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, 1998


                           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: (732) 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 [X] No [ ]

         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 $1.786,936.

         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 31, 1999, was approximately $9,024,750.

         Number of shares  outstanding of the issuer's common stock, as of March
31, 1999 was 5,651,333.

         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 continues to be one
of the fastest growing areas, and the Company has devoted significant  resources
in 1998 to develop single channel and multi channel amplifiers for this market.

         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 32 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.

                                        2

<PAGE>

         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
(732) 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 under the symbols
AMPD and AMDW, respectively.

         In December  1998,  the Company  announced  that it had entered  into a
letter of intent with Microwave Power Devices,  a publicly traded company listed
on Nasdaq  ("MPD"),  providing  for the proposed  merger of the Company with and
into MPD pursuant to a definitive merger agreement.  In January 1999 the Company
and MPD  terminated  the letter of intent,  inasmuch as such  parties  could not
consummate such merger on terms satisfactory to both parties.

         In March 1999 the Company sold an aggregate of 900,000 shares of Common
Stock  to  "accredited   investors"  (pursuant  to  Rule  506  of  Regulation  D
promulgated  under the  Securities Act of 1933, as amended) at a per share price
of $1.125  (for an  aggregate  of  $1,012,500),  resulting  in net  proceeds  of
$941,625.

FORWARD LOOKING STATEMENTS

         Certain information contained in this Annual Report 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.  Such  potential  risks  and
uncertainties include, but are not limited to: dependence on a limited number of
customers  including  those in the  Korean  marketplace;  reductions,  delays or
cancellations in orders from new or existing customers;  potential deterioration
of business and economic  conditions  in the Company's  customers  marketplaces,
including  the  Korean   marketplace;   new  product   development  and  product
obsolescence;  potential deterioration of the Company's customers credit quality
due  to   deteriorating   economic   conditions  in  the   Company's   customers
marketplaces,  including the Korean  marketplace;  a limited number of potential
customers;  intensely  competitive  industry with increasing price  competition;
reliance  on  certain  key  personnel;   new  product  development  and  product
obsolescence; variability in gross margins on new products and resulting impacts
on operating results;  continued success in the design of new amplifier products
and the

                                       3

<PAGE>

ability to  manufacture  in  quantity  such new  products;  continued  favorable
business  conditions  and  growth in the  wireless  communications  market;  and
dependence on certain  suppliers  for  single-sourced  components.  In addition,
prior financial  performance and customer orders are not necessarily  indicative
of the results that may be expected in the future and the Company  believes that
such comparisons cannot be relied upon as indicators of future performance.  Due
to the foregoing factors, the Company believes that period-to-period comparisons
of  its  operating  results  are  not  necessarily   meaningful  and  that  such
comparisons  cannot  be  relied  upon  as  indicators  of  future   performance.
Additionally,  the Company  undertakes  no  obligation  to publicly  release the
results of any revisions to these  forward-looking  statements which may be made
to reflect events or circumstances occurring after the date hereof or to reflect
the occurrence of unanticipated events.

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 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
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.  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.

         According  to a report  of  Strategy  Analytics,  by 2003 more than 725
million people worldwide will subscribe to cellular and personal  communications
services. Global Systems for Mobil Communications Technology (GSM) will continue
to dominate the worldwide  digital  cellular  market.  However CDMA Systems will
capture a 20% share of the  subscribers  by 2003. The report also indicates that
Southeast  Asia will  continue to hold a leadership  position  through 2003 with
total subscribers reaching 250 

                                       4

<PAGE>

million.  Western  Europe is predicted to grow at a compound  annual rate of 18%
until 2003.  Worldwide cellular telephone shipments are predicted to grow by 17%
annually,  to exceed 330 million units by 2003.  Southeast  Asia will remain the
largest market for cellular phones, representing a 34% market share.

EMERGING TECHNOLOGY AND WIRELESS INTERNET ACCESS

         The Global  market for mobile  users is forecast  to grow from  today's
figures of around 200 million users to around 2.4 billion  users by 2015,  which
means today's market only  represents 10% of future demand  according to sources
at  International  Telecommunication  Union.  With  consumers  looking for added
features  including voice and data and wireless Internet access,  new technology
is needed. The evolution of the third generation (3G) of wireless  communication
is a fundamental  step to the new world.  3G represents the world of multi media
mobile  communications  where  users  will have  access not just to voice but to
video, image, text, graphics and data  communications.  The capabilities offered
by 3G will be limitless,  offering  users  services such as video  conferencing,
access to the Internet and a host of other applications.

         The new  technology  will  require  wide band  ultra  liner  amplifiers
requiring  predistortion  and feed  forward  technology.  Amplidyne's  propriety
patented  technology and feed forward  correction systems are ideally suited for
this new emerging  market.  The Company expects to provide  solutions in the PCS
and IMT2000 formats using W-CDMA and similar technologies.

CELLULAR SYSTEMS

         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 

                                       5

<PAGE>

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  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 has  developed and refined its products
for this market such as the 2.4 ghz and 3.5 ghz wireless local loop  amplifiers.
As a result of these  developments,  the Company  received  purchase  orders for
these products from its customers, such as DSC Communications.

         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.

                                       6

<PAGE>

         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 original equipment manufactures
("OEMs") to develop  products  for the PCS market.  The  Company's  products are
being evaluated for emerging technology at various OEM sites.

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

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

         INCREASE PENETRATION OF WIRELESS EQUIPMENT  MANUFACTURERS.  Since 1991,
the Company has positioned  itself as a supplier of amplifier  products to large
wireless telecommunications OEMs, such as DSC Communications. 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. Amplidyne has
demonstrated  its PCS single and  multichannel  products to major U.S. OEM's and
attended  trade shows to promote its products.  As a result of this, the Company
has received favorable feedback from the engineering evaluation of its products.
The Company has provided several new models to its Southeast Asian, European and
US customers, which resulted in several new orders being placed with the Company
during 1998.

         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  supplied  amplifiers  to several  emerging
wireless equipment manufacturers during 1998.

         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  

                                       7

<PAGE>

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.  The Company is aware of the emerging 3D technology and is continuing
to provide  products for the technology  either at W-CDMA or IMT2000  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.  The Company has continued its research
and  development  on PCS and wireless  local loop products  during 1998, and has
procured some orders for this equipment during 1998.

         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  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 has adapted this
expertise for new commercial  market  applications and product  requirements and
develop  products  for the  DCS-1800  and  PCS-1900  markets.  The  Company  has
continued  to  develop  amplifier  products  which  can be used in PCS  repeater
subsystems.  This aspect of the  business has  continued  to show steady  growth
during 1998.

         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,

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<PAGE>

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  has  consistently  analyzed  in  house
automated  manufacturing versus the use of subcontracted  manufacturers in order
to control its production schedule.  The Company may install automated equipment
as needed. 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.  The  Company  has  been  a  pioneer  in its  use  and
development  of  predistortion  technology  and  intends to further  enhance its
products using such technology.

         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.  The  Company's  PCS  multicarrier  linear power
amplifier has been well received in the industry and,  management  believes,  is
among the leading  products  available in the wireless  industry.  The Company's
single  channel PCS  amplifiers  have also been well  received in the  industry,
however,  the Company has experienced more competition in this area. The Company
is seeking to position  itself to be a viable  source in this area.  The Company
constantly  monitors such  situations and will employ  significant  resources to
explore such opportunities, as financing permits.

                                       9

<PAGE>

         By utilizing its proprietary and patented predistortion  technology and
its proprietary feed forward technology,  the MCLPAs  amplification  capacity of
the Company's  amplifiers  are, in  management's  belief,  among the best in the
industry.

         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 to 32, 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.

         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 

                                       10

<PAGE>

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 32 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.

         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.

                                       11

<PAGE>

         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 among 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").

         EMERGING TECHNOLOGY AND WIRELESS INTERNET ACCESS. The Global market for
mobile users is  forecasted  to grow from today's  figures of around 200 million
users to around 2.4  billion  users by 2015,  which  means  today's  market only
represents  10%  of  future  demand   according  to  sources  at   International
Telecommunication  Union.  With consumers  looking for added features  including
voice and data and wireless Internet access,  new technology is needed.  The new
technology   will   require  wide  band  ultra   linear   amplifiers   requiring
predistortion  and  feed  forward  technology.  Amplidyne's  propriety  patented
technology and feed forward  correction  systems are ideally suited for this new
emerging market. The Company expects to provide solutions in the PCS and IMT2000
formats using W-CDMA and similar technologies.

         WIRELESS RECEIVE  TECHNOLOGY.  The receiving section of a cellular base
station   frequently  uses  two  antennas  for  efficient  spectrum  usage.  The
deployment  of complex  

                                       12

<PAGE>

circuitry and techniques,  including the use of GaAsFET (Gallium  Arsenide Field
Effect Transistors) enhances the systems performance,  enabling the weak "noisy"
signal  to be  amplified  with a  significant  reduction  in the level of noise.
Amplidyne has been manufacturing low noise amplifiers since 1991, with thousands
currently in service. 
MARKETS

         The market for wireless communications services has grown substantially
during the past decade as cellular  wireless  local loop,  PCS and other new and
emerging  applications (such as W-CDMA) 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  major  OEMs as well as
emerging wireless  telecommunications  infrastructure  equipment  providers when
providing infrastructure equipment for such new cell sites.

         WIRELESS LOCAL LOOP. 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 and single channel amplifiers for infrastructure
equipment  systems in the  wireless  local loop market in the 2 and 3-5 ghz. The
Company has  recently  obtained a sales  contract  for its  wireless  local loop
products,  the value of which may range  between $2 - $5 million  during  fiscal
years 1999 and 2000. (See Backlog/Future Orders discussion on pages 16-17)

         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 MARKET.  There are industry projections that by 2002, there will be
over 500 million cellular and PCS subscribers worldwide,  more than tripling the
end-year  1996  cellular  and PCS  subscriber  base of nearly 140  million.  Key
factors in this growth are the continued  deployment of digital cellular systems
and the more recent  implementation  of PCS  including  PCN, PHS and a number of
U.S.-based  standards including PCS 1900 (based on the GSM protocol),  CDMA, and
TDMA.  As evidenced in markets such as 

                                       13

<PAGE>

Japan and the U.S.,  PCS-based  operators are proving formidable  competitors to
cellular  network  operators.  The Company has  developed  products  for the PCS
market and has shipped  production  quantities of single  channel PCS amplifiers
and  received   additional   purchase  orders  for  PCS  single  channel  linear
amplifiers.  The Company has recently  obtained a purchase order in excess of $5
million for its PCS single  channel and  multi-channel  amplifier  products from
certain key customers in the  Southeast  Asian  market.  The Company  expects to
deliver such products  during fiscal year 1999 and the first half of 2000.  (See
Backlog/Future Orders discussion on pages 16-17)

PRODUCTS

         The Company designs and sells multicarrier  transmit amplifiers and low
noise receive amplifiers for the cellular  communications market, as well as the
PCS and wireless  local loop 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  designs and 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.
The Company's MCLPAs typically  amplify up to 32 carriers at 3.0 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.

                                       14

<PAGE>

                        AMPLIDYNE'S MCLPA PRODUCT SUMMARY

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


                                                            OUTPUT        IMD
     PRODUCT                                                POWER         ---
     MODEL NO.         FREQUENCY          STANDARD          WATTS        (DBC)*
     ---------         ---------          --------          -----        ------
--------------------------------------------------------------------------------
AMP461/466-N-100       463-467.5          NMT-450            100         -70
--------------------------------------------------------------------------------
AMP651/866-SE-100       851-866            SETACS            100         -70
--------------------------------------------------------------------------------
AMP869-896-100          869-894          AMPS/CDM            100         -70
                                            A
                                           CDPD,
                                           TDMA
--------------------------------------------------------------------------------
AMP917/950-E-100        917-960          ETACS/CD            100         -70
                                            MA
--------------------------------------------------------------------------------
AMP1819-D-100          1805-1880          DCS-1800           100         -70
--------------------------------------------------------------------------------
AMP1990-P-100          1930-1990          PCS-1900           100         -70
--------------------------------------------------------------------------------
AMP1855-K-100          1840-1870          PCS-CDMA           100         -70
--------------------------------------------------------------------------------

----------

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

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

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


--------------------------------------------------------------------------------
         Model No.      FREQUENCY     STANDARD       POWER WATTS
         ---------      ---------     --------       -----------
                           MHz
                           ---
--------------------------------------------------------------------------------
        AMP0861-50       869-894       CDMA              25
                                     AMPS/TDMA           50
                                     AMP/CDPD            65
--------------------------------------------------------------------------------
        AMP0935-16       925-960        GSM              65
--------------------------------------------------------------------------------
        AMP0933-50       917-960       ETACS             65
--------------------------------------------------------------------------------
        AMP0450-25       463-468      NMT-450            50
--------------------------------------------------------------------------------
        AMP1855-25      1840-1870    DCS-1800           30/35
--------------------------------------------------------------------------------
        AMP1990-25      1930-1990    PCS-1900            35
                                       TDMA              50
                                       CDMA           17/25/35
--------------------------------------------------------------------------------

                                       15

<PAGE>

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).

         The Company's wireless telecommunications  amplifiers can be configured
as  modules  separate  plug-in  amplifier  units or  integrated  subsytems.  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  generally  for a period of one (1) year from the date of  shipment.
Certain sales to Korean customers provide for a two year warranty.  To date, the
Company has not experienced a material amount of warranty claims.

BACKLOG/FUTURE ORDERS

         As of December 31, 1998,  the Company had  multi-year  backlog and open
future  orders of  approximately  $7,000,000  which the Company plans to deliver
during  fiscal  years  1999-2000  (which may be  extended).  The Company  cannot
predict whether or not all of such backlog or orders 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,  

                                       16

<PAGE>

corporations  are  frequently  requested to update and provide new prototypes in
accordance with new specifications if products become obsolete or inferior.

         A substantial  majority of these orders is  attributable to orders from
customers from the Korean market.  Based upon recent discussions with its Korean
customers,  the Company believes that the current  prolonged period of continued
economic and market  uncertainty  within Korea will result in either  postponed,
rescheduled or possibly  canceled  orders with the Company's  Korean  customers.
Such postponements or cancellations will significantly  reduce the amount of the
Company's backlog and orders.  Product orders are subject to changes in delivery
schedules or to  cancellation  at the option of the customer.  Accordingly,  the
Company  stresses that backlog or orders as of any particular  date may not be a
reliable indicator of sales for any future period.

         The Company's Korean and other  international  customers,  collectively
accounted for  approximately 80% of the Company's net sales for fiscal 1997, and
approximately  94% of the Company's net sales for fiscal 1998.  These sales were
principally  for the  supply of  equipment  for  implementation  in the  digital
cellular and PCS networks in Korea, and wireless local loop systems worldwide.

         The  build-out  of the Korean PCS networks  began the first  quarter of
1997.  Sales to the  Company's  Korean  customers  for the Korean  PCS  networks
represented substantially all of the Company's PCS sales during 1998.

         During the fourth quarter of 1997,  certain Asian countries,  including
South Korea, began to experience weaknesses in their currencies, banking systems
and  equity  markets.   The  deteriorating   economic  and  currency  conditions
throughout  Asia led South  Korea,  along with  several  other Asian  countries,
including  Indonesia  and  Thailand,   to  request  economic  support  from  the
International Monetary Fund in December 1997.

         The Company  currently  believes that the completion of the buildout of
the Korean  wireless  networks is dependent  upon a  stabilization  of economic,
currency and banking  conditions within Korea. It is currently  anticipated that
the continued  deployment of both the cellular and PCS digital  networks will be
delayed  until  such time that  economic  conditions  become  stabilized  from a
long-term perspective.  Economic conditions have improved,  however, weakness in
the currency and strict banking  controls have created problems in the execution
of planned growth for the Korean PCS networks. In certain cases, purchase orders
have been placed and then delayed, because of these circumstances.

         The Company's South Korean customers account for a substantial majority
of the  Company's  net sales.  Although the Company is  attempting to expand its
customer  base,  the Company  expects that a limited  number of  customers  will
continue to represent a  substantial  portion of the Company's net sales for the
foreseeable  future.  The Company  believes that its future success depends upon
its  ability to broaden  its  customer  base.  During  1998 the  Company has had
success in obtaining small quantity purchase orders 

                                       17

<PAGE>

from  some  key  North  American  OEM's  particularly  for  the PCS  single  and
multichannel amplifiers.

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 1996.

                        NET REVENUES BY MARKET CATEGORIES
                                 (IN THOUSANDS)

                                                     YEAR ENDED
                                                     DECEMBER 31,
                                               ------------------------

 MARKETS                                        1996     1997     1998
 -------                                       ------   ------   ------
Cellular  Analog ............................  $  126   $   99   $   15
Cellular  Digital ...........................     452       78        0
Wireless  Telephony .........................     759      265      600
Satellite  Communications,  Custom and other
Products ....................................     231      173      188
Digital PCS  Products .......................     652    1,818      983
        Total ...............................  $2,220   $2,433   $1,786


         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  continue to improve its market share in the cellular  digital,
wireless telephony and digital PCS products.

                    *      CELLULAR  ANALOG  AND  DIGITAL.  In 1989 the  Company
                    began  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 1997  and the
                    Company  concentrated its efforts in developing  MCLPAs.  In
                    February 1996 the Company received  prototype orders for its
                    wireless  MCLPAs.  Sales to the analog and 

                                       18

<PAGE>

                    digital  cellular  industry have decreased from 7.2% in 1997
                    to approximately .8% of total sales in 1998.

                    *      WIRELESS  TELEPHONY.  Sales to the wireless telephone
                    segments  of  the  wireless   communications  industry  have
                    increased  from  approximately  11% of  total  revenues  for
                    fiscal year end 1997 to 33% of total  revenue for the fiscal
                    year end 1998.

                    *      DIGITAL PCS. The Company has shipped  single  channel
                    amplifiers  to its  OEM  customers  as of  January  1,  1997
                    accounting for 75% of sales in the period ended December 31,
                    1997.  Sales  in  this  sector  of the  market  showed  some
                    decrease  during  fiscal  1998  accounting  for 55% of total
                    sales,  primarily  due to the  decline  in the South  Korean
                    marketplace.

                    *      INTERNATIONAL   SALES.  Sales  of  wireless  products
                    outside the United States  (primarily to Western  Europe and
                    the Far East) represented  approximately 66%, 80% and 94% of
                    net sales during fiscal 1996,  fiscal 1997, and fiscal 1998,
                    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
                    positioned  to be a prime  source  of base  station,  single
                    channel 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.

COMPETITION

         The  ability  of  the  Company  to  compete  successfully  and  operate
profitably 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 

                                       19

<PAGE>

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.

         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.

                                       20

<PAGE>

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

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

         The  Company  has   consistently   reviewed  its  in  house   automated
manufacturing  needs in order to control its production  schedule.  To date, the
Company has not established a fully automated manufacturing facility. Until such
time as its establishes such facilities,  the Company expects to be dependent on
contract manufacturing.

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 1996, 1997 and 1998
were  approximately  $1,150,000,   $876,000  and  $544,200,   respectively,  and
represented approximately 52%, 36% and 31%, respectively, of net revenues. These
efforts were primarily  dedicated to the development

                                       21

<PAGE>

of the linear feed forward, high power, low distortion amplifiers,  resulting in
the  Company's  models  for AMPS,  TACS,  NMT-450,  PCS-1900,  and PCS  Repeater
Amplifier (DCS 1800).

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

         The Company uses a CAD environment employing networked work stations to
model  and  test  new  circuits.  This  design  environment,  together  with the
Company's experience in interference cancellation technology and modular product
architecture,  allows the Company to rapidly define, develop and deliver new and
enhanced products and subsystems sought by its customers.

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

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.   The  Company  intends  to  broaden  its  patent
protection in other  countries for its existing  patents and file for additional
patent protection relating to products it is currently developing.

         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.

                                       22

<PAGE>

GOVERNMENTAL REGULATIONS

         The  Company's  customers  must obtain  regulatory  approval to operate
their base stations. The United States Federal Communications Commission ("FCC")
has 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,  1998,  the  Company  had a total of 37  employees,
including 26 in operations,  3 in  engineering,  2 in sales and marketing,  2 in
quality  assurance  and 4 in  administration.  The Company  believes  its future
performance  will  depend in large part on its  ability  to  attract  and retain
highly skilled  employees.  None of the Company's  employees is represented by a
labor union and the Company has not experienced any work stoppages.  The Company
considers its employee relations to be good.

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.

         IN ADDITION TO OTHER  INFORMATION IN THIS ANNUAL REPORT ON FORM 10-KSB,
THE FOLLOWING IMPORTANT FACTORS SHOULD BE CAREFULLY CONSIDERED IN EVALUATING THE
COMPANY AND ITS  BUSINESS  BECAUSE  SUCH FACTORS  CURRENTLY  HAVE A  SIGNIFICANT
IMPACT ON THE COMPANY'S BUSINESS, PROSPECTS,  FINANCIAL CONDITION AND RESULTS OF
OPERATIONS.

         RECENT  HISTORY  OF  LOSSES.   The  Company   incurred  net  losses  of
$5,419,940,  $2,493,611  and  $1,916,359  for the years ended December 31, 1996,
1997 and 1998,  respectively,  although a substantial  portion of the net losses
for such  periods is due to  nonoperating  charges  to  earnings  and  research,
engineering and development costs. The

                                       23
<PAGE>

Company expects that losses will increase and continue until such time, if ever,
as the Company can manufacture and market a new line of linear power  amplifiers
including  multicarrier  linear  power  amplifiers  (sometimes  referred  to  as
"MCLPA"). In addition,  the Company had an accumulated deficit of $11,569,036 at
December 31, 1998.

         POSSIBLE NEED FOR ADDITIONAL  FINANCING.  The Company believes that the
current cash on hand  including the proceeds of the recently  completed  private
placement  of 900,000  shares of Common  Stock,  resulting  in net  proceeds  of
$941,625  to the  Company,  together  with  cash flow  from  operations  will be
adequate to fund its  operations  for at least  twelve  months.  There can be no
assurance, however, that the Company will not require additional financing prior
to or after such time.  There can be no assurance that any additional  financing
will be available  to the Company on  acceptable  terms,  or at all. If adequate
funds are not  available,  the Company  may be required to delay,  scale back or
eliminate its research, engineering and development or manufacturing programs or
obtain funds through  arrangements  with partners or others that may require the
Company  to  relinquish  rights to  certain  of its  technologies  or  potential
products or other assets.  Accordingly,  the inability to obtain such  financing
could  have a  material  adverse  effect on the  Company's  business,  financial
condition and results of operations.

         RELIANCE UPON GROWTH OF WIRELESS  TELECOMMUNICATIONS  SERVICES.  Demand
for the Company's  products will depend in large part upon continued and growing
demand  within the wireless  telecommunications  industry for power  amplifiers.
Although demand for power amplifiers has grown in recent years,  there can be no
assurance that the quantity and variety of wireless  telecommunications services
will  continue  to grow,  or that such  services  will  create a demand  for the
Company's products.

         LACK OF  AUTOMATED  MANUFACTURING  PROCESSES;  DEPENDENCE  ON  CONTRACT
MANUFACTURERS;  LIMITED  NUMBER  OF  SUPPLIERS.  The  Company  has  consistently
reviewed  its in house  automated  manufacturing  needs in order to control  its
production schedule.  To date, the Company has not established a fully automated
manufacturing facility. Until such time as its establishes such facilities,  the
Company  expects to be  dependent  on  contract  manufacturing.  There can be no
assurance that the Company's contract  manufacturers will be able to fulfill the
Company's  production  commitments.  There are no written  agreements  with such
contract  manufacturers.  Any inability to obtain timely  deliveries of finished
assemblies  of acceptable  quality could delay the Company's  ability to deliver
its  products  to its  customers,  which in turn would  have a material  adverse
effect on the Company's business, financial condition and results of operations.
In  addition,  in the event that  production  costs for the  Company's  contract
manufacturers  increase,  the Company may suffer  losses due to an  inability to
recover such cost increases under its fixed price  commitments with its original
equipment manufacturer ("OEM") customers.

         Power  transistors  and  certain  other  key  components  used  in  the
Company's  products  are  currently  available  from  only a  limited  number of
sources.  Certain  of  the  Company's  limited  source  suppliers  have  limited
operating  histories and limited  financial 

                                       24

<PAGE>

and other resources and,  therefore,  they may prove to be unreliable sources of
supply. The Company has no written agreements with such suppliers.  Further, the
Company has generally not  previously  purchased key components in large volume.
If the  Company  were  unable to obtain  sufficient  quantities  of  components,
particularly power transistors,  delays or reductions in product shipments could
occur  which would have a material  adverse  effect on the  Company's  business,
financial  condition and results of operations.  Furthermore,  delays in filling
orders may have a material  adverse effect on the Company's  relationships  with
its OEM customers,  which may result in the  termination of material orders from
its OEM customers and/or cause a permanent loss of future sales.

         RELIANCE  ON A SMALL  NUMBER OF  CUSTOMERS;  POSSIBLE  FLUCTUATIONS  IN
OPERATING RESULTS. In 1996,  approximately 70% of net revenues were derived from
sales to  three  customers.  In 1997,  approximately  48% of net  revenues  were
derived from one customer (in South Korea).  In 1998,  approximately  94% of net
revenues were derived from three  customers (two European and one South Korean).
The Company  anticipates  that sales of its products to relatively few customers
(wireless  telecommunications OEMs) will account for a majority of the Company's
revenues in 1999. The  reduction,  delay or  cancellation  of orders from one or
more  significant  customers would materially and adversely affect the Company's
financial  condition  and  results of  operation.  Moreover,  as a result of the
uncertainty of such sales, the Company may in the future experience  significant
fluctuations in net sales, gross margins and operating results.

         LIMITED MARKETING  EXPERIENCE.  The Company has developed its sales and
marketing network,  which includes outside sales agents,  which has demonstrated
the advantages of its products over competing products.  The Company's marketing
experience with its single and multi channel  amplifiers has had limited success
with major OEMs.  The Company has to maintain a leading edge position  regarding
emerging  technologies,  such as the 3G systems and  wireless  Internet  access,
which require  ultra linear base station  amplifiers.  The Company  continues to
upgrade its sales and marketing efforts,  while maintaining  product cost. There
can be no assurance that the Company will be successful in its marketing efforts
or that it will be able to maintain sales and distribution capabilities.

         CONTROL BY  MANAGEMENT.  Officers and  directors and persons who may be
deemed affiliates beneficially own, in the aggregate, and have the right to vote
approximately 40% of the issued and outstanding  Common Stock (not including any
options they may own) of the Company.  The Chairman and Chief Executive  Officer
of the  Company  owns  approximately  38% of the issued and  outstanding  Common
Stock.  Accordingly,  such  holders  will be in a  position  to elect all of the
directors and thereby control the Company.

         LIMITED PRIOR PUBLIC MARKET; POTENTIAL LIMITED TRADING MARKET; POSSIBLE
VOLATILITY  OF  STOCK  PRICE.  There  has  only  been a  public  market  for the
Securities  since  January  1997 and  there can be no  assurance  that an active
trading market in the 

                                       25

<PAGE>

Company's  Securities  will be maintained.  In the absence of such a market,  an
investor may find it more difficult to sell the Securities  offered  hereby.  In
addition,  the stock market in recent years has  experienced  extreme  price and
volume  fluctuations that have  particularly  affected the market prices of many
smaller companies. The trading price of the Securities is expected to be subject
to  significant  fluctuations  in response to variations in quarterly  operating
results, changes in analysts' earnings estimates, announcements of technological
innovations  by  the  Company  or its  competitors,  general  conditions  in the
wireless communications industry and other factors. These fluctuations,  as well
as general economic and market conditions, may have a material adverse effect on
the market price of the Company's Securities.

         NO ASSURANCE OF  SUCCESSFUL  EXPANSION OF  OPERATIONS.  The Company has
substantially  increased  its  scale of  operations  over  the  past two  years,
however,  due to the down  turn in  business  activity  in the  Southeast  Asian
market,  the Company  has had to reassess  its  business  strategy.  The Company
intends to downsize some of its operations in order to maintain  competitiveness
and achieve  profitability.  The Company has explored joint ventures and mergers
in  order  to  achieve  these  results,  but has not  consummated  any of  these
transactions.  If the Company  does not increase  its sales,  decrease  overhead
expenditure  or does not  adequately  manage the growth of its  operations,  the
Company's results of operations will be materially adversely affected.

         DECLINING  AVERAGE SALES PRICES.  If wireless  telecommunications  OEMs
come under  increasing  price pressure from cellular and PCS service  providers,
the  Company  could  expect  to  experience  downward  pricing  pressure  on its
products.  In addition,  competition among non-captive amplifier suppliers could
increase the downward pricing pressure on the Company's products.  To date, such
pressure has not been experienced.  As these manufacturers  frequently negotiate
supply  arrangements  far in advance of delivery  dates,  the Company often must
commit to price  reductions  for its products  before it is aware of how, or if,
cost  reductions  can be  obtained.  If the  Company is unable to  achieve  cost
reductions, the Company's gross margins will decline, which will have a material
adverse  effect on the Company's  business,  financial  condition and results of
operations.

         RAPID  TECHNOLOGICAL  CHANGE  AND  INTENSE  COMPETITION.  The  wireless
telecommunications   equipment   industry  is  extremely   competitive   and  is
characterized by rapid technological  change, new product  development,  product
obsolescence and evolving industry standards. In addition,  price competition in
this market is intense and  characterized by significant  price erosion over the
life of a product.  Currently,  the Company competes  primarily with non-captive
suppliers  of  power  amplification  products.  The  Company  believes  that its
competition,  and ultimately the success of the Company, will be based primarily
upon service, pricing, reputation, and the ability to meet delivery schedules of
its customers.  The Company's existing and potential OEM customers  continuously
evaluate whether to manufacture their own amplification  products or to purchase
such  products   from  outside   sources.   These   customers  and  other  large
manufacturers  of wireless  telecommunications  infrastructure  equipment  could
elect

                                       26

<PAGE>

to enter the market and compete directly with the Company. Many of the Company's
competitors have  significantly  greater  financial,  technical,  manufacturing,
sales and  marketing  capabilities  and research and  development  personnel and
other resources than the Company and have achieved  greater name  recognition of
their  existing  products  and  technologies.   In  order  for  the  Company  to
successfully  compete it must continue to develop new  products,  keep pace with
advancing  technologies and competitive  innovations and successfully market its
products to OEM customers  that will  incorporate  the  Company's  products into
their  systems.  There  can be no  assurance  that the  Company  will be able to
compete successfully.

         In addition, there can be no assurance that new products or alternative
amplifier  technology will not be developed that render the Company's current or
planned products obsolete or inferior. Rapid technological development by others
may result in the  Company's  products  becoming  obsolete  before  the  Company
recovers   a   significant   portion   of   the   research,    development   and
commercialization expenses incurred with respect to those products.

         RISKS ASSOCIATED WITH SALES OUTSIDE OF THE UNITED STATES. International
sales represented  approximately 72%, 70%, and 94% of the Company's net revenues
for the years ended December 31, 1996, 1997 and 1998, respectively.  The Company
expects  that  international  sales will  continue to account for a  significant
portion of its net  revenues in the future.  To the extent that the Company does
not  achieve  and  maintain  substantial   international  sales,  the  Company's
business,  results of operations and financial condition could be materially and
adversely  affected.  There can be no assurance that the Company will be able to
maintain or increase its current level of international sales.

         Sales of the  Company's  products  outside  of the  United  States  are
denominated in US dollars.  An increase in the value of the U.S. dollar relative
to foreign  currencies  would make the Company's  products more  expensive  and,
therefore,  potentially  less competitive  outside the United Sates.  Additional
risks inherent in the Company's  sales abroad include the impact of recessionary
environments  in  economies   outside  the  United  States,   generally   longer
receivables collection periods,  unexpected changes in regulatory  requirements,
tariffs  and  other  trade  barriers,   potentially  adverse  tax  consequences,
restrictions   on  the   repatriation  of  earnings,   reduced   protection  for
intellectual  property  rights in some  countries,  and the burdens of complying
with a wide variety of foreign laws. There can be no assurance that such factors
will not have an adverse effect on the Company's future international sales and,
consequently,  on the  Company's  business,  financial  condition and results of
operations.

         DEPENDENCE UPON MANAGEMENT AND TECHNICAL PERSONNEL.  The success of the
Company is highly  dependent upon the continued  services of Devendar Bains, the
Company's President and Chief Executive Officer.  The Company has entered into a
five year employment  agreement with Mr. Bains which  terminates  April 30, 2001
and contains a covenant not to compete against the Company for a two year period
following 

                                       27

<PAGE>

termination  of  employment.  The Company has obtained key man  insurance on the
life of Mr. Bains in the amount of $1,000,000.  There can be no assurances  that
the Company will be able to replace Mr.  Bains in the event his services  become
unavailable  or that  the  proceeds  of such  insurance  would  be  adequate  to
compensate the Company for the loss of his services.

         Due to the specialized nature of the Company's business, the Company is
highly dependent on the continued  service of, and on its ability to attract and
retain, qualified technical and marketing personnel, particularly highly skilled
radio-frequency   ("RF")  and  microwave  design   engineers   involved  in  the
development of new products and processes and test  technicians  involved in the
manufacture and enhancement of existing  products.  In addition,  as part of the
Company's  team-based  sales  approach,  the Company  dedicates  specific design
engineers to service the requirements of individual  customers.  The loss of any
such engineer  could  adversely  affect the  Company's  ability to obtain future
purchase  orders from the  customers to which such  engineer is  dedicated.  The
Company has employment or  non-competition  agreements  with most of its current
design  engineers or test  technicians.  The  competition  for such personnel is
intense,  and the loss of any such  persons,  as well as the  failure to recruit
additional  key technical  personnel in a timely  manner,  would have a material
adverse  effect on the Company's  business,  financial  condition and results of
operations.

         PROPRIETARY TECHNOLOGY; RISK OF THIRD PARTY CLAIMS OF INFRINGEMENT. The
Company's ability to compete successfully and achieve future revenue growth will
depend,  in part,  on its  ability to protect  its  proprietary  technology  and
operate  without  infringing  upon the rights of others.  Although  there are no
pending  lawsuits  against the Company  regarding its technology or notices that
the Company is infringing upon intellectual property rights of others, there can
be no assurance  that  litigation or  infringement  claims will not occur in the
future.  Such  litigation  or claims  could  result in  substantial  costs,  and
diversion of resources and could have a material adverse effect on the Company's
business,  financial condition, and results of operations. The Company generally
enters into confidentiality and non-disclosure agreements with its employees and
limits access to and distribution of its proprietary information. However, there
can be no assurance that such measures will provide adequate  protection for the
Company's trade secrets or other proprietary information,  or that the Company's
trade secrets or proprietary  technology  will not otherwise  become known or be
independently  developed by  competitors.  The failure of the Company to protect
its proprietary technology could have a material adverse effect on its business,
financial condition and results of operations.

         NO  DIVIDENDS.  The  Company has not paid any  dividends  on its Common
Stock since its  inception  and does not intend to pay  dividends  on its Common
Stock in the foreseeable  future.  Any earnings which the Company may realize in
the foreseeable future will be retained to finance the growth of the Company.

         GOVERNMENTAL REGULATIONS AND ENVIRONMENTAL  REGULATIONS.  The Company's
customers must obtain  regulatory  approval to operate their base stations.  The
United

                                       28

<PAGE>

States Federal  Communications  Commission  ("FCC") has regulations  that impose
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.

         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.

         NASDAQ CONTINUED  LISTING  REQUIREMENTS.  Although the Company's Common
Stock and Warrants are currently listed on Nasdaq,  for continued listing on The
Nasdaq Small Cap Market, a company,  among other things, must have $2,000,000 in
net tangible  assets,  $1,000,000  in market value of public float and a minimum
bid  price of  $1.00  per  share.  If the  Company  is  unable  to  satisfy  the
requirements for continued quotation on The Nasdaq Small Cap Market, trading, if
any, in the Common Stock and Warrants  offered  hereby would be conducted in the
over-the-counter market in what are commonly referred to as the "pink sheets" or
on the NASD OTC Electronic  Bulletin Board. As a result, an investor may find it
more difficult to dispose of, or to obtain  accurate  quotations as to the price
of, the securities  offered  hereby.  The  above-described  rules may materially
adversely affect the liquidity of the market for the Company's securities.  This
Annual Report on Form 10-KSB for the year ended  December 31, 1998 indicates net
tangible assets of $1,167,251.  Although the Company  believes that the proceeds
of the private  placement in March 1999 as well as certain  other first  quarter
adjustments and revenue will assist the Company in its compliance with continued
listing, no assurances are made as to the Company's continued listing on Nasdaq.

         PENNY   STOCK   REGULATIONS   MAY  IMPOSE   CERTAIN   RESTRICTIONS   ON
MARKETABILITY  OF  SECURITIES.  The  Securities  and  Exchange  Commission  (the
"Commission") has adopted  regulations which generally define a "penny stock" to
be any equity  security  that has a market price (as defined) of less than $5.00
per share or an exercise price of less than $5.00 per share,  subject to certain
exceptions.  Since the Common  Stock is listed on The Nasdaq  Small Cap  Market,
such  securities  are exempt from the definition of "penny stock." If the Common
Stock and  Warrants  are removed  from listing by The Nasdaq 

                                       29

<PAGE>

Small Cap Market at any time, the Company's Common Stock and Warrants may become
subject  to  rules  that  impose  additional  sales  practice   requirements  on
broker-dealers  who sell such  securities  to  persons  other  than  established
customers and  accredited  investors  (generally  those with assets in excess of
$1,000,000 or annual income exceeding $200,000,  or $300,000 together with their
spouse).  For transactions covered by these rules, the broker-dealer must make a
special  suitability  determination for the purchase of such securities and have
received  the  purchaser's  written  consent  to the  transaction  prior  to the
purchase.  Additionally,  for any  transaction  involving a penny stock,  unless
exempt,  the rules require the  delivery,  prior to the  transaction,  of a risk
disclosure  document  mandated  by the  Commission  relating  to the penny stock
market.  The broker-dealer must also disclose the commission payable to both the
broker-dealer  and the  registered  representative,  current  quotations for the
securities and, if the broker-dealer is the sole market maker, the broker-dealer
must  disclose  this  fact and the  broker-dealer's  presumed  control  over the
market.  Finally,  monthly  statements  must be  sent  disclosing  recent  price
information  for the penny  stock held in the  account  and  information  on the
limited  market in penny  stocks.  Consequently,  the  "penny  stock"  rules may
restrict the ability of broker-dealers to sell the Company's  securities and may
affect  the  ability  of  purchasers  in this  Offering  to sell  the  Company's
securities in the secondary  market and the price at which such  purchasers  can
sell any such securities.

         CURRENT PROSPECTUS AND STATE BLUE SKY REGISTRATION REQUIRED TO EXERCISE
WARRANTS.  The  Company  will be able to issue  shares of its Common  Stock upon
exercise of the Warrants only if there is then a current prospectus  relating to
such Common Stock and only if such Common Stock is qualified  for sale or exempt
from  qualification  under applicable state securities laws of the jurisdictions
in which the  various  holders of the  Warrants  reside.  Currently  there is no
current  prospectus  which will permit the purchase and sale of the Common Stock
underlying  the Warrants  (which are currently  exercisable at $6.00 per share).
The Warrants may be deprived of any value and the market for the Warrants may be
limited if a current  prospectus  covering  the Common Stock  issuable  upon the
exercise  of the  Warrants  is not  effective  or if such  Common  Stock  is not
qualified or exempt from qualification in the jurisdictions in which the holders
of the Warrants then reside.

         POTENTIAL ADVERSE EFFECT OF REDEMPTION OF WARRANTS. The Warrants may be
redeemed  by the Company at any time at a  redemption  price of $.01 per Warrant
upon not less than 30 days prior written notice if the average  closing price or
bid price of the Common Stock as reported by the principal exchange on which the
Common Stock is traded,  the Nasdaq  SmallCap  Market or the National  Quotation
Bureau, Incorporated,  as the case may be, equals or exceeds $9.00 per Share for
any twenty (20)  consecutive  trading days ending  within five (5) days prior to
the date on which notice of  redemption  is given.  Notice of  redemption of the
Warrants  could force the holders to exercise  the Warrants and pay the exercise
price at a time  when it may be  disadvantageous  for them to do so, to sell the
Warrants at the current market price when they might  otherwise wish to hold the
Warrants,  or to accept the redemption price which would be  substantially  less
than the market value of the Warrants at the time of redemption.

                                       30

<PAGE>

         ANTI-TAKEOVER  PROVISIONS.  Pursuant to the  Company's  Certificate  of
Incorporation,  the  Board of  Directors  may  issue up to  1,000,000  shares of
Preferred  Stock in the future with such  preferences,  limitations and relative
rights as the Board may determine without  stockholder  approval.  The rights of
the holders of Common  Stock will be subject to, and may be  adversely  affected
by, the rights of the holders of any  Preferred  Stock that may be issued in the
future.  The  issuance  of  Preferred  Stock,  while  providing  flexibility  in
connection with possible  acquisitions and other corporate purposes,  could have
the effect of delaying or preventing a change in control of the Company  without
further  action by the  stockholders.  The Company has no present plans to issue
any shares of Preferred Stock. In addition,  following this Offering the Company
will  become  subject to the  anti-takeover  provisions  of  Section  203 of the
Delaware General  Corporation Law, which will prohibit the Company from engaging
in a "business  combination"  with an "interested  stockholder"  for a period of
three years  after the date of the  transaction  in which the persons  became an
interested  stockholder,  unless  the  business  combination  is  approved  in a
prescribed  manner. The application of Section 203 also could have the effect of
delaying or preventing a change of control of the Company.

         ADDITIONAL  AUTHORIZED  SHARES OF  COMMON  STOCK  AND  PREFERRED  STOCK
AVAILABLE  FOR  ISSUANCE  MAY  ADVERSELY  AFFECT  THE  MARKET.  The  Company  is
authorized to issue 25,000,000 shares of its Common Stock,  $.0001 par value. As
of March 31,  1999,  there  were  5,651,333  shares of Common  Stock  issued and
outstanding.  However,  the total  number of shares of Common  Stock  issued and
outstanding  does not  include  the  exercise  of up to  1,610,000  Warrants  to
purchase  up to  1,610,000  shares of Common  Stock,  the option  granted to the
underwriter of the Company's  initial public  offering to purchase up to 140,000
Shares and 140,000 Warrants to purchase 140,000 shares of Common Stock,  212,500
shares of Common Stock  issuable  upon exercise of the $2.50  Warrants,  350,000
shares  of  Common  Stock  issuable  upon  exercise  (at  $1.25) of the Rule 701
Warrants,  214,000  shares of Common Stock  issuable  upon exercise of the $4.00
Warrants, 90,000 shares of Common Stock issuable upon exercise of Agent Warrants
issued in the March 1999 private placement, and 1,500,000 shares of Common Stock
issuable upon exercise of options granted  pursuant to the Incentive Option Plan
(1,293,000  of which have been  granted).  After  reserving a total of 4,284,000
shares of  Common  Stock for  issuance  upon the  exercise  of all  options  and
warrants,  the Company will have at least  14,212,667  shares of authorized  but
unissued  Common  Stock  available  for  issuance  without  further  shareholder
approval.  As a result,  any issuance of  additional  shares of Common Stock may
cause current  shareholders of the Company to suffer significant  dilution which
may adversely affect the market.

         In addition to the above-referenced shares of Common Stock which may be
issued  without  shareholder  approval,  the  Company  has  1,000,000  shares of
authorized  preferred  stock,  the  terms of which  may be fixed by the Board of
Directors.  The  Company  presently  has no  issued  and  outstanding  shares of
preferred  stock  and  while it has no  present  plans to issue  any  shares  of
preferred stock, the Board of Directors has the authority,  without  shareholder
approval,  to create and issue one or more series of such 

                                       31

<PAGE>

preferred  stock and to  determine  the  voting,  dividend  and other  rights of
holders of such preferred stock. The issuance of any of such series of preferred
stock could have an adverse effect on the holders of Common Stock.

         SHARES ELIGIBLE FOR FUTURE SALE MAY ADVERSELY AFFECT THE MARKET.  As of
March 31, 1999, the Company had 5,651,333  shares of its Common Stock issued and
outstanding, 3,161,333 of which are "restricted securities". Of such "restricted
securities"  2,000,000  of such  Shares  may be  sold  pursuant  to Rule  144 as
described below,  40,000 Shares may be sold pursuant to Rule 144 commencing July
1999, 173, 333 Shares may be sold pursuant to Rule 144 commencing  January 2000,
48,000 Shares may be sold pursuant to Rule 144  commencing  January 2000 and the
remaining 900,000 Shares may be sold pursuant to Rule 144 commencing April 2000.

         Rule  144  provides,  in  essence,  that a person  holding  "restricted
securities"  for a period of one year may sell only an amount every three months
equal to the greater of (a) one percent of the Company's  issued and outstanding
shares, or (b) the average weekly volume of sales during the four calendar weeks
preceding the sale. The amount of "restricted  securities" which a person who is
not an affiliate of the Company may sell is not so limited, since non-affiliates
may sell without volume  limitation  their shares held for two years if there is
adequate current public information available concerning the Company. In such an
event,  "restricted  securities"  would be eligible for sale to the public at an
earlier  date.  The sale in the public market of such shares of Common Stock may
adversely affect prevailing market prices of the Common Stock.

         EFFECT OF  OUTSTANDING  OPTIONS  AND  WARRANTS.  As of the date of this
Annual Report,  there are outstanding  stock options and warrants (not including
the  underwriter's  warrants  and  publicly  traded  Warrants)  to  purchase  an
aggregate of 440,000  shares of Common  Stock at an exercise  price of $1.25 per
Share (which includes 90,000 Agent Warrants),  and additional  212,500 shares of
Common  Stock at an exercise  price of $2.50 per share,  an  additional  214,000
shares of Common Stock at an exercise price of $4.00 per share,  and the Company
has  reserved  1,293,000  shares  of  Common  Stock  for  issuance  pursuant  to
outstanding Employee Options. None of the $2.50 Warrants,  $4.00 Warrants, Agent
Warrants or Employee  Options are  available  for public  resale and such shares
would be  subject  to Rule 144 of the Act upon  issuance  thereof.  The  350,000
Shares  underlying the Rule 701 Warrants (which were issued pursuant to Rule 701
of the Act) are available  for sale in the public  market  pursuant to Rule 701.
The exercise of such outstanding options and warrants will dilute the percentage
ownership of the Company's  stockholders,  and any sales in the public market of
shares  of  Common  Stock   underlying  such  securities  may  adversely  affect
prevailing  market prices for the Common Stock.  Moreover,  the terms upon which
the Company will be able to obtain  additional  equity  capital may be adversely
affected  since the holders of such  outstanding  securities  can be expected to
exercise their  respective  rights therein at a time when the Company would,  in
all likelihood,  be able to obtain any needed capital on terms more favorable to
the Company than those provided in such securities.

                                       32

<PAGE>

         LIMITATION  ON DIRECTOR  LIABILITY.  As permitted by Delaware  law, the
Company's  Certificate of Incorporation limits the liability of directors to the
Company or its  stockholders  for  monetary  damages for breach of a  director's
fiduciary  duty except for  liability in certain  instances.  As a result of the
Company's  charter  provision  and Delaware law,  stockholders  may have limited
rights to recover against directors for breach of fiduciary duty.

         FORWARD-LOOKING  INFORMATION  MAY  PROVE  INACCURATE.  This  Memorandum
contains   forward-looking   statements  and  information   that  are  based  on
management's  beliefs as well as assumptions made by, and information  currently
available to,  management.  When used in this Memorandum  (including  Exhibits),
words such as "anticipate,"  "believe,"  "estimate," "except," and, depending on
the  context,   "will"  and  similar  expressions,   are  intended  to  identify
forward-looking  statements. Such statements reflect the Company's current views
with respect to future  events and are subject to certain  risks,  uncertainties
and assumptions, including the specific risk factors described above. Should one
or more of these  risks  or  uncertainties  materialize,  or  should  underlying
assumptions  prove  incorrect,  actual  results may vary  materially  from those
anticipated,  believed,  estimated or  expected.  The Company does not intend to
update these forward-looking statements and information.

ITEM 2.  PROPERTIES.

         The Company leases (from an unaffiliated  party)  approximately  21,000
square feet, on a  month-to-month  basis,  at 144 Belmont Drive,  Somerset,  New
Jersey 08873, which serves as the Company's  executive offices and manufacturing
facility.  The lease  term  expired  on March 31,  1999.  The  annual  rental is
$168,000.  The Company intends to move to new premises,  with a target to reduce
its  lease  obligations  to  $80,000  per year,  compared  to  $168,000  that it
currently pays.
With common area and other  charges,  the Company is currently  paying  $240,000
annually.

ITEM 3.  LEGAL PROCEEDINGS

         Other  than as set  forth  below,  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:

         1.   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 

                                       33
<PAGE>

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.  The case is
currently  in  discovery.  A motion for summary  judgment was denied in February
1999.

     2.  The  Company is also a  defendant  in a  complaint  filed in the United
States  District  Court for the  District  of New  Jersey on May 13,  1998.  The
complaint  alleges breach of contract of a representative  agreement between the
Company  and ENS  Engineering  of  South  Korea.  According  to the  plaintiff's
attorney,  the claim  against  the  Company is for  $135,000,  plus  unspecified
compensatory and punitive damages.  The Company filed an answer to the complaint
denying the  allegations  and a counterclaim  against the plaintiff on September
12, 1998. The counterclaim  alleges breach of contract for unspecified  damages,
which in the opinion of management  exceeds  $1,000,000.  The Company intends to
aggressively  defend this action and to prosecute its  counterclaim.  Management
believes  that the breach of contract was caused by the  plaintiff.  The case is
currently in discovery.

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

         On  December  28,  1998,   the  Company  held  an  annual   meeting  of
stockholders  to vote on the election of directors and the  ratification  of the
Company's  independent auditors. Of the 4,530,000 shares of the Company's Common
Stock entitled to vote at the meeting,  holders of 3,944,599 shares were present
in person or were represented by proxy at the meeting.

         The directors elected at the meeting and the results of the voting were
as follows:

                                                    For               Withheld
                                                    ---               --------
         Devendar S. Bains                       3,944,599             18,995
         Tarlochan Bains                         3,944,599             18,995
         Charles J. Ritchie                      3,944,599             18,995
         Manish V. Detroja                       3,944,599             18,995

         The above  represented  all of the directors of the Company on December
28, 1998.

         The shares voted  regarding the Board of Directors'  proposal to select
the accounting  firm of Grant Thornton LLP, to serve as independent  auditors of
the Company, were as follows:

         For:              3,936,594
         Against:              8,600
         Abstain:             18,400

                                       34
<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 closing prices
for the Company's  Common Stock and Warrants for the period  January 22, 1997 up
to March  31,1997,  the last three  quarters  in 1997,  fiscal  1998 and for the
period of  January  1,  1999 up to March  31,  1999 as  reported  by the  Nasdaq
SmallCap  Market.  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                     Closing Price
                  ------------------                     -------------
                                                     High               Low
                                                     ----               ---
                  January 22 - March 31              5.625             4.250
                  April 1 - June 30                  5.375             4.500
                  July 1 - September 30              7.625             4.250
                  October 1 - December 31            7.375             1.625

                  1998 Calendar Year
                  ------------------

                  January 1 - March 31               2.375              .875
                  April 1 - June 30                  1.813              .906
                  July 1 - September 30              1.750              .750
                  October 1 - December 31            1.844              .469

                  1999 Calendar Year
                  ------------------

                  January 1 - March 31               2.625             1.094

Warrants
--------

                  1997 Calendar Year                     Closing Price
                  ------------------                     -------------
                                                     High               Low
                                                     ----               ---
                  January 22 - March 31              .8125              .250
                  April 1 - June 30                 1.0625              .500
                  July 1 - September 30              1.750              .250

                                       35
<PAGE>

                  October 1 - December 31           1.0625              .250

                  1998 Calendar Year
                  ------------------

                  January 1 - March 31                .625              .125
                  April 1 - June 30                   .625              .125
                  July 1 - September 30               .531              .125
                  October 1 - December 31             .250              .063

                  1999 Calendar Year
                  ------------------

                  January 1 - March 31                .406              .031

         On March 31, 1999 the closing  prices of the Common  Stock and Warrants
as reported on Nasdaq  SmallCap  Market was $2.625 and $.406,  respectively.  On
March 31,  1999  there  were  5,651,333  shares of  Common  Stock and  1,610,000
Warrants  outstanding,  held of record by  approximately 56 record holders (with
over 1,000 beneficial owners).

                                       36
<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,
                                                   1998            1997   
                                                   ----            ----   

Net sales                                           100%            100%
   Cost of goods sold                              98.5%           78.9%
          Gross profit                              1.5%           21.1%
   Selling, general and
     administrative                                71.5%           66.4%
   Research, engineering and
     development                                   30.4%             36%
Total operating expenses                          101.9%          102.4%
Interest Income                                     4.4%            5.8%
Interest expense                                     .8%            2.0%
   Stock compensation and
     financing costs                               10.4%             25%
Loss before income taxes                         (107.2%)        (102.5%)
Provision (credit) for
  income taxes
Net loss                                         (107.2%)        (102.5%)


RESULTS OF  OPERATIONS - FISCAL YEAR ENDED  DECEMBER 31, 1998 COMPARED TO FISCAL
YEAR ENDED DECEMBER 31, 1997.

         Revenues  for the fiscal year ended  December  31, 1998  decreased  26%
compared to the fiscal year ended  December 31, 1997. The primary reason for the
decrease was due to the economic  crisis  experienced by South Korea during 1998
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.
During  1998 the  Company  continued  to refine its PCS single and  multichannel
amplifier products, and several products were shipped to major OEM's in the U.S.
and overseas for prototype evaluations.

                                       37
<PAGE>


         Sales for the first 3  quarters  of 1998 were weak due to the  economic
crises in the South East Asian  markets,  as planned  shipments  under  purchase
orders were never completed due to delay and cancellations by certain customers.
The Company refocused its strategy to obtain more US and European business. As a
result of its efforts, the Company was able to obtain a substantial order from a
major OEM in Europe.  The sales in the fourth  quarter of 1998 accounted for 35%
of the overall sales for 1998. Management intends to reduce overhead during 1999
and  continue to focus its sales and  marketing  efforts in the US and  European
markets.

         The Company's sales to  international  markets  representing 94% of the
Company's sales in 1998, were primarily to Korea and Europe.  Korea has suffered
significant  currency  fluctuations  during 1998. The Company  believes that its
ability  to  generate  sales  during  the first  half of 1999 will be  adversely
impacted by, among other things, economic conditions in Korea.

         Cost of sales as a  percentage  of sales was 98%  during the year ended
December  31,  1998,  compared  to 79%  during the same  period  for 1997.  This
increase can be attributed to the economic  conditions in South Korea  resulting
in slow  build-out  of the  PCS  networks  in that  country,  which  caused  the
Company's  ramp-up in  manufacturing  personnel and shop overhead to be severely
underutilized  during 1998.  The cost of new product  development is a prolonged
and an expensive  process,  causing the cost of certain prototypes to be greater
than targeted profit margins.  Further,  certain sales to a distributor in Korea
yield a lower sales price (as compared to a commission  expense  separately paid
and  included  in selling  general and  administrative  expenses)  and  extended
warranty  terms.  The  Company is  continuing  to assess cost  reduction  of its
products to improve gross margins in 1999.

         Selling,  general  and  administrative  expenses  decreased  in 1998 by
$337,300 to $1,278,256 from  $1,615,556,  in 1997.  Expressed as a percentage of
sales, the selling,  general and administrative  expenses were 71.5% in 1998 and
66.4% in 1997. The principal  factors  contributing  to the decrease in selling,
general and  administrative  expenses  were related to the reduction in staffing
levels, and cost containment efforts.

         Research,  engineering and development  expenses  decreased to 30.4% of
net sales in 1998  compared to 36% in 1997. In 1998,  the principal  activity of
the  business   related  to  the  design  and  production  of  product  for  OEM
manufacturers,  particularly for the PCS single and multichannel  products.  The
research,  engineering and development  expenses  consist  principally of salary
cost for engineers and the expenses of equipment purchases  specifically for the
design and testing of the prototype  products,  which decreased during 1998. The
Company's research and development efforts are influenced by available funds and
the level of effort  required  by the  engineering  staff on  customer  specific
projects.

         The Company had interest income in 1998 of $79,159 or 4.4% of net sales
due  to  earnings  on  initial  public  offering  proceeds,  and  reflect  lower
interest-earning balances.

                                       38
<PAGE>


         Interest  expense was lower in 1998  because of the closing out of some
capitalized leases on test equipment.

         Stock  compensation  and financing  expenses in 1997 of $607,179 and in
1998 of $186,249  relate to the 1996 and 1997  issuances  of stock,  options and
warrants at prices substantially lower than the fair market values. The decrease
in 1998 expense  reflects that some of these discounts have been fully amortized
over the respective vesting periods.

         As a result  of the  foregoing,  the  Company  incurred  net  losses of
$1,916,359  or ($.43) per share for the year ended  December  31, 1998  compared
with net losses of ($2,493,611) or ($.57) per share for the same period in 1997.

RESULTS OF  OPERATIONS - FISCAL YEAR ENDED  DECEMBER 31, 1997 COMPARED TO FISCAL
YEAR ENDED DECEMBER 31, 1996.

         Revenues  for the fiscal year ended  December 31, 1997  increased  9.6%
compared to the fiscal year ended  December 31, 1996.  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.  During 1997 the Company
continued  to refine its PCS single and  multichannel  amplifier  products,  and
several  products  were  shipped  to  major  OEM's  in the  U.S.  for  prototype
evaluations.  Furthermore  certain  production orders did not get released until
the 4th quarter. In the 4th quarter the Company shipped more than $1,000,000. In
fiscal year 1997,  approximately  17% of all product  shipments were  prototypes
compared to about 29% for the same period in 1996.

         The Company's sales to  international  markets  representing 80% of the
Company's  sales in 1997, were primarily to Korea,  which has recently  suffered
significant  currency  fluctuations.  The Company  believes  that its ability to
generate  sales  during the first part of 1998 will be  adversely  impacted  by,
among other things, economic conditions in Korea.

         Cost of sales as a  percentage  of sales was 79%  during the year ended
December  31,  1997,  compared  to 99%  during the same  period  for 1996.  This
decrease can be  attributed  to the  reduction in  engineering  and direct labor
costs  associated with the production of MCLPA  prototypes and other products in
1997.

         Selling,  general  and  administrative  expenses  increased  in 1997 by
$469,646 to $1,615,556 from  $1,145,910,  in 1996.  Expressed as a percentage of
sales, the selling,  general and administrative  expenses were 66.4% in 1997 and
51.6% in 1996. The principal  factors  contributing  to the increase in selling,
general and  administrative  expenses were related to the  appointment  of a new
Sales Director in 1997,  attendance at 

                                       39
<PAGE>


trade shows with live  demonstrations of amplifier PCS products as well as costs
incurred in connection with sales in South Korea.

         Research,  engineering and development expenses decreased to 36% of net
sales in 1997 compared to 51.8% in 1996. In 1997, the principal  activity of the
business  related to the design and  production  of product  prototypes  for OEM
manufacturers,  particularly for the PCS single and multichannel  products.  The
research,  engineering and development  expenses  consist  principally of salary
cost for engineers and the expenses of equipment purchases  specifically for the
design and testing of the prototype products, which decreased during 1997.

         The  Company  had  interest  income in 1997 of  $140,931 or 5.8% of net
sales due to earnings on initial public offering proceeds.

         Interest  expense  was  lower  in  1997  because  of the  repayment  of
outstanding bank debt and promissory notes.

         Stock  compensation and financing expenses in 1996 of $3,034,990 and in
1997 of $607,179  relate to the 1996 and 1997  issuances  of stock,  options and
warrants at prices substantially lower than the initial public offering price.

         As a result  of the  foregoing,  the  Company  incurred  net  losses of
$2,493,611  or ($.57) per share for the year ended  December  31, 1997  compared
with net  losses of  ($5,419,940)  or ($2.03)  per share for the same  period in
1996.

LIQUIDITY AND CAPITAL RESOURCES

         As of December 31, 1998,  the Company had cash and cash  equivalents of
$427,510.

         The Company  believes  that the net proceeds of the  Company's  initial
public  offering,  private  placement  in March  1999 and  cash  generated  from
revenues will permit it to continue to meet its working capital  obligations and
fund the further  development  of its business for the next 12 months.  Further,
the  officers  of the  Company  have  deferred  a portion of their  salaries  or
provided  loans to the Company to meet  short-term  liquidity  requirements.  In
light of the current  situation in Korea,  and its impact on sales,  the Company
expects to fund  operations  in 1999 with the  remaining  cash that was received
from the initial public offering and the March private  placement.  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  

                                       40
<PAGE>


could  have a  material  adverse  effect on the  Company's  business,  financial
condition and results of operations.

         Stockholders  loans of $98,000 were repaid in 1998.  The funds from the
stockholder's  loan were used for  working  capital  purposes.  The  Company has
several lease  obligations  for certain  research,  engineering  and development
equipment used in the production processes requiring minimum monthly payments of
$6,000 through the second quarter of 1999. The Company has converted  certain of
its  obligations  to  officers  through  the  issuance  of  Common  Stock (at an
equivalent fair value) and may continue to do so in 1999.

YEAR 2000

         Many  existing  computer  systems,  including  certain of the Company's
internal  systems,  use only the last two digits to  identify  years in the date
field. As a result, these computer systems do not properly recognize a year that
begins with "20" instead of the familiar "19", or may not function properly with
years later than 1999. If not corrected,  many computer  applications could fall
or create erroneous results. This is generally referred to as the "Year 2000" or
"Y2K" issue.  Computer  systems that are able to deal correctly with dates after
1999 are referred to as "Year 2000 compliant".

         The Company has 37  employees  of which 28 are  involved in  production
processes.  The Company's  internal  computers systems consist of individualized
PCs. The Company  intends to replace all of these PCs with the latest  hardware,
at an estimated cost of about $20,000. The Company's technical software has been
upgraded for the Y2K compliance. Presently the Company is exploring the purchase
of a new MRP system,  which will be Y2K compliant,  and will be installed by the
second or third quarter of 1999.  All other  software for day to day office work
is Y2K  compliant.  The Company's  accounting  software will also be upgraded as
part of the MRP system. Estimated cost is about $25,000.  Therefore, the Company
expect to be fully Y2K compliant by the third quarter of 1999. Other than as set
forth, the Company has no other contingency plan for Y2K non-compliance.

         The Company is in the process of  contacting  all its major vendors and
suppliers  to ensure that they are Y2K  compliant.  Overall the Company does not
see any material effect upon its business and operations due to the Y2K problem.

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.

                                       41
<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*      48        Chairman of the Board, President,  Chief 
                                  Executive Officer,  Treasurer and Director
Tarlochan Bains         49        Vice President-Sales & Marketing and Director
Nirmal Bains            42        Secretary
Charles J. Ritchie*     57        Director
Manish V. Detroja*      33        Director

*  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.

CHARLES J.  RITCHIE  was  elected to the Board of  Directors  of the  Company in
February 1998.  Mr.  Ritchie has had a 32 year career with Lucent  Technologies,
formerly  AT&T,  with  assignments  that included  Product  Management,  Account
Management,  AT&T  Divestiture  Planning,  National  Cellular  Sales Manager for
non-Wireline Companies, International Wireless Product Support, and many others.
Since 1992, Mr. Ritchie has 

                                       42
<PAGE>


been an International Wireless Product Support, and many others. Since 1992, Mr.
Ritchie has been an  International  Business  Development  director  for Europe,
Middle Ease and Africa for the Network Wireless Division at Lucent Technologies.
Marketing,  Sales and Business Development education and experience were accrued
over his business career.  Mr. Ritchie received a Bachelors Degree in Electrical
Engineering  at  Youngstown  University  and  continued  with  graduate  work in
Electrical Engineering at Ohio State University.

MANISH V.  DETROJA  was  elected  to the Board of  Directors  of the  Company in
February  1998.  Mr.  Detroja has been with Current  Circuits  Inc.  ("CCI"),  a
private company engaged in the  manufacturing  of printed circuit boards for the
electric  industry,  since its  inception  in May of 1989.  From  1989-1993  Mr.
Detroja was the  production  manager for CCI and from 1993-1996 he was its sales
manager for the entire  United  States.  His is currently is President and Chief
Executive Officer. Mr. Detroja is a graduate of Temple University and has a B.S.
in Electrical Engineering Technology.

         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 compensation  committee
consists of Devendar S. Bains, Charles J. Ritchie and Manish J. Detroja.

         The audit committee  reviews the professional  services provided by the
Company's  independent   auditors,   the  independence  of  such  auditors  from
management of the Company,  the annual  financial  statements of the Company and
the Company's system of internal accounting  controls.  The audit committee also
reviews  such  other  matters  with  respect  to the  accounting,  auditing  and
financial  reporting  practices  and  procedures  of the  Company as it may find
appropriate or as may be brought to its attention.  The audit committee consists
of Devendar S. Bains, Charles J. Ritchie and Manish J.
Detroja.

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.

                                       43
<PAGE>


         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,
1998,  all Section  16(a)  filing  requirements  applicable  to its officers and
directors and greater than ten percent beneficial owners were satisfied.

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,  1996,  1997 and 1998 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
                                                                        ------------------------------------
                                              Annual Compensation         Awards      Securities     Payouts
                                              -------------------       ------------------------------------
                                                           Other        Restricted    Underlying        All
Name of Individual                                         Annual          Stock          LTIP         Other      
and Principal Position      Year    Salary     Bonus    Compensation       Awards    Options/SARS(#)  Payouts     Comp.
-----------------------------------------------------------------------------------------------------------------------
<S>                         <C>     <C>         <C>     <C>                   <C>      <C>              <C>        <C>
Davendar S. Bains,          1998    $85,000     --      $ 20,000(1)           --              --         --        --
Chairman                                                $167,000(2)
Chief Executive Officer,    1997    $85,000     --      $ 20,000(1)           --              --         --        --
President and Treasurer     1996    $85,000     --      $ 20,000(1)           --       1,000,000         --        --
</TABLE>

(1)  Represents  payment for health  insurance and  automobile  insurance  lease
payments on behalf of such individual but does not include deferred compensation
(See note H-3 to the financial  statements).  

(2)  Represents the fair value of shares of Common Stock in lieu of cash payment
of the amount owed for deferred compensation - 144,000 shares in the aggregate.
-------------------

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.

                                       44
<PAGE>


         In June 1998,  the  Company  issued  40,000  shares of Common  Stock to
Devendar S. Bains,  the Company's  President  and Chief  Executive  Officer,  in
consideration  of the forgiveness by Mr. Bains of $50,000 of accrued salary owed
to him.

         On  September  30,  1998,  accrued and unpaid  salary in the  aggregate
amount of  $195,000  owed to  Devendar  S.  Bains  ($117,000),  Tarlochan  Bains
($54,600) and Nirmal Bains  ($23,400),  were forgiven.  In consideration of such
forgiveness of accrued  salary,  the Company issued  104,000,  48,533 and 20,800
shares,  respectively  to such persons in December  1998 (based upon the closing
sales price of the Common Stock ($1.125) on such date).

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 is administered by the compensation committee
which  determines,  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 compensation 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  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.

                                       45
<PAGE>


         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,  1,233,000  options to  purchase  Common  Stock  under the
Incentive  Option Plan were  granted to certain  employees,  including  Devendar
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. The options are exercisable at $4.00,
66.66% of which have vested (with the remainder to vest in May 1999). In January
1999,  30,000  options to purchase  Common Stock were granted to each of Messrs.
Detroja and Ritchie,  Directors of the Company, under the Incentive Option Plan.
These  options are  exercisable  at $1.25 and are fully  vested.  The  1,293,000
options granted under the Incentive  Option Plan are referred to collectively as
the "Employee  Options".  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.

RULE 701 WARRANTS

         In  December  1995,  the Company  issued Rule 701  Warrants to purchase
350,000  Shares  at $2.50 per  share  pursuant  to Rule 701 under the Act to the
Company's  former Vice President for Strategic  Alliances and Vice President for
Corporate Communications and Investor Relations,  respectively. The 701 Warrants
were  initially  exercisable  until June 30, 1999. In January 1999,  the Company
agreed to reduce the exercise  price of such Warrants to $1.25 and to extend the
expiration date to June 30, 2001.

PLACEMENT AGENT WARRANTS

         In connection  with the Company's  private  offering in March 1999, the
Company has committed to issued to certain NASD Members  90,000  warrants,  each
exercisable  at $1.25 per share (the "Agent  Warrants").  The Agent Warrants are
exercisable  for a two (2) year period through March 31, 2001 and are subject to
certain anti-dilution adjustments.

                                       46
<PAGE>


ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

         The following table sets forth  information,  as of March 31, 1999 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)               3,239,800                    48.35
Tarlochan Bains(3)                   148,533                     2.58
Nirmal Bains(2)                    3,239,800                    48.35
Charles J. Ritchie(4)                 30,000                      .53
Manish V. Detroja(5)                  30,000                      .53

All Officers and
  Directors as a group
  (5 persons)(6)                   3,448,333                    51.99

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

(1)  Beneficially  ownership as reported in the table above has been  determined
     in accordance  with  Instruction  (4) to Item 403 of Regulation  S-B of the
     Securities Exchange Act.

(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 2,169,000
     of such shares and Mrs. Nirmal Bains is the record holder of 20,800 of such
     shares.  Includes  1,000,000  Employee  Options  which were  granted to Mr.
     Devendar Bains.  Includes 50,000 Employee Options which were granted to Ms.
     Nirmal  Bains.   See   "Executive   Compensation-Stock   Option  Plans  and
     Agreements."

(3)  Mr.  Tarlochan Bains is the brother of Mr. Devendar  Bains.  Mr.  Tarlochan
     Bains is the  record  holder  of 48,533 of such  shares.  Includes  100,000
     Employee  Options.  See  "Executive  Compensation  - Stock Option Plans and
     Agreements."

(4)  The address  for such  person is 92 Parker  Road,  Long  Valley,  NJ 07853.
     Includes  30,000  Employee  Options.  See  "Executive  Compensation - Stock
     Option Plans and Agreements."

(5)  The  address  for such  person  is 925  Schwal  Road,  Hatfield,  PA 19440.
     Includes  30,000  Employee  Options.  See  "Executive  Compensation - Stock
     Option Plans and Agreements."

(6)  Include  1,000,000  options held by Devendar Bains,  50,000 options held by
     Nirmal Bains,  100,000 options held by Tarlochan Bains, 30,000 options held
     by Mr.  Detroja and 30,000 options held by Mr.  Ritchie.  See Notes 2, 3, 4
     and 5.

                                       47
<PAGE>


ITEM 12. CERTAIN  RELATIONSHIPS AND RELATED TRANSACTIONS

         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. $339,694 was repaid during 1997
and an additional $98,000 was repaid during 1998.

         In connection with the Company's  settlement of a litigation,  Devendar
S. Bains,  the  Company's  President  and Chief  Executive  Officer,  loaned the
Company $41,000 (in October 1997) without interest, payable on demand.

         See  "Management  -  Employment  Agreement"  for  recent  issuances  to
officers and directors.

         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.

                                       48
<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-21

(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

                                       49
<PAGE>

 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 1998.

                                       50
<PAGE>

                                 Amplidyne, Inc.

                          INDEX TO FINANCIAL STATEMENTS


                                                                        PAGE
                                                                        ----

Report of Independent Certified Public Accountants                      F-2

Financial Statements

        Balance Sheets                                                  F-3

        Statements of Operations                                        F-5

        Statement of Stockholders' Equity                               F-6

        Statements of Cash Flows                                        F-7

        Notes to Financial Statements                                F-8 - F-20

                                      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,  1998  and  1997,  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, 1998 and 1997,  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

Parsippany New Jersey
March 31, 1999

                                      F-2

<PAGE>


                                 Amplidyne, Inc.

                                 BALANCE SHEETS

                                  December 31,



       ASSETS                                              1998          1997
                                                        ----------    ----------

CURRENT ASSETS
  Cash and cash equivalents                             $  427,510    $2,039,012
  Accounts receivable, net of allowance
    for doubtful accounts of $86,000 and
    $41,000 in 1998 and 1997, respectively                 440,516       706,893
  Inventories                                              558,685       324,622

  Prepaid expenses and other                                14,206         9,296
                                                        ----------    ----------

    Total current assets                                 1,440,917     3,079,823

PROPERTY AND EQUIPMENT - AT COST
  Machinery and equipment                                  540,116       538,214
  Furniture and fixtures                                    43,750        43,750
  Autos and trucks                                          61,183        19,923
  Leasehold improvements                                     4,162         4,162
                                                        ----------    ----------

                                                           649,211       606,049
  Less accumulated depreciation and amortization           342,052       237,494
                                                        ----------    ----------

                                                           307,159       368,555

OTHER ASSETS                                                35,000        35,000
                                                        ----------    ----------

                                                        $1,783,076    $3,483,378
                                                        ==========    ==========


THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE STATEMENTS.

                                      F-3

<PAGE>

                                 Amplidyne, Inc.

                                 BALANCE SHEETS

                                  December 31,


         LIABILITIES AND
       STOCKHOLDERS' EQUITY                             1998            1997
                                                    ------------   ------------

CURRENT LIABILITIES
  Current maturities of lease obligations           $     70,311   $    136,396
  Accounts payable                                       220,991        194,572
  Deferred compensation                                   27,100        140,000
  Accrued expenses                                       255,439        189,123
  Stockholders' loan                                       5,051        103,051
                                                    ------------   ------------

    Total current liabilities                            578,892        763,142

LONG-TERM LIABILITIES
  Lease obligations                                       36,933         67,875

STOCKHOLDERS' EQUITY
  Preferred stock - authorized, 1,000,000 shares
    of no stated value; no shares issued and out-
    standing                                                  --             --
  Common stock - authorized, 25,000,000 shares
    of $.0001 par value; shares 4,703,333 and
    4,460,000 shares issued and outstanding at
    December 31, 1998 and 1997, respectively                 470            446
  Additional paid-in capital                          12,735,817     12,304,592
  Accumulated deficit                                (11,569,036)    (9,652,677)
                                                    ------------   ------------

                                                       1,167,251      2,652,361
                                                    ------------   ------------

                                                    $  1,783,076   $  3,483,378
                                                    ============   ============


THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE STATEMENTS.

                                      F-4

<PAGE>

                                 Amplidyne, Inc.

                            STATEMENTS OF OPERATIONS

                             Year ended December 31,


                                              1998           1997
                                          -----------    -----------

Net sales                                 $ 1,786,936    $ 2,433,310
Cost of goods sold                          1,758,915      1,920,178
                                          -----------    -----------

    Gross profit                               28,021        513,132

Operating expenses
  Selling, general and administrative       1,278,256      1,615,556
  Research, engineering and development       544,220        876,214
                                          -----------    -----------

    Operating loss                         (1,794,455)    (1,978,638)

Nonoperating income (expenses)
  Stock compensation and financing cost      (186,249)      (607,179)
  Interest income                              79,159        140,931
  Interest expense                            (14,064)       (47,975)
                                          -----------    -----------

    Loss before income taxes               (1,915,609)    (2,492,861)

Provision for income taxes                        750            750
                                          -----------    -----------

    NET LOSS                              $(1,916,359)   $(2,493,611)
                                          ===========    ===========

Net loss per share - basic and diluted    $      (.43)   $     (0.57)
                                          ===========    ===========

Weighted average number of shares
  outstanding                               4,485,132      4,367,320
                                          ===========    ===========


THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE STATEMENTS.

                                      F-5

<PAGE>

                                 Amplidyne, Inc.

                        STATEMENT OF STOCKHOLDERS' EQUITY

                     Years ended December 31, 1997 and 1998

<TABLE>
<CAPTION>

                                                       Common Stock           Additional
                                              ----------------------------      Paid-in      Accumulated
                                                  Shares        Par Value       Capital         Deficit         Total
                                              ------------    ------------    ------------   ------------    ------------
<S>                                              <C>          <C>             <C>            <C>             <C>          
Balance at December 31, 1996                     2,850,000    $        285    $  5,239,961   $ (7,159,066)   $ (1,918,820)

Net loss                                                                                       (2,493,611)     (2,493,611)
Financing and compensation costs related to
  options and warrants issued                                                      282,639                        282,639
Registration costs                                                              (1,428,847)                    (1,428,847)
Issuance of common stock                         1,610,000             161       8,210,839                      8,211,000
                                              ------------    ------------    ------------   ------------    ------------

Balance at December 31, 1997                     4,460,000             446      12,304,592     (9,652,677)      2,652,361

Net loss                                                                                       (1,916,359)     (1,916,359)
Financing and compensation costs related to
  options and warrants issued                                                      156,249                        156,249
Exercise of warrants                                30,000               3          29,997                         30,000
Conversion of deferred compensation to
  shares of common stock by officers               213,333              21         244,979                        245,000
                                              ------------    ------------    ------------   ------------    ------------

BALANCE AT DECEMBER 31, 1998                     4,703,333    $        470    $ 12,735,817   $(11,569,036)   $  1,167,251
                                              ============    ============    ============   ============    ============

</TABLE>

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THIS STATEMENT.

                                      F-6

<PAGE>

                                 Amplidyne, Inc.

                            STATEMENTS OF CASH FLOWS

                             Year ended December 31,

                                                        1998          1997
                                                     -----------  -----------

Cash flows from operating activities
  Net loss                                           $(1,916,359) $(2,493,611)
                                                     -----------  -----------
  Adjustments to reconcile net loss to net 
    cash used in operating activities
      Depreciation and amortization                      104,558      102,131
      Bad debt expense                                    45,510       23,640
      Write-off of obsolete inventory                     20,000      149,696
      Deferred compensation                              132,100           --
      Stock compensation and finance cost                186,249      607,179
      Changes in assets and liabilities
        Accounts receivable                              220,867     (523,194)
        Inventories                                     (254,063)     (71,623)
        Prepaid expenses and other                        (4,908)      (3,631)
        Accounts payable and accrued expenses             92,733     (568,581)
                                                     -----------  -----------

    Total adjustments                                    543,046     (284,383)
                                                     -----------  -----------
    Net cash used in operating activities             (1,373,313)  (2,777,994)
                                                     -----------  -----------
Cash flows from investing activities
  Purchase of property and equipment                      (1,900)    (149,725)
                                                     -----------  -----------
Cash flows from financing activities
  Payment of lease obligations                          (138,289)    (378,090)
  Repayments of stockholder loans, net                   (98,000)    (339,694)
  Repayments of bank line of credit                           --     (210,000)
  Repayments of notes payable                                 --   (1,159,000)
  Registration costs                                          --   (1,261,795)
  Stock issuance                                              --    8,211,000
                                                     -----------  -----------
    Net cash (used in) provided by 
     financing activities                               (236,289)   4,862,421
                                                     -----------  -----------
    NET (DECREASE) INCREASE IN CASH AND
      CASH EQUIVALENTS                                (1,611,502)   1,934,702
Cash and cash equivalents at beginning of year         2,039,012      104,310
                                                     -----------  -----------
Cash and cash equivalents at end of year             $   427,510  $ 2,039,012
                                                     ===========  ===========
Supplemental disclosures of cash flow information:
  Cash paid during the year for
    Interest                                         $    49,000  $    48,000


See Notes D-3, G and H-3 for noncash investing and financing activity.


THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE STATEMENTS.

                                      F-7

<PAGE>

                                 Amplidyne, Inc.

                          NOTES TO FINANCIAL STATEMENTS

                           December 31, 1998 and 1997

NOTE A - NATURE OF OPERATIONS AND LIQUIDITY

     Amplidyne,  Inc.  (the  "Company")  operates in one  segment,  which is the
     design,  manufacture  and  selling of ultra  linear  power  amplifiers  and
     related  subsystems  to the  worldwide  wireless,  local loop and satellite
     uplink telecommunications market.

     The Company has incurred  losses of $1,916,359  and  $2,493,611 in 1998 and
     1997,  respectively.  The  Company  funded  operations  during  this period
     primarily  from bridge  financing  and  proceeds  from its  initial  public
     offering.  The Company has also funded certain  operating  expenses through
     the issuance of warrants, and borrowings (in the form of deferring salaries
     and cash advances) from officers and principal shareholders.

     A significant portion  (approximately 94% and 80% of the Company's sales in
     1998  and  1997,   respectively)   of  the  Company's  sales  has  been  to
     international  markets.  The primary  international market to date has been
     Korea, which has recently suffered  significant  currency  fluctuations and
     economic turmoil which might affect the Company's future sales.  Several of
     these Korean customers have reduced,  delayed or cancelled purchase orders,
     thereby affecting the timing of when (or if) sales will be made. Management
     believes  that its ability to generate  sales  during 1999 may be adversely
     impacted by, among other things, economic conditions in Korea.

     Management's plans for dealing with the foregoing matters include:

     o    Reducing  costs  incurred and cash  requirements,  including cash flow
          management   of   production   through   increased   use  of  contract
          manufacturers and relocating to a less expensive facility;

     o    Decreasing  the dependency on these Korean  customers by  aggressively
          seeking other customers;

     o    Partnering with  significant  companies to jointly develop  innovative
          products;

     o    Completing,  in March 1999, a private  placement of 900,000  shares of
          common  stock at $1.125 per share.  The net  proceeds to the  Company,
          after commissions of approximately $71,000, were $942,000. The Company
          has committed to issue to certain NASD members 90,000  warrants,  each
          exercisable  at $1.25 per share through  March 31, 2001.  The warrants
          will contain certain antidilution provisions.

     o    Funding  operations in 1999 with the remaining  cash that was received
          from  the  initial  public  offering,  the  deferral  of  payments  of
          officers' salaries and the proceeds of the private placement.

                                      F-8

<PAGE>

                                 Amplidyne, Inc.

                    NOTES TO FINANCIAL STATEMENTS (CONTINUED)

                           December 31, 1998 and 1997

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. At December 31, 1998
         and 1997, inventories consisted of the following:

                                       1998                 1997
                                     ---------            ---------

             Component parts         $  99,473            $  87,378
             Work-in-progress          459,212              237,244
                                     ---------            ---------

                                     $ 558,685            $ 324,622
                                     =========            =========

     3.  PROPERTY, PLANT AND EQUIPMENT

         Depreciation and amortization are provided for in amounts sufficient to
         relate  the  cost  of  depreciable  assets  to  operations  over  their
         estimated  service  lives  which  range  from  three  to  seven  years.
         Leasehold  improvements  are amortized over the lives of the respective
         leases or the service lives of the improvements,  whichever is shorter.
         The straight-line  method of depreciation is followed for substantially
         all assets for financial  reporting  purposes,  but accelerated methods
         are used for tax purposes.

     4.  INCOME TAXES

         The Company accounts for income taxes under the provisions of Statement
         of  Financial  Accounting  Standards  No. 109,  "Accounting  for Income
         Taxes."  This  statement  requires,  among other  things,  an asset and
         liability  approach for financial  accounting and reporting of 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
         law or rates. Deferred income taxes arise from

                                      F-9

<PAGE>

                                 Amplidyne, Inc.

                    NOTES TO FINANCIAL STATEMENTS (CONTINUED)

                           December 31, 1998 and 1997

NOTE B (CONTINUED)

         temporary  differences resulting in the basis of assets and liabilities
         for financial reporting and income tax purposes.  A valuation allowance
         is  provided  if the  Company is  uncertain  as to the  realization  of
         deferred tax assets.

     5.   RISKS,  UNCERTAINTIES  AND CERTAIN  CONCENTRATIONS  OF CREDIT RISK AND
          ECONOMIC DEPENDENCY

         The  Company's  future  results  of  operations  involve  a  number  of
         significant  risks and  uncertainties.  Factors  that could  affect the
         Company's  future  operating  results and cause actual  results to vary
         materially  from  expectations   include,   but  are  not  limited  to,
         dependence  on  key  personnel,  dependence  on  a  limited  number  of
         customers,  ability to design new  products  and product  obsolescence,
         ability to generate  consistent sales,  ability to finance research and
         development,  government  regulation,   technological  innovations  and
         acceptance,  competition, reliance on certain vendors, credit and other
         risks associated with the Year 2000.

         Financial  instruments,   which  potentially  subject  the  Company  to
         concentrations of credit risk, consist principally of cash and accounts
         receivable.  Net sales  during 1998 and 1997 were  primarily  to Korean
         customers.  The Korean  marketplace has suffered  significant  currency
         fluctuations  and economic  turmoil  which might  affect the  Company's
         future sales.

         During 1998, two customers accounted for 85% of net sales (52% and 33%)
         and 77 % of accounts  receivable at December 31, 1998.  Export sales in
         1998, including sales through a sales agent for international  markets,
         accounted  for  approximately  94 % of net sales and were  primarily to
         Korea.  Sales  through the sales  agent  carry an extended  (two years)
         warranty,  for which  management  has  provided  an  estimated  cost to
         fulfill.

         During 1997, two customers accounted for 64% of net sales (48% and 16%)
         and 70% of accounts  receivable  at December 31, 1997.  Export sales in
         1997 accounted for approximately 80% 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)  and  subcontracted  manufacturing  processes.  Management
         believes that other  suppliers  could provide  similar  components  and
         processes 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  and cash  equivalents,  accounts
         receivable,  and  stockholder's  loan payable,  approximate fair value,
         principally because of the short maturity of these items.

                                      F-10

<PAGE>

                                 Amplidyne, Inc.

                    NOTES TO FINANCIAL STATEMENTS (CONTINUED)

                           December 31, 1998 and 1997

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.  CASH AND CASH EQUIVALENTS

         The Company  considers all highly  liquid  investments  purchased  with
         original maturities of three months or less to be cash equivalents.

         The Company  maintains  cash and cash  equivalents  in bank deposit and
         money market  accounts which, at times,  may exceed  federally  insured
         limits or not be insured. The Company has not experienced any losses in
         such  accounts  and does not  believe it is exposed to any  significant
         credit risk on cash and cash equivalents.

    9.   ADVERTISING EXPENSES

         The  Company  expenses  advertising  costs  as  incurred.   Advertising
         expenses  were  approximately  $33,000 and $105,000 for the years ended
         December 31, 1998 and 1997, respectively.

10.      RECLASSIFICATIONS

         Certain  reclassifications  were made to the 1997 amounts to conform to
         the current presentation.

                                      F-11

<PAGE>

                                 Amplidyne, Inc.

                    NOTES TO FINANCIAL STATEMENTS (CONTINUED)

                           December 31, 1998 and 1997

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 consisted of one share of common
     stock, par value $.0001 per share and one redeemable  common stock purchase
     warrant.  Each warrant  entitles the holder to purchase one share for $6.00
     during the four-year period ending January 21, 2001. The Company may redeem
     the  warrants at a price of $.01 per warrant at any time with not less than
     thirty days' prior  written  notice if the average  closing price equals or
     exceeds $9.00 per share for any twenty consecutive trading days.

     In January  1997 and March  1997,  the  Company  received  net  proceeds of
     approximately  $6,782,000,  which  included  the  overallotment  of 210,000
     units.  The  proceeds are net of legal fees,  underwriters'  fees and other
     expenses of the offering totalling approximately $1,429,000.

     The  underwriter  received an option to  purchase  up to 140,000  shares of
     common stock and 140,000 warrants under the same terms.


NOTE D - PRIVATE PLACEMENTS AND ISSUANCE OF NON-EMPLOYEE WARRANTS

     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 repaid 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,  8%
     promissory notes in the aggregate of $375,000,  including  187,500 warrants
     to purchase  common stock at $2.50 per share.  The warrants are exercisable
     for a  three-year  period.  All  principal  and  interest  were paid at the
     closing of the Company's initial public offering.

                                      F-12

<PAGE>

                                 Amplidyne, Inc.

                    NOTES TO FINANCIAL STATEMENTS (CONTINUED)

                           December 31, 1998 and 1997

NOTE D (CONTINUED)

     In  December  1996,  the Company  issued,  in two  private  placements,  8%
     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.  All
     principal and interest  were paid at the closing of the  Company's  initial
     public offering.

     The  difference  between the exercise  prices and fair market values of the
     above private  placement  transactions  in aggregate is $3,208,280  and was
     charged to operations over the term of the debt (to January 29, 1997).  The
     total financing costs reflected in nonoperating expenses for the year ended
     December 31, 1997 is $324,540.

     In February  and June 1997,  the Company  granted  warrants to  consultants
     whereby  they have the option to purchase  up to 75,000  shares of stock at
     $4.00 per share.  The warrants are exercisable  over the three-year  period
     ending June 2000. For financial reporting purposes,  the fair value of such
     warrants  aggregates to $209,500 and is being charged to operations ratably
     over the period from issuance to June 30, 2000.

     During 1997, the Company revised 200,000 of the options and warrants issued
     in March 1996,  September 1996 and December  1996.  The exercise  prices of
     these options and warrants were changed from $2.50,  $2.50 and $4.00 to the
     lower of $2.50 or 20% below market price on exercise  date.  The expiration
     date of 25,000 of such options and warrants was extended  until January 20,
     2001.  The  exercise  terms of these  warrants  were  revised  to include a
     cashless  exercise  option  commencing  October 1, 1998.  During 1998,  two
     holders of warrants  invoked the cashless  exercise  option  redeeming  (1)
     100,000 of the warrants  originally  issued in December 1996 and (2) 50,000
     of the  warrants  originally  issued in February  1997,  in exchange for an
     aggregate  of 30,000  shares of the  Company's  common  stock.  A charge to
     operations of $30,000 was recorded to reflect the market discount.

     On December  31,  1998,  525,000 of the  warrants  issued in March 1996 and
     April 1996 expired.  At December 31, 1998,  the following  warrants  remain
     outstanding:  (1)  212,500  exercisable  at the lower of $2.50 or 20% below
     market  price on  exercise  date  through  until  January  20, 2001 and (2)
     214,000 exercisable at $4.00 through until January 20, 2001.

                                      F-13

<PAGE>

                                 Amplidyne, Inc.

                    NOTES TO FINANCIAL STATEMENTS (CONTINUED)

                           December 31, 1998 and 1997

NOTE E - STOCK PLANS

     An  incentive  option  and  stock  appreciation  rights  ("SARs")  plan was
     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  exercisable at $4.00 per share  (estimated fair market value).  In
     June 1996,  1,000,000  options  were granted to the  principal  shareholder
     exercisable at $4.00 per share (estimated fair market value).

     In December 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. In January 1999, the  expiration  date of these warrants was
     extended to 2001 and the exercise  price was reduced to $1.25 per share.  A
     charge  to  operations  will be  reflected  in the  first  quarter  of 1999
     representing the difference in the value of the warrants.

     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.   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 as follows:

                                            1998                 1997
                                         ----------           ----------

      Net loss                           $2,352,555           $3,208,670

      Loss per share                     $      .52           $      .73


                                      F-14

<PAGE>

                                 Amplidyne, Inc.

                    NOTES TO FINANCIAL STATEMENTS (CONTINUED)

                           December 31, 1998 and 1997

NOTE E (CONTINUED)

     The  weighted-average  fair value of the individual  options granted during
     1996 is  estimated  at $1.07 on the date of grant.  There  were no  options
     granted,  exercised or forfeited in 1998.  The fair values were  determined
     using a Black-Scholes option-pricing model.

     Stock options, including warrants issued to officers,  activity during 1997
     and 1998 is summarized below:

                                            Shares of       weighted-
                                           common stock      average
                                           attributable   exercise price
                                            to options      of options
                                            ----------      ----------
Unexercised at January 1, 1997               1,647,000      $     3.63

Forfeited                                      (64,000)           2.59
                                            ----------      ----------

Unexercised at December 31, 1997 and 1998    1,583,000      $     3.67
                                            ==========      ==========

     The following  table  summarizes  information  concerning  outstanding  and
     exercisable options, including warrants issued to officers, at December 31,
     1998:

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

  $2.50 to $4.00   1,583,000       1.67        $3.67      1,583,000     $ 3.67


                                      F-15

<PAGE>

                                 Amplidyne, Inc.

                    NOTES TO FINANCIAL STATEMENTS (CONTINUED)

                           December 31, 1998 and 1997

NOTE F - INCOME TAXES

     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,  1998,  the  net
     operating  loss  carryforwards  are  approximately   $6,300,000.   The  net
     operating  loss  carryforwards  expire at various dates  through 2013,  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 5%) of the fair  market  value of the
     Company at the time of any such ownership change.

     The  Company's  tax  provision  is  principally  due to the impact of state
     income and minimum taxes.

NOTE G - CAPITAL LEASE OBLIGATIONS

     The Company has capital  leases (at  interest  rates  ranging  from 8.5% to
     14.2%) for certain  equipment  for use in its  manufacturing  and research,
     engineering and development activities.

     Future minimum lease payments on these leases are as follows:

Year ending December 31,
      1999                                $  76,200
      2000                                   19,000
      2001                                   12,700
      2002                                   10,200
                                          ---------

                                            118,100

  Less amount representing interest         (10,856)
                                          ---------

Present value of minimum lease payments   $ 107,244
                                          =========

Short-term portion                        $  70,311
Long-term portion                            36,933
                                          ---------

                                          $ 107,244
                                          =========

                                      F-16

<PAGE>

                                 Amplidyne, Inc.

                    NOTES TO FINANCIAL STATEMENTS (CONTINUED)

                           December 31, 1998 and 1997

NOTE G (CONTINUED)

     The cost of assets  under  capital  leases was  approximately  $159,000 and
     $197,000 at December  31, 1998 and 1997,  respectively,  and is included in
     property and equipment.  Accumulated  amortization at December 31, 1998 and
     1997 was approximately $61,000 and $20,000, respectively.


NOTE H - COMMITMENTS

     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 office and manufacturing space. The
         lease  term  commenced  April 1,  1996 and is for a  three-year  period
         ending March 31, 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.
         The  Company  is  currently  operating  under a  month-to-month  lease.
         However, the Company is currently exploring other locations.

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

                      Year ending December 31,
                          1999                       $44,600
                          2000                           600
                                                     -------

                                                     $45,200
                                                     =======

         Rent  expense,  including  the  Company's  share of real estate  taxes,
         utilities and other occupancy  costs, was $217,500 and $209,500 for the
         years ended December 31, 1998 and 1997, 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 paid in January 1997 from the proceeds of the public offering.

                                      F-17

<PAGE>

                                 Amplidyne, Inc.

                    NOTES TO FINANCIAL STATEMENTS (CONTINUED)

                           December 31, 1998 and 1997

NOTE H (CONTINUED)

     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 Chairman,  Vice  President of Sales and Marketing and the Secretary
         have agreed to defer approximately $140,000 of compensation at December
         31,  1997.  During  1998,  these  individuals  deferred  an  additional
         $126,000. In June 1998, the Chairman converted $50,000 of such deferral
         into 40,000  shares of common  stock of the Company,  representing  the
         estimated  fair value of the common  stock of the Company at that time.
         Effective September 30, 1998, the Chairman, Vice President of Sales and
         Marketing and the Secretary  converted an aggregate of $195,000 of such
         deferrals   into  173,333  shares  of  common  stock  of  the  Company,
         representing  the  estimated  fair  value  of the  common  stock of the
         Company at that time.  At December 31, 1998,  these  officers were owed
         approximately $27,100. Although they have not expressed an intention to
         require  payment  from the Company  before  January 1, 2000,  no formal
         agreements have been reached.

         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. At the end of
         1998,  these  officers  resigned.  At December 31, 1998 the Company had
         accrued expenses aggregating $120,000 for these individuals. In January
         1999,  these  individuals  converted  an  aggregate  of $60,000 of such
         amounts  due  into  48,000  shares  of  common  stock  of the  Company,
         representing  the  estimated  fair  value  of the  common  stock of the
         Company at that time.


NOTE I - LOSS PER SHARE

     In February 1997, the Financial Accounting Standards Board issued Statement
     of Financial  Accounting Standards No. 128, "Earnings per Share" ("SFAS No.
     128"). SFAS No. 128 specifies the computation,  presentation and disclosure
     requirements  for earnings per share for entities with publicly held common
     stock or potential  common stock.  The  requirements  of this statement are
     effective for interim and annual  periods  ending after  December 15, 1997.
     All prior years were restated in accordance with SFAS No. 128.

                                      F-18

<PAGE>

                                 Amplidyne, Inc.

                    NOTES TO FINANCIAL STATEMENTS (CONTINUED)

                           December 31, 1998 and 1997


NOTE I (CONTINUED)

     Net loss per common share - basic and diluted is determined by dividing the
     net  loss  by the  weighted  average  number  of  shares  of  common  stock
     outstanding. Net loss per common share - diluted does not include potential
     common  shares  derived from stock  options and  warrants  because they are
     anti-dilutive.


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 in 1997  $339,694  was  repaid  from
     proceeds of the initial public offering.

     Effective  March 31, 1996,  $125,716 of stockholder  loans was forgiven and
     contributed   to  capital.   During  1998  and  1997,  the  Company  repaid
     approximately $98,000 and $339,000, respectively.


NOTE K - LITIGATION

     The Company is a defendant to a complaint filed in the Circuit Court of the
     Eighteenth  Judicial  District of the State of Florida on January 23, 1997,
     alleging   breach  of  contract  and  alleged  damages  in  the  amount  of
     approximately  $4,323,000,  plus interest,  costs and 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  approximately  $463,000,  plus
     interest,   costs  and  attorneys'  fees.   Management  believes  that  the
     allegations  in the complaint are without  merit.  The case is currently in
     discovery. A motion for summary judgment was denied in February 1999.

     From time to time,  the  Company is party to what it  believes  are routine
     litigation and  proceedings  that may be considered as part of the ordinary
     course of its business. Except for the proceedings noted above, the Company
     is not aware of any current or pending litigation or proceedings that could
     have a material effect on the Company's  results of operations or financial
     condition.

                                      F-19

<PAGE>

                                 Amplidyne, Inc.

                    NOTES TO FINANCIAL STATEMENTS (CONTINUED)

                           December 31, 1998 and 1997


NOTE L - 401(k) PLAN

     During 1996,  the Company  established  a defined  contribution  plan,  the
     "Amplidyne, Inc. 401(k) Plan," effective June 1, 1996. No contributions are
     made by the Company.  All employees  with greater than six months'  service
     with the Company are eligible to join the plan. The plan is administered by
     American Funds Service Company.


NOTE M - SIGNIFICANT FOURTH QUARTER ADJUSTMENTS

  In the fourth quarter of 1998, the Company recorded the following:

     Stock compensation cost                              $156,000
     Compensation expense                                   25,000
     Write-off of obsolete inventory/warranty provision     45,000
     Reduction to sales                                    117,800
     Increase to bad debt expense                           45,000


                                      F-20

<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:                                         
                                        ---------------------------------------
                                        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, 1999
    Devendar S. Bains      President, Treasurer,
                           Principal Accounting Officer
                           and Director
/s/ TARLOCHAN BAINS
----------------------     Vice President and Director         April 15, 1999
    Tarlochan Bains

/s/ NIRMAL BAINS
----------------------     Secretary                           April 15, 1999
    Nirmal Bains

/s/ CHARLES J. RITCHIE
----------------------     Director                            April 15, 1999
    Charles J. Ritchie

/s/ MANISH V. DETROJA
----------------------     Director                            April 15, 1999
    Manish V. Detroja

                                       51