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, 2003


                           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                            (ZIP CODE)
         EXECUTIVE OFFICES)


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 $1,351,225

      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, 2004, was approximately $357,000.

      Number of shares outstanding of the issuer's common stock, as of March 31,
2004 was 10,376,500

      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 continued to refine 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. This amplifier was
modified to be operational  via power over Ethernet  configuration.  The company
also  developed a single channel NMT 450 Mhz amplifier for a major OEM customer.
The  Company  has had its  test  site in  Sparta  New  Jersey  under  continuous
operation  for more than 4 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.  This trend reversed somewhat during the first
quarter of  2003.However  this could not be  sustained  through  the rest of the
year. The company made significant staff cutbacks in late 2002,which resulted in
lower overhead costs during 2003. The Company was unable to raise any additional
funds and as a result the  Company  has been  operating  under  severe cash flow
conditions  for most of  2003.These  conditions  have  considerably  limited the
company's sales and marketing efforts.

      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


                                       2
<PAGE>

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 turnkey  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
turnkey  systems  for various  applications  or  components  for  expansion  and
concentration of existing networks. During 2003, Amplidyne continued offered its
"ISP in a Box" complete network start-up kit for deployment to ISPs.

      In light of the events of 2003,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 2004.

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.


                                       3
<PAGE>


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 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 2003. . The Company  designed a prototype  amplifier for the NMT
450 Mhz band for a major North American OEM customer during 2003 and refined its
3.5Ghz products during 2003,and has been manufacturing products during 2003.

Military Amplifier Development

      During the year the Company developed prototype  amplifiers for a military
replacement amplifier project. The Company intends to explore more opportunities
in this area during 2004.


                                       4
<PAGE>

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 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.  As a result of these
developments, the Company has continued to obtain orders for these products from
its customers.

      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 3G system  operators,  to  develop
technologically  advanced  amplifier  based  products.  The Company has recently
developed  amplifiers  for military  applications  and intends to pursue further
other such opportunities when they arise.

      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.

                                       5
<PAGE>

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

      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 3G  multichannel  products  to OEM's  during  2003.  The
Company  intends to pursue  this market  segment  during  2004.  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 2003.

      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  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,

                                       6
<PAGE>

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 better products in
the industry.

      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.


                                       7
<PAGE>


      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.

      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

                                       8
<PAGE>


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 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.


                                       9
<PAGE>

MARKETS

      The market for wireless  communications  services has grown  substantially
during the past decade as  cellular  wireless  local loop,  3G 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.

      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 2003.

      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.


                                       10
<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, 3G
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 has  continued to
refine its 4channel ultra-linear 3G amplifier.

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, 3G 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.

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


                                       11
<PAGE>


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 during most of 2003. Only the first quarter showed somewhat of a
recovery for sales of our products. The outlook for 2004 remains uncertain. 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,  2003,  the Company  had signed  purchase  orders for
approximately  $600,000.  The Company  expects to ship these products during the
first half of 2004.  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 2004. 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  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.


                                       12
<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 2002 and 2003.

                        NET REVENUES BY MARKET CATEGORIES
                                            (IN THOUSANDS)

<TABLE>
<CAPTION>
                                                                             YEAR ENDED
                                                                            DECEMBER 31,
                                                                      ------------------------
                                                                        2002            2003
                                                                      --------       ---------
<S>                                                                  <C>             <C>
AMPLIFIER MARKETS

 Cellular  Analog and  digital . . . . . . . . . . . . . . . . . .      $264.5          415.72

 Wireless  Telephony . . . . . . . . . . . . . . . . . . . . . . .       711.1             653

 Satellite  Communications,  Custom and other Products . . . . . .        57.0            59.8

AMPWAVE MARKET

 Wireless Internet Products.  And Broadband  solutions . . . . . .         581           222.7

         Total  .  . . . . . . . . . . . . . . . . . . . . . . . .    $1,613.6       $1,351,22
</TABLE>


      * Wireless  Telephony.  Sales to the  wireless  telephone  segments of the
      wireless  communications industry have increased from approximately 44% of
      total  revenues  for fiscal  year end 2002 to  approximately  48% of total
      revenue for the fiscal year end 2003.

      * Wireless Internet and Broadband solutions.  The Company shipped products
      to its  customers in 2003 with total sales for the year of $222,700  which
      accounts for approximately 16% of total revenues. The Company sold some of
      its Darwin Hotel assets and inventory during 2003.

      *  International  Sales.  Sales of  wireless  products  outside the United
      States (primarily to Western Europe and Canada  represented  approximately
      67% and 85% of net sales during fiscal 2002 and fiscal 2003, respectively.

      * Sales and Marketing.  The Company  reduced its sales and marketing force
      considerably  during 2003.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.


                                       13
<PAGE>


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 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.  During 2003 the
Company  has been  operating  under  severe cash flow  circumstances,  which has
restricted the Company's sales and marketing efforts.

HIGH SPEED WIRELESS INTERNET PRODUCTS AND BROADBAND SOLUTIONS

      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's  revenues from these
products  during 2003, and this market  accounted for  approximately  16% of the
total sales for the year 2003.


                                       14
<PAGE>


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 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.  Others also
manufacture  other  components  such as  resistors,  capacitors,  connectors  or
mechanical supported subassemblies.  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.


                                       15
<PAGE>


      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 2002 and 2003 were
approximately $406,614 and $287,629 respectively,  and represented approximately
25 and  21%,  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 3G and refinements
to its bi-directional amplifier, Client Premise equipment, and Microcell for its
wireless  internet  systems  and other high speed  wireless  internet  products.
During  2003 the  Company  has been  operating  with fewer  staff than 2002 as a
result of the cost cutting in late 2002.

      During most of 2003,  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.


                                       16
<PAGE>


      Notwithstanding  the Company's  active pursuit of patent  protection,  the
Company believes that the success of its amplifier  business depends more on its
specifications,  CAE/CAD  design and modeling  tools,  technical  processes  and
employee expertise than on patent protection.  The Company generally enters into
confidentiality  and  non-disclosure  agreements  with its  employees and limits
access to and distribution of its proprietary technology. The Company may in the
future  be  notified  that  it  is  infringing   certain   patent  and/or  other
intellectual  property  rights of  others.  Although  there are no such  pending
lawsuits  against  the  Company  or  unresolved  notices  that  the  Company  is
infringing  intellectual  property  rights of others,  there can be no assurance
that  litigation  or  infringement  claims  will not  occur in the  future.  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,  2003,  the Company had a total of 14  employees,  9 in
operations,  2 in  engineering,  3 in  administration;  the  Company  employs  1
consultant  in  sales  and  marketing.   The  employee   headcount  was  reduced
significantly  in the third and fourth quarters of 2002, from 33 employees and 3
consultants,  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.


                                       17
<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 $2,380,027  and $980,496 for the years ended December 31,
2002 and 2003,  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 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


                                       18
<PAGE>


ever become or remain  profitable.  In addition,  we had an accumulated  deficit
$22,930,175 as of December 31,2003.

      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,
2003 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 2004,  together with recently obtained funding
will be  adequate  to fund our  operations  for at least  three to four  months.
However,  we will require  additional  financing  during  fiscal  2004.  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 in the past,  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 sufficient 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 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


                                       19
<PAGE>


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.  $125,000  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 and
2003, 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 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


                                       20
<PAGE>

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 2002,  two customers
accounted for 60% of net sales (44% and 16%). In 2003,  two customers  accounted
for 80% of net sales  (49% and 31%).  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 2004  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.


                                       21
<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  30% of our issued and  outstanding  common  stock,  not including
common stock options they may own. Subsequent to December 31, 2003, this control
has shifted to Phoenix  Capital  Holdings (the  acquirers of Class C Convertible
Preferred  Stock) by virtue of the issuance of an irrevocable  proxy by Devendar
Bains.  As of March 31,  2004,  Phoenix has  effective  control  over 53% of the
Company's common stock. Accordingly, such holders may be in a position to affect
the election of all of our directors and control the 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.

      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


                                       22
<PAGE>


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 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 67 % and 85%
of  our  net  revenues  for  the  years


                                       23
<PAGE>


ended  December 31, 2002 and 2003,  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;

      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


                                       24
<PAGE>


agreement  terminates  April 30,  2005 and  contains  certain  covenants  not to
compete  against  our  company  following  termination  of  employment  with our
company.  We cannot be sure  whether we will be able to replace Mr. Bains if his
services become unavailable.

      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 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


                                       25
<PAGE>


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 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;


                                       26
<PAGE>


      o     Limited interest by investors in our securities;

      o     Volatility of our stock price due to low trading volume;

      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.


                                       27
<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,  2003,  there were
10,376,500 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.

            2,021,000  shares of our common  stock  issuable  upon  exercise  of
            options  granted to our employees  and Directors at exercise  prices
            ranging from $0.15 to $3.25 per share.

      As of December 31, 2003,  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  11,627,500  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.  Subsequent to year end, we issued 54,325 shares of
Series C Convertible  Preferred Shares to Phoenix Opportunity Fund III, L.P. who
in connection  therewith has obtained  effective control of 53% of the Company's
voting stock.

      SHARES  ELIGIBLE FOR FUTURE SALE MAY  ADVERSELY  AFFECT THE MARKET.  As of
December  31,  2003 we had  10,376,500  shares of our  common  stock  issued and
outstanding.  Of these 10,376,500 shares of issued and outstanding common stock,
approximately  5,914,270 shares are considered  "restricted  securities".  These
"restricted  securities"  may be sold pursuant to Rule 144 of the Securities Act
of 1933 as follows:

      o     Approximately  5,914,270 shares of our common stock may currently be
            sold pursuant to Rule 144;

                                       28
<PAGE>


      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,  2003,  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  2,221,000  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.

      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.


                                       29
<PAGE>

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. $125,000 has been paid to date; the balance of $75,000 has
to be paid in quarterly  payments of $25,000.  The Company  also issued  700,000
shares of common stock.

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.  Internet  Network  Corporation  has a pending motion seeking
sanctions  against the Company for violating the  bankruptcy  automatic stay for
debtors in  bankruptcy  proceedings.  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


                                       30
<PAGE>



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. .

3. The Company was subject to a SEC formal  order of  investigation  relating to
the subject  matter of the Class Action  Lawsuit that was  commenced in 1999 and
settled in 2001. On May 22, 2003, the  Commission  filed a settled action in the
United States  District Court for the District of New Jersey against  Amplidyne,
Inc.  ("Amplidyne")  and its President,  Chairman and Chief  Executive  Officer,
Devendar S. Bains ("Bains").  The Commission's  Complaint alleges that Amplidyne
and Bains  violated the antifraud  provision of the federal  securities  laws by
making  false  statements  concerning   Amplidyne's  purported  entry  into  the
high-speed  Internet wireless access market.  Simultaneously  with the filing of
the Complaint, Amplidyne and Bains, without admitting or denying the allegations
in the  Complaint,  consented  to the  entry  of a  final  judgment  permanently
enjoining  both from violating  Section 10(b) of the Securities  Exchange Act of
1934 and Rule 10b-5 thereunder. In addition, Bains agreed to pay a civil penalty
of $50,000.

4.  The  Company  (as well as an  officer  and  director  of the  Company)  is a
defendant in a complaint  brought in November  2003 in the Circuit  Court of the
State of Florida (17th Judicial  District,  Broward  County)  alleging fraud and
seeking relief for unspecified damages and costs associated with an aborted plan
of merger. Management has been in settlement discussions with the plaintiff, but
to date has not reached an accord. The Company is seeking representation on this
matter, but presently is unrepresented. No determination has been made as to the
amount of damages,  if any, the Company  would be required to pay.  Accordingly,
there is no provision in the financial statements for any damages in  connection
with this matter.

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

There were no matters submitted to a vote of stockholders in 2003.


                                       31
<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 Small Cap 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
------------

          2002 Calendar Year                                  High         Low
          ------------------                                  ----         ---

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

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

          January 1 - March 31                                 .18        .05
          April 1-June 30                                      .14        .05
          July1-September 30                                   .15        .07
          October 1-December 31                                .14        .04

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

          January 1-March 31                                   .20        .04



On March 31, 2004, the closing price of the Common Stock as reported on the NASD
OTCBB was $.10. On March 31, 2004 there were  10,376,500  shares of Common Stock
outstanding,  held of record by approximately 80 record holders (with over 2,300
beneficial owners).


                                       32
<PAGE>


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

RESULTS OF  OPERATIONS - FISCAL YEAR ENDED  DECEMBER 31, 2003 COMPARED TO FISCAL
YEAR ENDED DECEMBER 31, 2002.

Revenues for the fiscal year ended  December 31, 2003 decreased by $262,509 from
$1,613,734 to $1,351,225,  or 16% compared to the fiscal year ended December 31,
2002. 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 United States customers, which went down
to $201,087 in 2003 from $572,084 in 2002, a decrease of $370,997 or 65%.  Sales
substantially  declined  in the fourth  quarter of 2003.  Fourth  quarter  sales
represented only approximately 9% of the total sales for the year ($120,881).

The majority of the  amplifier  sales for the year ended  December 31, 2003 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 $1,411,679 or 104% of sales (including an inventory write-down
of $164,672) during the year ended December 31, 2003, compared to 94% during the
same  period for 2002.  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, 2003 was $1,247,007 or 92% 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 of  $164,672.  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 decreased in 2003 by $1,235,556 to
$852,877  from  $2,088,433,  in 2002.  Expressed as a percentage  of sales,  the
selling,   general   and   administrative   expenses   (excluding   stock  based
compensation)  were  63% in  2003  and  129%  in  2002.  The  principal  factors
contributing  to the increase in selling,  general and  administrative  expenses
were related to labor cutbacks and general cost cutting throughout the year.

Research,  engineering  and  development  expenses were 21% of net sales in 2003
compared  to 25% in 2002.  In 2003  and  2002,  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.


                                       33
<PAGE>


The Company had interest income and other income in 2002 of $3,170 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 in 2003  because we no
longer have any interest bearing temporary investments. Interest income declined
by $3,167 or approximately  100%, which is consistent with the steady decline in
cash balances and interest  rates in 2003.  The Company also sold New Jersey Net
operating loss carryforwards  pursuant to the New Jersey Technology  Certificate
Transfer Program, receiving $180,316 in 2003 and $163,687 in 2002.

Interest  expense was $3,657 in 2003  compared  to $932 in 2002 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 2003 and 2002,  to reflect our known
exposure in  litigation  against the Company,  as well as the actual cost of the
settlement of the following matters:

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.

There was no stock compensation cost for 2003 or 2002.

As a result of the  foregoing,  the Company  incurred  net losses of $980,496 or
$0.10 per share for the year ended December 31, 2003 compared with net losses of
$2,380,026 or $0.25 per share for the same period in 2002.


                                       34
<PAGE>


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.

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


                                       35
<PAGE>


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:

* 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.

* Settlement of the High Gain Antenna matter for $200,000 plus 700,000 shares of
restricted  common stock of the Company  (total charge to operations in 2002 was
$229.400).

* 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.

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, 2003, we had an
accumulated deficit of $22,930,175. 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.


                                       36
<PAGE>


As of  December  31,  2003,  our  current  liabilities  exceeded  our  cash  and
receivables  by $906,027.  Our current ratio was 0.51 to 1.00,  but our ratio of
accounts receivable to current liabilities was only 0.09 to 1.00. This indicates
that we will have difficulty meeting our obligations as they come due.

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, 2003, we had an overdraft of $17,855 compared to an overdraft
of $11,938 at December  31,  2002.  Overall our  overdraft  increased  by $5,917
during 2003.  Our cash used for operating  actives was  $226,064,  excluding the
benefit  of salary  deferrals  by  officer/stockholders  of  $109,988.  This was
principally  funded by officer and investor  loans  aggregating  $67,701 and the
sales of property and equipment of $44,500.

The allowance for doubtful accounts on trade receivables increased form $143,000
(25% of accounts  receivable  of $583,506) in 2002 to $251,000  (73% of accounts
receivable  of  $342,482)  in 2003.  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 2002,  we had several  large
outstanding balances that we had doubt we would collect.  Provision for doubtful
accounts receivable decreased from $291,471 in 2002 to $108,000 in 2003.

Our  inventories  decreased by $519,004 to $407,709 in 2003 compared to $926,713
in 2002,  a  decrease  of 56% We  believe  that the  reasons  for the  decreased
inventories primarily due to write-downs and distress sales of parts to generate
cash.

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 July 2004. Although the
Company did not convert  salaries  to  officers  through the  issuance of Common
Stock in 2003 or 2002, it may to do so in 2004. To help  alleviate the cash flow
difficulties,  the  Chief  Executive  Officer  agreed to defer an  aggregate  of
$139,706 of  salaries.  The Vice  President of  Operations  also agreed to defer
$44,281 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.


                                       37
<PAGE>


In 2003, the Company settled a litigation  matter for cash payments  aggregating
$200,000 plus 700,000 shares of restricted  common stock, with a down payment of
$75,000 in March 2003 and $25,000 per 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.  While the Company has
obtained financing through the issuance of Series C Convertible  Preferred Stock
subsequent  to December 31, 2003,  our  inability 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  sufficient  financing  will be available to the
Company on acceptable terms, or at all. If adequate funds are not available, the
Company  may be  required  to  delay,  scale  back or  eliminate  its  research,
engineering  and development or  manufacturing  programs or obtain funds through
arrangements  with partners or others that may require the Company to relinquish
rights to certain of its  technologies  or potential  products or other  assets.
Accordingly,  the  inability  to obtain  such  financing  could  have a material
adverse  effect on the Company's  business,  financial  condition and results of
operations.


ITEM 7. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

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


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

      None.


                                       38
<PAGE>


ITEM 8A: 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.


                                       39
<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:


NAME                          AGE         POSITION(S) WITH THE COMPANY
----                          ---         ----------------------------

Devendar S. Bains*            53          Chairman of the Board, Chief Executive
                                          Officer, Treasurer and Director

Tarlochan Bains               54          Vice President-Operations and Director

Nirmal Bains                  46          Secretary

Charles J. Ritchie*           62          Director

Manish V. Detroja*            36          Director


*     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.

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.


                                       40
<PAGE>


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, 2003 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 2003 Annual Report on Form 10-KSB.

      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, 2003, the Company  incurred  professional
fees to its auditors in the amount of $18,000,  all of which related to auditing
and quarterly review services.  No non-audit  services have been provided to the
Company by its current auditor.


                                       41
<PAGE>

      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, 2003,
all Section 16(a) filing requirements applicable to its officers,  directors and
greater than ten percent beneficial owners were satisfied.

CODE OF ETHICS

      Despite the  Sarbanes-Oxley  requirement  to have a Board approved Code of
Ethics  adopted by the Company,  we have not as of yet created or adopted such a
code. The Board intends to prepare and adopt a code of Ethics within the next 90
days.


                                       42
<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
                                                                                   -----------------------------------------
                                                                                  AWARDS                      PAYOUTS
                                                                                  ------                      -------
                                            ANNUAL COMPENSATION
                                            -------------------
                                                                         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>        <c>           <C>            <C>                 <C>       <C>

Devendar S. Bains,         2003     $162,000(4)    ---      $20,000 (1)
Chairman, Chief
Executive Officer,         2002     $162,000(2)    ---      $20,000 (1)
And Treasurer              2001     $162,000       ---      $20,000 (1)


Tarlochan Bains,           2003     $100,000(5)    ---
Vice President             2002     $100,000(3)    ---
and Director               2001     $125,000       ---
</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.  The accrued
      amount was paid in 2003.  Does not include  $50,000 paid to Nirmal  Bains,
      the wife of Devendar Bains

(3)   Includes  $20,000  accrued but unpaid at December  31,  2002.  The accrued
      amount was paid in 2003.

(4)   Of the salary,  $22,293 was paid and  $139,707 was accrued but not paid in
      the year ended December 31, 2003.  Does not include $50,000 paid to Nirmal
      Bains, the wife of Devendar Bains

(5)   Of the  salary,  $55,719  was paid and $44,281 was accrued but not paid in
      the year ended December 31, 2003.

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  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.


                                       43
<PAGE>


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

      There were no conversions of unpaid salary into equity from 2000 to 2003.

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


                                       44
<PAGE>


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.

      As of December 31, 2003,  1,856,000 options to purchase Common Stock under
the Option Plan were granted  and/or  reserved to certain  employees,  including
Devendar Bains (300,000 options),  Tarlochan Bains (300,000 options), and Nirmal
Bains  (50,000   options),   the  Company's   Chief  Executive   Officer,   Vice
President-Operations and Secretary, respectively. The options are exercisable at
$0.15 and expire on May 31, 2004.  60,000 options to purchase  Common Stock were
granted to each of Messrs. Detroja and Ritchie,  Directors of the Company. These
options are  exercisable  at $0.07,  are fully vested and expire on November 30,
2008.  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,  2003,  each of Messrs.  Detroja and Ritchie  also own
130,000  options to purchase  Common Stock,  70,000 of which are  exercisable at
$0.20 per  share,  are fully  vested  and  expire  May 31,  2006 and  60,000 are
exercisable at $0.07 per share,  are fully vested and expire  November 30, 2008.
In  addition,  pursuant to the terms a former  employee's  employment  agreement
employment  agreement,  the Company, in 2002, issued 300,000 options to purchase
Common Stock  exercisable  at $1.50 per share.  The options are fully vested and
expire December 31, 2005.


                                       45
<PAGE>


Audit Committee

The Audit Committee does not have a financial expert.  The Board has been unable
to find a suitable expert to fill that position.


                                       46
<PAGE>

ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

      The following table sets forth certain  information,  as of March 31, 2004
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 (%)
Owner*                             of Common Stock(1)           of Ownership
------                             ------------------           ------------

Devendar S. Bains(2)                  3,272,985                     27.98

Tarlochan Bains(3)                      178,456                      1.53

Nirmal Bains(2)                       3,272,985                     27.98

Charles J. Ritchie(4)                   130,000                      1.11

Manish V. Detroja(5)                    130,000                      1.11

Joseph Giamanco (6)                     584,674                      5.00

Jerome Belson (7)                       808,402                      6.91

All Officers and Directors
  As a group (5 persons)(8)           3,711,441                     31.73

* 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 130,000 stock options. See "Executive Compensation - Stock Option
      Plans and Agreements."

(5)   The address for such person is 2001  Buckingham Dr.,  Jamison,  PA, 18929.
      Includes 130,000 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.

                                       47
<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

     $55,982  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  $152,308 of which
$136,000 was repaid in 2002. Additionally, he agreed to defer $54,000 (2002) and
$139,706  (2003) of salaries to help the  Company  with its cash flow.  The Vice
President of Operations  and the Secretary each also agreed to defer $44,281 and
$9,000 of salaries,  respectively, in 2003. In 2003, the Chief Executive Officer
and  principal  shareholder  loaned the Company an  additional  $310,401 and was
repaid $262,700. As of December 31, 2003, the Company owed $203,716 to the Chief
Executive  Officer for loans ($64,010) and accrued salaries  ($139,706) and owed
other  officers an aggregate of $53,281 for accrued  salaries.  The total due to
all officers combined at December 31, 2003 was $256,997.

      From January  through March 2004, the Chief  Executive  Officer loaned the
Company an additional $18,000. As of March 31, 2004 the Company owed $244,908 to
this 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 2003 and 2002,  the
Company made purchases of approximately $38,000 and $24,000, respectively,  from
this 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.

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


                                       48
<PAGE>

      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.


                                       49
<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                                        F1

Report of Independent Certified Public Accountants                   F2

Balance Sheets                                                       F3-F4

Statement of Operations                                              F5

Statement of Stockholders' Equity                                    F6

Statement of Cash Flows                                              F7

Notes to Financial Statements                                        F8-F22

(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.23.1



                                       50
<PAGE>


*     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.

      The Company filed a report on Form 8-K in the first quarter of 2004



                                       51
<PAGE>


                                 AMPLIDYNE, INC.

                          INDEX TO FINANCIAL STATEMENTS


                                                                   Page
                                                                   ----

Report of Independent Certified Public Accountants                 F2

Financial Statements

         Balance Sheets                                            F3 to F4

         Statements of Operations                                  F5

         Statement of Stockholders' Equity                         F6

         Statements of Cash Flows                                  F7

         Notes to Financial Statements                             F8 to F22



                                      F-1
<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,  2003 and 2002,  and the related  statements  of  operations,  stockholders'
equity  (deficiency),  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, 2003 and 2002,  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 31, 2004


                                      F-2
<PAGE>


                                 AMPLIDYNE, INC.
                                 BALANCE SHEETS
                                  December 31,

<TABLE>
<CAPTION>
 ASSETS
                                                                                  2003                2002
                                                                               -----------         -----------
<S>                                                                            <C>                 <C>
CURRENT ASSETS
         Accounts receivable, net of allowance for doubtful accounts of
           $251,000 and  $143,000 in 2003 and 2002, respectively               $    91,482         $   440,506
         Inventories                                                               407,709             926,713
         Prepaid expenses and other                                                 12,307              24,616
                                                                               -----------         -----------

                  Total current assets                                             511,498           1,391,835

PROPERTY AND EQUIPMENT - AT COST

         Machinery and equipment                                                   565,629             725,628
         Furniture and fixtures                                                     43,750              43,750
         Autos and trucks                                                           66,183              66,183
         Leasehold improvements                                                      8,141               8,141
                                                                               -----------         -----------
                                                                                   683,703             843,702
         Less accumulated depreciation and amortization                           (646,627)           (760,633)
                                                                               -----------         -----------
                                                                                    37,076              83,069
                                                                               -----------         -----------

SECURITY DEPOSITS AND OTHER NON-CURRENT ASSETS                                      35,625              45,068
                                                                               -----------         -----------

                                                                               $   584,199         $ 1,519,972
                                                                               ===========         ===========
</TABLE>

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE STATEMENTS

                                      F-3
<PAGE>


                                 AMPLIDYNE, INC.
                                 BALANCE SHEETS
                                  December 31,

<TABLE>
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIENCY)
                                                                                      2003                 2002
                                                                                  ------------         ------------
<S>                                                                               <C>                  <C>
CURRENT LIABILITIES
         Overdraft                                                                $     17,855         $     11,938
         Current maturities of lease obligations                                            --                2,041
         Accounts payable                                                              411,171              410,445
         Accrued expenses                                                               81,486              155,027
         Accrued settlement of litigation                                              170,000              295,000
         Advances from customers                                                        60,000                   --
         Loans payable - officers                                                      256,997               99,308
                                                                                  ------------         ------------
                                    Total current liabilities                          997,509              973,759

Notes payable, convertible into common stock at the holders' option                     20,973                   --
                                                                                  ------------         ------------

                           TOTAL LIABILITIES                                         1,018,482              973,759

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

STOCKHOLDERS' EQUITY (DEFICIENCY)

         Common stock - authorized, 25,000,000 shares of $.0001 par value;
                  shares 10,376,500 and 9,676,500 shares issued
                  and outstanding at December 31, 2003 and 2002,                         1,038                  968
                  respectively
         Additional paid-in capital                                                 22,494,854           22,494,924
         Accumulated deficit                                                       (22,930,175)         (21,949,679)
                                                                                  ------------         ------------
                                                                                      (434,283)             546,213
                                                                                  ------------         ------------

                                                                                  $    584,199         $  1,519,972
                                                                                  ============         ============
</TABLE>

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE STATEMENTS


                                      F-4
<PAGE>


                                 AMPLIDYNE, INC.
                            STATEMENTS OF OPERATIONS
                             YEAR ENDED DECEMBER 31,

<TABLE>
<CAPTION>
                                                                         2003                 2002
                                                                     ------------         ------------
<S>                                                                  <C>                  <C>
Net sales                                                            $  1,351,225         $  1,613,734
Cost of goods sold  (net of inventory
         write-down of $164,672 in 2003 and $233,995 in 2002)           1,411,679            1,520,238
                                                                     ------------         ------------
                  Gross profit                                            (60,454)              93,496

Operating expenses
         Selling, general and administrative                              852,877            2,088,433
         Research, engineering and development                            287,629              406,614
                                                                     ------------         ------------


                  Operating loss                                       (1,200,960)          (2,401,551)

Nonoperating income (expenses)
         Interest income and other income                                       3                3,170
         Interest expense                                                  (3,657)                (932)
         Litigation settlement costs                                           --             (144,400)
         Gain on sale of property & equipment                              44,500                   --
         Sale of New Jersey tax benefits                                  180,316              163,687
                                                                     ------------         ------------

                  Loss before income taxes                               (979,798)          (2,380,026)

Provision for income taxes                                                    698                   --
                                                                     ------------         ------------

                  NET LOSS                                           $   (980,496)        $ (2,380,026)
                                                                     ============         ============

Net loss per share - basic and diluted                               $      (0.10)        $      (0.25)
                                                                     ============         ============

Weighted average number of shares outstanding                          10,318,167            9,386,790
                                                                     ============         ============
</TABLE>

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE STATEMENTS

                                      F-5
<PAGE>

                                 AMPLIDYNE, INC.
                 STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIENCY)
                     YEARS ENDED DECEMBER 31, 2003 AND 2002


<TABLE>
<CAPTION>
                                                           Preferred Stock                     Common Stock
                                                    ----------------------------       ----------------------------
                                                      Shares           Par Value         Shares          Par Value
                                                    ----------        ----------       -----------       ----------
<S>                                                 <C>               <C>             <C>               <C>
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 in issuable
common stock, actually issued in the year
ended December 31, 2003
Issuance of common stock in settlement
of class action                                                                            324,486               32
Issuance of common stock, net of costs                                                     750,000               75
Conversion of preferred stock to common stock          (55,000)               (6)          701,194               70
Issuance of common stock for services
rendered by  third party                                                                     8,159                1
                                                    ----------        ----------       -----------       ----------

BALANCE AT DECEMBER 31, 2002                                --                --         9,676,500              968

Net loss for the year ended
December 31, 2003 Issuance of common stock in
connection with litigation settled in
the year ended December 31, 2002                                                           700,000               70
                                                    ----------        ----------       -----------       ----------
BALANCE AT DECEMBER 31, 2003                                --        $       --        10,376,500       $    1,038
                                                    ==========        ==========       ===========       ==========
</TABLE>


<TABLE>
<CAPTION>
                                                            Additional
                                                             Paid-In          Accumulated     Subscriptions
                                                             Capital            Deficit         Receivable          Total
                                                           ------------      ------------      ------------      ------------
<S>                                                        <C>               <C>               <C>               <C>
BALANCE AT DECEMBER 31, 2001                               $ 21,921,495      $(19,569,653)     $   (180,000)     $  2,172,632

Net loss for the year ended December 31, 2002                                  (2,380,026)                         (2,380,026)
Cost of litigation to be settled in
issuable common stock, actually issued
in the year ended December 31, 2003                              29,400                                                29,400
Issuance of common stock in settlement of class action              (32)
Issuance of common stock, net of costs                          539,925                                               540,000
Conversion of preferred stock to common stock                       (64)          180,000           180,006
Issuance of common stock for services
rendered by  third party                                          4,200                --                --             4,201
                                                           ------------      ------------      ------------      ------------

BALANCE AT DECEMBER 31, 2002                                 22,494,924       (21,949,679)               --           546,213

Net loss for the year ended December 31, 2003                                    (980,496)                           (980,496)
Issuance of common stock in connection with
litigation settled in the year ended December 31, 2002              (70)                                                   --
                                                           ------------      ------------      ------------      ------------

BALANCE AT DECEMBER 31, 2003                               $ 22,494,854      $(22,930,175)     $         --      $   (434,283)
                                                           ============      ============      ============      ============
</TABLE>

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE STATEMENTS


                                      F-6
<PAGE>


                                AMPLIDYNE, INC.
                            STATEMENTS OF CASH FLOWS
                             YEAR ENDED DECEMBER 31,

<TABLE>
<CAPTION>
                                                                                  2003             2002
                                                                               -----------      -----------
<S>                                                                            <C>              <C>
Cash flows from operating activities:

Net Loss                                                                       $  (980,496)     $(2,380,026)
                                                                               -----------      -----------
Adjustments to reconcile net loss to net cash used in operating activities
                  Provision for doubtful accounts receivable                       108,000          291,471
                  Gain on sale of property & equipment                             (44,500)              --
                  Loss on write-down of long-term financed receivables
                           previously included within other assets                  30,058               --
                  Salary deferrals added to officer loans                          109,988           83,000
                  Provision for inventory write-down                               164,672          233,995
                  Depreciation and amortization                                     45,994           73,373
                  Provision for litigation settlement costs                             --          144,400
                  Payment of  litigation settlements                              (125,000)         (80,000)
                  Changes in assets and liabilities
                           Accounts receivable                                     241,024         (282,788)
                           Inventories                                             354,332           20,974
                           Prepaid expenses and other assets                        (8,307)          (1,152)
                           Accounts payable and accrued expense                    (72,814)         392,631
                           Advance from customer                                    60,000               --
                           Accrued interest on notes payable convertible
                               into common stock at holders' option                    973               --
                                                                               -----------      -----------
                                    Total adjustments                              864,420          875,904
                                                                               -----------      -----------
                   Net cash used for operating activities                         (116,076)      (1,504,122)
                                                                               -----------      -----------

Cash flows from investing activities:
         Proceeds from sale of property and equipment                               44,500               --
         Change in security deposits                                                    --            7,038
         Purchase of property and equipment                                             --           (1,966)
                                                                               -----------      -----------
                  Net cash provided by investing activities                         44,500            5,072
                                                                               -----------      -----------

Cash flows from financing activities:
         Increase in overdraft                                                       5,916           11,938
         Proceeds of  notes payable convertible into common stock
                  at holders' option                                                20,000               --
         Payment of capital lease obligations                                       (2,041)          (7,230)
         Proceeds of loans from officer                                             47,701           72,200
         Proceeds from sale of common stock, net of costs                               --          544,201
         Collection of Subscriptions receivable preferred stock                         --          180,000
                                                                               -----------      -----------
                  Net cash  (used for) provided by financing activities             71,576          801,109
                                                                               -----------      -----------
                           NET  (DECREASE) IN CASH                                                 (697,941)

Cash and cash equivalents at beginning year                                             --          697,941
                                                                               -----------      -----------
Cash and cash equivalents at end year                                          $                $        --
                                                                               ===========      ===========

Supplemental disclosures of cash flow information:
         Cash paid for: Interest                                               $     3,657      $       932
                        Income taxes                                           $       698      $        --
</TABLE>

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE STATEMENTS


                                      F-7
<PAGE>

                                 AMPLIDYNE, INC.
                          NOTES TO FINANCIAL STATEMENTS
                             MARCH 31, 2003 AND 2002


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.  These products are sold under the AmpWave(TM) name.
As of January 2004, the Company is effectively controlled by Phoenix Opportunity
Fund III, L.P. (see Note J - Subsequent Events)

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  $980,496  and  $2,380,026  in 2003 and 2002,
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.
While the  Company  has  obtained  financing  through  the  issuance of Series C
Convertible  Preferred  Stock  subsequent to December 31, 2003, our inability 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  sufficient  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.  In January 2004,  the Company  partially
addressed  these concerns by issuing Series C Convertible  Preferred  Stock (See
Note J, Subsequent Events)

The Company 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;


                                      F-8
<PAGE>

                                 AMPLIDYNE, INC.
                          NOTES TO FINANCIAL STATEMENTS
                             MARCH 31, 2003 AND 2002


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, 2003 and 2002,  inventories
consisted of the following:

                                          2003            2002
                                        --------        --------
                Component parts         $290,178        $489,542
                Work-in-progress          36,052         209,822
                Finished Goods            81,479         227,349
                                        --------        --------
                                        $407,709        $926,713
                                        ========        ========


                                      F-9

<PAGE>

                                 AMPLIDYNE, INC.
                          NOTES TO FINANCIAL STATEMENTS
                             MARCH 31, 2003 AND 2002


3. PROPERTY, PLANT AND EQUIPMENT

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

4. 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, 2003.

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 2003, two customers  accounted for 80% of net sales (49% and 31%) and 45%
of net accounts  receivable at December 31, 2003. Export sales in 2003 accounted
for  approximately  85% of net sales and were primarily to Europe (54%),  Canada
(31%).



                                      F-10
<PAGE>


                                 AMPLIDYNE, INC.
                          NOTES TO FINANCIAL STATEMENTS
                             MARCH 31, 2003 AND 2002


During 2002, two customers  accounted for 60% of net sales (44% and 16%) and 71%
of net 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.

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

The carrying values of financial  instruments  potentially  subject to valuation
risk,  consisting  of  cash  and  cash  equivalents,  accounts  receivable,  and
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
$5,792 and $68,878 for the years ended December 31, 2003 and 2002, respectively.

11. RECLASSIFICATIONS

Certain  reclassifications  were  made to the 2002  amounts  to  conform  to the
current presentation.


                                      F-11
<PAGE>


                                 AMPLIDYNE, INC.
                          NOTES TO FINANCIAL STATEMENTS
                             MARCH 31, 2003 AND 2002


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 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, 2003 and 2002 were 945,000 shares.

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,
                                                      2003            2002
                                                   ----------      ----------
<S>                                                <C>             <C>
       Sales - external
                   Amplifier                        1,128,453      $  992,362
                   Internet business                  222,772         621,372
                                                   ----------      ----------
                                                   $1,351,225      $1,613,734
                                                   ==========      ==========

          Sales - external, by geographic area
                   United States                   $  201,087      $  572,084
                   Europe                             732,694         711,862
                   Canada                             417,444         273,350
                   All other foreign countries             --          56,438
                                                   ----------      ----------
                                                   $1,351,225      $1,613,734
                                                   ==========      ==========

          Inventory
                   Amplifier                       $  248,575      $  441,654
                   Internet business                  159,134         485,059
                                                   ----------      ----------
                                                   $  407,709      $  926,713
                                                   ==========      ==========
</TABLE>


                                      F-12
<PAGE>

                                 AMPLIDYNE, INC.
                          NOTES TO FINANCIAL STATEMENTS
                             MARCH 31, 2003 AND 2002


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 to  redemption  (at the option of the Company) at a rate of
      110% of the original issuance price and


                                      F-13
<PAGE>


                                 AMPLIDYNE, INC.
                          NOTES TO FINANCIAL STATEMENTS
                             MARCH 31, 2003 AND 2002


      (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, 2003, 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, 2003,  the Company had employee  stock  options  outstanding  to
acquire  2,221,000  shares of common stock at exercise  prices of $0.15 to $3.25
per share.

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 a class action compliant  settled in September
2001.  The  complaint,  brought on behalf of purchasers of the Company's  common
stock  during a specified  period in a prior year,  alleged that the Company and
certain individuals violated the federal securities laws by, among other things,
the issuance of a press release during that specified period.

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


                                      F-14
<PAGE>


                                 AMPLIDYNE, INC.
                          NOTES TO FINANCIAL STATEMENTS
                             MARCH 31, 2003 AND 2002


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, 2003. 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:

                                       2003                2002
                                   -----------         -----------
             Net loss              $(1,197,411)        $(2,567,411)

             Loss per share        $     (0.12)        $     (0.27)


                                      F-15
<PAGE>


                                 AMPLIDYNE, INC.
                          NOTES TO FINANCIAL STATEMENTS
                             MARCH 31, 2003 AND 2002


Stock option activity during 2003 and 2002, 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, 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
                 Issued during 2003                  200,000           0.150
                 Expired at December 31, 2003        (30,000)          3.250
                                                ------------
        Unexercised at December 31, 2003           2,221,000           0.669
                                                ============
</TABLE>


The  following  table   summarizes   information   concerning   outstanding  and
exercisable  options,  including  warrants  issued to officers,  at December 31,
2003:

<TABLE>
<CAPTION>
                                      Options Outstanding                           Options Exercisable
                                      -------------------                           -------------------

                        Number      Weighted average                          Number            Weighted
         Exercise     outstanding at   remaining       Weighted average     exercisable at      average
         Prices        period end    contractual life   exercise price       period end       exercise price
         ------        ----------    ----------------   --------------       ----------       --------------
<S>                    <C>           <C>                <C>                  <C>              <C>
          0.150           1,346,000     1.4 years (1)         0.150         1,346,000           0.150
          1.150             200,000     1.4 years             1.150           200,000           1.150
          1.250             150,000     0.4 years             1.250           150,000           1.250
          3.125             100,000     0.25 years            3.125           100,000           3.250
          1.040              10,000     2 years               1.040            10,000           1.040
          1.120              10,000     2 years               1.120            10,000           1.120
          3.250              55,000     1 year                3.250            55,000           3.250
          1.500             300,000     2 years               1.500           300,000           1.500
          0.200              50,000     2.25 years            0.200            50,000            0.200
                          ---------                                         ---------
                          2,221,000                                         2,221,000
</TABLE>

(1) Expiration  date extended from May 1, 2000 to May 31, 2006 and was re-priced
on April 9, 2003 from $4.00 to $.15 per share.


                                      F-16
<PAGE>

                                 AMPLIDYNE, INC.
                          NOTES TO FINANCIAL STATEMENTS
                             MARCH 31, 2003 AND 2002


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, 2003, the Federal net operating
loss  carryforwards  are  approximately  $15,440,000.  The  net  operating  loss
carryforwards  expire  at  various  dates  through  2023,  and  because  of  the
uncertainty  in  the  Company's  ability  to  utilize  the  net  operating  loss
carryforwards,  a full  valuation  allowance  of  approximately  $5,400,000  and
$5,100,000  has been provided on the deferred tax asset at December 31, 2003 and
2002, 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 2003 and 2002, the Company  received
$180,316 and $163,687, respectively, from the sale of such net operating losses.
The Company expects to sell additional New Jersey net operating  losses in 2004,
although there can be no assurance a suitable  transaction  will be consummated.
The New Jersey net operating loss carryforwards are approximately  $4,267,000 at
December 31, 2003.

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 2003 and 2002 is  principally  due to the impact
of state income and minimum taxes.

NOTE F - ASSETS FORMERLY UNDER CAPITAL LEASE OBLIGATIONS

The Company had 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. The remainder balances on these leases have been paid in
full at December 31, 2003.

The cost of assets under capital  leases was  approximately  $24,000 at December
31,  2003 and 2002,  and is  included in  property  and  equipment.  Accumulated
depreciation at December 31, 2003 and 2002 was approximately $24,000.


                                      F-17
<PAGE>


                                 AMPLIDYNE, INC.
                          NOTES TO FINANCIAL STATEMENTS
                             MARCH 31, 2003 AND 2002


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.  The landlord holds a
security deposit of $35,625 representing approximately 6 months rent.

Future remaining minimum lease payments on  non-cancelable  operating leases are
$38,000 for 2004.

Rent expense,  including the Company's share of real estate taxes, utilities and
other occupancy  costs, was $81,940 and $79,725 for the years ended December 31,
2003 and 2002, 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.

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 2003, the Chief Executive
Officer  deferred  salaries of $139,707 and the Vice President of Operations and
the Secretary each also deferred  salaries of $44,281 and $9,000,  respectively.
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 in either 2003 or 2002.

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  participate  in the
plan. The plan is administered by a third party.


4. LETTER OF INTENT - ABORTED MERGER

In  February,  2003,  the Company  entered  into a letter of intent with V-Link,
Inc., a provider of wireless  networks for hotels  whereby was to acquire all of
that  Company's  common stock.  V-Link,  as a customer of the Company,  advanced
$100,000 in March 2003 for future  orders  which had been  fulfilled by December
31, 2003.  The merger  negotiations  have ceased and V-Link has sued the Company
and its Chief Executive Officer (see Note I - Litigation - item 6).

5. NOTES PAYABLE CONVERTIBLE INTO COMMON STOCK AT HOLDERS' OPTION

In March 2003, two investors,  each of which already own approximately 4% of the
Company's  outstanding  common stock,  loaned the Company $20,000.  The terms of
each  loan  provide  for 6%  interest


                                      F-18
<PAGE>

                                 AMPLIDYNE, INC.
                          NOTES TO FINANCIAL STATEMENTS
                             MARCH 31, 2003 AND 2002


and are due in March  2005 with  accrued  interest.  By their  terms,  the loans
provide for accelerated payment under certain  conditions,  and conversion prior
to maturity into the Company's  common stock at the holder's  option at the rate
of $.10 per share. As of December 31, 2003, there are no conditions present that
trigger an acceleration, nor has either holder exercised their option to convert
them into common stock.

NOTE H - RELATED PARTY TRANSACTIONS

1. OFFICER / STOCKHOLDER LOANS

$55,982 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  $152,308 of which $136,000
was repaid in 2002. Additionally, he agreed to defer $54,000 (2002) and $139,706
(2003) of salaries to help the Company with its cash flow. The Vice President of
Operations  and the  Secretary  each also agreed to defer  $44,281 and $9,000 of
salaries,  respectively,  in 2003.  In 2003,  the Chief  Executive  Officer  and
principal  shareholder loaned the Company an additional  $310,401 and was repaid
$262,700.  As of  December  31,  2003,  the Company  owed  $203,716 to the Chief
Executive  Officer for loans ($64,010) and accrued salaries  ($139,706) and owed
other  officers an aggregate of $53,281 for accrued  salaries.  The total due to
all officers combined at December 31, 2003 was $256,997.

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  2003  and  2002,  the  Company  made  purchases  of
approximately $38,000 and $24,000, respectively, from this vendor.



                                      F-19
<PAGE>


                                 AMPLIDYNE, INC.
                          NOTES TO FINANCIAL STATEMENTS
                             MARCH 31, 2003 AND 2002


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. A customer 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 that  customer at a cost of
$175,000;  $25,000  is to be paid  quarterly  over two years.  $95,000  remained
unpaid at December 31, 2003.

2. 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
South Korean sales rep. 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 a total of
$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 the
plaintiff and management  believes that the possibility of any further assertion
in this matter is remote.  Accordingly,  the provision for litigation settlement
costs for the year  ended  December  31,  2002,  reflects  a  reduction  for the
estimated  liability in this matter as of December 31, 2001.  As of December 31,
2003, the status of this matter remains unchanged.

3. The Company was subject to a SEC formal  order of  investigation  relating to
the subject  matter of the Class Action  Lawsuit that was  commenced in 1999 and
settled in 2001. On May 22, 2003, the  Commission  filed a settled action in the
United States  District Court for the District of New Jersey against  Amplidyne,
Inc.  ("Amplidyne")  and its President,  Chairman and Chief  Executive  Officer,
Devendar S. Bains ("Bains").  The Commission's  Complaint alleges that Amplidyne
and Bains  violated the antifraud  provision of the federal  securities  laws by
making false  statements  concerning  Amplidyne's  purported entry into the high
speed Internet  wireless  access market.  Simultaneously  with the filing of the
Complaint,  Amplidyne and Bains, without admitting or denying the allegations in
the Complaint,  consented to the entry of a final judgment permanently enjoining
both from  violating  Section 10(b) of the  Securities  Exchange Act of 1934 and
Rule 10(b)-5  thereunder.  In addition,  Bains agreed to pay a civil  penalty of
$50,000.

4. 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 later 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).  Accordingly,  a provision for
litigation  settlement  costs of $229,400 for the year ended  December 31, 2002,
was made to reflect an estimated  liability for it at that date. The stipulation
called 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 judgment 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 judgment after crediting  $105,000 for the agreed value of the shares issued
plus any payments made pursuant to the settlement.  As of December 31, 2003, the
balance due in connection  with this matter was $75,000.  Failure by the Company
to timely meet the settlement  terms would have a material adverse effect on the
Company's financial position and prospects.


                                      F-20
<PAGE>

                                 AMPLIDYNE, INC.
                          NOTES TO FINANCIAL STATEMENTS
                             MARCH 31, 2003 AND 2002


5. On May 30, 2002, the Company filed a two-count  lawsuit 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.

6.  The  Company  (as well as an  officer  and  director  of the  Company)  is a
defendant in a complaint  brought in November  2003 in the Circuit  Court of the
State of Florida (17th Judicial  District,  Broward  County)  alleging fraud and
seeking relief for unspecified damages and costs associated with an aborted plan
of merger. Management has been in settlement discussions with the plaintiff, but
to date has not reached an accord. The Company is seeking representation on this
matter, but presently is unrepresented. No determination has been made as to the
amount of damages,  if any, the Company  would be required to pay.  Accordingly,
there is no provision in the financial  statements for any damages in connection
with this matter.



                                      F-21
<PAGE>


                                 AMPLIDYNE, INC.
                          NOTES TO FINANCIAL STATEMENTS
                             MARCH 31, 2003 AND 2002


NOTE J - SUBSEQUENT EVENTS

1. ISSUANCE OF SERIES C CONVERTIBLE PREFERRED STOCK

On January 28, 2004,  the Company  closed a $0.1 million  financing from Phoenix
and Phoenix  Opportunity Fund III, L.P.  ("Phoenix  III"),  which are managed by
Phoenix Capital  Holdings.  Pursuant to the terms of the subscription  agreement
between the Company and Phoenix,  Phoenix agreed to make an aggregate investment
of  approximately  $100,000  in the Company in  exchange  for 282,700  shares of
Series C Convertible  Preferred  Stock,  representing  approximately  80% of the
outstanding  stock of the Company on a fully diluted basis.  As the Company will
need to amend its certificate of  incorporation  or effect a reverse stock split
in order to have sufficient  authorized shares to complete the equity financing,
Phoenix has made an initial investment of approximately  $20,000 in exchange for
54,325 shares of Series C Convertible  Preferred Stock of the Company,  with the
remaining   portion  of  the  equity   investment  to  be  completed  after  the
recapitalization.

Phoenix also entered into a stock  restriction  agreement  with Devendar  Bains,
pursuant to which Mr. Bains  issued an  irrevocable  proxy to Phoenix  until the
recapitalization  is  completed,  which,  together  with the shares  received in
connection with the initial investment, gives Phoenix effective control over 53%
of the Company's voting stock.

In connection with the investment, Phoenix III has agreed to loan to the Company
up to $0.4 million.  The loan is secured by  substantially  all of the assets of
the  Company.  The  Company  has drawn  down  approximately  $80,000 of the loan
immediately,  $30,000 of which was  immediately  available  to the  Company  and
$50,000 of which had been  placed into an escrow  fund to be made  available  at
such time as the Company  completes its  recapitalization.  The Company has been
allowed  to draw  down the  $50,000  without  completing  the  recapitalization.
Generally,  the  remaining  portion of the  commitment is reserved for specific,
enumerated  purposes,  and Phoenix III retains  substantial  discretion over the
availability of the funds.

2. LOANS FROM AND REPAYMENTS TO OFFICER / STOCKHOLDER

From January through March 2004, the Chief Executive  Officer loaned the Company
an  additional  $18,000.  As of March 31, 2004 the Company owed $244,908 to this
officer for loans and accrued salaries. (See note H-1).

3. PAYROLL TAXES

The Company did not remit payments to Federal and state taxing  authorities  for
taxes  withheld from  employees'  pay, as well as the  Company's  share of those
taxes for the first quarter of 2004. The balance of those taxes due  approximate
$38,000.  Management estimates that taxing authorities will impose penalties and
interest of approximately $5,000. Management is in the process of remedying this
situation but the Company has not paid the taxes due as of March 31, 2004.


                                      F-22
<PAGE>


ITEM 14:

Audit fees

Aggregate fees bills by the Company's principal  accountant were $18,000 in 2003
and $37,000 in 2002.

Audit-Related Fees

Aggregate  fees billed for audit  related  services in 2002 were $8,500 and were
principally for assistance in responses to S.E.C. comment letters. There were no
audit related fees in 2003.

Audit Committee Policies and Procedures for Pre-Approval of Services

The audit committee is in the process of formulating procedures for pre-approval
of all audit, review and attest services and non-audit services.



                                       52
<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 14, 2004
---------------------------
Devendar S. Bains                   Treasurer, Principal Accounting
                                    Officer and Director


/s/ Tarlochan Bains                 Vice President and Director             April 14, 2004
---------------------------
Tarlochan Bains


/s/ Nirmal Bains                    Secretary                               April 14, 2004
---------------------------
Nirmal Bains


/s/Charles J. Ritchie               Director                                April 14, 2004
---------------------------
Charles J. Ritchie


/s/Manish V. Detroja                Director                                April 14, 2004
---------------------------
Manish V. Detroja
</TABLE>


                                       53