UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1998.
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES AND
EXCHANGE ACT OF 1934.
FOR THE TRANSITION PERIOD FROM ____________ TO _____________
Commission File Number 0-21931
AMPLIDYNE, INC.
---------------
(Exact name of small business issuer as specified in its charter)
DELAWARE 2-3440510
-------- ---------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
144 Belmont Drive
SOMERSET, NEW JERSEY 08873
--------------------------
(Address of principal executive offices)
(732) 271-8473
--------------
(Issuer's telephone number)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the past 12
months (or for such shorter period that the registrant was required to file such
reports), and (2) has been subject to such filing requirements for the past 90
days.
Yes [X] No [ ]
The number of shares outstanding of the Issuer's Common Stock, $.0001 Par Value,
as of August 13, 1998 was 4,500,000.
<PAGE>
AMPLIDYNE, INC.
FORM 10-QSB
SIX MONTHS ENDED JUNE 30, 1998
TABLE OF CONTENTS
PART 1 - FINANCIAL INFORMATION
Item 1 FINANCIAL STATEMENTS (Unaudited):
Balance Sheets................................................. 1-2
Statements of Operations....................................... 3
Statement of Cash Flows........................................ 4
Statement of Changes in Stockholder's Equity................... 5
Notes to Financial Statements.................................. 6-7
Item 2 Management's Discussion and Analysis of Financial
Condition and Results of Operations.......................... 8-9
PART II - OTHER INFORMATION
Item 1 Legal Proceedings............................................... 10
Item 2 Change in Securities............................................ 10
Signatures.............................................................. 11
Exhibit 27- Financial Data Schedule..................................... 12
<PAGE>
PART 1 - FINANCIAL INFORMATION
Item 1. Financial Statements
AMPLIDYNE, INC.
BALANCE SHEETS
ASSETS
December 31, June 30,
1997* 1998
---------- ----------
(Unaudited)
CURRENT ASSETS
Cash and cash equivalents $2,039,012 $1,612,061
Accounts receivable, net of allowance
for doubtful accounts of $40,510 706,893 427,421
Inventories 324,622 298,503
Prepaid expenses and other current assets 9,296 13,690
---------- ----------
Total current assets 3,079,823 2,351,675
PROPERTY AND EQUIPMENT - AT COST
Machinery and equipment 538,214 538,214
Furniture and fixtures 43,750 43,751
Autos and trucks 19,923 19,923
Leasehold improvements 4,162 4,162
---------- ----------
606,049 606,050
Less: Accumulated depreciation and amortization 237,494 288,646
---------- ----------
Net depreciated cost 368,555 317,404
OTHER ASSETS 35,000 35,000
---------- ----------
TOTAL ASSETS $3,483,378 $2,704,079
========== ==========
* Derived from Company's audited Balance Sheet at December 31, 1997
The accompanying notes are an integral part of these financial statements
-1-
<PAGE>
AMPLIDYNE, INC.
BALANCE SHEETS
LIABILITIES AND STOCKHOLDERS' EQUITY
December 31, June 30,
1997* 1998
------------ ------------
(Unaudited)
CURRENT LIABILITIES
Current maturities of lease obligations $ 136,396 125,307
Accounts payable 194,572 176,413
Accrued expenses 189,123 136,415
Stockholders' loan 103,051 78,051
------------ ------------
Total current liabilities 623,142 516,186
LONG-TERM LIABILITIES
Lease obligations 67,875 9,541
Deferred compensation 140,000 160,000
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; 4,460,000
shares and 4,500,000 shares issued and
outstanding at December 31, 1997 and
June 30, 1998, respectively 446 450
Additional paid-in-capital 12,304,592 12,354,588
Accumulated deficit (9,652,677) (10,336,686)
------------ ------------
Total stockholders' equity 2,652,361 2,018,352
------------ ------------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 3,483,378 $ 2,704,079
============ ============
* Derived from Company's audited Balance Sheet at December 31, 1997
The accompanying notes are an integral part of these financial statements
-2-
<PAGE>
AMPLIDYNE, INC.
STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
Three Three Six Six
Months Months Months Months
Ended Ended Ended Ended
June 30, June 30, June 30, June 30,
1997 1998 1997 1998
----------- --------- ----------- ---------
<S> <C> <C> <C> <C>
Net sales $ 348,249 $ 502,714 $ 898,894 824,511
Cost of goods sold 318,488 375,670 836,758 746,974
----------- --------- ----------- ---------
Gross profit (loss) 29,761 127,044 62,136 77,537
Operating expenses
Selling, general, and admin. 310,111 261,255 620,154 535,330
Research, engineering, and dev. 212,508 142,004 477,028 264,165
----------- -------- ----------- ---------
Operating loss (492,858) (276,215) (1,035,046) (721,958)
Other nonoperating income and expenses
Interest income 51,666 23,243 66,626 48,409
Interest expense 8,905 4,462 27,886 9,785
Stock compensation and financing -- -- 324,540 --
----------- --------- ----------- ---------
Loss before income taxes (450,097) (257,434) (1,320,846) (683,334)
Provision for income taxes -- 475 350 675
----------- --------- ----------- ---------
NET LOSS $ (450,097) $(257,909) $(1,321,196) $(684,009)
=========== ========= =========== =========
Net loss per share - basic and diluted $ (.08) $ (.06) $ (.25) $ (.16)
=========== ========= ============ =========
Weighted average number of shares
outstanding 5,254,950 4,407,370 5,254,950 4,407,370
=========== ========= =========== =========
</TABLE>
The accompanying notes are an integral part of these financial statements
-3-
<PAGE>
AMPLIDYNE, INC.
STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Six Months Six Months
Ended Ended
June 30, 1997 June 30, 1998
------------- -------------
<S> <C> <C>
Cash flows from operating activities:
Net Loss $ (1,321,196) $ (684,009)
Adjustments to reconcile net loss to net cash
used in operating activities
Depreciation and amortization 44,594 51,152
Stock compensation expense 324,540 --
Changes in assets and liabilities
Accounts receivable (66,692) 279,472
Inventories 10,754 26,119
Prepaid expenses and other current assets 55,300 (4,394)
Accounts payable and accrued expenses (518,530) (50,868)
------------ ------------
Total adjustments (150,034) 301,481
------------ ------------
Net cash used for operating activities (1,471,230) (382,528)
------------ ------------
Cash flows from investing activities:
Purchase of fixed assets (137,765) --
------------ ------------
Net cash used for investing activities (137,765) --
------------ ------------
Cash flows from financing activities:
Proceeds from (repayments of) bank line of credit (210,000) --
Proceeds from (repayments of) notes payable (1,214,000) --
Lease obligations (223,433) (69,423)
Proceeds from (repayments of) stockholders' loans (294,694) (25,000)
Prepaid registration costs 167,053 --
Stock issuance 6,782,153 50,000
------------ ------------
Net cash provided (used) by financing activities 5,007,079 (44,423)
------------ ------------
NET INCREASE (DECREASE) IN CASH 3,398,084 (426,951)
Cash at beginning of year 104,310 2,039,012
------------ ------------
Cash and cash equivalents at end of year $ 3,502,394 $ 1,612,061
============ ============
Supplemental disclosures of cash flow information
Cash paid for: Interest $ 97,403 $ 10,339
Income taxes -- 475
</TABLE>
The accompanying notes are an integral part of these financial statements
-4-
<PAGE>
AMPLIDYNE, INC.
STATEMENT OF CHANGES IN STOCKHOLDER'S EQUITY
FOR THE THREE MONTHS ENDED
JUNE 30, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
Common Stock Additional Accumulated
Shares Par Value Paid-In-Capital (Deficit) Total
------ --------- --------------- --------- -----
<S> <C> <C> <C> <C> <C>
Balance at December 31, 1997 4,460,000 $ 446 $ 12,304,592 $ (9,652,677) $ 2,652,361
Issuance of Common Stock 40,000 4 49,996 50,000
Net Loss (684,009) (684,009)
---------- ----- ----------- ------------ ----------
Balance at June 30, 1998 4,500,000 $ 450 $12,354,588 $(10,336,686) $ 2,018,352
========== ===== =========== ============ ==========
</TABLE>
The accompanying notes are an integral part of these financial statements
-5-
<PAGE>
AMPLIDYNE, INC.
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1998
NOTE A - ADJUSTMENTS
In the opinion of management, all adjustments, consisting only of normal
recurring adjustments necessary for a fair statement of (a) results of
operations for the six-month periods ended June 30, 1997 and June 30, 1998,
(b) the financial position at December 31, 1997 and June 30, 1998, (c) the
statements of cash flows for the six-month periods ended June 30, 1997 and
June 30, 1998, and (d) the changes in stockholders' equity for the six-month
period ended June 30, 1998, have been made. The results of operations for
the six months ended June 30, 1998 are not necessarily indicative of the
results to be expected for the full year.
NOTE B - UNAUDITED INTERIM FINANCIAL INFORMATION
The accompanying unaudited financial statements have been prepared in
accordance with generally accepted accounting principles for interim
financial information. Accordingly, they do not include all the information
and footnotes required by generally accepted accounting principles for
financial statements. For further information, refer to the audited
financial statements and notes thereto for the year ended December 31, 1997,
included in the Company's Form 10-KSB filed with the Securities and Exchange
Commission on April 15, 1998.
NOTE C - PUBLIC OFFERING
A registration statement covering an underwritten public offering of
1,610,000 units at a price of $5.10 per unit, prior to underwriters'
commissions, was declared effective by the Securities and Exchange
Commission on January 21, 1997. Each unit consists of one share of common
stock, par value $.0001 per share and one redeemable common stock purchase
warrant. Each warrant entitles the holder to purchase one share for $6.00
during the four-year period ending January 21, 2002. The Company may redeem
the warrants at a price of $.01 per warrant at any time with not less than
thirty days' prior written notice if the average closing price equals or
exceeds $9.00 per share for any twenty consecutive trading days.
In January 1997 and March 1997, the Company received net proceeds of
approximately $6,782,000, which included the overallotment of 210,000 units.
The proceeds are net of legal fees, underwriter's fees and other expenses of
the offering totaling approximately $1,429,000.
-6-
<PAGE>
AMPLIDYNE, INC.
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1998
NOTE D - LOSS PER SHARE
In February 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 128, "Earnings per Share" ("SFAS No.
128"). SFAS No. 128 specifies the compilation, presentation and disclosure
requirements for earnings per share for entities with publicly held common
stock or potential common stock. The requirements of this statement are
effective for interim and annual periods ending after December 15, 1997.
Net loss per common share - basic and diluted is determined by dividing the
net loss by the weighted average number of common stock outstanding. Net
loss per common share - diluted does not include potential common shares
derived from stock options and warrants because they are antidilutive.
NOTE E - LITIGATION
The Company is a defendant to a complaint filed in the Circuit Court of the
Eighteenth Judicial District of the State of Florida on January 23, 1997,
alleging breach of contract and alleged damages in the amount of
approximately $4,323,000, plus interest, costs and attorney's fees. The
Company filed an answer to the complaint denying the allegations therein and
a counterclaim on March 10, 1997. The counterclaim alleges breach of
contract, common law fraud, conversion and unjust enrichment. The Company
further asserts damages in the amount of approximately $463,000, plus
interest, costs and attorney's fees. Management believes that the
allegations in the complaint are without merit.
From time to time, the Company is party to what it believes is routine
litigation and proceedings that may be considered as part of the ordinary
course of its business. Except for the proceedings noted above, the Company
is not aware of any current or pending litigation or proceedings that would
have a material effect on the Company's results of operations or financial
statements.
-7-
<PAGE>
PART 1 - FINANCIAL INFORMATION
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
RESULTS OF OPERATIONS
The following table sets forth certain operating data:
Total Net Sales
Six Months ended June 30,
1997 1998
---------- -----------
Net sales $ 898,894 $ 824,511
Cost of goods sold 836,758 746,974
---------- -----------
Gross profit (Loss) 62,136 77,537
---------- -----------
Selling, general, and
administrative 620,154 535,330
Research, engineering,
and development 477,028 264,165
---------- -----------
Total operating expenses 1,097,182 799,495
---------- -----------
Stock compensation and
financing costs 324,540 --
Interest income 66,626 48,409
Other expenses 27,886 9,785
---------- -----------
Loss before income taxes (1,320,846) (683,334)
Provision for income taxes 350 675
---------- -----------
NET LOSS $(1,321,196) $ (684,009)
========== ===========
RESULTS OF OPERATIONS-SIX MONTHS ENDED JUNE 30, 1998 COMPARED
TO THE SIX MONTHS ENDED JUNE 30, 1997
Net sales for the six month period ended June 30, 1998 were $824,511, while
sales for the six months ended June 30, 1997 were $898,894. Sales increased in
the 2nd quarter of 1998 compared with the 1st quarter of 1998, due to continuing
orders from customers and less orders requiring large amounts of research and
development time.
Gross profit for the six months ended June 30, 1998 amounted to $77,537 (9.4% of
sales), compared to $62,136 (6.9% of sales) for the corresponding six months of
1997. This increase in gross margin is principally attributable to lower lease
expenses on equipment used to manufacture products and reduced material costs.
-8-
<PAGE>
PART 1 - FINANCIAL INFORMATION - ITEM 2 (CONTINUED)
Selling, general, and administrative expenses were $535,330 (65% of sales) for
the first six months of 1998, compared to $620,154 (69% of sales) for the first
six months of 1997. The 4% decrease is due to reduced overhead costs. These
expenses were higher in 1997 due to the Company's initial public offering.
Research, engineering, and development costs decreased for the six months ended
June 30, 1998 compared with the corresponding period of 1997. This decrease is
due to a reduced level of staff performing research and development activities.
This trend should continue if reoccurring orders are received from customers
utilizing the existing technology.
Interest expense was lower in the second quarter of 1998 compared to the
corresponding period of 1997. The decrease is due to lower lease payments, as
some of the leases on test equipment have been paid off. This trend is expected
to continue.
As a result of the foregoing, the Company incurred net losses of (684,009) or
(.16) per share for the six months ended June 30, 1998 compared to net losses of
(1,321,196) or (.25) per share for the same period in 1997.
LIQUIDITY AND CAPITAL RESOURCES
At June 30, 1998, the Company had cash and cash equivalents of $1,612,061
principally due to the injection of IPO funds in early 1997. The Company had
accrued expenses of $136,415, consisting of payroll and commissions.
The Company believes that the net proceeds of the Company's initial public
offering and operations will meet its working capital obligations and fund
further development of its business for the next twelve months. There can be no
assurance that any additional financing will be available to the Company on
acceptable terms, or at all.
-9-
<PAGE>
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
The Company is a defendant in a complaint filed in the United States District
Court for the District of New Jersey on May 13, 1998. The complaint alleges
breach of contract of a representative agreement between the Company and ENS
Engineering of South Korea. The claim against Amplidyne, Inc. is for $135,000,
plus unspecified compensatory and punitive damages. The Company filed and answer
to the complaint denying allegations and a counterclaim against the plaintiff on
June 12, 1998. The counterclaim alleges breach of contract for unspecified
damages, which in the opinion of management exceeds $1,000,000. The Company
intends to aggressively defend this action and to prosecute its counterclaim.
Management believes that the breach of contract was caused by the plaintiff.
Item 2. Change in Securities
On June 30, 1998, the Company issued 40,000 shares of common stock to Devendar
S. Bains, its Chief Executive Officer and President. The shares were issued in
consideration of the forgiveness of $50,000 due to Mr. Bains, representing a
portion of deferred compensation owed to him. The sale was made in reliance on
Section 4 (2) of the Securities Act of 1933, as amended. No underwriting
discounts or commissions were paid.
-10-
<PAGE>
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant has
duly caused this report to be signed on its behalf by the undersigned, thereunto
duly authorised.
AMPLIDYNE, INC.
Dated: August 13, 1998 By: /s/ DEVENDAR S. BAINS
---------------------
Name: Devendar S. Bains
Title: Chief Executive Officer,
President, Treasurer,
Principal Accounting
Officer and Director
-11-
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE BALANCE
SHEETS AND STATEMENTS OF OPERATIONS FOUNDED ON PAGES 1-3 OF THE COMPANY'S FORM
10-QSB, FOR THE YEAR-TO-DATE AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0001016151
<NAME> AMPLIDYNE, INC.
<MULTIPLIER> 1
<CURRENCY> USD
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1998
<PERIOD-END> JUN-30-1998
<EXCHANGE-RATE> 1
<CASH> 1,612,061
<SECURITIES> 0
<RECEIVABLES> 467,931
<ALLOWANCES> 40,510
<INVENTORY> 298,503
<CURRENT-ASSETS> 2,351,675
<PP&E> 606,050
<DEPRECIATION> 288,646
<TOTAL-ASSETS> 2,704,079
<CURRENT-LIABILITIES> 516,186
<BONDS> 0
0
0
<COMMON> 450
<OTHER-SE> 2,017,902
<TOTAL-LIABILITY-AND-EQUITY> 2,018,352
<SALES> 824,511
<TOTAL-REVENUES> 872,920
<CGS> 746,974
<TOTAL-COSTS> 1,011,139
<OTHER-EXPENSES> 535,330
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 9,785
<INCOME-PRETAX> (683,334)
<INCOME-TAX> 675
<INCOME-CONTINUING> (684,009)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (684,009)
<EPS-PRIMARY> (.16)
<EPS-DILUTED> (.16)
</TABLE>
