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                       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, 2002


                           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)

         59 LaGrange Street
         Raritan, New Jersey                                 08869
         -------------------                                 -----
(Address of Principal Executive Offices)                   (Zip Code)


Registrant's telephone number, including area code: (908) 253-6870

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)

     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 $1,613,732

     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, 2003, was approximately $592,281

     Number of shares  outstanding of the issuer's common stock, as of March 31,
2003 was 9,676,500.

     Documents Incorporated by Reference: None


<PAGE>



                                     PART I

Item 1. BUSINESS

General

Amplifier Products

     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  multi-carrier  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"),  digital communication service at 1800 MHz ("DCS-1800")
and wideband code division  multiple access 3G  communications  ("W-CDMA").  The
products  are  marketed  to the  cellular,  wireless  local  loop  and  personal
communication  systems  ("PCS")  segments  of  the  wireless  telecommunications
industry.

     The Company has also  refined  amplifier  products  for the 3.5 GHZ digital
data transmission  systems that are presently being deployed by some major OEM's
in North  America.  The Company also refined its amplifier  products such as the
MINI amplifier for its high-speed  wireless Internet  products.  The Company has
had its test site in Sparta New Jersey under continuous  operation for more than
3 years. The Company has been able to get reliable and successful  service under
various and severe weather including rain and snow.

     In the year 2002,the  Company  experienced a  considerable  downturn in its
overall business due to the general decline in the  Telecommunications  Industry
as well as slow down in demand  for its High  Speed  Internet  products,  due to
prevailing  economic  conditions.   Sales  in  the  first  three  quarters  were
particularly  down,  only the fourth  quarter showed a recovery for us. Sales in
the fourth  quarter  were  $550,00  (33% of sales for the year 2002).  The first
three quarters generated sales totaling  $1,063,732,  compared to $1,838,519 for
the same period in 2001, a decrease of 42% from 2001. The Company  increased its
sales and  marketing  and  support  team for the High  Speed  Wireless  Internet
products,  but due to market conditions the sales did not increase significantly
in the first three quarters.  Therefore the Company began to aggressively reduce
staff and expenditures in the third and fourth quarters.  The Company was unable
to raise any  additional  funds and as a result the Company  has been  operating
under severe cash flow conditions since the middle of the third quarter of 2002.



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     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 very  effective  in  reducing
distortion,  in  amplifiers.  In addition to  Company's  product  line of single
channel  power  amplifiers,   which  are  currently  utilized  by  the  wireless
communications  industry,  the Company also develops,  designs and  manufactures
Multi-carrier Linear Power Amplifiers ("MCLPAs"). MCLPAs combine the performance
capabilities of many 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.

High Speed Wireless Internet Products

     In 1999 the  Company  made its entry into the  emerging  wireless  Internet
access market with new products in the ISM license exempt operating band (2.4 to
2.4835 GHz).  The line of spread  spectrum  radio  products has been expanded to
provide  complete  solutions,  with  designs  for  indoor,  outdoor  and  hybrid
indoor/outdoor     network     coverage     including     point-to-point     and
point-to-multi-point configurations.

     These  products  include ISP Base  Stations,  PCMCIA radio  cards,  modular
customer premise equipment (CPE), micro-cells,  client base station, amplifiers,
and other  network  components  to provide a turn-key  network  solution.  These
products are IEEE 802.11  compliant and provide  high-speed  internet access and
private network access from any point in the network. The Company's capabilities
include  engineering  design to  provide  coverage  over a wide  area.  Wireless
network  elements  therefore  provide users access from anywhere in the wireless
network.  Management believes that this type of design delivers high performance
and lower  operating and  maintenance  costs,  compared to a conventional  wired
network.  An additional  value added to a network utility is full roaming access
for portable  devices  anywhere in the network.  The Company  installed  its own
wireless   network  in  the  fourth  quarter  of  1999  to  provide  a  customer
demonstration system, which has proven to be successful.

     The Company  designs  outdoor  solutions  specifically  targeted to the ISP
market  which  consist  of   point-to-point   backbones  for  the  networks  and
point-to-multi-point  access to  wireless  clients.  ISP's  can  order  complete
turn-key  systems for various  applications  or  components  for  expansion  and
concentration of existing networks. During 2002, Amplidyne continued offered its
"ISP in a Box" complete network start-up kit for deployment to ISPs.



                                       3
<PAGE>

     The Company also expanded its LAN products to include a new access  points,
refined  gateway and high power PCMCIA  radio card to support its indoor  market
development  and penetration  into  Multi-Dwelling  Units  ("MDUs").  The use of
discreet antennas and intelligent  amplifiers has proved especially effective in
providing  ubiquitous coverage in tall buildings,  large atriums,  and sprawling
campus  applications.  The SOHO  package was also refined in 2002 to quickly and
easily  implement  simple home and small office  networks  without  professional
installation or maintenance.

     In light of the events of  2002,particularly  the downsizing of the Company
and serious  cash flow  constraints  during the year,  the Company  will need to
re-evaluate its products and future marketing strategy during 2003.

Historical

     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 59 LaGrange  Street,  Raritan,  NJ 08869 and its telephone  number is
(908) 253-6870.  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  ("Warrants")) in January 1997 pursuant
to firm commitment underwritten offering. The offering price was $5.10 per Unit.
The Warrants were redeemed in May 2000.  Prior to redemption,  124,871  Warrants
were exercised. The Common Stock trades on the NASD OTC Bulletin Board under the
symbol AMPD.OB.

Forward Looking Statements

     Certain  information  contained  in this Annual  Report is  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,  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.  In addition to  statements,  that
explicitly describe such risks and uncertainties,  readers are urged to consider
statements labeled with the terms "believes,"  "belief,"  "expects,"  "intends,"
"estimate,"  "project,"  "may," "will,"  "should,"  continue,"  "anticipates" or
"plans" to be uncertain  and  forward-looking.  The  forward-looking  statements
contained  herein are also subject  generally  to other risks and  uncertainties
that are described from time to time in the Company's  reports and  registration
statements  filed with the  Securities  and Exchange  Commission,  including the
risks described in Part I-Risk Factors.  Such potential risks and  uncertainties
include,  but are not limited to: the  ability to increase  revenues  and reduce
operating losses; the successful deployment and sale of products; the successful
distribution  of our products in the  marketplace;  the successful  expansion of
business with sales made by ISPs;  managing  expansion;  dependence on a limited
number

                                       4
<PAGE>


of customers; reductions, delays or cancellations in orders from new or existing
customers;  potential  deterioration of business and economic  conditions in the
Company's   customers   marketplaces;   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;  a limited number of potential  customers;  intensely  competitive
industry with increasing price competition;  successful development of strategic
partnerships globally;  reliance on certain key personnel;  variability in gross
margins on new products and resulting  impacts on operating  results;  continued
success in the design of new products and the 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.


Wireless Local Loop Amplifier Products

     The Company  has  continued  to refine its  wireless  local loop  amplifier
products  during 2002.  These products  operate in the NMT 450 band. The Company
designed a prototype  amplifier for the 3.5 GHz band for a major North  American
OEM  customer  during 2000 and refined the products  during  2001,  and has been
manufacturing  products during 2002. The Company expects to obtain future orders
for its NMT450 and 3.5GHz amplifiers during 2003 as systems get deployed.

Cellular Systems

     A cellular  system consists of a number of cell sites that 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."

     The ability of  cellular  system  operators  to  increase  system  capacity
through the use of microcells is largely dependent on their ability to broadcast
multiple  signals with  acceptable  levels of interference  and  distortion.  In
cellular  systems,  the  amplifier  is generally  the greatest  source of signal
interference  and  distortion,   particularly  with  multi  carrier  high  power
amplifiers.  Consequently,  obtaining  amplifiers  that can transmit and



                                       5
<PAGE>

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.

     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  and the  NMT-450
products. As a result of these developments, the Company has continued to obtain
orders for these products from its customers,  including  major OEMs and expects
to continue to do so in 2003.

     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  spots  of  growth  in  wireless  telephone  use
(cellular,   NMT-450  and  wireless  local  loop)   particularly  in  developing
countries, while a general downward trend has remained in the Telecommunications
market.

     The Company's products have been evaluated and successfully deployed in the
OEM systems.  However, due to market conditions,  the Company expects the 3.5GHz
products to be given priority in the near future by its OEM customers.

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

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



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<PAGE>

     Wireless  Internet  Products.  The Company's  high-speed  wireless Internet
products  have been  successfully  deployed  since 1999.  Our wireless  Internet
products are aimed at four market segments:  (a) Hospitality and  Multi-Dwelling
Units (MDU) including  hotels and  condominiums,  (b) enterprise,  corporate and
education  campuses (c) Internet  Service  Provider  (ISP)  networks,  (d) Small
Office/Home Office (SOHO),

     Increase Penetration of Wireless Equipment  Manufacturers.  Since 1991, the
Company  has  positioned  itself as a supplier  of  amplifier  products to large
wireless  telecommunications OEMs. 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 3.5 GHz
and 450 MHz single and  multichannel  products to OEM's during 2002. The Company
intends to pursue this market  segment  during  2003.  There can be no assurance
that the Company will be successful since some of the Company's competitors have
vast financial, technical and marketing resources.


     Maintain a Technology  Edge. 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   pre-distortion   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 maintain resources in research and
development  associated with its  interference  cancellation  technologies.  The
Company has continued its development on 3.5GHz,  NMT-450, 3G (Third Generation)
amplifiers and wireless local loop products during 2002.

     Develop Innovative  Proprietary  Products. To date, the Company has focused
its  efforts  in  the  development  of  amplifier   products  which  are  highly
innovative,  and  which  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
develops products for the NMT-450, 3G (Third Generation) and wireless local loop
markets.

     Provide Support from Product Design through Installation and Operation. The
Company works with its customers throughout the design process to assist them in


                                       7
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refining and developing their amplifier specifications.  Once the specifications
have  been  met  and the  product  delivered,  Amplidyne  continues  to  provide
technical  support to  facilitate  system  integration,  start-up and  continued
operation.  By providing customer support services from the product design phase
through  installation and operation,  management  believes it fosters  increased
levels of customer loyalty and satisfaction.  In addition, through this process,
the Company believes it will develop new product definitions and implementations
to further enhance the strategic position of the Company in the wireless market.

     Maintain Control of the Manufacturing  Process.  Amplidyne has consistently
analyzed  in  house  automated  manufacturing  versus  the use of  subcontracted
manufacturers in order to control its production schedule. The Company installed
automated  manufacturing  equipment in the first quarter of 2000, to enhance its
manufacturing  process for NMT-450 and wireless local loop  amplifiers and other
related  products.  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  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  pre-distorted  amplifier to have feed forward  correction (which is
described  below,  see  "Technology")   applied  to  it  to  achieve  distortion
cancellation.

     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  single channel  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 resources to explore such opportunities, as financing permits.

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


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     Linearity,   Low  Distortion  and  High  Amplification.   Wireless  service
providers'  ability to manage scarce  spectrum  resources more  effectively  and
accommodate  large numbers 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, micro-cellular 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 we believe,  gives us a significant
advantage over our competitors.

     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 many single channel power  amplifiers,  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,
among 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.

     Wireless  Internet  Products.  One of the key  components  in the  wireless
Internet access system is the bi-directional  tower top amplifier.  We also have
considerable  experience  in the design,  development  and  deployment  of fixed
broadband  amplifier  products.  The  amplifier  has to operate  reliably  in an
outdoor application. Our expertise in this area is an advantage over competitors
who are required to purchase their amplifiers from outside sources.

     We also  have  considerable  know-how  of other  related  products  such as
antennas, filters, power supplies and digital control circuits. We are therefore
able to  offer a  turnkey  solution  to  ISP's,  providing  indoor  and  outdoor
networking  support  using  our  existing  resources.  We have a cost  advantage
because we manufacture our own amplifiers,  which we can, if necessary,  rapidly
refine and change.

     We intend to refine our products as needed and in a timely fashion in order
to obtain market share.



                                       9
<PAGE>

     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
that should further reduce costs.

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

Technology

     Wireless  Transmit  Technology.  A typical wireless  communications  system
comprises a geographic  region  containing  a number of cells,  each with a base
station,  which are networked to form a 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  wire  line  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
many 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



                                       10
<PAGE>

processing technology.  The Company has developed certain proprietary technology
and methods to achieve minimal distortion in its amplifiers,  technically called
predistortion  and feed  forward  correction.  The Company  uses three  distinct
technologies (A) Linear class A and AB amplifiers,  (B) Predistorted class A and
AB  amplifiers  and (C)  Predistortion  feed forward  amplifiers.  The Company's
proprietary leading edge products contain patented predistortion and proprietary
feed  forward  technology  combined  in  a  proprietary   automatic   correction
technique.

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

     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 for its major OEM customers.

     The Company's  wireless  Internet access products consist of point-to-point
and point to  multipoint  indoor and  outdoor  units that can be  configured  to
provide broad coverage over a city or region or to create  coverage in an indoor
space with free roaming access.

     At the remote site an indoor or outdoor LAN system can be connected using a
single  channel  CPE  or  Access  Point,  with  various  antennae  combinations.
Amplifiers are used for range extension purposes.

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
decreased  substantially over the last year or so, decreasing the demand for the
Company's products, although the Company cannot predict trends in these markets.



                                       11
<PAGE>

     Cellular Market. The market for cellular  communications still accounts for
a fairly large portion of the wireless  services.  The general  downturn in this
segment decreased demand for amplifier products during 2002.

     Wireless  Local Loop.  Wireless local loop systems are  increasingly  being
adopted in  developing  markets to more  quickly  implement  telephone  and Data
communication  services.  In certain developing  countries,  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 bands.

     Wireless Internet Access Market.  The Company's  products are aimed at four
market segments: (a) Hospitality and Multi-Dwelling Units (MDU) including hotels
and condominiums, (b) enterprise,  corporate and education campuses (c) Internet
Service Provider (ISP) networks, (d) Small Office/Home Office (SOHO).

     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.

Products

     The Company  designs and sells  multi-carrier  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.  In
addition,  the Company also sells a complete  line of fixed  broadband  wireless
networking and LAN products for private  networks,  virtual private networks and
Internet access.

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 3G (Third Generation) 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
     pre-distortion technology; core linear amplifier technology and proprietary
     feed forward  technology  achieve all of the  objectives  mentioned  above.
     Amplidyne's MCLPAs are a unique line of ultra linear devices, which utilize
     a proprietary pre-distortion and phase locked feed forward architecture.



                                       12
<PAGE>

o    Wireless  Internet  Products.  The  Company's  wireless  Internet  products
     operate in the 2.4 GHz ISM band using  Direct  Sequencing  Spread  Spectrum
     technology.

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.

o    3G  (Third  Generation)  Amplifier  Development.  The  Company  held a live
     demonstration of its 4channel ultra-linear 3G amplifier at the CTIA expo in
     March of 2002.Deployment  of this Technology has been delayed;  the Company
     is maintaining contact with its customers for future opportunities.

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  ordered  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 a 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.  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 subsystems. The Company's
products are  integrated  into systems by OEM  customers,  and therefore must be
engineered to be compatible  with industry  standards and with certain  customer
specifications,  such as frequency, power, linearity and built-in test (BIT) for
automatic fault diagnostics.



                                       13
<PAGE>

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. To
date, the Company has not experienced a material amount of warranty claims.

Backlog/Future Orders

     The Company regularly reviews its backlog (which includes  projected future
orders from customers) that it expects to ship over the next 12 months.  We have
had to change schedules and delay orders  depending on customer needs.  Customer
schedules  or  requirements  may  frequently  change and in some cases result in
cancellation  of orders,  in  response  to which the  Company  has to change its
production schedule. Changes and cancellations exist since, among other matters,
the wireless  communications  industry is characterized  by rapid  technological
change,  new product  development,  product  obsolescence and evolving  industry
standards. In addition, the decline in the Telecommunications  industry resulted
in low  activity in the first three  quarters of 2002.  Only the fourth  quarter
showed  somewhat of a recovery for sales of our  products.  The outlook for 2003
has improved, however some uncertainty remains to the extent of the recovery and
its sustainability. This uncertainty may lead to postponement or cancellation of
future or current orders. In addition,  as technology changes,  corporations are
frequently requested to update and provide new prototypes in accordance with new
specifications if products become obsolete or inferior.  Therefore,  the Company
has been focusing on strategic  partnerships to provide better quality solutions
to our partners with higher margin sales opportunities.

     As of  December  31,  2002,  the  Company  had signed  purchase  orders for
approximately  $500,000.  The Company  expects to ship these products during the
first quarter of 2003. In the present state of the  Telecommunications  Industry
there is a reluctance of companies to commit to large blanket orders.  We expect
to see this trend, of just in time orders,  to continue during 2003. The Company
would like to stress,  although useful for scheduling production,  backlog as of
any  particular  date may not be a  reliable  indicator  of sales for any future
period.  The Company  expects sales to improve  during the first half of 2003 as
compared to the half of 2002.

     The Company expects to continue to ship products to its major OEM customers
during 2003 at the levels or above the levels of 2002.

     The  acquisition  of certain of the Darwin  assets in 2001 (which  included
access to hotels) and the Company  venturing  into the  "hospitality"  market in
2001 was new to the Company and turning  this  venture  into a success  depended
largely on the Company being able to dispose of some of the assets  rapidly in a
"bulk" sale.  The value of some of these assets has decreased  with time.  These
products are being sold under the Ampwave product line.



                                       14
<PAGE>

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 in 2001 and 2002.

                  Net Revenues By Market Categories
                                            (In thousands)
                                                           Year Ended
                                                           December 31,
                                                         ---------------
                                                         2001       2002
                                                         ----       ----
Amplifier Markets
 Cellular Analog and digital                           $  267.5      264.5

 Wireless Telephony                                     1,361.3      711.1
 Satellite Communications, Custom and other Products      170.0       57.0
 Digital PCS  Products                                        0          0
Ampwave Market
 Wireless Internet Products. And Broadband solutions      406.2      581.0
         Total                                         $2,205.0   $1,613.6


Wireless  Telephony.  Sales to the wireless  telephone  segments of the wireless
communications  industry have decreased from approximately 62% of total revenues
for fiscal year end 2001 to  approximately  44% of total  revenue for the fiscal
year end 2002.

     *    Wireless  Internet  and  Broadband  solutions.   The  Company  shipped
          products  to its  customers  in 2002 with total  sales for the year of
          $581,613,  which accounts for approximately 36% of total revenues. The
          Company  sold some of its Darwin  Hotel  assets and  inventory  during
          2002.

     *    International  Sales.  Sales of wireless  products  outside the United
          States   (primarily   to  Western   Europe   and  Canada   represented
          approximately  81% and 62% of net sales during  fiscal 2001 and fiscal
          2002, respectively.



                                       15
<PAGE>

     *    Sales and Marketing. The Company reduced its sales and marketing force
          considerably   during  2002.The   Company's  officers  and  sales  and
          marketing consultants maintain significant contact with key customers,
          ensuring  close   technical   liaison  with  customer   engineers  and
          purchasing  managers.  The  Company's  High  Speed  Wireless  Internet
          products  generated sales of  approximately  36% of total revenues for
          2002.

Competition

Amplifier Products

     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 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



                                       16
<PAGE>

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.

High Speed Wireless Internet Products

     The Company has  targeted its products to  segments:  (a)  Hospitality  and
Multi-Dwelling  Units (MDU) including hotels and  condominiums,  (b) enterprise,
corporate and education  campuses (c) Internet  Service Provider (ISP) networks,
and (d) Small Office/Home Office (SOHO).  The Company first derived  significant
revenue  from  these  products  during  2001,  and  this  market  accounted  for
approximately 36% of the total sales for the year 2002.

The Company has relied on being able to work strategically with its partners and
consultants,  as well as its own  engineers to develop and refine its  products.
The Company has taken some risks in introducing  products to certain  sectors by
providing  samples and system  trials,  which in certain cases may not result in
revenues.  The vast  majority  of ISP's  are in need of  capital  to grow  their
businesses and in certain cases may not be able to obtain such financing.

Manufacturing

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

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

     The Company's  devices,  components  and other  electrical  and  mechanical
subcomponents are generally purchased from multiple suppliers.  The Company does
not have any  written  agreement  with any of its  suppliers.  The  Company  has
followed a general  policy of multiple  sourcing  for most of its  suppliers  in
order to assure a continuous  flow of such supplies.  However,  the Company does
purchase certain transistors  produced by a single  manufacturer  because of the
high quality of its  components.  The Company  believes it is unlikely that such
transistors would become



                                       17
<PAGE>

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 purchased  automated surface mount machinery ("SMT") to enhance
its manufacturing  ability for amplifiers as well as wireless internet products,
which was installed during the first quarter of 2000. The equipment has provided
improved  efficiency in production and faster turn around for certain  products.
The Company has started to  manufacture  some of the products for its High Speed
Wireless Internet products.

     The Company manufacturers some of its High Speed Wireless Internet products
and amplifiers in its New Jersey  facility and the rest in offshore  facilities,
which are ISO 9001, certified.

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 The  Company's  research,
engineering and development  expenses in fiscal 2001 and 2002 were approximately
$593,823 and $406,614,  respectively, and represented approximately 27% and 25%,
respectively,  of net revenues.  These efforts were  primarily  dedicated to the
development of the linear feed forward,  high power, low distortion  amplifiers,
resulting in the Company's  models for 3Gand  refinements to its  bi-directional
amplifier,  Client Base Station, ISP Base Station and Microcell for its wireless
internet



                                       18
<PAGE>

systems and other high speed wireless  internet  products.  During the third and
fourth quarters of 2002 the Company significantly reduced its costs by staff and
consulting reductions.

     During  the  first  half of 2002,  the  Company  was able to  maintain  its
research and development costs by being able to develop significant  products in
house, thereby, minimizing commitments to outside suppliers and consultants. The
Company did,  however,  incur  consulting  fees regarding the development of the
High Speed Wireless Internets Products.

     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  workstations  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.

     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


                                       19
<PAGE>

infringing  intellectual  property  rights of others,  there can be no assurance
that  litigation  or  infringement  claims  will not  occur in the  future.  The
Company's  wireless  internet  access  products are marketed under the trademark
Ampwave(TM)

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,  2002,  the Company had a total of 14  employees,  9 in
operations,  2 in  engineering,  3 in  administration;  the  Company  employs  2
consultants  in  sales   andmarketing.   The  employee   headcount  was  reduced
significantly  in the third and fourth quarters of 2002, from 33 employees and 3
consultants  during the second  quarter,  to the  present  levels.  The  Company
believes  its future  performance  will  depend in large part on its  ability to
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.



                                       20
<PAGE>

     In  addition to other  information  in this Annual  Report,  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.

                                  RISK FACTORS

     You should carefully consider the risks described below before investing in
our company.  The risks and uncertainties  described below are not the only ones
facing our company.  Other risks and uncertainties that we have not predicted or
assessed may also adversely affect our company.

     Some of the  information  in this Annual  Report  contains  forward-looking
statements that involve  substantial risks and  uncertainties.  You can identify
these  statements  by  forward-looking  words such as "may,"  "will,"  "expect,"
"anticipate,"  "believe,' "intend,"  "estimate," and "continue" or other similar
words.  You should read  statements  that contain these words  carefully for the
following reasons:

     o    the statements may discuss our future expectations;

     o    the  statements may contain  projections of our future  earnings or of
          our financial condition; and

     o    the statements may state other "forward-looking" information.

     We  believe  it  is  important  to  communicate  our  expectations  to  our
investors.  There  may be  events  in  the  future,  however,  that  we are  not
accurately  able to predict or over which we have no control.  The risk  factors
listed below, as well as any cautionary language in or incorporated by reference
into this Annual Report,  provide  examples of risks,  uncertainties  and events
that may cause our actual results to differ  materially from the expectations we
describe in our  forward-looking  statements.  Before you invest in our company,
you should be aware that the  occurrence  of any of the events  described in the
risk factors below,  elsewhere in or  incorporated by reference into this Annual
Report and other  events that we have not  predicted  or  assessed  could have a
material  adverse effect on our earnings,  financial  condition or business.  In
such case,  the trading price of our  securities  could decline and you may lose
all or part of your investment.

We Have a Recent  History  of Losses  and  Expect  Losses to  Continue.  We have
incurred net losses of $2,024,882  and  $2,380,027  for the years ended December
31, 2001 and 2002,  respectively.  These losses were due, in large part,  to the
research,  engineering and development costs associated with the creation of our
line of multicarrier  linear power  amplifiers,  sales and marketing efforts and
high speed wireless internet products and stock  compensation  costs for the use
of stock or stock  options to obtain  services or to obtain  financing.  We have
made  commitments  to  vendors  to  purchase  hardware  for use in our  wireless
internet systems.  We may need to cancel such orders, and the inability to do so
may result in material  losses to the  company.  We  expected to have  increased
sales in this area to compensate for the expenses, however



                                       21
<PAGE>

we have reduced staff  levels,  therefore  there is no guarantee  that this will
happen.  The  need  for  high  bandwidth  products  may  lead to  rapid  product
obsolescence.  With our  reduced  staff  levels,  we may not be able to compete.
Further,  we have not  generated  sufficient  sales volume to cover our overhead
costs and generate  profits.  We have minimized losses by staff reduction;  this
could  result in loss of market  share from which we may not be able to recover.
We expect that our losses will  increase and will  continue  until such time, if
ever, as we are able to  successfully  manufacture  and market our products on a
larger scale and  therefore  generate  higher  profit  margins.  We will need to
generate a substantial  increase in revenues to become profitable.  Accordingly,
we cannot assure you that we will ever become or remain profitable. In addition,
we had an accumulated deficit$21,949,679 as of December 31,2002.

     Other factors may cause us to incur additional  losses. We have experienced
a down turn in our amplifier and High Speed Wireless  Internet  Access  business
due to the worldwide  recession in the  telecommunications  market,  and general
lack of funding to Wisp's and corporate spending restraints.  We may also not be
able to sell-off  certain of our Darwin assets or inventory,  which will further
contribute  to our  losses  (or lower  sales).  We need to update our high speed
wireless internet access products and amplifier products, but may not be able to
accomplish  this  given the losses we have  sustained  and the  capital  that is
required.  Finally,  we may not be able to collect certain Ampwave  receivables,
which will further cause us to sustain additional losses. In addition, we lost a
lawsuit in May 2002 (See Risk Factors - We lost a lawsuit  which  brought a jury
verdict  against us and will need to use funds to make the  required  settlement
payments, which will have an adverse effect on our cash position.

The report  from our  independent  auditors  includes an  explanatory  paragraph
regarding the doubt of the Company to continue as a going concern. The auditors'
report on the Company's  financial  statements  for the year ended  December 31,
2002 includes an explanatory paragraph stating that our losses, lack of cash and
otherwise limited financial  resources raise substantial doubt about our ability
to continue as a going concern.  The risk that we may not be able to continue in
existence may limit our ability to access  certain  types of  financing,  or may
prevent us from obtaining financing on acceptable terms.

We Will Require Additional Financing. We believe that collections of our current
accounts receivable and sales in 2003, together with loans from an officer, will
be adequate to fund our operations  for at least three to four months.  However,
we will require  additional  financing during fiscal 2003. We have  considerable
accounts payable and accrued professional fees, which have aged considerably and
need to be paid to avoid  further  undesirable  collection  action by vendors or
even litigation.  We have issued our common stock, when available to us, in lieu
of cash payment of officer's salaries, commissions and consulting fees, although
we may not be able to continue this practice. If additional financing is needed,
we cannot be sure that such  financing  will be  available  to us on  acceptable
terms or at all. If adequate  funds are not  available,  we will have to further
reduce our  operations,  resulting in delays,  scale back or  elimination of our
research,  engineering and development or manufacturing programs, or we may have


                                       22
<PAGE>

to cease operation entirely.  To raise funds through  arrangements with partners
or others may require us to  relinquish  rights to certain of our  technologies,
potential products or other assets.  Thus, our inability to obtain the necessary
financing  will  have a  material  adverse  effect  on our  business,  financial
condition and operations.

Terrorist  Attacks Or Acts Of War May  Seriously  Harm Our  Business.  Terrorist
attacks  or  acts  of war  may  impact  our  revenues,  expenses  and  financial
condition.  The  terrorist  attacks  that  took  place in the  United  States on
September 11, 2001 were unprecedented events that have created many economic and
political  uncertainties,  some of which may materially and adversely affect our
business,  results of  operations,  and financial  condition.  The potential for
future terrorist attacks, the national and international  responses to terrorist
attacks,  and other acts of war or  hostility  have  created  many  economic and
political  uncertainties,  which  could  materially  and  adversely  affect  our
business,  results  of  operations,  and  financial  condition  in ways  that we
currently cannot predict.

We Lost a Lawsuit,  Which Brought a Jury Verdict  Against Us. In connection with
the  complaint  brought  in the  Superior  Court of New  Jersey,  Law  Division,
Somerset  County,  by High Gain Antenna Co. Ltd. of Korea, a trial  commenced on
May 7, 2002, and on May 13, 2002,  the jury brought in a verdict  against us for
$400,000.  A settlement  was reached,  whereby we agreed to pay $200,000 in cash
and to issue 700,000  shares of common stock.  $75,000 has been paid to date and
$25,000 is required to be paid  quarterly  until the balance is paid in full. If
Amplidyne  fails to make any payment  when the same is due or within the fifteen
(15) day cure  period,  then High Gain  shall  have the right to  execute on the
outstanding  balance due under the $400,000 judgment,  after crediting the value
of the  shares  of stock  transferred  which  shall be valued  at  $105,000  and
crediting all payments made. High Gain will also be able to levy and execute its
judgment,  which will have an adverse  effect on the company and may  jeopardize
our ability to continue to operate.

     Our Success Relies Upon The Growth of Wireless Telecommunications Services.
The demand for our products will depend in large part upon continued and growing
demand within the wireless  telecommunications industry for power amplifiers and
our high speed wireless  internet access products.  During 2002 a major downturn
occurred in the Telecommunications  market and recovery may not occur for a year
or two,  therefore  the demand for our  products  will  remain  subject to great
uncertainty from quarter to quarter.

     Our Limited Lack of Automated Manufacturing Processes and Our Dependence on
Third  Party  Manufacturers  Could  Adversely  Affect  Our  Business.   We  have
consistently reviewed our automated  manufacturing needs in order to control our
production  schedule.  To  date,  we have  not  established  a  fully  automated
manufacturing  facility  although we have  purchased an automated  surface mount
machine and reflow process oven. Our wireless internet products are manufactured
at offshore facilities,  which are our sole suppliers. Until such time as we are
able to  establish  such  facilities,  we expect to be  dependent on third party
manufacturers.  We cannot be sure



                                       23
<PAGE>

that these third  party  manufacturers  will be able to fulfill  our  production
commitment.   Furthermore,   we  do  not  have  written  agreements  with  these
manufacturers.   Our  inability  to  obtain  timely   deliveries  of  acceptable
assemblies  could delay our ability to deliver  products to our  customers,  and
would have a material  adverse effect on our business,  financial  condition and
results of  operations.  In  addition,  if these  manufacturers  increase  their
production  costs,  we may not be able to recover such cost increases  under the
fixed price commitments with our customers.

     Our Limited Number of Suppliers Could Adversely Affect Our Business.  Power
transistors  and  certain  other key  components  used in our  products  for our
amplifiers,  as well as our wireless internet  business are currently  available
from only a limited  number of suppliers.  Certain of our suppliers have limited
operating histories and limited financial and other resources. Our suppliers may
prove to be unreliable sources of certain  components.  Furthermore,  we have no
written  agreements  with our suppliers.  In the past, we have not purchased key
components in large  volumes but  anticipate  that our need for component  parts
will increase.  If we are unable to obtain sufficient  quantities of components,
particularly  power  transistors,  we could  experience  delays or reductions in
product  shipments.  Such  delays or  reductions  could have a material  adverse
effect  on  our  business,   financial  condition  and  results  of  operations.
Additionally,  such delays or reductions  may have a material  adverse effect on
our  relationships  with  customers  and result in the  termination  of existing
orders  and/or a  permanent  loss in our future  sales.  Our  wireless  internet
products are manufactured at offshore  facilities.  The lack of supply from this
source due to any reason could adversely impact our business.

     Our Success Will Rely On Our Ability To Enter Into Strategic  Partnerships.
We are  currently  developing  and  expect  to  continue  to  develop  strategic
partnerships  and other  relationships  in order to  expand  our  business.  The
failure to successfully develop such relationships could have a material adverse
effect on our business, financial condition and result of operations.

     Our Success Relies on a Small Number of Customers and Our Sales Orders Have
Had a High Degree of Delays and Cancelled Orders. In 2001,  approximately 74% of
our net  sales  were  derived  from  two  customers  (62%  and  12%).  In  2002,
approximately  62% of our net sales were  derived  from two  customers  (44% and
18%).  In the  past  few  years  we  have  experienced  reductions,  delays  and
cancellations in orders from our new and existing customers,  we anticipate that
sales of our products to relatively few customers will account for a majority of
our 2003 revenues. . The reduction,  delay or cancellation of orders from one or
more of our  significant  customers  would  materially and adversely  affect our
financial  condition  and  results of  operation.  Moreover,  we may  experience
significant  fluctuations in net sales,  gross margins and operating  results in
the future as a result of the uncertainty of such sales.



                                       24
<PAGE>

     Our Limited Marketing Experience  (Particularly for our High Speed Wireless
Internet Products),  May Adversely Affect Our Business.  We are not sure whether
our  marketing  efforts will be  successful  or that we will be able to maintain
competitive sales and distribution  capabilities.  In addition,  we have limited
experience  in the marketing and sales of our wireless  internet  products,  and
cannot  be  certain   that  this  sector  will  grow  in  revenue  as  expected,
particularly with our reduced staff levels.

     Management  of our Company  Owns a  Significant  Amount of our  Outstanding
Common  Stock.  Our  officers,  directors  and  persons  who may be  deemed  our
affiliates  beneficially  own,  in the  aggregate,  and have  the  right to vote
approximately  24% of our issued and  outstanding  common  stock,  not including
common  stock  options  they  may own.  Accordingly,  such  holders  may be in a
position to affect the election of all of our directors and control our company.

     We May Not Be Able To Comply In A Timely  Manner  With All Of The  Recently
Enacted  Or  Proposed  Corporate  Governance  Provisions.   Beginning  with  the
enactment of the  Sarbanes-Oxley  Act of 2002 in July 2002, a significant number
of new corporate governance requirements have been adopted or proposed. Although
we currently expect to comply with all current and future  requirements,  we may
not be  successful  in  complying  with these  requirements  at all times in the
future.  In  addition,  certain of these  requirements  will  require us to make
changes to our corporate governance practices.  For example, one Nasdaq proposal
(which may become  applicable to companies  listed on the OTC Bulletin Board, or
its  successor,  the BBX Exchange)  under review by the  Securities and Exchange
Commission will require that a majority of our Board of Directors be composed of
independent directors by our 2004 Annual Meeting of Stockholders. Currently, two
of the members of our Board of Directors are  considered to be  independent.  We
may not be able to attract a  sufficient  number of  directors  in the future to
satisfy  this  requirement,  if  enacted  and if it  becomes  applicable  to our
Company. Additionally, the Commission recently passed a final rule that requires
companies  to  disclose  whether a member  of their  Audit  Committee  satisfies
certain  criteria  as a  "financial  expert" We  currently  do not have an Audit
Committee  member that  satisfies  this  requirement  and, we may not be able to
satisfy this, or other,  corporate  governance  requirements at all times in the
future,  and our failure to do so could cause the  Commission  or Nasdaq to take
disciplinary  actions  against us,  including an action to delist our stock from
the OTC Bulletin Board or any other exchange or electronic  trading system where
our shares of common stock trade.

     Our Success Depends on Our Ability to Manage the Size of Our Operations. We
downsized some of our operations in order to maintain competitiveness and reduce
our operating  losses. We have also explored joint ventures and mergers in order
to achieve these results,  but have not consummated any such transaction.  If we
do not increase our sales,  decrease  overhead  expenditure or do not adequately
manage the size of our operations,  our results of operations will be materially
adversely affected.



                                       25
<PAGE>

     Declining  Average Sales Prices Could  Adversely  Affect Our  Business.  If
wireless internet and  telecommunications  customers come under increasing price
pressure from service providers,  we could expect to experience downward pricing
pressure on our products.  In addition,  competition among non-captive amplifier
suppliers  could  increase  the  downward  pricing  pressure  on  our  amplifier
products.  To date,  we have not  experienced  such  pressure.  As our customers
frequently  negotiate  supply  arrangements  with us far in  advance  of product
delivery dates, we often must commit to price reductions before we can determine
whether  cost  reductions  can be  obtained.  If we are unable to  achieve  cost
reductions, our gross margins will decline and our business, financial condition
and results of operations could be materially and adversely affected.

     Rapid  Technological  Change and Intense Competition Could Adversely Affect
Our Business. The wireless internet and 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,  we compete
primarily with non-captive suppliers of power amplification products. We believe
that our success will be based primarily upon service, pricing,  reputation, and
our ability to meet product  delivery  schedules.  Our  existing  and  potential
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  equipment could elect
to enter the market and compete  directly with us. Many of our competitors  have
significantly greater financial, technical,  manufacturing,  sales and marketing
capabilities and research and development  personnel and other resources than us
and have  achieved  greater  name  recognition  of their  existing  products and
technologies.  In order for us to  successfully  compete,  we must  continue  to
develop new products,  keep pace with  advancing  technologies  and  competitive
innovations and successfully market our products.  Our inability to successfully
compete against our larger  competitors will have a materially adverse affect on
our business, financial condition and operations.

     In addition, we are not sure whether new products or alternative technology
will  render  our  current or  planned  products  obsolete  or  inferior.  Rapid
technological development by others may result in our products becoming obsolete
before  we  recover a  significant  portion  of the  research,  development  and
commercialization expenses we incurred with respect to those products.

     Our  Business  Will Be  Adversely  Affected  if We Do Not  Keep Up With the
Internet's Rapid Technological Change,  Evolving Industry Standards and Changing
User  Requirements.  To be  successful,  we must adapt to our  rapidly  changing
market by continually enhancing the technologies used for Internet access. If we
are unable,  for technical,  legal,  financial or other  reasons,  to adapt in a
timely manner in response to changing  market  conditions or user  requirements,
our  business  could  be  materially  adversely  affected.   Significant  issues
concerning  the  commercial use of Internet  technologies,  including  security,
reliability, cost, ease of use and quality of service, remain unresolved and may
inhibit the growth of  businesses  relying on the



                                       26
<PAGE>

Internet.  Our future success will depend, in part, on our ability to meet these
challenges. Among the most important challenges facing us is the need to:

     o    effectively use established technologies;
     o    continue to develop our technical expertise; and
     o    respond to emerging industry standards and other technical changes.

     All of these changes must be met in a timely and cost-effective  manner. We
cannot assure you that we will succeed in effectively  meeting these  challenges
and our failure to do so could materially and adversely affect our business.

     Risks  Associated  with Sales  Outside of the United  States May  Adversely
Affect Our Business.  International sales represented  approximately 85% and 66%
of  our  net  revenues  for  the  years  ended   December  31,  2001  and  2002,
respectively.  We expect that international sales will continue to account for a
significant  portion of our net revenues in the future. To the extent that we do
not achieve and maintain substantial international sales, our business,  results
of  operations  and  financial  condition  could  be  materially  and  adversely
affected.

     Sales of our 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 our products more expensive and,  therefore,  potentially
less  competitive  outside the United States.  Additional  risks inherent in our
sales abroad include:

     o    the impact of  recessionary  environments  in  economies  outside  the
          United States;

     o    generally longer receivables collection periods;



                                       27
<PAGE>


     o    unexpected changes in regulatory requirements;

     o    tariffs and other trade barriers;

     o    potentially adverse tax consequences;

     o    reduced protection for intellectual property rights in some countries;

     o    the burdens of complying with a wide variety of foreign laws.

     These factors may have an adverse effect on our future  international sales
and,  consequently,   on  our  business,  financial  condition  and  results  of
operations.

     Our Operating  Results May Vary From Quarter to Quarter in Future  Periods,
and As A Result,  Our Stock  Price  May  Fluctuate  or  Decline.  Our  quarterly
operating results may fluctuate  significantly in the future due to a variety of
factors  that could  affect  our  revenues  or our  expenses  in any  particular
quarter. Factors that may affect our quarterly results include:

     o    our ability to attract and retain customers;

     o    development of competitive products;

     o    the short term nature of manufacturing and engineering orders to date;

     o    unforeseen changes in operating expenses;

     o    the loss of key employees; and

     o    unexpected revenue shortfalls.

     A  substantial  portion of our  operating  expenses is related to personnel
costs and overhead,  which we cannot adjust quickly and are therefore relatively
fixed in the short term. Our operating  expense levels are based, in significant
part, on our  expectations  of future  revenues on a quarterly  basis. If actual
revenues are below our  expectations,  our results of  operations  and financial
condition would be materially and adversely  affected because a relatively small
amount of our costs and expenses are  proportionate  with  revenues in the short
term.

     Due to all of the foregoing  factors and the other risks  discussed in this
Annual  Report,  it is  possible  that in some  future  periods  our  results of
operations may be below the expectations of investors and public market analysts
which may cause our stock price to fluctuate or decline.

     We Are Dependent Upon  Management and Technical  Personnel.  Our success is
highly  dependent  upon the  continued  services  of Devendar  Bains,  our Chief
Executive  Officer  .The  employment  agreement  terminates  April 30,  2005 and
contains  certain  covenants  not  to  compete  against  our  company  following
termination of employment  with our company.  We have obtained key man insurance
on the life of Mr. Bains in the amount of $1,000,000.  We cannot be sure whether
we will be able to replace.  Mr. Bains if his services  become  unavailable  or,
whether the proceeds of such  insurance  would be adequate to  compensate us for
the loss of his services.

     Due to the specialized  nature of our business,  we are highly dependent on
the  continued  service of, and on our ability to attract and retain,  qualified
technical  and  marketing   personnel,   particularly   those  involved  in  the
development of new products and processes and the manufacture and enhancement of
our existing products. In addition, as part of our team-based sales approach, we
dedicate  specific  design  engineers to service the  requirements of individual
customers.  The loss of any such engineer could adversely  affect our ability to
obtain  future  purchase  orders from the  customers to which such  engineer was
dedicated.  We have  employment or  non-competition  agreements with most of our
current  design  engineers  and  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,  could have a
material  adverse  effect on our  business,  financial  condition and results of
operations.

     We rely on the  Ability to Protect  Proprietary  Technology;  Risk of Third
Party Claims of  Infringement  May Affect Our  Business.  Our ability to compete
successfully  and achieve  future  revenue  growth will depend,  in part, on our
ability to protect  proprietary  technology and operate without  infringing upon
the  rights of others.  Although  there are no pending  lawsuits  regarding  our
technology or notices that we are



                                       28
<PAGE>

infringing  upon   intellectual   property  rights  of  others,   litigation  or
infringement  claims may 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 our business,  financial  condition,  and results of
operations.   We  generally  enter  into   confidentiality   and  non-disclosure
agreements  with  our  employees  and  limit  access  to  and   distribution  of
proprietary  information.  However, we cannot be sure whether such measures will
provide  adequate   protection  for  our  trade  secrets  or  other  proprietary
information,  or  whether  our trade  secrets  or  proprietary  technology  will
otherwise  become  known or  independently  developed  by our  competitors.  Our
failure to protect  proprietary  technology could have a material adverse effect
on our business, financial condition and results of operations.

     We Do Not Plan To Pay Dividends On Our Common Stock. We have never paid any
dividends on our common  stock and do not intend to pay  dividends on our common
stock  in the  foreseeable  future.  Any  earnings  that we may  realize  in the
foreseeable future will be retained to finance our growth.

     Governmental  Regulations  and  Environmental  Regulations Can Have a Large
Impact on Our Business. Our customers must obtain regulatory approval to operate
their base  stations.  The United States Federal  Communications  Commission has
regulations  that impose  stringent  radio  frequency  and  microwave  emissions
standards on the  telecommunications  industry.  Our  customers  are required to
comply with such regulations.  The failure of our customers to comply with these
regulations could materially adversely affect our business,  financial condition
and results of operations.  We manufacture  products according to specifications
provided by our  customers,  which  specifications  are  required to comply with
applicable regulations. We do not believe that costs involved with manufacturing
to meet specifications will have a material impact on our operations.  We cannot
be sure whether the adoption of future regulations would have a material adverse
affect on our business.

     We are  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  our
products.  We  believe  that we are  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 our company,
suspension of our production, alteration of our manufacturing process, cessation
of our operations or other actions,  which could materially and adversely affect
our business, financial condition and results of operations.

     The Limited  Public Market and Trading  Market May Cause  Volatility in Our
Stock  Price.  There has only been a public  market for our common  stock  since
January 1997 and we are not sure whether an active  trading market in our common
stock will ever be maintained.  In the absence of such a market, you may find it
more difficult to sell our common stock. 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 and  technology  based
companies.  The trading  price of our common  stock



                                       29
<PAGE>

is expected to be subject to significant  fluctuations in response to variations
in our quarterly  operating  results;  changes in analysts'  earnings  estimates
regarding our Company;  announcements of technological  innovations by us or our
competitors;  and 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 our common
stock.


     Penny Stock Regulations May Impose Certain Restrictions on Marketability of
Our Securities.  The SEC has adopted regulations which generally define a "penny
stock" to be any equity  security that has a market price of less than $5.00 per
share or an  exercise  price of less than  $5.00 per  share,  subject to certain
exceptions. Since our common stock is listed on The NASD OTC Electronic Bulletin
Board,  it is subject to the  definition  of "penny  stock and is subject to the
"penny stock" rules.  These rules 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:

o    Make a special suitability  determination with respect to each purchaser of
     securities;

o    Receive the purchaser's  written  consent to the  transaction  prior to the
     purchase;

o    Deliver,  prior to the purchase, a risk disclosure document mandated by the
     SEC relating to the penny stock market;

o    Disclose  the  commission   payable  to  both  the  broker-dealer  and  the
     registered representative;

o    Disclose current quotations for such securities;

o    Disclose whether the broker-dealer has control over the particular  market;
     and

o    Deliver  monthly  statements  disclosing  recent price  information for the
     securities and information on the limited market in penny stocks.

     Consequently,   the  "penny  stock"  rules  may  restrict  the  ability  of
broker-dealers  to sell our securities and adversely affect your ability to sell
our  securities in the secondary  market and the price of our  securities in the
secondary market.

     There Are Risks  Associated With Our Stock Trading On The NASD OTC Bulletin
Board  Rather  Than A  National  Exchange.  There are  significant  consequences
associated  with our stock trading on the NASD OTC Bulletin  Board rather than a
national  exchange.  The effects of not being able to list our  securities  on a
national exchange include:

o    Limited release of the market prices of our securities;
o    Limited news coverage of us;
o    Limited interest by investors in our securities;
o    Volatility of our stock price due to low trading volume;


                                       30
<PAGE>

o    Increased  difficulty in selling our  securities  in certain  states due to
     "blue sky" restrictions;
o    Limited ability to issue additional securities or to secure financing.

     Anti-Takeover  Provisions May Adversely Affect the Value of Our Outstanding
Securities. Pursuant to our Certificate of Incorporation, our 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 they may  determine  without
stockholder  approval.  The rights of the  holders  of our common  stock will be
subject to, and may be  adversely  affected by, the rights of the holders of any
preferred stock outstanding or that may we may issue 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 our  company  without  further  action by the
stockholders.  In addition,  we are subject to the  anti-takeover  provisions of
Section 203 of the Delaware  General  Corporation  Law. Section 203 prohibits us
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 our company.



                                       31
<PAGE>

     Additional  Authorized Shares of Common Stock and Preferred Stock Available
for  Issuance  May  Adversely  Affect the  Market.  We are  authorized  to issue
25,000,000  shares of our common  stock.  As of December  31,  2002,  there were
9,676,500 shares of our common stock issued and  outstanding,  which amount does
not include:

o    (1)      20,000 exercisable  at  $1.00  through  May  2010
o    (2)      20,000 exercisable at $7.00 through  December  2004
o    (3)      30,000 exercisable at $6.00 through November 2004
o    (4)      50,000  exercisable  at $2.00 through December 2004
o    (5)      50,000 exercisable  at  $4.00  through  December  2004
o    (6)      16,000 exercisable at $1.75 through December 2004
o    (7)      41,500 exercisable at $1.80 through July 31, 2004
o    (8)      207,500 exercisable at $3.00 through July 31, 2004
o    (9)      55,000 exercisable at  $1.20  through  September  30,  2004
o    (10)     300,000 exercisable at $2.00 through December 31, 2005
o    (11)     75,000 exercisable at $.96 through March 2007
o    (12)     80,000 exercisable  at  $1.50  through  December  2004.
o    2,051,000  shares of our common  stock  issuable  upon  exercise of options
     granted to our employees and Directors at exercise  prices ranging  between
     $0.20 and $4.00 per share.

     As of December 31, 2002, after reserving a total of 2,996,000 shares of our
common  stock  for  issuance  upon the  exercise  of all  options  and  warrants
described  above,  we will have at least  12,327,500  shares of  authorized  but
unissued  common  stock  available  for  issuance  without  further  shareholder
approval.  Any issuance of  additional  shares of our common stock may cause our
current shareholders to suffer significant dilution,  which may adversely affect
the market for our securities.

     In addition,  we have 1,000,000 shares of authorized preferred stock. While
we have no present plans to issue any additional  shares of preferred stock, our
Board of Directors has the authority,  without shareholder  approval,  to create
and  issue one or more  series of such  preferred  stock  and to  determine  the
voting,  dividend  and other  rights of holders  of such  preferred  stock.  The
issuance  of any of our  preferred  stock  could have an  adverse  effect on the
holders of our common stock.

     Shares  Eligible  for Future Sale May  Adversely  Affect the Market.  As of
December  31,  2002 we had  9,676,500  shares of our  common  stock  issued  and
outstanding.  Of these 9,676,500 shares of issued and outstanding  common stock,
approximately  6,292,143 shares are considered  "restricted  securities".  These
"restricted  securities"  may be sold pursuant to Rule 144 of the Securities Act
of 1933 as follows:



                                       32
<PAGE>

o    Approximately  6,283,894  shares of our common stock may  currently be sold
     pursuant to Rule 144;

o    Approximately 8,159 shares of our common stock may be sold pursuant to Rule
     144 commencing June 2003

     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 our company may sell is not so  limited.  Non-affiliates  may sell
without volume  limitation  their shares held for two years if there is adequate
current public information available concerning our company.

     The sale in the public  market of our  common  stock may  adversely  affect
prevailing market prices of our common stock.

     The Exercise of Outstanding  Options and Warrants May Adversely  Affect the
Market for Our Common  Stock.  As of December  31,  2002,  we had the  following
outstanding stock options and warrants to purchase shares of our common stock:

           (1)    20,000 exercisable  at  $1.00  through  May  2010
           (2)    20,000 exercisable at $7.00 through  December  2004
           (3)    30,000 exercisable at $6.00 through November 2004
           (4)    50,000  exercisable  at $2.00 through December 2004
           (5)    50,000 exercisable  at  $4.00  through  December  2004
           (6)    16,000 exercisable at $1.75 through December 2004
           (7)    41,500 exercisable at $1.80 through July 31, 2004
           (8)    207,500 exercisable at $3.00 through July 31, 2004
           (9)    55,000 exercisable at  $1.20  through  September  30,  2004
           (10)   300,000 exercisable at $2.00 through December 31, 2005
           (11)   75,000 exercisable at $.96 through March 2007
           (12)   80,000 exercisable  at  $1.50  through  December  2004.

     In  addition,  we have  reserved  2,051,000  shares of our common stock for
issuance  pursuant to outstanding  employee  stock options.  The exercise of our
outstanding  options and warrants  will dilute the  percentage  ownership of our
stockholders.  Sales in the public  market of our common stock  underlying  such
options or warrants may adversely affect prevailing market prices for our common
stock.  Moreover,  the terms  upon  which we 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 we would, in all likelihood,  be able to obtain any needed capital on terms
more favorable to us those provided in such securities.




                                       33
<PAGE>

     Limitation  on Director  Liability  May  Adversely  Affect the Value of our
Common Stock.  As permitted by Delaware law, our  Certificate  of  Incorporation
limits the liability of our  directors for monetary  damages for breach of their
fiduciary  duty except for  liability in certain  instances.  As a result of our
charter  provision  and Delaware  law,  you may have  limited  rights to recover
against our directors for breach of their fiduciary duty.

Item 2.  PROPERTIES.

     The Company leases (from an unaffiliated party) approximately 11,000 square
feet, at 59 LaGrange Street,  Raritan,  NJ 08869,  which serves as the Company's
executive offices and manufacturing facility. The lease term expires on July 13,
2004. The annual rental is $71,250 plus the Company's share of real estate taxes
and other occupancy costs.

Item 3.  LEGAL PROCEEDINGS

     Other than as set forth  below,  the Company is not a party to any material
pending 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 a party to the following matters:

1. HIGH GAIN ANTENNA CO., LTD. OF KOREA

The Company (as well as an officer and  director of the Company) was a defendant
in a  complaint  brought in the  Superior  Court of New  Jersey,  Law  Division,
Somerset  County,  by High Gain Antenna Co., Ltd. of Korea in November 2000. The
complaint  sought  damages for an alleged breach of a contract for the repair of
certain  equipment  purchased by plaintiff  from a distributor  of the Company's
products and the Company. A trial commenced on May 7, 2002, and on May 13, 2002,
the jury  brought in a verdict  against the Company  for  $400,000.  The Company
filed a motion in the Law Division for a new trial, which was denied, and gave a
notice  of appeal of the  verdict  and  judgment  to the  Superior  Court of New
Jersey,  Appellate  Division.  2. A stipulated  settlement was signed on January
3,2003.According to the settlement the Company would pay $200,000 in cash, to be
paid in installments. $75,000 has been paid to date; the balance of $125,000 has
to be paid in quarterly  payments of $25,000.  The Company  also issued  700,000
shares of common stock.



                                       34
<PAGE>

2. AMPLIDYNE,  INC. V. WAYNE FOGEL,  DIGITAL  COMMUNICATIONS  NETWORK,  INC. AND
INTERNET NETWORK CORPORATION

On May 30,  2002,  the  Company  filed a  two-count  lawsuit  against  the above
mentioned defendants in the Superior Court of New Jersey, Law Division, Somerset
County, seeking, among other things,  declaratory relief that the Company is not
obligated to pay a finders fee (in connection with the Company's purchase of the
Darwin Assets), and that the Company is entitled to monetary damages as a result
of  defendant's  false  misrepresentations.  On July 10,  2002,  the  matter was
removed to the United States District Court of New Jersey but later  transferred
back to the United States  Bankruptcy  Court and then  transferred to the United
States  District  Court of New  Jersey.  On July 29,  2002,  defendants  filed a
counterclaim seeking $200,000 in damages as a result of a finders fee agreement.
In January 2003, the matter was  transferred to the United States District Court
for the Middle District of Florida.  The defendants sought a further transfer to
the United States Bankruptcy Court for the Middle District of Florida,  but such
motion was denied.  Although the Company is confident in its position, it cannot
predict  the  outcome of the case and any  negative  outcome may have a material
adverse effect on the Company's financial position or prospects.

3. The  Company  was  served  with  class  action  complaints  on  behalf of all
purchasers of the Company's common stock and warrants between  September 9, 1999
and September 14, 1999. By orders of the District  Court for the District of New
Jersey, the actions were consolidated and lead plaintiffs were appointed.  On or
about March 24,  2000,  the Company was served with a  consolidated  and amended
class action complaint on behalf of purchasers of the Company's common stock and
warrants  between  September  9, 1999 and  September  17, 1999.  That  complaint
alleged that the Company and other individuals  violated the federal  securities
laws by, among other  things,  the  issuance of a press  release on September 9,
1999.  Although  the  Company  believed  that the  complaint  had no  merit  and
vigorously  contested  it, the Company and the other parties to the class action
reached a settlement  on May 2, 2001,  which was approved by the District  Court
for the  District of New Jersey on August 14, 2001 (which  became  effective  on
September 14, 2001)  Pursuant to the  settlement  agreement,  a settlement  fund
consisting  of  $750,000  in cash  ($50,000  of which was paid  directly  by the
Company) was  established  for the benefit of members of the class. In addition,
the Company issued 324,486 freely tradable shares of its common stock (which was
valued at  $500,000  as of May 2,  2001) on behalf  of the  class  members.  The
Company  had  recorded  the  cost  of the  litigation,  including  a  credit  to
Additional Paid-In Capital for the value of the settlement that has been settled
by the  issuance of common  stock.  In addition the Company is subject to an SEC
formal  order of private  investigation  relating to the  subject  matter of the
class action. The Company has responded to the SEC requests.  In April 2003, the
SEC indicated that it intends to file a civil complaint  against the Company and
Devendar S. Bains.  The Company and Mr. Bains are negotiating with the SEC in an
attempt to reach a consensual resolution of this matter.

Item 4. Submission Of Matters To A Vote Of Security Holders

There were no matters submitted to a vote of stockholders in 2002.



                                       35
<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 Warrants  were  redeemed in May 2000.
The Common Stock was regularly  quoted and traded on the Nasdaq  SmallCap Market
under the symbol AMPD,  through  January 13, 2003.  Since January 14, 2003,  the
common stock trades on the NASD OTC Bulletin Board under the symbol AMPD.OB.

     The following table sets forth the range of high and low closing prices for
the Company's  Common Stock for fiscal years 2001 and 2002 and for the period of
January 1, 2003 up to March 31, 2003 as reported by the Nasdaq SmallCap  Market,
or the NASD  OTCBB,  as the case may be.  The  trading  volume of the  Company's
securities  fluctuates and may be limited during certain  periods.  As a result,
the liquidity of an investment in the Common Stock may be adversely affected.

Common Stock

2001 Calendar Year
------------------
                              High    Low

January 1-March 31            2.78   1.250
April 1-June 30               1.95    1.13
July 1-September 30           1.57     .79
October 1-December 31         1.25     .69

2002 Calendar Year
------------------

January 1 - March 31          1.37     .86
April 1-June 30               1.07     .58
July1-September 30             .57     .10
October 1-December 31          .28     .08

2003 Calendar Year
------------------

January 1-March 31             .15     .05


On March 31, 2003, the closing price of the Common Stock as reported on the NASD
OTCBB was $.08.  On March 31, 2003 there were  9,676,500  shares of Common Stock
outstanding,  held of record by approximately 80 record holders (with over 2,300
beneficial owners).



                                       36
<PAGE>

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

     Results of  Operations - Fiscal Year ended  December  31, 2002  compared to
Fiscal Year ended December 31, 2001.

     Revenues for the fiscal year ended  December 31, 2002 decreased by $591,696
from $2,205,428 to $1,613,732, or 27% compared to the fiscal year ended December
31,  2001.  The  primary  reason for the  decrease  was the  general  decline in
purchasing  of  equipment  by the  telecommunications  industry.  The decline is
largely represented by the decrease in sales to European  customers,  which went
down to $711,861 in 2002 from $1,361,316 in 2001, a decrease of $649,455 or 48%.
Sales substantially declined in the first three quarters of 2002. Fourth quarter
sales represented  approximately 33% of the total sales for the year ($531,200).
Coupled with the staff  reductions  and other  aggressive  cost cuts, the fourth
quarter losses were significantly reduced.

     The majority of the  amplifier  sales for the year ended  December 31, 2002
were  obtained  from the  Wireless  Local  Loop  amplifier  products  to a major
European customer. The Company has also supplied 3.5GHz linear amplifiers to its
major North American customer.

     The  Company  has  continued  to develop  its IMT 2000  amplifiers  for the
worldwide 3G market,  however,  deployment of this  technology has been delayed.
The  Company  has  focused  its sales and  marketing  efforts in the more stable
United States, European and Canadian markets.

     Cost of sales  was  $1,520,237  or 94% of  sales  (including  an  inventory
write-down of $233,995) during the year ended December 31, 2002, compared to 58%
during the same period for 2001. Our fixed  overhead  costs are relatively  high
for our current sales volume.  Excluding the inventory  write-down,  the cost of
sales for the year ended December 31, 2002 was  $1,286,242 or 80% of sales.  The
decline in gross margin was principally attributable to pricing pressures caused
by business  conditions in the  telecommunications  industry and a write-down of
obsolete  inventory  in the  3rd  quarter  of  2002 of  $233,995.  Gross  margin
decreased from the year ended December 31, 2001 because of lower amplifier sales
resulting  in higher fixed  direct  costs and lower  margins for the  high-speed
wireless Internet  products.  The Company is continuing to assess cost reduction
of its products and sales volume increases to improve gross margins in 2003.

     Selling,   general  and  administrative  expenses  (excluding  stock  based
compensation)  increased in 2002 by $183,943 to $2,088,433 from  $1,904,490,  in
2001.   Expressed  as  a  percentage   of  sales,   the  selling,   general  and
administrative  expenses  (excluding stock based compensation) were 129% in 2002
and 86% in 2001. The principal factors  contributing to the increase in selling,
general and  administrative  expenses were related to increases in bad debts and
salaries,  offset by labor  cutbacks and general cost cutting in the 3rd and 4th
quarters.



                                       37
<PAGE>

     Research,  engineering  and  development  expenses were 25% of net sales in
2002  compared to 27% in 2001. In 2002 and 2001,  the principal  activity of the
business related to the design and production of product for OEM  manufacturers,
particularly  for  the  IMT  2000  and  3.5  GHz  single  channel  products  and
refinements to the High Speed Internet 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.   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 and other income in 2001 of $50,915 due to
influx of new  capital  during  2000 and 2001 from our  private  placements  and
exercise of warrants  and options.  Interest  income went down to $3,170 in 2002
because our cash balances  which we have  historically  temporarily  invested in
interest  bearing  accounts  declined by $709,879 and interest  rates went down.
This is a decline of approximately  102%. Interest income declined by $47,745 or
approximately 94% , which is consistent with the steady decline in cash balances
and interest  rates in 2002. The Company also sold New Jersey Net operating loss
carryforwards  pursuant  to  the  New  Jersey  Technology  Certificate  Transfer
Program, receiving $163,687 in 2002 and $189,744 in 2001.

     Interest  expense was $932 in 2002 compared to $864 in 2001 and principally
related to balances due on capitalized leases for testing equipment.

     Actual and estimated  litigation  settlement costs (see financial statement
Note I -  Litigation)  have been  provided in both 2002 and 2001, to reflect our
known exposure in litigation against the Company,  as well as the actual cost of
the settlement of the following matters:

     o    Class  action  lawsuit  in 2001  with a cash  cost of  $50,000  to the
          Company  plus the issuance of  free-trading  common  shares  valued at
          $500,000.

     o    Settlement  of the High Gain Antenna  matter for $200,000 plus 700,000
          shares  of  restricted  common  stock  of the  Company  (total  charge
          $229.400).

     o    Because of the remoteness of any further assertions in another matter,
          we determined  that the charge of $85,000 from 2001 should be reversed
          in 2002.

     Stock  compensation  and financing  expenses of $140,000 for the year ended
December 31, 2001 is due to the financing cost associated with warrants extended
and shares issued. There was no stock compensation cost for 2002.

     As a result of the foregoing, the Company incurred net losses of $2,380,027
or $0.25 per share for the year ended December 31, 2002 compared with net losses
of $2,024,882 or $0.26 per share for the same period in 2001.



                                       38
<PAGE>

     Results of  Operations - Fiscal Year ended  December  31, 2001  compared to
Fiscal Year ended December 31, 2000

     Revenues  for the fiscal  year  ended  December  31,  2001  decreased  from
$2,595,090 to $2,205,429,  or 15% compared to the fiscal year ended December 31,
2000. The primary reason for the decrease was the general  decline in purchasing
of  equipment  by  the  telecommunications  industry.  The  decline  is  largely
represented by the decrease in sales to Canadian  customers,  which went down to
$264,488 in 2001 from $666,069 in 2000, a decrease of $401,581 or 60%.

     The majority of the sales for the year 2001 were obtained from the Wireless
Local Loop amplifier products to a major European customer. The Company has also
supplied 900 MHz cellular  multi  carrier  linear  amplifiers to its major North
American  customer,  as well as 3.5GHz  amplifiers  for the wireless  local loop
products.

     The  Company  has  continued  to develop  its IMT 2000  amplifiers  for the
worldwide 3G market,  however,  deployment of this  technology has been delayed.
The  Company  has  focused  its sales and  marketing  efforts in the more stable
United States,  European and Canadian markets. It is maintaining a more cautious
approach  towards  the  South  Korean  market  due to the  significant  currency
fluctuations and purchase order cancellations during the past few years in South
Korea.

     Cost of sales  as a  percentage  of sales  was 58%  during  the year  ended
December  31,  2001,  compared  to 95%  during the same  period  for 2000.  This
decrease can be attributed to the decrease in the costs of certain components of
our products with selling prices to customers remaining relatively stable and to
the  maturation  of  our  manufacturing   processes   resulting  in  substantial
reductions in production  costs.  The stability of our selling prices,  combined
with the decline of component costs, improved manufacturing efficiencies through
automation and the reduction in subcontracted  work resulted in our higher gross
profits.  Our fixed  overhead  costs are  relatively  high for our current sales
volume.  The increase in inventory held at year-end was in part due to component
purchases in  anticipation of orders from our major  amplifier  customers.  Lead
times for imported  finished  products and components  required advance stocking
for certain  essential items. The Company is continuing to assess cost reduction
of its products and sales volume increases to improve gross margins in 2002.

     Selling,   general  and  administrative  expenses  (excluding  stock  based
compensation)  decreased in 2001 by $81,680 to $1,904,490  from  $1,986,170,  in
2000.   Expressed  as  a  percentage   of  sales,   the  selling,   general  and
administrative  expenses were 86% in 2001 and 77% in 2000. The principal factors
contributing  to the increase in selling,  general and  administrative  expenses
were related to decreases in advertising, depreciation and professional fees.

     Research,  engineering  and  development  expenses were 27% of net sales in
2001  compared to 23% in 2000. In 2001 and 2000,  the principal  activity of the
business related


                                       39
<PAGE>

to the design and production of product for OEM manufacturers,  particularly for
the IMT 2000 and 3.5 GHz single channel 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.  Research,  engineering and development  expenses  remained
relatively  unchanged from 2000 to 2001. 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 and other income in 2001 of $50,915 due to
influx of new  capital  during  2000 and 2001 from our  private  placements  and
exercise of warrants  and  options.  Interest  income went down because our cash
balances which we have  historically  temporarily  invested in interest  bearing
accounts  declined  by  $1,268,000.  This is a  decline  of  approximately  65%.
Interest  income  declined by  approximately  56%, which is consistent  with the
steady  decline  in cash  balances  and  interest  rates  in 2001,  compared  to
increases  balances in 2000. The Company also sold New Jersey Net operating loss
carryforwards  pursuant  to  the  New  Jersey  Technology  Certificate  Transfer
Program, in both 2001 and 2000.

     Interest expense  decreased in 2001 because of the decrease in balances due
on capitalized leases on test equipment.

     Estimated and actual litigation settlement costs have been provided in both
2001 and 2000, to reflect our estimated or known exposure in litigation  against
the  Company,  as well as the actual cost of the  settlement  of a class  action
lawsuit in 2001 with a cash cost of $50,000 to the Company  plus the issuance of
free-trading common shares valued at $500,000.  See financial statement Note I -
Litigation.

     Stock  compensation  and financing  expenses of $140,000 for the year ended
December 31, 2001 compared to $114,546 for the comparable  2000 period is due to
the financing cost associated with warrants extended and shares issued.

     As a result of the foregoing, the Company incurred net losses of $2,024,882
or $.26 per share for the year ended  December 31, 2001 compared with net losses
of $2,440,045 or $.34 per share for the same period in 2000.


     Liquidity and Capital Resources

     Liquidity  refers to our  ability to generate  adequate  amounts of cash to
meet  our  needs.  We have  been  generating  the  cash  necessary  to fund  our
operations from continual  loans from the President and Chief Executive  Officer
of the  Company,  Devendar  Bains.  We have  incurred  a loss in each year since
inception..  It is possible that we will incur further  losses,  that the losses
may fluctuate, and that such fluctuations may be substantial. As of December 31,
2002, we had an accumulated deficit of $21,949,679.  Potential immediate sources
of liquidity are loans from Mr. Bains.  Another potential source of liquidity is
the sale of restricted  shares of our common  stock,  but there are no immediate
plans for such sale.



                                       40
<PAGE>

     As of December  31,  2002,  our current  liabilities  exceeded our cash and
receivables  by $533,254.  Our current ratio was 1.43 to 1.00,  but our ratio of
accounts receivable to current liabilities was only 0.45 to 1.00. This indicates
that we will have  difficulty  meeting our  obligations as they come due. We are
carrying $926,713 in inventory,  of which $489,542  represents  component parts.
Based on last years usage,  we are  carrying 186 days worth of parts  inventory.
Because of the lead times in our manufacturing  process,  we will likely need to
replenish many items before we use everything we now have in stock. Accordingly,
we will need more cash to replenish our component parts inventory  before we are
able realize cash from all of our existing inventories.

     As of December  31, 2002,  we had an overdraft of $11,939  compared to cash
and cash equivalents of $697,940 at December 31, 2001. Overall our cash and cash
equivalents went down $709,879 during 2002. Our cash used for operating  actives
was   $1,587,122,   which  was   funded  by  loans  and  salary   deferrals   by
officer/stockholders  of  $155,200  and  proceeds  from  private  placements  of
$724,201 (including collection of subscriptions receivable at December 31, 2001)
as well as using up all of the cash we started the year with of $697,940.

     The allowance for doubtful  accounts on trade  receivables  increased  form
$131,104  (23% of accounts  receivable  of $580,294) in 2001 to $143,000  (25%of
accounts receivable of $583,506) in 2002. Because of our relatively small number
of customers and low sales volume,  accounts  receivable balances and allowances
for doubtful  accounts do not reflect a  consistent  relationship  to sales.  We
determine   our   allowance   for   doubtful   accounts   based  on  a  specific
customer-by-customer  review of  collectiblity.  In 2001,  we had several  large
outstanding  balances that we had doubt we would collect.  In 2002, we concluded
that several of those doubtful  accounts were in fact not  collectible  and they
were  charged off against the  previously  established  reserve.  Because of the
general decline in business in the  telecommunications  sector,  we had to write
off even more accounts in 2002. Bad debts expense increased from $67,592 in 2001
to $291,471 in 2002, even though the reserve increased only slightly by $11,896,
because of the direct write-offs during the year.

     Our  inventories  decreased  by $254,969  to  $926,713 in 2002  compared to
$1,181,682  in 2001,  a decrease  of 22% We  believe  that the  reasons  for the
decreased inventories were primarily due to the write-down in the 3rd quarter of
2002 of $233,995.

     During 2002 we raised $540,000 from the privately placed sale of securities
and collected  $180,000 from  subscriptions  receivable for our preferred  stock
offering at December 31, 2001 for a total of $720,000.  During 2001, the Company
raised  $1,054,750  ($180,000 of which was collected in 2002) from the privately
placed sale of securities  and from the exercise of warrants and options,  which
were  used  for  working  capital  purposes.   The  Company  has  several  lease
obligations for its premises and certain  equipment and an automobile  requiring
minimum  monthly  payments of  approximately  $5,900 through


                                       41
<PAGE>

2004.  Although  the Company did not  convert  salaries to officers  through the
issuance  of  Common  Stock  in 2002 or 2001,  it may to do so in 2003.  To help
alleviate the cash flow  difficulties,  the Chief  Executive  Officer  agreed to
defer an aggregate of $54,000 of salaries. Additionally, the Secretary agreed to
defer $9,000 and the Vice  President of Operations  also agreed to defer $20,000
of salaries.

     The  Company  continues  to explore  strategic  relationships  with  ISP's,
customers  and  others,   which  could  involve  jointly   developed   products,
revenue-sharing models, investments in or by the Company, or other arrangements.
There can be no assurance that a strategic relationship can be consummated.

     In 2001, the Company settled a class action lawsuit and another  litigation
matter. The class action resulted in a cost to the Company of $550,000,  $50,000
of which was cash and $500,000 in the Company's  common stock.  The other matter
was settled  for cash  payments  aggregating  $200,000,  with a down  payment of
$75,000 in March 2003 and $25,000 quarter from June 2003 through May 2004

     In the past,  the officers of the Company have  deferred a portion of their
salaries  or  provided  loans  to  the  Company  to  meet  short-term  liquidity
requirements.  Where possible,  the Company has issued stock or granted warrants
to certain vendors in lieu of cash payments,  and may do so in the future. 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.

     With no remaining  cash and no near term  prospects of private  placements,
options or warrant exercises and reduced revenues,  we believe that we will have
great  difficulty   meeting  our  working  capital  and  litigation   settlement
obligations  over the next 12 months.  We are presently  dependent on cash flows
generated  from  sales and loans  from  officers  to meet our  obligations.  Our
failure to consummate a merger. or substantially  improve our revenues will have
serious adverse consequences and, accordingly, there is substantial doubt in our
ability to remain in business over the next 12 months. There can be no assurance
that any 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.




                                       42
<PAGE>

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.

     On February 15, 2002,  Grant Thornton LLP ("Grant  Thornton") was dismissed
as the independent accountants for the Company. The reports of Grant Thornton on
the Company's  financial  statements  within the two most recent fiscal years or
any  subsequent  interim  period,  contain no adverse  opinion or  disclaimer of
opinion and were not  qualified  or modified as to  uncertainty,  audit scope or
accounting principles.

     The Company's Board of Directors and Audit Committee approved the dismissal
of Grant  Thornton.  During the two most recent fiscal years and any  subsequent
interim   period   preceding   Grant   Thornton's   dismissal,   there  were  no
disagreement(s)  with Grant  Thornton on any matter of accounting  principles or
practices,  financial statement disclosure or auditing scope or procedure, which
disagreement(s),  if not resolved to the  satisfaction of Grant Thornton,  would
have caused it to make reference to the subject matter of the disagreement(s) in
connection with its report.

     No  "reportable  events" (as defined in Item 304 (a) (1) (iv) of Regulation
S-B)  occurred  during  the  Company's  two most  recent  fiscal  years  and any
subsequent  interim period,  preceding the accounting  firm of Grant  Thornton's
dismissal.




                                       43
<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
as of the date of this filing are set forth below:


<TABLE>
<CAPTION>
Name                                     Age          Position(s) with the Company
----                                     ---          ----------------------------
<S>                                      <C>
Devendar S. Bains*                       52           Chairman of the Board,  Chief  Executive  Officer,  Treasurer  and
                                                      Director


Tarlochan Bains                          53           Vice President-Operations and Director

Nirmal Bains                             45           Secretary

Charles J. Ritchie*                      59           Director

Manish V. Detroja*                       35           Director
</TABLE>


*  Member of the Compensation Committee and Audit Committee.

Background of Executive Officers and Directors

Devendar  S. Bains has been  Chairman  of the Board,  Chief  Executive  Officer,
Treasurer and a director of the Company since its inception in 1988. He was also
President of the Company from inception  through  September  2001.  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  Bachelors  Degree  in  Electronic
Engineering  from  Sheffield  University,  England,  and  a  Masters  Degree  in
Microwave  Communications  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  Operations  since March 2000 and a
director  since 1991.  From 1991 through March 2000,  he was the Company's  Vice
President of Sales and Marketing. Previously, Mr. Bains was Technical Manager at
Land Rover in Solihull,  England. He has a Higher National Diploma in Mechanical
Engineering  from  Hatfield  Polytechnic,   England  and  a  Masters  Degree  in
Automotive  Engineering  from Cranfield  Institute of Technology,  England.  Mr.
Bains is the  brother  of  Devendar  S. Bains and the  brother-in-law  of Nirmal
Bains.



                                       44
<PAGE>

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 been an International  Business Development director
for Europe,  Middle East 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
electronics  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.  He is currently the president and chief
executive officer of CCI. Mr. Detroja is a graduate of Temple University and has
a B.S. in Electrical Engineering Technology.

     The  Company  has   established  an  audit  committee  and  a  compensation
committee.

     The audit committee reviews, among other matters, 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
adopted an audit  committee  charter in 2002 and  intends to adopt a new charter
which conforms to the requirements of the Sarbanes-Oxley Act of 2002.

     The audit  committee  has  reviewed  and  discussed  the audited  financial
statements included in the Company's Annual Report on Form 10-KSB for the fiscal
year ended December 31, 2002 with management.  The audit committee has discussed
with the independent auditors the matters required to be discussed by SAS 61, as
may be modified or  supplemented.  The audit  committee has received the written
disclosures   and  the  letter  from  the  independent   auditors   required  by
Independence Standards Board Standard No. 1, as may be modified or supplemented,
and has discussed  with the  independent  auditors the  auditors'  independence.
Based on the review and discussions noted above, the audit committee recommended
to the Board of Directors that the audited  financial  statements be included in
the Company 2002 Annual Report on Form 10-KSB.



                                       45
<PAGE>

     The audit committee consists of three members, two of whom (Messrs. Ritchie
and Detroja) are  "independent".  Mr.  Devendar Bains is the third member of the
committee. The audit committee met four times during fiscal year 2002. The Board
intends to take appropriate action that may be required under the Sarbanes-Oxley
Act of 2002 and revised  listing  standards of the  applicable  stock markets to
assure  that all  members of the Audit  Committee  are  independent  under those
rules.

     For the year ended  December 31, 2002,  the Company  incurred  professional
fees to its auditors in the amount of $42,280,  all of which related to auditing
and quarterly review services.  No non-audit  services have been provided to the
Company by its current auditor.

     The compensation  committee  reviews  executive  salaries,  administers any
bonus,  incentive  compensation  and  stock  option  plans of the  Company,  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 V. Detroja. The compensation  committee met
four times during fiscal year 2002.

     Each non-employee 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. Directors who are employees of the Company are not paid any fees
or other  remuneration  for service on the Board or any of the committees.  Each
non-employee  director  may receive  options to purchase  Common  Stock or other
remuneration.  The  members  of the Board of  Directors  intend to meet at least
quarterly during the Company's fiscal year, and at such other times duly called.

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

     Section 16(a) of the Securities  Exchange Act of 1934 (the "Exchange  Act")
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  (the "SEC")
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  stockholders  are required by SEC regulation to furnish the Company
with copies of all Section 16(a) forms they file.

     To the Company's  knowledge,  based solely upon its review of the copies of
such reports  furnished to the Company  during the year ended December 31, 2001,
all Section 16(a) filing requirements applicable to its officers,  directors and
greater than ten percent beneficial owners were satisfied.



                                       46
<PAGE>

Item 10. Executive Compensation

Compensation of Directors and Executive Officers

Summary Compensation Table

     The  following  table sets  forth the  aggregate  compensation  paid by the
Company  for the years  ended  December  31,  2000,  2001 and 2002 for its Chief
Executive Officer and Vice President,  respectively.  Each non-employee 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.


<TABLE>
<CAPTION>
                                                                                            Long Term Compensation
                                                                                   -----------------------------------------
                                             Annual Compensation
                                                                                  Awards                      Payouts
                                                                       -----------------------------    --------------------

                                                                       Restricted      Securities
Name of Individual                                      Other Annual   Stock           Underlying       LTIP      All Other
and Principal Position     Year      Salary     Bonus   Compensation     Awards     Options/SARS (#)    Payouts     Comp.
                          ------ ----------- --------- --------------- ----------- -------------------- --------- ----------
<S>                       <C>    <C>                   <C>
Devendar S. Bains,        2002   $162,000              $20,000(1)
Chairman,                        (2)
Chief Executive Officer,
And Treasurer
                          2001   $162,000              $20,000(1)
                          2000   $162,000              $20,000(1)


Tarlochan Bains,          2002   $100,000(3)
Vice President            2001   $125,000
And Director              2000   $105,000


</TABLE>

(1)  Represents  payment for health  insurance and  automobile  insurance  lease
     payments  on  behalf  of such  individual  but  does not  include  deferred
     compensation.
(2)  Includes $54,000 accrued but unpaid at December 31, 2002
(3)  Includes $20,000 accrued but unpaid at December 31, 2002

Employment Agreements

     The Company entered into employment  agreements with each of Devendar Bains
(Chairman,  Chief  Executive  Officer  and  Treasurer),  Tarlochan  Bains  (Vice
President - Operations),  and Nirmal Bains (Secretary),  which, as extended, now
expire on April 30,  2005.  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


                                       47
<PAGE>

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 following termination of employment.

     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 December 31, 1998,  accrued and unpaid salary in the aggregate amount of
$195,000  owed  as of  September  30,  1998 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 (based upon the closing
sales price of the Common Stock as of September 30, 1998).

     On March 31, 1999,  accrued and unpaid  salary in the  aggregate  amount of
$20,717 owed as of December 31, 1998 to Devendar S. Bains  ($10,566),  Tarlochan
Bains ($6,629) and Nirmal Bains ($3,522) were forgiven. In consideration of such
forgiveness of accrued salary, the Company issued 4,025, 2,526 and 1,342 shares,
respectively,  to such persons (based upon the closing sales price of the Common
Stock as of March 31, 1999).

     On March 31, 1999,  accrued and unpaid  salary in the  aggregate  amount of
$41,920  owed as of March 31,  1999 to Devendar  S. Bains  ($14,346),  Tarlochan
Bains  ($25,474) and Nirmal Bains ($2,100) were forgiven.  In  consideration  of
such  forgiveness of accrued  salary,  the Company  issued 5,465,  9,704 and 800
shares, respectively, to such persons (based upon the closing sales price of the
Common Stock as of March 31, 1999).

     On June 30,  1999,  accrued and unpaid  salary in the  aggregate  amount of
$57,546 owed as of June 30, 1999 to Devendar S. Bains ($27,424), Tarlochan Bains
($22,822) and Nirmal Bains  ($7,300) were  forgiven.  In  consideration  of such
forgiveness  of accrued  salary,  the Company  issued  15,398,  12,815 and 4,099
shares, respectively, to such persons (based upon the closing sales price of the
Common Stock as of June 30, 1999).

     On September 30, 1999, accrued and unpaid salary in the aggregate amount of
$38,541 owed as of September 30, 1999 to Devendar S. Bains ($20,885),  Tarlochan
Bains ($12,986) and Nirmal Bains ($4,700),  were forgiven.  In  consideration of
such  forgiveness of accrued  salary,  the Company  issued 3,358,  2,088 and 756
shares, respectively, to such persons (based upon the closing sales price of the
Common Stock on September 29, 1999).

     On December 31, 1999,  accrued and unpaid salary in the aggregate amount of
$22,369 owed as of December 31, 1999 to Devendar S. Bains  ($14,346),  Tarlochan
Bains ($5,923) and Nirmal Bains ($2,100),  were forgiven.  In  consideration  of
such  forgiveness of accrued  salary,  the Company  issued 3,566,  1,060 and 376
shares, respectively, to such



                                       48
<PAGE>

persons  (based upon the closing sales price of the Common Stock on December 31,
1999).

     There were no conversion of unpaid salary into equity from 2000 to 2002.

Stock Option Plans and Agreements

     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 Stock
Option Plan (as amended,  the "Option Plan").  The purpose of the 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") or non-qualified stock options ("NQOs").

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

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

     The total  number of shares  with  respect to which  options may be granted
under the Option Plan is currently  2,225,000.  Options may not be granted to an
individual  to the extent that in the calendar  year in which such options first
become  exercisable  the shares subject to such options have a fair market value
on the date of grant in excess of $100,000.  No option may be granted  under the
Option  Plan after May 2006 and no option may be  outstanding  for more than ten
years after its grant. Additionally, no option can be granted for more than five
(5)  years to a  stockholder  owning  10% or more of the  Company's  outstanding
Common Stock and such options must have an exercise  price of not less than 110%
of the fair market value on the date of grant.

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

     The Option  Plan may be  terminated  or amended at any time by the Board of
Directors, except that, without stockholder approval, the Option Plan may not be
amended to increase the number of shares subject to the Option Plan,  change the
class of persons eligible to receive options under the Option Plan or materially
increase the benefits of participants.



                                       49
<PAGE>

     As of December 31, 2002,  1,656,000  options to purchase Common Stock under
the Option Plan were granted  and/or  reserved 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-Operations and Secretary, respectively. The options are exercisable at
$4.00 and expire on May 31, 2004.  30,000 options to purchase  Common Stock were
granted to each of Messrs. Detroja and Ritchie,  Directors of the Company. These
options are  exercisable  at $1.25,  are fully vested and expire on May 31, 2004
The balance of these options are exercisable  between $1.04 and $4.00 per share.
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.

Other Options

     As of December  31,  2002,  each of Messrs.  Detroja  and Ritchie  also own
70,000 options to purchase Common Stock. 45,000 of these options are exercisable
at $1.25 per share,  are fully vested and expire on May 31, 2004. The balance of
these options are  exercisable  at $0.20 per share,  are fully vested and expire
March  31,  2006.  In  addition,  pursuant  to the  terms  a  former  employee's
employment agreement employment agreement, the Company issued 300,000 options to
purchase  Common  Stock  exercisable  at $1.50 per share.  The options are fully
vested and expire December 31, 2005.




                                       50
<PAGE>

Item 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

     The following  table sets forth certain  information,  as of March 31, 2003
with respect to the beneficial  ownership of the outstanding Common Stock by (i)
any holder of more than five percent (5%);  (ii) each of 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 (%) of
Owner*                          of Common Stock(1)                 Ownership
------                          ------------------                 ---------

Devendar S. Bains(2)                     3,272,985                     30.51

Tarlochan Bains(3)                         178,456                      1.83

Nirmal Bains(2)                          3,272,985                     30.51

Charles J. Ritchie(4)                      100,000                      1.02

Manish V. Detroja(5)                       100,000                      1.02

Joseph Giamanco (6)                        584,674                      6.03

Jerome Belson (7)                          808,402                      8.31

All Officers and Directors
  As a group (5 persons)(8)              3,651,441                     32.82

*    Unless  otherwise  indicated,  the  address of all  persons  listed in this
     section is c/o Amplidyne, Inc., 59 LaGrange Street, Raritan, NJ 08869.

(1)  Beneficial  ownership as reported in the table above has been determined in
     accordance  with  Instruction  (4) to  Item  403 of  Regulation  S-B of the
     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 2,194,812
     of such shares and Mrs. Nirmal Bains is the record holder of 28,173 of such
     shares.  Includes  1,000,000  stock  options,  which  were  granted  to Mr.
     Devendar Bains.  Includes  50,000 stock 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 78,456 of such shares. Includes 100,000 stock
     options. See "Executive Compensation - Stock Option Plans and Agreements."

(4)  The address  for such  person is 92 Parker  Road,  Long  Valley,  NJ 07853.
     Includes 100,000 stock options. See "Executive  Compensation - Stock Option
     Plans and Agreements."

(5)  The address for such person is 2001  Buckingham  Dr.,  Jamison,  PA, 18929.
     Includes 100,000 stock options. See "Executive  Compensation - Stock Option
     Plans and Agreements."

(6)  Based upon a Schedule  13G filed with the SEC on February 2, 2001 and other
     information  provided to the Company by such  stockholder.  The address for
     this stockholder is c/o G.H.M., Inc., 74 Trinity Place, New York, NY 10006.
     Includes  25,000  shares of Common Stock that are issuable upon exercise of
     warrants owned by such  stockholder that are exercisable at $3.00 per share
     and expire on July 31, 2004.


                                       51
<PAGE>

(7)  Based upon a Schedule  13D filed with the SEC on August 27,  2001 and other
     information  provided to the Company by such  stockholder.  The address for
     this stockholder is c/o Jerome Belson Associates,  Inc., 495 Broadway,  New
     York,  NY 10012.  Includes  670,402  shares owned by Mr.  Belson and 88,000
     shares owned by the Jerome Belson Foundation,  a charitable  corporation of
     which Mr. Belson is the President  and, as a result,  may be deemed to have
     voting and investment  power over such shares.  Also includes 50,000 shares
     that are issuable  upon  exercise of warrants  owned by Mr. Belson that are
     exercisable  at $3.00  per  share and  expire  on July 31,  2004.  Does not
     include  an  additional  135,400  shares of Common  Stock  held by  certain
     members of Mr.  Belson's  family.  All of such  persons may be deemed to be
     members of a group within the meaning of Section  13(d) of the Exchange Act
     that owns 9.71% of the Company's outstanding Common Stock.

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



Item 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

     $55,892  was  owed  to the  Company  by the  Chief  Executive  Officer  and
principal shareholder as of December 31, 2001. In 2002, this officer repaid this
loan and advanced to the Company  additional sums aggregating  $206,308 of which
$136,000  was repaid in 2002 and  $57,200 was repaid in 2003.  Additionally,  he
agreed to defer $54,000 of salaries to help the Company with its cash flow.  The
Vice President of Operations and the Secretary each also agreed to defer $20,000
and $9,000 of salaries, respectively. In March 2003, the Chief Executive Officer
and  principal  shareholder  loaned the  Company an  additional  $23,000.  As of
December 31, 2002, the Company owed $70,308 to the Chief  Executive  Officer for
loans and accrued  salaries and owed other  officers an aggregate of $29,000 for
accrued  salaries.  The total due to all officers  combined at December 31, 2002
was  $99,308.  As of March  26,  2003 the  Company  owed  $86,108  to the  Chief
Executive Officer for loans and accrued salaries.

     Mr.  Detroja,  a  director  of the  Company,  is the  president  and  chief
executive officer of one of the Company's  vendors.  During fiscal year 2001 and
2002,  the  Company  made  purchases  of   approximately   $79,000  and  $24,000
respectively, from such vendor.

     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.  Through December 31, 1999,  substantially
all amounts were settled either by payment or issuance of stock.



                                       52
<PAGE>

     See  "Management  -  Employment  Agreement"  for  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.


                                       53
<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 - F-3

Balance Sheets                                                F-4 - F-5

Statement of Operations                                       F- 6

Statement of Stockholders' Equity                             F- 7

Statement of Cash Flows                                       F- 8

Notes to Financial Statements                                 F- 9 - F- 24

(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
  3.6**  Certificate of Designation of Series A Preferred Stock
  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
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     Intentionally Omitted
10.6     Intentionally Omitted
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.



                                       54
<PAGE>

23.1 Consent  of  Kahn  Boyd  Levychin,   LLP,   Independent   Certified  Public
     Accountants.

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

**   Incorporated  by  Reference  to the  Company's  Form 8-K filed on August 3,
     1999.

(b)  Reports on Form 8-K

     The Company did not file any reports on Form 8-K during the fourth  quarter
of fiscal 2002.


Item 14: CONTROLS AND PROCEDURES

(a)  Evaluation of Disclosure Controls and Procedures.

     Within  the 90 days  prior  to the  date of this  report,  Amplidyne,  Inc.
     carried out an evaluation, under the supervision and with the participation
     of the Company's  management,  including the Company's  Chief Executive and
     Principal  Accounting  Officer,  of the  effectiveness  of the  design  and
     operation of the Company's  disclosure  controls and procedures pursuant to
     Exchange Act Rule 13a-14.  Based upon that evaluation,  the chief Executive
     and Principal  Accounting  Officer concluded that the Company's  disclosure
     controls and  procedures  are effective in timely  alerting him to material
     information  required to be included in the Company's  periodic SEC filings
     relating to the Company.

(b)  Changes in Internal Controls.

     There were no significant  changes in the Company's internal controls or in
     other  factors  that could  significantly  affect these  internal  controls
     subsequent to the date of my most recent evaluation.




                                       55



<PAGE>

                                 Amplidyne, Inc.

                          INDEX TO FINANCIAL STATEMENTS

                                                                   Page
                                                                   ----

Report of Independent Certified Public Accountants                 F-2


Financial Statements

         Balance Sheets                                            F-3 - F-4

         Statements of Operations                                  F-5

         Statement of Stockholders' Equity                         F-6

         Statements of Cash Flows                                  F-7

         Notes to Financial Statements                             F-8 - F-22

                                      -F1-


<PAGE>

               REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

Board of Directors and Stockholders
AMPLIDYNE, INC.

We have audited the accompanying balance sheet of Amplidyne, Inc. as of December
31,  2002 and 2001,  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 auditing standards generally accepted
in the  United  States of  America.  Those  standards  require  that we plan and
perform the audits 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, 2002 and 2001,  and the results of its operations and its cash flows for the
years then ended in conformity with accounting  principles generally accepted in
the United States of America.

The  accompanying  financial  statements  have been  prepared  assuming that the
Company  will  continue  as a  going  concern.  As  discussed  in  Note A to the
financial statements,  the Company suffered losses from operations,  has no cash
and otherwise limited financial  resources,  raising substantial doubt about its
ability to continue as a going  concern.  Management's  plans in regard to these
matters are also  described in Note A. The  financial  statements do not include
any  adjustments  relating to the  recoverability  and  classification  of asset
carrying  amounts or the amounts and  classifications  of liabilities that might
result should the Company be unable to continue as a going concern.

KAHN BOYD LEVYCHIN, LLP

New York, New York
March 26, 2003


                                      -2-
<PAGE>



                                 Amplidyne, Inc.
                                 BALANCE SHEETS
                                  December 31,

<TABLE>
<CAPTION>
ASSETS
                                                                                 2002              2001
                                                                             -----------       -----------
CURRENT ASSETS
<S>                                                                          <C>               <C>
         Cash and cash equivalents                                           $        --       $   697,940
                                                                             -----------       -----------
         Accounts receivable, net of allowance for doubtful accounts of
           $143,000 and  $131,104 in 2002 and 2001, respectively                 440,506           449,190
         Inventories                                                             926,713         1,181,682
         Loan receivable - officer                                                    --            55,892
         Prepaid expenses and other                                               24,616            23,464

                  Total current assets                                         1,391,835         2,408,168

PROPERTY AND EQUIPMENT - AT COST
         Machinery and equipment                                                 725,629           723,663
         Furniture and fixtures                                                   43,750            43,750
         Autos and trucks                                                         66,183            66,183
         Leasehold improvements                                                    8,141             8,141
                                                                             -----------       -----------
                                                                                 843,703           841,737
         Less accumulated depreciation and amortization                         (760,633)         (687,260)
                                                                                  83,070           154,477
                                                                             -----------       -----------
SECURITY DEPOSITS AND OTHER NON-CURRENT ASSETS                                    45,068            52,106
                                                                             -----------       -----------
                                                                             $ 1,519,973       $ 2,614,751
                                                                             ===========       ===========
</TABLE>

        THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE STATEMENTS


                                      -3-
<PAGE>


                                 Amplidyne, Inc.
                                 BALANCE SHEETS
                                  December 31,


<TABLE>
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY
                                                                               2002               2001
                                                                           ------------       ------------
CURRENT LIABILITIES
<S>                                                                        <C>                <C>
         Overdraft                                                         $     11,939       $         --
         Current maturities of lease obligations                                  2,041              9,271
         Accounts payable                                                       410,445            121,533
         Accrued expenses                                                       155,027            131,308
         Accrued settlement of litigation                                       295,000            180,000
         Loans payable - officers                                                99,308                 --
                                                                           ------------       ------------
                                                                                973,760            442,112

COMMITMENTS AND OTHER COMMENTS - NOTE G
RELATED PARTY TRANSACTIONS - NOTE H
LITIGATION - NOTE I
SUBSEQUENT EVENTS - NOTE J

STOCKHOLDERS' EQUITY
         Convertible Preferred stock - authorized 100,000 shares of
$.0001 par value; 55,000 shares issued and outstanding
                  at December 31, 2001 (liquidation preference of
                  $550,000 at December 31, 2001)                                     --                  6

         Common stock - authorized, 25,000,000 shares of $.0001 par
                  value; shares 9,676,500 and 7,892,661 shares issued
                  and outstanding at December 31, 2002 and 2001,                    968                790
                  respectively
         Additional paid-in capital                                          22,494,924         21,921,495
         Subscriptions receivable - preferred stock                                  --           (180,000)
         Accumulated deficit                                                (21,949,679)       (19,569,652)
                                                                           ------------       ------------
                                                                                546,213          2,172,639
                                                                           ------------       ------------
                                                                           $  1,519,973       $  2,614,751
                                                                           ============       ============
</TABLE>

        THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE STATEMENTS


                                      -4-
<PAGE>


                                 Amplidyne, Inc.
                            STATEMENTS OF OPERATIONS
                             Year ended December 31,

<TABLE>
<CAPTION>
                                                                      2002              2001
                                                                   -----------       -----------
<S>                                                                <C>               <C>
Net sales                                                          $ 1,613,732       $ 2,205,429
Cost of goods sold  (net of inventory
         write-down of $233,995 in 2002)                             1,520,237         1,281,009
                                                                   -----------       -----------
                  Gross profit                                          93,495           924,420

Operating expenses
         Selling, general and administrative, including stock
                  compensation costs of  $140,000 in 2001            2,088,433         2,044,490
         Research, engineering and development                         406,614           593,823
                                                                   -----------       -----------
                  Operating loss                                    (2,401,552)       (1,713,893)

Nonoperating income (expenses)
         Interest income and other income                                3,170            50,915
         Interest expense                                                 (932)             (864)
         Litigation settlement costs                                  (144,400)         (550,000)
         Sale of New Jersey tax benefits                               163,687           189,744
                                                                   -----------       -----------

                  Loss before income taxes                          (2,380,027)       (2,024,098)

Provision for income taxes                                                  --               784

                  NET LOSS                                         $(2,380,027)      $(2,024,882)
                                                                   ===========       ===========

Net loss per share - basic and diluted                             $     (0.25)      $     (0.26)
                                                                   ===========       ===========

Weighted average number of shares outstanding                        9,386,790         7,706,971
                                                                   ===========       ===========
</TABLE>


        THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE STATEMENTS


                                      -5-
<PAGE>


                                 Amplidyne, Inc.
                        STATEMENT OF STOCKHOLDERS' EQUITY
                     Years Ended December 31, 2002 and 2001

<TABLE>
<CAPTION>
                                                                          Preferred Stock                      Common Stock
                                                                      ----------------------------     ----------------------------
                                                                         Shares          Par Value        Shares           Par Value

<S>                                                                                     <C>               <C>              <C>
BALANCE AT DECEMBER 31, 2000                                                 --         $      --         7,463,841        $     747

Net loss for the year ended December 31, 2001
Cost of litigation to be settled by the issuance of  common stock
Financing cost associated with warrants extended and  shares issued                                           1,820
Issuance of common stock, net of costs                                                                      415,000               42
Issuance of preferred stock, net of costs                                55,000                 6
Issuance of common stock for services rendered by third party                                                12,000                1
                                                                        -------         ---------         ---------        ---------
BALANCE AT DECEMBER 31, 2001                                             55,000                 6         7,892,661              790

Net loss for the year ended December 31, 2002
Cost of litigation to be settled by the issuance of  common stock
Collection of subscription receivable
Conversion of preferred stock to common stock                           (55,000)               (6)          701,194               70
Issuance of common stock in settlement of class action                                                      324,486               32
Issuance of restricted common stock in lieu of expenses                                                       8,159                1
Issuance of common stock, net of cost                                                                       750,000               75
                                                                        -------         ---------         ---------        ---------
BALANCE AT DECEMBER 31, 2002                                                 --         $      --         9,676,500        $     968
                                                                        =======         =========         =========        =========
</TABLE>



<TABLE>
<CAPTION>
                                                                        Additional
                                                                          Paid-In     Accumulated     Subscriptions
                                                                          Capital        Deficit       Receivable       Total
                                                                          -------        -------       ----------       -----
<S>                                                                   <C>             <C>             <C>             <C>
BALANCE AT DECEMBER 31, 2000                                          $ 20,212,154    $(17,544,770)   $         --    $  2,668,131

Net loss for the year ended December 31, 2001                                           (2,024,882)                     (2,024,882)
Cost of litigation to be settled by the issuance of  common stock          500,000                                         500,000
Financing cost associated with warrants extended and  shares issued        140,000                                         140,000
Issuance of common stock, net of costs                                     559,708                                         559,750
Issuance of preferred stock, net of costs                                  494,994                        (180,000)        315,000
Issuance of common stock for services rendered by third party         $     14,639    $         --    $         --    $     14,640
                                                                      ------------    ------------    ------------    ------------
BALANCE AT DECEMBER 31, 2001                                            21,921,495     (19,569,652)       (180,000)      2,172,639

Net loss for the year ended December 31, 2002                           (2,380,027)     (2,380,027)
Cost of litigation to be settled by the issuance of  common stock           29,400                                          29,400
Collection of subscription receivable                                      180,000                         180,000
Conversion of preferred stock to common stock                                  (64)                                             --
Issuance of common stock in settlement of class action                         (32)                                             --
Issuance of restricted common stock in lieu of expenses                      4,200                                           4,201
Issuance of common stock, net of costs                                     539,925                                         540,000
                                                                      ------------    ------------    ------------    ------------
BALANCE AT DECEMBER 31, 2002                                          $ 22,494,924    $(21,949,679)   $         --    $    546,213
                                                                      ============    ============    ============    ============
</TABLE>



        THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE STATEMENTS


                                      -6-
<PAGE>


                                 Amplidyne, Inc.
                            STATEMENTS OF CASH FLOWS
                             Year ended December 31,

<TABLE>
<CAPTION>
                                                                                 2002           2001
                                                                             -----------    -----------
Cash flows from operating activities:
<S>                                                                          <C>            <C>
Net Loss                                                                     $(2,380,027)   $(2,024,882)
                                                                             -----------    -----------
Adjustments to reconcile net loss to net cash used in operating activities
                  Depreciation and amortization                                   73,373         98,415
                  Bad debt expense                                               291,471         67,592
                  Litigation loss                                                144,400        530,000
                  Provision for inventory write-down                             233,995         20,000
                  Stock compensation charge                                           --        154,640
                  Changes in assets and liabilities
                           Accounts receivable                                  (282,787)      (204,876)
                           Inventories                                            20,974       (603,728)
                           Prepaid expenses and other assets                      (1,152)       105,179
                           Accounts payable and accrued expense                  312,631       (248,842)
                                                                             -----------    -----------
                                    Total adjustments                            792,905        (81,620)
                                                                             -----------    -----------
                   Net cash used for operating activities                     (1,587,122)    (2,106,502)
                                                                             -----------    -----------
Cash flows from investing activities:
         Officer loans and salary deferrals                                      155,200        (22,225)
         Change in security deposits                                               7,038             --
         Purchase of property and equipment                                       (1,966)        (2,845)
                                                                             -----------    -----------
                  Net cash provided by (used for) investing activities           160,272        (25,070)
                                                                             -----------    -----------
Cash flows from financing activities:
         Payment of lease obligations                                             (7,230)       (11,380)
         Proceeds from sale of preferred stock, net of costs                          --        495,000
         Proceeds from sale of common stock, net of costs                        544,201        559,750
         Subscriptions receivable preferred stock - net                          180,000       (180,000)
                                                                             -----------    -----------
                  Net cash provided by financing activities                      716,971        863,370
                                                                             -----------    -----------
                           NET  (DECREASE) IN CASH                              (709,879)    (1,268,202)

Cash at and cash equivalents beginning of period                                 697,940      1,966,142
                                                                             -----------    -----------
Cash (overdraft) and cash equivalents at end of period                       $   (11,939)   $   697,940
                                                                             ===========    ===========
Supplemental disclosures of cash flow information:
         Cash paid for: Interest                                             $       932    $       864
                        Income taxes                                         $        --    $       784
</TABLE>

        THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE STATEMENTS


                                      -7-
<PAGE>



                                 Amplidyne, Inc.
                          Notes to Financial Statements
                           December 31, 2002 and 2001




NOTE A - NATURE OF OPERATIONS AND LIQUIDITY

Amplidyne, Inc. (the Company) has historically operated 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  introduced  products  which offer
high-speed wireless internet connectivity to residential and business clients of
internet service providers in the third quarter of 1999. These products are sold
under the AmpWave(TM) name.

The Company's financial statements have been presented on a going concern basis,
which contemplates the realization of assets and the satisfaction of liabilities
in the  normal  course  of  business.  The  liquidity  of the  Company  has been
adversely  affected in recent years by significant  losses from operations.  The
Company has  incurred  losses of  $2,380,027  and  $2,024,882  in 2002 and 2001,
respectively.

With no remaining cash and no near term prospects of private placements, options
or warrant exercises and reduced revenues,  management believes that the Company
will have great difficulty meeting its working capital and litigation settlement
obligations over the next 12 months. The Company is presently  dependent on cash
flows generated from sales and loans from officers to meet our obligations.  Our
failure to consummate a merger with an appropriate  partner or to  substantially
improve our revenues will have serious adverse  consequences  and,  accordingly,
there is substantial doubt in our ability to remain in business over the next 12
months.  There can be no assurance  that any 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.

The Company funded  operations during the year ended December 31, 2002 primarily
from the proceeds of privately  placed common and preferred  stock.  The Company
has also funded certain  operating  expenses through  borrowings (in the form of
deferring salaries and cash advances) from officers and principal  shareholders.
The  Company  has in the past  issued  its  stock in lieu of cash  payments  for
compensation, sales commissions and consulting fees, wherever possible.

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

     o    Increasing  sales of its high  speed  internet  connectivity  products
          through both individual customers, strategic alliances and mergers.

     o    Decreasing the dependency on certain major  customers by  aggressively
          seeking other customers in the amplifier markets;

     o    Partnering with  significant  companies to jointly develop  innovative
          products,  which has yielded  orders with  multinational  companies to
          date, and which are expected to further expand such relationships;



                                      -8-
<PAGE>

     o    Reducing costs through a more streamlined operation by using automated
          machinery to produce components for our products;

     o    Deferral of payments of officers' salaries, as needed;

     o    Selling  remaining net operating losses applicable to the State of New
          Jersey,  pursuant to a special  government  high-technology  incentive
          program in order to provide working capital, if possible;

     o    Reducing overhead costs and general expenditures.

     o    Merging with another company to provide  adequate  working capital and
          jointly develop innovative products.


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  because our
shipping terms are F.O.B. shipping point.

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, 2002 and 2001,  inventories
consisted of the following:

                                                      2002            2001
                                                 --------------  --------------
Component parts                                  $      489,542  $      724,797
Work-in-progress                                        209,822         231,150
Finished Goods                                          227,349         225,735
                                                 --------------  --------------
                                                 $      926,713  $    1,181,682
                                                 ==============  ==============

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.



                                      -9-
<PAGE>

                                 Amplidyne, Inc.
                          Notes to Financial Statements
                           December 31, 2002 and 2001



4. VALUATION OF LONG-LIVED ASSETS

The Company  reviews  long-lived  assets held and used for  possible  impairment
whenever events or changes in circumstances indicate that the carrying amount of
an asset may not be recoverable.  The Company has not recorded any provision for
the impairment of long-lived assets at December 31, 2002.

5. 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
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.

6. 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.

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

The Company maintains cash and cash equivalents in bank deposit and money market
accounts in one bank,  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.

During 2002, two customers  accounted for 60% of net sales (44% and 16%) and 71%
of accounts  receivable at December 31, 2002. Export sales in 2002 accounted for
approximately 67% of net sales and were primarily to Europe (46%), Canada (18%),
and other foreign countries.

During 2001, two customers  accounted for 74% of net sales (62% and 12%) and 49%
of accounts  receivable at December 31, 2001. Export sales in 2001 accounted for
approximately 85% of net sales and were primarily to Europe (62%), Canada (12%),
and other foreign countries.

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.



                                      -10-
<PAGE>


                                 Amplidyne, Inc.
                          Notes to Financial Statements
                           December 31, 2002 and 2001


The carrying values of financial  instruments  potentially  subject to valuation
risk,  consisting  of  cash  and  cash  equivalents,  accounts  receivable,  and
officer's loan receivable,  approximate fair value,  principally  because of the
short maturity of these items.

7. USE OF ESTIMATES

In preparing  financial  statements in  conformity  with  accounting  principles
generally  accepted in the United  States of America,  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.

8. 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,  and  related  interpretations  as
clarified by Financial  Interpretation  No. 44 (FIN 44),  Accounting for Certain
Transactions  Involving  Stock  Compensation.  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.

9. CASH AND CASH EQUIVALENTS

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

10. ADVERTISING EXPENSES

The Company expenses  advertising costs as incurred.  Advertising  expenses were
$68,878  and  $99,261  for  the  years  ended   December   31,  2002  and  2001,
respectively.

11. RECLASSIFICATIONS

Certain  reclassifications  were  made to the 2001  amounts  to  conform  to the
current presentation.

12. LOSS PER SHARE

Statement of Financial  Accounting Standards No.128 (SFAS No. 128), Earnings per
Share, specifies the computation,  presentation and disclosure  requirements for
earnings per share for  entities  with  publicly  held common stock or potential
common stock.

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


                                      -11-
<PAGE>

                                 Amplidyne, Inc.
                          Notes to Financial Statements
                           December 31, 2002 and 2001


include  potential common shares derived from stock options and warrants because
they are antidilutive.  The number of antidilutive  securities excluded from the
dilutable loss per share  calculation  for the years ended December 31, 2002 and
2001 were 945,000 and 2,373,500 shares, respectively.

13. SEGMENT INFORMATION

The Company commenced its wireless Internet  connectivity business in the summer
of  2000.  The  Company  does not  measure  its  operating  results,  assets  or
liabilities by segment.  However,  the following limited segment  information is
available:

<TABLE>
<CAPTION>
                                                    Year Ended           Year Ended
                                                   December 31,         December 31,
                                                       2002                 2001
                                              -------------------  -------------------
Sales - external
<S>                                                       <C>      <C>
         Amplifier                                        992,361  $         1,901,702
         Internet business                                621,371              303,727
                                              -------------------  -------------------
                                              $         1,613,732  $         2,205,429
                                              ===================  ===================
Sales - external, by geographic area
         United States                        $           572,083  $           330,834
         Europe                                           711,861            1,361,316
         Canada                                           273,350              264,488
         All other foreign countries                       56,438              248,791
                                              -------------------  -------------------
                                              $         1,613,732  $         2,205,429
                                              ===================  ===================
Inventory
         Amplifier                            $           441,654  $           802,964
         Internet business                                485,059              378,718
                                              -------------------  -------------------
                                              $           926,713  $         1,181,682
                                              ===================  ===================
</TABLE>


                                      -12-
<PAGE>



                                 Amplidyne, Inc.
                          Notes to Financial Statements
                           December 31, 2002 and 2001


NOTE C - PUBLIC OFFERING AND PRIVATE PLACEMENTS

PUBLIC OFFERING

A registration  statement covering an underwritten  public offering of 1,610,000
units at a price of $5.10  per unit,  prior to  underwriters'  commissions,  was
declared  effective by the  Securities  and Exchange  Commission  on January 21,
1997.  Each unit  consisted of one share of common  stock,  par value $.0001 per
share and one  redeemable  common stock purchase  warrant.  In 1997, the Company
received  net proceeds  from the public  offering of  approximately  $6,782,000,
which  included  the over  allotment of 210,000  units.  The proceeds are net of
legal  fees,  underwriters'  fees and other  expenses of the  offering  totaling
approximately  $1,429,000.  Each  warrant  originally  entitled  the  holder  to
purchase  one share for $6.00 during the  four-year  period  ending  January 21,
2001.  The Company  provided  notice in April 2000 to redeem the warrants on May
17, 2000 unless the warrants were previously exercised.

On May 1, 2000, the Company  reduced the exercise price of the warrants to $5.00
per share.  Through May 16, 2000,  124,871  warrants  were  exercised,  yielding
proceeds of $650,454.  The  remaining  unexercised  warrants of  1,485,129  were
redeemed  at $0.01  per  warrant  on May 17,  2000,  resulting  in an  aggregate
expenditure of $14,851.

The  underwriter  received an option to purchase up to 140,000  shares of common
stock and  140,000  warrants  under the same  terms.  All the  options  remained
outstanding at December 31, 2000 and the warrants were redeemed in May 2000.

In January 2001, the Company  extended the expiration  date of 212,500  warrants
resulting in a charge to earnings of $140,000.

In 2001 the Company entered into the following private placements:

     o    During the second  quarter  ended June 30,  2001,  the Company  issued
          390,000  shares of  common  stock at $1.50 per  share,  to  accredited
          investors,  resulting in gross proceeds of $585,000.  The Company paid
          cash commissions of $58,500 in connection with such private placement.

     o    In July 2001,  the Company  issued  25,000  shares of common  stock at
          $1.50 per share, to accredited investors,  resulting in gross proceeds
          of $37,000.  The Company paid cash commissions of $3,750 in connection
          with such private placement.

     o    In the 3rd and 4th quarters of 2001,  the Company issued 55,000 shares
          of Series B Preferred Stock to accredited  investors  pursuant to Rule
          506 of Regulation D of the Act. The Company sold such shares at $10.00
          per share,  received  gross  proceeds of $550,000  and paid  brokerage
          commissions  of  $55,000  (resulting  in  net  proceeds  of  $495,000,
          $180,000  [net] of which was  received in the first  quarter of 2002).
          The Preferred  Stock: (i) are entitled to dividends at the annual rate
          of 10%, payable  semi-annually,  in cash or in shares of Common Stock;
          (ii) has a  liquidation  preference  of  $10.00  per  share,  (iii) is
          convertible  into shares of Common  Stock at the lesser of (A) 100% of
          the  average  closing  sales  price  of the  Common  Stock on the five
          trading days prior to issuance or (B) 85% of the average  closing sale
          price  of the  Common  Stock  for  the  five  trading  days  prior  to
          conversion,  in each  case  not less  than  $.75  per  share;  (iv) is
          non-voting,  (v) is  subject



                                      -13-
<PAGE>

                                 Amplidyne, Inc.
                          Notes to Financial Statements
                           December 31, 2002 and 2001


          to redemption  (at the option of the Company) at a rate of 110% of the
          original  issuance  price and (vi) shall  automatically  convert  into
          Common Stock on September 30, 2004 (if not previously converted).  The
          Company  shall  also have the right,  at its  option,  to convert  the
          Preferred  Stock  (at a  conversion  rate of $1.00  per  share) if the
          average  closing  sales  price  per  share  of  Common  Stock,  for  a
          consecutive  20 trading  day period,  is $3.00 or greater.  All shares
          outstanding  at  December  31, 2001  converted  to common in the first
          quarter of 2002.


At  December 31, 2002, the following 945,000 warrants, remained outstanding:

         (1)      20,000 exercisable  at  $1.00  through  May  2010
         (2)      20,000 exercisable at $7.00 through  December  2004
         (3)      30,000 exercisable at $6.00 through November 2004
         (4)      50,000  exercisable  at $2.00 through December 2004
         (5)      50,000 exercisable  at  $4.00  through  December  2004
         (6)      16,000 exercisable at $1.75 through December 2004
         (7)      41,500 exercisable at $1.80 through July 31, 2004
         (8)      207,500 exercisable at $3.00 through July 31, 2004
         (9)      55,000 exercisable at  $1.20  through  September  30,  2004
         (10)     300,000 exercisable at $2.00 through December 31, 2005
         (11)     75,000 exercisable at $.96 through March 2007
         (12)     80,000 exercisable  at  $1.50  through  December  2004.

At December 31, 2002,  the Company had employee  stock  options  outstanding  to
acquire 2,051,000 shares of common stock at exercise prices of $.20 to $4.00.

During the first quarter ended March 31, 2002, the Company issued 750,000 shares
of Common Stock, at $.80 per share (resulting in gross proceeds of $600,000), to
accredited investors. In connection with such private offering, the Company paid
commissions to NASD  broker-dealers  in the amount of $60,000 and issued to such
persons  75,000  warrants,  which are  exercisable  at $.96 per share and expire
March 31, 2007.

During the first quarter ended March 31, 2002, the Company issued 701,194 shares
of Common Stock in connection with the conversion of all of the Company's Series
B Preferred  Stock  (which  included  shares of Common  Stock  issued in lieu of
accrued dividends thereon).

During the first quarter ended March 31, 2002, the Company issued 324,486 shares
of Common Stock to the members of the class action compliant,  which was settled
in September 2001.

During the second  quarter ended June 30, 2002,  the Company issued 8,159 shares
of common stock to a customer in lieu of cash.

For the year  ended  December  31,  2001,  the  Company  recorded  a  charge  to
operations of $140,000  reflecting the costs  recognized for warrants  issued to
consultants  of the Company,  and employee  stock options  granted with a strike
price below quoted market value (see Note D).



                                      -14-
<PAGE>

                                 Amplidyne, Inc.
                          Notes to Financial Statements
                           December 31, 2002 and 2001



Under the  accounting  guidance of FIN 44, a reduction  of a warrant's  exercise
price or an extension of the exercise date is treated as a variable option,  and
therefore requires that a portion of the difference between the market values at
the date of the  modification  be charged to  operations.  The  extension of the
exercise  date of the  warrants  mentioned  above did not  result in a charge to
operations  because the extension occurred prior to the effective date of FIN 44
and because the  exercise  price  exceeded  the market  value of the  underlying
common stock at the date of the extension.


NOTE D - STOCK OPTION PLANS

An 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. At the 2001 Annual Shareholders' Meeting, the maximum
number of shares set aside for this plan was increased to  2,225,000.  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.  1,656,000
options remained outstanding at December 31, 2002. The extension of the exercise
date of the warrants  mentioned  above did not result in a charge to  operations
because the extension occurred prior to the effective date of FIN 44 and because
the exercise price  exceeded the market value of the underlying  common stock at
the date of the extension.

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 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:

                                                2002                 2001
Net loss                             $       (2,416,794)  $       (2,061,649)
Loss per share                       $            (0.26)  $            (0.27)



                                      -15-
<PAGE>



                                 Amplidyne, Inc.
                          Notes to Financial Statements
                           December 31, 2002 and 2001



Stock option activity during 2002 and 2001, is summarized below:

<TABLE>
<CAPTION>
                                                                                  Shares of common     Weighted average
                                                                                 stock attributable    exercise price of
                                                                                      to options            options
                                                                                      ----------            -------
<S>                                                                                        <C>        <C>
Unexercised at December 31, 2000                                                           1,491,000  $             3.850
         Issuance to employees and directors                                                 690,000                2.430
                                                                                           ---------
Unexercised at December 31, 2001                                                           2,181,000                3.400
         Expired at December 31, 2002                                                      (180,000)                1.460
         Issued during 2002                                                                   50,000                0.200
                                                                                           ---------
Unexercised at December 31, 2002                                                           2,051,000                3.233
                                                                                           =========
</TABLE>


The  following  table   summarizes   information   concerning   outstanding  and
exercisable  options,  including  warrants  issued to officers,  at December 31,
2002:


<TABLE>
<CAPTION>
                                      Options Outstanding                           Options Exercisable
                                      -------------------                           -------------------
                                     Weighted average
                                        remaining      Weighted average                       Weighted
                        Number       contractual life   exercise price        Number           average
 Exercise Prices    outstanding at                                        exercisable at    exercise price
                      period end                                            period end
 ----------------   -------------    ----------------------------------   -------------     --------------
<S>     <C>                  <C>        <C>                <C>                 <C>            <C>
        $ 3.250              30,000     0.8 years          $ 3.250             30,000         $ 3.250
          4.000           1,346,000     2.4 years (1)        4.000          1,346,000           4.000
          1.250             150,000     1.4 years            1.250            150,000           1.250
          3.125             100,000    1.25 years            3.125            100,000           3.250
          1.040              10,000       3 years            1.040             10,000           1.040
          1.120              10,000       3 years            1.120             10,000           1.120
          3.250              55,000       2 years            3.250             55,000           3.250
          1.500             300,000       3 years            1.500            300,000           1.500
          0.200              50,000    3.25 years            0.200             50,000           0.200
                          ---------                                         ---------
                          2,051,000                                         2,051,000
</TABLE>


(1)  Expiration date extended from May 1, 2000 to May 31, 2004



                                      -16-
<PAGE>

                                 Amplidyne, Inc.
                          Notes to Financial Statements
                           December 31, 2002 and 2001



NOTE E - 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, 2002, the Federal net operating
loss  carryforwards  are  approximately  $14,000,000.  The  net  operating  loss
carryforwards  expire  at  various  dates  through  2022,  and  because  of  the
uncertainty  in  the  Company's  ability  to  utilize  the  net  operating  loss
carryforwards,  a full  valuation  allowance  of  approximately  $5,126,000  and
$4,426,000  has been provided on the deferred tax asset at December 31, 2002 and
2001, respectively.

The Company  participated in the New Jersey Technology Tax Certificate  Transfer
Program, whereby net operating loss carryforwards generated in New Jersey can be
sold to other qualified  companies.  During 2002 and 2001, the Company  received
$163,687 and $189,744, respectively, from the sale of such net operating losses.
The Company expects to sell additional New Jersey net operating  losses in 2003,
although there can be no assurance a suitable  transaction  will be consummated.
The New Jersey net operating loss carryforwards are approximately  $2,000,000 at
December 31, 2002.

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 for 2002 and 2001 is  principally  due to the impact
of state income and minimum taxes.


NOTE F - 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
$2,041.

The cost of assets under capital  leases was  approximately  $24,000 at December
31,  2002 and 2001,  and is  included in  property  and  equipment.  Accumulated
depreciation at December 31, 2002 and 2001 was approximately $24,000.



                                      -17-
<PAGE>

                                 Amplidyne, Inc.
                          Notes to Financial Statements
                           December 31, 2002 and 2001


NOTE G - COMMITMENTS AND OTHER COMMENTS

1. OPERATING LEASES

During July 2000, the Company entered into a lease  agreement for  approximately
11,000 square feet of office and  manufacturing  space,  for a five-year  period
ending July 13, 2004.  The annual rental is $71,000 plus the Company's  share of
real estate taxes, utilities and other occupancy costs.

Future  minimum lease  payments on  non-cancelable  operating  leases  aggregate
$109,000 as follows: $71,000 for 2003 and $38,000 for 2004.

Rent expense,  including the Company's share of real estate taxes, utilities and
other occupancy  costs, was $79,725 and $87,109 for the years ended December 31,
2002 and 2001, respectively.

2. 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  Officers).  These  agreements  were extended to expire April 30,
2005. The agreements call for aggregate  annual base salaries of $312,000,  plus
certain employee benefits.

In September  2001, the Company entered into a three-year  employment  agreement
with its  former  President.  On July 12,  2002,  the then  President  resigned,
receiving a severance  package of $40,000,  $20,000 of which  remains  unpaid at
December 31, 2002. The Chief Executive Officer,  has been appointed President to
fill the vacancy.

The Officers deferred a portion of their compensation from 1997 through 1999. In
1999  the  Officers  converted  an  aggregate  of  $181,131  of such  deferrals,
principally  arising in 1999, into 66,378 shares of common stock of the Company,
representing the estimated fair value of the common stock of the Company at that
time.  During  2001,  no  shares  were  issued  in  lieu of  officers'  deferred
compensation and no compensation was deferred.  During 2002, the Chief Executive
Officer  deferred  salaries of $54,000 and the Vice  President of Operations and
the Secretary each also deferred  salaries of $20,000 and $9,000,  respectively.
No shares were issued in lieu of officers' deferred compensation.

3. 401(K) PLAN

During 1996, the Company established a defined contribution plan, the Amplidyne,
Inc. 401(k) Plan. The Company makes no contributions. All employees with greater
than six months'  service  with the Company are  eligible to join the plan.  The
plan is administered by a third party.

4. DARWIN ASSETS

In January 2002, the Company entered into an agreement to acquire certain assets
of Darwin  Networks,  Inc.  ("Darwin") for $175,000 plus  additional  contingent
payments not to exceed  $340,000.  Darwin was in



                                      -18-
<PAGE>

                                 Amplidyne, Inc.
                          Notes to Financial Statements
                           December 31, 2002 and 2001

the business of installing and maintaining  high-speed  Internet  structures for
hotels and residential  properties.  The assets acquired included  equipment not
yet installed as well as completed  installations in a specified number of hotel
properties.  Pursuant to the  agreement,  the Company has the sole and exclusive
right to contact and negotiate with each property paid for under the contract to
either activate or remove the equipment.  After a specified  number of locations
were  successfully  negotiated (which are covered in the initial purchase price)
the  Company  had the right (now  expired)  to  continue  to contact  additional
properties  and must pay a specified sum for each  successful  negotiation up to
the  $340,000  maximum.  As of March 26,  2003,  the  Company  had  successfully
negotiated  11  properties  and has incurred no liability to pay any  additional
sums under the contract.


NOTE H - RELATED PARTY TRANSACTIONS

1. OFFICER / STOCKHOLDER LOANS

$55,892 was owed to the  Company by the Chief  Executive  Officer and  principal
shareholder as of December 31, 2001. In 2002,  this officer repaid this loan and
advanced to the Company  additional sums aggregating  $206,308 of which $136,000
was repaid in 2002 and  $57,200 was repaid in 2003.  Additionally,  he agreed to
defer  $54,000 of  salaries  to help the  Company  with its cash flow.  The Vice
President of Operations  and the Secretary each also agreed to defer $20,000 and
$9,000 of salaries, respectively. In March 2003, the Chief Executive Officer and
principal  shareholder loaned the Company an additional  $23,000. As of December
31, 2002, the Company owed $70,308 to the Chief Executive  Officer for loans and
accrued  salaries  and owed other  officers an  aggregate of $29,000 for accrued
salaries.  The total due to all  officers  combined  at  December  31,  2002 was
$99,308.  As of March 26, 2003 the Company owed  $86,108 to the Chief  Executive
Officer for loans and accrued salaries.

2. PURCHASES FROM RELATED PARTY

A member of the Company's  Board of Directors is President and CEO of one of the
Company's  vendors.  During  2002  and  2001,  the  Company  made  purchases  of
approximately $24,000 and $79,000, respectively, from this vendor.


                                      -19-
<PAGE>

                                 Amplidyne, Inc.
                          Notes to Financial Statements
                           December 31, 2002 and 2001
NOTE I - LITIGATION

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 below,  the Company is not
aware of any pending litigation or proceedings that could have a material effect
on the Company's results of operations or financial condition.

1. AIRNET COMMUNICATIONS CORPORATION VS. AMPLIDYNE, INC.

AirNet  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.  During 2000,  the Company  settled with AirNet at a cost of $175,000;
$25,000 is to be paid  quarterly  over two  years.  $95,000  remained  unpaid at
December 31, 2002.

2.  ENS  ENGINEERING  VS.  AMPLIDYNE,  INC.

The  Company  was 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.  The Company reached oral settlement  terms and,
based  upon such oral  settlement,  the  court  dismissed  the case in the first
quarter of 2000. The terms of the oral settlement  called for the Company to pay
$85,000 in twelve  equal  monthly  installments,  none of which has been paid to
date. The Company has not received any required documents and releases from ENS.
There is no liability reflected for this settlement as of December 31, 2002.

3. The  Company  was  served  with  class  action  complaints  on  behalf of all
purchasers of the Company's common stock and warrants between  September 9, 1999
and September 14, 1999. By orders of the District  Court for the District of New
Jersey, the actions were consolidated and lead plaintiffs were appointed.  On or
about March 24,  2000,  the Company was served with a  consolidated  and amended
class action complaint on behalf of purchasers of the Company's common stock and
warrants  between  September  9, 1999 and  September  17, 1999.  That  complaint
alleged that the Company and other individuals  violated the federal  securities
laws by, among other  things,  the  issuance of a press  release on September 9,
1999.  Although  the  Company  believed  that the  complaint  had no  merit  and
vigorously  contested  it, the Company and the other parties to the class action
reached a settlement  on May 2, 2001,  which was approved by the District  Court
for the  District of New Jersey on August 14, 2001 (which  became  effective  on
September 14, 2001)  Pursuant to the  settlement  agreement,  a settlement  fund
consisting  of  $750,000  in cash  ($50,000  of which was paid  directly  by the
Company) was  established  for the benefit of members of the class. In addition,
the Company issued 324,486 freely tradable shares of its common stock (which was
valued at  $500,000  as of May 2,  2001) on behalf  of the  class  members.  The
Company  had  recorded  the  cost  of the  litigation,  including  a  credit  to
Additional Paid-In Capital for the value of the settlement that has been settled
by the  issuance of common  stock.  In addition the Company is subject to an SEC
formal  order of private  investigation  relating to the  subject  matter of the
class action. The Company has responded to the SEC requests.  In April 2003, the
SEC indicated that it intends to file a civil complaint  against the Company and
Devendar S. Bains.  The Company and Mr. Bains are negotiating with the SEC in an
attempt to reach a consensual resolution of the matter.

                                      -20-
<PAGE>

                                 Amplidyne, Inc.
                          Notes to Financial Statements
                           December 31, 2002 and 2001

4. HIGH GAIN ANTENNA CO., LTD. OF KOREA

The Company (as well as an officer and  director of the Company) was a defendant
in a  complaint  brought in the  Superior  Court of New  Jersey,  Law  Division,
Somerset  County,  by High Gain Antenna Co., Ltd. of Korea in November 2000. The
complaint  sought  damages for an alleged breach of a contract for the repair of
certain  equipment  purchased by plaintiff  from a distributor  of the Company's
products and the Company. A trial commenced on May 7, 2002, and on May 13, 2002,
the jury brought in a verdict against the Company for $400,000.  The Company had
filed a motion in the Law  Division  for a new trial,  which was denied and gave
notice of appeal to file an appeal of the verdict and  judgment to the  Superior
Court of New Jersey,  Appellate  Division.  Management  latter  determined  that
pursuing  the appeal  would not be in the best  interest  of the Company and its
shareholders.

In January  2003,  the Company  entered into a  Stipulation  of  Settlement  and
Release before the Superior Court of New Jersey, Somerset County. The settlement
stipulates  that the  Company  pay a total of $200,000  plus  700,000  shares of
restricted  common  stock of the  Company  valued by the  agreement  at $105,000
(management has determined that the discounted  value of the 700,000  restricted
shares was $29,400 as of February 4, 2003 based on quoted  market price of $0.07
per share discounted for lack of  marketability).  The stipulation  calls for an
initial  payment of $75,000  (paid in March  2003)  with the  remaining  balance
payable in $25,000  increments on the following dates:  June 2, 2003, August 31,
2003,  November  29,  2003,  February  27,  2004 and May 28,  2004.  The  record
judgement of $400,000  shall remain  until the payment  obligations  are made in
full. In the event of default, the plaintiff shall have the right to execute the
judgement  after  crediting  $105,000 for the agreed value of the shares  issued
plus any payments made pursuant to the settlement.  Accordingly,  failure by the
Company to timely meet the settlement  terms will have a material adverse effect
on the Company's financial position and prospects.

5. AMPLIDYNE,  INC. V. WAYNE FOGEL,  DIGITAL  COMMUNICATIONS  NETWORK,  INC. AND
INTERNET NETWORK CORPORATION

On May 30,  2002,  the  Company  filed a  two-count  lawsuit  against  the above
mentioned defendants in the Superior Court of New Jersey, Law Division, Somerset
County, seeking, among other things,  declaratory relief that the Company is not
obligated to pay a finders fee (in connection with the Company's purchase of the
Darwin Assets), and that the Company is entitled to monetary damages as a result
of  defendant's  false  misrepresentations.  On July 10,  2002,  the  matter was
removed to the United States District Court of New Jersey but later  transferred
back to the United States  Bankruptcy  Court and then  transferred to the United
States  District  Court of New  Jersey.  On July 29,  2002,  defendants  filed a
counterclaim seeking $200,000 in damages as a result of a finders fee agreement.
In January 2003, the matter was  transferred to the United States District Court
for the Middle District of Florida.  The defendants sought a further transfer to
the United States Bankruptcy Court for the Middle District of Florida,  but such
motion was denied.  Although the Company is confident in its position, it cannot
predict  the  outcome of the case and any  negative  outcome may have a material
adverse effect on the Company's financial position or prospects.


                                      -21-
<PAGE>
                                 Amplidyne, Inc.
                          Notes to Financial Statements
                           December 31, 2002 and 2001


NOTE J - SUBSEQUENT EVENTS

1. SETTLEMENT OF HIGH GAIN ANTENNA CO., LTD. OF KOREA MATTER

In January  2003, a settlement  was reached with High Gain Antenna Co.,  Ltd. of
Korea  (see  Note I .4.) for  $200,000  plus  700,000  shares  of the  Company's
restricted  common stock. In March 2003, the Company made the first  installment
of $75,000 in connection with the settlement.

2. LOANS FROM AND REPAYMENTS TO OFFICER / STOCKHOLDER

From January  through March 2003,  this officer loaned the Company an additional
$73,000 and was repaid $57,200. As of March 26, 2003 the Company owed $86,108 to
this officer for loans and accrued salaries. (See note H-1).

3. INVESTOR LOANS

In March 2003, investor loaned the Company $20,000.  The terms of this loan have
not as yet been determined.

4. ADVANCE FROM CUSTOMER

In March 2003, the Company received $100,000 as an advance against future orders
from a customer with whom it is considering  entering into a potential  purchase
or merger agreement.

                                      -22-
<PAGE>

                                   SIGNATURES

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

                                       AMPLIDYNE, INC.


                                       By: /s/ Devendar S. Bains
                                           ----------------------------------
                                           Name: Devendar S. Bains
                                           Title: Chief Executive Officer,
                                           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.

<TABLE>
<CAPTION>
Signature                                   Title                                     Date
---------                                   -----                                     ----
<S>                                                                                   <C> <C>
/s/ Devendar S. Bains               Chief Executive Officer,                    April 15, 2003
Devendar S. Bains          Treasurer, Principal Accounting
                                    Officer and Director




/s/ Tarlochan Bains                 Vice President and Director                 April 15, 2003
--------------------------
Tarlochan Bains


/s/ Nirmal Bains                    Secretary                                   April 15, 2003
--------------------------
Nirmal Bains

/s/Charles J. Ritchie               Director                                    April 15, 2003
--------------------------
Charles J. Ritchie

/s/Manish V. Detroja                Director                           April 15, 2003
--------------------------
Manish V. Detroja
</TABLE>




<PAGE>

      CERTIFICATION OF PRINCIPAL EXECUTIVE AND PRINCIPAL ACCOUNTING OFFICER
                   PURSUANT TO 18 U.S.C 1350, AS ADOPTED, AND
        THE REQUIREMENTS OF SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002


     I, Devendar S. Bains,  Chief  Executive  Officer and  Principal  Accounting
Officer of Amplidyne, Inc. (the "Company") do hereby certify that:

     1    I have reviewed this annual report on Form 10-KSB of the Company;

     2    Based on my knowledge,  this annual report does not contain any untrue
          statement  of a  material  fact  or  omit to  state  a  material  fact
          necessary to make the  statements  made, in light of the  circumstance
          under which such  statements were made, not misleading with respect to
          the period covered by this annual report; and

     3    Based on my knowledge,  the financial statements,  and other financial
          information  included in this  annual  report,  fairly  present in all
          material respects the financial  condition,  results of operations and
          cash flow of the Company as of, and for, the period  presented in this
          annual report.

     4    I am responsible for establishing and maintaining  disclosure controls
          and  procedures  (as defined in Exchange  Act Rules 13a-14 and 15d-14)
          for the Company and have:

          (a)  Designed such  disclosure  controls and procedures to ensure that
               material information relating to the Company, is made known to me
               by others within the Company,  particularly  during in which this
               annual report is being prepared;

          (b)  Evaluated the effectiveness of the Company's  disclosure controls
               and  procedures  as of a date  within 90 days prior to the filing
               date of this annual report (the "Evaluation Date"); and

          (c)  Presented  in  this  annual  report  my   conclusion   about  the
               effectiveness of the disclosure  controls and procedures based on
               my evaluation as of the date of the Evaluation Date;

     5    I have disclosed, based on my most recent evaluation, to the Company's
          auditors and the audit  committee of the Company's  board of directors
          (or persons performing the equivalent functions):

          (a)  All  significant  deficiencies  in the  design  or  operation  of
               internal  controls  which could  adversely  affect the  Company's
               ability to record,  process,  summarize and report financial data
               and  have  been  identified  for the  registrant's  auditors  any
               material weakness in internal controls; and

          (b)  Any fraud,  whether or not material,  that involves management or
               other  employees  who  have  significant  role  in the  Company's
               internal controls; and

     6    I have  indicated  in this  annual  report  whether  or not there were
          significant  changes in  internal  controls or in other  factors  that
          could significantly affect internal controls subsequent to the date of
          my most recent  evaluation,  including  any  corrective  actions  with
          regard to significant deficiencies and material weakness.



/s/ Devendar S. Bains                                             April 15, 2003
-----------------------------------
Devendar S. Bains
Chief Executive Officer and Principal Accounting Officer