SECURITIES AND EXCHANGE COMMISSION
                            WASHINGTON, D.C. 20549

                            REPORT ON FORM 10-KSB

        [X]      Annual Report pursuant to Section 13 or 15(d) of the
                 Securities Exchange Act of 1934

    For the fiscal year ended December 31, 1996

Commission File No. 0-21931


                               AMPLIDYNE, INC.
            (Exact name of registrant as specified in its charter)


Delaware                                      22-3440510
(State of or other jurisdiction               (IRS Employer Identification No.)
of incorporation or organization)

144 Belmont Drive
Somerset, New Jersey                            08873
(Address of Principal                         (Zip Code)
 Executive Offices)

Registrant's telephone number, including area code: (908) 271-8473

Securities registered pursuant to Section 12(b) of the Act: None.

Securities registered pursuant to Section 12 (g) of the Act:

                   Common Stock, par value $.0001 per share
                               (Title of Class)

               Class A Redeemable Common Stock Purchase Warrant
                               (Title of Class)

         Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Sections 13 or 15 (d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes __ No X

         Indicate by check mark if disclosure of delinquent filers pursuant to 
Item 405 of the Regulation S-B is not contained in this form, and no disclosure
will be contained, to the best of registrant's knowledge, in definitive proxy 
or information statements incorporated by reference in Part III of this Form
10-KSB or any amendment to this Form 10-KSB. [X]

         Issuer's revenues for its most recent fiscal year were $2,219,945.

         The aggregate market value of the voting stock held by non-affiliates
of the Registrant, computed by reference to the closing price of such stock as

of March 14, 1997, was approximately $12,937,500.

         Number of shares outstanding of the issuer's common stock, as of March
14, 1997 was 4,460,000.

         Documents Incorporated by Reference:  None


<PAGE>

                                    PART I

Item 1.   BUSINESS

         General

         Amplidyne, Inc., a Delaware corporation ("Amplidyne" or the "Company")
designs, manufactures and sells ultra linear power amplifiers and related
subsystems to the worldwide wireless, local loop and satellite uplink
telecommunications market. These power amplifiers, which are a key component in
cellular base stations, increase the power of radio frequency ("RF") and
microwave signals with low distortion, enabling the user to significantly
increase the quality and quantity of calls processed by new and existing
cellular base stations. The Company's wireless telecommunications products
consist of solid-state, RF and microwave, single and multicarrier power
amplifiers that support a broad range of analog and digital transmission
protocols including advanced mobile phone services ("AMPS"), code division
multiple access ("CDMA"), time division multiple access ("TDMA"), total access
communication systems ("TACS"), extended total access communication systems
("ETACS"), nordic mobile telephone ("NMT"), global system for mobile
communications ("GSM") and digital communication service at 1800 MHz
("DCS-1800"). The products are marketed to the cellular, wireless local loop and
personal communication systems ("PCS") segments of the wireless
telecommunications industry. The PCS segment of the market is one of the fastest
growing segments and the Company has devoted significant resources in 1996 to
develop products for this market. The Company's largest wireless
telecommunications customers are DSC Communications and Samsung, each of which
is an original equipment manufacturer ("OEM").

         Amplidyne has several products covered by a patent issued by the United
States Patent and Trademark Office for Pre-Distortion and Pre-Distortion
Linearization which, the Company believes, is more effective in reducing
distortion than other currently available technology. In addition to its
presence in the wireless telecommunications industry, the Company designs and
manufactures products for uplink satellite communications and for audio and TV
transmission links. The Company also believes that its products have great
potential opportunity for the wireless communication industry in developing
countries.

         In addition to the Company's product line of single channel power
amplifiers which are currently utilized by the wireless communications industry,
the Company has developed a Multicarrier Linear Power Amplifier ("MCLPA"). MCLPA
combines the performance capabilities of up to 25 single carrier amplifiers into
one unit, eliminating the need for numerous single carrier amplifiers and the

corresponding unnecessary space occupied by the cavity filters encasing the
amplifiers. Management believes that with its (i) proprietary technology (which
effectively reduces distortion), (ii) technological expertise and (iii)
established product line consisting of ultra linear single channel power
amplifiers, the Company can achieve similar performance with its MCLPAs. The
Company's linear power amplifiers and MCLPAs utilizes the Company's patented
predistortion and proprietary feed forward technology which amplifies many
channels with minimal distortion at the same time with one product.

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<PAGE>

         The Company intends to capitalize on its extensive management
experience developing power amplifiers for worldwide markets by introducing more
sophisticated amplifiers for commercial applications. Amplidyne believes that
its core technological expertise should continue to enhance its ability to
introduce new products for the wireless telecommunications industry.

         The Company was incorporated on December 14,1995 pursuant to the laws
of the State of Delaware as the successor to Amplidyne, Inc., a New Jersey
corporation ("Amplidyne-NJ"), which was incorporated in October 1988. The
Company was organized to effectuate a reincorporation of Amplidyne-NJ with and
into the Company on December 22, 1995. The Company maintains its executive
offices at 144 Belmont Drive, Somerset, NJ 08873 and its telephone number is
(908) 271-8473. The Company completed its initial public offering of 1,610,000
Units (each Unit consisting of one (1) share of Common Stock and one (1)
Redeemable Common Stock Purchase Warrant ) in January 1997 pursuant to firm
commitment underwritten offering. The offering price was $5.10 per Unit. The
Common Stock and Warrants trade on the Nasdaq SmallCap Market.

Forward Looking Statements

         Certain information contained in this Annual Report on Form 10-KSB,
including, without limitation, information appearing under Part I, Item I
(Business), and Part II, Item 6 (Management's Discussion and Analysis of
Financial Condition and Results of Operations) are forward-looking statements
(within the meaning of Section 27A of the Securities Act of 1933, as amended and
Section 21E of the Securities Exchange Act of 1934, as amended). Factors set
forth that appear with the forward-looking statements, or in the Company's other
Securities and Exchange Commission filings, including its Registration Statement
on Form SB-2 dated January 21, 1997, could affect the Company's actual results
and could cause the Company's actual results to differ materially from those
expressed in any forward-looking statements made by, or on behalf of, the
Company in this Annual Report on Form 10-KSB.

Industry Background

         The market for wireless communication services has grown substantially
during the past decade. Cellular service has been one of the fastest growing
segments of the wireless telecommunications market. The worldwide wireless
revolution exploded in 1994, adding 24 million new subscribers bringing the
total global subscriber count in 1995 to approximately 55 million, a growth rate
of more than 70%. However, this represents a worldwide penetration of only

1.35%. Industry officials project a worldwide market penetration of 8% going
into the next century, a 50% compounded annual growth rate ("CAGR"). The growth
in cellular communications has required, and will continue to require,
substantial investment by cellular service providers in wireless infrastructure
equipment. Moreover, management believes that intensified competition among
cellular service providers is resulting in declining costs to end-users as well
as new types of service offerings. This demand, coupled with unprecedented
growth, will, in management's belief, require new infrastructure equipment and
technology that will allow better coverage for higher-density networks. Carriers
also need to have the flexibility to place cell sites anywhere, provide speedier

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deployment without regard to frequency allocation or planning with lower
installation, maintenance and operational costs. In order for carriers to meet
their demands, new technologies and base station equipment must be deployed.

         The PCS market is also one of the fastest growing segments in the
wireless telecommunications market. Recently major OEMs such as AT&T have
announced digital PCS services nationwide; such service is expected to begin in
early 1997. PCS service providers are attracting more subscribers than analysts
had projected. The attraction to consumers is lower prices than cellular and as
well as the fact that PCS phones use more powerful digital technology, which
improves call quality compared with cellular service. This result is due to the
fact that PCS transmits at a higher radio frequency. It is also easier to
program PCS phones for advanced features (i.e., sending electronic mail and news
headlines). Amplidyne has developed PCS linear amplifiers and PCS MCLPAs.
Management believes that these products will produce increased sales for the
Company during the next few years.

         A cellular system consists of a number of cell sites which are
networked to form a cellular system operator's geographic coverage area. Each
cell site has a base station which houses the equipment that transmits and
receives telephone calls between the cellular subscriber within the cell and the
switching office of the local wireline telephone system. Such base station
equipment includes an antenna and a series of transceivers, power amplifiers and
cavity filters. Large cell sites, which generally cover a geographic area of up
to five miles in radius, are commonly referred to as "macrocells."

         Cellular system operators in densely populated areas are able to expand
the capacity of their existing cellular systems by incorporating smaller cells,
commonly referred to as "microcells," that divide macrocells into several
smaller cell sites, typically one to three miles in radius. The base stations
for microcells are substantially smaller physically than base stations for
macrocells. Microcells require less expensive equipment at each base station,
but require greater numbers of these smaller base stations to maintain service
quality and system capacity.

         The ability of cellular system operators to increase system capacity
through the use of microcells is largely dependent on their ability to broadcast
multiple signals with acceptable levels of interference and distortion. In
cellular systems, the amplifier is generally the greatest source of signal

interference and distortion, particularly with multi carrier high power
amplifiers. Consequently, obtaining amplifiers which can transmit and receive
multiple signals with low distortion or interference from adjacent signals
("high spectral purity") is critical to a cellular system operator's ability to
increase system capacity. Substantial resources and technical expertise are
required to design and manufacture multi carrier power amplifiers with high
spectral purity. To achieve high spectral purity, multi carrier amplifier
systems must have high interference cancellation properties.

         In addition to cellular/ PCS system operators' need for base station
equipment, in many developing countries, where access to the public switch
telephone network ("PSTN") by the general population is significantly less than
in developed countries, the Company believes that wireless 

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telecommunications systems are the most economic means to provide basic 
telephone service. The expense, difficulty and time requirements of building and
maintaining a cellular or PCS network is generally less than the cost of
building and maintaining a comparable wireline network. Thus, in many less
developed countries, wireless service may provide the primary service platform
for both mobile and fixed telecommunications applications. In a wireless local
loop system, use is made of wireless radio systems instead of wireline networks
to connect telephone subscribers to the PSTN. The Company believes that the
potential opportunities for wireless communication services in countries without
reliable or extensive wireline systems may be even greater than in countries
with developed telecommunication systems.

         The Company's satellite amplifier products are used to amplify the
signal which is being transmitted from the ground up to the satellite. The
manufacturers of satellite communications equipment operate in commercial
markets such as television broadcast services and commercial military
communications. Amplidyne has also provided amplifiers for terrestrial radio
systems which are used for television and audio signal transmission.

Company Strategy

         Utilizing its proprietary, patented technology and experience in
interference cancellation, the Company is pursuing a strategy, focused on the
need of cellular, wireless local loop and PCS system operators, to develop
technologically advanced amplifier based products. The Company has recently
developed products which address the technical issues faced by such system
operators as a result of the rapid growth in wireless telephone use (cellular,
PCS and wireless local loop) and the resulting need to increase systems
capacity.

         Since early 1995 the Company has been involved in research, design and
development of linear power amplifiers and MCLPAs for the wireless
communications industry and most recently for the emerging PCS industry. The
Company has received a patent from the United States Patent and Trademark Office
on its predistortion technology which has enabled the Company to provide ultra
linear amplifiers with its proprietary feed forward technology. Since early 1996

the Company has allocated substantial engineering resources to develop linear
power amplifiers and MCLPAs for the emerging PCS market. The Company has focused
on establishing working relationships with major OEMs to develop products for
the PCS market, which is projected to show increased growth in 1997.

         Management believes that with its predistortion technology and the
linearity capability of its core amplifier technology, the Company can achieve
similar performance from a multicarrier amplifier which others achieve by using
dual feed forward loops; this results in much higher component count within the
amplifier unit and may result in poor reliability for such products, compared to
predistortion based feed forward amplifiers which use fewer components and
thereby have a high reliability.

         The Company's business strategy focuses primarily on the wireless
communication market and consists of the following elements:

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<PAGE>

         Increase Penetration of Wireless Equipment Manufacturers. Since 1991,
the Company has positioned itself as a supplier of amplifier products to large
wireless telecommunications OEMs, such as DSC Communications and Samsung.
Amplidyne seeks to capitalize on its existing customer relationships and become
a more significant source of its customers' amplifiers by working closely with
OEM customers to offer innovative solutions to technical requirements and
problems. Based on the performance characteristics and functionality of its
products, Amplidyne believes it will be able to more rapidly penetrate the
infrastructure equipment market by initially focusing its marketing efforts on
large OEMs rather than system operators.

         Develop Relationships with Emerging Wireless Equipment Manufacturers.
The Company anticipates that emerging wireless equipment manufacturers will make
an increasingly significant contribution to the growth of the wireless
telecommunications industry particularly the PCS and cellular segments.
Management believes that its linear power amplifiers and MCLPAs will assist
these equipment manufacturers in providing high capacity, low distortion low
cost per channel products and has already begun to sell amplifiers to several
emerging wireless equipment manufacturers.

         Develop Products for Multiple Protocols. The Company intends to
continue to invest resources in the research and development of new products for
various protocols. For cellular systems, the Company currently supports the AMPS
and TACS analog protocols, and the CDMA, TDMA, E-TACS, NMT and GSM digital
protocols. For PCS systems, Amplidyne currently supports CDMA, TDMA, DCS-1800
and PCS-1900 digital protocols. Amplidyne is continuing to develop products that
incorporate protocols which it believes will address the needs of established
and emerging wireless systems. Management believes the development of products
for multiple protocols will enable Amplidyne to benefit from the continuing
growth of existing wireless systems and other emerging wireless
telecommunications markets while reducing the risks associated with relying on
the success of one or a limited number of existing or emerging industry
protocols.


         Maintain a Technology Leadership Position. In management's belief the
Company, with its innovative products, has been addressing the needs of its
customers for products that solve significant technical problems. The Company
believes its interference cancellation technologies are among the most advanced
that are commercially available in the industry, both in performance and
diversity of methodology. The Company utilizes proprietary and patented
predistortion technology and proprietary feed forward interference cancellation
technology in its linear power amplifiers and MCLPAs to enable the user to
significantly increase the quality and quantity of calls processed by new and
existing cellular base stations. The Company intends to continue to invest
substantial resources in research and development associated with its
interference cancellation technologies. See "Technology". The Company has
emphasized research and development on PCS products during 1996 which management
believes will be a growth area for the Company during 1997.

         Develop Innovative Proprietary Products. To date, the Company has
focused its efforts in the development of amplifier products which are highly
innovative and are not the standard "commodity" type product. In addition, the
Company believes that it has compiled an extensive design library in the
solid-state, high power amplifier industry utilizing its proprietary and
patented technology and expertise in interference cancellation. The Company has
developed and intends to 

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continue to develop products which combine basic components in unique and high
performance configuration to command higher prices in the wireless
communications market. In addition, the Company also plans to adopt this
expertise for new commercial market applications and product requirements and
develop products for the emerging DCS-1800 and PCS-1900 markets. The Company has
developed amplifier products during 1996 which can be used in PCS repeater
subsystems. Management believes that this segment of the business will show
increased growth.

         Provide Support from Product Design through Installation and Operation.
The Company works with its customers throughout the design process to assist
them in refining and developing their amplifier specifications. Once the
specifications have been met and the product delivered, Amplidyne continues to
provide technical support to facilitate system integration, start-up and
continued operation. By providing customer support services from the product
design phase through installation and operation, management believes it fosters
increased levels of customer loyalty and satisfaction. In addition, through this
process, the Company believes it will develop new product definitions and
implementations to further enhance the strategic position of the Company in the
wireless market.

         Maintain Control of the Manufacturing Process. As part of the
transition to becoming a leading amplifier supplier to the wireless
telecommunications market, Amplidyne is in the process of implementing in-house
automated manufacturing in order to control its production schedule. In certain
instances, Amplidyne has made the strategic decisions to select single or
limited source suppliers in order to obtain lower pricing, receive more timely

delivery and maintain quality control.

The Amplidyne Advantage

         The Company believes that its products, particularly the ultra linear
power amplifiers and MCLPAs, have several features which differentiate them from
those of its competitors, such as:

         The Predistortion Solution. Utilizing its proprietary technology the
Company can obtain significant distortion reduction in its core amplifiers. This
enables the predistorted amplifier to have feed forward correction (which is
described below, see "Technology") applied to it to achieve distortion
cancellation. The Company believes that its competitors are only able to obtain
this level of distortion cancellation by use of complex and component intensive
"Dual Feed Forward Loops" resulting in the use of more components within the
amplifier unit. In general, the fewer components that an amplifier uses, the
better its reliability.

         Superior Distortion and Spurious Cancellation Resulting in Ultra Linear
High Power Amplifiers.The Company believes the use of MCLPAs is critical in the
implementation of new cellular systems and upgrade of older analog systems.
Cellular systems need to cover large areas with minimum hardware in order to
minimize cost per subscriber. Reduction of the distortion and spurious signals
from the amplifiers is a key enabling technology. Amplidyne has developed
proprietary interference cancellation technology using multiple methods to
achieve high suppression of spurious output and distortion typically associated
with higher power amplifiers.

         By utilizing its proprietary and patented predistortion technology and
its proprietary feed 

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forward technology, the MCLPAs amplification capacity of the Company's
amplifiers are, in management's belief, among the best in the industry. Standard
MCLPAs currently support 25 channels with approximately 25 watts composite
power, resulting in approximate 1 watt per channel. The Company's MCLPAs support
up to 25 channels at 4 watts per channel, an approximate 400% increase over
industry standard MCLPAs.

         High Quality and Reliability. Amplidyne believes that it has
consistently provided high quality, reliable products to its customers. The
Company has many thousands of its amplifiers in the field. Management believes
that its reputation for quality and reliability will enable Amplidyne to attract
new customers and maintain existing customers for all its products.

         Linearity, Low Distortion and High Amplification. Wireless service
providers' ability to manage scarce spectrum resources more effectively and
accommodate a larger number of subscribers is largely dependent on their ability
to broadcast signals with high linearity, which pertains to the ability of a
component to amplify a wave form without altering its characteristics in
undesirable ways. Linear amplifiers allow signals to be amplified without

introducing spurious emissions that might interfere with adjacent channels.
Higher linearity increases the capacity of cellular systems by enabling a more
efficient use of digital transmission technologies, microcellular architectures
and adaptive channel allocation. In current cellular systems, the power
amplifier is generally the source of the greatest amount of signal distortion.
Consequently, obtaining power amplifiers with high linearity and low distortion
is critical to wireless service providers' ability to improve spectrum
efficiency.

         The Company has several products covered by a patent issued by the
United States Patent and Trademark Office which it believes gives it a
significant advantage over its competitors. These features for Pre-distortion
and Pre-distortion Linearization designs significantly reduces distortion below
that which is currently available in the marketplace.

         Multicarrier Designs. Multicarrier amplification, in which all channels
are amplified together by a MCLPA, rather than each channel using a separate
amplifier, allows for instantaneous electronic channel allocation. Functionally,
it combines multiple single channel power amplifiers, typically 16, into a
single unit, thereby eliminating the single channel power amplifiers and the
corresponding tunable cavity filters. MCLPAs require significantly higher
linearity compared to single channel designs.

         By virtue of the Company's high linearity products which incorporates
pre-distortion and feed forward technology achieving, in management's belief,
the lowest distortion in the industry, the MCLPA amplified signal remains within
their prescribed band and spectrum with low interference of adjacent channels
thus providing flexibility to accommodate any frequency plan. Management
believes that its technology in MCLPAs will enable Amplidyne to attract new
customers.

         Low Noise Amplifier. Since 1991, the Company has been manufacturing low
noise amplifiers (LNA) which are used in the receiver section of the base
station (digital and analogue). With this technology, the Company has the
ability to offer "booster amplifiers" to the wireless 

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industry which incorporate LNAs, MCLPAs and receive / transmit filters.
Management believes that there is a significant market for "booster amplifiers"
which it intends to pursue. The Company has recently received orders for small
quantities of its low noise PCS products. Management believes that this line of
products have growth potential.

         High Quality, Reliability and Customer Support. The Company believes
that the power amplifier in cell sites historically has been the single most
common point of equipment failure in wireless telecommunications networks.
Increasingly reliable power amplifiers, therefore, will improve the level of
service offered by wireless service providers, while reducing their operating
costs. In addition, MCLPAs eliminate the need for high-maintenance, tunable
cavity filters which should further reduce costs.


         The Company works closely with its customers throughout the design
process in refining and developing their amplifier specifications. The Company
uses the latest equipment and computer aided design and modeling, solid state
device physics, advanced digital signal processing ("DSP") and digital control
systems, in the development of its products in their specialized engineering and
research departments. The integration of the Company's design and production is
a factor in the Company's ability to provide its customers with high
reliability, low distortion and low maintenance amplifiers.

Technology

         Wireless Transmit Technology. A typical cellular communications system
comprises a geographic region containing a number of cells, each with a base
station, which are networked to form a cellular service provider's coverage
area. Each base station or cell site houses the equipment that transmits and
receives telephone calls to and from the cellular subscriber within the cell and
the switching office of the local wireline telephone system. Such equipment
includes a series of transceivers, power amplifiers, tunable cavity filters and
an antenna. In a single channel system, each channel requires a separate
transceiver, power amplifier and tunable cavity filter. The power amplifier
within the base station receives a relatively weak signal from the transceiver
and significantly boosts the power of the outgoing wireless signal so that it
can be broadcast throughout the cell. The radio power levels necessary to
transmit the signal over the required range must be achieved without distorting
the modulation characteristics of the signal. The signal must also be amplified
with linearity in order to remain in the assigned channel with low distortion or
interference with adjacent channels.

         Because cellular operators are allocated a small RF spectrum and
certain channels, it is necessary to make efficient use of the spectrum to
enable optimum system capacity. By amplifying all channels with minimum
distortion at the same time, rather than inefficient use of single channel
amplification, one obtains better system capacity. A MCLPA combines the
performance capabilities of up to 25 single carrier amplifiers into one unit,
eliminating the need for numerous single carrier amplifiers and their
corresponding tunable cavity filters. These MCLPAs require less space than
multiple single channel amplifiers and their corresponding tunable cavity
filters which reduce the size and cost of a base station.

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         MCLPAs create distortion products which can cause adjacent channel
interference. The minimization of these distortion products requires
sophisticated technology. This is accomplished through interference cancellation
techniques such as "predistortion" and "feed forward" accompanied by highly
advanced control and processing technology. The Company has developed certain
proprietary technology and methods to achieve minimal distortion in its
amplifiers, technically called predistortion and feed forward correction. The
Company uses three distinct technologies (A) Linear class A and AB amplifiers,
(B) Predistorted class A and AB amplifiers and (C) Predistortion feed forward
amplifiers. The Company's proprietary leading edge products contain patented
predistortion and proprietary feed forward technology combined in a proprietary

automatic correction technique.

         All amplifiers create distortion when they are run at a high power
level. In an ideal case the output of the amplifier would faithfully reproduce
the input signal without any distortion. In real life, however, distortion
characteristics are produced. These distortion products can cause interference
with another caller's channel which in turn produces poor call quality. By using
a simple, patented technology, Amplidyne recreates the distortion for the
amplifier in such a manner to cancel the interference signals.

         Amplidyne believes that this cancellation technique is superior to any
other predistortion technology available at present. Feed forward cancellation
involves taking the distortion created by the amplifier and processing it in
such a way that when it is added back into the amplifier having been
pre-distorted and combined with the feed forward technology, distortion
cancellation occurs. The Company believes that its patented technology has the
most unique and potent technology for distortion cancellation. Furthermore,
Amplidyne has selected linear class AB technology for its base amplifier which
it believes also has superior distortion characteristics compared to other
competitors because it is easier to pre-distort. Thus the three key ingredients
(a) Linear class A and AB amplifiers, (b) Predistortion technology and (c) Feed
forward technology enables Amplidyne to produce MCLPAs with what it believes to
be the best distortion cancellation available on the market.

         Analog v. Digital Technology. Cellular system operators are increasing
their system capacity by transitioning from analog to digital technology.
Cellular systems based on analog technology are capable of carrying only one
call per channel. Current analog standards and formats include AMPS and TACS.
Digital systems allow a given channel of spectrum to carry multiple calls
simultaneously thereby increasing system capacity. Conversion to digital
transmission is expected to allow three to eight times as many voice
conversations to occupy the same frequency bands. Current digital standards and
formats include TDMA and CDMA in North America and GSM and DCS-1800 in Europe.
An additional cellular system operating in the specialized mobile radio ("SMR")
spectrum is in the early stages of deployment in the United States. This system
uses digital techniques that include Frequency Hopping Multiple Access ("FHMA").

         Wireless Receive Technology. The receiving section of a cellular base
station frequently uses two antennas for efficient spectrum usage. The
deployment of complex circuitry and techniques, including the use of GaAsFET
(Gallium Arsenide Field Effect Transistors) enhances the systems performance,
enabling the weak "noisy" signal to be amplified with a significant reduction in
the level of noise. Amplidyne has been manufacturing low noise amplifiers since
1991, with thousands currently in service.

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Markets

         The market for wireless communications services has grown substantially
during the past decade as cellular wireless local loop, SMR and other new and
emerging applications (such as PCS) have become increasingly accessible and

affordable to growing numbers of consumers. The growth of these markets has
increased the demand for the Company's products, although the Company cannot
predict trends in these markets.

         Cellular Market. The market for cellular communications is currently
the largest of the wireless services. See " Industry Background." Cellular
system operators have expanded the capacity of their existing cellular systems
by splitting macrocells into smaller microcells. The Company believes that the
relatively small size, high power and performance characteristics of its
microcell MCLPAs will be particularly attractive to companies like AT&T, DSC
Communications, Samsung, Goldstar as well as emerging wireless
telecommunications infrastructure equipment providers when providing
infrastructure equipment for such new cell sites.

         Wireless Local Loop and SMR Markets. Wireless local loop systems are
increasingly being adopted in developing markets to more quickly implement
telephone communication services. In certain developing countries, such as
Indonesia and Brazil, wireless local loop systems provide an attractive
alternative to copper and fiber optic cable based systems, with the potential to
be implemented more quickly and at lower cost than wireline telephone systems.
The Company designs, manufactures and markets MCLPAs for infrastructure
equipment systems in the wireless local loop market.

         SMR, like cellular communications, is a two-way service for both speech
and data. SMR originally was designed as a private network for closed groups
communicating between a base station and a large number of users, mainly for
dispatching taxis, delivery and public safety vehicles. SMR system operators are
subject to certain limitations which make the use of SMR frequencies more
appropriate for short dispatch messages. The success of SMR as a new type of
wireless service will depend in part on whether infrastructure manufacturers and
service providers can reduce costs so as to gain greater market penetration than
cellular service providers.

         Custom Communications and Other Markets. The custom communications
market consists of small niche segments within the larger communications market:
long-haul radio communications, land mobile communications, surveillance
communications, ground-to-air communications, microwave communications,
broadband communications and telemetry tracking. The Company sells custom
amplifiers and related products to these segments. See " Customers, Sales and
Marketing".

         PCS and Other Potential Markets. The Company believes that new types of
wireless systems will be introduced in the near future. For example, in 1994 and
1995, the FCC auctioned RF spectrum in the 1.85 to 1.99 gigahertz range for the
provision of PCS. Like SMR, the success of PCS will depend in part on whether
manufacturers and service providers can reduce system manufacturing and service
costs sufficiently. The Company believes that cellular, SMR and PCS will share
future markets with PCS capturing the most significant portion of this market.
See 

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"Business - Industry Background." The Company is currently developing products
for the PCS market, has shipped prototype products for the PCS market and has
recently received purchase orders for PCS linear power amplifiers.

Products

         The Company designs and sells multicarrier transmit amplifiers and low
noise receive amplifiers for the cellular communications market, as well as the
PCS, wireless local loop and special mobile radio (SMR) segments of the wireless
communications industry. The Company also provides a large number of catalog and
custom amplifiers to OEMs and to other customers in the communications market in
general.

         o        Multicarrier Linear Power Amplifiers (MCLPAs). When a
                  cellular or PCS user places a call, the call is processed
                  through a base station, amplified, and then transmitted on to
                  the person receiving the call. Therefore, all base stations
                  require amplifiers (MCLPAs) whether they are being used for
                  cellular, PCS or local loop applications. Amplidyne
                  manufactures these amplifiers. The objective is to provide a
                  quality product at a good price and to have exemplary
                  reliability. Management believes that Amplidyne's products
                  with its patented predistortion technology, core linear
                  amplifier technology and proprietary feed forward technology
                  achieve all of the above mentioned objectives. Amplidyne's
                  MCLPAs are a unique line of ultra linear devices which utilize
                  a proprietary predistortion and phase locked feed forward
                  architecture. MCLPAs typically amplify up to 25 carriers at 4
                  watts of output power.

         The following table provides certain information regarding the
Company's MCLPAs. The key item in this table is the IMD specification, which
management believes is among the best available in the industry.


<PAGE>
                       AMPLIDYNE'S MCLPA PRODUCT SUMMARY
<TABLE>
<CAPTION>
                                                        OUTPUT
     Product                                             POWER
    Model No.           FREQUENCY       STANDARD         WATTS     IMD (dBc)*
    ---------           ---------       --------        ------     ----------
<S>                     <C>             <C>             <C>        <C>
AMP461/466-N-100         463-467.5      NMT-450          100          -70

AMP651/866-SE-100        851-866        SETACS           100          -70

AMP869-896-100           869-894        AMPS/CDMA        100          -70
                                        CDPD, TDMA

AMP917/950-E-100         917-960        ETACS/CDMA       100          -70

AMP1819-D-100           1805-1880       DCS-1800         100          -70


AMP1990-P-100           1930-1990       PCS-1900         100          -70

AMP1855-K-100           1840-1870       PCS-CDMA         100          -70
</TABLE>

       * Carrier to Intermodulation Distortion Radio (the industry's 
                 standard measure) and spurious emissions.

         o        High Power Linear Amplifiers. Amplidyne's product line of
                  linear amplifiers have a high third order intercept point
                  which translates to better call quality. These high power
                  amplifiers are supplied as modules or plug in enclosures. The
                  communication bands available are NMT-450, AMPS, TACS, ETACS
                  and PCS. The output power ranges from 1 to 200 Watts. These
                  amplifiers can be used in instances where service providers
                  only need a single transmit channel.


<PAGE>

The following table lists the Company's high power linear amplifiers:

<TABLE>
<CAPTION>
Model No.       FREQUENCY MHz      STANDARD       POWER WATTS     IMD (dBc)
---------       -------------      --------       -----------     ---------
<S>             <C>                <C>            <C>             <C>
AMP0861-50         869-894         CDMA               25             -50
                                   AMPS/TDMA          50             -40
                                   AMP/CDPD           65             -25

AMP0935-16         925-960         GSM                65             -25

AMP0933-50         917-960         ETACS              65             -25

AMP0450-25         463-468         NMT-450            50             -40

AMP1855-25        1840-1870        DCS-1800           30             -30

AMP1990-25        1930-1990        PCS-1900           30             -30
                                   TDMA               50             -40
                                   CDMA               25             -40
</TABLE>


         o        Local Loop and Mini Cell Amplifiers. Local loop and mini cell
                  amplifiers are designed with a proprietary circuit to 
                  achieve a high IMD specification, which translates to better 
                  call quality through the mini cell. These amplifiers can be 
                  supplied by the Company as modules or in a rack configuration.

         o        Low Noise Amplifier, Cellular, PCN, PCS, GSM. Amplidyne's 
                  low noise amplifiers are manufactured with a mix of silicon 

                  and GaAsFET devices. These amplifiers offer the user the 
                  lowest noise and the highest intercept point, while 
                  maintaining good efficiency. Received calls at a base 
                  station are low in level due to the fact that hand held 
                  cellular phones typically operate at half a watt power level. 
                  This weak signal has to be amplified clearly which is done 
                  by using Amplidyne's low noise amplifier. All amplifiers 
                  undergo 72 hour burn-in period to ensure reliable filed 
                  operation.

         o        Communication Amplifiers. These amplifiers are designed for 
                  cellular and PCN/PCS applications and use GaAs or Silicon 
                  Bipolar FET devices. Management believes that this product 
                  provides the industry's best performance per dollar. The 
                  transmit amplifiers are optimized for low distortion 
                  products. Custom configurations are available for all
                  communication amplifiers. This line of products is aimed at 
                  the single channel base station users employing the digital 
                  cellular standards (CDMA and TDMA). Management believes by 
                  marketing this product in this format a distinct, large 
                  market can be addressed by these products.

<PAGE>

         o        Receive Multi-Coupler Amplifiers. Amplidyne supplies dual 
                  receiver multi-carriers for cellular and PCS bands. 
                  Management believes that this product line offers high 
                  performance and reliability. Receive multi-coupler 
                  amplifiers consist of low noise amplifiers, as described
                  above, filters and other components used as a receiving 
                  subsystem within the base station. Management believes by 
                  offering this product line, Amplidyne has more value added 
                  to its low noise amplifiers and at the same time can satisfy 
                  the requirements of its customers.


         The Company has used its technological expertise to improve the
linearity of its amplifiers by introducing pre-distortion and compensation
techniques. Several of the Company's single-channel amplifiers include linearity
correction and compensation networks. These techniques are combined with
automatic error correction circuits to enhance the linearity and performance of
the Company's feed-forward amplifiers. Amplidyne has also used its technological
expertise to design and manufacture new products, such as the first 200 watt
average power multi-channel pre-distortion amplifier, and a PCS single-channel
CDMA amplifier being used in an overseas CDMA base station evaluation.

         The Company's wireless telecommunications amplifiers can be configured
as modules, separate plug-in amplifier units or integrated subsystems. The
Company's products are integrated into systems by OEM customers, and therefore
must be engineered to be compatible with industry standards and with certain
customer specifications, such as frequency, power, linearity and built-in test
(BIT) for automatic fault diagnostics.

Product Warranty


         The Company warrants new products against defects in materials and 
workmanship for a period of one (1) year from the date of shipment. To date,
the Company has not experienced a material line of warranty claims.

Backlog

         As of December 31, 1995 the Company had a backlog of $3.5 million. As
of December 31, 1996, the Company had a multi-year delivery backlog of
approximately $103,000,000. It is anticipated that this backlog will be filled
with continuing production during fiscal years 1997-1999. The Company cannot
predict whether or not all of such backlog will be delivered inasmuch as
purchase orders are subject to changes and/or cancellation particularly since
the wireless communications industry is characterized by rapid technological
change, new product development, product obsolescence and evolving industry
standards. In addition, as technology changes, corporations are frequently
requested to update and provide new prototypes in accordance with new
specifications if products become obsolete or inferior.

Customers, Sales & Marketing

         Customers. The Company markets its products worldwide generally to
wireless communications manufacturers (OEMs) and communications system
operators. The table below indicates net revenues derived from customers in the
Company's markets since 1994.

                                      15

<PAGE>

                      Net Revenues By Market Categories
                                (in thousands)

                                                   Year Ended 
                                                   December 31,
                                             -----------------------
Markets                                      1994      1995     1996
-------                                      ----      ----     ----

Cellular Analog .......................     $2,780    $  308   $  126

Cellular Digital.......................        143       591      452

Wireless Telephony.....................        187       435      759

Satellite Communications, Custom 
and other  Products....................        465       476      231

Digital PCS Products...................        ---       ---      652

     Total.............................     $3,575    $1,810   $2,220


         Historically, the Company has derived a substantial percentage of its

net revenues from various customers during certain fiscal periods and until
fiscal 1994 the Company derived substantially all of its net revenues from
cellular analog products. However, since 1995 the Company has focused primarily
on digital cellular and wireless telephony and therefore the sales in those
areas have substantially increased. The Company expects that for future sales
the Company will have substantial market share in the cellular digital, wireless
telephony and digital PCS products.

         *        Cellular Analog and Digital. Since 1989 the Company has been
                  working closely with AT&T Bell Labs to develop products for
                  analog base stations primarily in the AMPS Band. These
                  products consist primarily of high linearity pre-amp
                  amplifiers and low noise amplifiers for the receive section of
                  the base station. In subsequent years the Company shipped
                  thousands of the amplifiers to its OEM customers. However,
                  with the transition of digital technology the sales of the
                  products decreased substantially in 1995 and the Company
                  concentrated its efforts in developing MCLPAs. In February
                  1995 the Company received prototype orders for its wireless
                  MCLPAs. Sales to the analog and digital cellular industry have
                  decreased from 82% in 1994 to approximately 26% of total sales
                  in 1996.

         *        Wireless Telephony. As a result of the shift in the Company's
                  research, engineering and development and marketing efforts,
                  sales to the wireless telephone segments of the wireless
                  communications industry have increased from approximately 5%
                  of total revenues for fiscal year end 1994 to 34% of total
                  revenue for the fiscal year end 1996.

                                      16

<PAGE>

         *        Digital PCS. The Company has shipped prototype amplifiers to
                  its OEM customers as of December 31, 1996 accounting for 29%
                  of sales in the period ended December 31, 1996 and recently
                  received purchase orders for its PCS products. Management
                  expects this sector of the market to show substantial growth
                  during fiscal 1997. The Company believes it is one of the
                  pioneers for low noise, and single channel high power MCLPAs
                  for the worldwide OEM and system operators.

         *        International Sales. Sales of wireless products outside the
                  United States (primarily to Western Europe and the Far East)
                  represented approximately 8%, 30% and 34% of net sales during
                  fiscal 1994, fiscal 1995 and fiscal 1996, respectively. The
                  Company believes that cellular, PCS and wireless telephony
                  growth worldwide is going to far exceed growth rate
                  experienced in the U.S. The Company is positioning itself with
                  strategic alliances with key OEM's overseas to be a prime
                  source of base station, low noise and multi carrier power
                  amplifiers.


         *        Sales and Marketing. The Company's executive officers are
                  involved in all aspects of the Company's relationships with
                  its major OEM and system operator customers. The Company
                  employs a direct sales approach focused on providing its
                  wireless industry customers with unique solutions to satisfy
                  their transmit and receive amplification needs. Sales of the
                  Company's products to OEM and system operators requires close
                  technical liaison with customer engineers and purchasing
                  managers. The Company has entered into technical sales
                  representative agreements for the territories of Maryland,
                  Virginia, Pennsylvania, Washington, D.C., Delaware, New
                  Jersey, Korea, England and parts of Western Europe. By having
                  sales representatives in selected areas the Company can better
                  serve its key customers in these areas and continue to have
                  good relationships with them by providing technical support as
                  well as strong individual based customer service.

Competition

         The ability of the Company to compete successfully and sustain
profitability depends in part upon the rate of which OEM customers incorporate
the Company's products into their systems. The Company believes that a
substantial majority of the present worldwide production of power amplifiers is
captive within the manufacturing operations of a small number of wireless
telecommunications OEMs and offered for sale as part of their wireless
telecommunications systems. The Company's future success is dependent upon the
extent to which these OEMs elect to purchase from outside sources rather than
manufacture their own amplification products. There can be no assurance that OEM
customers will incorporate the Company's products into their systems or that in
general OEM customers will continue to rely, or expand their reliance, on
external sources of supply for their power amplification products. Since each
OEM product involves a separate proposal by the amplifier supplier, there can be
no assurance that the Company's current OEM customers will not rely upon
internal production capabilities or a non-captive competitor for future
amplifier product needs. The Company's OEM customers continuously evaluate
whether to manufacture their own amplification products or purchase them from
outside sources. These OEM customers are large manufacturers of wireless
telecommunications equipment who could elect to enter the non-captive market and
compete directly with the Company. Such increased competition could materially
adversely affect the Company's business, financial condition and results of
operations.

                                      17

<PAGE>

         Certain of the Company's competitors have substantially greater
technical, financial, sales and marketing, distribution and other resources than
the Company and have greater name recognition and market acceptance of their
products and technologies. In addition, certain of these competitors are already
established in the wireless amplification market, but the Company believes it
can compete with them effectively. No assurance can be given that the Company's
competitors will not develop new technologies or enhancements to existing
products or introduce new products that will offer superior price or performance

features. To the extent that OEMs increase their reliance on external sources
for their power amplification needs more competitors could be attracted to the
market.

         The Company expects its competitors to offer new and existing products
at prices necessary to gain or retain market share. The Company expects to
experience significant price competition, which could have a materially adverse
effect on gross margins. Certain of the Company's competitors have substantial
financial resources which may enable them to withstand sustained price
competition or downturns in the power amplification market. Currently, the
Company competes primarily with non-captive suppliers of power amplification
products. The Company believes that its competition, and ultimately the success
of the Company, will be based primarily upon service, pricing, reputation and
the ability to meet the delivery schedules of its customers.

Manufacturing

         The Company assembles, tests, packages, and ships its products at its
manufacturing facilities located in Somerset, New Jersey. This facility includes
a separate assembly and test facility for various custom products.

         Manufacturing Process. The Company's manufacturing process consists of
purchasing components, assembling and testing components and subassemblies,
integrating the subassemblies into a final product and testing the product. The
Company's amplifiers consist of a variety of subassemblies and components
designed or specified by the Company including housings, harnesses, cables,
packaged RF power transistors, integrated circuits and printed circuit boards.
Most of these components are manufactured by others and are shipped to the
Company for final assembly. Each of the Company's products receives extensive in
process and final quality inspections and tests.

         The Company's devices, components and other electrical and mechanical
subcomponents are generally purchased from multiple suppliers. The Company does
not have any written agreement with any of its suppliers. The Company has
followed a general policy of multiple sourcing for most of its suppliers in
order to assure a continuous flow of such supplies. However, the Company does
purchase certain transistors produced by a single manufacturer because of the
high quality of its components. The Company believes it is unlikely that such
transistors would become unavailable, however, if that were to occur, there are
multiple manufacturers of generally comparable transistors. The Company would
require a period of time to "return" its products to function properly with the
replacement transistors. The Company believes that the distributors of such
transistors maintain adequate inventory levels, which would mitigate any adverse
effect on the Company's production in the event unavailability or shortage of
such transistors. If for any reason the Company could not obtain comparable
replacement transistors or could not return its products to operate with the
replacement transistors, the Company's business, financial condition and results
of operations could be adversely affected.

                                      18

<PAGE>

         The Company currently utilizes discrete circuit technology on printed

circuit boards which are designed by the Company and provided by suppliers to
the Company's specifications. All transistors and other semiconductor devices
are purchased in sealed packages ready for assembly and testing. Other
components such as resistors, capacitors, connectors or mechanical supported
subassemblies are also manufactured by others. Components are ordered from
suppliers under master purchase orders with deliveries timed to meet the
Company's production schedules. As a result, the Company maintains a low
inventory of components, which could result in delay in production in the event
of delays in such deliveries.

         The Company is in the process of integrating automated equipment to
place surface mount components on printed circuit boards.

         Microwave Integrated Circuit Manufacturing Facility. The Company is
planning to install a facility to support assembly and testing of custom RF and
microwave amplifiers and other passive components for which miniaturization is
particularly important. Handling of all components, assembly and testing is
undertaken in environmentally controlled surroundings. The Company believes that
this approach may be used as a core technology for PCS products in the future
and the Company may use its capability and technology in conceptualization and
implementation of PCS amplifiers and related products. However, the Company to
date has not manufactured PCS products utilizing the approach and no assurance
can be made that the Company will be able to make such products utilizing the
approach. There currently are adequate and readily available sources for all
components used in the Company's custom products.

         In connection with the Company's transition to an automated
manufacturing process, the Company intends to introduce computerized
surface-mount machinery and related process equipment to support automated
assemblies. The Company anticipates the transition to commence in the second
quarter of 1997.

Research, Engineering and Development

         The Company's research, engineering and development efforts are focused
on the design of amplifiers for new protocols, the improvement of existing
product performance, cost reductions and improvements in the manufacturability
of existing products.

         The Company has historically devoted a significant portion of its
resources to research, engineering and development programs and expects to
continue to allocate significant resources to these efforts. The Company's
research, engineering and development expenses in fiscal 1994, 1995 and 1996
were approximately $330,000, $370,000 and $1,150,000, respectively, and
represented approximately 9%, 21% and 52%, respectively, of net revenues. These
efforts were primarily dedicated to the development of the linear feed forward,
high power, low distortion amplifiers, resulting in the Company's models for
AMPS, TACS, NMT-450 and PCS-1900.

         The Company uses the latest equipment and computer aided design and
modeling, solid state device physics, advanced digital signal processing ("DSP")
and digital control systems, in the development of its products in the
specialized engineering and research departments.


         The Company uses a CAD environment employing networked work stations to
model and test new circuits. This design environment, together with the
Company's experience in interference

                                      19

<PAGE>

cancellation technology and modular product architecture, allows the Company to
rapidly define, develop and deliver new and enhanced products and subsystems
sought by its customers.

         The markets in which the Company and OEM customers compete are
characterized by rapidly changing technology, evolving industry standards and
continuous improvements in products and services.

Patents, Proprietary Technology and Other Intellectual Property

         The Company's ability to compete successfully and achieve future
revenue growth will depend, in part, on its ability to protect its proprietary
technology and operate without infringing the rights of others. The Company has
a policy of seeking patents, when appropriate, on inventions resulting from its
ongoing research and development and manufacturing activities.

         Presently, the Company has been granted a patent (No. 5,606,286) by the
United States Patent and Trademark Office with respect to its Pre-Distortion and
Pre-Distortion Linearization technology which, the Company believes, is more
effective in reducing distortion then other currently available technology.

There can be no assurance that the Company's patent will not be challenged or
circumvented by competitors.

         Notwithstanding the Company's active pursuit of patent protection, the
Company believes that the success of its amplifier business depends more on its
specifications, CAE/CAD design and modeling tools, technical processes and
employee expertise than on patent protection. The Company generally enters into
confidentiality and non-disclosure agreements with its employees and limits
access to and distribution of its proprietary technology. The Company may in the
future be notified that it is infringing certain patent and/or other
intellectual property rights of others. Although there are no such pending
lawsuits against the Company or unresolved notices that the Company is
infringing intellectual property rights of others, there can be no assurance
that litigation or infringement claims will not occur in the future.

Governmental Regulations

         The Company's customers must obtain regulatory approval to operate
their base stations. The United States Federal Communications Commission ("FCC")
recently adopted new regulations that impose more stringent RF and microwave
emissions standards on the telecommunications industry. There can be no
assurance that the Company's customers will comply with such regulations which
could materially adversely affect the Company's business, financial condition
and results of operations. The Company manufactures its products according to
specifications provided by its customers, which specifications are given to

comply with applicable regulations. The Company does not believe that costs
involved with manufacturing to meet specifications will have a material impact
on its operations. There can be no assurances that the adoption of future
regulations would not have a material adverse affect on the Company's business.

Employees

         As of December 31, 1996, the Company had a total of 42 employees,
including 21 in operations, 15 in engineering, 1 in sales and marketing, 2 in
quality assurance and 3 in administration. The Company believes its future
performance will depend in large part on its ability

                                      20

<PAGE>

to attract and retain highly skilled employees. None of the Company's employees
is represented by a labor union and the Company has not experienced any work
stoppages. The Company considers its employee relations to be good.

Environmental Regulations

         The Company is subject to Federal, state and local governmental
regulations relating to the storage, discharge, handling, emissions, generation,
manufacture and disposal of toxic or other hazardous substances used to
manufacture the Company's products. The Company believes that it is currently in
compliance in all material respects with such regulations. Failure to comply
with current or future regulations could result in the imposition of substantial
fines on the Company, suspension of production, alteration of its manufacturing
process, cessation of operations or other actions which could materially and
adversely affect the Company's business, financial condition and results of
operations.

Item 2.  PROPERTIES.

         The Company leases (from an unaffiliated party) approximately 21,000
square feet at 144 Belmont Drive, Somerset, New Jersey 08873 which serves as the
Company's executive offices and manufacturing facility. The lease term commenced
on May l, 1996 and expires on April 30, 1999. The annual rental is $168,000. The
Company has the option to extend the term of the lease for a three (3) year
period so long as it exercises the option for the entire building (36,405 square
feet) less space leased to third parties.

         The Company leases (from an unaffiliated party) approximately 6,000
square feet at Building 7, Unit 9, Ilene Court, Belle Mead, New Jersey 08502
which until April 1996 served as the Company's executive offices. The lease term
expires on October 31, 1997. The annual rental increases to a maximum of
$40,500. Total rental expenses for the years ended December 31, 1995 and 1996
were $34,295 and $42,400, respectively. The Company is presently in litigation
with the landlord of the premises.

                                      21

<PAGE>


Item 3.  LEGAL PROCEEDINGS

         The Company is not a party to any litigation or governmental
proceedings that management believes would result in judgments or fines that
would have a material adverse effect on the Company.

         The Company is involved in the following matters:

         AirNet Communications Corporation v. Amplidyne, Inc.

                   Plaintiff filed a complaint in the Circuit Court of the
         Eighteenth Judicial District of the State of Florida on January 23,
         1997 alleging breach of contract. Plaintiff also alleges damages in the
         amount of $4,322,579.05, plus interest, costs and attorneys 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 $48,587.48, plus
         interest, costs and attorney fees. Management believes that the
         allegations in the complaint are without merit.

         Larker Associates v. Amplidyne, Inc.

                  Plaintiff filed a compliant in the Supreme Court of New
         Jersey, Somerset County alleging breach of a lease (for the premises
         located in Belle Mead, New Jersey -- See "Item 2 - Properties").
         Plaintiff is alleging damages in the amount of $48,587.48. The Company
         filed an answer to the compliant and a counterclaim for breach of
         lease, cancellation of any rental due and damages in an amount in
         excess of $10,000. Management believes that the claim is without merit.

Item 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

                  There have been no matters which have been submitted to a vote
of the Company's security holders.


                                      22

<PAGE>

                                   PART II

Item 5.  MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.

         The Company's Common Stock and Warrants commenced trading on the Nasdaq
Small Cap Market on January 22, 1997.The Common Stock and Warrants are regularly
quoted and traded on the Nasdaq SmallCap Market under the symbols AMPD and
AMPDW, respectively.

         The following table sets forth the range of high and low bid quotation
prices for the Company's Common Stock and Warrants for the period January 22,
1997 up to March 31,1997 as requested by the Nasdaq SmallCap Market. The quotes

represent inter-dealer prices without adjustment or mark-ups, mark-downs or
commissions and may not necessarily represent actual transactions. The trading
volume of the Company's Common Stock and Warrants fluctuates and may be limited
during certain periods. As a result, the liquidity of an investment in the
Common Stock and Warrants may be adversely affected.

Common
Stock
------
        1997 Calendar Year                             Quoted Bid Price
        ------------------                            ------------------
                                                      High           Low
                                                      ----           ---
        January 22 - March 31                         5-5/8          4-1/4


Warrants
--------
        1997 Calendar Year                             Quoted Bid Price
        ------------------                             ----------------
                                                      High           Low
                                                      ----           ---
       January 22 - March 31                          13/16          1/4


         On March 31, 1997 the closing prices of the Common Stock and Warrants
as reported on Nasdaq SmallCap Market was $5-1/8 and $27/32, respectively. On
March 31, 1997 there were 4,460,000 shares of Common Stock and 1,610,000
Warrants outstanding, held of record by approximately 41 record holders.

                                      23

<PAGE>

Item 6.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF
         FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

Results of Operations

         The following table sets forth certain operating data as percentage of
total revenue:

                                          Percentage of Total Net Sales
                                                  Years ended
                                                  December 31,
                                            1995                 1996
                                            -------------------------
Net sales                                   100.0%                100%
   Cost of goods sold                        97.0                 99.0
          Gross profit                        3.0                  1.0
   Selling, general and
     administrative                          28.5                 51.6
   Research, engineering and
     development                             20.6                 51.8

Total operating expenses                     49.1                103.4
Interest expense                               .6                  4.9
   Stock compensation and
      financing costs                        65.2                136.7
Loss before income taxes                   (111.9)              (244.1)
Provision (credit) for
    income taxes
Net loss                                   (111.9)              (244.1)

 Results of operations - Fiscal year ended December 31, 1996 compared to Fiscal
Year ended December 31, 1995

         Revenues for the fiscal year ended December 31, 1996 increased 23%
compared to the fiscal year ended December 31, 1995. The Company's principal
business strategy since 1995 has been devoted to the engineering production of
the linear power amplifiers and Multicarrier Linear Power Amplifiers (MCLPA)
prototypes for major international OEM manufactures. As a result, the production
of commercial cellular amplifiers decreased significantly in 1995 replaced with
minimal revenues relating to the MCLPA. During fiscal year 1996, the Company's
revenues relating to the MCLPA as compared to the same period in 1995 increased
significantly as the MCLPA is further developed and nearing acceptance by OEM
manufacturers. In fiscal year 1996, approximately 29% of all product shipments
were prototypes compared to about 7% for the same period in 1995.

         Cost of sales as a percentage of sales was 99% during the year ended
December 31, 1996, compared to 97% during the same period for 1995. This
increase can be attributed to the extensive engineering and direct labor costs
associated with the production of MCLPA prototypes.

                                      24

<PAGE>


         Selling, general and administrative expenses increased in 1996 by
$629,496 to $1,145,910 from $516,414 in 1995. Expressed as a percentage of
sales, the selling, general and administrative expenses were 51.6% in 1996 and
28.5 % in 1995. The principal factors contributing to the increase in selling,
general and administrative expenses relate to consulting and professional fees
in 1996 that did not exist in 1995 and increased rent expense due to the Company
leasing a new larger facility. 

         Research, engineering and development expenses increased to 51.8% of
net sales in 1996 compared to 20.6% in 1995. In 1996, the principal activity of
the business related to the design and production of product prototypes for OEM
manufacturers. The research, engineering and development expenses consist
principally of salary costs for engineers and the expenses of equipment
purchased specifically for the design and testing of the prototype products.

         Interest expense was higher in 1996 because of the outstanding
bank debt, lease obligations and promissory notes.

         Stock  compensation  expense in 1996 of $3,034,990  relates to the 
1996 issuance of stock and options at prices  substantially  lower than the
initial public offering price.


         As a result of the foregoing, the Company incurred net losses of 
($5,419,940)  or ($1.49) per share for the year ended  December 31, 1996
compared with net losses of ($2,025,677) or ($.56) per share for the same 
period in 1995.

  1995 Compared with 1994

         In 1995 the Company began focusing its business on the MCLPA, a
relatively recent outgrowth in the market place. Since 1989 the Company had
concentrated in the commercial cellular amplifier business. The transition in
the Company's focus from a supplier of single channel amplifiers to the design
of MCLPA prototypes for large OEM wireless telecommunications manufacturers
resulted in a decrease in revenues of $1,764,910, or 49%, to $1,810,222 in 1995
from $3,575,132 in 1994. Shipments of prototype products accounted for about 7%
of all shipments in 1994 whereas in 1995 they accounted for 21%. During 1995
approximately 61% of net sales were to four customers and approximately 30% of
total sales were export sales.

         Cost of sales as a percentage of sales was 97% in 1995 compared to 76%
in 1994. The increase is principally due to the change in the business. The
Company's focus on the MCLPA has required a substantial amount of direct labor
costs, principally engineering, to develop the MCLPA technology.

         Selling, general and administrative expenses decreased in 1995 by
$205,579 to $516,414 from $721,993 in 1994. Expressed as a percentage of sales,
the selling, general and administrative expenses were 29% in 1995 and 20% in
1994. Selling, general and administrative expenses decreased as a result of
lower sales commissions, reduction in management bonuses and fewer staff. The
percentage increase in 1995 is attributed to fixed costs, such as rent, etc.,
representing a higher portion of net sales.

         Research, engineering and development expenses as a percentage of net
sales increased to 21% in 1995 compared to 9% in 1994. This increase reflects
the changes in the business to design and production of prototypes for OEM
manufacturers. The research and development expenses

                                      25

<PAGE>

consist principally of salary costs for engineers and the expensing of equipment
purchases acquired specifically for the design and testing of the prototype
products.

         Stock  compensation and financing costs of $1,180,000 in 1995 relates 
to the assignment of stock from the principal stockholder to a director and a
law firm and stock agreements with officers of the Company.

 Liquidity and Capital Resources

         As of December 31, 1996, the Company had a current ratio of .33 to 1.00
The bank line of credit outstanding totaled $210,000 in addition to stockholders
loans of $442,745. The funds from the credit line and stockholder's loan were
used for working capital purposes. Additional loans totaling $1,214,000 were

incurred during 1996 as a result of bridge financings. All of the bridge
financing loans paid interest at 8% and were paid in January 1997 (at the
closing of the initial public offering).

         The Company has several lease obligations for certain research,
engineering and development equipment used in the production processes requiring
minimum monthly payments of $22,637 through 1999.

         The Company believes that the net proceeds of the Company's initial
public offering will permit it to continue to meet its working capital
obligations and fund the further development of its business for the next 12
months. There can be no assurance that any additional financing will be
available to the Company on acceptable terms, or at all. If adequate funds are
not available, the Company may be required to delay, scale back or eliminate its
research, engineering and development or manufacturing programs or obtain funds
through arrangements with partners or others that may require the Company to
relinquish rights to certain of its technologies or potential products or other
assets. Accordingly, the inability to obtain such financing could have a
material adverse effect on the Company's business, financial condition and
results of operations.

Item 7.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

         See financial statements following Item 13 of this Annual Report on
Form 10-KSB.

Item 8.  CHANGES IN AND DISAGREEMENT WITH ACCOUNTANTS ON ACCOUNTING AND 
         FINANCIAL DISCLOSURE.

                  None.

                                      26

<PAGE>

                                   PART III

Item 9.  DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; 
         COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT OF THE
         REGISTRANT

         The names and ages of the directors and executive officers of the
Company are set forth below:

Name                   Age    Position(s) with the Company
----                   ---    ----------------------------

Devendar S. Bains*     45     Chairman of the Board, President, Chief 
                              Executive Officer, Treasurer and Director
Tarlochan Bains*       47     Vice President-Sales & Marketing and Director
Nirmal Bains           39     Secretary
Robert S. Benou*       60     Director
William A. Suter       45     RF Design Manager
Harris Freedman        61     Vice President - Strategic Alliances

Sharon Will            36     Vice President - Corporate Communications and 
                              Investor Relations

  *  Member of the Compensation Committee and Audit Committee.

Background of Executive Officers and Directors

Devendar S. Bains has been Chairman of the Board, President, Chief Executive 
Officer,  Treasurer and a director of the Company since its inception in 1988.
From 1983 to 1988 Mr. Bains was Group  Project  Leader of Amplifier division 
of Microwave Semiconductor Corporation. Previously, Mr. Bains was employed at
G.E.C. in Coventry, England. Mr. Bains received a Bachelor's Degree in 
Electronic Engineering from Sheffield University, England, and a Masters 
Degree from the University of Leeds and Sheffield, England. Mr. Bains is the 
brother of Tarlochan Bains and the husband of Nirmal Bains.

  Tarlochan Bains has been Vice President of Sales and Marketing since 1991.  
Previously, Mr. Bains was Technical Manager at Land Rover in Solihull, England.
He has a Masters Degree in Mechanical Engineering from Hatfield Polytechnic,  
England.  Mr. Bains is the brother of Devendar S. Bains and the brother-in-law 
of Nirmal Bains.

  Nirmal Bains has been Secretary of the Company since 1989. She has a degree 
in Computer Programming from Cittone Institute in New Jersey.  Mrs. Bains is
the wife of Devendar S. Bains and the sister-in-law of Tarlochan Bains.

  Robert S. Benou has been a Director of the Company since December 1995. Since
1968 Mr. Benou has been the Chairman of the Board, President and Chief 
Executive Officer of Conolog Corporation, a publicly traded company on Nasdaq.  
Conolog is engaged in the design, manufacture 

                                      27

<PAGE>

and distribution of electronic and electromagnetic components and subassemblies
for use in telephones, radio and microwave transmission and reception and
communication. Mr. Benou is a graduate of Victoria College and has a Bachelor of
Science from Kingston College, England and a Bachelor of Science in Electronic
Engineering from Newark College of Engineering.

  William A. Suter is the RF Design  Manager of the Company  responsible for 
the design and development of the Company's products. Previously he was Senior
Design Engineer for Amplifonix, Inc. from August 1993 to November 1995, 
Plessey SA from November 1989 to June 1993, BH  Electronics from February 1989 
to October 1989, and Communication Techniques, Inc. from February 1986 to 
February 1987. Mr. Suter has published various articles on amplification  
methods and technology in several industry publications.  Mr. Suter has a 
Bachelors of Science in Electronic Engineering from the University of Cape 
Town, South Africa.

  Harris Freedman has served as Vice President - Strategic Alliances of the
Company since July 1996. Since August 1994 he has been Vice President of
Hemispherx Biopharma, Inc., a publicly traded company listed on Nasdaq. He is

the Secretary of SMACS Holdings Corp. a private company which provides
strategic-alliance services to emerging technology companies in the private and
public markets. His business experience has encompassed developing significant
business contacts and acting as an officer of several companies in the
pharmaceutical, health care and entertainment fields. Mr. Freedman was Vice
President of U.S. Alcohol Testing of America, Inc., from August 1990 to February
1991. Additionally, he was Vice President - East Coast Marketing for MusicSource
U.S.A., Inc from October 1992 to January 1994. Mr. Freedman attended New York
University from 1951 to 1954.

   Sharon Will has been Vice President - Corporate Communications and Investor
Relations of the Company since July 1996. Since November 1994 she has been Vice
President of Hemispherx Biopharma, Inc., a publicly traded company listed on
Nasdaq. She was a registered sales representative and Senior Vice President for
Institutional Sales at Westfield Financial Corporation from September 1994 to
October 1994. She was a registered sales representative with Marsh Block
Corporation from July 1994 to September 1994. From October 1993 to July 1994 she
served as a registered sale representative at Seaboard Securities Corp. From
October 1991 to present, Ms. Will has been President of Worldwide Marketing Inc.
a manufacturers' representative of various companies selling to the retail trade
markets. Ms. Will was the National Sales Manager of Innovo, Inc., a domestic
manufacturer of textiles, from October 1989 to November 1991. She attended
Baylor College as an undergraduate for two years with a primary focus on
chemistry.

         The Company has established a compensation committee and an audit
committee. The compensation committee reviews executive salaries, administers
any bonus, incentive compensation and stock option plans of the Company,
including the Amplidyne, Inc. 1996 Incentive Stock Option and Stock Appreciation
Rights Plan, and approves the salaries and other benefits of the executive
officers of the Company. In addition, the compensation committee consults with
the Company's management regarding pension and other benefit plans, and
compensation policies and practices of the Company.

         The audit committee reviews the professional services provided by the
Company's independent auditors, the independence of such auditors from
management of the Company, the annual financial statements of the Company and
the Company's system of internal accounting

                                      28

<PAGE>

controls. The audit committee also reviews such other matters with respect to
the accounting, auditing and financial reporting practices and procedures of the
Company as it may find appropriate or as may be brought to its attention.

Compliance with Section 16(a) of the Securities Exchange Act of 1934

         Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's directors and executive officers, and persons who own more than ten
percent (10%) of a registered class of the Company's equity securities, to file
with the Securities and Exchange Commission initial reports of ownership and
reports of changes in ownership of common stock and other equity securities of

the Company. Officers, directors and greater than ten percent shareholders are
required by SEC regulation to furnish the Company with copies of all Section
16(a) forms they file.

         To the Company's knowledge, based solely upon its review of the copies
of such reports furnished to the Company during the year ended December 31,
1996, all Section 16(a) filing requirements applicable to its officers and
directors and greater than ten percent beneficial owners were satisfied.

                                      29

<PAGE>

Item 10. Executive Compensation

         Compensation of Directors and Executive Officers

         Summary Compensation Table

         The following table sets forth the aggregate compensation paid by the
Company for the years ended December 31, 1994, 1995 and 1996 for its Chief
Executive Officer. No other employee received compensation in excess of
$100,000. Each director of the Company is entitled to receive reasonable
out-of-pocket expenses incurred in attending meetings of the Board of Directors
of the Company but are not compensated for services provided in their capacities
as directors.

<TABLE>
<CAPTION>     
                                                                      Long Term Compensation
                                                             ----------------------------------------
                                                               Awards    Securities    
                                   Annual Compensation       ----------  ----------     Payouts
Name of Individual            -----------------------------  Restricted  Underlying  ----------------
and Principal                                  Other Annual  Stock       Options/    LTIP    All Othr
Position                 Year Salary   Bonus   Compensation  Awards      SARS(#)     Payouts Comp.   
----------------------   ---- ------   -----   ------------  ----------  ----------  ------- --------
<S>                      <C>  <C>     <C>      <C>           <C>         <C>         <C>     <C>
Devendar S. Bains,          
Chairman,                1996 $80,000  ---      $20,000(1)      ---      1,000,000     ---      ---
Chief Executive Office,  1995  85,000  ---       20,000(1)      ---        ---         ---      ---
President and Treasurer  1994  85,000 $200,000   10,000(1)      ---        ---         ---      ---
</TABLE>

(1) Represents payment for health insurance and automobile insurance lease
payments on behalf of such individual.

         Set forth below is information relating to stock options granted to the
officers and directors in fiscal 1996.

                        Option/SAR Grants in Fiscal 1996

<TABLE>
<CAPTION>

                                  Percent of
                     Number of    Total
                     Securities   Option/SARs
                     Underlying   Granted to
                     Option/SARs  Employees in    Exercise     
Name                 Granted      Fiscal 1996    Price($/sh)   Expiration Date
----                 -------      -----------    -----------   ---------------
<S>                 <C>           <C>            <C>           <C>
Devendar S. Bains   1,000,000     77.10%            $4.00      December 31, 2000
Nirmal Bains           50,000      3.86%            $4.00      December 31, 2000
Tarlochan Bains       100,000      7.71%            $4.00      December 31, 2000
</TABLE>

             Aggregated Option/SARs Exercises During Fiscal 1996
                        and Year End Option/SAR Values

<TABLE>
<CAPTION>                                                                            
                                                                            Value of Unexercised      
                                            Number of Securities                 In-the-Money
                     Shares                Underlying Unexercised                Options/SARs
                     Acquired              Options/SARs at FY-End                at FY-End(1)
                     on        Value      --------------------------     --------------------------
Name                 Exercise  Realized   Exercisable  Unexercisable     Exercisable  Unexercisable
----                 --------  --------   -----------  -------------     -----------  -------------
<S>                  <C>       <C>        <C>          <C>               <C>          <C>
Devendar S. Bains      ---       ---         ----        1,000,000            ---       $1,000,000
Nirmal Bains           ---       ---         ----           50,000            ---           50,000
Tarlochan Bains        ---       ---         ----          100,000            ---       $  100,000
</TABLE>

(1) Represents the value of options assuming the initial public offering price
per share.

                                      30

<PAGE>

Employment Agreements

         The Company has entered into five-year employment agreements commencing
May 1, 1996 with each of Devendar Bains (Chairman, Chief Executive Officer,
President and Treasurer), Tarlochan Bains (Vice President - Sales & Marketing),
and Nirmal Bains (Secretary). The employment agreements provide for annual base
salaries of $162,000, $100,000 and $50,000 with respect to Devendar Bains,
Tarlochan Bains and Nirmal Bains, respectively. The employment agreements
provide for discretionary bonuses to be determined in the sole discretion of the
Board of Directors and contain covenants not to compete with the Company for a
two year period following termination of employment.

         The Company has entered into a two-year agreement commencing December
1995 and ending December 1997 with Robert Benou. Mr. Benou is to provide the
Company with such services as requested by the Company. Under such agreement,
Mr. Benou will receive compensation of $30,000 per year for a minimum of two

years.

         In December 1995 the Company entered into three-year employment
agreements with each of Harris Freedman and Sharon Will, Vice President for
Strategic Alliances and Vice President for Corporate Communications and Investor
Relations, respectively. Under the terms of each agreement they are to be paid
$60,000 per annum through December 1998.

  Stock Option Plans and Agreements

         Incentive Option Plan - In May 1996, the Directors of the Company
adopted and the stockholders of the Company approved the adoption of the
Company's 1996 Incentive Stock Option Plan (" Incentive Option Plan"). The
purpose of the Incentive Option Plan is to enable the Company to encourage key
employees and Directors to contribute to the success of the Company by granting
such employees and Directors incentive stock options ("ISOs").

         The Incentive Option Plan will be administered by the Board of
Directors or a committee appointed by the Board of Directors (the "Committee")
which will determine, in its discretion, among other things, the recipients of
grants, whether a grant will consist of ISOs or a combination thereof, and the
number of shares to be subject to such options.

         The Incentive Option Plan provides for the granting of ISOs to purchase
Common Stock at an exercise price to be determined by the Board of Directors or
the Committee not less than the fair market value of the Common Stock on the
date the option is granted.

         The total number of shares with respect to which options may be granted
under the Incentive Option Plan is 1,500,000. ISOs may not be granted to an
individual to the extent that in the calendar year in which such ISOs first
become exercisable the shares subject to such ISOs have a fair market value on
the date of grant in excess of $100,000. No option may be granted under the
Incentive Option Plan after May 2006 and no option may be outstanding for more
than ten years after its grant. Additionally, no option can be granted for more
than five (5) years to a 

                                      31

<PAGE>

stockholder owning 10% or more of the Company's outstanding Common Stock and
such options must have an exercise price of not less than 110% of the fair
market value on the date of grant.

         Upon the exercise of an option, the holder must make payment of the
full exercise price. Such payment may be made in cash or in shares of Common
Stock, or in a combination of both. The Company may lend to the holder of an
option funds sufficient to pay the exercise price, subject to certain
limitations.

         The Incentive Option Plan may be terminated or amended at any time by
the Board of Directors, except that, without stockholder approval, the Incentive
Option Plan may not be amended to increase the number of shares subject to the

Incentive Option Plan, change the class of persons eligible to receive options
under the Incentive Option Plan or materially increase the benefits of
participants.

         In May 1996, 1,267,000 options to purchase Common Stock under the
Incentive Option Plan were granted to 40 employees ("Employee Options") ,
including Dave Bains (1,000,000 options), Tarlochan Bains (100,000 options) and
Nirmal Bains (50,000 options), the Company's Chief Executive Officer, Vice
President-Sales and Marketing and Secretary, respectively. See "Principal
Stockholders." No determinations have been made regarding the persons to whom
options will be granted in the future, the number of shares which will be
subject to such options or the exercise prices to be fixed with respect to any
option. The Employee Options are exercisable at $4.00 which will vest, as to
33.33%, one year from the date of grant (May 1997) and, as to the remainder,
ratably over the following two-year period (33.33% in May 1998 and 33.33% in May
1999).

         In addition, in May 1996, 30,000 options were granted to 1 employee
("Key Employee Options") which are exercisable at $1.00 which will vest, as to
33.33%, one year from the date of grant (May 1997) and, as to the remainder,
ratably over the following two-year period (33.33% in May 1998 and 33.33% in May
1999) .

701 Warrants

         In December 1995, the Company issued 701 Warrants to purchase 350,000
Shares at $2.50 per share pursuant to Rule 701 under the Act to Harris Freedman
and Sharon Will, the Company's Vice President for Strategic Alliances and Vice
President for Corporate Communications and Investor Relations, respectively, of
the Company. The 701 Warrants vest in one-third increments (commencing June
1996) over a three (3)year period and are exercisable until June 30, 1999.

                                      32

<PAGE>

Item 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

         The following table sets forth information, as of March 31, 1997 with
respect to the beneficial ownership of the outstanding shares of the Company's
Common Stock by (i) any holder of more than five percent (5%) of the outstanding
shares; (ii) the Company's officers and directors; and (iii) the directors and
officers of the Company as a group:

  Name of Beneficial       Number of Shares          Percentage %
   Owner*                  of Common Stock(1)        Ownership
  -------                  ---------------           ------------
  Devendar S. Bains(2)        2,350,000                 48.86
  Tarlochan Bains(3)             33,333                   .74
  Nirmal Bains(2)(4)          2,350,000                 48.86
  Robert S. Benou                50,000                  1.12
  Harris Freedman(5)            151,667                  3.35
  Sharon Will(6)                165,000                  3.66


  All Officers and
  Directors as a group
  (6 persons)                 2,750,000                 57.73

---------
  *      Unless otherwise indicated, the address of all persons listed in this 
         section is c/o Amplidyne, Inc., 144 Belmont Drive, Somerset, NJ 08873.

   (1)   A person is deemed to be the beneficial owner of securities that can be
         acquired by such person within 60 days from the date of this Prospectus
         upon the exercise of options. Each beneficial owner's percentage
         ownership is determined by assuming those options that are held by such
         person and that are exercisable within 60 days from the date of the
         Prospectus have been exercised.

   (2)   Mr. Devendar Bains is the husband of Mrs. Nirmal Bains and the 
         brother of Mr. Tarlochan Bains. Mr. Devendar Bains is the record 
         holder of 2,000,000 of such shares. Includes 333,333 Employee Options 
         (but does not include  666,667 Employee Options) which was granted to 
         Mr. Devendar Bains. Includes 16,667 Employee Options (but not include 
         33,333 Employee Options) which was granted to Ms. Nirmal Bains.  See  
         "Executive Compensation-Stock Option Plans and Agreements."

   (3)   Does not include 66,666 Employee Options. See "Executive Compensation  
         - Stock Option Plans and Agreements."

   (4)   Does not include 33,333 Employee Options. See "Executive Compensation 
         - Stock Option Plans and Agreements."

   (5)   The address for such person is 1241 Gulf of Mexico Drive,  Longboat 
         Key, Florida 34228. Mr. Freedman is the Vice President - Strategic  
         Alliances of the Company. Includes 90,000 shares of Common Stock and 
         61,667 warrants to purchase Common Stock at $2.50 per share. Does not 
         include an additional 123,333 of such warrants. See Item 9.

  (6)    The address for such person is RRI Box 132, Millerton, New York 12546.
         Ms. Will is the Vice  President - Corporate Communications and 
         Investor Relations of the Company. Includes 110,000 shares of Common 
         Stock and 55,000 warrants to purchase Common Stock at $2.50 per share.
         Does not include an additional 110,000 of such warrants.  See Item 9.

                                      33

<PAGE>

Item 12. CERTAIN  RELATIONSHIPS AND RELATED TRANSACTIONS

                  All of the sales of securities prior to the date hereof were 
made in reliance upon Section 4(2) of the 1933 Act, which provides  exemption
for transactions not involving a public offering.

         The Company was incorporated on December 14, 1995 pursuant to the laws
of the State of Delaware as the successor to Amplidyne, Inc., a New Jersey
corporation ("Amplidyne-NJ"), which was incorporated in October 1988. The

Company was organized to effectuate a reincorporation of Amplidyne-NJ with and
into the Company on December 22, 1995.

         Between January 1994 and December 1996, Devendar S. Bains, the
Company's President and Chief Executive Officer, loaned the Company an aggregate
of $442,745 without interest, payable on demand.

         The Company intends to indemnify its officers and directors to the full
extent permitted by Delaware law. Under Delaware law, a corporation may
indemnify its agents for expenses and amounts paid in third party actions and,
upon court approval in derivative actions, if the agents acted in good faith and
with reasonable care. A majority vote of the Board of Directors, approval of the
stockholder or court approval is required to effectuate indemnification.

         Insofar as indemnification for liabilities arising under the Securities
Act of 1933, as amended, may be permitted to officers, directors or persons
controlling the Company, the Company has been advised that, in the opinion of
the Securities and Exchange Commission, such indemnification is against public
policy as expressed in such Act and is, therefore, unenforceable. In the event
that a claim for indemnification against such liabilities (other than the
payment by the Company of expenses incurred or paid by an officer, director or
controlling person of the Company in the successful defense of any action, suit
or proceeding) is asserted by such officer, director or controlling person in
connection with the securities being registered, the Company will, unless in the
opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in such Act and will
be governed by the final adjudication of such issue.

         Transactions between the Company and its officers, directors, employees
and affiliates will be on terms no less favorable to the Company than can be
obtained from unaffiliated parties. Any such transactions will be subject to the
approval of a majority of the disinterested members of the Board of Directors.

                                      34

<PAGE>

                                   PART IV

Item 13. EXHIBITS AND REPORTS ON FORM 8-K

(a)(1)  Financial Statements.

         The following financial statements are included in Part II, Item 7:


Index to Financial Statements                                      F-1

Report of Independent Certified Public Accountants                 F-2

Balance Sheet                                                      F-3

Statement of Operations                                            F-5


Statement of  Stockholders' Equity                                 F-6

Statement of Cash Flows                                            F-7

Notes to Financial Statements                                      F-8 - F-19


                                      35

<PAGE>

(a) (2) Exhibits

  1.1*       Form of Underwriting Agreement
  1.2*       Form of Selected Dealer Agreement
  1.3*       Form of Agreement Among Underwriters
  3.1*       Certificate of Incorporation of the Company
  3.2*       Certificate of Merger (Delaware)
  3.3*       Certificate of Merger (New Jersey)
  3.4*       Agreement and Plan of Merger
  3.5*       By-Laws of the Company
  4.1*       Specimen Certificate for shares of Common Stock
  4.2*       Specimen Certificate for Warrants
  4.3*       Form of Underwriter's Purchase Option
  4.4*       Form of Warrant Agreement
  5.1*       Opinion of Bernstein & Wasserman, LLP, counsel to the Company
 10.1*       1996 Incentive Stock Option Plan
 10.2*       Employment Agreement between the Company and Devendar S. Bains
 10.3*       Employment Agreement between the Company and Tarlochan Bains
 10.4*       Employment Agreement between the Company and Nirmal Bains
 10.5*       Agreement of Lease for Premises located at 144 Belmont Drive, 
             Somerset, New Jersey  08873
 10.6*       Agreement of Lease for Premises located at Unit 9, Building 7, 
             Ilene Court, Belle Mead, New Jersey  08502
 10.7*       Agreement between the Company and Electronic Marketing Associates, 
             Inc.
 10.8*       Agreement between the Company and Link Microtek Limited.
 10.9*       Agreement between the Company and ENS Engineering.
 10.10*      Employment Agreement between the Company and Harris Freedman.
 10.11*      Employment Agreement between the Company and Sharon Will.
 10.12*      Form of Lockup Agreement with Officers, Directors and 5% or 
             Greater Shareholders.
 10.13*      Form of Lockup Agreement with Selling Securityholders.
 23.1*       Consent of Bernstein & Wasserman, LLP (included in Exhibit 5.1)
 23.2*       Consent of Grant Thornton, LLP,  Independent Certified Public
             Accountants.
 27          Financial Data Schedule

*      Incorporated by Reference to the Company's Registration Statement on 
       Form SB-2, No. 333-11015.

         (b)      Reports on Form 8-K


                  The Company did not file any reports on Form 8-K during the
fourth quarter of fiscal 1996.

                                      36



<PAGE>

                                 Amplidyne, Inc.

                          INDEX TO FINANCIAL STATEMENTS

                                                                      Page

Report of Independent Certified Public Accountants                        

Financial Statements                                                 F-2

        Balance Sheets                                               F-3     

        Statements of Operations                                     F-5  

        Statement of Stockholders' Equity                            F-6     

        Statements of Cash Flows                                     F-7   

        Notes to Financial Statements                                F-8 - F-19





                                     F-1

<PAGE>


                       REPORT OF INDEPENDENT CERTIFIED
                              PUBLIC ACCOUNTANTS

Board of Directors and Stockholders
    Amplidyne, Inc.

We have audited the accompanying balance sheets of Amplidyne, Inc. as of
December 31, 1995 and 1996, and the related statements of operations,
stockholders' equity, and cash flows for the years then ended. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in

all material respects, the financial position of Amplidyne, Inc., as of December
31, 1995 and 1996, and the results of its operations and its cash flows for the
years then ended in conformity with generally accepted accounting principles.



GRANT THORNTON LLP


New York, New York
April 10, 1997


                                     F-2


<PAGE>


                               Amplidyne, Inc.

                                BALANCE SHEETS

                                 December 31,


             ASSETS                                      1995           1996
                                                         ----           ----

CURRENT ASSETS

    Cash                                               $153,747      $  104,310
    Accounts receivable, net of allowance
      for doubtful accounts of $10,000 and
      $119,000 in 1995 and 1996, respectively           165,702         207,339
    Inventories                                         281,078         402,696
    Deferred financing costs                                            324,540
    Private placement receivables                                        55,000
    Prepaid expenses and other current assets            28,235           5,665
                                                       --------      ----------

         Total current assets                           628,762       1,099,550

PROPERTY AND EQUIPMENT - AT COST

    Machinery and equipment                             132,067         389,433
    Furniture and fixtures                               13,144          42,806
    Autos and trucks                                     19,923          19,923
    Leasehold improvements                               21,220           4,162
                                                       --------      ----------

                                                        186,354         456,324
    Less accumulated depreciation and amortization      103,951         145,593
                                                        -------      ----------

                                                         82,403         310,731


PREPAID REGISTRATION COSTS                                              167,053

OTHER ASSETS                                             11,100          45,230
                                                       --------      ----------

                                                       $722,265      $1,622,564
                                                        =======       =========








The accompanying notes are an integral part of these statements.

                                     F-3

<PAGE>
                               Amplidyne, Inc.

                                BALANCE SHEETS

                                 December 31,

LIABILITIES AND
STOCKHOLDERS' EQUITY                               1995               1996
                                                   ----               ----
CURRENT LIABILITIES
    Bank line of credit                         $   230,000       $    210,000
    Notes payable                                                    1,214,000
    Current maturities of lease obligations          78,365            381,392
    Accounts payable                                287,498            690,760
    Accrued expenses                                184,429            401,518
    Customer advances                               155,932
    Stockholders' loan                              270,716            442,745
                                                -----------        -----------

         Total current liabilities                1,206,940          3,340,415

LONG-TERM LIABILITIES
    Lease obligations                                69,451            200,969

STOCKHOLDERS' EQUITY

    Preferred stock - authorized, 1,000,000 
      shares of no stated value; no shares
      issued and outstanding
    Common stock - authorized, 25,000,000 
      shares of $.0001 par value; 2,100,000
      shares and 2,850,000 shares issued and 
      outstanding at December 31, 1995 and 
      1996, respectively                                210                285
    Additional paid-in capital                    1,184,790          5,239,961
    Retained earnings (accumulated deficit)      (1,739,126)        (7,159,066)
                                                -----------         ---------- 

                                                   (554,126)        (1,918,820)
                                                -----------         ---------- 

                                               $    722,265         $ 1,622,564
                                                ===========          ==========
The accompanying notes are an integral part of these statements.

                                     F-4


<PAGE>
                               Amplidyne, Inc.

                           STATEMENTS OF OPERATIONS

                           Year ended December 31,

<TABLE>
<CAPTION>
                                                        1995                1996
                                                     -----------         ----------
<S>                                                  <C>                 <C>
Net sales                                            $ 1,810,222         $ 2,219,945
Cost of goods sold                                     1,756,365           2,198,503
                                                       ---------          ----------
         Gross profit                                     53,857              21,442

Operating expenses
    Selling, general and administrative                  516,414           1,145,910
    Research, engineering and development                372,334           1,150,710
                                                     -----------          ----------
         Operating loss                                 (834,891)         (2,275,178)

Other nonoperating expenses
    Interest expense                                      10,736             109,772
    Stock compensation and financing costs             1,180,000           3,034,990
                                                       ----------          ----------

         Loss before income taxes                      (2,025,627)         (5,419,940)

Provision for income taxes                                     50
                                                        ----------          ----------
         NET LOSS                                      $(2,025,677)        $(5,419,940)
                                                        ==========          ========== 


Net loss per share                                           $(.56)             $(1.49)
                                                              ====               ===== 

Weighted average number of shares
    outstanding                                          3,644,950           3,644,950
                                                         =========           =========
</TABLE>


The accompanying notes are an integral part of these statements.

                                     F-5


<PAGE>

                               Amplidyne, Inc.

                      STATEMENT OF STOCKHOLDERS' EQUITY

                     Years ended December 31, 1995 and 1996
<TABLE>
<CAPTION>
                                                        Common stock                   Additional      Retained
                                                 -----------------------------           paid-in       earnings
                                                  Shares             Par value           capital       (deficit)        Total
                                                 --------            ---------         ----------      ---------        -----
<S>                                              <C>                 <C>              <C>             <C>             <C>    
Balance at December 31, 1994                     2,100,000              $210            $    4,790      $  286,551     $   291,551

Net loss for 1995                                                                                       (2,025,677)     (2,025,677)
Assignment of common stock                                                                 400,000                         400,000
Stock-related compensation expense                                                         780,000                         780,000
                                                 ---------              ----            ----------      ----------     -----------
Balance at December 31, 1995                     2,100,000               210             1,184,790      (1,739,126)       (554,126)

Net loss for 1996                                                                                       (5,419,940)     (5,419,940)
Private placements                                 550,000                55               549,945                         550,000
Financing and compensation costs 
  related to Options and warrants issued                                                 3,359,530                       3,359,530
Contributed capital                                                                        125,716                         125,716
Exercise of options                                200,000                20                19,980                          20,000
                                                 ---------              ----            ----------      -----------    -----------
Balance at December 31, 1996                     2,850,000              $285            $5,239,961      $(7,159,066)   $(1,918,820)
                                                 =========              ====            ==========      ===========    =========== 
</TABLE>


The accompanying notes are an integral part of this statement.


                                     F-6


<PAGE>


                               Amplidyne, Inc.

                           STATEMENTS OF CASH FLOWS

                           Year ended December 31,

                                                        1995            1996
                                                       ------          ------
Cash flows from operating activities
    Net loss                                        $(2,025,677)    $(5,419,940)
                                                     ----------      ---------- 
    Adjustments to reconcile net loss to net cash
        used in operating activities
         Depreciation and amortization                   30,011         102,710
         Loss on disposal of fixed assets                                11,023
         Bad debt expense                                               109,000
         Write-off of equipment                                         304,005
         Stock compensation expense                   1,180,000       3,034,990
         Changes in assets and liabilities
           Accounts receivable                          243,133        (150,637)
           Inventories                                    4,288        (121,618)
           Prepaid expenses and other current 
              assets                                      6,389          22,570
           Accounts payable and accrued
              expenses                                  124,989         620,351
           Other assets                                                 (85,000)
           Customer advances                            119,952        (155,932)
                                                      ---------       ---------
         Total adjustments                            1,708,762       3,691,462
                                                      ---------       ---------
         Net cash used in operating 
            activities                                 (316,915)     (1,728,478)
                                                      ---------      ---------- 
Cash flows from investing activities
    Purchase of fixed assets                            (41,220)        (93,767)
                                                      ---------      ---------- 
Cash flows from financing activities
    Proceeds from (repayments of) bank line
      of credit                                         230,000         (20,000)
    Proceeds from notes payable                                       1,159,000
    Lease obligations                                   128,545         (66,884)
    Proceeds from stockholder loans                     150,000         297,745
    Prepaid registration costs                                         (167,053)
    Stock issuance                                                      570,000
                                                      ---------       ---------
         Net cash provided by financing
             activities                                 508,545       1,772,808
                                                      ---------       ---------
         NET INCREASE (DECREASE)
             IN CASH                                    150,410         (49,437)
Cash at beginning of year                                 3,337         153,747

                                                      ---------       ---------
Cash at end of year                                   $ 153,747       $ 104,310
                                                       ========        ========
Supplemental disclosures of cash flow
   information:
    Cash paid during the year for 
      Interest                                        $  11,426       $  39,009
      Income taxes                                        9,496


The accompanying notes are an integral part of these statements.

                                     F-7


<PAGE>


                               Amplidyne, Inc.

                        NOTES TO FINANCIAL STATEMENTS

                          December 31, 1995 and 1996

NOTE A - NATURE OF OPERATIONS

     Amplidyne, Inc. (the "Company") designs, manufactures and sells ultra
     linear power amplifiers and related subsystems to the worldwide wireless,
     local loop and satellite uplink telecommunications market. Many of its
     customers are large, international telecommunications original equipment
     manufacturers ("OEMs") for which products are manufactured to their
     specifications.

     The Company was incorporated on December 14, 1995, as a Delaware
     corporation as the successor to Amplidyne, Inc. (the predecessor company),
     a New Jersey corporation, which was incorporated in October 1988. On
     December 22, 1995, the predecessor company was merged into the Company.
     Each share of the predecessor company, 100 shares outstanding, was
     exchanged for 21,000 shares of the Company. As a result, the sole
     shareholder of the predecessor owned 2,100,000 shares of the Company after
     the merger.

NOTE B - SUMMARY OF ACCOUNTING POLICIES

     A summary of the significant accounting policies consistently applied in
     the preparation of the accompanying financial statements follows.

     1.  Revenue Recognition

         Revenue is recognized upon shipment of products to customers.

     2.  Inventories

         Inventories are stated at the lower of cost or market; cost is
         determined using the first-in, first-out method.

     3.  Property, Plant and Equipment

         Depreciation and amortization are provided for in amounts sufficient to
         relate the cost of depreciable assets to operations over their
         estimated service lives which range from three to seven years.
         Leasehold improvements are amortized over the lives of the respective
         leases or the

                                     F-8

<PAGE>



                                 Amplidyne, Inc.

                    NOTES TO FINANCIAL STATEMENTS (continued)

                           December 31, 1995 and 1996

NOTE B (continued)

         service lives of the improvements, whichever is shorter. The
         straight-line method of depreciation is followed for substantially all
         assets for financial reporting purposes, but accelerated methods are
         used for tax purposes.

     4.  Income Taxes

         The Company accounts for income taxes using an asset and liability
         approach for financial accounting and reporting for deferred income
         taxes. In addition, the deferred tax liabilities and assets are
         required to be adjusted for the effect of any future changes in the tax
         laws or rates. Deferred income taxes arise from temporary differences
         resulting in the basis of assets and liabilities for financial
         reporting and income tax purposes.

     5.  Fair Value of Financial Instruments, Concentrations of Credit
             Risk and Economic Dependency

         Financial instruments, which potentially subject the Company to
         concentrations of credit risk, consist principally of cash and accounts
         receivable.

         The Company's customers are generally large, international, original
         equipment manufacturers. A relatively few customers account for a
         substantial portion of the Company's revenues and accounts receivable.

         During 1995, four customers accounted for 61% of net sales. Export
         sales in 1995 accounted for approximately 30% of net sales and were
         primarily to the United Kingdom and Spain. During 1996, three customers
         accounted for 65% of net sales. In 1996, export sales accounted for
         approximately 66% of net sales and were primarily to the United
         Kingdom and Korea.

         In addition, the Company is dependent on a limited number of suppliers
         for key components used in the Company's products (primarily power
         transistors). Management believes that other suppliers could provide
         similar components on comparable terms. A change in suppliers, however,
         could disrupt manufacturing.

         The carrying values of financial instruments potentially subject to
         valuation risk, consisting of cash, accounts receivable, accounts
         payable, accrued expenses and notes payable, approximate fair value,
         principally because of the short maturity of these items.

                                     F-9


<PAGE>


                                 Amplidyne, Inc.

                    NOTES TO FINANCIAL STATEMENTS (continued)

                           December 31, 1995 and 1996

NOTE B (continued)

     6.  Use of Estimates

         In preparing financial statements in conformity with generally accepted
         accounting principles, management is required to make estimates and
         assumptions that affect the reported amounts of assets and liabilities
         and the disclosure of contingent assets and liabilities at the date of
         the financial statements and revenues and expenses during the reporting
         period. Actual results could differ from those estimates.

     7.  Stock-based Employee Compensation

         Stock-based employee compensation is accounted for under the intrinsic
         value based method as prescribed by Accounting Principles Board ("APB")
         Opinion No. 25, "Accounting for Stock Issued to Employees." Included in
         these notes to the financial statements are the pro forma disclosures
         required by Statement of Financial Accounting Standards No. 123 ("SFAS
         No. 123"), "Accounting for Stock-Based Compensation."

     8.  Prepaid Registration Costs

         Prepaid registration costs represent certain direct fees incurred in
         connection with the public offering. Such amounts will be accounted for
         as a reduction of proceeds.

     9.  Deferred Financing Costs

         Deferred financing costs represent costs incurred with the issuance of
         warrants in connection with the private placements. The costs are being
         charged to operations over the expected term of the debt (to January 
         29, 1997).

   10.   Prior Year Reclassifications

         Certain items previously reported in specific financial statement
         captions have been reclassified to conform with the 1996 presentation.

                                     F-10

<PAGE>

                                 Amplidyne, Inc.

                    NOTES TO FINANCIAL STATEMENTS (continued)


                           December 31, 1995 and 1996

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 22, 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 commencing one year from the date of the
     offering. 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 $5,600,000, which included the overallotment of 210,000
     units.  The proceeds are net of legal fees, underwriters' fees and other
     expenses.

     The following table summarizes shares of common stock reserved for
     issuance:

                                                                  Number
                                                                of shares
            Reserved for                                         issuable
            ------------                                        ----------

        Offering shares and warrants                             3,220,000
        Underwriters' overallotment warrants and shares            280,000
        Options to noteholders                                     550,000
        Warrants to noteholders                                    476,500
        Shares reserved for stock option and SARs plan           1,500,000
        Warrants to officers                                       350,000
        Options to employees                                        30,000
                                                                 ---------
                                                                 6,406,500
                                                                 =========

                                     F-11
<PAGE>

                                 Amplidyne, Inc.

                    NOTES TO FINANCIAL STATEMENTS (continued)

                           December 31, 1995 and 1996

NOTE D - PRIVATE PLACEMENTS

     In March 1996, the Company issued, in a private placement, ten units at
     $50,000 per unit, resulting in proceeds of $480,000, which is net of

     expenses of $20,000. Each unit consists of 25,000 shares of common stock at
     $1.00 per share, par value $.0001 per share, 25,000 options each to
     purchase one share of common stock at $2.50 per share, exercisable until
     December 31, 1998, and an 8% promissory note in the principal amount of
     $25,000, which was paid at the closing of the Company's initial public
     offering.

     In April 1996, the Company issued an additional twelve units at $50,000 per
     unit, resulting in proceeds of $600,000. Each unit consists of 25,000
     shares of common stock at $1.00 per share, par value of $.0001 per share,
     25,000 options each to purchase one share of common stock at $2.50 per 
     share, exercisable until December 31, 1998, and an 8% promissory note in 
     the principal amount of $25,000, which was paid at the closing of the 
     Company's initial public offering.

     In September 1996, the Company issued, in a private placement, promissory
     notes in the aggregate of $375,000, including 187,500 warrants to purchase
     common stock at $2.50 per share.

     In December 1996, the Company issued, in two private placements, promissory
     notes in the aggregate of $289,000, including 189,000 and 100,000 warrants 
     to purchase common stock at $4.00 and $2.50 per share, respectively.

     The warrants are exercisable for a three-year period.  The promissory 
     notes accrue interest at 8% per annum.  All principal and interest were 
     paid at the closing of the Company's initial public offering.

     The differences between the exercise prices and fair market values of  
     the above private placement transactions in aggregate is $3,208,280 and 
     is being charged to operations over the expected term of the debt (to 
     January 29, 1997). The total financing costs reflected in nonoperating 
     expenses for the year ended December 31, 1996, is $2,883,740.


                                     F-12

<PAGE>

                                 Amplidyne, Inc.

                    NOTES TO FINANCIAL STATEMENTS (continued)

                           December 31, 1995 and 1996

NOTE E - STOCK PLANS

     An incentive option plan and stock appreciation rights ("SARs") were
     authorized prior to the public offering whereby options could be granted to
     purchase no more than 1,500,000 shares of common stock at exercise prices
     no less than fair market value as of date of grant. Under the plan,
     employees and directors may be granted options to purchase shares of common
     stock at the fair market value at the time of grant. Options generally vest
     in three years and expire in four years from the date of grant. In May
     1996, 267,000 options were granted to approximately forty employees of the

     Company. The options are exercisable at $4.00 per share (estimated fair
     market value). In June 1996, 1,000,000 options were granted to the
     principal shareholder. The options are exercisable at $4.00 per share
     (estimated fair market value).

     In May 1996, 30,000 options were granted to a key employee of the Company.
     The options are exercisable at $1.00 per share and vest ratably over a
     three-year period. Approximately $90,000 of compensation expense will be
     charged to operations over the three-year period of vesting.

     On December 22, 1995, the Company's principal shareholder entered into
     stock assignment agreements with an individual and a law firm, which
     assigned without cost 50,000 shares each for services previously rendered
     to the Company. For financial reporting purposes, the difference between
     the cost to the assignees (zero) and $4.00 (the estimated fair market value
     per share), which aggregates to $400,000, is considered to be a 
     contribution to capital by the principal stockholder and consulting 
     expense charged to operations in 1995.

     In December 1995, the Company entered into employment agreements with its
     Vice-President of Corporate Communications and Investor Relations and its
     Vice-President of Strategic Alliances. Under the terms of each agreement,
     the officers will be paid $60,000 per year (paid monthly) each for
     thirty-six months beginning in January 1996. The aggregate compensation
     will be charged ratably to operations beginning in January 1996. In
     addition, the officers were given the opportunity to purchase an aggregate
     of 200,000 shares at $.10 per share upon execution of the agreements and
     purchased such shares in April 1996. For financial reporting purposes, the
     difference between the $.10 per share and $4.00 (the estimated fair market
     value per share) is considered to be compensation ($780,000), which was
     charged to operations in December 1995 with a corresponding amount credited
     to paid-in capital.


                                     F-13

<PAGE>

                                 Amplidyne, Inc.

                    NOTES TO FINANCIAL STATEMENTS (continued)

                           December 31, 1995 and 1996

NOTE E (continued)

     Also in December 31, 1995, the Company granted warrants to the officers
     whereby they have the option to purchase up to 350,000 shares of stock at
     $2.50 per share. The warrants are exercisable one-third after June 30,
     1996, two-thirds after June 30, 1997 and 100% on June 30, 1998. For
     financial reporting purposes, the difference between the $2.50 per share
     and $4.00 (the estimated fair market value per share) aggregates to 
     $525,000 and is being charged to operations ratably over the period from 
     July 1, 1996 to June 30, 1998. 


     The Company has elected to follow Accounting Principles Board Opinion
     ("APB") No. 25, "Accounting for Stock Issued to Employees," and related
     Interpretations in accounting for its stock options. Under APB No. 25, if
     the exercise price of the Company's employee stock options equals the
     market price of the underlying stock on the date of grant, no compensation
     expense is recognized. Total compensation expense during 1996 for options
     granted to a key employee and officers of the Company reflected in
     nonoperating expenses was $151,250. SFAS No. 123, "Accounting for
     Stock-Based Compensation," requires presentation of pro forma net loss and
     loss per share as if the Company had accounted for its employee stock
     options granted subsequent to December 31, 1994, under the fair value
     method of that statement. For purposes of pro forma disclosure, the
     estimated fair value of the options is amortized to expense over the
     vesting period. Under the fair value method, the Company's net loss and
     loss per share would have been increased as follows:

                                                   1995                1996
                                                 ---------           --------

        Net loss                                 $116,795           $1,226,695

        Loss per share                               $.01                 $.28

     The weighted-average fair value of the individual options granted during
     1995 and 1996 is estimated as $2.62 and $1.07, respectively, on the date of
     grant. The fair values for both years were determined using a Black-Scholes
     option-pricing model with the following assumptions:

                                                   1995                1996
                                                 ---------           --------
        Volatility                                36.00%              36.00%
        Risk-free interest rate                    6.42%               6.42%
        Expected life                            2 years             2 years


                                     F-14

<PAGE>

                                 Amplidyne, Inc.

                    NOTES TO FINANCIAL STATEMENTS (continued)

                           December 31, 1995 and 1996

NOTE E (continued)

     Stock option activity during 1995-1996 is summarized below:

                                              Shares of          Weighted-
                                             common stock         average
                                             attributable       exercise price
                                              to options         of options

                                             ------------       --------------

       Unexercised at January 1, 1995             -                $  -

        Granted                                550,000               1.63
        Exercised                                 -                   -
        Forfeited                                 -                   -
                                             ---------             

        Unexercised at December 31, 1995       550,000               1.63

        Granted                              1,297,000               3.93
        Exercised                              200,000                .10
        Forfeited                                 -                   -
                                             ---------

        Unexercised at December 31, 1996     1,647,000               3.63
                                             =========                         

     The following table summarizes information concerning outstanding and
     exercisable options at December 31, 1996:

<TABLE>
<CAPTION>
                                Options outstanding                  Options exercisable
                      ----------------------------------------   ----------------------------
                                       Weighted-
                         Number         average     Weighted-       Number         Weighted-      
                       outstanding     remaining     average     exercisable        average       
   Range of            at period -    contractual    exercise    at period -       exercise       
exercise prices           end             life        price          end             price        
---------------        -----------    -----------   ---------    -----------      -----------     
<S>                    <C>            <C>           <C>          <C>              <C>             
$  .10 to 1.00             30,000         4.00         $1.00           -             -
  2.50 to 4.00          1,617,000         3.15          3.68        231,000           $2.50
                        ---------                                   -------
                        1,647,000                                   231,000
                        =========                                   =======
</TABLE>


                                     F-15

<PAGE>

                                 Amplidyne, Inc.

                    NOTES TO FINANCIAL STATEMENTS (continued)

                           December 31, 1995 and 1996

NOTE F - INCOME TAXES

     The Company accounts for income taxes on the liability method, as provided

     by Statement of Financial Accounting Standards No. 109, "Accounting for
     Income Taxes" ("SFAS No. 109"). Temporary differences and carryforwards
     give rise to deferred tax assets and liabilities. The principal components
     of the deferred tax assets relate to net operating loss carryforwards. At
     December 31, 1996, the net operating loss carryforward is approximately
     $2,000,000. The net operating loss carryforwards expire at various dates
     through 2011, and because of the uncertainty in the Company's ability to 
     utilize the net operating loss carryforwards, a full valuation allowance 
     has been provided.

     Internal Revenue Code Section 382 places a limitation on the utilization of
     Federal net operating loss and other credit carryforwards when an ownership
     change, as defined by the tax law, occurs. Generally, this occurs when a
     greater than 50 percentage point change in ownership occurs. Accordingly,
     the actual utilization of the net operating loss carryforwards and other
     deferred tax assets for tax purposes may be limited annually under Code
     Section 382 to a percentage (about 6%) of the fair market value of the
     Company at the time of any such ownership change.

     The Company's tax provision (benefit) differs from the expected statutory
     rate principally due to the impact of state income and minimum taxes,
     increases in valuation allowance and impact of surtax exemptions.

NOTE G - CAPITAL LEASE OBLIGATIONS

     The Company has capital leases for certain equipment for use in its
manufacturing and research and development activities.

                                       F-16

<PAGE>

                                 Amplidyne, Inc.

                    NOTES TO FINANCIAL STATEMENTS (continued)

                           December 31, 1995 and 1996

NOTE G (continued)

     Future minimum lease payments on these leases are as follows:

        Year ending December 31,

             1997                                          $441,970
             1998                                           147,887
             1989                                            64,012
             2000                                             6,781
             2001                                               525
                                                           --------

                                                            661,175

             Less amount representing interest              (78,814)

                                                           --------   
        Present value of minimum lease payments            $582,361
                                                            =======

     The carrying value of assets under capital leases was $0 and $177,682 at
     December 31, 1995 and 1996, respectively, and is included in property and
     equipment. Amortization of these assets is included in depreciation and 
     research and development expenses.

NOTE H - COMMITMENTS AND CONTINGENCIES

     1.  Operating Leases

         The Company leases office and manufacturing space and various equipment
         under operating leases expiring through 2000.

         During March 1996, the Company entered into a lease agreement for
         approximately 21,000 square feet of additional office and manufacturing
         space. The lease term commenced May 1, 1996 and is for a three-year
         period ending April 30, 1999. The annual rental is $168,000 plus the
         Company's share of real estate taxes, utilities and other occupancy
         costs. The Company has the option to renew the lease for another
         three-year term so long as it exercises its option to lease the entire
         building (36,405 square feet).

                                     F-17

<PAGE>


                                 Amplidyne, Inc.

                    NOTES TO FINANCIAL STATEMENTS (continued)

                           December 31, 1995 and 1996

NOTE H (continued)

         The Company is still obligated, until October 31, 1997, under its lease
         for its previous 6,000 square-foot office location. This location may
         be utilized by the Company as its mechanical workshop or it may be
         sublet. 

         Future minimum lease payments on noncancellable operating leases are as
         follows:

           Year ending December 31,

                   1997                                     $229,117
                   1998                                      182,512
                   1999                                       44,750
                   2000                                          579
                                                            --------
                                                            $456,958

                                                             =======
  
         Rent expense was $129,000 and $245,839 for the years ended December 31,
         1995 and 1996, respectively.

     2.  Bank Line of Credit

         During May 1995, the Company obtained a bank line of credit of $250,000
         to meet short-term liquidity requirements. Borrowings under the line
         were due December 3, 1996 and paid in January 1997 from the proceeds of
         the public offering.

     3.  Employment Agreements

         Commencing May 1, 1996, the Company entered into three five-year
         employment agreements with its Chairman, its Vice President of Sales
         and Marketing and its Secretary. The agreements call for aggregate
         annual base salaries of $312,000, plus certain employee benefits.

         The Company entered into a two-year consulting agreement commencing
         December 1995 and ending December 1997 with a Director of the Company. 
         Under such agreement, the Director will receive compensation of 
         $30,000 per year for a minimum of two years.


                                 F-18

<PAGE>


                                 Amplidyne, Inc.

                    NOTES TO FINANCIAL STATEMENTS (continued)

                           December 31, 1995 and 1996

NOTE I - LOSS PER SHARE

     All shares, warrants and options issued or granted within the prior twelve
     months at prices lower than the initial public offering price ($5 per
     share) are considered, for purposes of calculating loss per share, to be
     outstanding for all periods presented. Accordingly, loss per share amounts
     are based upon the weighted average number of shares outstanding (2,850,000
     shares) for each period presented plus the effect of below market warrants
     and options calculated based on the treasury stock approach (794,950 shares
     for each period presented). The total shares outstanding for purposes of
     loss per share calculations is 3,644,950.

     Proceeds from the public offering of common stock (Note C) were used to
     retire debt of $1,214,000 in January 1997. Had the public offering and
     corresponding retirement of debt occurred on January 1, 1996 or on their 
     date of issuance in 1996, net loss per share would have been $1.00 in 1996.

NOTE J - STOCKHOLDER LOAN


     During 1994, 1995 and 1996, the Company's president and principal
     shareholder advanced funds to the Company for operating needs. Amounts so
     advanced were without interest and are expected to be repaid in full from
     proceeds of the initial public offering.

     Effective March 31, 1996, $125,716 of stockholder loans was forgiven and
     contributed to capital.

NOTE K - SUPPLEMENTAL CASH FLOW DISCLOSURES

     The Company acquired equipment under capital lease obligations totalling
     $501,429 during the year ended December 31, 1996. During 1996, the officer
     of the Company forgave $125,716 in debt, and contributed to capital. In
     1996, the Company recorded $324,500 in non-cash Deferred Financing Costs. 
     In December 1996, the Company recorded a non-cash amount of $55,000 
     relating to a December Private Placement.

NOTE J - LITIGATION

     The Company is a Defendent 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
     $4,322,579.05, plus interest, costs and attorneys 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 $463,411.36, plus interest, costs
     and attorney 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 condition.

<PAGE>

                                  SIGNATURES

          Pursuant to the requirements of Section 13 or 15(d) of the Securities
 Exchange Act of 1934, the registrant has duly caused this report to be signed
 on its behalf by the undersigned, thereunto duly authorized.

                                        AMPLIDYNE, INC.

                                        By:/s/ Devendar S. Bains
                                           ---------------------------
                                           Name:  Devendar S. Bains
                                           Title: Chief Executive Officer,
                                              President, Treasurer, Principal
                                              Accounting Officer and Director

          Pursuant to the requirements of Section 13 or 15(d) of the Securities
 Exchange Act of 1934, the registrant has duly caused this report to be signed
 on its behalf by the undersigned, thereunto duly authorized.

 Signature                         Title                          Date
 ---------                         -----                          ----

/s/ Devendar S. Bains         Chief Executive Officer,           April 15, 1997
------------------------      President, Treasurer,
Devendar S. Bains             Principal Accounting Officer
                              and Director

/s/ Tarlochan Bains           Vice President and Director        April 15, 1997
------------------------
 Tarlochan Bains

 /s/ Nirmal Bains             Secretary                          April 15, 1997
-------------------------
 Nirmal Bains