AMPD Promoters Associated With Fraud, Company's Claims of Wireless Internet Access Questioned
No lies. Only the Truth. Friday, 10-Sep-1999 09:19:56 EDT
Amplidyne (AMPD)
59 LaGrange Street
Raritan, New Jersey 08869
(908) 253-6870
Officers:
Devendar Bains CHAIRMAN/PRES/CEO/TREASURER
Tarlochan Bains VP
Sharon Will VP:INVESTOR RELATIONS
Harris Freedman VP
Nirmal Bains SECRETARY
On September 9, 1999, a small New Jersey company, called Amplidyne, issued a curious press release, describing its remarkable new wireless Internet access service. This press release, and the resulting explosion in the price of AMPD shares, has prompted The Truthseeker to examine AMPD. Are investors really buying into revolutionary technology when they buy shares of AMPD?
Amplidyne - The Company:
Before examining the press release, lets take a look at AMPD the company. Amplidyne was taken public by penny stock house Patterson Travis, in January 1997, as a developer of power amplifiers to the wireless industry. Competitors in this space include Powerwave (PWAV), P-Com (PCMS), Netro (NTRO), Digital Microwave (DMIC), among others.
Unlike these other companies, which have ridden the wireless boom to success, AMPD has never been a successful company. Lets see how some of these companies compare:
Company Last Q Revenues Last Q EPS Price/Sales
AMPD 0.423 million -.08 24x
PWAV 68.5 million +.20 5x
DMIC 66.0 million +.00 4x
Amplidyne - Last Quarter's Results:
In the June 1999 ending quarter, AMPD posted these results ( See the 10Q, available at Exhibit 1 )
Figures in '000s
Net Sales: 423
Cost of Goods: 426
Gross Profit (Loss): (3)
SG&A Expense 349
R&D Expense 136
Amplidyne sells its products at a LOSS. How many other companies with "revolutionary technology" are forced to sell at a negative gross margin? Competitor Powerwave has a 26.5% gross margin for the 2nd quarter of 1999.
How did Amplidyne develop its "incredible" Internet access systems when only spending $136,000 in Research and Development for the entire second quarter? Powerwave spent 6.4 million on R&D for the quarter.
The balance sheet tells an interesting story as well:
As of June 30, 1999
Cash 886
A/R 515
Inventories 801
Amplidyne has almost 6 months worth of inventory. This means the company turns its inventory a paltry 2 times per year. Powerwave, to contrast, turns its inventory 12x per year. PWAV holds only 1 months worth of inventory on the balance sheet.
Even more worrisome is that because the company is selling products for less than it costs to build them, the inventory number on the balance sheet may need to be written down. The inventory asset is likely overstated.
Even though Amplidyne customers are being charged less then it costs AMPD to build their products, the customers don't seem to paying. A/R is more than the total sales for the quarter, indicating that AMPD is not collecting from its customers. Why is this? Could it be that the customers are not customers are not paying AMPD.
Amplidyne's quarterly results would have been even worse, if it were not for this little item, tucked away in the back of the 10Q. In the quarter, the Bains issued themselves stock in lieu of salaries.
One might ask, is the company pays its employees by giving them stock, "How does Amplidyne stay in business?" The answer: By selling stock. In 1999, there have been several stock sales. In the first quarter the company sold 900,000 shares at $1.11 per share. The company also issued to employees (the Bains) and consultants 72,000 shares of stock in Q1.
In the second quarter, the company did a Reg D placement of 50,000 shares of Preferred Stock, for $500,000. The preferred shares can be converted at a price no lower than $1.25 per share. Most likely, looking over the terms of the Reg D placement located in this 8-K Exhibit 2, the preferred will convert at $2 per share, meaning that there are an additional 250,000 shares of common stock.
Amplidyne - The Failed Acquisition:
On December 2, 1998, a New York company, Microwave Power Devices (MPDI) offered to purchase Amplidyne for $7.2 million, approximately 15% of AMPD's current market capitalization (See Exhibit 3 ). On January 21, 1999 MPDI and AMPD terminated their merger plans. (See Exhibit 4 ) What did MPDI find that scared them so?
Amplidyne - The Mystery Orders:
After the merger with MPDI fell apart, AMPD issued a press release on January 25, 1999, (See Exhibit 5 ) stating that the company has received purchase orders for $5.4 million of amplifiers for shipment to begin immediately and to be completed by Q4 1999. At the end of Q2 1999, Amplidyne has only shipped $1.08 million worth of product. What happened to the big orders claimed by the company?
Amplidyne - Recent Moves:
In July 1999, Amplidyne moved from Somerset, NJ to smaller offices in Raritan, NJ. It is not uncommon for companies to move, but in growth investments, stockholders should be looking for moves into bigger quarters, signaling expansion, not moves into tiny offices, signaling contraction of the business.
Amplidyne - History of Officers:
Harris Freedman and Sharon Will, who according to AMPD's SEC filing dated Nov 28, 1998 Exhibit 6 have both been VP's at AMPD since July 1996, have also been associated with three companies named October 2, 1998 by the New York State Attorney General in a stock -- manipulation indictment.
Sharon Will has been Amplidyne's VP of IR since July 1996. Harris Freedman, has been the VP of Strategic Alliances since July 1996. But, Sharon and Harris have been quite busy, because they also have been working together at Hemispherx Biopharma (HEB) since 1994.
In addition, Mr. Freedman and Ms. Wills have both been accused by Securities Fraud Investigator Manuel Asensio of promoting Hemispherx Biopharma, Inc. (AMEX: HEB). Mr. Asensio claims HEB promotes a fraudulent cure for Chronic Fatigue Syndrom (CFS).
Here are the BIOS of Freedman and Will from the Amplidyne web site: Exhibit 6
Harris Freedman has served as Vice President of Strategic Alliances of the Company since July 1996. Since August 1994 he has been Vice President of Hemispherx Biopharma, Inc., a publicly traded company listed on Nasdaq. He is the Secretary of SMACS Holdings Corp. a private company which provides strategic-alliance services to emerging technology companies in the private and public markets. His business experience has encompassed developing significant business contacts and acting as an officer of several companies in the pharmaceutical, health care and entertainment fields. Mr. Freedman was Vice President of U.S. Alcohol Testing of America, Inc. from August 1990
to February 1991. Additionally, he was Vice President - East Coast Marketing for MusicSource U.S.A., Inc. from October 1992 to January 1994. Mr. Freedman attended New York University from 1951 to 1954.
Sharon Will has been Vice President of Corporate Communications and Investor Relations of the Company since July 1996. Since November 1994 she has been Vice President of Hemispherx Biopharma, Inc., a publicly traded company listed on Nasdaq. She was a registered sales representative and Senior Vice President for Institutional Sales at
Westfield Financial Corporation from September 1994 to October 1994. She was a registered sales representative with Marsh Block Corporation from July 1994 to September 1994. From October 1993 to July 1994 she served as a registered sales representative at Seaboard Securities Corp. From October 1991 to present, Ms. Will has been President of Worldwide Marketing Inc. a manufacturer's representative of various companies selling to the retail trade markets. Ms. Will was the National Sales Manager of Innovo, Inc., a domestic manufacturer of textiles, from October 1989 to November 1991. She attended Baylor College as an undergraduate for two year with primary focus on chemistry.
In addition, Mr. Freedman and Ms.Wills have both been accused by Securities Fraud Investigator Manuel Asensio of promoting Hemispherx Biopharma, Inc. (AMEX: HEB). Mr. Asensio claims HEB promotes afraudulent cure for Chronic Fatigue Syndrom (CFS). Read about it here:
Exhibit 8
May 21, 1999
Hemispherx officers tied to other manipulated stocks.
Harris Freedman and Sharon Will, who have been vice presidents of Hemispherx Biopharma Inc. (AMEX: HEB) since 1994, and a former Hemispherx board member, Stephen J. Drescher, have been associated with three of the companies named in a press release announcing the October 2, 1998 New York State Attorney General stock-manipulation indictment. Hemispherx was one of the named companies. Mr. Freedman, Ms. Will, and Mr. Drescher, along with Hemispherx's underwriters, are as a group connected to a number of other companies associated with fraudulent activities.
Mr. Freedman and Ms. Will, either directly or indirectly, controlled substantial amounts of Netsmart Technologies, Inc. (NASDAQ: NTST) and Big City Bagels, Inc. (NASDAQ: VILN) stock before their respective 1996 initial public offerings. Monroe Parker Securities, Inc., one of the indictment's named defendants, underwrote the Big City Bagels and Netsmart IPOs. Mr. Drescher was a board member of Big City Bagels and was Monroe Parker's Director of Corporate Finance at the time it took those companies public. Both Netsmart and Big City Bagels were named in the stock-manipulation release.
Mr. Freedman and Mr. Drescher have also both been corporate officers and shareholders of MusicSource USA Inc. (OTC: MUSS), which was delisted by NASDAQ in April 1995 and last traded on April 30, 1999 at 4 cents. Mr. Drescher served as MusicSource's president from February 1994 until November 1996. Mr. Freedman had been a vice president at MusicSource from October 1992 until January 1994. According to a September 1996 report in the Palm Beach Post, five stockbrokers pleaded guilty to accepting bribes from a stock promoter in exchange for persuading clients to buy stocks in several companies, including MusicSource. In September 1998, according to a report in the Orange County Register, the U.S. Attorney's Office charged ten additional brokers with accepting bribes to sell stocks including
MusicSource.
Amplidyne - The Press Release:
The September 9, 1999 press release, (See Exhibit 9 ) details AMPD's new wireless "internet access" products. Remember, these products are the result of AMPD's massive R&D budget of over $520,000 per year.
The company states the equipment will be compatible with the IEEE 802.11 standard. That's great, the 802.11 standard was conceived in 1990. The final standard was drafted in 1997. Many companies make wireless products around this standard. Read more about IEEE 802.11 here:
Exhibit 10 . The 802.11 standard specifies the use of the unlicensed 2.4 Ghz band, which is what AMPD is claiming to use. AMPD claims their products will operate at 2mbps.
Read this press release from wireless leader Proxim (PROX), from June 1997, over 2 years ago!
( Exhibit 11 )
Proxim Unveils Plans To Deliver IEEE 802.11 2 Mbps Frequency Hopping Wireless LAN Product Line Announces Cooperation With 802.11 Frequency Hopping Interoperability Efforts
MOUNTAIN VIEW, Calif., June 27, 1997 -- Proxim, Inc., a leading supplier of wireless data communications products, today announced plans to deliver a high-performance frequency hopping wireless local area networking (LAN) product family based on the IEEE 802.11 standard. Proxim's 802.11-based product family will utilize 2 Mbps frequency
hopping spread spectrum (FHSS) technology and will include access points (APs), adapter cards and OEM modules that utilize the same form factors and interfaces as RangeLAN2 products. By implementing the same hardware and software interfaces as RangeLAN2, OEM samples will be available in Q3 1997, with general availability later in the year.
So, AMPD is basically announcing the very same product that back in 1997 the wireless LAN industry leader PROX, had already developed!
The most curious part of AMPD's press release is this section:
By using roof top antennas, line of sight links up to 50 miles are possible. ISPs in metropolitan areas who have access to radio towers can offer multiple subscription service using this technology.
Is this implying that the 2.4Ghz IEEE 802.11 technology can be used as a point to point or point to multipoint microwave link between a building an ISP? It appears to be. If so, it is a very misleading statement.
The truth is more likely that AMPD wants ISPs to use a "point to point" or "point to multipoint" microwave link between the customer's rooftop and an ISP. These systems are referred to as fixed wireless. The fixed wireless equipment business is dominated by companies such as DMIC, NT, SPCT, NTRO and PCMS. All of these companies are significantly larger, and more successful in the microwave radio marketplace than APMD.
Hope you enjoyed this story. Your humble servant,
The Truthseeker
The Truthseeker
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