represent certain direct fees incurred in
connection with this public offering. Such amounts will be accounted
for as a reduction of proceeds. In the event the offering is not
completed, these amounts will be charged to operations.
NOTE C - PUBLIC OFFERING AND RESERVED SHARES
The Company intends to sell 1,200,000 shares of common stock at a proposed
public offering price of $5.00 per share and 1,200,000 warrants at a
proposed public offering price of $.10 per warrant. The final offering
price will be set immediately prior to the signing of an Underwriter
Agreement with Patterson Travis, Inc. Patterson Travis will have the option
to purchase up to 180,000 additional shares to cover overallotments.
In addition, the Company intends to issue to the Underwriter warrants to
purchase an aggregate 10% of the amount of common stock and warrants
offered to the public, exclusive of exercise of any portion of the
overallotment option (the "Underwriter's Warrants"). The Underwriter's
Warrants entitle the holder thereof to purchase one share and one warrant
at prices per share and per warrant equal to 120% of the public offering
prices of the common stock and warrants and shall be exercisable for a
period of four years commencing one year after the effective date of the
contemplated registration statement.
The Company also issued 250,000 options and 300,000 options in March and
April 1996, respectively, to noteholders (Note D) whereby each option
entitles the holder to purchase one share of common stock at $2.50,
exercisable until December 31, 1998.
An incentive option plan and stock appreciation rights ("SARs") were
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. In May 1996, 267,000
options were granted to approximately forty employees of the Company. The
options are
F-12
<PAGE>
Amplidyne, Inc.
NOTES TO FINANCIAL STATEMENTS (continued)
December 31, 1994 and 1995
(Amounts and information applicable to June 30, 1995 and 1996 are unaudited)
NOTE C (continued)
exercisable at $4.00 per share (estimated fair market value). In June 1996,
1,000,000 options were granted to the principal shareholder. The options
are exercisable at $4.00 per share (estimated fair market value).
In May 1996, 30,000 options were granted to a key employee of the Company.
The options are exercisable at $1 per share and vest ratably over a
three-year period. Approximately $90,000 of compensation expense will be
charged to operations over the three-year period of vesting.
Also, in December 1995, the Company granted to two officers options to
purchase an aggregate 200,000 shares at $.10 per share (Note A). The
options were exercised in full in April 1996. The Company also granted
warrants to these officers in December 1995 to purchase 350,000 shares at
$2.50 per share, exercisable over a two-year period from July 1, 1996 to
June 30, 1998.
The following table summarizes shares of common stock reserved for issuance
(assuming the overallotment option is not exercised):
Number
of shares
Reserved for issuable
------------ ---------
Underwriters' warrants 240,000
Options to noteholders (March) 250,000
Options to noteholders (April) 300,000
Shares reserved for stock option and SARs plan 1,500,000
Warrants to officers 350,000
Options to employees (May) 30,000
---------
2,670,000
=========
F-13
<PAGE>
Amplidyne, Inc.
NOTES TO FINANCIAL STATEMENTS (continued)
December 31, 1994 and 1995
(Amounts and information applicable to June 30, 1995 and 1996 are unaudited)
NOTE D - PRIVATE PLACEMENT
In March 1996, the Company issued, in a private placement, ten units at
$50,000 per unit, resulting in proceeds of $480,000, which is net of
expenses of $20,000. Each unit consists of 25,000 shares of common stock,
par value $.0001 per share, 25,000 options each to purchase one share of
common stock at a price equal to $2.50 per share, exercisable until
December 31, 1998, and an 8% promissory note in the principal amount of
$25,000 due on the earlier of (i) March 15, 1997 or (ii) the closing of the
Company's initial public offering.
In April 1996, the Company issued an additional twelve units at $50,000 per
unit, resulting in proceeds of $600,000. Each unit consists of 25,000
shares of common stock at $1 per share, par value of $.0001 per share,
25,000 options each to purchase one share of common stock at a price equal
to $2.50 per share, exercisable until December 31, 1998, and an 8%
promissory note in the principal amount of $25,000 due on the earlier of:
(i) March 15, 1997 or (ii) the closing of the Company's initial public
offering.
The difference between the $1.00 per share purchase price and the fair
market value price of $4.00 per share ($3.00 per share) aggregating
$1,650,000 for the March and April private placements will be charged to
operations over the expected term of the debt (to September 30, 1996) with
a corresponding credit to paid-in capital.
The difference between the option price of $2.50 per share and the fair
market value price of $4.00 per share ($1.50 per share) aggregates $825,000
for the March and April private placements and will be charged to
operations over the expected term of the debt (to September 30, 1996) with
a corresponding credit to paid-in capital.
The total financing cost resulting from the above stock transaction is
$2,475,000 ($1,125,000 relating to March and $1,350,000 relating to April),
which will be charged in the first quarter ($281,250) and second and third
quarters ($1,096,875 each in the second and third quarters) of 1996.
F-14
<PAGE>
Amplidyne, Inc.
NOTES TO FINANCIAL STATEMENTS (continued)
December 31, 1994 and 1995
(Amounts and information applicable to June 30, 1995 and 1996 are unaudited)
NOTE E - INCOME TAXES
The Company filed its Federal income tax and New Jersey corporation
business tax returns on the basis of a September 30 year-end. The Company
intends to change its tax year and to conform to its financial reporting
year-end.
The provision (benefit) for income taxes consists of:
Year ended December 31,
------------------------------
1994 1995
-------- --------
Federal $(19,403)
State 4,143 $ 50
-------- --------
$(15,260) $ 50
======== ========
The 1994 Federal benefit results from carryback of net operating losses to
prior tax years. New Jersey tax law does not allow a carryback of net
operating losses. The 1994 New Jersey tax expense relates to tax on income
reported in tax year-end September 30, 1994.
The principal components of the Company's Federal and state deferred tax
assets relate to net operating loss carryovers. At December 31, 1995, the
Company's Federal net operating loss carryovers is approximately $814,000,
the New Jersey net operating loss carryover is approximately $984,000.
Because of uncertainty in the Company's ability to utilize the net
operating loss carryovers, a full valuation allowance has been provided.
Approximately $400,000 of such net operating losses arise from deductions
relating to stock and options. If and to the extent tax benefits relating
to stock and options are realized, such benefits will be credited to
operations to the extent of amounts previously charged to operations.
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 6%) of the fair market value of the
Company at the time of any such ownership change.
F-15
<PAGE>
Amplidyne, Inc.
NOTES TO FINANCIAL STATEMENTS (continued)
December 31, 1994 and 1995
(Amounts and information applicable to June 30, 1995 and 1996 are unaudited)
NOTE E (continued)
The Company's tax provision (benefit) differs from the expected statutory
rate principally due to the impact of state income and minimum taxes,
increases in valuation allowance and impact of surtax exemptions.
NOTE F - LEASE OBLIGATIONS
The Company has capital leases for certain equipment for use in its
research and development activities. Since the equipment is deemed to have
no alternative future use or economic value, the discounted present value
of such leases has been expensed to research, engineering and development
at lease inception. The total amount expensed relating to research and
development was $143,000 and $20,000 for the years ended December 31, 1995
and 1994, respectively, and $273,000 for the six months ended June 30,
1996. At June 30, 1996, $188,855 of lease obligations related to other
office equipment not related to research, engineering and development
activities.
Future minimum lease payments on these leases are as follows:
December 31, June 30,
1995 1996
------------ -----------
(unaudited)
1996 $ 90,360 $ 191,479
1997 73,169 264,160
1998 126,635
1999 53,386
2000 6,781
Thereafter 525
--------- ---------
163,529 642,966
Less amount representing interest (15,713) (80,575)
--------- ---------
Present value of minimum lease payments $ 147,816 $ 562,391
========= =========
F-16
<PAGE>
Amplidyne, Inc.
NOTES TO FINANCIAL STATEMENTS (continued)
December 31, 1994 and 1995
(Amounts and information applicable to June 30, 1995 and 1996 are unaudited)
NOTE G - COMMITMENTS AND CONTINGENCIES
1. Operating Leases
The Company leases office and manufacturing space and various
equipment under operating leases expiring through 2000.
The following is a schedule, by calendar year, of future minimum lease
payments under operating leases having remaining terms in excess of
one year as of December 31, 1995:
Year ending December 31,
1996 $179,888
1997 216,138
1998 177,592
1999 42,000
--------
$615,618
========
Total expenses for all operating leases was $168,000 and $129,000 for
the years ended December 31, 1994 and 1995, respectively, and $70,000
for the six months ended June 30, 1996.
During March 1996, the Company entered into a lease agreement for
approximately 21,000 square feet of additional office and
manufacturing space. The lease term commenced May 1, 1996 and is for a
three-year period ending April 30, 1999. The annual rental is $168,000
plus the Company's share of real estate taxes, utilities and other
occupancy costs. The Company has the option to renew the lease for
another three-year term so long as it exercises its option to lease
the entire building (36,405 square feet).
The Company is still obligated, until October 31, 1997, under its
lease for its previous 6,000 square-foot office location. This
location may be utilized by the Company as its mechanical workshop or
it may be sublet. The total remaining commitment is approximately
$73,000, which includes estimated real estate and other occupancy
cost.
F-17
<PAGE>
Amplidyne, Inc.
NOTES TO FINANCIAL STATEMENTS (continued)
December 31, 1994 and 1995
(Amounts and information applicable to June 30, 1995 and 1996 are unaudited)
NOTE G (continued)
2. Bank Line of Credit
During May 1995, the Company obtained a bank line of credit of
$250,000 to meet short-term liquidity requirements. The line expired
January 31, 1996 but was extended to July 31, 1996. At December 31,
1995, $230,000 was outstanding. Interest is payable at 1% above prime
(9.5% at December 31, 1995) and the loan is collateralized by accounts
receivable, inventory and equipment.
3. 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 agreements call for aggregate
annual base salaries of $312,000, plus certain employee benefits.
NOTE H - LOSS PER SHARE
All shares, warrants and options issued or granted within the past twelve
months at prices lower than the initial public offering price ($5 per
share) are considered, for purposes of calculating loss per share, to be
outstanding for all periods presented. Accordingly, loss per share amounts
are based upon the weighted average number of shares outstanding (2,850,000
shares) for each period presented plus the effect of below market warrants
and options calculated based on the treasury stock approach (337,500 shares
for each period presented). The total shares outstanding for purposes of
loss per share calculations is 3,187,500.
NOTE I - STOCKHOLDER LOAN
During 1994, 1995 and 1996, the Company's president and principal
shareholder advanced funds to the Company for operating needs. Amounts so
advanced were without interest and are expected to be repaid in full from
the proceeds of the contemplated initial public offering.
Effective March 31, 1996, $125,716 of stockholder loans was forgiven and
contributed to capital.
F-18
<PAGE>
Amplidyne, Inc.
NOTES TO FINANCIAL STATEMENTS (continued)
December 31, 1994 and 1995
(Amounts and information applicable to June 30, 1995 and 1996 are unaudited)
NOTE J - SUPPLEMENTAL CASH FLOW DISCLOSURES
The Company acquired equipment under capital lease obligations totalling
$198,110 during the six months ended June 30, 1996.
NOTE K - SUBSEQUENT EVENT
During September 1996, the Company raised additional funds in the aggregate
amount of $375,000 by issuance of 8% per annum promissory notes. Such notes
are payable upon the earlier of March 15, 1997 or the closing of the
Company's initial public offering. In addition, warrants were granted for
the purchase of 187,500 shares of common stock at an exercisable price of
$2.50 per share. The proceeds were used for working capital needs.
F-19
<PAGE>
No dealer, salesman or other person has been authorized to give any
information or to make any representations not contained in this Prospectus and
if given or made, such information or representations must not be relied upon as
having been authorized by the Company or any Underwriter. Neither the delivery
of this Prospectus nor any sale made hereunder shall under any circumstances
create any implication that there has been no change in the affairs of the
Company since the date hereof. This Prospectus does not constitute an offer of
any securities other than the securities to which it relates or an offer to any
person in any jurisdiction in which such an offer would be unlawful.
TABLE OF CONTENTS
Page
----
Prospectus Summary.................................................
The Company........................................................
The Offering.......................................................
Summary Financial .................................................
Information......................................................
Risk Factors.......................................................
Use of Proceeds....................................................
Dilution...........................................................
Capitalization.....................................................
Dividend Policy....................................................
Selected Financial Data............................................
Management's Discussion and
Analysis of Financial
Condition and Results of
Operations.......................................................
Business...........................................................
Management.........................................................
Principal Stockholders.............................................
Certain Transactions...............................................
Description of
Securities........................................................
Selling Securityholders............................................
Underwriting.......................................................
Experts............................................................
Legal Matters......................................................
Available Information..............................................
Glossary of Terms..................................................
Financial Statements...............................................
Until ______, 1996 (25 days after the date of this Prospectus), all dealers
effecting transactions in the registered securities, whether or not
participating in this distribution, may be required to deliver a Prospectus.
This is in addition to the obligation of dealers to deliver a Prospectus when
acting as underwriters and with respect to their unsold allotments or
subscriptions.
1,200,000 Shares of Common Stock
1,200,000 Redeemable Common Stock
Purchase Warrants
AMPLIDYNE, INC.
----------
PROSPECTUS
----------
Patterson Travis, Inc.
_______, 1996
68
<PAGE>
SUBJECT TO COMPLETION, DATED ________, 1996
SELLING
SECURITYHOLDERS
PROSPECTUS
AMPLIDYNE, INC.
550,000 Shares of Common Stock
This Prospectus relates to the sale of 550,000 shares of common stock,
$.0001 par value per share ("Common Stock" or "Shares") of Amplidyne, Inc. (the
"Company" or "Amplidyne") underlying options granted to certain stockholders,
hereinafter collectively referred to as the "Selling Securityholders." The
Company will not receive any of the proceeds on the sale of the securities by
the Selling Securityholders. The securities held by the Selling Securityholders
may not be sold until twelve (12) months from the date of this Prospectus,
subject to earlier release at the sole discretion of Patterson Travis, Inc. the
representative of the several underwriters of the Company's initial public
offering (the"Representative"). Such consent may not be given for a period of
six (6) months from the date of this Prospectus. The Representative may release
the transfer restrictions regarding the securities held by the Selling
Securityholders at any time after all securities subject to the Over-Allotment
Option (as hereinafter defined) have been sold or such option has expired. The
resale of the securities of the Selling Securityholders are subject to
Prospectus delivery and other requirements of the Securities Act of 1933, as
amended (the "Act"). Sales of such securities or the potential of such sales at
any time may have an adverse effect on the market prices of the securities
offered hereby. See "Selling Securityholders" and "Risk Factors - Shares
Eligible for Future Sale May Adversely Affect the Market."
The Company has applied for inclusion of its Common Stock and Redeemable
Common Stock Purchase Warrants ("Warrants") on The Nasdaq Small Cap Market,
although there can be no assurances that an active trading market will develop
even if the securities are accepted for quotation or that the Company will
maintain certain minimum criteria established by Nasdaq for continued quotation.
See "Risk Factors No Prior Public Market; Potential Limited Trading Market;
Possible Volatility of Stock Price."
The securities offered by this Prospectus may be sold from time to time by
the Selling Securityholders, or by their transferees. No underwriting
arrangements have been entered into by the Selling Securityholders. The
distribution of the securities by the Selling Securityholders may be effected in
one or more transactions that may take place on the over-the-counter market
including ordinary broker's transactions, privately-negotiated transactions or
through sales to one or more dealers for resale of such shares as principals at
market prices prevailing at the time of sale, at prices related to such
prevailing market prices or at negotiated prices. Usual and customary or
specifically negotiated brokerage fees or commissions may be paid by the Selling
Securityholders in connection with sales of such securities.
The Selling Securityholders and intermediaries through whom such
securities may be sold may be
<PAGE>
deemed "underwriters" within the meaning of the Securities Act of 1933, as
amended (the "Act"), with respect to the securities offered and any profits
realized or commissions received may be deemed underwriting compensation. The
Company has agreed to indemnify the Selling Securityholders against certain
liabilities, including liabilities under the Act.
All costs incurred in the registration of the securities of the Selling
Securityholders are being borne by the Company. See "Selling Securityholders."
On the date hereof the Company commenced a public offering of 1,200,000
shares of Common Stock and 1,200,000 Warrants. See "Company Offering."
_____________________
AN INVESTMENT IN THE SECURITIES OFFERED HEREBY INVOLVES A HIGH DEGREE OF
RISK AND IMMEDIATE SUBSTANTIAL DILUTION. SEE "RISK FACTORS" WHICH BEGIN
ON PAGE ____ AND "DILUTION."
_____________________
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
The date of this Prospectus is _____________, 1996
Alt - 2
<PAGE>
THE OFFERING
Securities Offered(1) 550,000 shares of Common Stock, $.0001 par value.
See Description of Securities.
Securities Outstanding Prior
to Company Offering 2,850,000 Shares
Securities Outstanding
Subsequent to
Company Offering...... 4,050,000 Shares
............ 1,200,000 Warrants
Use of Proceeds......... The Company will not receive any of the proceeds
of the offering of the securities offered hereby
by the Selling Securityholders.
Risk Factors............ The securities are subject to a high degree of
risk and substantial dilution. See "Risk Factors"
and "Dilution".
Proposed Nasdaq SmallCap
Market Symbols(3)...... Common Stock - AMPD; Warrants - AMPDW
- ----------
(1) Concurrently with this Offering, the Company is offering 1,200,000 shares
of Common Stock and 1,200,000 Warrants. See "Company Offering."
Alt - 3
<PAGE>
ALTERNATE
COMPANY OFFERING
On the date of this Prospectus, a Registration Statement under the Act
with respect to an underwritten public offering (the "Offering") of 1,200,000
shares of Common Stock and 1,200,000 Warrants by the Company was declared
effective by the Securities and Exchange Commission ("SEC"), and the Company
commenced the sale of Shares offered thereby. Sales of securities under this
Prospectus by the Selling Securityholders or even the potential of such sales
may have an adverse effect on the market price of the Company's securities.
SELLING SECURITYHOLDERS
The registration statement of which this Prospectus forms a part covers
the registration and sale of 550,000 shares of Common Stock underlying options
granted to certain stockholders of the Company, hereinafter collectively
referred to as the "Selling Securityholders." The Company will not receive any
of the proceeds on the sale of the securities by the Selling Securityholders.
The securities held by the Selling Securityholders may not be sold until twelve
(12) months from the date of this Prospectus, subject to earlier release at the
sole discretion of the Representative. Such consent may not be given for a
period of six (6) months from the date of this Prospectus. The resale of the
securities by the Selling Securityholders is subject to Prospectus delivery and
other requirements of the Act.
The following table sets forth the holders of the shares of Common Stock
which are being offered by the Selling Securityholders, the number of shares
owned before the Offering, the number of shares being offered and the number of
shares and the percentage of the class to be owned after the Offering is
complete.
================================================================================
Name Shares of Shares of Shares of Percentage of
Common Common Stock Class After
Stock Owned Stock Owned Offering (2)
Before Offered After
Offering (1) Hereby Offering
- --------------------------------------------------------------------------------
Robert Karsten 25,000 12,500 12,500 .28
- --------------------------------------------------------------------------------
Ronny Doran 12,500 6,250 6,250 .14
- --------------------------------------------------------------------------------
Joseph Giamanco 50,000 25,000 25,000 .56
- --------------------------------------------------------------------------------
Marvin Ginsberg 25,000 12,500 12,500 .28
- --------------------------------------------------------------------------------
Gerald Kay 50,000 25,000 25,000 .56
- --------------------------------------------------------------------------------
Jerome Belson 50,000 25,000 25,000 .56
- --------------------------------------------------------------------------------
Robert Wax 25,000 12,500 12,500 .28
- --------------------------------------------------------------------------------
Bernice Brauser 50,000 25,000 25,000 .56
- --------------------------------------------------------------------------------
Milton Greiss 18,750 9,375 9,375 .21
- --------------------------------------------------------------------------------
Alt - 4
<PAGE>
- --------------------------------------------------------------------------------
Evan Stern 18,750 9,375 9,375 .21
- --------------------------------------------------------------------------------
Bircherest Industries 50,000 25,000 25,000 .56
- --------------------------------------------------------------------------------
Wellington 12,500 6,250 6,250 .14
Corporation, N.V
- --------------------------------------------------------------------------------
Jaminsville 31,250 15,625 15,625 .36
Corporation, N.V.
- --------------------------------------------------------------------------------
Carol Shiller 50,000 25,000 25,000 .28
- --------------------------------------------------------------------------------
Chana Sasha Foundation 50,000 25,000 25,000 .28
- --------------------------------------------------------------------------------
Katherine Gaston 12,500 6,250 6,250 .14
- --------------------------------------------------------------------------------
Phil Lifschitz 50,000 25,000 25,000 .56
- --------------------------------------------------------------------------------
Alan Grodko 25,000 12,500 12,500 .28
- --------------------------------------------------------------------------------
Israel Cohen 25,000 12,500 12,500 .28
- --------------------------------------------------------------------------------
Jeffrey Grodko 25,000 12,500 12,500 .28
- --------------------------------------------------------------------------------
General Capital
Associates 50,000 25,000 25,000 .56
- --------------------------------------------------------------------------------
Quad Capital Partners 50,000 25,000 25,000 .56
- --------------------------------------------------------------------------------
ATM Partners 25,000 12,500 12,500 .28
- --------------------------------------------------------------------------------
The Bridge Fund N.V. 18,750 9,375 9,375 .21
- --------------------------------------------------------------------------------
Alan Cohen 25,000 12,500 12,500 .14
- --------------------------------------------------------------------------------
Raymond Agoglia 25,000 12,500 12,500 .14
- --------------------------------------------------------------------------------
Isaac Dweck 100,000 50,000 50,000 .56
- --------------------------------------------------------------------------------
Universal Partners, L.P. 50,000 25,000 25,000 .28
- --------------------------------------------------------------------------------
Michael Rubin 25,000 12,500 12,500 .14
- --------------------------------------------------------------------------------
Tissera Overseas 50,000 25,000 25,000 .28
Fund N.V
- --------------------------------------------------------------------------------
Diane Weiser 25,000 12,500 12,500 .14
- --------------------------------------------------------------------------------
Total 1,100,000 550,000 550,000 12.50
================================================================================
(1) Includes shares of Common Stock underlying the 550,000 options.
(2) Assumes the exercise of the 550,000 options, the sale of the Common Stock
issuable upon exercise thereof and the sale of the 1,200,000 shares of
Common Stock offered by the Company.
Alt - 5
<PAGE>
PLAN OF DISTRIBUTION
The securities offered hereby may be sold from time to time directly by
the Selling Securityholders. Alternatively, the Selling Securityholders may from
time to time offer such securities through underwriters (including the
Representative) dealers or agents. The distribution of securities by the Selling
Securityholders may be effected in one or more transactions that may take place
on the over-the-counter market, including ordinary broker's transactions,
privately-negotiated transactions or through sales to one or more broker-dealers
for resale of such shares as principals, at market prices prevailing at the time
of sale, at prices related to such prevailing market prices or at negotiated
prices. Usual and customary or specifically negotiated brokerage fees or
commissions may be paid by the Selling Securityholders in connection with such
sales of securities. The securities offered by the Selling Securityholders may
be sold by one or more of the following methods, without limitations: (a) a
block trade in which a broker or dealer so engaged will attempt to sell the
shares as agent but may position and resell a portion of the block as principal
to facilitate the transaction; (b) purchases by a broker or dealer as principal
and resale by such broker or dealer for its account pursuant to this Prospectus;
(c) ordinary brokerage transactions and transactions in which the broker
solicits purchasers, and (d) face-to-face transactions between sellers and
purchasers without a broker-dealer. In effecting sales, brokers or dealers
engaged by the Selling Securityholders may arrange for other brokers or dealers
to participate. The Selling Securityholders and intermediaries through whom such
securities are sold may be deemed "underwriters" within the meaning of the Act
with respect to the securities offered, and any profits realized or commissions
received may be deemed underwriting compensation.
At the time a particular offer of securities is made by or on behalf of a
Selling Securityholders, to the extent required, a Prospectus will be
distributed which will set forth the number of shares being offered and the
terms of the Offering, including the name or names of any underwriters, dealers
or agents, if any, the purchase price paid by any underwriter for sales
purchased from the Selling Securityholders and any discounts, commissions or
concessions allowed or reallowed or paid to dealers and the proposed selling
price to the public.
Sales of securities by the Selling Securityholders or even the potential
of such sales would likely have an adverse effect on the market prices of the
securities offered hereby. See "Company Offering."
<PAGE>
No dealer, salesman or other person has been authorized to give any
information or to make any representations not contained in this Prospectus and
if given or made, such information or representations must not be relied upon as
having been authorized by the Company or any Underwriter. Neither the delivery
of this Prospectus nor any sale made hereunder shall under any circumstances
create any implication that there has been no change in the affairs of the
Company since the date hereof. This Prospectus does not constitute an offer of
any securities other than the securities to which it relates or an offer to any
person in any jurisdiction in which such an offer would be unlawful.
__________
TABLE OF CONTENTS
Page
----
Prospectus Summary.....................................................
The Company............................................................
The Offering...........................................................
Summary Financial .....................................................
Information..........................................................
Risk Factors...........................................................
Use of Proceeds of Company
Offering ...........................................................
Dilution...............................................................
Capitalization.........................................................
Dividend Policy........................................................
Selected Financial Data................................................
Management's Discussion and
Analysis of Financial
Condition and Results of
Operations............................................................
Business...............................................................
Management.............................................................
Principal Stockholders.................................................
Certain Transactions...................................................
Description of
Securities............................................................
Company Offering.......................................................
Selling Securityholders................................................
Plan of Distribution...................................................
Experts................................................................
Changes in Accountants.................................................
Legal Matters..........................................................
Available Information..................................................
Glossary of Terms......................................................
Financial Statements...................................................
Until ___, 1996 (25 days after the date of this Prospectus), all dealers
effecting transactions in the registered securities, whether or not
participating in this distribution, may be required to deliver a Prospectus.
This is in addition to the obligation of dealers to deliver a Prospectus when
acting as underwriters and with respect to their unsold allotments or
subscriptions.
ALTERNATE
___________
___________
___________
AMPLIDYNE, INC.
----------
PROSPECTUS
----------
_______, 1996
__________
Alt - 7
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 24. Indemnification of Directors and Officers.
In connection with the Offering, the Underwriter agreed to indemnify the
Company, its directors, and each person who controls it within the meaning of
Section 15 of the Act with respect to any statement in or omission from the
registration statement or the Prospectus or any amendment or supplement thereto
if such statement or omission was made in reliance upon information furnished in
writing to the Company by the Underwriter specifically for or in connection with
the preparation of the registration statement, the prospectus, or any such
amendment or supplement thereto.
Section 145 of the Delaware General Corporation Law empowers a corporation
to indemnify its directors and officers and to purchase insurance with respect
to liability arising out of the performance of their duties as directors and
officers.
The Delaware General Corporation Law provides further that the
indemnification permitted thereunder shall not be deemed exclusive of any other
rights to which the directors and officers may be entitled under the
corporation's by-laws, any agreement, vote of Stockholders or otherwise.
Article Ninth of the Company's Certificate of Incorporation eliminates the
personal liability of directors to the fullest extent permitted by Section 102
of the Delaware General Corporation Law and Article Tenth provides for
indemnification of officers and directors.
The effect of the foregoing is to require the Company to the extent
permitted by law to indemnify the officers and directors of the Company for any
claim arising against such persons in their official capacities if such person
acted in good faith and in a manner that he reasonably believed to be in or not
opposed to the best interests of the corporation, and, with respect to any
criminal action or proceeding, had no reasonable cause to believe his conduct
was unlawful. Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers or persons controlling
the Company pursuant to the foregoing provisions, the Company has been informed
that in the opinion of the Securities and Exchange Commission, such
indemnification is against public policy as expressed in the Securities Act and
is therefore unenforceable.
The Company does not currently have any liability insurance coverage for
its officers and directors.
Items 25. Other Expenses of Issuance and Distribution.
The estimated expenses in connection with this Offering are as follows:
SEC filing fee...................... $ 6,731.37
The Nasdaq Small Cap Market
filing fee........................ $ 10,000.00
NASD filing fee..................... $ 2,452.25
Accounting fees and expenses*...... $ 75,000.00
Legal fees and expenses*............ $ 90,000.00
Blue Sky fees and expenses*......... $ 45,000.00
II - 1
<PAGE>
Printing and engraving*............. $ 40,000.00
Transfer Agent's and Registrar's fee $ 3,500.00
Miscellaneous expenses*............. $ 27,316.38
Total............................... $300,000.00
===========
- ----------
* Estimated
Item 26. Recent Sales of Unregistered Securities.
The following information sets forth all securities of the Company sold by
it since inception, which securities were not registered under the Securities
Act of 1933, as amended. There were no underwriting discounts and commissions
paid in connection with the issuance of any shares of Common Stock prior to the
date of this Registration Statement.
All of the sales of securities prior to the date hereof were made in
reliance upon Section 4(2) of the 1933 Act, which provides exemption for
transactions not involving a public offering. All certificates are "restricted
securities" and bear a restrictive legend. See "Description of Securities -
Shares Eligible for Future Sale."
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. In connection with the merger, each share
of Amplidyne-NJ common stock (a total of 100) was converted into 21,000 shares
of the Company's Common Stock, resulting in the issuance of 2,100,000 shares of
Common Stock.
In December 1995, the Company offered for sale an aggregate of 200,000
shares of its Common Stock to two officers (Harris Freedman and Sharon Will) at
a purchase price of $.10 per share (an aggregate purchase price of $20,000).
Such shares were purchased in April 1996.
Between January and February 1996 the Company sold an aggregate of 250,000
shares of Common Stock to the following persons: Robert Karsten (12,500), Ronny
Doran (6,250), Joseph Giamanco (25,000), Marvin Ginsberg (12,500), Gerald Kay
(25,000), Jerome Belson (25,000), Robert Wax (12,500), Bernice Brauser (25,000)
Milton Greiss (9,375), Evan Stern (9,375), Birchcrest Industries (25,000),
Wellington Corporation, N.V. (6,250), Jaminsville Corporation, N.V. (6,250),
Carol Shiller (25,000) and Chana Sasha Foundation (25,000). The sales of these
shares of Common Stock were in connection with a $500,000 private financing in
which the Company issued promissory notes in the aggregate amount of $250,000,
250,000 shares of Common Stock and 250,000 options to purchase Common Stock at
$2.50 per share. The promissory notes accrue interest at 8% per annum. The
principal and accrued interest are payable on the earlier of (i) March 15, 1997
or (ii) the closing of this Offering. See "Use of Proceeds." The options are
immediately exercisable until December 31, 1998. The shares of Common Stock
underlying the options are being registered hereunder. See "Selling
Securityholders."
II - 2
<PAGE>
In April 1996 the Company sold an aggregate of 300,000 shares of Common
Stock to the following persons: Katherine Gaston(6,250), Phil Lifschitz
(25,000), Alan Grodko (12,500), Israel Cohen (12,500), Jeffrey Grodko (12,500),
Generation Capital Associates (25,000), Quad Capital Partners (25,000), ATM
Partners (12,500), Jaminsville Corporation, N.V. (9,375), The Bridge Fund, N.V.
(9,375), Alan Cohen (12,500) Raymond Agoglia (12,500), Isaac Dweck (50,000),
Universal Partners, L.P. (25,000) Michael Rubin (12,500), Tissere Overseas Fund,
N.V. (25,000) and Diane Weiser (12,500). The sales of these shares of Common
Stock were in connection with a $600,000 private financing in which the Company
issued promissory notes in the aggregate amount of $300,000, 300,000 shares of
Common Stock and 300,000 options to purchase Common Stock at $2.50 per share.
The promissory notes accrue interest at 8% per annum. The principal and accrued
interest are payable on the earlier of (i) March 15, 1997 or (ii) the closing of
this Offering. See "Use of Proceeds." The options are immediately exercisable
until December 31, 1998. The shares of Common Stock underlying the options are
being registered hereunder. See "Selling Securityholders."
Item 27. 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
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
5.1 Opinion of Bernstein & Wasserman, LLP, counsel to the Company**
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
II - 3
<PAGE>
10.4 Employment Agreement between the Company and Nirmal Bains
10.5 Agreement of Lease for Premises located at 144 Belmont Drive, Somerset,
New Jersey 08873
10.6 Agreement of Lease for Premises located at Unit 9, Building 7, Ilene
Court, Belle Mead, New Jersey 08502
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 Employment Agreement between the Company and Harris Freedman.*
10.11 Employment Agreement between the Company and Sharon Will.*
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 Bernstein & Wasserman, LLP (included in Exhibit 5.1)**
23.2 Consent of Grant Thornton, LLP, Independent Certified Public
Accountants.*
- ----------
* Filed herewith.
** To be filed by Amendment.
Item 28. Undertakings.
(a) Rule 415 Offering
The undersigned Registrant will:
1. File, during any period in which offers or sales are being made, a
post-effective amendment to this Registration Statement to:
(i) Include any prospectus required by Section 10(a)(3) of the Act;
(ii) Reflect in the prospectus any facts or events which, individually or
in the aggregate, represent
II - 4
<PAGE>
a fundamental change in the information set forth in the
registration statement;
(iii) Include any additional or changed material information on the plan
of distribution.
2. For determining liability under the Act, treat each such post-effective
amendment as a new registration statement of the securities offered, and the
Offering of such securities at that time shall be deemed to be the initial bona
fide offering.
3. File a post-effective amendment to remove from registration any of the
securities that remain unsold at the end of the Offering.
(b) Equity Offerings of Nonreporting Small Business Issuers
The undersigned Registrant will provide to the Underwriter at the closing
specified in the underwriting agreement certificates in such denominations and
registered in such names as required by the Underwriter to permit prompt
delivery to each purchaser.
(c) Indemnification
Insofar as indemnification for liabilities arising under the Act may be
permitted to directors, officers or controlling persons of the Registrant
pursuant to the provisions referred to in Item 24 of this Registration Statement
or otherwise, the Registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public policy
as expressed in the Act and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment by
the Registrant of expenses incurred or paid by a director, officer or
controlling person of the Registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, the Registrant 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 the Act and
will be governed by the final adjudication of such issue.
(d) Rule 430A
The undersigned Registrant will:
1. For determining any liability under the Act, treat the information
omitted from the form of Prospectus filed as part of this Registration Statement
in reliance upon Rule 430A and contained in the form of a prospectus filed by
the small business issuer under Rule 424(b)(1) or (4) or 497(h) under the Act as
part of this Registration Statement as of the time the Commission declared it
effective.
2. For any liability under the Act, treat each post-effective amendment
that contains a form of prospectus as a new registration statement for the
securities offered in the Registration Statement, and that the Offering of the
securities at that time as the initial bona fide Offering of those securities.
II - 5
<PAGE>
SIGNATURES
In accordance with the requirements of the Securities Act of 1933, as
amended, the Registrant, certifies that it has reasonable grounds to believe
that it meets all the requirements for filing on Form SB-2 and authorized this
Registration Statement to be signed on its behalf by the undersigned, in New
York, New York on October 10, 1996.
AMPLIDYNE, INC.
By: /s/ Devendar S. Bains
----------------------
Name: Devendar S. Bains
Title: Chief Executive Officer,
President, Treasurer, Principal
Accounting Officer and Director
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement or Amendments thereto has been signed below by the
following persons in the capacities and on the dates indicated.
Signature Title Date
--------- ----- ----
/s/ Devendar S. Bains Chief Executive Officer, October 10, 1996
- --------------------- President, Treasurer,
Devendar S. Bains Principal Accounting Officer
and Director
/s/ Tarlochan Bains Vice President and Director October 10, 1996
- -------------------
Tarlochan Bains
/s/ Nirmal Bains Secretary October 10, 1996
- ----------------
Nirmal Bains
/s/ Robert S. Benou Director October 10, 1996
- -------------------
Robert S. Benou
II - 6
<PAGE>
[Form of Face of Warrant Certificate]
No. W Warrants
VOID AFTER ________ __, 2001
STOCK PURCHASE WARRANT CERTIFICATE FOR PURCHASE OF COMMON STOCK
AMPLIDYNE, INC.
THIS CERTIFIES THAT FOR VALUE RECEIVED
or registered assigns (the "Registered Holder") is the owner of the number of
Redeemable Common Stock Purchase Warrants ("Warrants") specified above. Each
Warrant initially entitles the Registered Holder to purchase, subject to the
terms and conditions set forth in this Certificate and the Warrant Agreement (as
hereinafter defined), one fully paid and nonassessable share of Common Stock,
par value $.0001 per share ("Common Stock"), of AMPLIDYNE,INC., a Delaware
corporation (the "Company"), at any time between the Initial Warrant Exercise
Date and the Expiration Date (as hereinafter defined), upon the presentation and
surrender of this Warrant Certificate with the Subscription Form on the reverse
hereof duly executed, at the corporate office of AMERICAN STOCK TRANSFER & TRUST
COMPANY as Warrant Agent, or its successor (the "Warrant Agent"), accompanied by
payment of $6.00 (the "Purchase Price") in lawful money of the United States of
America in cash or by official bank or certified check made payable to
Amplidyne, Inc.
This Warrant Certificate and each Warrant represented hereby are issued
pursuant to and are subject in all respects to the terms and conditions set
forth in the Warrant Agreement (the "Warrant Agreement") dated ________ __,
1996, by and between the Company and the Warrant Agent.
In the event of certain contingencies provided for in the
<PAGE>
Warrant Agreement, the Purchase Price or the number of shares of Common Stock
subject to purchase upon the exercise of each Warrant represented hereby are
subject to modifications or adjustment.
Each Warrant represented hereby is exercisable at the option of the
Registered Holder, but no fractional shares of Common Stock will be issued. In
the case of the exercise of less than all the Warrants represented hereby, the
Company shall cancel this Warrant Certificate upon the surrender hereof and
shall execute and deliver a new Warrant Certificate or Warrant Certificates of
like tenor, which the Warrant Agent shall countersign, for the balance of such
Warrants.
The term "Initial Warrant Exercise Date" shall mean ________ __, 1997.
The term "Expiration Date" shall mean 5:00 p.m. (New York time on
________ __, 2001, or such earlier date as the Warrants shall be redeemed. If
such date shall in the State of New York be a holiday or a day on which the
banks are authorized to close, then the Expiration Date shall mean 5:00 p.m.
(New York time) the next following day which in the State of New York is not a
holiday or a day on which banks are authorized to close.
The Company shall not be obligated to deliver any securities pursuant
to the exercise of this Warrant unless a registration statement under the
Securities Act of 1933, as amended, with respect to such securities is
effective. This Warrant shall not be exercisable by a Registered Holder in any
state where such exercise would be unlawful.
This Warrant Certificate is exchangeable, upon the surrender hereof by
the Registered Holder at the corporate office of the Warrant Agent, for a new
Warrant Certificate or Warrant Certificates of like tenor representing an equal
aggregate number of Warrants, each of such new Warrant Certificates to represent
such number of Warrants as shall be designated by such Registered Holder at the
time of such surrender. Upon due presentment with any transfer fee in addition
to any tax or other governmental charge imposed in connection therewith, for
registration of transfer of this Warrant Certificate at such office, a new
Warrant Certificate or Warrant Certificates representing an equal
<PAGE>
aggregate number of Warrants will be issued to the transferee in exchange
therefor, subject to the limitations provided in the Warrant Agreement.
Prior to the exercise of any Warrant represented hereby, the Registered
Holder shall not be entitled to any rights of a stockholder of the Company,
including, without limitation, the right to vote or to receive dividends or
other distributions, and shall not be entitled to receive any notice of any
proceedings of the Company, except as provided in the Warrant Agreement.
This Warrant may be redeemed at the option of the Company, at a
redemption price of $.01 per Warrant at any time after ________ __, 1997,
provided the Market Price (as defined in the Warrant Agreement) for the
securities issuable upon exercise of such Warrant shall exceed $9.00 per share.
Notice of redemption shall be given not later than the thirtieth day before the
date fixed for redemption, all as provided in the Warrant Agreement. On and
after the date fixed for redemption, the Registered Holder shall have no rights
with respect to this Warrant except to receive the $.01 per Warrant upon
surrender of this Certificate.
Prior to due presentment for registration of transfer hereof, the
Company and the Warrant Agent may deem and treat the Registered Holder as the
absolute owner hereof and of each Warrant represented hereby (notwithstanding
any notations of ownership or writing hereon made by anyone other than a duly
authorized officer of the Company or the Warrant Agent) for all purposes and
shall not be affected by any notice to the contrary.
This Warrant Certificate shall be governed by and construed in
accordance with the laws of the State of Delaware.
This Warrant Certificate is not valid unless countersigned by the
Warrant Agent.
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Warrant Certificate to
be duly executed, manually or in facsimile by two of its officers thereunto duly
authorized and a facsimile of its corporate seal to be imprinted hereon.
AMPLIDYNE, INC.
By:
- ------------------------------
Devendar S. Bains
Its: President
Date: ______________________________
[Seal]
COUNTERSIGNED:
AMERICAN STOCK TRANSFER & TRUST COMPANY,
as Warrant Agent
By: ______________________________
Its: Authorized Officer
<PAGE>
[Form of Reverse of Warrant Certificate]
SUBSCRIPTION FORM
To Be Executed by the Registered Holder in Order to Exercise Warrants
THE UNDERSIGNED REGISTERED HOLDER hereby irrevocably elects to exercise
_____ Warrants represented by this Warrant Certificate, and to purchase the
securities issuable upon the exercise of such Warrants, and requests that
certificates for such securities shall be issued in the name of
--------------------------------------------
(please insert social security or other identifying number)
and be delivered to
--------------------------------------------
--------------------------------------------
--------------------------------------------
--------------------------------------------
(please print or type name and address)
and if such number of Warrants shall not be all the Warrants evidenced by this
Warrant Certificate, that a new Warrant Certificate for the balance of such
Warrants be registered in the name of, and delivered to, the Registered Holder
at the address stated below:
--------------------------------------------
--------------------------------------------
--------------------------------------------
<PAGE>
(Address)
---------------------------------
(Date)
---------------------------------
(Taxpayer Identification Number)
If this Warrant has been solicited by a member of the National
Association of Securities Dealers, Inc., the name of such firm
is:__________:
SIGNATURE GUARANTEED
ASSIGNMENT
To Be Executed by the Registered Holder in Order to Assign Warrants
FOR VALUE RECEIVED, hereby sells, assigns, and transfers unto
--------------------------------------------
(please insert social security or other identifying number)
--------------------------------------------
--------------------------------------------
--------------------------------------------
--------------------------------------------
(please print or type name and address)
of the Warrants represented by this Warrant Certificate, and
<PAGE>
hereby irrevocably constitutes and appoints _________________________________
Attorney to transfer this Warrant Certificate on the books of the Company, with
full power of substitution in the premises.
---------------------------------
(Date)
SIGNATURE GUARANTEED
THE SIGNATURE TO THE ASSIGNMENT OR THE SUBSCRIPTION FORM MUST CORRESPOND TO THE
NAME AS WRITTEN UPON THE FACE OF THIS WARRANT CERTIFICATE IN EVERY PARTICULAR,
WITHOUT ALTERATION OR ENLARGEMENT OR ANY CHANGE WHATSOEVER, AND MUST BE
GUARANTEED BY AN ELIGIBLE INSTITUTION (AS DEFINED IN RULE 17Ad-15 UNDER THE
SECURITIES AND EXCHANGE ACT OF 1934) WHICH MAY INCLUDE A COMMERCIAL BANK OR
TRUST COMPANY, SAVINGS ASSOCIATION, CREDIT UNION OR A MEMBER FIRM OF THE
AMERICAN STOCK EXCHANGE, NEW YORK STOCK EXCHANGE, PACIFIC STOCK EXCHANGE OR
MIDWEST STOCK EXCHANGE.
<PAGE>
AGREEMENT BETWEEN AMPLIDYNE, INC.
AND
ELECTRONIC MARKETING ASSOCIATES, INC.
THIS AGREEMENT made this 8/28/95 by and between Amplidyne Inc., a
corporation incorporated under the laws of the State of New Jersey
having its principal office at Ilene Court, Belle Mead, NJ, hereinafter
referred to as "Manufacturer," and Electronic Marketing Associates
manufacturers' representative company operating under the laws of the
state of Maryland principal office located at: 14100 Luarel Park Drive,
Suite A, Laurel, MD 20707 herein after referred to as
"Representative,"provides as follows:
1. APPOINTMENT AND ACCEPTANCE. Manufacture appoints Representative as
its exclusive selling representative to sell products (enumerated in
Provision #4 hereof) in the territory (defined in Provision #2 hereof);
and Representative accepts the appointment and agrees to sell and
promote the sales of the Manufacturer's products.
2. TERRITORY. Representative's territory shall consist of the
following New Jersey, Pennsylvania, Maryland, Virginia, Washington, DC,
Delaware.
3. HOUSE ACCOUNT. With the following exceptions,:
AT&T, Whippany, NJ buying the following products:
KS21583, L3, L4, L5 & L6
K723757 L1 & L3
4. PRODUCT. All "products" of the Manufacturer are to be sold by the
Representative, except those specified below:
AT&T products: KS21583 L3, L4, L5 & L6
KS23757 L1 & L3
5. Amount of Compensation. Representative compensation per order for
services performed hereunder shall be a percentage of the "net invoice
price" of the Manufacturer's product shipped into the Representative's
territory on a sliding scale as follows:
10% of the first $ 15,000 ($ 0 to $ 15,000)
8% of the next $ 35,000 ($ 15,001 to $ 50,000)
6% of the next $ 50,000 ($ 50,001 to $ 100,000)
4% of the next $ 150,000 ($ 100,001 to $ 250,000)
2% of the next $ 750,000 ($ 250,001 to $1,000,000)
1% of all over $1,000,000 ($1,000,001 and up)
When engineering, execution of the order, or shipment involved in
different territories, The Manufacture will split the full commission
among the Representative whose territories are involved. The
Manufacturers will make this determination and advise the interested
Representative at the time the order is submitted to the Manufacturer.
Manufacturer shall have the right to reasonably reduce
<PAGE>
commissions when a quotation is reduced for the purpose of securing an
order. Manufacturer agrees to notify the Representative at the time the
order is placed.
6. COMPUTATION AND PAYMENT OF COMMISSION.
Comissions are based upon the net F.O.B.
a. Invoiced amount of orders received and accepted by Manufacturer from
the aforesaid territory of the Representative. Such commissions to be
paid on the 15th of every month following the month after Manufacturer
has received payment in full for individual invoices or progress
payments.
b. At the time of payment, manufacturer will send Representative a
commission statement showing the computation of commissions.
c. "Net invoice price" shall mean the total price that an order is
invoiced to the customer, including any increase or decrease in the
total amount of the order (even if such increase or decrease takes place
after the effective date of termination), but excluding shipping and
mailing costs, taxes, insurance, and any allowances or discounts granted
to the customer by the Manufacturer.
d. There shall be deducted from any sum due Representative:
1. An amount equal to commissions previously paid or credited on
sales of Manufacturer products, which have since been returned to the
customer or on allowance credited to the customer for any reason by the
Manufacturer; and
2. An amount equivalent to commissions previously paid or credited on
sales which Manufacturer shall not have been fully paid the customer
whether by reason of the customer's bankruptcy, insolvency, or any other
reason which, in Manufacture judgement, renders the account
uncollectible (if any sums are ever realized upon such uncollectible
accounts, Manufacturer will pay Representative its percentage of
commissions applicable at the time of the original sale upon the net
proceeds of such collection).
e. "Order" shall mean any commitment to purchase Manufacturer's
products which calls for shipment into Representative's territory or
which is subject to split commission in accordance with Provision #4
hereof.
7. ACCEPTANCE OF ORDERS. All order are subject to acceptance or
rejection by an authorized officer of Manufacture at its home office and
to the approval of Manufacture's credit department. Manufacturer shall
be responsible for all credit risk and collection.
If Manufacturer notifies customer of its acceptance or rejection of
an order, a copy shall be transmitted to the Representative.
8. TERMS OF SALE. All sales shall be at prices and upon terms
established by Manufacturer and it shall have the right, in its
sole discretion, from time to time, to establish, change, alter or amend
prices and other terms and conditions of sale.
<PAGE>
Representative shall not accept orders in the
Manufacturer's name, make price quotations or delivery promises without
the Manufactures prior approval.
9. REPRESENTATIVE'S RELATIONSHIP AND CONDUCT OF BUSINESS.
a. Representative shall maintain a sales office in the territory and
shall use it best efforts and devote such time as may be reasonably
necessary to sell and promote the sale of Manufacturer's products within
the territory.
b. Representative will conduct all of it business in its own name
and in such manner it my see fit. Representative will pay all expenses
whatever of its office and activities and will be responsible for the
act and expenses of its employees.
c. Respresentative shall not, without prior written consent of the
Manufacturer, handle products which, in the opinion of Manufacturer, are
competitive with the products of the Manufacturer being handled by the
Representative. Representative shall notify the Manufacturer whenever
taking on any additional lines other than those now handled by the
Representative, or whenever his relationship is terminated with any
other Manufacturer which it now represents.
d. Nothing in this Agreement shall be construed to constitute the
Representative as the partner, employee, or agent of the Manufacturer,
nor shall either party have any authority to bind the other in any
respect, it being intended that each shall remain an independent
contractor responsible only for its own actions.
e. Representative shall not, without Manufacturer's prior written
approval, alter, enlarge or limit orders, make representation or
guarantees concerning Manufacturer's product, or accept the return of or
make any allowance for such products.
f. Representative shall furnish information to Manufacturers'
Accounting Department any information which it may have from time to
time relative to the credit of its customers.
g. Representative shall abide by Manufacturer's policies and
communicate same to Manufacturer's customers.
h. Manufacturers shall be solely responsible for the design,
development, supply production and performance of its products and the
protection of its trade names.
i. Manufacturer shall furnish Representative, at no expense to the
Representative, a reasonable quantity of catalogs, literature, and any
other material necessary for the proper promotion and sale its products
in the territory. Any literature which is not used or samples, or other
equipment belonging to Manufacturer, shall be returned to the Manufacturer
at its request.
<PAGE>
[Missing Text]
10. TERMS OF AGREEMENT AND TERMINATION. This agreement may be terminated
with or without cause by either party after 30 days from date of written
notice.
Notice of termination shall be certified or registered by mail. The
effective date of notice or termination shall be the date mailed.
11. RIGHTS UPON TERMINATION. Upon termination of this Agreement for any
reason, Representative shall be entitled to:
a. Commissions for all orders booked [illegible] into Representative's
territory which are dated on communicated to Manufacture prior to
effective date of termination; and
b. Its share of split commissions for orders dated or communicated
to Manufacturer prior to this effective date of termination, regardless
of when such orders are shipped.
12. GENERAL. This Agreement contains the entire understanding of the
parties, and shall supersede any other oral or written agreement, and
shall insure to the benefit of Manufacturer's successors and assigns. It
may be modified in any way without the written consent of both parties.
Representative shall not have the right to assign this Agreement in
whole or part without Manufacturers written consent.
13. CONSTRUCTION OF AGREEMENT. This Agreement shall be construed
according to the laws of the State of New Jersey. IN WITNESS WHEREOF,
the parties hereto have executed this Agreement the day and year first
above written in multiple counterparts, each of which shall be
considered an original.
MANUFACTURERS: SALES REPRESENTATIVE
============== ====================
AMPLIDYNE, INC. ELECTRONIC MARKETING
UNITS 9 & 10, BLDG 7 ASSOCIATES,
Ilene Court 14100 LAUREL PARK DRIVE
Belle Mead, LAUREL, MD 20707
NJ 08502 Dated 8/23/95
-------------------- -------------------------
Date 9/15/94 Date 8/24/95
<PAGE>
AGREEMENT BETWEEN AMPLIDYNE, INC.
AND
LINK MICROTEK LIMITED
This agreement made this October 17, 1995 by and between Amplidyne Inc., a
corporation incorporated under the laws of the State of New Jersey having its
principal office at Ilene Court, Belle Mead, NJ, hereinafter referred to as
"Manufactuer." and Link Microtek Limited a manufacturers' representative
company operating under the laws of the state and England principal office
located at: Unit 17, Campbell Road, bramely, Tadley, Hampshire RG26 SEG here in
after referred to as "Representative," provides as follows:
1. APPOINTMENT AND ACCEPTANCE. Manufacture appoints Representative as its
exclusive selling representative to sell products (enumerated in Provision #4
hereof) in the territory (defined in Provision #2 hereof); and Representative
accepts the appointment and agrees to sell and promote the sales of the
Manufacturer's products.
2. TERRITORY. Representative's territory shall consist of the following U.K.
and Ireland.
3. HOUSE ACCOUNT. With the following exceptions,:
4. PRODUCT. All "products" of the Manufacturer are to be sold by the
Representative, except those specified below:
5. Amount of Compensation. Representative compensation for services performed
hereunder shall be a percentage of the "net invoice price" of the
Manufacturer's product shipped into the Representative's territory on a
sliding scale as follows:
10% of the first $ 15,000 ($ to $ 15,000)
8% of the next $ 35,000 ($ 15,001 to $ 50,000)
6% of the next $ 50,000 ($ 50,001 to $ 100,000)
4% of the next $150,000 ($100,001 to $ 250,000)
2% of the next $750,000 ($250,001 to $1,000,000)
1% of all over $1,000,000 ($1,000,001 and up)
When engineering, execution of the order, or shipment involved in different
territories, The Manufacture will split the full commission among the
Representative whose territories are involved. The Manufacturers will make
this determination and advise the interested Representative at the time the
order is submitted to the Manufacturer.
Manufacturer shall have the right to reasonably reduce commissions when a
quotation is reduced for the purpose of securing an order. Manufacturer
agrees to notify the Representative at the time the order is placed.
<PAGE>
6. COMPUTATION AND PAYMENT OF COMMISSION.
Commissions are based upon the net F.O.B.
a. Invoiced amount of orders received and accepted by Manufacturer from the
aforesaid territory of the Representative. Such commissions to be paid on
the 15th of every month following the month after Manufacturer has received
payment in full for individual invoices or progress payments.
b. At the time of payment, Manufacturer will send Representative a commission
statement showing the computation of commissions.
c. "Net invoice price" shall mean the total price that an order is invoiced to
the customer, including any increase or decrease in the total amount of the
order (even if such increase or decrease takes place after the effective
date of termination), but excluding shipping and mailing costs, taxes,
insurance and any allowances or discounts granted to the customer by the
Manufacturer; and
d. There shall be deducted from any sum due Representative:
1. An amount equal to commissions previously paid or credited on sales of
Manufacturer products, which have since been returned to the customer or
an allowance credited to the customer for any reason by the Manufacturer;
and
2. An amount equivalent to commissions previously paid or credited on sales
which Manufacturer shall not have been fully paid the customer whether by
reason of the customer's bankruptcy, insolvency, or any other reason
which, in Manufacture judgement, renders the account uncollectible (if any
sums are ever realized upon such uncollectible (if any sums are ever
realized upon such uncollectible accounts, Manufacturer will pay
Representative its percentage of commissions applicable at the time of the
original sale upon the net proceeds of such collection).
e. "Order" shall mean any commitment to purchase Manufacturer's products which
calls for shipment into Representative's territory or which is subject
to split commission in accordance with Provision #4 hereof.
7. ACCEPTANCE OF ORDERS. All orders are subject to acceptance or rejection by an
authorized officer of Manufacture at its home office and to the approval of
Manufacture's credit department. Manufacturer shall be responsible for all
credit risk and collection.
If Manufacturer notifies customer of its acceptance or rejection of an order,
a copy shall be transmitted to the Representative.
8. TERMS OF SALE. All sales shall be at prices and upon terms established by
Manufacturer and it shall have the right, in its sole discretion, from time
to time, to establish, change, alter or amend prices and other terms and
conditions of sale. Representative shall not accept orders in the
Manufacturer's name, make price quotations or delivery promises without the
Manufacturers prior approval.
<PAGE>
9. REPRESENTATIVE'S RELATIONSHIP AND CONDUCT OF BUSINESS.
a. Representative shall maintain a sales office in the territory and shall use
its best efforts and devote such time as may be reasonably necessary to
sell and promote the sale of Manufacturer's products within the territory.
b. Representative will conduct all of its business in its own name and in such
manner it may see fit. Representative will pay all expenses whatever of its
office and activities and will be responsible for the act and expenses of
its employees.
c. Representative shall not, without prior written consent of the
Manufacturer, handle products which, in the opinion of Manufacturer, are
competitive with the products of the Manufacturer being handled by the
Representative. Representative shall notify the Manufacturer whenever
taking on any additional lines other than those now handled by the
Representative, or whenever his relationship is terminated with any other
Manufacturer which it now represents.
d. Nothing in this Agreement shall be construed to constitute the
Representative as the partner, employee, or agent of the Manufacturer, nor
shall either party have any authority to bind the other in any respect, it
being intended that each shall remain an independent contractor responsible
only for its own actions.
e. Representative shall not, without Manufacturer's prior written approval,
alter, enlarge or limit orders, make representation or guarantees
concerning Manufacturer's product, or accept the return of or make any
allowance for such products.
f. Representative shall furnish information to Manufacturers' Accounting
Department any information which it may have from time to time relative to
the credit of its customers.
g. Representative shall abide by Manufacturer's policies and communicate same
to Manufacturer's customers.
h. Manufacturers shall be solely responsible for the design, development,
supply production and performance of its products and the protection of its
trade names.
i. Manufacturer shall furnish Representative, at no expense to the
Representative, a reasonable quantity of catalogs, literature, and any
other material necessary for the proper promotion and sale of its
products in the territory. Any literature which is not used, or samples,
or other equipment belonging to Manufacturer, shall be returned to the
Manufacturer at its request.
<PAGE>
10.TERMS OF AGREEMENT AND TERMINATION. This agreement may be terminated
with or without cause by either party after 30 days from date of written
notice.
Notice of termination shall be certified or registered mail. The
effective date of notice or termination shall be the date mailed.
11.RIGHTS UPON TERMINATION. Upon termination of this Agreement for any
reason, Representative shall be entitled to:
a.Commissions for all orders shipped into Representative's territory
which are dated or communicated to Manufacture prior to effective date
of termination; and
b.Its share of split commissions for orders dated or communicated to
Manufacturer prior to this effective date of termination, regardless of
when such orders are shipped.
12.GENERAL.This agreement contains the entire understanding of the
parties, and shall supersede any other oral or written agreement, and
shall insure to the benefit of Manufacturer's successors and assigns. It
may not be modified in any way without the written consent of both
parties. Representative shall not have the right to assign this
Agreement in whole or part without Manufacturers written consent.
13.CONSTRUCTION OF AGREEMENT.This Agreement shall be construed according
to the laws of the State of New Jersey. IN WITNESS WHEREOF, the parties
hereto have executed this Agreement the day and year first above written
in multiple counterparts, each of which shall be considered an original.
MANUFACTURER: SALES REPRESENTATIVE
============= ====================
AMPLIDYNE, INC. LINK MICROTEK LTD.
NJ 08502 UNIT 17, CAMPBELL COURT,
BRAMLEY, U.K.
______________ _______________________
Date 10-17-95 Date 19 Oct 95
<PAGE>
AGREEMENT BETWEEN AMPLIDYNE, INC.
AND
ENS ENGINEERING
THIS AGREEMENT made this June 2, 1995 by and between Amplidyne Inc., a
corporation incorporated under the laws of the State of New Jersey
having its principal office at Ilene Court, Belle Mead, NJ, hereinafter
referred to as "Manufacturer." and ENS Engineering a manufacturers'
representative company operating under the laws of the state of Korea
office located at:Gaepung Bld.#987-14, Daechi-Dong, Kangnamgu, Seoul,
135-283, Korea as "Representative," provides as follows:
1. APPOINTMENT AND ACCEPTANCE. Manufacture appoints Representative as its
exclusive selling representative to sell products (enumerated in Provision #4
hereof) in the territory (defined in Provision #2 hereof); and Representative
accepts the appointment and agrees to sell and promote the sales of the
Manufacturer's products.
2. TERRITORY. Representative's territory shall consist of the following:
Korea.
3. HOUSE ACCOUNT. None
4. PRODUCT. All "products" of the Manufacturer are to be sold by the
Representative.
5. COMPUTATION AND PAYMENT
Amplidyne agrees to wire transfer the representative the commission
agreed within 30 Business days after shipment of the product by
Amplidyne, Inc.
Representative Commission
Up to $10,000 15%
100,001-250,000 12%
250,001-250,000 10%
500,001- 10 million 8%
In the event of the agency contract being terminated by the principal,
for any reason other than willful misconduct on the part of the agent,
the agent shall be entitled to an amount to be paid to him by principal
by way of compensation for loss of goodwill suffered by the agent.
Such commission shall be an amount, equal to an indemnity for one year
calculated from the Agent's average annual sum, earned by the agent in
respect of commission under the agency during the 5 years immediately
preceding the said termination.
<PAGE>
In the event of agency having existed for a shorter period than 5 years,
the amount of the compensation shall be calculated on the average for
the entire period of the agency.
6. ACCEPTANCE OF ORDERS. All orders are subject to acceptance or
rejection by an authorized officer of Manufacturer at its home office
and to the approval of Manufacturer's credit department. Manufacturer
shall be responsible for all credit risk and collection.
If Manufacturer notifies customer of its acceptance or rejection of
an order, a copy shall be transmitted to the Representative.
7. TERMS OF SALE. All sales shall be at prices and upon terms
established by Manufacturer and it shall have the right, in its sole
discretion, from time to time, to establish, change, alter or amend
prices and other terms and conditions of sale. Representative shall not
accept orders in the Manufacturer's name, make price quotations or
delivery promises without the Manufacturer's prior approval.
8. REPRESENTATIVE'S RELATIONSHIP AND CONUCT OF BUSINESS.
A.Representative shall maintain a sales office in the territory and
shall use its best efforts and devote such time as may be reasonably
necessary to sell and promote the sale of Manufacturer's products within
the territory.
b.Representative will conduct all of its business in its own name
and in such manner it may see fit. Representative will pay all expenses
whatever of its office and activities and will be responsible for the
act and expenses of its employees.
c.Representative shall not, without prior written consent of the
Manufacturer, handle products which, in the opinion of Manufacturer, are
competitive with the products of the Manufacturer being handled by the
Representative. Representative shall notify the Manufacturer whenever
taking on any additional lines other than those now handled by the
Representative, or whenever his relationship is terminated with any
other Manufacturer which it now represents.
d.Nothing in this Agreement shall be construed to constitute the
Representative as the partner, employee, or agent of the Manufacturer,
nor shall either party have any authority to bind the other in any
respect, it being intended that each shall reamin an independent
contractor responsible only for its own actions.
e.Representative shall not, without Manufacturer's prior written
approval, alter, enlarge or limit orders, make representation or
guarantees concerning Manufacturer's product, or accept the return of or
make any allowance for such products.
f.Representative shall furnish information to Manufacturers'
Accounting Department any information which it may have from time to
time relative to the credit of its customers.
<PAGE>
g.Representative shall abide by Manufacturer's policies and
communicate same to Manufacturer's customers.
h.Manufacturers shall be solely responsible for the design,
development, supply production and performance of its products and the
protection of its trade names.
i.Manufacturer shall furnish Representative, at no expense to the
Representative, a reasonable quantity of catalogs, literature, and any
other material necessary for the proper promotion and sale of its
products in the territory. Any literature which is not used, or samples,
or other equipment belonging to Manufacturer, shall be returned to the
Manufacturer at its request.
9. TERMS OF AGREEMENT AND TERMINATION. This agreement shall remain in
force and effect for a period of 3 years from the date 2nd June, 1995
and thereafter shall be extended year to year except that either party
may terminate the agreement at the end of the third year from the date
hereof or during any year by giving ninety days prior written notice to
the other party.
Notice of termination shall be certified or registered mail. The
effective date of notice or termination shall be the date mailed.
10.RIGHTS UPON TERMINATION. Upon termination of this Agreement for any
reason, Representative shall be entitled to:
a.Commissions for all orders shipped into Representative's territory
which are dated or communicated to Manufacturer prior to effective date
of termination; and
b.Its share of split commissions for orders dated or communicated to
Manufacturer prior to this effective date of termination, regardless of
when such orders are shipped.
11.GENERAL.This Agreement contains the entire understanding of the
parties, shall supersede any other oral or written agreement, and shall
insure to the benefit of Manufaturer's successors and assigns. It may
not be modified in any way without the written consent of both parties.
Representative shall not have the right to assign this Agreement in
whole or part without Manufacturer's written consent.
12.CONSTRUCTION OF AGREEMENT.This Agreement shall be construed according
to the laws of the State of New Jersey. IN WITNESS WHEREOF, the
parties hereto have executed this Agreement the day and year first
above written in multiple counterparts, each of which shall be
considered an original.
MANUFACTURER: SALES REPRESENTATIVE
============ ====================
AMPLIDYNE, INC. ENS ENGINEERING,
UNITS 9 & 10, BLDG. 7 GAEPUNG BLD.
Ilene Court SEOUL, KOREA
NJ 08502
. . . . . . . . . . . . . . . . . . . . . .
Date 12-5-95 Date 12-5-95
_________________ _________________
<PAGE>
EMPLOYMENT CONTRACT
AGREEMENT made as of the 13th day of December 1995 between AMPLIDYNE, INC.,
a Delaware corporation having an office at 144 Belmont Drive, Somerset, N.J.
08873 (hereinafter referred to as the "CORPORATION"), and Harris Freedman,
residing at 1241 Gulf of Mexico Dr., Longboat Key, Fl. 34227 (hereinafter
referred to as "EMPLOYEE").
IN CONSIDERATION OF the premises and mutual covenants and conditions herein
contained, the CORPORATION and EMPLOYEE hereby agree as follows:
1. EMPLOYMENT. The CORPORATION agrees to employ EMPLOYEE, and EMPLOYEE
agrees to serve the CORPORATION as a Vice President for strategic alliances upon
the terms and conditions hereafter set forth.
2. TERM. The term of this Agreement shall commence immediately, and shall
continue for three (3) year terms subject to provisions of Article 7 herein
provided.
3. COMPENSATION AND OTHER BENEFITS.
(a) For his services to the Company during the TERM, the Company shall
pay EMPLOYEE a salary ("Salary") at the annual rate of Sixty Thousand ($60,000)
Dollars. The EMPLOYEE acknowledges and agrees all salary amounts accrue and
shall only be payable by the Company at such time as the Company receives the
proceeds from its' initial public stock offering.
<PAGE>
(b) The Company shall issue to the EMPLOYEE Warrants to purchase One
Hundred Eighty Five (185,000) shares of Common Stock of Corporation at Two
Dollars and Fifty Cents ($2.50) per share, expiring September 30, 1999 under a
701 Employees Option Plan.
4. SERVICES. EMPLOYEE agrees to serve the CORPORATION faithfully and to the
best of his ability, and shall devote approximately twenty (20%) percent of his
business time, attention and energies to the business of the CORPORATION during
regular business hours and at any other time during the week as reasonably
requested by the CORPORATION. All services required to be rendered by the
EMPLOYEE may be rendered for the benefit of any of the CORPORATION's affiliates
or subsidiaries, but no liability shall attach to such affiliate or subsidiary
for the payment of any compensation hereunder.
5. EXPENSES. During the period of his employment, EMPLOYEE will be
reimbursed for his reasonable and necessary expenses incurred by him pursuant to
his employment hereunder as authorized in writing upon submission of appropriate
paid bills or vouchers therefor. All personal expenses of whatsoever kind or
nature are to be defrayed and borne by the EMPLOYEE, and the EMPLOYEE will not
make any commitments or purchases in behalf of the CORPORATION, nor obligate the
CORPORATION in any manner whatsoever.
6. EMPLOYER'S AUTHORITY. EMPLOYEE agrees to observe and comply with the
rules and regulations of the CORPORATION as
2
<PAGE>
adopted by the CORPORATION'S Board of Directors, either orally or in writing,
respecting performance of his duties, and to carry out and to perform orders,
directions and policies stated by the CORPORATION to him from time to time,
either orally or in writing.
7. TERMINATION. This Agreement and EMPLOYEE'S employment hereunder shall be
terminated upon the happening of any of the following events:
a. Whenever EMPLOYEE engages in a breach of any of the terms of this
Agreement;
b. Whenever the CORPORATION and EMPLOYEE shall mutually agree to
termination in writing;
c. Upon the death of EMPLOYEE;
d. (1) In the event that an EMPLOYEE incurs a disability through
physical or mental incapacity which renders EMPLOYEE incapable of performing the
customary duties of his employment for a period of six (6) month in any
consecutive one (1) year period.
(2) During the period of disability, the disable EMPLOYEE shall
continue to receive full compensation from the CORPORATION each week for the
term of such disability but not to exceed six (6) months; after the expiration
of said six (6) months period, EMPLOYEE shall receive compensation at the rate
of fifty percent (50%) of his full compensation each week for the remaining
terms of such disability but not to exceed an additional six (6) months; after
the expiration of said one (1) year period, EMPLOYEE shall not be entitled to
any additional compensation until the
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resumption of the normal duties of his employment; provided, however, that if
EMPLOYEE is disabled as defined herein, and thereafter resumes full time
employment hereunder, and thereafter becomes disabled again, any such resumed
period of disability shall, for the purspoes of determining the percentage of
full compensation and duration of payment thereof to which EMPLOYEE is then
entitled, be deemed a continuation of the prior period of disability unless a
period of at least six (6) continuous months of active full time employment
elapsed since the conclusion of the prior period of disability. Any amounts paid
hereunder to the disabled EMPLOYEE shall be reduced by any disability income
insurance proceeds under any policies owned by or paid for the CORPORATION.
(3) Anything herein contained to the contrary notwithstanding,
EMPLOYEE shall be conclusively deemed to be disabled within the meaning of this
Agreement during any period in which he receives disability insurance proceeds
from an insurance carrier, the policies of which were owned or paid for by the
CORPORATION.
e. EMPLOYEE or the CORPORATION gives fourteen (14) days' written notice
to the other of his intention to terminate this Agreement.
f. The EMPLOYEE shall be terminable by the CORPORATION upon either (i)
the termination by the EMPLOYEE of his employment with the CORPORATION,
including by resignation, or (ii) the termination by the CORPORATION of the
EMPLOYEE's employment
4
<PAGE>
hereunder for Cause. As used in this Agreement, "Cause" shall include, but not
limited to:
(1) any breach by the EMPLOYEE of Sections of this Agreement
relating to confidential information, inventions, non-competition,
non-solicitation of clients, and non-solicitation of employees, respectively;
(2) a failure or refusal by the EMPLOYEE to perform his duties set
forth in this Agreement or as reasonably assigned to him (her) in the future by
the CEO or his designee;
(3) any misappropriation of funds or other property of the
CORPORATION;
(4) insubordination or dishonesty;
(5) conviction of the EMPLOYEE of a felony involving moral
turpitude;
(6) any intentional and willful conduct by EMPLOYEE in his capacity
as an EMPLOYEE of the CORPORATION which is injurious to the CORPORATION; or
(7) the continued inability of the EMPLOYEE to perform his duties by
reason of alcoholism or drug abuse.
8. This Agreement may be terminated immediately in the event of the
CORPORATION'S bankruptcy, insolvency, liquidation, or the cessation of business
or a division thereof.
Upon termination for any of the foregoing causes, EMPLOYEE shall be
entitled to receive only the compenstion accrued but unpaid as of the date of
termination, and an additional three
5
<PAGE>
month compensation if the termination is for reason other than EMPLOYEE'S breach
of contract.
9. TRADE SECRETS AND NON-DISCLOSURE. The Employee hereby acknowledges
that certain trade secrets of the CORPORATION are valuable, special and unique
assets of the CORPORATION'S business. Such trade secrets include but are not
limited to its customer lists and the sources of its materials and products. The
EMPLOYEE hereby covenants that he will not, during or after the term of his
employment, disclose any of the foreoging secrets or any part thereof to any
firm, person or corporation or any entity for any reason or purpose whatsoever.
In the event of a breach or threatened breach by the EMPLOYEE of the provisions
of this Paragraph, the arbitration provisions of this Agreement to the contrary
notwithstanding, the CORPORATION shall be entitled to proceed in any court for
an injunction restraining the EMPLOYEE from disclosing, in whole or in part, any
of the aforesaid trade secrets, or from rendering such service to any person,
firm, corporation, association or any entity to whom such trade secrets, in
whole or in part, have been disclosed, or are threatened to be disclosed.
Nothing herein contained shall be construed as prohibiting the CORPORATION from
pursuing any other remedies for such breach or threatened breach, including the
recovery of damages from the EMPLOYEE and/or from proceeding pursuant to the
arbitration provisions of this Agreement.
10. NOTICES. Any notices required or permitted to be given under this
Agreement shall be sufficient if in writing and if
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<PAGE>
sent by registered or certified mail to his residence in the case of EMPLOYEE,
or to the principal office of the CORPORATION in the case of the CORPORATION.
11. ENTIRE AGREEMENT. This instrument contains the entire agreement of the
parties. It may not be changed orally but only by an agreement in writing signed
by the party or parties against whom enforcement of any waiver, change,
modification, extention or discharge is sought.
12. ARBITRATION. Any claim or controversy among or between the parties
hereto arising out of or pertaining to any matter contained in this Agreement,
or any difference as to the interpretation or performance of any of the
provisions of this Agreement shall be settled by arbitration in New York, New
York before three (3) arbitrators of the American Arbitration Association under
its then prevailing rules. The arbitrators sitting in any such controversy
shall not have the authority or power to modify or alter any express condition
or provision of this Agreement, or any modification thereof, or to render any
award which, by its terms, has the effect of altering of modifying any express
condition or provision of this Agreement or modification thereof. No award may
be made which imposes liability contrary to the provisions hereof, or which is
in excess of specified measure of damages limiting claims against the parties
hereto, and any award in violation thereof shall be deemed a departure from the
terms of the submission, and shall by wholly void and unenforceable. It shall be
a condition precedent to the
7
<PAGE>
institution of said arbitration proceedings that the proceeding be commenced
within one (1) year from (i) the date the claim or controversy arises; or (ii)
the date of termination of your services or employment, whichever is first to
occur, and the failure to institute arbitration proceedings within such period
shall constitute an absolute bar to the institution of any proceedings and a
waiver of all claims. The award of the arbitrators shall be final and binding,
and judgment may be entered thereon in any court of competent jurisdiction.
The parties consent to the jurisdiction of the State of New York and the
United States District Court for the Southern District of New York for all
purposes in connection with arbitration, including the entry of judgment on any
award. The parties consent that any process or Notice of Motion or other
application to either of said courts, and any paper in connection with the
arbitration may be served by certified mail, return receipt requested, or by
personal service, or in such other manner as may be permissible under the rules
of the applicable court or arbitration tribunal provided a reasonable time for
appearance is allowed.
13. BINDING EFFECT. This Agreement shall be binding upon and inure to the
benefit of the successors and assignees of the CORPORATION, and the heirs,
representatives and beneficiaries of the EMPLOYEE.
14. PRIOR AGREEMENTS. All prior employment agreements between the parties
hereto are hereby revoked.
8
<PAGE>
IN WITNESS WHEREOF, the parties hereto have set their respective hands and
seals as of the day and year first above written.
AMPLIDYNE, INC.
By /s/ Devendar Baines
_______________________________
DEVENDAR BAINES
By _______________________________
HARRIS FREEDMAN
9
<PAGE>
EMPLOYMENT CONTRACT
-------------------
AGREEMENT made as of the 13th day of December 1995 between AMPLIDYNE, INC.,
a Delaware corporation having an office at 144 Belmont Drive, Somerset, N.J.
08873 (hereinafter referred to as the "CORPORATION"), and Sharon Will, residing
at 250 East 51st Street, New York, NY 10022 (hereinafter referred to as
"EMPLOYEE").
IN CONSIDERATION OF the premises and mutual covenants and conditions herein
contained, the CORPORATION and EMPLOYEE hereby agree as follows:
1. EMPLOYMENT. The CORPORATION agrees to employ EMPLOYEE, and EMPLOYEE
agrees to serve the CORPORATION as a Vice President for Investor Relations upon
the terms and conditions hereafter set forth.
2. TERM. The term of this Agreement shall commence immediately, and shall
continue for three (3) year terms subject to provisions of Article 7 herein
provided.
3. COMPENSATION AND OTHER BENEFITS.
(a) For his services to the Company during the TERM, the Company shall
pay EMPLOYEE a salary ("Salary") at the annual rate of Sixty Thousand ($60,000)
Dollars. The EMPLOYEE acknowledges and agrees all salary amounts accrue and
shall only be payable by the Company at such time as the Company receives the
proceeds from its' initial public stock offering.
(b) The Company shall issue to the EMPLOYEE
<PAGE>
Warrants to purchase One Hundred Sixty Five (165,000) shares of Common Stock of
Corporation at Two Dollars and Fifty Cents ($2.50) per share, expiring September
30, 1999 under a 701 Employees Option Plan
4. SERVICES. EMPLOYEE agrees to serve the CORPORATION faithfully and to the
best of his ability, and shall devote approximately twenty (20%) percent of his
business time, attention and energies to the business of the CORPORATION during
regular business hours and at any other time during the week as reasonably
requested by the CORPORATION. All services required to be rendered by the
EMPLOYEE may be rendered for the benefit of any of the CORPORATION's affiliates
or subsidiaries, but no liability shall attach to such affiliate or subsidiary
for the payment of any compensation hereunder.
5. EXPENSES. During the period of his employment, EMPLOYEE will be
reimbursed for his reasonable and necessary expenses incurred by him pursuant to
his employment hereunder as authorized in writing upon submission of appropriate
paid bills or vouches therefor. All personal expenses of whatsoever kind or
nature are to be defrayed and borne by the EMPLOYEE, and the EMPLOYEE will not
make any commitments or purchases in behalf of the CORPORATION, nor obligate the
CORPORATION in any manner whatsoever.
6. EMPLOYER'S AUTHORITY. EMPLOYEE agrees to observe and comply with the
rules and regulations of the CORPORATION as adopted by the CORPORATION'S Board
of Directors, either orally or
2
<PAGE>
in writing, respecting performance of his duties, and to carry out and to
perform orders, directions and policies stated by the CORPORATION to him from
time to time, either orally or in writing.
7. TERMINATION. This Agreement and EMPLOYEE'S employment hereunder shall
be terminated upon the happening of any of the following events:
a. Whenever EMPLOYEE engages in a breach of any of the terms of this
Agreement;
b. Whenever the CORPORATION and EMPLOYEE shall mutually agree to
termination in writing;
c. Upon the death of EMPLOYEE;
d. (1) In the event that an EMPLOYEE incurs a disability through
physical or mental incapacity which renders EMPLOYEE incapable of performing the
customary duties of his employment for a period of six (6) month in any
consecutive one (1) year period.
(2) During a period of disability, the disable EMPLOYEE shall
continue to receive full compensation from the CORPORATION each week for the
term of such disability but not to exceed six (6) months; after the expiration
of said six (6) months period, EMPLOYEE shall receive compensation at the rate
of fifty percent (50%) of his full compensation each week for the remaining
terms of such disability but not to exceed six (6) months; after the expiration
of said one (1) year period, EMPLOYEE shall not be entitled to any additional
compensation until the resumption of the normal duties of his employment;
provided,
3
<PAGE>
however, that if EMPLOYEE is disabled as defined herein, and thereafter resumes
full time employment hereunder, and thereafter becomes disabled against, any
such resumed period of disability shall, for the purposes of determining the
percentage of full compensation and duration of payment thereof to which
EMPLOYEE is then entitled, be deemed a continuation of the prior period of
disability unless a period of at least six (6) continuous months of active full
time employment elapsed since the conclusion of the prior period of disability.
Any amounts paid hereunder to the disabled EMPLOYEE shall be reduced by any
disability income insurance proceeds under any policies owned by or paid for the
CORPORATION.
(3) Anything herein contained to the contrary notwithstanding, EMPLOYEE
shall be conclusively deemed to be disabled within the meaning of this Agreement
during any period in which he receives disability insurance proceeds from an
insurance carrier, the policies of which were owned or paid for by the
CORPORATION.
e. EMPLOYEE or the CORPORATION gives fourteen (14) days' written notice
to the other of his intention to terminate this Agreement.
f. The EMPLOYEE shall be terminable by the CORPORATION upon either (1)
the termination by the EMPLOYEE of his employment with the CORPORATION,
including by resignation, or (ii) the termination by the CORPORATION of the
EMPLOYEE's employment hereunder for Cause. As used in this Agreement, "cause"
shall
4
<PAGE>
include, but not limited to:
(1) any breach by the EMPLOYEE of Sections of this Agreement relating to
confidential information, inventions, non-competition, non-solicitation of
clients, and non-solicitation of employees, respectively;
(2) a failure or refusal by the EMPLOYEE to perform his duties set forth
in this Agreement or as reasonably assigned to him (her) in the future by the
CEO or his designee;
(3) any misappropriation of funds or other property of the CORPORATION;
(4) insubordination or dishonesty;
(5) conviction of the EMPLOYEE of a felony involving moral turpitude;
(6) any intentional and willful conduct by EMPLOYEE in his capacity as
an EMPLOYEE of the CORPORATION which is injurious to the CORPORATION; or
(7) the continued inability of the EMPLOYEE to perform his duties by
reason of alcoholism or drug abuse.
8. This Agreement may be terminated immediately in the event of the
CORPORATION'S bankruptcy, insolvency, liquidation, or the cessation of business
or a division thereof.
Upon termination for any of the foregoing causes, EMPLOYEE shall be
entitled to receive only the compensation accrued but unpaid as of the date of
termination, and an additional three month compensation if the termination is
for reason other than
5
<PAGE>
EMPLOYEE'S breach of contract.
9. TRADE SECRETS AND NON-DISCLOSURE. The Employee hereby acknowledges that
certain trade secrets of the CORPORATION are valuable, special and unique assets
of the CORPORATION'S business. Such trade secrets include but are not limited to
its customer lists and the sources of its materials and products. The EMPLOYEE
hereby covenants that he will not, during or after the term of his employment,
disclose any of the foregoing secrets or any part thereof to any firm, person or
corporation or any entity for any reason or purpose whatsoever. In the event of
a breach or threatened breach by the EMPLOYEE of the provisions of this
Paragraph, the arbitration provisions of this Agreement to the contrary
notwithstanding, the CORPORATION shall be entitled to proceed in any court for
an injunction restraining the EMPLOYEE from disclosing, in whole or in part, any
of the aforesaid trade secrets, or from rendering such service to any person,
firm, corporation, association or any entity to whom such trade secrets, in
whole or in part, have been disclosed, or are threatened to be disclosed.
Nothing herein contained shall be construed as prohibiting the CORPORATION from
pursuing any other remedies for such breach or threatened breach, including the
recovery of damages from the EMPLOYEE and/or from proceeding pursuant to the
arbitration provisions of this Agreement.
10. NOTICES. Any notices required or permitted to be given under this
Agreement shall be sufficient if in writing and if sent by registered or
certified mail to his residence in the case
6
<PAGE>
of EMPLOYEE, or to the principal office of the CORPORATION in the case of the
CORPORATION.
11. ENTIRE AGREEMENT. This instrument contains the entire agreement of
the parties. It may not be changed orally but only by an agreement in writing
signed by the party or parties against whom enforcement of any waiver, change,
modification, extension or discharge is sought.
12. ARBITRATION. Any claim or controversy among or between the parties
hereto arising out of or pertaining to any matter contained in this Agreement,
or any differences as to the interpretation or performance of any of the
provisions of this Agreement shall be settled by arbitration in New York, New
York before three (3) arbitrators of the American Arbitration Association under
its then prevailing rules. The arbitrators sitting in any such controversy shall
not have the authority or power to modify or alter any express condition or
provision of this Agreement, or any modification thereof, or to render any award
which, by its terms, has the effect of altering or modifying any express
condition or provision of this Agreement or modification thereof. No award may
be made which imposes liability contrary to the provisions hereof, or which is
in excess of specified measure of damages limiting claims against the parties
hereto, and any award in violation thereof shall be wholly void and
unenforceable. It shall be a condition precedent to the institution of said
arbitration proceedings that the proceeding be
7
<PAGE>
commenced within one (1) year from (i) the date the claim or controversy arises;
or (ii) the date of termination of your services or employment, whichever is
first to occur, and the failure to institute arbitration proceedings within such
period shall constitute an absolute bar to the institution of any proceedings
and a waiver of all claims. The award of the arbitrators shall be final and
binding, and judgment may be entered thereon in any court of competent
jurisdiction.
The parties consent to the jurisdiction of the State of New York and the
United States District Court for the Southern District of New York for all
purposes in connection with arbitration, including the entry of judgement on any
award. The parties consent that any process or Notice of Motion or other
application to either of said courts, and any paper in connection with the
arbitration may be served by certified mail, return receipt requested, or by
personal service, or in such other manner as may be permissible under the rules
of the applicable court or arbitration tribunal provided a reasonable time for
appearance is allowed.
13. BINDING EFFECT. This Agreement shall be binding upon and inure to the
benefit of the successors and assignees of the CORPORATION, and the heirs,
representatives and beneficiaries fo the EMPLOYEE.
14. PRIOR AGREEMENTS. All prior employment agreements between the parties
hereto are hereby revoked.
8
<PAGE>
IN WITNESS WHEREOF, the parties hereto have set their respective hands and
seals as of the day and year first above written.
AMPLIDYNE, INC.
By___________________________
DEVENDAR BAINES
BY___________________________
SHARON WILL
9
<PAGE>
Patterson Travis, Inc.
One Battery Park Plaza
New York, NY 10004
Re: Amplidyne, Inc.
Gentlemen:
The undersigned is the beneficial and record holder of shares of common
stock ("Common Stock"), and/or other securities (together with Common Stock, the
"Securities") of Amplidyne, Inc., a Delaware corporation (the "Company"). In
connection with the proposed initial public offering of securities of the
Company (the "Offering"), and in consideration of your acting as underwriter for
the Offering, the undersigned agrees not to directly or indirectly, for a period
of eighteen (18) months following the effective date of the Offering, offer,
sell (including by effecting any short sale), loan, hypothecate, pledge, grant
any option for the sale of, acquire any option to dispose of, transfer or gift
(except for estate planning or charitable transfers or other private sales,
provided the transferees agree to be bound by the same restrictions on
transfer), or otherwise dispose of any Securities without obtaining your prior
written consent (which consent may be withheld or granted in your discretion).
The undersigned acknowledges and agrees that in order to enforce the covenants
contained in this letter agreement, the Company will impose stop-transfer
instructions with respect to the Securities owned by the undersigned until the
end of such eighteen (18) month period for transfers other than those exceptions
described above. In addition, the undersigned waives any registration rights he
may have with respect to all such Securities for such eighteen (18) month
period.
Date: October 1, 1996
Signed:_____________________________
Print Name:__________________________
<PAGE>
Patterson Travis, Inc.
One Battery Park Plaza
New York, NY 10004
Re: Amplidyne, Inc.
Gentlemen:
The undersigned is the beneficial and record holder of shares of common
stock ("Common Stock"), and/or other securities (together with Common Stock, the
"Securities") of Amplidyne, Inc., a Delaware corporation (the "Company"). In
connection with the proposed initial public offering of securities of the
Company (the "Offering"), and in consideration of your acting as underwriter for
the Offering, the undersigned agrees not to directly or indirectly, for a period
of twelve (12) months following the effective date of the Offering, offer, sell
(including by effecting any short sale), loan, hypothecate, pledge, grant any
option for the sale of, acquire any option to dispose of, transfer or gift
(except for estate planning or charitable transfers or other private sales,
provided the transferees agree to be bound by the same restrictions on
transfer), or otherwise dispose of any Securities without obtaining your prior
written consent (which consent may be withheld or granted in your discretion).
The undersigned acknowledges and agrees that in order to enforce the covenants
contained in this letter agreement, the Company will impose stop-transfer
instructions with respect to the Securities owned by the undersigned until the
end of such twelve (12) month period for transfers other than those exceptions
described above. In addition, the undersigned waives any registration rights he
may have with respect to all such Securities for such twelve (12) month period.
Date: October 1, 1996
Signed:_____________________________
Print Name:__________________________
<PAGE>
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We have issued our reports dated May 17, 1996, except for Note K, as to which
the date is September 30, 1996, accompanying the financial statements and
schedules of Amplidyne, Inc. contained in the Registration Statement and
Prospectus. We consent to the use of the aforementioned reports in the
Registration Statement and Prospectus, and to the use of our name as it appears
under the caption "Experts."
GRANT THORNTON LLP
/s/ Grant Thornton LLP
Parsippany, New Jersey
October 9, 1996
