**U.S. SECURITIES AND EXCHANGECOMMISSION**

**Washington, D.C. 20549**

 

**Form 10-QSB**

 

**(Mark one)**

 

**ý****QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIESEXCHANGE ACT OF1934**

 

**For the quarterly period ended September 30, 2002**

 

**o****TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIESEXCHANGE ACT**

 

**Commission file number 0-24886**

 

**ACRODYNE COMMUNICATIONS, INC.**

(Exactname of small business issuer as specified in its charter)

 

| **Delaware**                                                    |   | **11-3067564**                        |
|-----------------------------------------------------------------|--------|---------------------------------------|
| (State or other jurisdiction of  incorporation or organization) |   | (I.R.S. Employer  Identification No.) |
|                                                            |   |                                  |
| **10706 Beaver Dam Road  Cockeysville, Maryland**               |   | **21030**                             |
| (Address of principal executive offices)                        |   | (Zip Code)                            |
|                                                            |   |                                  |
| **410-568-1629**                                                |
| Issuer’s telephone number, including Area Code             |

 

Check whether the issuer (1) has filed all reports required to be filedby Section 13 or 15(d) of the Exchange Act during the past 12 months (or forsuch 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  ý  No o

 

State the number of shares outstanding of each of the issuer’s classesof common equity, as of the latest practicable date: 7,409,608 shares of commonstock of Acrodyne Communications, Inc. were outstanding on October 29, 2002.

 

 

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ACRODYNECOMMUNICATIONS, INC.

 

**INDEX**

 
| PART I.  FINANCIAL INFORMATION:             |
|--------------------------------------------------|
|                                             |   |
| Item 1 – Financial Statements               |
|                                             |   |
|                                             | Consolidated Balance Sheets  at September 30, 2002 (unaudited) and December 31, 2001 |
|                                             |   |
|                                             | Consolidated  Statements of Operations for the Three Months and Nine Months EndedSeptember 30, 2002 and 2001  (unaudited) |
|                                             |   |
|                                             | Consolidated  Statements of Cash Flows for the Nine Months Ended  September 30, 2002 and 2001(unaudited) |
|                                             |   |
|                                             | Notes to  Consolidate Financial Statements (unaudited) |
|                                             |   |
|                                             | Item  2.  Management’s Discussion and  Analysis of Financial Condition and Results of Operations |
|                                             |   |
|                                             | Item 3. Controls and  Procedures |
|                                             |
| PART II.   OTHER INFORMATION, AS APPLICABLE |
|                                             |
|                                             | Item  6. Exhibits and Reports on Form 8-K |
|                                             |   |
| SIGNATURES                                       |
|                                                  |  |  |

 

2

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**AcrodyneCommunications, Inc.**

**Consolidated Balance Sheets**

 
|                                                                                                                                                             |   | **September 30,  2002** |       | **December 31,  2001** |   |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-------------------------|------------|------------------------|--------|
|                                                                                                                                                             |   | **(unaudited)**         |       | **(audited)**          |   |
| **ASSETS**                                                                                                                                                       |   |                    |       |                   |   |
| CURRENT ASSETS:                                                                                                                                                  |   |                    |       |                   |   |
| Cash and cash equivalents                                                                                                                                        |   | $                       | 1,104,904  |                   | $      | 17,687 |   |
| Accounts receivables, net of allowance for doubtful accounts of  $653,611 at September 30, 2002 and $500,000 at December 31, 2001, respectively        |   | 1,461,733               |       | 1,466,788              |   |
| Inventories, net                                                                                                                                                 |   | 2,019,564               |       | 1,281,512              |   |
| Prepaid assets and deposits                                                                                                                                      |   | 1,233,787               |       | 44,955                 |   |
| **Total current assets**                                                                                                                                         |   | 5,819,988               |       | 2,810,942              |   |
| PROPERTY, PLANT AND EQUIPMENT, net                                                                                                                               |   | 3,515,741               |       | 3,771,969              |   |
| LICENSE AGREEMENT, net of accumulated  amortization of $750,000 and $525,000 at September 30, 2002 and  December 31, 2001, respectively      |   | 750,000                 |       | 975,000                |   |
| **Total assets**                                                                                                                                                 |   | $                       | 10,085,729 |                   | $      | 7,557,911 |   |
|                                                                                                                                                             |   |                    |       |                   |   |
| **LIABILITIES  AND SHAREHOLDERS’ EQUITY (DEFICIT)**                                                                                                         |   |                    |       |                   |   |
| CURRENT LIABILITIES:                                                                                                                                             |   |                    |       |                   |   |
| Line of credit – related party                                                                                                                              |   | $                       | 5,133,759  |                   | $      | 5,133,759 |   |
| Subordinated debenture – related party                                                                                                                      |   | 2,000,000               |       | 2,000,000              |   |
| Current portion of capital lease obligations                                                                                                                     |   | 468,616                 |       | 116,478                |   |
| Accounts payable                                                                                                                                                 |   | 1,331,794               |       | 1,946,907              |   |
| Accrued expenses                                                                                                                                                 |   | 1,163,970               |       | 1,185,828              |   |
| Customer advances                                                                                                                                                |   | 5,009,742               |       | 2,879,995              |   |
| Deferred revenue                                                                                                                                                 |   | 14,103                  |       | 14,103                 |   |
| Other current liabilities                                                                                                                                        |   | 2,420,590               |       | 1,445,016              |   |
| **Total  current liabilities**                                                                                                                                   |   | 17,542,574              |       | 14,722,086             |   |
| CAPITAL LEASE OBLIGATION, net of current portion                                                                                                                 |   | 3,745,814               |       | 3,757,987              |   |
| LICENSE FEE PAYABLE – long term                                                                                                                             |   | 450,000                 |       | 975,000                |   |
| NON – COMPETE LIABILITY                                                                                                                                     |   | 845,912                 |       | 845,912                |   |
| **Total Liabilities**                                                                                                                                            |   | $                       | 22,584,300 |                   | $      | 20,300,985 |   |
|                                                                                                                                                             |   |                    |       |                   |   |
| SHAREHOLDERS’ EQUITY (DEFICIT)                                                                                                                              |   |                    |       |                   |   |
| Common stock, par value $.01; 30,000,000 shares authorized;  7,409,608 shares issued and outstanding at September 30, 2002   and December 31, 2001, respectively |   | 74,096                  |       | 74,096                 |   |
| Additional paid-in-capital                                                                                                                                       |   | 22,071,641              |       | 22,071,641             |   |
| Accumulated deficit                                                                                                                                              |   | (34,644,308             | )          | (34,888,811            | )      |
| **Total shareholders’ equity (deficiency)**                                                                                                                 |   | (12,498,571             | )          | (12,743,074            | )      |
|                                                                                                                                                             |   |                    |       |                   |   |
| **TOTAL  LIABILITIES AND SHAREHOLDERS’ EQUITY (DEFICIT)**                                                                                                   |   | $                       | 10,085,729 |                   | $      | 7,557,911 |   |

 

**See notes to consolidated financial statements**

 

3

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**Acrodyne Communications, Inc.**

**Consolidated Statements of Operations****(Unaudited)**

 
|                                                       |   | **Three Months Ended  September 30,** |       | **Nine Months Ended  September 30,** |       |
|------------------------------------------------------------|--------|---------------------------------------|------------|--------------------------------------|------------|
|                                                       |   | **2002**                              | ** ** | **2001**                             | ** ** | **2002** |   | **2001** |   |
|                                                       |   |                                  |       |                                 |       |   |   |   |   |
| NET SALES                                                  |   |                                  |       |                                 |       |   |   |   |   |
| Related party sales, net                                   |   | $                                     | 4,318,928  |                                 | $          | 3,055,829 |   | $ | 11,971,245 |   | $ | 3,465,591 |   |
| Other sales, net                                           |   | 1,944,545                             |       | 1,684,233                            |       | 5,979,758 |   | 4,172,983 |   |
| NET SALES                                                  |   | 6,263,473                             |       | 4,740,062                            |       | 17,951,003 |   | 7,638,574 |   |
| COST OF SALES                                              |   | 4,585,804                             |       | 3,056,534                            |       | 13,086,343 |   | 5,791,425 |   |
| Gross Profit                                               |   | 1,677,669                             |       | 1,683,528                            |       | 4,864,660 |   | 1,847,149 |   |
|                                                       |   |                                  |       |                                 |       |   |   |   |   |
| OPERATING EXPENSES                                         |   |                                  |       |                                 |       |   |   |   |   |
| Engineering                                                |   | 441,347                               |       | 379,360                              |       | 1,494,318 |   | 1,542,687 |   |
| Selling                                                    |   | 301,362                               |       | 179,338                              |       | 1,058,468 |   | 726,327 |   |
| Administration                                             |   | 625,931                               |       | 293,370                              |       | 1,453,212 |   | 1,649,089 |   |
| Amortization of intangible assets                          |   | 75,000                                |       | 75,000                               |       | 225,000 |   | 225,000 |   |
| Total operating expenses                                   |   | 1,443,640                             |       | 927,068                              |       | 4,230,998 |   | 4,143,103 |   |
| Operating Income (loss)                                    |   | 234,029                               |       | 756,460                              |       | 633,662 |   | (2,295,954 | ) |
|                                                       |   |                                  |       |                                 |       |   |   |   |   |
| OTHER (EXPENSES) INCOME                                    |   |                                  |       |                                 |       |   |   |   |   |
| Interest expense, net                                      |   | (215,460                              | )          | (213,337                             | )          | (648,354 | ) | (644,305 | ) |
| Other Income, net                                          |   | 29,358                                |       | 3,764                                |       | 259,195 |   | 175,984 |   |
| Net Income (Loss)                                          |   | 47,927                                |       | 546,887                              |       | 244,503 |   | (2,764,275 | ) |
|                                                       |   |                                  |       |                                 |       |   |   |   |   |
| Dividend on 8% convertible preferred stock                 |   | 0                                     |       | 0                                    |       | 0 |   | (28,056 | ) |
| NET INCOME (L0SS) APPLICABLE TO COMMON  SHAREHOLDERS       |   | $                                     | 47,927     |                                 | $          | 546,887 |   | $ | 244,503 |   | $ | (2,792,331 | ) |
| NET INCOME (LOSS) PER COMMON SHARE – BASIC            |   | $                                     | 0.01       |                                 | $          | 0.07 |   | $ | 0.03 |   | $ | (0.39 | ) |
| WEIGHTED AVERAGE COMMON SHARES OUTSTANDING –  BASIC   |   | 7,409,608                             |       | 7,330,438                            |       | 7,409,608 |   | 7,098,866 |   |
|                                                       |   |                                  |       |                                 |       |   |   |   |   |   |   |   |   |
| NET INCOME (LOSS) PER SHARE – DILUTED                 |   | $                                     | 0.01       |                                 | $          | 0.07 |   | $ | 0.03 |   | $ | (0.39 | ) |
| WEIGHTED AVERAGE COMMON SHARES OUTSTANDING –  DILUTED |   | 7,999,114                             |       | 7,901,075                            |       | 7,999,114 |   | 7,098,866 |   |

 

**See notes to consolidated financial statements**

 

4

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**Acrodyne Communications, Inc.**

**CONSOLIDATED STATEMENTS OF CASH FLOWS****(Unaudited)**

 
|                                                                                  |   | **Nine  months ended  September 30,** |       |
|---------------------------------------------------------------------------------------|--------|---------------------------------------|------------|
|                                                                                  |   | **2002**                              | ** ** | **2001** |   |
| CASH FLOWS FROM OPERATING ACTIVITIES:                                                 |   |                                  |       |   |   |
| Net Income (Loss)                                                                     |   | $                                     | 244,503    |   | $ | (2,764,275 | ) |
| Adjustments to reconcile net income (loss) to net cash used in  operating activities: |   |                                  |       |   |   |
| Depreciation and amortization                                                         |   | 285,485                               |       | 423,699 |   |
| Provision for bad debts                                                               |   | 153,611                               |       | 13,983 |   |
|                                                                                  |   |                                  |       |   |   |
| Changes in assets and liabilities:                                                    |   |                                  |       |   |   |
| Accounts receivable and other                                                         |   | (148,556                              | )          | 302,737 |   |
| Inventories                                                                           |   | (738,052                              | )          | (669,545 | ) |
| Prepaid expenses and deposits                                                         |   | (1,188,832                            | )          | (273,040 | ) |
| Capital lease obligations                                                             |   | 339,965                               |       | 418,846 |   |
| Accounts payable                                                                      |   | (615,113                              | )          | 579,558 |   |
| Accrued expenses                                                                      |   | (21,858                               | )          | 804,034 |   |
| Other current liabilities                                                             |   | 675,574                               |       | (284,111 | ) |
| Deferred revenue                                                                      |   | 0                                     |       | (1,830,332 | ) |
| Customer advances                                                                     |   | 2,129,747                             |       | 778,126 |   |
| Net cash provided (used) in operating activities                                      |   | 1,116,474                             |       | (2,500,320 | ) |
|                                                                                  |   |                                  |       |   |   |
| CASH FROM INVESTING ACTIVITIES:                                                       |   |                                  |       |   |   |
| Purchases of property, plant, and equipment                                           |   | (29,257                               | )          | 18,176 |   |
| Net cash provided by (used in) investing activities                                   |   | (29,257                               | )          | 18,176 |   |
|                                                                                  |   |                                  |       |   |   |
| CASH FLOWS FROM FINANCING ACTIVITIES:                                                 |   |                                  |       |   |   |
| Proceeds from the issuance of warrants                                                |   | 0                                     |       | 336,000 |   |
| Borrowings under line of credit                                                       |   | 0                                     |       | 2,300,000 |   |
| Cash dividends on convertible preferred stock                                         |   | 0                                     |       | (28,056 | ) |
| Net cash provided by financing activities                                             |   | 0                                     |       | 2,607,944 |   |
|                                                                                  |   |                                  |       |   |   |
|                                                                                  |   |                                  |       |   |   |
| Net increase in cash and cash equivalents                                             |   | 1,087,217                             |       | 125,800 |   |
| Cash and cash equivalents at beginning of period                                      |   | 17,687                                |       | 86,959 |   |
| Cash and cash equivalents at end of period                                            |   | $                                     | 1,104,904  |   | $ | 212,759 |   |

 

**See notes to consolidated financial statements**

 

5

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**Acrodyne Communications, Inc.**

**Notes to Consolidated FinancialStatements****(Unaudited)**

 
| **1.** |   | **Unaudited Consolidated Financial  Statements** |
|--------|--------|--------------------------------------------------|

 

 

The accompanying consolidated balance sheets of Acrodyne Communications,Inc. and its subsidiaries (the “Company” or “Acrodyne”) at September 30, 2002and the related consolidated statements of operations and of cash flows for thenine months ended September 30, 2002 and 2001 have been prepared bymanagement.  In the opinion ofmanagement, all adjustments (consisting of normal recurring adjustments only)necessary to present fairly the financial position at September 30, 2002, andthe results of operations and cash flows for the nine months ended September30, 2002 and 2001 have been made.

 

These consolidated financial statements should be read in conjunctionwith the financial statements and notes thereto included in the Company’sAnnual Report on Form 10-KSB for the year ended December 31, 2001 as filed withthe Securities and Exchange Commission.  The results of operations for interim periods are not necessarilyindicative of the results to be obtained for the entire year.

 
| **2.** |   | **Inventories**       |
|--------|--------|-----------------------|
|   |   | Inventories comprise: |

 
|                              |   | **September 30,   2002** |       | **December 31,   2001** |       |
|-----------------------------------|--------|--------------------------|------------|-------------------------|------------|
|                              |   |                     |       |                    |       |
| Raw materials                     |   | $                        | 2,741,877  |                    | $          | 2,192,096 |   |
| Work  in process                  |   | 637,990                  |       | 449,742                 |       |
| Finished  Goods                   |   | 116,133                  |       | 116,110                 |       |
| Total  inventory                  |   | 3,496,000                |       | 2,757,948               |       |
| Allowance  for obsolete inventory |   | (1,476,436               | )          | (1,476,436              | )          |
| Inventory  (net)                  |   | $                        | 2,019,564  |                    | $          | 1,281,512 |   |
|                              |   |                     | ** ** |                    | ** ** |

** **
| **3.** |   | **Property  and Equipment**                      |
|--------|--------|--------------------------------------------------|
|   |   | Property and equipment consist of the following: |

 
|                                       |   | **September 30,  2002** |      | **December 31,  2001** |   |
|--------------------------------------------|--------|-------------------------|-----------|------------------------|--------|
|                                       |   |                    |      |                   |   |
| Test Equipment                             |   | $                       | 697,373   |                   | $      | 690, 273 |   |
| Machinery and equipment                    |   | 63,805                  |      | 52,755                 |   |
| Office furniture and  equipment            |   | 444,909                 |      | 436,866                |   |
| Building lease/leasehold  improvements     |   | 3,784,231               |      | 3,781,167              |   |
| Purchased computer  software               |   | 120,646                 |      | 120,646                |   |
|                                       |   | 5,110,964               |      | 5,081,707              |   |
| Accumulated depreciation  and amortization |   | 1,595,223               |      | 1,309,738              |   |
| Property, plant and  equipment, net        |   | $                       | 3,515,741 |                   | $      | 3,771,969 |   |

 

 

6

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**4.             Earnings Per Share**

 

Basic earnings (loss) per share is computed by dividing the net lossavailable to common shareholders by the weighted average number of sharesoutstanding during the period.  Dilutedearnings (loss) per share is computed using the weighted average number ofshares determined for the basic computations plus the number of shares ofcommon stock that would be issued assuming all contingently issuable shareshaving a dilutive effect on earnings per share were outstanding for the period.

 

The following table sets forth the computation of basic and dilutedearnings per share.

 
|                                                      |   | **Three Months Ended********September 30,** |   | **Nine Month Ended********September 30,** |   |
|-----------------------------------------------------------|--------|---------------------------------------------|--------|-------------------------------------------|--------|
|                                                      |   | **2002**                                    |   | **2001**                                  |   | **2002** |   | **2001** |   |
| Numerator                                                 |   |                                        |   |                                      |   |   |   |   |   |
| Net income (loss)                                         |   | $                                           | 47,927 |                                      | $      | 546,887 |   | $ | 244,503 |   | $ | (2,792,331 | ) |
| Denominator                                               |   |                                        |   |                                      |   |   |   |   |   |
| Denominator for basic  income                             |   |                                        |   |                                      |   |   |   |   |   |
| Per share – weighted  average shares                 |   | 7,409,608                                   |   | 7,330,438                                 |   | 7,409,608 |   | 7,098,866 |   |
| Dilutive effect of  options, warrants, and shares payable |   | 7,999,114                                   |   | 7,901,075                                 |   | 7,999,114 |   | — |   |
| Basic income (loss) per  share                            |   | $                                           | 0.01   |                                      | $      | 0.07 |   | $ | 0.03 |   | $ | (0.39 | ) |
|                                                      |   |                                        |   |                                      |   |   |   |   |   |
| Diluted income (loss) per  share                          |   | $                                           | 0.01   |                                      | $      | 0.07 |   | $ | 0.03 |   | $ | (0.39 | ) |

 

In 2002 the exercise price of outstanding options and warrants topurchase shares of the Company stock are in excess of the market price and areexcluded from the computation of diluted income per share.  Shares payable but not yet issued andoutstanding are included.

 

Due to the Company’s net loss in 2001 the incremental shares issuable inconnection with convertible preferred stock, stock options and warrants wereanti-dilutive and, accordingly, are not considered in the calculation.

 

**5****.             RelatedParty Transactions**

 

OnJanuary 27, 1999, Sinclair invested $4,300,000 in the Company in return for1,431,333 shares of the Company’s common stock and warrants to purchase up toan aggregate of 8,719,225 shares over a term of up to seven years at pricesranging from $3.00 to $6.00 per share. Sinclair also acquired an additional800,000 shares of common stock previously held by outside investors. OnDecember 20, 1999, the Company committed to issue 112,000 shares to Sinclairwith respect to the terms of a Guaranty and Lease Compensation Agreement (seediscussion below).  These shares weresubsequently issued.  As of December 31,2000, the Company is obligated to issue 589,506 shares to Sinclair with respectto the terms of the Guaranty and Lease Compensation Agreement.  As of September 30, 2002 and December 31,2001, Sinclair held an aggregate of 2,418,333 shares of the Company’s commonstock, representing approximately 32.6% of issued common stock assuming nowarrants are exercised.

 

In connection with obtaining a creditfacility in 1999, the bank required, as a condition of the loan, that Sinclairunconditionally and irrevocably guarantee all of our obligations under thefacility.  We agreed to issue Sinclair$200,000 of our common stock (83,000 shares) as compensation for theguarantee.  In October 2000, Sinclairpurchased the line of credit from the bank and filed related UCC liens againstour personal property, which eliminated the Sinclair guarantee.  At September 30, 2002 and December 31, 2001the borrowing on this facility was $1,158,753. On April 27, 2001, we secured an additional $4,000,000 line of creditfacility with Sinclair.  The creditfacility requires monthly interest-only payments at a fixed rate of interest of12% per annum and matures upon demand by Sinclair.  At September 30, 2002 we had borrowed approximately $3,975,000against the line.

 

On November 19, 1999 we entered into asublease agreement with Sinclair for approximately 44,000 square feet of spaceon Hollow Road in Upper Providence, Montgomery County, 

 

7

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Pennsylvania.  Our relocation to this facility was completed in the fourthquarter of 2000.  The lease commenced atthat time.  Lease payments were not madedue to liquidity.  The liability wasrecorded as amounts owed under the line of credit until the credit limit wasmet.  Since that time, the amount owedhas been recorded as a current liability.

 

**DuringMarch 2000, the Company entered into a 10-year license agreement (the “LicenseAgreement”) with Sinclair for the exclusive right to manufacture and sellcertain Sinclair designed transmitter lines. Under terms of the LicenseAgreement, the Company will pay Sinclair an annual royalty of $300,000 for fiveyears.  For years six through ten, theCompany shall pay Sinclair an annual royalty equal to 1.0% of revenues realizedby the Company attributable to the License Agreement.  At end of the tenth year, the Company has the option to purchasethe Sinclair technology.  The purchaseprice would be twice the cumulative royalty amount paid to Sinclair for yearssix through ten.**

 

DuringMarch 2000, the Company entered into a subordinated debenture agreement (the“Debenture”) with Sinclair. Under the terms of the Debenture, the Company couldborrow up to $2,000,000 at an interest rate of 10.5%. The first payment ofinterest was to be made April 1, 2000 and on a monthly basis thereafter.  Principal is payable upon demand bySinclair.  Further, Sinclair has theright, at any time, to convert all, but not less than all, of the principalowed to Sinclair into the Company’s common stock at $3.45 per share.  The Company had borrowed $2,000,000 underthe terms of this arrangement on September 30, 2002 and December 31, 2001.

 

Inthe first quarter of 2001 it was determined by Sinclair that in order forSinclair to meet their SEC public financial filing requirements that Acrodynewould have to accelerate their audit schedule. Sinclair agreed to pay $150,000 of Acrodyne’s audit fees for the yearended 2000, in order to meet the expedited schedule.

 

 

6.             SUMMARY OFSIGNIFICANT ACCOUNTING POLICIES:

 

The following summarizes the significant accounting policies employedby the Company in preparation of its consolidated financial statements:

 

Consolidation

 

The financial statements include the accounts of the Company and itswholly-owned subsidiary, Acrodyne Industries. All intercompany transactions andbalances are eliminated in consolidation. Certain prior year amounts have been reclassified to conform to currentyear presentation.

 

Cash and Cash Equivalents

 

The Company considers all short-term investments with an originalmaturity of three months or less to be cash equivalents.

 

Inventory

 

Inventory includes material, direct labor and overhead and is valued atthe lower of cost or market on a first-in, first-out basis.

 

Property and Equipment

 

Property and equipment are carried at cost. The cost of additions andimprovements are capitalized, while maintenance and repairs are charged tooperations when incurred. The cost and related accumulated depreciation ofassets sold, retired or otherwise disposed of are removed from the respectiveaccounts and any resulting gain or loss is recorded in the statement of operations.Depreciation is recorded using the straight-line method over the estimateduseful lives of the assets, primarily three to seven years. Leaseholdimprovements are amortized over the shorter of their useful lives or theremaining lease terms. Capital leases are depreciated over their useful livesor lease term, as applicable.

 

Customer Advances

 

Deposits received from customers on orders for purchase of products arerecorded as a liability.

 

Revenue Recognition

 

In December 1999, the Securities and Exchange Commission issued StaffAccounting Bulletin (“SAB”) No. 101, “Revenue Recognition in FinancialStatements.”  SAB No. 101 summarizes thestaff’s views in applying generally accepted accounting principles to selectedrevenue recognition issues.  Guidance isprovided with respect to the recognition, presentation and disclosure ofrevenue in the financial statements. The Company implemented the provisions ofSAB 101 in the fourth quarter of 2000, retroactive to January 1, 2000.  Effective January 1, 2000, the Companychanged its method of accounting for transmitter sales such that the Companyrecognizes revenue from the sale of transmitters when title and risks ofownership are transferred to the customer, which generally occurs upon shipmentor customer pick-up of the equipment or completion of the installation processif the Company is obligated to perform the installation.

 

A customer may be invoiced for and receive title to transmitters priorto taking physical possession when the customer has made a fixed, writtencommitment for the purchase, the transmitters have been completed, tested andare available for pick-up or delivery, and the customer has requested that theCompany hold the transmitters until the customer determines the most economicalmeans of taking physical possession. Upon such a request, the Companyrecognizes revenue if it has no further obligation except to segregate thetransmitters, invoice the customer under normal billing and credit terms, andhold the transmitter for a short period of time as is customary in theindustry.

 

8

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Transmitters are built to customer specification and no right of returnor exchange privileges are granted. Accordingly, no provision for salesallowances or returns is recorded.  TheCompany records revenue for services related to installation of transmittersupon completion of the installation process. Amounts which cannot be recognized in accordance with the above policyare recorded as deferred revenue in the accompanying consolidated balancesheets.  The adoption of SAB No. 101, inthe fourth quarter of 2000, resulted in an increase in reported revenues forthe years ending December 31, 2001 and 2000 of approximately $2,276,000 and$540,000, respectively.

 

Concentration of Credit Risk

 

The Company’s customers are domestic and international televisionstations, broadcasters, government entities, not-for-profit organizations andeducational institutions. International sales were $591,876 and $1,035,037 forthe years ended December 31, 2001 and 2000, respectively.

 

Use of Estimates

 

The preparation of financial statements, in conformity with generallyaccepted accounting principles, requires management to make estimates andassumptions that affect the reported amounts of assets and liabilities;disclosure of contingent assets and liabilities at the date of the financialstatements; and the reported amount of revenues and expenses during thereporting periods.  Actual results coulddiffer from those estimates.

 

Research and Development

 

Research and development expenditures related to the design anddevelopment of new products are expensed as incurred and as such are includedin engineering department expenses in the accompanying consolidated statementsof operations.  

 

**7.         NewAccounting Policies**

 

In June 2001, the Financial Accounting Standards Board (“FASB”) issuedStatement of Financial Accounting Standards (“SFAS”) 141, *Business Combinations*, and SFAS 142, *Goodwill and Intangible Assets*.  SFAS 141 is effective for all businesscombinations completed after June 30, 2001. SFAS 142 is effective for fiscal years beginning after December 15,2001; however, certain provisions of this Statement apply to goodwill and otherintangible assets acquired between July 1, 2001 and the effective date of SFAS142.  Major provisions of theseStatements and their effective dates for the Company are as follows:

 

•       All business combinations initiated afterJune 30, 2001 must use the purchase method of accounting.  The pooling of interests method ofaccounting is prohibited except for transactions initiated before July 1, 2001.

•       Intangible assets acquired in a businesscombination must be recorded separately from goodwill if they arise fromcontractual or other legal rights or are separable from the acquired entity andcan be sold, transferred, licensed, rented or exchanged, either individually oras part of a related contract, asset or liability.

•       Goodwill, as well as intangible assets withindefinite lives, acquired after June 30, 2001, will not be amortized.

•       Effective January 1, 2002, all previouslyrecognized goodwill and intangible assets with indefinite lives will no longerbe subject to amortization.

•       Effective January 1, 2002, goodwill andintangible assets with indefinite lives will be tested for impairment annuallyand whenever there is an impairment indicator.

•       All acquired goodwill must be assigned toreporting units for purposes of impairment testing and segment reporting.

 

9

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On January 1, 2002, the Company adopted SFAS 142. This statement  required that within the first interimperiod of adoption, the intangible assets with indefinite lives should betested for impairment as of the date of adoption, and that if any impairmentresults, it should be recognized as a change in accounting principle.  Additionally, SFAS 142 requires that, withinsix months of adoption, goodwill be tested for impairment at the reporting unitlevel as of the date of adoption.  Ifany impairment is indicated to have existed upon adoption, it should bemeasured and recorded before the end of the year of adoption.  SFAS 142 requires that any goodwillimpairment loss recognized as a result of initial application be reported inthe first interim period of adoption as a change in accounting principle andthat the income per share effects of the accounting change be separatelydisclosed.  The Company has no goodwillor indefinitely lived intangible assets. The adoption of SFAS 142 had no impact on the financial position or  results of operations of the Company.

 

In August 2001, the FASB issued SFAS 143, *Accounting for Asset Retirement Obligations*.  SFAS 143 applies to all entities, includingrate-regulated entities, that have legal obligations associated with theretirement of a tangible long-lived asset that result from acquisition,constructions or development and (or) normal operations of the long-livedasset.  The application of thisStatement is not limited to certain specialized industries, such as theextractive or nuclear industries.  ThisStatement also applies, for example, to a company that operates a manufacturingfacility and has a legal obligation to dismantle the manufacturing plant andrestore the underlying land when it ceases operation of that plant.  A liability for an asset retirementobligation should be recognized if the obligation meets the definition of aliability and can be reasonable estimated. The initial recording should be at fair value.  SFAS 143 is effective for financial statements issued for fiscalyears beginning after June 15, 2002, with earlier application encouraged.  The provisions of the Statement are notexpected to have an impact on the financial condition or results of operationsof the Company.

 

In August 2001, the FASB issued SFAS 144, *Accounting for the Impairment or Disposal of Long-Lived Assets*.  SFAS 144 retains the existing requirementsto recognize and measure the impairment of long-lived assets to be held andused or to be disposed of by sale. However, SFAS 144 makes changes to the scope and certain measurementrequirements of existing accounting guidance. SFAS 144 also changes the requirements relating to reporting the effectsof a disposal or discontinuation of a segment of a business.  SFAS 144 is effective for financialstatements issued for fiscal years beginning after December 15, 2001 andinterim periods within those fiscal years. The adoption of this Statement did not expected to have an impact on thefinancial condition or results of operations of the Company.

 

In April 2002, Statement of Financial Accounting Standards No. 145,“Rescission of FASB Statements NO. 4, 44, and 64, Amendment of FASB No. 13, andTechnical Corrections” (SFAS 145) was issued. This standard changes the accounting principles governing extraordinaryitems by, among other things, providing more definitive criteria forextraordinary items by clarifying and, to some extent, modifying the existingdefinition and criteria, specifying disclosure for extraordinary items and specifyingdisclosure requirements for other unusual or infrequently occurring events andtransactions that are not extraordinary items. SFAS 145 is effective for financial statements issued for fiscal yearsbeginning after June 15, 2002, with early adoption encouraged.  The adoption of this statement is notexpected to have an impact on the financial condition or results of operationsof the company.

 

In July 2002, the FASB issued SFAS No. 146, “Accounting for CostsAssociated with Exit or Disposal Activities” (SFAS 146).  SFAS 146 requires companies to recognizecosts associated with exit or disposal activities when they are incurred ratherthan at the date of a commitment to an exit or disposal plan.  SFAS 146 is effective prospectively for exitand disposal activities initiated after December 31, 2002.  As provisions of SFAS 146 are to be appliedprospectively after adoption date, the company cannot determine the potentialeffects that the adoption of SFAS 146 will have on its financial statements.

 

10

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Other Intangible Assets

 

Effective January 1, 2002, the Company adopted SFAS 142, “Goodwill andOther Intangible Assets.”  The followingtable reflects the components of intangible assets,

 
|              |   | **September 30, 2002**        |      | **January 1, 2002**                  |   |
|-------------------|--------|-------------------------------|-----------|--------------------------------------|--------|
|              |   | **Gross   Carrying   Amount** |      | **Accumulated********Amortization.** |   | **Gross   Carrying   Amount** |   | **Accumulated********Amortization.** |   |
|              |   |                          |      |                                 |   |   |   |   |   |
| License agreement |   | $                             | 1,500,000 |                                 | $      | 750,000 |   | $ | 1,500,000 |   | $ | 525,000 |   |
|                   |        |                               |           |                                      |        |  |  |  |  |  |  |  |  |

 

The following sets forth the estimated amortization expense onintangible assets for the fiscal years ending December 31,:

 

| 2002 |   | $ | 300,000 |   |
|------|--------|---|---------|--------|
| 2003 |   | $ | 300,000 |   |
| 2004 |   | $ | 300,000 |   |
| 2005 |   | $ | 75,000  |   |

 

Income Taxes:

 

The Company recorded no taxexpense for the nine months ended September 30, 2002 due to the use of netoperating loss carryforwards.

 

**MANAGEMENT’S DISCUSSION AND ANALYSIS OFFINANCIAL CONDITION AND RESULTS OF OPERATIONS**

 

**THE COMPANY**

Weare Acrodyne Holdings, Inc., a Delaware corporation, which was formed in May1991. In 1995, we changed our name to Acrodyne Communications, Inc., which weoperate in one industry segment – the design, manufacture and marketing oftelevision transmitters and translators, which are sold in the United Statesand internationally.

 

On May 16, 1994, we entered into agreementsto acquire all of the outstanding stock of Acrodyne Industries, Inc., a companyengaged in the manufacture and sale of TV transmitters, LPTV transmitters andTV translators, which are produced to customer specification.  The acquisition was consummated on October24, 1994 with proceeds obtained from a public offering of our common stock.

 

On January 27, 1999, we finalized a strategic agreement with theSinclair Broadcast Group, Inc. (“Sinclair”). Under this agreement Sinclair invested $4.3 million in consideration for1,431,333 shares of our common stock and the issuance of warrants to purchaseup to an aggregate of 8,719,225 shares over a term of seven years at pricesranging from $3.00 to $6.00 per share. Of such warrants, 6,000,000 are exercisableonly upon our achievement of increased product sales or products with newtechnology.  See additional discussionin the Significant and Recent Events section of this document.

 

11

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**BASIS OF PRESENTATION**

Upon completion of the audit of ourconsolidated financial statements for the year ended December 31, 2001, ourindependent auditors issued an opinion with an explanatory paragraph statingthat substantial doubt exists about our ability to continue as a goingconcern.  Our ability to continue as agoing concern depends upon: (1) market acceptance of our new digital product;(2) our ability to generate sufficient revenues to achieve and sustain positivecash flow; and (3) our ability to raise the necessary capital to fund operatingneeds and finance the planned investment. The factors noted above raise substantial doubt concerning our abilityto continue as a going concern.  Theconsolidated financial statements do not include any adjustments relating to therecoverability and classification of asset carrying amounts or the amount andclassification of liabilities that might result should we be unable to continueas a going concern.   On November 1,2002 our Board of Directors voted to approve a recapitalization plan bySinclair Broadcast Group (“Sinclair”). Under the potential recapitalization, Sinclair would receive additional common stock in exchange forforgiveness of certain amounts that we owe to Sinclair.  This plan will be submitted for shareholderapproval at an annual meeting to be held in December 2002.  In addition, Sinclair has orally committedto purchase all UHF transmitters requirements from us.

 

**BUSINESSOF ACRODYNE**

Wehave designed, manufactured and marketed television transmitters and translatorswhich have been sold in the United States and internationally since 1971.  The function of a television transmitter isto broadcast over the air television signals to a specific audience receivingsuch signals by regular antenna or by a local cable company, which then feedsthe signal to their subscribers. Television translators, which operate unattended, retransmit incomingsignals from primary stations on different channels within areas where directreception of the original signal may be limited by mountains or othergeographic impediments.

 

**ACRODYNEPRODUCTS AND SERVICES**

Wedesign, manufacture and market digital and analog television broadcasttransmitters and translators for domestic and international televisionstations, broadcasters, government agencies, not-for-profit organizations andeducational institutions.  The usefullife of a television transmitter or translator is approximately 20 years.  Our television transmitters, which range intransmission power levels from one watt for localized applications to tens ofthousands of watts for large television broadcasters, have a modularizeddesign, which permits us to respond to specific customer requests.  We classify our transmitters into twocategories based upon the power output of such transmitters (as discussed ingreater detail below).  Lower powertransmitters and higher power transmitters transmit signals in both UHF and VHFfrequency bands.  The VHF band coverschannels two through thirteen and the UHF band covers channels above thirteen.  Each transmitter permits the sender tobroadcast over one channel, except in the case of adjacent channel assignmentsfor which one transmitter is able to transmit two television signals, oneanalog and one digital.

 

All of our television transmitters feature enhanced linearamplifiers.   Such units feature easy toread diagnostic displays and meters, which clearly indicate a unit’s operatingcondition.  Units automatically shutdown for self-protection if out-of-tolerance conditions are encountered. Webelieve that our television transmitters are relatively easy to maintain sincethey utilize common modules and parts. Other operating features include full remote control, telemetry andstatus functions, and a modular design, which allows for cost-effectiveexpansion to higher output power levels.

 

12

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**We expanded our solid state productline to 40 kilowatts analog and 10 kilowatts digital**

 

The forthcoming digitization of televisionnetworks in the United States, the world’s single most significant market fortelevision transmitters, has created greater demand for digital broadcastingtechnology.  This demand offers theopportunity to take advantage of the emerging market, not only with high powertransmitters, but also with solid-state and medium power transmitters.  On November 29, 1999, Acrodyne and Rohde& Schwartz, the world’s foremost manufacturer of solid-state transmittersformed a strategic alliance.  The Rohde& Schwarz group of companies, with headquarters in Munich, Germany,develops, produces and markets communication test and measurement instrumentsand systems.  It gave exclusive rightsto us to market and sell Rohde & Schwarz solid state transmitter productsin the United States.  This agreementalso includes technology and product sales agreement to support a new line ofour high power transmitter products.

 

**New line of IOT-equipped television transmitters developed atSinclair**

 

In March 2000, we reached a definitiveagreement with Sinclair to exclusively manufacture and sell the Sinclairdesigned “Quantum” IOT transmitter line. Sinclair created this newly developed line of transmitter products atits Hunt Valley, Maryland, headquarters to meet its own internal digital andanalog requirements and has licensed this technology to us.  The Quantum line was conceived bybroadcasters and designed by the same Emmy award winning talents that inventedIOT transmitters over ten years ago. The digital version of the Quantum line is designed to be capable ofboth 8-VSB and COFDM service.  Weintroduced this advanced line of transmitters at the National Association ofBroadcasters April 2001 show in Las Vegas.

 

**OPERATIONS AND BUSINESS RISK**

Due to the nature of our business, we aresubject to various risks including, but not limited to, technological andmarket acceptance of our product, capital availability, dependence onmanagement and other risks.

 

We have been in the process of developingproducts and applications using digital transmission technology.  Related to this process, we entered into alicense agreement with Sinclair in March 2001 (see Note 5 to FinancialStatements).  We shipped the first ofour digital transmitters in March 2001. To date, most of the orders for our digital product are from Sinclair.

 

Sincethe acquisition of Acrodyne Industries in 1994, we have incurred significantlosses including a net loss of $2,569,204 and a cash flow deficit of $3,877,708in 2001.  These losses and cash flowdeficits have been funded primarily with proceeds from the sale of equitysecurities, including $225,000 and $3,805,374 from common stock and warrantssold to Sinclair in 2000 and 1999, respectively, a $2,000,000 subordinateddebenture provided by Sinclair, our Credit Facility with Sinclair (see Note 5 toFinancial Statements) and customer advances. As of September 30, 2002 andDecember 31, 2001 Sinclair owned 32.6% of our common stock, and has warrants topurchase 8,644,225 additional shares (see Notes 5 to Financial Statements),which represented 60.4% of our common stock on a fully diluted basis.

 

13

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In March 2000, Sinclair agreed to provide additional funds to us of upto $2,000,000 under terms of a subordinated debenture (see Note 5 to FinancialStatements).  On April 27, 2001, weentered into an additional $4,000,000 line of credit facility withSinclair.   This line of credit requiresmonthly interest-only payments at a fixed rate of interest of 12% per annum andmatures upon demand by Sinclair.  Ourability to continue as a going concern depends upon: (1) market acceptance ofour new digital product; (2) our ability to generate sufficient revenues toachieve and sustain positive cash flow; and (3) our ability to raise thenecessary capital to fund operating needs and finance the plannedinvestment.  The factors noted aboveraise substantial doubt concerning our ability to continue as a going concern.The consolidated financial statements do not include any adjustments relatingto the recoverability and classification of asset carrying amounts or theamount and classification of liabilities that might result should we be unableto continue as a going concern.  OnNovember 1, 2002 our Board of Directors voted to approve a recapitalizationplan by Sinclair Broadcast Group (“Sinclair”). Under the potential recapitalization, Sinclair would receive additional common stock in exchange forforgiveness of certain amounts that we owe to Sinclair.  This plan will be submitted for shareholderapproval at an annual meeting to be held in December 2002.  In addition, Sinclair has orally committedto purchase all UHF transmitter requirements from us.

 

**RESULTS OFOPERATIONS**

 

The following compares the Company’s summary results of operations forthe three and nine months ended September 30, 2002 to the three and nine monthsended September 30, 2001:

 
|                    |   | **Three Months Ended September 30,** |   | **Nine Months Ended September 30,** |   |
|-------------------------|--------|--------------------------------------|--------|-------------------------------------|--------|
|                    |   | **2002**                             |   |                                |   | **2001** |   |   |   | **2002** |   |   |   | **2001** |   |   |   |
|                    |   | **$**                                |   |                                |   | **$** |   | **%** |   | **$** |   | **%** |   | **$** |   | **%** |   |
| Net Sales               |   | 6,263,473                            |   | 100.0                               |   | 4,740,062 |   | 100.0 |   | 17,951,003 |   | 100.0 |   | 7,638,574 |   | 100.0 |   |
| Cost of Sales           |   | 4,585,804                            |   | 73.2                                |   | 3,056,534 |   | 64.5 |   | 13,086,343 |   | 72.9 |   | 5,791,425 |   | 75.8 |   |
| Gross Profit (Loss)     |   | 1,677,669                            |   | 26.8                                |   | 1,683,528 |   | 35.5 |   | 4,864,660 |   | 27.1 |   | 1,847,149 |   | 24.2 |   |
| Operating Expenses      |   | 1,443,640                            |   | 23.1                                |   | 927,068 |   | 19.6 |   | 4,230,998 |   | 23.6 |   | 4,143,103 |   | 54.3 |   |
| Operating Income (Loss) |   | 234,029                              |   | 3.7                                 |   | 756,460 |   | 15.9 |   | 633,662 |   | 3.5 |   | (2,295,954 | ) | (30.1 | ) |

 

Net sales for the three month and nine month periods ended September 30,2002 increased 32.1% and 135.0%, respectively over net sales for the periodsended September 30, 2001. Significant quantities of the Quantum transmitterwere not produced and shipped until the third quarter of 2001, resulting in the135% nine month sales increase.  Salesfor the three month period ending September 30, 2002 included one additionaltransmitter to Sinclair Broadcasting, compared to the prior year period.  In addition, the market for low power,digital equipment transmitters increased, resulting in additional sales in theRohde and Schwartz product line.

 

Gross margin on sales for the first nine months of 2002, as a percentageof sales improved from the prior year. Margin in 2001 was negatively affected by unabsorbed overhead, resultingfrom low sales volume.  Margins for thethree month period ending September 30, 2002 were lower than the correspondingperiod in 2001 due to increased sales volume of low power transmitters.  Low power transmitters are sold at lowergross margins than high power transmitters, consequently the average grossmargin declined.

 

14

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Total operating expenses remained about the same for the nine monthsended September 30, 2002 from the same period in 2001.  There was, however, a substantial increasein operating expenses for the three month period ending September 2002 comparedto 2001. Operating expenses rose from $927,068 for the three months endingSeptember 30, 2001 to $1,443,640 for the three months ending September 30, 2002.  $122,024 of the increase was in theMarketing and Sales Department.  Thiswas due to a new ad campaign, increased sales commissions to foreignrepresentatives of our product, and the timing of recording expenses for theNational Association of Broadcasters show. $332,561 of the increased operating costs in the three month period wereincurred in the Administration Department. Legal and professional fees and insurance expense were bothsubstantially higher than during the previous year.  Insurance expense increased due to the renewal of the Directorsand Officers policy at a substantially higher rate than the previouspolicy.  An additional allowance fordoubtful accounts of $153,611 was recorded in the period.  An increase in Engineering expenses was primarilyattributable to salary and wages, which were $49,008 higher in the 2002quarter.

 

**LIQUIDITY AND CAPITAL RESOURCES**

 

Historically,we have financed our activities primarily from customer advances, internallygenerated funds, proceeds from the sale of equity securities and use of ourcredit facilities.  At September 30,2002, we had a working capital deficit of $11,722,586 compared to a working capital deficit of $11,911,144 atDecember 31, 2001.  Customer depositsincreased $2,129,747 during the first nine months of 2002.  These funds were used to finance a higherlevel of inventory and for prepaid deposits to Acrodyne suppliers.  Prepaid deposits are required for high cost,long lead, specialty products.  Whenthose items are received they become Acrodyne inventory.  As transmitters are shipped to ourcustomers, our inventory is moved to the cost of goods sold account andCustomer deposits is reduced.  Ourstandard terms of sale require 90% of the transmitter price to be receivedprior to shipment.

 

In connection with obtaining a credit facility in 1999, the bankrequired, as a condition of the loan, that Sinclair unconditionally andirrevocably guarantee all of our obligations under the facility.   We agreed to issue Sinclair $200,000 of ourcommon stock (83,000 shares) as compensation for the guarantee.  In October 2000, Sinclair purchased the lineof credit from the bank and filed related UCC liens against our personalproperty, which eliminated the Sinclair guarantee.  At September 30, 2002 and December 31, 2001 the borrowing on thisfacility was $1,158,753.  On April 27,2001, we secured an additional $4,000,000 line of credit facility withSinclair.  The credit facility requiresmonthly interest-only payments at a fixed rate of interest of 12% per annum andmatures upon demand by Sinclair.  AtSeptember 30, 2002 we had borrowed approximately $3,975,000 against the line.

 

Our ability to continue as a going concerndepends upon: (1) market acceptance of our new digital product; (2) our abilityto generate sufficient revenues to achieve and sustain positive cash flow; and(3) our ability to raise the necessary capital to fund operating needs andfinance the planned investment.  Thefactors noted above raise substantial doubt concerning our ability to continueas a going concern. The consolidated financial statements do not include anyadjustments relating to the recoverability and classification of asset carryingamounts or the amount and classification of liabilities that might resultshould we be unable to continue as a going concern.  On November 1, 2002 our Board of Directors voted to approve arecapitalization plan by Sinclair Broadcast Group (“Sinclair”).  Under the potential recapitalization,  Sinclair would receive additional commonstock in exchange for forgiveness of certain amounts that we owe toSinclair.  This plan will be submittedfor shareholder approval at an annual meeting to be held in December 2002.  In addition, Sinclair has orally committedto purchase all UHF transmitters requirements from us.

 

15

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#### **Significantand Recent Events**

 

The SEC is continuing an investigation of the facts and circumstancesthat required the company’s financial statements and filings to be restated forthe year ending 1999 and the first two quarters of 2000.  Acrodyne has not been charged with anywrongdoing, is cooperating fully with the investigation, and has supplieddocuments to assist in the SEC investigation. Several former employees, a current employee of the company, as well asa Sinclair employee have been subpoenaed and testified before attorneys for theSEC.  The duration, facts, and outcomeof the investigation cannot be estimated by the company at this time.

 

**ForwardLooking Statements**

 

Certain statements contained in this report that donot relate to historical information are “forward looking statements” withinthe meaning of the United States Private Securities Litigation Reform Act of1995 and thus are prospective.  Suchforward-looking statements are subject to risks, uncertainties and otherfactors which could cause actual results to differ materially from futureresults expressed, projected or implied by such forward-lookingstatements.  Such factors include, butare not limited to, economic, competitive, and broadcast industryconditions.  These factors are discussedin greater detail in the Company’s filings with the United States Securitiesregulators.  The Company disclaims anyresponsibility to update any such forward-looking statements.

 

ACRODYNE COMMUNICATIONS, INC.

PART II. OTHER INFORMATION

 

Item 3. Controls and Procedures

 

The management of the Company, including Nathaniel Ostroff as Chairmanand Chief Executive Officer and Robert E. Woodruff, Jr. as Chief FinancialOfficer, have evaluated the Company's disclosure controls and procedures. Underrules promulgated by the Securities and Exchange Commission, disclosurecontrols and procedures are defined as those "controls or other proceduresof an issuer that are designed to ensure that information required to bedisclosed by the issuer in the reports filed or submitted by it under the[Securities Exchange] Act is recorded, processed, summarized and reported,within the time periods specified in the Commission's rules and forms."Based on the evaluation of the Company's disclosure controls and procedures,Messrs. Ostroff and Woodruff determined that such controls and procedures wereeffective as of September 30, 2002, the date of the conclusion of theevaluation. There were no significant changes in the company's internalcontrols or in other factors that could significantly affect these controlsbetween September 30, 2002, the date of the conclusion of the evaluation ofdisclosure controls and procedures, and the date of this report.

 

Item 6.  None

 

(a)                                  NoExhibits

 

**SIGNATURES**

 

Pursuant to the requirements of the Securities Exchange Act of 1934, theregistrant has duly caused this report to be signed on its behalf by theundersigned thereunto duly authorized.

 
|                          |   |   |   |   | Acrodyne Communications, Inc.                     |                         |
|-------------------------------|--------|--------|--------|--------|---------------------------------------------------|------------------------------|
|                          |   |   |   |   | (Registrant)                                      |                         |
|                          |   |   |   |   |                                              |                         |
|                          |   |   |   |   |                                              |                         |
| Date:  November 13, 2002 |   |   |   |   | By                                                | /s/ John Strzelecki          |   |
|                          |   |   |   |   | John Strzelecki, Executive Vice President,        |                         |
|                          |   |   |   |   |                                              |                         |
|                          |   |   |   |   |                                              |                         |
|                          |   |   |   |   | By                                                | /s/ Robert E. Woodruff,  Jr. |   |
|                          |   |   |   |   | Robert E. Woodruff, Jr.,  Chief Financial Officer |                         |

 

16

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**CERTIFICATION**

 

I, Robert E. Woodruff, Jr. certify that:

 

1.                   Ihave reviewed this quarterly report on Form 10-Q of Acrodyne Communications,Inc. (the “registrant”);

 

2.                   Basedon my knowledge, this quarterly report does not contain any untrue statementsof a material fact or omit to state a material fact necessary to make thestatements made, in light of the circumstances under which such statements weremade, not misleading with respect to the period covered by this quarterlyreport;

 

3.                   Basedon my knowledge, the financial statements, and other financial informationincluded in this quarterly report, fairly present in all material respects thefinancial condition, results of operations and cash flows of the registrant asof, and for, the periods presented in this quarterly report;

 

4.                   Theregistrant’s other certifying officers and I are responsible for establishingand maintaining disclosure controls and procedures (as defined in Exchange ActRules 13a-14 and 15d-14) for the registrant and have;

 

a.                   designedsuch disclosure controls and procedures to ensure that material informationrelating to the registrant, including its consolidated subsidiaries, is madeknown to us by others within those entities, particularly during the period inwhich this quarterly report is being prepared;

b.                  evaluatedthe effectiveness of the registrant’s disclosure controls and procedures as ofa date within 90 days prior to the filing date of this quarterly report (the“Evaluation Date”); and

c.                   Presentedin this quarterly report our conclusions about the effectiveness of thedisclosure controls and procedures based on our evaluation as of the EvaluationDate;

 

5.                   Theregistrant’s other certifying officers and I have disclosed, based on our mostrecent evaluation, to the registrant’s auditors and the audit committee of theregistrant’s board of directors (or person fulfilling the equivalent function);

 

a.                   Allsignificant deficiencies in the design or operation of internal controls whichcould adversely affect the registrant’s ability to record, process, summarizeand report financial data and have identified for the registrant’s auditors anymaterial weaknesses in internal controls; and

b.                  Anyfraud, whether or not material, that involves management or other employees whohave a significant role in the registrant’s internal controls; and

 

6.                   Theregistrant’s other certifying officers and I have indicated in this quarterlyreport whether or not there were significant changes in internal controls or inother factors that could significantly affect internal controls subsequent tothe date of our most recent evaluation, including any corrective actions withregard to significant deficiencies and material weaknesses.

 

 
| Date:  | November 13, 2002 |   |   |   |                    |   |
|--------|-------------------|--------|--------|--------|-------------------------|--------|
|   |              |   |   |   |                    |   |
|   |              |   |   |   | /s/ R.E. Woodruff, Jr.  |   |
|   |              |   |   |   | Chief Financial Officer |   |

 

17

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**CERTIFICATION**

 

I, Nathaniel Ostroff certify that:

 

7.                   Ihave reviewed this quarterly report on Form 10-Q of Acrodyne Communications,Inc. (the “registrant”);

 

8.                   Basedon my knowledge, this quarterly report does not contain any untrue statementsof a material fact or omit to state a material fact necessary to make thestatements made, in light of the circumstances under which such statements weremade, not misleading with respect to the period covered by this quarterlyreport;

 

9.                   Basedon my knowledge, the financial statements, and other financial informationincluded in this quarterly report, fairly present in all material respects thefinancial condition, results of operations and cash flows of the registrant asof, and for, the periods presented in this quarterly report;

 

10.                Theregistrant’s other certifying officers and I are responsible for establishingand maintaining disclosure controls and procedures (as defined in Exchange ActRules 13a-14 and 15d-14) for the registrant and have;

 

a.                   designedsuch disclosure controls and procedures to ensure that material informationrelating to the registrant, including its consolidated subsidiaries, is madeknown to us by others within those entities, particularly during the period inwhich this quarterly report is being prepared;

b.                  evaluatedthe effectiveness of the registrant’s disclosure controls and procedures as ofa date within 90 days prior to the filing date of this quarterly report (the“Evaluation Date”); and

c.                   Presentedin this quarterly report our conclusions about the effectiveness of thedisclosure controls and procedures based on our evaluation as of the EvaluationDate;

 

11.                Theregistrant’s other certifying officers and I have disclosed, based on our mostrecent evaluation, to the registrant’s auditors and the audit committee of theregistrant’s board of directors (or person fulfilling the equivalent function);

 

a.                   Allsignificant deficiencies in the design or operation of internal controls whichcould adversely affect the registrant’s ability to record, process, summarizeand report financial data and have identified for the registrant’s auditors anymaterial weaknesses in internal controls; and

b.                  Anyfraud, whether or not material, that involves management or other employees whohave a significant role in the registrant’s internal controls; and

 

12.                Theregistrant’s other certifying officers and I have indicated in this quarterlyreport whether or not there were significant changes in internal controls or inother factors that could significantly affect internal controls subsequent tothe date of our most recent evaluation, including any corrective actions withregard to significant deficiencies and material weaknesses.

 

 
| Date:  | November 13, 2002 |   |   |   |                    |   |
|--------|-------------------|--------|--------|--------|-------------------------|--------|
|   |              |   |   |   |                    |   |
|   |              |   |   |   | /s/ Nathaniel Ostroff   |   |
|   |              |   |   |   | Chief Executive Officer |   |

 

18

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**CERTIFICATION OF PERIODIC REPORT**

 

 

I, Nathaniel Ostroff, CEO of AcrodyneCommunications (the “Company”), certify, pursuant to section 906 of theSabanes-Oxley Act of 2002, 18 U.S.C. Section 1350, that:

 

(1)                                  the Quarterly Report on Form 10Q of theCompany for the quarterly period ended September 30, 2002 (the “Report”) fullycomplies with the requirements of Section 13(a) or 15(d) of the SecuritiesExchange Act of 1934 (15 U.S.C. 78m or 78o(d)); and

(2)                                  the information contained in the Reportfairly presents, in all material respects, the financial condition and resultsof operations of the Company.

 
| Dated:  November 13, 2002 |   |   |   |   | By                                          | /s/ Nathaniel Ostroff |   |
|--------------------------------|--------|--------|--------|--------|---------------------------------------------|-----------------------|--------|
|                           |   |   |   |   | Nathaniel Ostroff, Chief  Executive Officer |                  |

 

 

I, Robert E. Woodruff, Jr., CFO of AcrodyneCommunications (the “Company”), certify, pursuant to section 906 of theSabanes-Oxley Act of 2002, 18 U.S.C. Section 1350, that:

 

(1)          the Quarterly Report on Form 10Q of theCompany for the quarterly period ended September 30, 2002 (the “Report”) fullycomplies with the requirements of Section 13(a) or 15(d) of the SecuritiesExchange Act of 1934 (15 U.S.C. 78m or 78o(d)); and

(2)          the information contained in the Reportfairly presents, in all material respects, the financial condition and resultsof operations of the Company.

 
| Dated:  November 13, 2002 |   |   |   |   | By                                                | /s/ R. E. Woodruff, Jr. |   |
|--------------------------------|--------|--------|--------|--------|---------------------------------------------------|-------------------------|--------|
|                           |   |   |   |   | Robert E. Woodruff, Jr.,  Chief Financial Officer |                    |

 

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