UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2021March 31, 2022
or
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _________ to _________
Commission File Number 001-40069
AmpliTech Group, Inc. |
(Exact name of registrant as specified in its charter) |
Nevada | 27-4566352 | |
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification Number) |
620 Johnson155 Plant Avenue
Bohemia,Hauppauge, NY 1171611788
(Address of principal executive offices) (Zip Code)
(631)-521-7831
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
Common Stock, par value $0.001 per share | AMPG | The Nasdaq Stock Market LLC | ||
Warrants to Purchase Common Stock | AMPGW | The Nasdaq Stock Market LLC |
Indicate by check mark whether registrant (1) has filed all reports to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large“large accelerated filer," "accelerated” “accelerated filer," "smaller” “smaller reporting company"company” and “emerging growth company” in Rule 12b-2 of the Exchange Act:
Large accelerated filer | ☐ | Accelerated filer | ☐ |
Non-accelerated | ☒ | Smaller reporting company | ☒ |
Emerging growth company | ☐ |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
As of November 11, 2021,May 9, 2022, the registrant had 9,393,6719,582,113 shares of common stock, par value $0.001 per share, issued and outstanding.
AMPLITECH GROUP, INC.
QUARTERLY REPORT ON FORM 10-Q
September 30, 2021March 31, 2022
TABLE OF CONTENTS
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Management’s Discussion and Analysis of Financial Condition and Results of Operations | 34 | ||||
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2 |
Use of Certain Defined Terms
Except as otherwise indicated by the context, references in this report to “we,” “us,” “our,” “our Company”, “the Company”, “AmpliTech”, “Specialty” or “SMW” “Spectrum” or “SSM”, “AmpliTech Group MMIC Design Center” or “AGMDC”, are to the combined business of AmpliTech Group, Inc. and its consolidated subsidiaries,subsidiary, AmpliTech, Inc. and AMPG’s divisions Specialty Microwave.Microwave, Spectrum Semiconductor Materials, and AmpliTech Group MMIC Design Center.
CAUTIONARY STATEMENT ON FORWARD-LOOKING INFORMATION
This Quarterly Report on Form 10-Q contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, as amended, or the Securities Act, and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Forward-looking statements discuss matters that are not historical facts. Because they discuss future events or conditions, forward-looking statements may include words such as “anticipate,” “believe,” “estimate,” “intend,” “could,” “should,” “would,” “may,” “seek,” “plan,” “might,” “will,” “expect,” “anticipate,” “predict,” “project,” “forecast,” “potential,” “continue” negatives thereof or similar expressions. Forward-looking statements speak only as of the date they are made, are based on various underlying assumptions and current expectations about the future and are not guarantees. Such statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, level of activity, performance or achievement to be materially different from the results of operations or plans expressed or implied by such forward-looking statements.
We cannot predict all the risks and uncertainties. Accordingly, such information should not be regarded as representations that the results or conditions described in such statements or that our objectives and plans will be achieved, and we do not assume any responsibility for the accuracy or completeness of any of these forward-looking statements. These forward-looking statements are found at various places throughout this Quarterly Report on Form 10-Q and include information concerning possible or assumed future results of our operations, including statements about potential acquisition or merger targets; business strategies; future cash flows; financing plans; plans and objectives of management; any other statements regarding future acquisitions, future cash needs, future operations, business plans and future financial results, and any other statements that are not historical facts.
These forward-looking statements represent our intentions, plans, expectations, assumptions and beliefs about future events and are subject to risks, uncertainties and other factors. Many of those factors are outside of our control and could cause actual results to differ materially from the results expressed or implied by those forward-looking statements. Considering these risks, uncertainties and assumptions, the events described in the forward-looking statements might not occur or might occur to a different extent or at a different time than we have described. You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of the Quarterly Report on Form 10-Q. All subsequent written and oral forward-looking statements concerning other matters addressed in this Quarterly Report on Form 10-Q and attributable to us or any person acting on our behalf are expressly qualified in their entirety by the cautionary statements contained or referred to in this Quarterly Report on Form 10-Q.
Except to the extent required by law, we undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events, a change in events, conditions, circumstances or assumptions underlying such statements, or otherwise.
3 |
Table of Contents |
PART I – FINANCIAL INFORMATIONINFORMATION
Item 1. Financial StatementsStatements
AmpliTech Group, Inc.
Condensed Consolidated Balance Sheets
| |||||||||
|
|
| March 31, |
|
| December 31, |
| ||
|
| 2022 |
|
| 2021 |
| ||
|
| (Unaudited) |
|
|
|
| ||
Assets |
|
|
|
|
|
| ||
Current Assets |
|
|
|
|
|
| ||
Cash and cash equivalents |
| $ | 15,958,960 |
|
| $ | 18,018,874 |
|
Accounts receivable, net |
|
| 1,986,988 |
|
|
| 1,659,878 |
|
Other Receivable |
|
| 278,949 |
|
|
| 201,215 |
|
Inventories, net |
|
| 4,632,219 |
|
|
| 4,192,812 |
|
Prepaid expenses |
|
| 292,117 |
|
|
| 210,028 |
|
Total Current Assets |
|
| 23,149,233 |
|
|
| 24,282,807 |
|
|
|
|
|
|
|
|
|
|
Property and equipment, net |
|
| 1,523,551 |
|
|
| 1,355,288 |
|
Right of use operating lease assets |
|
| 1,027,699 |
|
|
| 1,115,588 |
|
Intangible assets, net |
|
| 3,246,729 |
|
|
| 3,284,082 |
|
Goodwill |
|
| 4,817,019 |
|
|
| 4,817,019 |
|
Investment |
|
| 350,000 |
|
|
| 250,000 |
|
Security deposits |
|
| 129,470 |
|
|
| 122,404 |
|
|
|
|
|
|
|
|
|
|
Total Assets |
| $ | 34,243,701 |
|
| $ | 35,227,188 |
|
|
|
|
|
|
|
|
|
|
Liabilities and Stockholders' Equity |
|
|
|
|
|
|
|
|
Current Liabilities |
|
|
|
|
|
|
|
|
Accounts payable and accrued expenses |
|
| 1,622,680 |
|
| $ | 3,006,334 |
|
Customer deposits |
|
| 657,667 |
|
|
| 253,909 |
|
Current portion of financing lease |
|
| 34,102 |
|
|
| 33,688 |
|
Current portion of operating lease |
|
| 374,110 |
|
|
| 391,571 |
|
Current portion of notes payable |
|
| 175,476 |
|
|
| 129,876 |
|
Total Current Liabilities |
|
| 2,864,035 |
|
|
| 3,815,378 |
|
|
|
|
|
|
|
|
|
|
Long Term Liabilities |
|
|
|
|
|
|
|
|
Finance lease, net of current portion |
|
| 8,789 |
|
|
| 17,471 |
|
Operating lease, net of current portion |
|
| 722,779 |
|
|
| 795,317 |
|
Notes payable, net of current portion |
|
| 200,996 |
|
|
| 200,491 |
|
Revenue earnout |
|
| 1,365,038 |
|
|
| 1,365,038 |
|
Total Liabilities |
|
| 5,161,637 |
|
|
| 6,193,695 |
|
|
|
|
|
|
|
|
|
|
Commitments and Contingencies |
|
| 0 |
|
|
| 0 |
|
|
|
|
|
|
|
|
|
|
Stockholders' Equity |
|
|
|
|
|
|
|
|
Series A convertible preferred stock, par value $0.001, 1,000,000 shares authorized, 0 issued and outstanding |
|
| 0 |
|
|
| 0 |
|
Common Stock, par value $0.001, 500,000,000 shares authorized, 9,582,113 shares issued and outstanding, respectively |
|
| 9,582 |
|
|
| 9,582 |
|
Additional paid-in capital |
|
| 35,696,034 |
|
|
| 35,651,088 |
|
Accumulated deficit |
|
| (6,623,552 | ) |
|
| (6,627,177 | ) |
|
|
|
|
|
|
|
|
|
Total Stockholders' Equity |
|
| 29,082,064 |
|
|
| 29,033,493 |
|
|
|
|
|
|
|
|
|
|
Total Liabilities and Stockholders' Equity |
| $ | 34,243,701 |
|
| $ | 35,227,188 |
|
|
| September 30, |
|
| December 31, |
| ||
|
| 2021 |
|
| 2020 |
| ||
|
| (Unaudited) |
|
|
| |||
Assets |
|
|
|
|
|
| ||
Current Assets |
|
|
|
|
|
| ||
Cash and cash equivalents |
| $ | 22,947,873 |
|
| $ | 199,536 |
|
Accounts receivable, net |
|
| 489,736 |
|
|
| 357,055 |
|
Marketable Securities, net |
|
| 4,152,589 |
|
|
| 0 |
|
Inventories, net |
|
| 948,512 |
|
|
| 517,338 |
|
Prepaid expenses |
|
| 913,926 |
|
|
| 322,124 |
|
Total Current Assets |
|
| 29,452,636 |
|
|
| 1,396,053 |
|
|
|
|
|
|
|
|
|
|
Property and equipment, net |
|
| 1,166,589 |
|
|
| 289,251 |
|
Right of use operating lease assets |
|
| 278,878 |
|
|
| 347,156 |
|
Intangible assets, net |
|
| 601,511 |
|
|
| 632,209 |
|
Goodwill |
|
| 120,136 |
|
|
| 120,136 |
|
Cost-method-investment |
|
| 250,000 |
|
|
| 0 |
|
Security deposits |
|
| 26,707 |
|
|
| 26,707 |
|
|
|
|
|
|
|
|
|
|
Total Assets |
| $ | 31,896,457 |
|
| $ | 2,811,512 |
|
|
|
|
|
|
|
|
|
|
Liabilities and Stockholders' Equity |
|
|
|
|
|
|
|
|
Current Liabilities |
|
|
|
|
|
|
|
|
Accounts payable and accrued expenses |
| $ | 354,728 |
|
| $ | 113,541 |
|
Customer deposits |
|
| 212,067 |
|
|
| 15,300 |
|
Current portion of financing lease |
|
| 33,280 |
|
|
| 32,084 |
|
Current portion of operating lease |
|
| 88,986 |
|
|
| 87,930 |
|
Current portion of notes payable |
|
| 137,394 |
|
|
| 205,592 |
|
Line of credit |
|
| 0 |
|
|
| 200,000 |
|
Total Current Liabilities |
|
| 826,455 |
|
|
| 654,447 |
|
|
|
|
|
|
|
|
|
|
Long Term Liabilities |
|
|
|
|
|
|
|
|
Finance lease, net of current portion |
|
| 26,047 |
|
|
| 51,159 |
|
Operating lease, net of current portion |
|
| 199,302 |
|
|
| 267,050 |
|
Notes payable, net of current portion |
|
| 234,341 |
|
|
| 1,398,574 |
|
Total Liabilities |
|
| 1,286,145 |
|
|
| 2,371,230 |
|
|
|
|
|
|
|
|
|
|
Commitments and Contingencies |
|
| 0 |
|
|
| 0 |
|
|
|
|
|
|
|
|
|
|
Stockholders' Equity |
|
|
|
|
|
|
|
|
Series A convertible preferred stock, par |
|
| 0 |
|
|
| 0 |
|
value $0.001, 1,000,000 shares authorized, |
|
|
|
|
|
|
|
|
0 issued and outstanding |
|
|
|
|
|
|
|
|
Common Stock, par value $0.001, |
|
|
|
|
|
|
|
|
500,000,000 shares authorized, |
|
|
|
|
|
|
|
|
9,343,671 and 4,839,448 shares |
|
|
|
|
|
|
|
|
issued and outstanding, respectively |
|
| 9,344 |
|
|
| 4,839 |
|
Additional paid-in capital |
|
| 34,414,811 |
|
|
| 2,303,815 |
|
Accumulated deficit |
|
| (3,813,843 | ) |
|
| (1,868,372 | ) |
|
|
|
|
|
|
|
|
|
Total Stockholders' Equity |
|
| 30,610,312 |
|
|
| 440,282 |
|
|
|
|
|
|
|
|
|
|
Total Liabilities and |
|
|
|
|
|
|
|
|
Stockholders' Equity |
| $ | 31,896,457 |
|
| $ | 2,811,512 |
|
See accompanying notes to the condensed consolidated financial statements
4 |
Table of Contents |
AmpliTech Group, Inc. | ||||||||
Condensed Consolidated Statements of Operations | ||||||||
(Unaudited) |
|
| For The Three Months Ended |
| For The Nine Months Ended |
|
| For The Three Months Ended |
| ||||||||||||||||
|
| September 30, |
| September 30, |
| September 30, |
| September 30, |
|
| March 31, |
| March 31, |
| ||||||||||
|
| 2021 |
| 2020 |
| 2021 |
| 2020 |
|
| 2022 |
|
| 2021 |
| |||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||
Revenue |
| $ | 1,056,596 |
| $ | 1,150,732 |
| 2,553,982 |
| $ | 2,567,379 |
|
| $ | 5,099,520 |
| $ | 472,974 |
| |||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||
Cost of goods sold |
|
| 742,983 |
|
| 630,486 |
|
| 1,840,764 |
|
| 1,581,831 |
|
|
| 2,775,922 |
|
|
| 417,993 |
| |||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||
Gross Profit |
| 313,613 |
| 520,246 |
| 713,218 |
| 985,548 |
|
| 2,323,598 |
| 54,981 |
| ||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||
Selling, general and administrative expense |
|
| 850,329 |
|
| 475,248 |
|
| 2,802,434 |
|
| 1,456,266 |
| |||||||||||
Operating Expenses |
|
|
|
|
| |||||||||||||||||||
Selling, general and administrative |
| 1,901,310 |
| 901,325 |
| |||||||||||||||||||
Research and development |
|
| 413,303 |
|
|
| 7,229 |
| ||||||||||||||||
Total operating expenses |
| 2,314,613 |
| 908,554 |
| |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||
Income (Loss) From Operations |
| (536,716 | ) |
| 44,998 |
| (2,089,216 | ) |
| (470,718 | ) |
| 8,985 |
| (853,573 | ) | ||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||
Other Income (Expenses) |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||
Gain on extinguishment of debt |
| 0 |
| 0 |
| 232,200 |
| 0 |
| |||||||||||||||
Other income |
| 11,520 |
| 0 |
| 11,520 |
| 0 |
| |||||||||||||||
Unrealized gain (loss) on investments |
| (63,807 | ) |
| 0 |
| (63,135 | ) |
| 0 |
| |||||||||||||
Interest expense, net |
|
| (3,842 | ) |
|
| (27,988 | ) |
|
| (36,840 | ) |
|
| (78,501 | ) |
|
| (5,360 | ) |
|
| (26,358 | ) |
Total other income (expense) |
| (56,129 | ) |
| (27,988 | ) |
| 143,745 |
| (78,501 | ) |
| (5,360 | ) |
| (26,358 | ) | |||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||
Income (Loss) Before Income Taxes |
| (592,845 | ) |
| 17,010 |
| (1,945,471 | ) |
| (549,219 | ) |
| 3,625 |
| (879,931 | ) | ||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||
Provision For Income Taxes |
|
| 0 |
|
| 0 |
|
| 0 |
|
| 0 |
|
|
| 0 |
|
|
| 0 |
| |||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||
Net Income (Loss) |
| $ | (592,845 | ) |
| $ | 17,010 |
| $ | (1,945,471 | ) |
| $ | (549,219 | ) |
| $ | 3,625 |
|
| $ | (879,931 | ) | |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Net Income (Loss) Per Share; |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||
Basic |
| $ | (0.06 | ) |
| $ | 0.01 |
| $ | (0.25 | ) |
| $ | (0.22 | ) |
| $ | 0.00 |
|
| $ | (0.16 | ) | |
Diluted |
| $ | (0.06 | ) |
| $ | 0.00 |
| $ | (0.25 | ) |
| $ | (0.22 | ) |
| $ | 0.00 |
|
| $ | (0.16 | ) | |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||
Weighted Average Shares Outstanding; |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||
Basic |
|
| 9,343,671 |
|
| 2,548,212 |
|
| 7,939,008 |
|
| 2,500,789 |
|
|
| 9,582,113 |
|
|
| 5,568,350 |
| |||
Diluted |
|
| 9,343,671 |
|
| 4,553,212 |
|
| 7,939,008 |
|
| 2,500,789 |
|
|
| 9,582,113 |
|
|
| 5,568,350 |
|
See accompanying notes to the condensed consolidated financial statements
5 |
Table of Contents |
AmpliTech Group, Inc. Condensed Consolidated Statements of Cash Flows | ||||||||||
| ||||||||||
(Unaudited) | ||||||||||
|
| For the three months ended September 30, 2021 |
| |||||||||||||||||||||||||||||
|
| Series A Convertible Preferred |
|
| Common Stock |
|
| Common |
|
| Additional |
|
|
|
|
| Total |
| ||||||||||||||
|
| Number of |
|
| Par |
|
| Number of |
|
| Par |
|
| Stock |
|
| Paid-In |
|
| Accumulated |
|
| Stockholders' |
| ||||||||
|
| Shares |
|
| Value |
|
| Shares |
|
| Value |
|
| Payable |
|
| Capital |
|
| Deficit |
|
| Equity |
| ||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Balance, June 30, 2021 |
|
| - |
|
| $ | 0 |
|
|
| 9,343,671 |
|
| $ | 9,344 |
|
| $ | 0 |
|
| $ | 34,388,700 |
|
| $ | (3,220,998 | ) |
| $ | 31,177,046 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock based compensation |
|
| - |
|
|
| 0 |
|
|
| - |
|
|
| 0 |
|
|
| 0 |
|
|
| 26,111 |
|
|
| 0 |
|
|
| 26,111 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss for the three months ended September 30, 2021 |
|
| - |
|
|
| 0 |
|
|
| - |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| (592,845 | ) |
|
| (592,845 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, September 30, 2021 |
|
| - |
|
| $ | 0 |
|
|
| 9,343,671 |
|
| $ | 9,344 |
|
| $ | 0 |
|
| $ | 34,414,811 |
|
| $ | (3,813,843 | ) |
| $ | 30,610,312 |
|
|
| For the nine months ended September 30, 2021 |
| |||||||||||||||||||||||||||||
|
| Series A Convertible Preferred |
|
| Common Stock |
|
| Common |
|
| Additional |
|
|
|
| Total |
| |||||||||||||||
|
| Number of |
|
| Par |
|
| Number of |
|
| Par |
|
| Stock |
|
| Paid-In |
|
| Accumulated |
|
| Stockholders' |
| ||||||||
|
| Shares |
|
| Value |
|
| Shares |
|
| Value |
|
| Payable |
|
| Capital |
|
| Deficit |
|
| Equity |
| ||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Balance, December 31, 2020 |
|
|
|
| $ |
|
|
|
| 4,839,448 |
|
| $ | 4,839 |
|
|
|
|
| $ | 2,303,815 |
|
| $ | (1,868,372 | ) |
| $ | 440,282 |
| ||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||
Common stock issued in private placement |
|
| - |
|
|
| - |
|
|
| 2,715,000 |
|
|
| 2,715 |
|
|
| - |
|
|
| 20,973,629 |
|
|
| 0 |
|
|
| 20,976,344 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock issued in public offering |
|
|
|
|
|
|
|
|
|
| 1,577,142 |
|
|
| 1,578 |
|
|
|
|
|
|
| 9,448,019 |
|
|
|
|
|
|
| 9,449,597 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additional shares issued in connection to reverse split due to rounding |
|
|
|
|
|
|
|
|
|
| 1,381 |
|
|
| 1 |
|
|
|
|
|
|
| (1 | ) |
|
|
|
|
|
| 0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock issued upon exercise of warrants |
|
| - |
|
|
| 0 |
|
|
| 210,700 |
|
|
| 211 |
|
|
| 0 |
|
|
| 1,474,688 |
|
|
|
|
|
|
| 1,474,899 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock based compensation |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 214,661 |
|
|
|
|
|
|
| 214,661 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss for the nine months ended September 30, 2021 |
|
| - |
|
|
| 0 |
|
|
| - |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
| $ | (1,945,471 | ) |
|
| (1,945,471 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, September 30, 2021 |
|
| - |
|
| $ | 0 |
|
|
| 9,343,671 |
|
| $ | 9,344 |
|
| $ | 0 |
|
| $ | 34,414,811 |
|
| $ | (3,813,843 | ) |
| $ | 30,610,312 |
|
|
| For The Three Months Ended |
| |||||
|
| March 31, |
|
| March 31, |
| ||
|
| 2022 |
|
| 2021 |
| ||
Cash Flows from Operating Activities: |
|
|
|
|
|
| ||
Net Income (Loss) |
| $ | 3,625 |
|
| $ | (879,931 | ) |
Adjustments to reconcile net income (loss) to net cash used in operating activities: |
|
|
|
|
|
|
|
|
Depreciation and amortization |
|
| 85,201 |
|
|
| 24,306 |
|
Amortization of prepaid consulting |
|
| 13,500 |
|
|
| 113,742 |
|
Amortization of right-of-use operating lease asset |
|
| 87,889 |
|
|
| 25,607 |
|
Stock based compensation |
|
| 44,946 |
|
|
| 54,000 |
|
Changes in Operating Assets and Liabilities: |
|
|
|
|
|
|
|
|
Accounts receivable |
|
| (327,110 | ) |
|
| (64,400 | ) |
Other receivable |
|
| (77,734 | ) |
|
| 0 |
|
Inventories |
|
| (439,407 | ) |
|
| (272,958 | ) |
Prepaid expenses |
|
| (146,233 | ) |
|
| 28,542 |
|
Security deposits |
|
| (7,066 | ) |
|
| 0 |
|
Accounts payable and accrued expenses |
|
| (1,383,655 | ) |
|
| 202,675 |
|
Operating lease liability |
|
| (99,765 | ) |
|
| (25,144 | ) |
Customer deposits |
|
| 403,758 |
|
|
| 134,570 |
|
Net cash used in operating activities |
|
| (1,842,051 | ) |
|
| (658,991 | ) |
|
|
|
|
|
|
|
|
|
Cash Flows from Investing Activities: |
|
|
|
|
|
|
|
|
Purchase of equipment |
|
| (82,850 | ) |
|
| (15,000 | ) |
Investment |
|
| (100,000 | ) |
|
| 0 |
|
Net cash used in investing activities |
|
| (182,850 | ) |
|
| (15,000 | ) |
|
|
|
|
|
|
|
|
|
Cash Flows from Financing Activities: |
|
|
|
|
|
|
|
|
Proceeds received from public offering, net of expenses |
|
| 0 |
|
|
| 9,449,597 |
|
Proceeds received from exercise of warrants |
|
| 0 |
|
|
| 1,132,600 |
|
Proceeds (Repayment) of line of credit, net |
|
| 0 |
|
|
| (200,000 | ) |
Repayments on finance lease |
|
| (8,268 | ) |
|
| (7,875 | ) |
Proceeds (Repayment) of notes payable, net |
|
| (26,745 | ) |
|
| (44,629 | ) |
Net cash (used in) provided by financing activities |
|
| (35,013 | ) |
|
| 10,329,693 |
|
|
|
|
|
|
|
|
|
|
Net change in cash and cash equivalents |
|
| (2,059,914 | ) |
|
| 9,655,702 |
|
|
|
|
|
|
|
|
|
|
Cash and Cash Equivalents, Beginning of Period |
|
| 18,018,874 |
|
|
| 199,536 |
|
|
|
|
|
|
|
|
|
|
Cash and Cash Equivalents, End of Period |
| $ | 15,958,960 |
|
| $ | 9,855,238 |
|
|
|
|
|
|
|
|
|
|
Supplemental disclosures: |
|
|
|
|
|
|
|
|
Cash paid for interest expense |
| $ | 6,397 |
|
| $ | 25,550 |
|
Cash paid for income taxes |
| $ | 0 |
|
| $ | 0 |
|
|
|
|
|
|
|
|
|
|
Non-Cash Investing and Financing Activities: |
|
|
|
|
|
|
|
|
Promissory note on equipment |
| $ | 82,615 |
|
| $ | 0 |
|
Finance agreement entered in exchange for prepaid assets |
| $ | 0 |
|
| $ | 32,222 |
|
Equipment received for prepaid assets |
| $ | 50,644 |
|
| $ | 0 |
|
See accompanying notes to the condensed consolidated financial statements
6 |
Table of Contents |
|
| For The Three Months Ended September 30, 2020 |
| |||||||||||||||||||||||||||||
|
| Series A Convertible Preferred |
|
| Common Stock |
|
| Common |
|
| Additional |
|
|
|
| Total |
| |||||||||||||||
|
| Number of |
|
| Par |
|
| Number of |
|
| Par |
|
| Stock |
|
| Paid-In |
|
| Accumulated |
|
| Stockholders' |
| ||||||||
|
| Shares |
|
| Value |
|
| Shares |
|
| Value |
|
| Payable |
|
| Capital |
|
| Deficit |
|
| Equity |
| ||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Balance, June 30, 2020 |
|
| 1,000 |
|
| $ | 1 |
|
|
| 2,454,316 |
|
| $ | 2,455 |
|
| $ | 24,480 |
|
| $ | 1,933,245 |
|
| $ | (1,409,042 | ) |
| $ | 551,139 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common Stock issued for common stock payable |
|
| - |
|
|
| - |
|
|
| 22,500 |
|
|
| 22 |
|
|
| (24,480 | ) |
|
| 24,458 |
|
|
| - |
|
|
| - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock based compensation |
|
| - |
|
|
| 0 |
|
|
| - |
|
|
| 0 |
|
|
| 0 |
|
|
| 15,233 |
|
|
| 0 |
|
|
| 15,233 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock issued upon exercise of warrants |
|
| - |
|
|
| 0 |
|
|
| 102,632 |
|
|
| 102 |
|
|
| 0 |
|
|
| (102 | ) |
|
| 0 |
|
|
| 0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income for the three months ended September 30, 2020 |
|
| - |
|
|
| 0 |
|
|
| - |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 17,010 |
|
|
| 17,010 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, September 30, 2020 |
|
| 1,000 |
|
| $ | 1 |
|
|
| 2,579,448 |
|
| $ | 2,579 |
|
| $ | 0 |
|
| $ | 1,972,834 |
|
| $ | (1,392,032 | ) |
| $ | 583,382 |
|
AmpliTech Group, Inc.
|
| For The Nine Months Ended September 30, 2020 |
| |||||||||||||||||||||||||||||
|
| Series A Convertible Preferred |
|
| Common Stock |
|
| Common |
|
| Additional |
|
|
|
| Total |
| |||||||||||||||
|
| Number of |
|
| Par |
|
| Number of |
|
| Par |
|
| Stock |
|
| Paid-In |
|
| Accumulated |
|
| Stockholders' |
| ||||||||
|
| Shares |
|
| Value |
|
| Shares |
|
| Value |
|
| Payable |
|
| Capital |
|
| Deficit |
|
| Equity |
| ||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Balance, December 31, 2019 |
|
| 1,000 |
|
| $ | 1 |
|
|
| 2,454,316 |
|
| $ | 2,455 |
|
| $ | 24,480 |
|
| $ | 1,909,550 |
|
| $ | (842,813 | ) |
| $ | 1,093,673 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common Stock issued for common stock payable |
|
| - |
|
|
| - |
|
|
| 22,500 |
|
|
| 22 |
|
|
| (24,480 | ) |
|
| 24,458 |
|
|
| - |
|
|
| - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock based compensation |
|
| - |
|
|
| - |
|
|
| - |
|
|
| 0 |
|
|
| 0 |
|
|
| 38,928 |
|
|
| 0 |
|
|
| 38,928 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock issued upon exercise of warrants |
|
| - |
|
|
| 0 |
|
|
| 102,632 |
|
|
| 102 |
|
|
| 0 |
|
|
| (102 | ) |
|
| 0 |
|
|
| 0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss for the nine months ended September 30, 2020 |
|
| - |
|
|
| 0 |
|
|
| - |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| (549,219 | ) |
|
| (549,219 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, September 30, 2020 |
|
| 1,000 |
|
| $ | 1 |
|
|
| 2,579,448 |
|
| $ | 2,579 |
|
| $ | 0 |
|
| $ | 1,972,834 |
|
| $ | (1,392,032 | ) |
| $ | 583,382 |
|
Condensed Consolidated Statements of Stockholders' Equity
(Unaudited)
|
| For The Three Months Ended March 31, 2022 |
| |||||||||||||||||||||||||
|
| Series A Convertible Preferred |
|
| Common Stock |
|
| Additional |
|
|
|
|
| Total |
| |||||||||||||
|
| Number of |
|
| Par |
|
| Number of |
|
| Par |
|
| Paid-In |
|
| Accumulated |
|
| Stockholders' |
| |||||||
|
| Shares |
|
| Value |
|
| Shares |
|
| Value |
|
| Capital |
|
| Deficit |
|
| Equity |
| |||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
Balance, December 31, 2021 |
|
| - |
|
| $ | 0 |
|
|
| 9,582,113 |
|
| $ | 9,582 |
|
| $ | 35,651,088 |
|
| $ | (6,627,177 | ) |
| $ | 29,033,493 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock based compensation |
|
| - |
|
|
| 0 |
|
|
|
|
|
|
| 0 |
|
|
| 44,946 |
|
|
| 0 |
|
|
| 44,946 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income for the three months ended March 31, 2022 |
|
| - |
|
|
| 0 |
|
|
| - |
|
|
| 0 |
|
|
| 0 |
|
|
| 3,625 |
|
|
| 3,625 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance March 31, 2022 |
|
| - |
|
| $ | 0 |
|
|
| 9,582,113 |
|
| $ | 9,582 |
|
| $ | 35,696,034 |
|
| $ | (6,623,552 | ) |
| $ | 29,082,064 |
|
|
|
|
| |||||||||||||||||||||||||
|
| For The Three Months Ended March 31, 2021 |
| |||||||||||||||||||||||||
|
|
|
| |||||||||||||||||||||||||
Balance, December 31, 2020 |
|
| - |
|
| $ | 0 |
|
|
| 4,839,448 |
|
| $ | 4,839 |
|
| $ | 2,303,815 |
|
| $ | (1,868,372 | ) |
| $ | 440,282 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock issued in public offering |
|
| - |
|
|
| 0 |
|
|
| 1,577,142 |
|
|
| 1,578 |
|
|
| 9,448,019 |
|
|
| 0 |
|
|
| 9,449,597 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additional shares issued in connection to reverse split due to rounding |
|
| - |
|
|
| 0 |
|
|
| 1,381 |
|
|
| 1 |
|
|
| (1 | ) |
|
| 0 |
|
|
| 0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock issued upon exercise of warrants |
|
| - |
|
|
| 0 |
|
|
| 161,800 |
|
|
| 162 |
|
|
| 1,132,438 |
|
|
| 0 |
|
|
| 1,132,600 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock based compensation |
|
| - |
|
|
| 0 |
|
|
| - |
|
|
| 0 |
|
|
| 54,000 |
|
|
| 0 |
|
|
| 54,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss for the three months ended March 31, 2021 |
|
| - |
|
|
| 0 |
|
|
| - |
|
|
| 0 |
|
|
| 0 |
|
| (879,931 | ) |
|
| (879,931 | ) | |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, March 31, 2021 |
|
| - |
|
| $ | 0 |
|
|
| 6,579,771 |
|
| $ | 6,580 |
|
| $ | 12,938,271 |
|
| $ | (2,748,303 | ) |
| $ | 10,196,548 |
|
See accompanying notes to the condensed consolidated financial statements
7 |
| ||
| ||
|
|
| For The Nine |
|
| For The Nine |
| ||
|
| Months Ended |
|
| Months Ended |
| ||
|
| September 30, |
|
| September 30, |
| ||
Cash Flows from Operating Activities: |
| 2021 |
|
| 2020 |
| ||
|
|
|
|
|
|
| ||
Net Loss |
| $ | (1,945,471 | ) |
| $ | (549,219 | ) |
Adjustments to reconcile net loss to |
|
|
|
|
|
|
|
|
net cash used in operating activities: |
|
|
|
|
|
|
|
|
Depreciation and amortization |
|
| 94,295 |
|
|
| 67,678 |
|
Amortization of prepaid consulting |
|
| 148,390 |
|
|
| 37,108 |
|
Amortization of right-of-use operating lease asset |
|
| 68,278 |
|
|
| 100,028 |
|
Stock based compensation |
|
| 214,661 |
|
|
| 38,928 |
|
Gain on forgiveness of debt |
|
| (232,200 | ) |
|
| 0 |
|
Change in fair value of marketable securities |
|
| 63,135 |
|
|
| 0 |
|
Loss on disposal of vehicle |
|
| 7,188 |
|
|
| 0 |
|
Changes in Operating Assets and Liabilities: |
|
|
|
|
|
|
|
|
Accounts receivable |
|
| (132,681 | ) |
|
| (147,294 | ) |
Inventories |
|
| (431,174 | ) |
|
| (44,726 | ) |
Prepaid expenses |
|
| (707,970 | ) |
|
| (43,595 | ) |
Accounts payable and accrued expenses |
|
| 208,965 |
|
|
| 46,887 |
|
Operating lease liability |
|
| (66,692 | ) |
|
| (97,025 | ) |
Customer deposits |
|
| 196,767 |
|
|
| 76,932 |
|
Net cash used in operating activities |
|
| (2,514,509 | ) |
|
| (514,298 | ) |
|
|
|
|
|
|
|
|
|
Cash Flows from Investing Activities: |
|
|
|
|
|
|
|
|
Purchase of equipment |
|
| (948,123 | ) |
|
| (11,557 | ) |
Purchase of short term investments, net |
|
| (4,215,724 | ) |
|
| 0 |
|
Purchase of cost method investment |
|
| (250,000 | ) |
|
| 0 |
|
Net cash used in investing activities |
|
| (5,413,847 | ) |
|
| (11,557 | ) |
|
|
|
|
|
|
|
|
|
Cash Flows from Financing Activities: |
|
|
|
|
|
|
|
|
Proceeds received from private placement, net of expenses |
|
| 20,976,344 |
|
|
| 0 |
|
Proceeds received from public offering, net of expenses |
|
| 9,449,597 |
|
|
|
|
|
Proceeds received from exercise of warrants |
|
| 1,474,899 |
|
|
| 0 |
|
Proceeds from notes payable |
|
|
|
|
|
|
|
|
Proceeds (Repayment) of line of credit, net |
|
| (200,000 | ) |
|
| 300,000 |
|
Repayments on finance lease |
|
| (23,916 | ) |
|
| (22,910 | ) |
Proceeds from notes payable |
|
| 0 |
|
|
| 232,200 |
|
Repayment of notes payable |
|
| (1,000,231 | ) |
|
| (132,272 | ) |
Net cash provided by financing activities |
|
| 30,676,693 |
|
|
| 377,018 |
|
|
|
|
|
|
|
|
|
|
Net change in cash and cash equivalents |
|
| 22,748,337 |
|
|
| (148,837 | ) |
|
|
|
|
|
|
|
|
|
Cash and Cash Equivalents, Beginning of Period |
|
| 199,536 |
|
|
| 574,712 |
|
|
|
|
|
|
|
|
|
|
Cash and Cash Equivalents, End of Period |
| $ | 22,947,873 |
|
| $ | 425,875 |
|
|
|
|
|
|
|
|
|
|
Supplemental disclosures: |
|
|
|
|
|
|
|
|
Cash paid for interest expense |
| $ | 45,175 |
|
| $ | 71,125 |
|
Cash paid for income taxes |
| $ | 0 |
|
| $ | 0 |
|
|
|
|
|
|
|
|
|
|
Non-Cash Investing and Financing Activities |
|
|
|
|
|
|
|
|
Promissory note on equipment |
| $ | 0 |
|
| $ | 68,510 |
|
Finance agreement in exchange for prepaid assets |
| $ | 32,222 |
|
| $ | 0 |
|
Equipment received for prepaid assets |
| $ | 0 |
|
| $ | 58,192 |
|
Common stock issued for common stock payable |
| $ | 0 |
|
| $ | 24,480 |
|
Cashless exercise of warrants |
| $ | 0 |
|
| $ | 2,053 |
|
See accompanying notes to the condensed consolidated financial statements
Table of Contents |
AmpliTech Group, Inc.
Notes To Condensed Consolidated Financial Statements
For The NineThree Months Ended September 30,March 31, 2022 and 2021 and 2020
(1) Organization and Business Description
AmpliTech Group, Inc. (“AmpliTech” or “the Company”) was incorporated under the laws of the State of Nevada on December 30, 2010. On August 13, 2012, the Company acquired AmpliTech, Inc., by issuing 833,750 shares of the Company’s common stock to the shareholders of AmpliTech, Inc. in exchange for 100% of the outstanding shares of AmpliTech Inc. (“the Share(the “Share Exchange”). After the Share Exchange, the selling shareholders owned 60,000 shares of the outstanding 889,250 shares of Company common stock, resulting in a change in control. Accordingly, the transaction was accounted for as a reverse acquisition in which AmpliTech, Inc. was deemed to be the accounting acquirer, and the operations of the Company were consolidated for accounting purposes. The capital balances have been retroactively adjusted to reflect the reverse acquisition.
AmpliTech designs, engineers and assembles microwave component based low noise amplifiers (“LNA”) that meet individual customer specifications. Application of the Company’s proprietary technology results in maximum frequency gain with minimal background noise distortion as required by each customer. The Company has both domestic and international customers in such industries as aerospace, governmental, defense and commercial satellite.
On September 12, 2019, AmpliTech Group, Inc. acquired the assets of Specialty Microwave Corporation (SMW) (“Specialty”), a privately held company based in Ronkonkoma, NY. The purchase included all inventory, orders, customers, property and equipment, and all intellectual property. The assets also included all eight team members of SMW.Specialty.
Specialty designs and manufactures passive microwave components and related subsystems that meet individual customer specifications for both domestic and international customers for use in satellite communication ground networks.
On February 17, 2021, AmplitechAmpliTech Group, Inc., common stock and warrants under the symbols “AMPG” and “AMPGW”, respectively, commenced trading on NASDAQ. A reverse split of the outstanding common stock at a 1-for-20 ratio became effective February 17, 2021 as of 12:01 a.m., Eastern Time. In connection with the public offering, 1,371,428 units at an offering price of $7.00 per unit were sold. Each unit issued in the offering consisted of one share of common stock and one warrant.
8 |
Table of Contents |
AmpliTech Group, Inc.
Notes To Condensed Consolidated Financial Statements
For The Three Months Ended March 31, 2022 and 2021
On November 19, 2021, AmpliTech Group, Inc. entered into an Asset Purchase Agreement (the “Purchase Agreement”) with Spectrum Semiconductor Materials Inc. (the "Seller" or “SSM”), pursuant to which AmpliTech would acquire substantially all of the assets of the Company (the “Acquisition”). The Acquisition was completed on December 15, 2021.
Spectrum Semiconductor Materials ("SSM”), located in Silicon Valley (San Jose, CA), is a global authorized distributor of integrated circuit ("IC") packaging and lids for semiconductor device assembly, prototyping, testing, and production requirements.
IC packaging is the case or enclosure that contains the semiconductor device to protect it from corrosion or physical damage; the IC packaging also supports the electrical contacts, which connect the semiconductor device to a circuit board. IC packaging often gets sealed with lids, which creates an airtight seal to prevent contaminants, particles, liquids, or gases from entering the packaging to ensure the proper operation of the device. The Company offers multiple IC packaging and lids product lines according to desired product specifications, device performance, dimensions, resistances, and tolerances.
Our IC packaging and lids products serve a global customer base in a wide range of end-market applications, including aerospace, defense, industrial, medical, wireless, communications, automotive, and other growing markets. The Company is ISO 9001:2015 and AS9120B certified for the Distribution of Semiconductor Materials for the Assembly Phase of Integrated Circuit Manufacturing, as well as in compliance with the Conflict Minerals Reporting Template ("CMRT"), the European Union's Restriction of Hazardous Substances ("RoHS") and Registration, Evaluation, Authorization, and Restriction of Chemicals ("REACH") directives, as well as registered with the U.S. Government's System for Award Management ("SAM").
9 |
Table of Contents |
AmpliTech Group, Inc.
Notes To Condensed Consolidated Financial Statements
For The NineThree Months Ended September 30,March 31, 2022 and 2021 and 2020
The COVID-19 Pandemic
The global health crisis caused by the novel coronavirus COVID-19 pandemic and its resurgences has caused significant worldwide disruption throughoutand may continue to negatively impact global economic activity, which, despite progress in vaccination efforts, remains uncertain and cannot be predicted with confidence. In addition, variants of COVID-19, including Delta and Omicron, continue to emerge, the courseimpact of 2020which cannot be predicted at this time, and into 2021could depend on numerous factors, including vaccination rates among the population, the effectiveness of the COVID-19 vaccines against COVID-19 variants along with the response by governmental bodies and resulted inregulators. Given the impositionongoing and dynamic nature of various public and private sector measuresthe circumstances, it is difficult to trypredict the impact of the COVID-19 pandemic on our business. Many countries around the world have continued to contain the virus, on a local, state, national and international level, such as travel bansimpose quarantines and restrictions quarantines, shelter-in-place/stay-at-homeon travel and social distancing orders, and shutdowns. These measures have temporarily impacted our workforce and operations and somemass gatherings to slow the spread of the operations of our customers, and vendors, suppliers, and partners. The ultimate impact and efficacy of government measures and potential future measures is currently unknown.
There is uncertainty regarding the business impacts from such measures and potential future measures. While we have been able to continue our operations through a combination of work-from-home and social distancing policies implemented to protect employees, these measures have resulted in reduced workforce availability. We resumed operations on May 5, 2020, with the CDC safeguard guidelines in place. Difficulties in communicating with our customers’ employees and delivery delays due to COVID-19 may impactvirus. Accordingly, our ability to meet customer demand,continue to operate our business may also be limited. Such events may result in a period of business, supply and thus decrease revenues into 2021manufacturing disruptions, and negatively impactin reduced operations, any of which could materially affect our business, financial condition and results of operations. A continuation or worsening of the levels of market disruption and volatility seen in the recent past could have an adverse effect on our ability to access capital, which could in the future negatively affect our liquidity. In addition, a recession or market correction resulting from the spread of COVID-19 could materially affect our business and the value of our common stock. We continue to monitor the impacts of COVID-19 on the global economy and on our business operations. Although we expect the vaccinations for COVID-19 will continue to improve conditions, the ultimate impact from COVID-19 on our business operations and financial results will depend on, among other things, the ultimate severity and scope of the pandemic, including the new variants of the virus, the pace at which governmental and private travel restrictions and public concerns about public gatherings will ease, the rate at which historically large increases in unemployment rates will decrease, if at all, and whether, and the speed with which, the economy recovers. We are not able to fully quantify the impact that these factors will have on our business, but developments related to COVID-19 may materially affect financial condition and results of operations in future periods.
(2) Summary of Significant Accounting Policies
Basis of Accounting
The accompanying condensed consolidated financial statements have been prepared using the accrual basis of accounting.
The accompanying unaudited interim condensed consolidated financial statements of AmpliTech Group, Inc. (“Group” or the “Company”) have been prepared by management in accordance with accounting principles generally accepted in the United States of America for interim financial information and pursuant to rules and regulations of the Securities and Exchange Commission (“SEC”). Accordingly, they do not include all information and footnotes required by generally accepted accounting principles for annual audited financial statements. In the opinion of management, all adjustments of a normal recurring nature, considered necessary for a fair presentation have been included.
The results of operations for the three and nine months ended September 30, 2021 are not necessarily indicative of the results to be expected for the year ending December 31, 2021. The accompanying unaudited interim condensed consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements and notes related thereto for the years ended December 31, 2020 and 2019 included in Form 10-K filed with the SEC.
10 |
Table of Contents |
AmpliTech Group, Inc.
Notes To Condensed Consolidated Financial Statements
For The NineThree Months Ended September 30,March 31, 2022 and 2021
The results of operations for the three months ended March 31, 2022 are not necessarily indicative of the results to be expected for the year ending December 31, 2022. The accompanying unaudited interim condensed consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements and notes related thereto for the years ended December 31, 2021 and 2020 included in Form 10-K filed with the SEC filed on March 31, 2022.
Principles of Consolidation
The accompanying condensed consolidated financial statements include the accounts of the Company and its subsidiaries. All intercompany accounts and transactions have been eliminated in consolidation.
Use of Estimates
The preparation of financial statements in conformity with generally accepted accounting principles requires management 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 the reported amounts of revenues and expenses for the periods presented. Actual results could differ from those estimates.
Reclassifications
Certain reclassifications have been made to the prior years’ financial statements to conform to the current year presentation. These reclassifications had no effect on previously reported results of operations.
Cash and Cash Equivalents
The Company considers deposits that can be redeemed on demand and investments and marketable securities that have original maturities of less than three months, when purchased, to be cash equivalents. As of September 30, 2021,March 31, 2022, the Company’s cash and cash equivalents were deposited in threefour financial institutions.
Accounts Receivable
Trade accounts receivablereceivables are recorded at the net invoice value and are not interest bearing.
The Company provides an allowance for doubtful accounts equal to the estimated uncollectible amounts. The Company’s estimate is based on historical collection experience and a review of the current status of accounts receivable. It is reasonably possible that the Company’s estimate of the allowance for doubtful accounts will change in the future. An allowance of $113,670 and $125,400$39,380 has been recorded at September 30, 2021March 31, 2022 and December 31, 2020. Subsequent2021.
11 |
Table of Contents |
AmpliTech Group, Inc.
Notes To Condensed Consolidated Financial Statements
For The Three Months Ended March 31, 2022 and 2021
Employee Retention Credit
The Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) provided an employee retention credit which was a refundable tax credit against certain employment taxes. New legislation amended the employee retention credit to Septemberbe equal to 70% of qualified wages paid to employees after December 31, 2020, and before January 1, 2022. During calendar year 2021, a maximum of $10,000 in qualified wages for each employee per qualifying calendar quarter may be counted in determining the 70% credit. Therefore, the maximum tax credit that can be claimed by an eligible employer is $7,000 per employee per qualifying calendar quarter of 2021. The Company qualifies for the employee retention credit for quarters that experience a significant decline in gross receipts, defined as quarterly gross receipts that are less than 80 percent of its gross receipts for the same calendar quarter in 2019. The Company qualified for the credit beginning on January 1, 2021 and received credits for qualified wages through June 30, 2021, the2021. The Company collected $62,560 towards the allowance for doubtful accounts.recorded, as Other Receivable, an employee retention credit totaling $201,215 at March 31, 2022 and December 31, 2021.
Marketable Securities
The Company’s investments in marketable securities are classified based on the nature of the securities and their availability for use in current operations. The Company’s marketable securities are stated at fair value with all realized and unrealized gains and losses on investments in marketable equity securities recognized in other income, net. The realized and unrealized gains and losses on marketable securities are determined using specific identification method.
AmpliTech Group, Inc.
Notes To Condensed Consolidated Financial Statements
For The Nine Months Ended September 30, 2021 and 2020
Inventories
Inventories, which consist primarily of raw materials, work in progress and finished goods, is stated at the lower of cost (first-in, first-out basis) or market (net realizable value).
Inventory quantities and related values are analyzed at the end of each fiscal quarter to determine those items that are slow moving and obsolete. An inventory reserve is recorded for those items determined to be slow moving with a corresponding charge to cost of goods sold. Inventory items that are determined obsolete are written off currently with a corresponding charge to cost of goods sold.
As of March 31, 2022 and December 31, 2021, the reserve for inventory obsolescence was $1,035,986 and $1,031,986, respectively.
12 |
Table of Contents |
AmpliTech Group, Inc.
Notes To Condensed Consolidated Financial Statements
For The Three Months Ended March 31, 2022 and 2021
Property and Equipment
Property and equipment are recorded at cost. Depreciation is provided over the estimated useful lives of the related assets using the straight-line method for financial statement purposes. Amortization of leasehold improvements is computed using the straight-line method over the shorter of the remaining lease term or the estimated useful lives of the improvements.
Property and equipment are depreciated as follows:
Description |
| Useful Life |
| Method |
|
Office equipment |
| 7 years |
| Straight-line |
|
|
| 5 to 10 years |
| Straight-line |
|
Computer |
|
|
| Straight-line |
|
Vehicles |
| 5 years |
| Straight-line |
|
Long-lived assets
Long lived assets, such as property, plant and equipment are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Circumstances which could trigger a review include, but are not limited to; significant decrease in the market price of the asset; significant adverse changes in the business climate or legal factors; current period cash flow or operating losses combined with a history of losses, or a forecast of continuing losses associated with the use of the asset;asset, and current expectation that the asset will more likely than not be sold or disposed of significantly before the end of its estimated useful life.
Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to estimated undiscounted future cash flows expected to be generated by the asset. If the carrying amount of an asset exceeds its estimated undiscounted future cash flows, an impairment charge is recognized by the amount by which the carrying amount of the asset exceeds the fair value of the asset. Assets to be disposed of would be separately presented in the balance sheet and reported at the lower of the carrying amount of fair value less costs to sell and would no longer be depreciated. The depreciable basis of assets that are impaired and continue in use is their respective fair values.
Table of Contents |
AmpliTech Group, Inc.
Notes To Condensed Consolidated Financial Statements
For The NineThree Months Ended September 30,March 31, 2022 and 2021 and 2020
Investment Policy-Cost Method
Investments consist of non-controlling equity investments in privately held companies. The Company elected the measurement alternative for these investments without readily determinable fair values and for which the Company does not control or have the ability to exercise significantconsiderable influence over operating and financial policies. These investments are accounted for under the cost method of accounting. Under the cost method of accounting, the non-marketable equity securities are carried at cost less any impairment, adjusted for observable price changes of similar investments of the same issuer. Fair value is not estimated for these investments if there are no identified events or changes in circumstances that may have an effect oninfluence the fair value of the investment. Under this method, the Company’s share of the earnings or losses of such investee companies is not included in the consolidated balance sheet or consolidated statements of operations. The Company held $250,000$350,000 of investments without readily determinable fair values at September 30, 2021March 31, 2022 (see Note 8)10). These investments are included in other long-term assets on the condensed consolidated balance sheets. There were no indicators of impairment during the three and nine months ended September 30, 2021.March 31, 2022.
Goodwill and Intangible Assets
Intangible assets include goodwill, trademarks, intellectual property and customer base acquired through the asset purchasepurchases of Specialty Microwave.and Spectrum. The Company accounts for Other Intangible Assets under the guidance of ASC 350, “Intangibles-Goodwill and Other.” Under the guidance, other intangible assets with definite lives are amortized over their estimated useful lives. Intangible assets with indefinite lives are tested annually for impairment. Goodwill is not amortized. We test goodwill balances for impairment annually at December 31 or whenever impairment indicators arise.
Leases
On January 1, 2019, we adopted ASU No. 2016-02, “Leases (Topic 842),” which requires leases with durations greater than twelve months to be recognized on the balance sheet. We adopted this standard using the modified retrospective approach with an effective date as of the beginning of January 2019. Prior year financial statements were not restated under the new standard. We lease property and equipment under finance and operating leases. For leases with terms greater than 12 months, we record the related asset and obligation at the present value of lease payments over the lease term. The Company has elected not to separate lease and non-lease components for all property leases for the purpose of calculating ROU assets and lease liabilities. Many of our leases include rental escalation clauses, renewal options and/or termination options that are factored into our determination of lease payments when appropriate. When available, we use the rate implicit in the lease to discount lease payments to present value; however, most of our leases do not provide a readily determinable implicit rate. Therefore, we must estimate our incremental borrowing rate to discount the lease payments based on information available at lease commencement. The incremental borrowing rate is the rate of interest that a lessee would have to pay to borrow on a collateralized basis considering such factors as lease term and economic environment risks.
Table of Contents |
AmpliTech Group, Inc.
Notes To Condensed Consolidated Financial Statements
For The NineThree Months Ended September 30,March 31, 2022 and 2021 and 2020
Revenue Recognition
We sell our products through a combination of a direct sales force in the United States and independent sales representatives in international markets. Revenue is recognized when a customer obtains control of promised goods based on the consideration we expect to receive in exchange for these goods. This core principle is achieved through the following steps:
Identify the contract with the customer. A contract with a customer exists when (i) we enter into an enforceable contract with a customer that defines each party’s rights regarding the goods to be transferred and identifies the payment terms related to these goods, (ii) the contract has commercial substance and, (iii) we determine that collection of substantially all consideration for services that are transferred is probable based on the customer’s intent and ability to pay the promised consideration. We do not have significant costs to obtain contracts with customers. For commissions on product sales, we have elected the practical expedient to expense the costs as incurred.
Identify the performance obligations in the contract. Generally, ourOur contracts with customers do not include multiple performance obligations to be completed over a period.
Our performance obligations generally relate to delivering single-use products to a customer, subject to the shipping terms of the contract. Limited warranties are provided, under which we typically accept returns and provide either replacement parts or refunds.
We do not have significant returns. We do not typically offer extended warranty or service plans.
Determine the transaction price. Payment by the customer is due under customary fixed payment terms, and we evaluate if collectability is reasonably assured. None of our contracts as of September 30, 2021March 31, 2022 contained a significant financing component. Revenue is recorded at the net sales price, which includes estimates of variable consideration such as product returns, rebates, discounts, and other adjustments. The estimates of variable consideration are based on historical payment experience, historical and projected sales data, and current contract terms. Variable consideration is included in revenue only to the extent that it is probable that a significant reversal of the revenue recognized will not occur when the uncertainty associated with the variable consideration is subsequently resolved. Taxes collected from customers relating to product sales and remitted to governmental authorities are excluded from revenues.
Allocate the transaction price to performance obligations in the contract. We typically do not have multiple performance obligations in our contracts with customers. As such, we generally recognize revenue upon transfer of the product to the customer's control at contractually stated pricing.
Recognize revenue when or as we satisfy a performance obligation. We generally satisfy performance obligations at a point in time upon either shipment or delivery of goods, in accordance with the terms of each contract with the customer. We do not have significant service revenue.
Table of Contents |
AmpliTech Group, Inc.
Notes To Condensed Consolidated Financial Statements
For The NineThree Months Ended September 30,March 31, 2022 and 2021 and 2020
Reserves are recorded as a reduction in net sales and are not considered material to our condensed consolidated statements of operations for the nine months ended September 30, 2021 and 2020.
Research and Development
Research and development expenditures are charged to operations as incurred. The major components of research and development costs include consultants, outside service, and supplies.
The Company has begun its research and development into the next generation of 5G/6G subsystems for cellular and satellite communications. The Company is in the process of designing and developing antennas and subsystems that will be an integral part of the GPS and 5G infrastructure. These subsystems will enable high-speed, high capacity 5G/6G networks that will be installed into infrastructure for retrofitting and improving connectivity for cellphones, satellites and many other everyday applications.
In 2021, the Company opened a MMIC chip design center in Texas and has started to implement several of its proprietary amplifier designs into MMIC components. MMICs, or monolithic microwave integrated circuits, are semiconductor chips used in high-frequency communications applications. MMIC’s are widely desired for power amplification solutions to service emerging technologies such as phased array antennas and quantum computing. MMIC’s carry a smaller footprint enabling them to be incorporated into a broader array of systems while reducing costs by eliminating connectors and skilled labor.
Research and development costs for the ninethree months ended September 30,March 31, 2022 and 2021 were $413,303 and 2020 were $ 39,142$7,229, respectively. For financial reporting purposes, research and $ 41,083.development costs of $7,229 was reclassed from selling and administrative expense for the three months ended March 31, 2021.
Income Taxes
The Company’s deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements or tax returns. Under this method, deferred tax assets and liabilities are determined based on the differences between the financial statement carrying amounts and tax bases of certain assets and liabilities using enacted tax rates in effect in the years in which the differences are expected to reverse. The deferred tax assets and liabilities are classified according to the financial statement classification of the assets and liabilities generating the differences. Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized. The ASC prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. The ASC provides guidance on de-recognition, classification, interest and penalties, accounting in interim periods, disclosure and transition. At September 30, 2021,March 31, 2022, the Company had no material unrecognized tax benefits.
16 |
Table of Contents |
AmpliTech Group, Inc.
Notes To Condensed Consolidated Financial Statements
For The Three Months Ended March 31, 2022 and 2021
Earnings Per Share
Basic earnings per share (“EPS”) are determined by dividing the net earnings by the weighted-average number of shares of common shares outstanding during the period. Diluted EPS is determined by dividing net earnings by the weighted average number of common shares used in the basic EPS calculation plus the number of common shares that would be issued assuming conversion of all potentially dilutive securities outstanding under the treasury stock method. As of September 30,March 31, 2021, and 2020, there were 3,386,442 and 2,005,000, respectively,1,415,342 potentially dilutive shares that need to be considered as common share equivalents.
AmpliTech Group, Inc.
Notes To Condensed Consolidated Financial Statements
For The Nine Months Ended September 30, 2021 Options and 2020warrants were not included in the dilutive earnings per share calculation as their strike price was above the average share price as of March 31, 2022.
The computation of weighted average shares outstanding and the basic and diluted earnings per share consisted of the following:
|
| Net (Loss) Income |
|
| Shares |
|
| Per Share Amount |
| |||
|
|
|
|
|
|
|
|
|
| |||
For the three months ended September 30, 2021: |
|
|
|
|
|
|
|
|
| |||
|
|
|
|
|
|
|
|
|
| |||
Basic EPS |
| $ | (592,845 | ) |
|
| 9,343,671 |
|
| $ | (0.06 | ) |
Effect of dilutive stock options, warrants and series A shares |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted EPS |
| $ | (592,845 | ) |
|
| 9,343,671 |
|
| $ | (0.06 | ) |
For the three months ended September 30, 2020: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic EPS |
| $ | 17,010 |
|
|
| 2,548,212 |
|
| $ | 0.01 |
|
Effect of dilutive stock options, warrants and series A shares |
|
|
|
|
|
| 2,005,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted EPS |
| $ | 17,010 |
|
|
| 4,553,212 |
|
| $ | 0.00 |
|
|
| Net (Loss) Income |
|
| Shares |
|
| Per Share Amount |
|
| Net Income (Loss) |
|
| Shares |
|
| Per Share Amount |
| ||||||
|
|
|
|
|
|
|
|
|
| |||||||||||||||
For the nine months ended September 30, 2021: |
|
|
|
|
|
|
| |||||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||||||
For the year ended March 31, 2022: |
|
|
|
|
|
|
| |||||||||||||||||
Basic EPS |
| $ | (1,945,471 | ) |
| 7,939,008 |
| $ | (0.25 | ) |
| $ | 3,625 |
| 9,582,113 |
| $ | 0.00 |
| |||||
Effect of dilutive stock options, warrants and series A shares |
|
|
|
|
|
|
|
|
|
|
| - |
| - |
|
|
|
| ||||||
|
|
|
|
|
|
|
| |||||||||||||||||
Diluted EPS |
| $ | (1,945,471 | ) |
|
| 7,939,008 |
|
| $ | (0.25 | ) |
| $ | 3,625 |
|
|
| 9,582,113 |
|
| $ | 0.00 |
|
For the nine months ended September 30, 2020: |
|
|
|
|
|
|
| |||||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||||||
For the year ended March 31, 2021: |
|
|
|
|
|
|
| |||||||||||||||||
Basic EPS |
| $ | (549,219 | ) |
| 2,500,789 |
| $ | (0.22 | ) |
| $ | (879,931 | ) |
| 5,568,350 |
| $ | (0.16 | ) | ||||
Effect of dilutive stock options, warrants and series A shares |
|
|
|
|
|
|
|
|
| - |
| - |
|
|
| |||||||||
|
|
|
|
|
|
|
| |||||||||||||||||
Diluted EPS |
| $ | (549,219 | ) |
|
| 2,500,789 |
|
| $ | (0.22 | ) |
| $ | (879,931 | ) |
|
| 5,568,350 |
|
| $ | (0.16 | ) |
Fair Value of Assets and Liabilities
Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. A fair value hierarchy is used to prioritize the quality and reliability of the information used to determine fair values. Categorization within fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement. The fair value hierarchy is defined in the following categories as follows:
AmpliTech Group, Inc.
Notes To Condensed Consolidated Financial Statements
For The Nine Months Ended September 30, 2021 and 2020
Level 1. Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities. Cash and cash equivalents are valued using inputs in Level 1.
Level 2. Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly, including quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets or liabilities in markets that are not active; inputs other than quoted prices that are observable for the asset or liability (e.g., interest rates); and inputs that are derived principally from or corroborated by observable market data by correlation or other means.
Level 3. Inputs that are both significant to the fair value measurement and unobservable. These inputs rely on management's own assumptions about the assumptions that market participants would use in pricing the asset or liability. The unobservable inputs are developed based on the best information available in the circumstances and may include the Company's own data.
Fair Value of Marketable SecuritiesMeasurements
The fair value of a financial instrument is the amount that could be received upon the sale of an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Financial assets are marked to bid prices and financial liabilities are marked to offer prices. Fair value measurements do not include transaction costs.
A fair value hierarchy is used to prioritize the quality and reliability of the information used to determine fair values. Categorization within the fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement. The fair value hierarchy is divided intodefined in the following three categories:
Level 1. Quoted market1: Unadjusted quoted prices that are available in active markets for identical assets or liabilities.liabilities at the measurement date.
Level 2. Observable market-based2: Significant other observable inputs available at the measurement date, other than quoted prices included in Level 1, either directly or indirectly.
Level 3: Significant unobservable inputs that arecannot be corroborated by observable market data.
Level 3. Unobservable inputs that are not corroborated by market data.
Fair value estimates of financial instruments are made at a specific point in time, based on relevant information about financial marketsdata and specific financial instruments. As these estimates are subjective in nature, involving uncertainties and mattersreflect the use of significant judgment, they cannot be determined with precision. Changes in assumptions can significantly affect estimated fair value. Management is of the opinion that the Company is not exposed to significant interest or credit risks arising from financial instruments and any declines in the value of investments are temporary in nature. Money market funds and certificates of deposits are shown at cost on the balance sheet and their adjusted cost approximates their fair value.management judgment.
17 |
Table of Contents |
AmpliTech Group, Inc.
Notes To Condensed Consolidated Financial Statements
For The NineThree Months Ended September 30,March 31, 2022 and 2021
Cash and 2020cash equivalents, receivables, inventory, prepaid expenses, accounts payable, accrued expenses, and customer deposits approximate fair value, due to their short-term nature. The carrying value of notes payable and short and long-term debt also approximates fair value since these instruments bear market rates of interest.
Assets and liabilities that are measured at fair value on a nonrecurring basis relate primarily to long-lived assets, intangible assets, and goodwill, which are remeasured when the derived fair value is below carrying value in the consolidated balance sheets.
Stock-Based Compensation
The Company records stock-based compensation in accordance with ASC 718, Compensation-Stock Compensation. All transactions in which goods or services are the consideration received for the issuance of equity instruments are accounted for based on the fair value of the consideration received or the fair value of the equity instrument issued, whichever is more reliably measurable. Equity instruments issued to employees and the cost of the services received as consideration are measured and recognized based on the fair value of the equity instruments issued and are recognized over the employees required service period, which is generally the vesting period.
Concentration of Credit Risk
Financial instruments that potentially subject the company to concentration of credit risk consist primarily of cash. cash and accounts receivable
Accounts at each institution are insured by the Federal Deposit Insurance Corporation (“FDIC”) up to $250,000. At September 30, 2021March 31, 2022 and December 31, 2020,2021, the Company had $22,447,873$14,779,545 and $0$17,018,874 in excess of the FDIC insured limit, respectively.
The Company performs ongoing credit evaluations of its customers and maintains allowances for potential credit losses. Therefore, management does not believe significant credit risks exist at March 31, 2022.
Recent Accounting Pronouncements
In December 2019,October 2021, the FASB issued ASU 2019-12, Income Taxes2021-08, Business Combinations (Topic 740)805): Simplifying the Accounting for Income Taxes, which is intended to simplify various aspects related to accounting for income taxes.Contract Assets and Contract Liabilities from Contracts with Customers. This ASU removes certain exceptionsamends ASC 805 to the general principlesrequire acquiring entities to apply ASC 606 to recognize and measure contract assets and contract liabilities in Topic 740 and clarifies and amends existing guidance to improve consistent application. Thisbusiness combinations. The ASU is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020, with early adoption permitted. We are currently assessing the impact of this standard on our consolidated financial statements.
On August 5, 2020, FASB issued ASU 2020-06, which is expected to reduce complexity and improve comparability of financial reporting associated with accounting for convertible instruments and contracts in an entity’s own equity. The ASU is effectivepublic entities for fiscal years beginning after December 15, 2021,2022, including interim periods within those fiscal years, with an earlyyears. The Company has not completed its assessment of the standard but does not expect the adoption permitted. The adoption of this standard became effective for us on January 1, 2021 and did notto have a material impact on our consolidated financial statements.
We do not expect the adoption of these or other recently issued accounting pronouncements to have a significant impact on our results of operation, financial position or cash flow.
18 |
Table of Contents |
AmpliTech Group, Inc.
Notes To Condensed Consolidated Financial Statements
For The NineThree Months Ended September 30,March 31, 2022 and 2021 and 2020
(3) Revenues
The following table presents sales disaggregated based on geographic regions and for the years ended:
AmpliTech Inc. |
| March 31, 2022 |
|
| March 31, 2021 |
| ||
Domestic sales |
| $ | 867,362 |
|
| $ | 403,510 |
|
International sales |
|
| 200,793 |
|
|
| 69,464 |
|
Total sales |
| $ | 1,068,155 |
|
| $ | 472,974 |
|
|
|
|
|
|
|
|
|
|
Spectrum |
| March 31, 2022 |
|
|
|
|
| |
Domestic sales |
| $ | 1,595,626 |
|
|
|
|
|
International sales |
|
| 2,435,739 |
|
|
|
|
|
Total sales |
| $ | 4,031,365 |
|
|
|
|
|
Total sales for the three and nine months ended:ended March 31, 2022 were $5,099,520.
|
| For the three months ended |
|
| For the nine months ended |
| ||||||||||
|
| Sept. 30, 2021 |
|
| Sept. 30, 2020 |
|
| Sept. 30, 2021 |
|
| Sept. 30, 2020 |
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Domestic sales |
| $ | 846,577 |
|
| $ | 1,031,653 |
|
| $ | 2,106,717 |
|
| $ | 2,205,324 |
|
International sales |
|
| 210,019 |
|
|
| 119,079 |
|
|
| 447,265 |
|
|
| 362,055 |
|
Total sales |
| $ | 1,056,596 |
|
| $ | 1,150,732 |
|
| $ | 2,553,982 |
|
| $ | 2,567,379 |
|
(4) Segment Reporting
ASC 280, “Segment Reporting”, establishes standards for reporting information about operating segments on a basis consistent with the Company's internal organizational structure as well as information about geographical areas, business segments and major customers in financial statements for details on the Company's business segments.
The following table presents summary information by segment for the three months ended March 31, 2022:
March 31, 2022 |
| AmpliTech Inc. |
|
| Spectrum |
|
| Corporate |
|
| Total |
| ||||
Revenue |
| $ | 1,068,155 |
|
|
| 4,031,365 |
|
| $ | 0 |
|
| $ | 5,099,520 |
|
Cost of Goods Sold |
|
| 644,338 |
|
|
| 2,131,584 |
|
|
| 0 |
|
|
| 2,775,922 |
|
Net Income (Loss) |
|
| (805,856 | ) |
|
| 1,077,984 |
|
|
| (268,503 | ) |
|
| 3,625 |
|
Total Assets |
|
| 16,466,809 |
|
|
| 15,121,520 |
|
|
| 2,655,372 |
|
|
| 34,243,701 |
|
Depreciation and Amortization |
|
| 53,681 |
|
|
| 31,520 |
|
|
| 0 |
|
|
| 85,201 |
|
Interest Expense |
|
| 2,924 |
|
|
| 0 |
|
|
| 3,473 |
|
|
| 6,397 |
|
19 |
Table of Contents |
AmpliTech Group, Inc.
Notes To Condensed Consolidated Financial Statements
For The Three Months Ended March 31, 2022 and 2021
(5) Acquisition of Spectrum Semiconductors Materials
On December 15, 2021, AmpliTech Group Inc. acquired Spectrum Semiconductor Materials (SSM), an “S” Corporation located in Silicon Valley (San Jose, CA). Spectrum Semiconductor Materials ("SSM”) is a global authorized distributor of integrated circuit ("IC") packaging and lids for semiconductor device assembly, prototyping, testing, and production requirements.
The purchase is expected to deliver significant strategic and top and bottom-line benefits while also building on AmpliTech’s technical and management expertise and distribution reach.
The purchase included all accounts receivables, accounts payable, inventory, orders, customers, property and equipment and intellectual property. The aggregate purchase price for the acquisition was $10,123,276 subject to certain working capital and other adjustments of which $665,200 was paid by the issuance of 188,442 unregistered shares of AmpliTech common stock at the closing of the Acquisition.
Simultaneously with the execution of the Purchase Agreement, $1,500,000 was deposited into escrow, comprising of a $750,000, “Purchase Price Adjustment Escrow Fund” and a $750,000, “Indemnification Escrow Fund. The Purchase Price Adjustment Escrow Fund will be available for the payment of any working capital adjustment owed by Seller to Buyer or Buyer to Seller pursuant to and in accordance with the Purchase Agreement.
The Indemnification Escrow Fund will be available to satisfy any losses incurred or sustained by or imposed upon the Indemnified Parties pursuant to and in accordance with the Purchase Agreement. The escrow release date is March 31, 2023.
20 |
Table of Contents |
AmpliTech Group, Inc.
Notes To Condensed Consolidated Financial Statements
For The Three Months Ended March 31, 2022 and 2021
Within sixty (60) days after the Closing Date, AmpliTech prepared and delivered to Seller a statement setting forth its calculation of Closing Working Capital of the Business, according to the terms of the Purchase Agreement. The “Working Capital Adjustment” shall be an amount equal to the Closing Working Capital minus $3,296,427. If the Working Capital Adjustment is a positive number, Buyer shall pay to Seller an amount equal to the Working Capital Adjustment. If the Working Capital Adjustment is a negative number, Seller shall pay to Buyer an amount equal to the Working Capital Adjustment.
The Working Capital Adjustment was determined to be $708,076 owed to Seller.
Within forty (40) days after December 31, 2022, AmpliTech will prepare and deliver to Seller a statement setting forth its calculation of Two Years Net Revenues of the business, or the “Revenue Statement”. The Revenues Adjustment shall be an amount equal to 25% of two years net revenues minus $20,000,000. If the Revenues Adjustment is a positive number, Buyer shall pay to Seller an amount equal to the Revenues Adjustment. If the Revenues Adjustment is a negative number, Seller shall pay to Buyer and amount equal to the Revenues Adjustment. The fair value of the revenue adjustment was determined to be $1,365,038 owed to Seller and recorded as a contingent liability as of December 31, 2021.
The Purchase Agreement contains representations, warranties, and covenants believed to be customary for a transaction of this nature, including covenants as to indemnification for breaches of certain representations, warranties and covenants, subject to certain exclusions and caps. Further, the completion of the Acquisition is subject to release of all liens and to the satisfaction of closing conditions, including the continued employment of certain Company employees.
The fair value of the purchase consideration issued to Spectrum Semiconductor Materials was allocated to the net tangible assets acquired. The Company accounted for the Acquisition as the purchase of a business under GAAP under the acquisition method of accounting, and the assets and liabilities acquired were recorded as the acquisition date, at their respective fair values and consolidated with those of the Company. The fair value of the net assets acquired was approximately $4,098,516. The excess of the aggregate fair value of the net tangible assets has been allocated to net intangible assets of $7,389,794.
21 |
Table of Contents |
AmpliTech Group, Inc.
Notes To Condensed Consolidated Financial Statements
For The Three Months Ended March 31, 2022 and 2021
The following table summarizes the allocation of the purchase price of the acquisition:
Purchase consideration at fair value: |
|
|
| |
Cash |
| $ | 8,000,000 |
|
Common stock |
|
| 665,200 |
|
Net working capital adjustment |
|
| 708,076 |
|
Indemnification escrow amount |
|
| 750,000 |
|
Fair value of revenue earnout |
|
| 1,365,038 |
|
Total purchase price |
| $ | 11,488,314 |
|
|
|
|
|
|
Allocation of purchase price: |
|
|
|
|
Working Capital |
| $ | 3,730,133 |
|
Property and Equipment |
|
| 99,188 |
|
Goodwill |
|
| 4,696,883 |
|
Tradename |
|
| 514,284 |
|
Customer relationships |
|
| 2,178,631 |
|
Right of Use operating lease asset |
|
| 858,508 |
|
Right of Use operating lease liability |
|
| (619,271 | ) |
Other asset |
|
| 29,958 |
|
Net assets acquired |
| $ | 11,488,314 |
|
The following table summarizes the Company’s consolidated results of operations, as well as unaudited proforma consolidated results of operations as though the acquisition had occurred on January 1, 2021:
|
| For the three months ended |
| |||||
|
| March 31, 2021 |
| |||||
|
| As Reported |
|
| Pro Forma |
| ||
|
|
|
|
|
|
| ||
Net sales |
| $ | 472,974 |
|
| $ | 4,059,487 |
|
Net income(loss) attributable to common shareholders |
|
| (879,931 | ) |
|
| 93,630 |
|
Earnings per common share, basic and diluted: |
|
|
|
|
|
|
|
|
Basic |
|
| (0.16 | ) |
|
| 0.01 |
|
Diluted |
|
| (0.16 | ) |
|
| 0.01 |
|
22 |
Table of Contents |
AmpliTech Group, Inc.
Notes To Condensed Consolidated Financial Statements
For The Three Months Ended March 31, 2022 and 2021
The unaudited pro-forma results of operations are presented for information purposes only. The unaudited pro-forma results of operations are not intended to present actual results that would have been attained had the Acquisition been completed as of January 1, 2021 or to project potential operating results as of any future date or for any future periods.
(6) Marketable Securities
The following table is a summary of marketable securities at September 30, 2021:March 31, 2022:
|
| Adjusted Cost |
|
| Unrealized Gains |
|
| Unrealized Loss |
|
| Fair Value |
|
| Adjusted Cost |
| Realized Gains |
| Realized Loss |
| Fair Value |
| |||||||
Level 1 (1) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||
Money Market Funds |
| 782,429 |
|
|
|
|
| 782,429 |
| |||||||||||||||||||
Marketable Equity Securities |
| 4,215,724 |
| 16,639 |
| (79,774 | ) |
| 4,152,589 |
| ||||||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||
Money Market Fund |
| $ | 2,500,026 |
|
|
|
|
| $ | 2,500,026 |
| |||||||||||||||||
Total |
| $ | 4,998,152 |
| $ | 16,639 |
| $ | (79,774 | ) |
| $ | 4,935,017 |
|
| $ | 2,500,026 |
|
|
|
|
| $ | 2,500,026 |
|
Cash and cash equivalents in our marketable securities account at September 30, 2021March 31, 2022 was $782,429.$2,500,026.
(1) Level 1 fair value estimates are based on quoted prices in active markets for identical assets or liabilities. |
When evaluating an investment for impairment, the Company reviews factors including the length of time and extent to which fair value has been below cost basis, the financial condition of the issuer, changes in market interest rates and whether it is more likely than not the Company will be required to sell the investment before recovery of the investment’s cost basis. As of September 30, 2021,March 31, 2022, the Company does not consider any of its investments to be impaired.
(7) Inventories
The inventory consists of the following at March 31, 2022 and December 31, 2021:
|
| March 31, |
|
| December 31, |
| ||
|
| 2022 |
|
| 2021 |
| ||
Raw Materials |
| $ | 803,369 |
|
| $ | 609,841 |
|
Work-in Progress |
|
| 257,399 |
|
|
| 162,072 |
|
Finished Goods |
|
| 4,607,437 |
|
|
| 4,452,885 |
|
Subtotal |
| $ | 5,668,205 |
|
| $ | 5,224,798 |
|
Less: Reserve for Obsolescence |
|
| (1,035,986 | ) |
|
| (1,031,986 | ) |
|
|
|
|
|
|
|
|
|
Total |
| $ | 4,632,219 |
|
| $ | 4,192,812 |
|
Table of Contents |
AmpliTech Group, Inc.
Notes To Condensed Consolidated Financial Statements
For The NineThree Months Ended September 30,March 31, 2022 and 2021 and 2020
(5) Inventories
The inventory value at September 30, 2021 and December 31, 2020 were as follows:
|
| September 30, |
|
| December 31, |
| ||
|
| 2021 |
|
| 2020 |
| ||
|
|
|
|
|
|
| ||
Raw Materials |
| $ | 615,618 |
|
| $ | 325,251 |
|
Work-in Progress |
|
| 155,273 |
|
|
| 129,882 |
|
Finished Goods |
|
| 244,895 |
|
|
| 128,479 |
|
Engineering Models |
|
| 3,726 |
|
|
| 3,726 |
|
|
|
|
|
|
|
|
|
|
Subtotal |
| $ | 1,019,512 |
|
| $ | 587,338 |
|
Less: Reserve for |
|
|
|
|
|
|
|
|
Obsolescence |
|
| (71,000 | ) |
|
| (70,000 | ) |
|
|
|
|
|
|
|
|
|
Total |
| $ | 948,512 |
|
| $ | 517,338 |
|
(6)(8) Property and Equipment
Property and Equipment consisted of the following at September 30, 2021March 31, 2022 and December 31, 2020:2021:
|
| September 30, |
| December 31, |
| |||||||||||
|
| 2021 |
| 2020 |
|
| March 31, |
| December 31, |
| ||||||
|
|
|
|
|
|
| 2022 |
|
| 2021 |
| |||||
Lab Equipment |
| $ | 1,811,486 |
| $ | 865,414 |
|
| $ | 1,934,976 |
| $ | 1,893,564 |
| ||
Manufacturing Equipment |
| 25,000 |
| 25,000 |
|
| 117,095 |
| 25,000 |
| ||||||
Automobiles |
| 7,335 |
| 19,527 |
|
| 7,335 |
| 7,335 |
| ||||||
Computer Equipment and Software |
| 170,105 |
| 159,315 |
| |||||||||||
Leasehold Improvements |
| 25,571 |
| 0 |
| |||||||||||
Furniture and Fixtures |
|
| 38,217 |
|
|
| 36,165 |
|
|
| 73,747 |
|
|
| 27,504 |
|
|
|
|
|
|
| |||||||||||
Subtotal |
| 1,882,038 |
| 946,106 |
|
| 2,328,829 |
| 2,112,718 |
| ||||||
Less: Accumulated Depreciation |
|
| (715,449 | ) |
|
| (656,855 | ) |
|
| (805,278 | ) |
|
| (757,430 | ) |
|
|
|
|
|
| |||||||||||
Total |
| $ | 1,166,589 |
|
| $ | 289,251 |
|
| $ | 1,523,551 |
|
| $ | 1,355,288 |
|
Depreciation expense for the ninethree months ended September 30,March 31, 2022 and 2021 was $47,848 and 2020 was $63,597 and $36,802,$14,186, respectively.
AmpliTech Group, Inc.
Notes To Condensed Consolidated Financial Statements
For The Nine Months Ended September 30, 2021 and 2020
(7)(9) Intangible Assets
Goodwill
The goodwillGoodwill is related to the acquisition of Specialty Microwave Corp. on September 12, 2019 and the acquisition of Spectrum Semiconductor Materials Inc. on December 15, 2021. Goodwill is primarily related to expected improvements and technology performance and functionality, as well sales growth from future product and service offerings and new customers, together with certain intangible assets that do not qualify for separate recognition. Goodwill is generally not amortizable for tax purposes and is not amortizable for financial statement purposes. As of September 30, 2021March 31, 2022 and December 31, 2020,2021, goodwill was valued at $120,136.$4,817,019 respectively.
Other Intangible Assets
Intangible assets with an estimated useful life of fifteen and twenty years consisted of the following at September 30, 2021:March 31, 2022:
|
| Gross Carrying |
|
| Accumulated |
|
|
|
|
| Weighted |
| ||||
|
| Amount |
|
| Amortization |
|
| Net |
|
| Average Life |
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Trade name |
| $ | 70,233 |
|
| $ | - |
|
| $ | 70,233 |
|
| Indefinite |
| |
Customer relationships |
|
| 412,860 |
|
|
| 56,481 |
|
|
| 356,379 |
|
|
| 13.0 |
|
Intellectual Property |
|
| 202,771 |
|
|
| 27,872 |
|
|
| 174,899 |
|
|
| 13.0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
| $ | 685,864 |
|
| $ | 84,353 |
|
| $ | 601,511 |
|
|
|
|
|
Amortization expense for the years ended September 30, 2021 and 2020 was $30,698 and $30,876, respectively.
Annual amortization of intangible assets are as follows:
2021 |
|
| 10,344 |
|
2022 |
|
| 41,042 |
|
2023 |
|
| 41,042 |
|
2024 |
|
| 41,042 |
|
2025 |
|
| 41,042 |
|
Thereafter |
|
| 356,766 |
|
|
| $ | 531,278 |
|
|
| Gross Carrying |
|
| Accumulated |
|
|
|
|
| Weighted |
| ||||
|
| Amount |
|
| Amortization |
|
| Net |
|
| Average Life |
| ||||
Trade name |
| $ | 584,517 |
|
| $ | 0 |
|
| $ | 584,517 |
|
| Indefinite |
| |
Customer relationships |
|
| 2,591,491 |
|
|
| 97,438 |
|
|
| 2,494,053 |
|
|
| 18.73 |
|
Intellectual Property |
|
| 202,771 |
|
|
| 34,612 |
|
|
| 168,159 |
|
|
| 12. |
|
Total |
| $ | 3,378,779 |
|
| $ | 132,050 |
|
| $ | 3,246,729 |
|
|
|
|
|
Table of Contents |
AmpliTech Group, Inc.
Notes To Condensed Consolidated Financial Statements
For The NineThree Months Ended September 30,March 31, 2022 and 2021 and 2020
Amortization expense for the three months ended March 31, 2022 and 2021 was $37,353 and $10,120, respectively.
Annual amortization of intangible assets are as follows:
2022 | 112,621 | |||
2023 | 149,974 | |||
2024 | 149,974 | |||
2025 | 149,974 | |||
2026 | 149,974 | |||
Thereafter | 1,949,695 | |||
$ | 2,662,212 |
(8)(10) Cost Method Investment
On June 10, 2021, the Company entered into a membership interest purchase agreement with SN2N, LLC for an aggregate purchase price of $350,000, to be paid in four tranches. Each tranche represents a 5% membership interest, and in aggregate a 20% membership interest. SN2N plans to design and manufacture an un-hackable communications channel that creates a new security paradigm; a state-of-the art signal amplification secured by intelligence-community-caliber hardware encryption. AmpliTech would serve as exclusive manufacturer for the low noise amplifier product line used with this encryption technology. As of September 30, 2021,March 31, 2022, the Company has made an investment of $250,000$350,000 for a 15%20% membership interest.
(9)(11) Line of Credit
On November 20, 2020,2021, AmpliTech entered into arenewed its business line of credit for $750,000 maturing on November 1, 2021.2022. The line is evaluated monthly on a borrowing base formula advancing 75% of accounts receivables aged less than 90 days and 50% of inventory raw materials costs. The interest rate shall be based upon the Wall Street Journal Prime Rate, plus 1%. The Company has the option to prepay all or any portion of the amount owed prior to its due date without penalty.
In connection with the loan, the Company granted the lender a security interest in all of its respective assets. In addition, the President and CEO, has agreed to guarantee the loan.
The Company made cash payments of $232,000 and $100,000 during the nine months ended September 30, 2021 and 2020, respectively.
As of September 30,March 31, 2022 and 2021, and December 31, 2020, the outstanding balance on the line of credit was $0 and $200,000, respectively.
(10) Leases
We adopted ASC 842 “Leases” using the modified retrospective approach, electing the practical expedient that allows us not to restate our comparative periods prior to the adoption of the standard on January 1, 2019. As such, the disclosures required under ASC 842 are not presented for periods before the date of adoption.$0.
Table of Contents |
AmpliTech Group, Inc.
Notes To Condensed Consolidated Financial Statements
For The NineThree Months Ended September 30,March 31, 2022 and 2021 and 2020
(12) Leases
The following was included in our balance sheet as of September 30, 2021:March 31, 2022:
Operating leases |
| Sept. 30, 2021 |
|
| March 31, 2022 |
| ||
|
|
|
|
|
|
| ||
Assets |
|
|
|
|
|
| ||
ROU operating lease assets |
| $ | 278,878 |
|
| $ | 1,027,699 |
|
|
|
|
|
|
|
| ||
Liabilities |
|
|
|
|
|
| ||
Current portion of operating lease |
| $ | 88,986 |
|
| $ | 374,110 |
|
Operating lease, net of current portion |
| $ | 199,302 |
|
| $ | 722,779 |
|
Total operating lease liabilities |
| $ | 288,288 |
|
| $ | 1,096,889 |
|
|
|
|
|
|
|
| ||
Finance leases |
|
|
|
|
|
|
| |
Assets |
|
|
|
|
|
| ||
Property and equipment, gross |
| $ | 157,184 |
|
| $ | 157,184 |
|
Accumulated depreciation |
| (72,978 | ) |
|
| (84,206 | ) | |
Property and equipment, net |
| $ | 84,206 |
|
| $ | 72,978 |
|
|
|
|
| |||||
Liabilities |
|
|
|
|
|
| ||
Current portion of financing lease |
| $ | 33,280 |
|
| $ | 34,102 |
|
Finance lease, net of current portion |
| 26,047 |
|
| $ | 8,789 |
| |
Total operating lease liabilities |
| $ | 59,327 |
|
| $ | 42,891 |
|
The weighted average remaining lease term and weighted average discount rate at September 30, 2021March 31, 2022 were as follows:
Weighted average remaining lease term (years) |
|
|
| |
Operating leases |
|
|
| |
Finance leases |
|
|
| |
Weighted average discount rate |
|
|
|
|
Operating leases |
|
| % | |
Finance leases |
|
| 4.89 | % |
Table of Contents |
AmpliTech Group, Inc.
Notes To Condensed Consolidated Financial Statements
For The NineThree Months Ended September 30,March 31, 2022 and 2021 and 2020
Finance Lease
The Company entered into a 60-month lease agreement to finance certain laboratory equipment in July 2018 with a purchase option of $1. As such, the Company has accounted for this transaction as a finance lease.
The following table reconciles future minimum finance lease payments to the discounted lease liability as of September 30, 2021:March 31, 2022:
2021 |
| 9,445 |
| |||||
2022 |
| 37,778 |
|
| 28,334 |
| ||
2023 |
| 18,889 |
|
|
| 18,889 |
| |
Total lease payments |
| 66,112 |
|
| 47,223 |
| ||
Less imputed interest |
| (2,695 | ) |
| (1,411 | ) | ||
Less sales tax |
| (4,090 | ) |
|
| (2,921 | ) | |
Total lease obligations |
| 59,327 |
|
| 42,891 |
| ||
Less current obligations |
|
| (33,280 | ) |
|
| (34,102 | ) |
Long-term lease obligations |
| $ | 26,047 |
|
| $ | 8,789 |
|
Operating Leases
On December 4, 2015, the Company entered into a new operating lease agreement to rent office space in Bohemia, NY. This five-year agreement commenced February 1, 2016 with an annual rent of $50,000 and 3.75% increases in each successive lease year. On January 13, 2021, a lease rider was annexed to the original lease whereby the lease term will be extended on a month-by-month basis, commencing on February 1, 2021. The lease was terminated in April 2022.
On January 15, 2016, the Company entered into a five-year agreement to lease 2 copiers with and annual payment of $2,985. This lease was terminated on November 16, 2020 and the Company entered into a new five-year agreement to lease 2 copiers with an annual payment of $3,976.
On September 12, 2019, the Company entered into a new operating lease agreement to rent office space in Ronkonkoma, NY. This five- year agreement commenced on September 12, 2019 with an annual rent of $90,000 and 3% increase in each successive lease year beginning in 2021. The Company has an option to buy the property during the first two years of the lease for $1,200,000 and then at fair market value for the remainder of the lease term. This option has expired and was not exercised as of March 31, 2022.
On November 27, 2019, the Company entered a 39-month agreement to lease an automobile with a monthly payment of $420.
On December 15, 2021, the Company assumed the SSM lease agreement for office and warehouse space in San Jose, CA, with the same terms and conditions. Effective February 1, 2020, the lease term will expire on January 31, 2025 with a base rent of $24,234 for the first 12 months and increase by approximately 3% every year.
Table of Contents |
AmpliTech Group, Inc.
Notes To Condensed Consolidated Financial Statements
For The NineThree Months Ended September 30,March 31, 2022 and 2021 and 2020
The following table reconciles future minimum operating lease payments to the discounted lease liability as of September 30, 2021:March 31, 2022:
2021 |
| 25,428 |
| |||||
2022 |
| 104,497 |
|
| 308,943 |
| ||
2023 |
| 102,741 |
|
| 419,050 |
| ||
2024 |
| 79,948 |
|
| 405,944 |
| ||
2025 |
|
| 3,645 |
|
|
| 30,876 |
|
Total lease payments |
| 316,259 |
|
| 1,164,813 |
| ||
Less imputed interest |
|
| (27,971 | ) |
|
| (67,924 | ) |
Total lease obligations |
| 288,288 |
|
| 1,096,889 |
| ||
Less current obligations |
|
| (88,986 | ) |
|
| (374,110 | ) |
Long-term lease obligations |
| $ | 199,302 |
|
| $ | 722,779 |
|
(11)(13) Notes Payable
Promissory Note:
On September 12, 2019, AmpliTech Group, Inc. acquired Specialty, Microwave Corporation (SMW), a privately held company based in Ronkonkoma, NY. The purchase included all inventory, orders, customers, property and equipment, and all intellectual property. The assets also included all eight team members of SMW.Specialty. The total consideration paid was $1,143,633, consisting of $668,633 in cash and a $475,000 promissory note with an interest rate of 6%. Beginning November 1, 2019, payment of principal and interest shall be due payable in fifty-nine (59) monthly payments of $9,213 with a final payment due October 1, 2024 of $9,203. As of September 30, 2021,March 31, 2022, the balance of this promissory note was $309,868.$263,508. Principal payments of $59,647$15,612 along with interest expense of $14,062$2,816 was paid during the ninethree months ended September 30, 2021.March 31, 2022. The promissory note is secured by certain assets of the Company.
Loan Payable:
On September 12, 2019, the Company entered a $1,000,000 seven-year term loan with amortization based on a ten- year repayment schedule. The loan bears interest at a fixed rate of 6.75% with a monthly repayment amount of $11,533. On May 10, 2021, the Company paid off the balance of the seven-year term loan. In the nine month period, $909,036 of principal payments and interest of $23,999 were paid.
Table of Contents |
AmpliTech Group, Inc.
Notes To Condensed Consolidated Financial Statements
For The NineThree Months Ended September 30,March 31, 2022 and 2021 and 2020
Loan Payable:
On April 20, 2020, the Company entered into a Paycheck Protection Program Promissory Note (“PPP Note”) in the principal amount of $232,200 (“PPP Loan”) from BNB Bank (“PPP Loan Lender”). The PPP Loan was obtained pursuant to the Paycheck Protection Program (“PPP”) of the Coronavirus Aid Relief and Economic Security Act (“CARES Act”) administered by the U.S Small Business Administration (“SBA”). The PPP Loan was disbursed by the PPP Loan Lender on April 20, 2020 (the “Disbursement Date).
On April 20, 2021, SBA approved the PPP loan forgiveness of $232,200.
In addition, on September 12, 2019, the Company was approved for a $250,000 equipment leasing facility.facility which was subsequently increased to $500,000. The Company has borrowed against the leasing facility as follows:
| · | On December 20, 2019, the Company borrowed $58,192 to be paid over a three-year term with monthly payments of |
March 31, 2022. | ||
| · | On May 14, 2020, the Company borrowed $27,494 to be paid over a three-year term with monthly payments of $815 at an interest rate of 4.268%. The balance as of |
March 31, 2022. | ||
| · | On June 10, 2020, the Company borrowed $41,015 to be paid over a three-year term with monthly payments of $1,216 at an interest rate of 4.278%. The balance as of |
In January 2022, the Company purchased machinery for $91,795, applying a deposit of $9,180 and financing the balance of $82,616 over 24 payments at an interest rate of 1.90%. The balance as of March 31, 2022 was $72,459. Principal payments of $10,156 and interest expense of $376 was paid for the three months ended March 31, 2022.
Future principal payments over the term of the loans as of September 30, 2021March 31, 2022 are as follows:
|
| Payments |
|
| Payments |
| ||
2021 |
| 33,620 |
| |||||
2022 |
| 137,623 |
|
| 155,663 |
| ||
2023 |
| 110,894 |
|
| 131,210 |
| ||
2024 |
| 89,596 |
|
|
| 89,599 |
| |
| ||||||||
Total remaining payments |
| $ | $371,733 |
|
| $ | 376,472 |
|
(12)(14) Stockholders’ Equity
The total number of shares of stock this Corporation is authorized to issue shall be five hundred one million (501,000,000) shares, par value $0.001 per share. Our authorized capital stock consists of 500,000,000 shares of common stock and 1,000,000 shares of blank check preferred stock.
AmpliTech Group, Inc.
Notes To Condensed Consolidated Financial Statements
For The Nine Months Ended September 30, 2021 and 2020
Preferred Stock
On July 10, 2013, the Board of Directors of the Company approved a certificate of amendment to the articles of incorporation and changed the authorized capital stock of the Company to include and authorize 500,000 shares of Preferred Stock, par value $0.001 per share. On October 7, 2020, the Board of Directors of the Company approved a certificate of amendment to the articles of incorporation and changed the total number of authorized shares of Preferred Stock to be 1,000,000 shares, $0.001 per share.
29 |
Table of Contents |
AmpliTech Group, Inc.
Notes To Condensed Consolidated Financial Statements
For The Three Months Ended March 31, 2022 and 2021
On October 7, 2020, our Board of Directors and our stockholders approved a resolution to amend and restate the certificate of designation of preferences, rights and limitations of Series A Convertible Preferred Stock to restate that there are 401,000 shares of the Company’s blank check Preferred Stock designated as Series A Convertible Preferred Stock. The amended and restated certificate clarifies that the Series A Convertible Preferred Stock convert at a rate of five shares of the Company’s common stock for every share of Series A Convertible Preferred Stock, and also restates that the Series A Convertible Preferred Stock shall be entitled to vote on all matters submitted to shareholders of the Company for each share of Series A Convertible Preferred Stock owned on the record date for the determination of shareholders entitled to vote on such matter or, if no such record date is established, on the date such vote is taken or any written consent of shareholders is solicited. The number of votes entitled to be cast by the holders of the Series A Convertible Preferred Stock equals that number of votes that, together with votes otherwise entitled to be cast by the holders of the Series A Convertible Preferred Stock at a meeting, whether by virtue of stock ownership, proxies, voting trust agreements or otherwise, entitle the holders to exercise 51% of all votes entitled to be cast to approve any action which Nevada law provides may or must be approved by vote or consent of the holders of common stock entitled to vote.
On November 20, 2020, the Company issued 2,005,000 shares of common stock to Fawad Maqbool, the Chief Executive Officer of the Company. 5,000 of the shares were issued at par value upon the conversion of 1,000 shares of Preferred Stock. The remaining 2,000,000 of the shares were issued pursuant to the exercise by Mr. Maqbool of options to purchase 400,000 shares of Preferred Series A stock, at an exercise price of $1.03 per share, which were then converted into 2,000,000 shares of Common Stock.
On December 23, 2020, the Company filed amended and restated articles of incorporation to keep the authorized shares of Common Stock at 500,000,000 and set the authorized shares of blank check preferred stock at 1,000,000. On December 23, 2020, the Company filed an amended and restated certificate of designation of preferences, rights and limitations of the Series A Convertible Preferred Stock.
AmpliTech Group, Inc.
Notes To Condensed Consolidated Financial Statements
For The Nine Months Ended September 30, 2021 and 2020
Common Stock:
The Company originally authorized 50,000,000 shares of common stock with a par value of $0.001. Effective May 20, 2014, the Company increased its authorized shares of common stock from 50,000,000 to 500,000,000.
On December 7, 2020, the Board of Directors approved a reverse stock split of the Company’s common stock, in connection with a potential listing onto NASDAQ in a ratio to be determined by the Board based on market conditions and the Company’s
trading price at the time of such reverse split in the range of 1:20 to 1:200, while the authorized shares of common stock remain at 500,000,000. A reverse stock split of the outstanding common stock at a 1-for-20 ratio became effective February 17, 2021. All per share amounts and number of shares in the condensed consolidated financial statements and related notes have been retroactively restated to reflect the reverse stock split.
On October 15, 2019, the Company engaged Maxim Group LLC (“Maxim”) as its financial advisor to assist the Company in growth strategy to the investment community with the ultimate goal of an up-list and capital raise on NASDAQ.
As consideration for Maxim’s services, Maxim shall be entitled to receive, and the Company agrees to pay Maxim, the following compensation:
|
|
| |
|
| |
|
|
AmpliTech Group, Inc.
Notes To Condensed Consolidated Financial Statements
For The Nine Months Ended September 30, 2021 and 2020
On July 28, 2020, Wayne Homschek elected to exercise 150,000 of his cashless warrants and 102,632 shares of common stock was issued.
On October 12, 2020, the Company engaged service providers for services related to the NASDAQ up list totaling $100,000. The Company issued 100,000 shares on December 18, 2020 under the Company’s equity incentive plan immediately following the filing of a Registration Statement on Form S-8 and were issued without restrictions. These services have been expensed as of March 31, 2021.
On October 16, 2020, the Company entered into an advisory agreement to assist in product sales and distribution in Asia and the Middle East. The advisor will be paid compensation of 100,000 shares totaling $108,000 over a two- year period. These shares were issued under the Company’s equity incentive plan immediately following the filing of a Registration Statement on Form S-8 and were issued without restrictions. As of September 30, 2021, $51,633 of expense had been recognized and $56,367 remained as a prepaid to be amortized over a two-year period.
On October 16, 2020, the Company entered into a public relations service agreement whereby the consultant will be paid compensation of 25,000 shares totaling $27,000 over a nine-month period. These shares were issued under the Company’s equity incentive plan immediately following the filing of a Registration Statement on Form S-8 and were issued without restrictions. As of June 30, 2021, $27,000 of expense had been recognized
On November 20, 2020, the Company issued 2,005,000 shares of common stock to Fawad Maqbool, the Chief Executive Officer of the Company. 5,000 of the shares were issued at par value upon the conversion of 1,000 shares of Preferred Stock. The remaining 2,000,000 of the shares were issued pursuant to the exercise by Mr. Maqbool of options to purchase 400,000 shares of Preferred Series A stock, at an exercise price of $1.03 per share, which were then converted into 2,000,000 shares of Common Stock.
On December 18, 2020, the Company issued 30,000 shares of common stock under the Company’s stock option plan as stock compensation totaling $90,000.
On February 17, 2021, Amplitech Group Inc., common stock and warrants under the symbols “AMPG” and “AMPGW”, respectively, commenced trading on NASDAQ. In connection with the public offering, 1,371,428 units at an offering price of $7.00 per unit were sold. Each unit issued in the offering consisted of one share of common stock and one warrant. Maxim Group LLC acted as sole book-running manager for the offering. Net proceeds received was $8,119,502.
On February 24, 2021, Maxim Group LLC exercised its overallotment option to purchase an additional 205,714 shares of common stock. Net proceeds received was $1,330,095.
From March 8 to March 12,As of December 31, 2021, 161,800210,700 warrants were exercised at aan exercise price of $7.00 and 161,800210,700 shares of common stock were issued. Total cashGross proceeds received were $1,132,600.$1,474,900.
Table of Contents |
AmpliTech Group, Inc.
Notes To Condensed Consolidated Financial Statements
For The NineThree Months Ended September 30,March 31, 2022 and 2021 and 2020
From April 1 through April 6, 2021, 48,900 warrants were exercised at an exercise price of $7.00 and 48,900 shares of common stock were issued. Gross proceeds received were $342,300.
On April 15, 2021, the Company entered into definitive agreements with certain institutional investors for the sale of 2,715,000 shares of common stock in a registered direct offering priced at-the-market under NASDAQ rules. Concurrently, the Company agreed to issue to the investors, in a private placement, warrants to purchase an aggregate of 1,900,500 shares of common stock at an exercise price of $8.48 per share with a five-year term. Maxim Group LLC acted as the exclusive placement agent for this offering. The shares of common stock as described were offered pursuant to a “shelf” registration statement filed with the SEC on April 1, 2021 and declared effective on April 14, 2021. The aggregate gross proceeds to the Company were approximately $23 million dollars before deducting placement agent’s fees and expenses. The offering closed on April 16, 2021. On April 30, 2021, the Company filed a registration statement providing for the resale of the shares of common stock issuable upon the exercise of the warrants issued in the private placement. The registration statement became effective on May 11, 2021.
On December 15, 2021, 188,442 unregistered shares of AmpliTech’s common stock were issued as part of the Spectrum Semiconductor Materials acquisition for $665,200.
2020 Equity Incentive Plan:
In October 2020, the Board of Directors and shareholders adopted the Company's 2020 Equity Incentive Plan (the "2020 Plan"), effective as of December 14, 2020. Under the 2020 Plan, the Company reserved 1,250,000 shares of common stock to grant shares of the Company's common stock to employees and individuals who perform services for the Company. The purpose of the 2020 Plan is to attract and retain the best available personnel for positions of substantial responsibility, to provide incentives to individuals who perform services for the Company, and to promote the success of the Company's business. The 2020 Plan permits the grant of Incentive Stock Options, Nonstatutory Stock Options, Stock Appreciation Rights, Restricted Stock, Restricted Stock Units, Performance Units, Performance Shares, and other stock or cash awards as the Board of Directors may determine.
Stock Options:
On June 30, 2021, the Company granted to each of our Board of Directors (Mr. Lee, Mr. Kappers, and Mr. Mazziota) ten-year nonqualified stock options to purchase 12,500 shares of common stock (totaling 37,500) according to the Company's 2020 Plan. The stock options vest in full on the date of the grant, with an exercise price of $4.63 per share. The Company has calculated these options' estimated fair market value at $134,550 using the Black-Scholes model, with the following assumptions: expected term 2.5 years, stock price $4.63, exercise price $4.63, volatility 153.1%, risk-free rate 0.36%, and no forfeiture rate.
On July 26, 2021, the Company granted three employees, a consultant and two advisors to the Board ten-year stock options to purchase shares of common stock (totaling 52,000) according to the Company's 2020 Plan. The stock options vest in equal quarterly installments over three years commencing one year after the grant date, with an exercise price of $3.88 per share. The Company has calculated these options' estimated fair market value at $190,252 using the Black-Scholes model, with the following assumptions:
AmpliTech Group, Inc.
Notes To Condensed Consolidated Financial Statements
For The Nine Months Ended September 30, 2021 and 2020
expected term 7.0 years, stock price $3.88, exercise price $3.88, volatility 142.6%, risk-free rate 1.04%, and no forfeiture rate.
Below is a table summarizing the changes in stock options outstanding during the nine-month period ended September 30, 2021:
|
| Number of |
|
| Weighted Average |
| ||
|
| Options |
|
| Exercise Price ($) |
| ||
Outstanding at December 31, 2020 |
|
| - |
|
|
| - |
|
Granted |
|
| 89,500 |
|
| $ | 4.19 |
|
Exercised |
|
| - |
|
|
| - |
|
Expired |
|
| - |
|
|
| - |
|
Outstanding at September 30, 2021 |
|
| 89,500 |
|
| $ | 4.19 |
|
Exercisable at September 30, 2021 |
|
| 37,500 |
|
| $ | 4.63 |
|
As of September 30, 2021, all outstanding stock options were issued according to the Company's 2020 Plan, and there remain 1,160,500 shares of common stock available for future issuance under the 2020 Plan.
Stock-based compensation expense related to stock options of $143,661 and $0 was recorded in the nine months ended September 30, 2021 and September 30, 2020, respectively. As of September 30, 2021, the remaining unrecognized compensation cost related to non-vested stock options is $181,658 and is expected to be recognized over 3.82 years. The outstanding stock options have a weighted average remaining contractual life of 7.70 years and a total intrinsic value of $0.
Warrants:
Effective February 19, 2021, Amplitech Group Inc., common stock and warrants under the symbols "AMPG" and "AMPGW," respectively, commenced trading on NASDAQ. In connection with the public offering, 1,371,428 units sold at an offering price of $7.00 per unit. Each unit issued in the offering consisted of one share of common stock and one warrant. Maxim Group LLC acted as sole book-running manager for the offering and partially exercised its overallotment option to purchase 205,714 warrants at the public offering price. The warrants expire ten years from the date of issuance.
Effective April 16, 2021, the Company entered into definitive agreements with certain institutional investors to sell 2,715,000 shares of common stock in a registered direct offering priced at the market under NASDAQ rules. Concurrently, the Company agreed to issue to the investors, in a private placement, warrants to purchase an aggregate of 1,900,500 shares of common stock at an exercise price of $8.48 per share with a five-year term.
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AmpliTech Group, Inc.
Notes To Condensed Consolidated Financial Statements
For The NineThree Months Ended September 30,March 31, 2022 and 2021 and 2020
On July 20, 2021,Stock Options:
Below is a table summarizing the changes in connection with a product development agreement with an unrelated party,stock options outstanding for the Companythree months ended March 31, 2022:
|
|
|
| Weighted Average |
| |||
|
| Number of Options |
|
| Exercise Price ($) |
| ||
Outstanding at December 31, 2021 |
|
| 305,500 |
|
| $ | 3.74 |
|
Granted |
|
| - |
|
| 0 |
| |
Exercised |
|
| - |
|
|
| 0 |
|
Expired |
|
| - |
|
|
| 0 |
|
Outstanding at March 31, 2022 |
|
| 305,500 |
|
| $ | 3.74 |
|
Exercisable at March 31, 2022 |
|
| 305,500 |
|
| $ | 3.70 |
|
As of March 31, 2022, all outstanding stock options were issued warrantsaccording to purchase 30,000the Company's 2020 Plan, and there remains 944,500 shares of common stock. The warrants vest in one year fromstock available for future issuance with an exercise price of $5.00 per share. The Company has calculated these warrants estimated fair market value at $88,803 usingunder the Black-Scholes model, with the following assumptions: expected term 3.0 years, stock price $3.80, exercise price $5.00, volatility 149.8%, risk-free rate 0.37%, and no forfeiture rate.2020 Plan.
FromStock-based compensation expense related to stock options of $23,049 was recorded for the three months ended March 8 through April 6, 2021, 210,700 warrants were exercised at $7.00, resulting in31, 2022. As of March 31, 2022, the issuanceremaining unrecognized compensation cost related to non-vested stock options is $188,184 and is expected to be recognized over 3.32 years. The outstanding stock options have a weighted average remaining contractual life of 210,700 shares5.40 years and a total intrinsic value of common stock.$0.
|
| Number of |
|
| Weighted Average |
| ||
|
| Warrants |
|
| Exercise Price ($) |
| ||
Outstanding at December 31, 2020 |
|
| 0 |
|
|
| - |
|
Granted |
|
| 3,507,642 |
|
| $ | 7.78 |
|
Exercised |
|
| (210,700 | ) |
| $ | 7.00 |
|
Expired |
|
| - |
|
|
| - |
|
Outstanding at September 30, 2021 |
|
| 3,296,942 |
|
| $ | 7.83 |
|
Exercisable at September 30, 2021 |
|
| 3,266,942 |
|
| $ | 7.86 |
|
Warrants:
Below is a table summarizing the changes in warrants outstanding for the three months ended March 31, 2022:
|
|
|
| Weighted Average |
| |||
|
| Number of Warrants |
|
| Exercise Price ($) |
| ||
Outstanding at December 31, 2021 |
|
| 3,266,942 |
|
| $ | 7.83 |
|
Granted |
|
| - |
|
| - |
| |
Exercised |
|
| - |
|
|
| - |
|
Expired |
|
| - |
|
|
| - |
|
Outstanding at March 31, 2022 |
|
| 3,296,942 |
|
| $ | 7.83 |
|
Exercisable at March 31, 2022 |
|
| 3,266,942 |
|
| $ | 7.86 |
|
Stock-based compensation expense related to warrants of $17,517$21,897 was recorded infor the ninethree months ended September 30, 2021 and September 30, 2020, respectively.March 31, 2022. As of September 30, 2021,March 31, 2022, the remaining unrecognized compensation cost related to non-vested warrants is $0.$27,005. The outstanding warrants have a weighted average remaining contractual life of 6.566.06 years and a total intrinsic value of $0.
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(13) CommitmentsAmpliTech Group, Inc.
Notes To Condensed Consolidated Financial Statements
For The Three Months Ended March 31, 2022 and Contingencies: 2021None applicable
(14)(15) Commitments and Contingencies
On November 19, 2021, AmpliTech Group, Inc. entered into an Asset Purchase Agreement (the “Purchase Agreement”) with Spectrum Semiconductor Materials Inc. (the "Seller" or “SSM”), pursuant to which AmpliTech would acquire substantially all of the assets of the Company (the “Acquisition”). The Acquisition was completed on December 15, 2021.
Within forty (40) days after December 31, 2022, AmpliTech, as stipulated in the Purchase Agreement, will prepare and deliver to Seller a statement setting forth its calculation of Two Years Net Revenues of the business, or the “Revenue Statement”. The Revenues Adjustment shall be an amount equal to 25% of two years net revenues minus $20,000,000. If the Revenues Adjustment is a positive number, Buyer shall pay to Seller an amount equal to the Revenues Adjustment. If the Revenues Adjustment is a negative number, Seller shall pay to Buyer and amount equal to the Revenues Adjustment. The fair value of the revenue adjustment was determined to be $1,365,038 owed to Seller and recorded as a contingent liability as of March 31, 2022 and December 31, 2021.
(16) Subsequent events
In accordance with ASC 855-10, Company management reviewed all material events through the date of this report.
On October 15, 2021, the Company entered into a new lease for a 20,000 square foot facility on Long Island,at 155 Plant Avenue, Hauppauge, New York, for a term of seven years and two months. The yearly base rent of $346,242 shall increase at a rate of 2.75% per year to begin on the first anniversary lease commencement date and each year thereafter. The first two months of basic rent shall be abated following the commencement lease date. In the event the landlord decides to sell the property, the Company shall have the right of first offer to purchase subject property. Upon lease execution, the Company paid two months of base rent as a security deposit and one month’s rent totaling $86,560. The Company expects to be fully operational atmoved into the new manufacturing and headquarters facility in the first quarter ofApril 1, 2022.
AmpliTech Group, Inc.
Notes To Condensed Consolidated Financial Statements
For The Nine Months Ended September 30, 2021 and 2020
On November 1, 2021,May 5, 2022, the Company opened its MMIC Design Center (AGMDC) in Texas and expects the facilityborrowed $441,139 to be fully operationalpaid over a three-year term with monthly payments of $13,341 totaling $480,276. An advance payment of $26,682 will be applied to the first and last month’s payments. This equipment is secured by year-end 2021. The MMIC design center is expected to integrate the Company’s low noise figures into more compact packages that will allow for integration into a larger rangemoney market account with a balance of consumer applications.
On November 10, 2021, Maxim was issued 50,000 restricted shares of Common Stock as per the placement agency agreement dated April 15, 2021.$500,000.
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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following discussion provides information which management believes is relevant to an assessment and understanding of our results of operations and financial condition. The discussion should be read along with our financial statements and notes thereto contained elsewhere in this Quarterly Report on Form 10-Q. The following discussion and analysis contain forward-looking statements, which involve risks and uncertainties. Our actual results may differ significantly from the results, expectations and plans discussed in these forward-looking statements.
Business Overview
AmpliTech Group Inc. (“AMPG,” “AmpliTech” or the “Company”), incorporated in 2010 in the state of Nevada, is the parent company of its subsidiary AmpliTech, Inc., and AMPG’s divisions Specialty Microwave, Spectrum Semiconductor Materials, and AmpliTech Group MMIC Design Center (“AGMDC”).
AmpliTech Inc. designs, engineers and assembles micro-wave component-based amplifiers that meet individual customer specifications. Our products consist of radio frequency (“RF”)RF amplifiers and related subsystems, operating at multiple frequencies from 50kHz to 44GHz, including low noise amplifiers (“LNA”), medium power amplifiers, cryogenic amplifiers, and custom assembly designs for the aerospace, governmental,global satellite communications, telecom (5G & IoT), space, defense, and commercial satellitequantum computing markets. We also offer non-recurring engineering services on a project-by-project basis, for a predetermined fixed contractual amount, or on a time plus material basis.
Our Specialty Microwave division designs and manufactures passive microwave components and related subsystems for use in satellite communication ground networks that meet individual customer specifications for We have both domestic and international customers.customers in such industries as aerospace, governmental, defense and commercial satellite.
Specialty Microwave designs and manufactures state-of- the-art precision SATCOM microwave components, RF subsystems and specialized electronic assemblies for the military and commercial markets, flexible and rugged waveguides, wave guide adapters and more.
AGMDC designs, develops and manufactures state-of-the-art signal processing components for satellite and 5G communications networks, defense, space and other commercial applications, allowing the Company to market its products to wider base of customers requiring high technology in smaller packages.
On November 19, 2021, AMPG entered into an Asset Purchase Agreement with Spectrum Semiconductor Materials Inc. (“SSM”), a globally authorized distributor of integrated circuit (IC) packaging and lids for semiconductor device assembly, prototyping, testing, and production requirements founded in 1990 and headquartered in San Jose, CA, pursuant to which AMPG acquired substantially all of the assets of the Company (the Acquisition). The Acquisition was completed on December 15, 2021.
In 2021, the Company opened a monolithic microwave integrated circuits (“MMIC”) chip design center in Texas and has started to implement several of its proprietary amplifier designs into MMIC components. MMICs are semiconductor chips used in high-frequency communications applications. MMICs are widely desired for power amplification solutions to service emerging technologies, such as phased array antennas and quantum computing. MMICs carry a smaller footprint enabling them to be incorporated into a broader array of systems while reducing costs.
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Our mission is to patent our proprietary IP and trade secrets that were used in small volume niche markets and expand our capabilities through strategic partnerships, joint ventures, mergers/acquisitions with key industry leaders in the 5G/6G, quantum computing, and cybersecurity markets. We believe this will enable us to scale up our products and revenue by developing full systems and subsystems with our unique technology as a core component, which we expect will position us as a global leader in these rapidly emerging technology sectors and addresses large volume markets as well, such as cellphone handsets, laptops, server networks, and many other applications that improve everyday quality of life.
We believe ourThe Company’s research and development initiative to expand ourits product line of low noise amplifiers to include ourits new 5G and wireless infrastructure products and MMIC designs is progressing significantly. We have introduced new products that will be manufactured through our SMW acquisition. TheOur combined engineering and manufacturing resources isare expected to complement the new product development of new subsystems for satellite, wireless, and 5G infrastructures, as well as advanced military and commercial market.markets.
Corporate Information
Our principal executive offices are located at 620 Johnson155 Plant Avenue, Bohemia,Hauppauge, NY 11716.11788. Our telephone number is (631) 521-7831. Our corporate website is www.amplitechinc.com. The information on our website is not a part of, or incorporated in, this prospectus.
Recent Developments
On AprilOctober 15, 2021, we entered into purchase agreements with certain institutional investors for the sale of an aggregate of 2,715,000 shares of common stock at a purchase price of $8.48 per share in a registered direct offering.
In a concurrent private placement, the Company sold to the investors, warrants to purchase an aggregate of 1,900,500 shares of common stock at an exercise price of $8.48 per share with a five-year term. The exercise price of the warrants and the number of shares of the common stock issuable upon the exercise of the warrants are subject to adjustment in the event of any stock dividends and splits, reverse stock split, recapitalization, reorganization or similar transaction, as described in the warrants. The warrants are exercisable on a “cashless” basis in certain circumstances.
The closing of the sale of the shares of common stock in the registered direct offering, and the sale of the warrants in the concurrent private placement, occurred on April 16, 2021.
On April 30, 2021, the Company filed a registration statement providing for the resale of the shares of common stock issuable upon the exercise of the warrants. Upon effectiveness of such registration statement, the warrants are not exercisable on cashless basis. The registration statement became effective on May 11, 2021.
On June 10, 2021, the Company entered a new lease for a 20,000 square foot facility at 155 Plant Avenue, Hauppauge, New York, for a term of seven years and two months. The yearly base rent of $346,242 shall increase at a rate of 2.75% per year to begin on the first anniversary lease commencement date and each year thereafter. The first two months of basic rent shall be abated following the commencement lease date. In the event the landlord decides to sell the property, the Company shall have the right of first offer to purchase subject property. Upon lease execution, the Company paid two months of base rent as a security deposit and one month’s rent totaling $86,560. The Company moved into a membership interest purchase agreement for an aggregate purchase price of $350,000,the new manufacturing and headquarters facility April 1, 2022.
On May 5, 2022, the Company borrowed $441,139 to be paid in four tranches. Each tranche represents a 5% membership interest, and in aggregate a 20% membership interest. SN2N plans to design and manufacture an un-hackable communications channel that creates a new security paradigm; a state-of-the art signal amplification secured by intelligence-community-caliber hardware encryption. Amplitech would serve as exclusive manufacturer for the low noise amplifier product line used with this encryption technology. As of September 30, 2021, the Company has made an investment of $250,000 for a 15% membership interest.
On July 26, 2021, 52,000 incentive/ non-qualified stock options were issued to various employees and consultants. The options have a strike price of $3.88 and a ten-year term. The options shall vest in equal quarterly installments over a three-year period commencing one year afterterm with monthly payments of $13,341 totaling $480,276. An advance payment of $26,682 will be applied to the datefirst and last month’s payments. This equipment is secured by a money market account with a balance of grant.$500,000.
Results of Operations
For the Three Months Ended September 30, 2021March 31, 2022 and September 30, 2020March 31, 2021
Revenues
Overall, the increase in custom amplifier sales during this comparison period, was offset by the decrease in sales in microwave components by our Specialty Microwave division. Combined sales decreasedSales increased from $1,150,732$472,974 for the three months ended September 30, 2020March 31, 2021 to $1,056,596 for three months ended September 30, 2021, a decrease of $94,136 or approximately 8.18%. Supply chain disruptions as a result of the global health crisis has posed some challenges to our manufacturing and shipments for the third quarter of 2021.
Cost of Goods Sold and Gross Profit
Cost of goods sold increased from $630,486$5,099,520 for the three months ended September 30, 2020 to $742,983 for the three months ended September 30, 2021,March 31, 2022, an increase of $112,497$4,626,546 or approximately 17.85%978.18%. This increase is directly relatedSales increased primarily due to the increase in direct assembly laboracquisition of Spectrum Microwave, whose sales for this quarter totaled $4,031.365. Following the easing of COVID restrictions, amplifier and partsRF subsystems sales increased as well as with the hiring of a director of operations to oversee production and to help meet company growth objectives.
As a result, the gross profit was $313,613 for the three months ended September 30, 2021 compared to $520,246 for the three months ended September 30, 2020, a decrease of $206,633three-month period by $595,181 or 39.72%. Gross profit as a percentage of sales decreased to 29.68% from 45.21%125.84%.
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Cost of Goods Sold and Gross Profit
Cost of Goods Sold increased from $417,993 for the three months ended March 31, 2021 to $2,775,922 for the three months ended March 31, 2022, an increase of $2,357,929 or approximately 564.11%. This increase is directly related to approximately $2,131,584 of additional expense included in cost of goods sold as part of the SSM acquisition and the increase in sales. As a result, the gross profit was $2,323,598 for the three months ended March 31, 2022 compared to $54,981 for the three months ended March 31, 2021, an increase of $2,268,617 or 4126.18%. As a result of the acquisition and the increase in LNA and RF subsystems sales, gross profit as a percentage of sales increased to 45.57% from 11.62%.
Selling, General and Administrative Expenses
Selling, general and administrative expenses increased to $850,329$1,901,310 for the three months ended September 30,March 31, 2022 from $901,325 for the first three months ended March 31, 2021, from $475,248an increase of $999,985 or approximately 110.95%. With the acquisition of Spectrum, selling, general and administrative expenses increased by $821,797. In addition, expenses such as salaries, employee benefits, accounting fees, IR/PR, advertising, and trade show expenses have increased as well.
Research and Development Expenses
Research and development expenditures are charged to operations as incurred. The major components of research and development costs include consultants, outside service, and supplies.
The Company has begun its research and development into the next generation of 5G/6G subsystems for cellular and satellite communications. The Company is in the process of designing and developing antennas and subsystems that will be an integral part of the GPS and 5G infrastructure. These subsystems will enable high-speed, high capacity 5G/6G networks that will be installed into infrastructure for retrofitting and improving connectivity for cellphones, satellites and many other everyday applications. This new product line is expected to be released to market during fiscal year 2022.
AGMDC, the MMIC chip design center in Texas has started to implement several of its proprietary amplifier designs into MMIC components. MMICs are semiconductor chips used in high-frequency communications applications and are widely desired for power amplification solutions to service emerging technologies such as phased array antennas and quantum computing. AGMDC is expected to start contributing to revenue during 2022.
Research and development costs for the three months ended September 30, 2020, an increase of $375,081 or approximately 78.92%. The Company experienced an increase in parent company expenses, such as regulatory fees, directors’ insurance, IR/PRMarch 31, 2022 and consulting, legal2021 were $413,303 and accounting fees. Additional expenses were incurred in payroll and payroll taxes, sales commissions and promotion.
Income (Loss) From Operations
As a result of the above, the Company has a loss from operations of $536,716 for the three months ended September 30, 2021 and income from operations of $44,998 for the three months ended September 30, 2020.
Other Income (Expenses)
Interest expense decreased by $24,146 or 86.27%, when comparing the three months ended September 30, 2021 to the three months ended September 30, 2020. The decrease was primarily due to the repayment of debt.
The Company also recorded an unrealized loss on investments of $63,807 and other income of $11,520.
Net Income (Loss)
The Company reported a net loss of $592,845 for the three months ended September 30, 2021, compared to a net income of $17,010 for the three months ended September 30, 2020.
For the Nine Months Ended September 30, 2021 and September 30, 2020
Revenues
When comparing sales for the nine months ended September 30, 2021 of $2,553,982, to sales for the nine months ended September 30, 2020 of $2,567,379, sales decreased slightly by $13,397 or approximately .52%. Sales have remained relatively flat year to year, primarily due to the lower sales volume experienced in the first quarter of 2021 as a result of the COVID-19 pandemic and worldwide freight issues causing disruption to the supply chain. Our RFQ (Request for Quote) activity remains strong and as more business restrictions are lifted, this should translate to increased sales for the balance of the year.
Cost of Goods Sold and Gross Profit
Cost of goods sold increased by $258,933 or 16.37% for the nine months ended September 30, 2021 compared to the nine months ended September 30, 2020. This increase is directly related to the increase in direct assembly labor and parts as well as with the hiring of a director of operations to oversee production and to help meet company growth objectives.$7,229, respectively.
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Gross profit decreased by $272,330 or 27.63%, when comparing the first nine months of 2021 to the first nine months of 2020. Gross profit percentage decreased from 38.39% to 27.93%. Overall, the global pandemic and diminished economic activity that resulted from the pandemic impacted our gross profit.
Selling, General and Administrative Expenses
General and administrative expenses increased from $1,456,266 for the first nine months of 2020 compared to $2,802,434 for the first nine months of 2021, an increase of $1,346,168 or approximately 92.44%. The Company experienced an increase in parent company expenses, such as stock compensation, IR/PR fees, consulting fees, legal fees, accounting fees and regulatory filing fees relating to both offerings. Approximately $370,000 of expenses are non-recurring and related to the public offerings. Additional expenses were incurred in payroll and payroll taxes, sales commissions and promotion and recruiting fees.
Income (Loss) From Operations
As a result of the above, the Company hadhas income from operations of $8,985 and a net loss from operations of $2,089,216,$853,573 for the ninethree months ended September 30,March 31, 2022 and 2021, compared to the loss from operations of $470,718, for the nine months ended September 30, 2020, an overall increase of $1,618,498.respectively.
Other Income (Expenses)
Interest expense decreased from $78,501 forby $20,998 or 79.66%, when comparing the first ninethree months of 2020 comparedended March 31, 2022 to $36,840 for the first ninethree months of 2021, a decrease of $41,661 or 53.07%.ended March 31, 2021. The decrease was primarily due to the repayment of debt.
In addition, on April 20, 2021, the SBA approved the forgiveness of the Company’s PPP loan of $232,200.
The Company also recorded an unrealized loss on investments of $63,135 and other income of $11,520.
Net Income (Loss)
The Company reported a net lossincome of $1,945,471$3,625 for the ninethree months ended September 30, 2021,March 31, 2022, compared to a net loss of $549,219$879,931 for the ninethree months ended September 30, 2020.March 31, 2021.
Liquidity and Capital Resources
Operating Activities
The net cash used in operating activities for the ninethree months ended September 30,March 31, 2022 was $1,842,051 resulting primarily from net income and operating changes in accounts receivable, inventories, accounts payable and accrued expenses customer deposits and operating lease liability.
The net cash used in operating activities for the three months ended March 31, 2021 was $2,514,509,$658,991, resulting primarily from the net loss and the operating changes in accounts receivable, inventories, prepaid expenses and the operating lease liability.
Net cash used in operating activities was $514,298 for the nine months ended September 30, 2020, resulting primarily from the net loss and operating changes in accounts receivable, inventory, prepaid expenses, and the operating lease liability.
Investing Activities
The net cash used in investing activities for the ninethree months ended September 30, 2021March 31, 2022 was $5,413,847, resulting in$182,850, of which $82,850 related to the purchase of equipment marketable securities and the 15% membership interest.$100,000 for our investment in SN2N.
The net cash used in investing activities for the ninethree months ended September 30, 2020March 31, 2021 was $11,557,$15,000 for the purchase of equipment.
Financing Activities
The net cash used in financing activities for the three months ended March 31, 2022 was $35,013 a result primarily from the repayments of notes payable and finance lease.
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The net cash provided by financing activities for the ninethree months ended September 30,March 31, 2021 was $30,676,693$10,329,693 which includes $31,900,840$10,582,197 million from new issuances of common stock and warrants, netted against the repayment of the line of credit, notes payable and finance lease and notes payable.
The net cash provided by financing activities for the nine months ended September 30, 2020 was $377,018, a result primarily from the proceeds of the line of credit and PPP loan, netted against lease and notes payable.payments.
We have historically financed our operations by the issuance of debt tofrom third party lenders, equity offerings, notes issued to various private individuals and personal funds advanced from time to time by the majority shareholder, who is also the President and Chief Executive Officer of the Company.
As of September 30,March 31, 2022, we had cash and cash equivalents of $15,958,960, a working capital of $20,285,198 and an accumulated deficit of $6,623,552.
As of December 31, 2021, we had cash and cash equivalents of $22,947,873,$18,018,874, a working capital of $28,626,181$20,467,429 and an accumulated deficit of $3,813,843.
As of December 31, 2020, we had cash and cash equivalents of $199,536, working capital of $741,606 and an accumulated deficit of $1,868,372.$6,627,177.
We intend to continue to finance our internal growth with cash on hand, and cash provided from operations.operations, borrowings, debt or equity offerings, or some combination thereof. We believe that our cash provided from operations and cash on hand will provide enough working capital to fund our operations for the next twelve months.
Critical Accounting Policies, Estimates and Assumptions
The SEC defines critical accounting policies as those that are, in management'smanagement’s view, most important to the portrayal of our financial condition and results of operations and those that require significant judgments and estimates.
The discussion and analysis of our financial condition and results of operations is based upon our financial statements which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets and liabilities. On an on-going basis, we evaluate our estimates including the allowance for doubtful accounts, the salability and recoverability of inventory, income taxes and contingencies. We base our estimates on historical experience and on other assumptions that we believe to be reasonable under the circumstances, the results of which form our basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. The Company believes there have been no significant changes during the nine-monththree month period ended September 30, 2021,March 31, 2022, to the items disclosed as critical accounting policies in management’s discussion and analysis in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020.2021.
We cannot predict what future laws and regulations might be passed that could have a material effect on our results of operations. We assess the impact of significant changes in laws and regulations on a regular basis and update the assumptions and estimates used to prepare our financial statements when we deem it necessary.
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Off Balance Sheet Transactions
None.
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
.
Smaller reporting companies are not required to provide the information required by this item.
Item 4. Controls and Procedures.
Evaluation of Disclosure Controls and Procedures
Our management, including our chief executive officer and chief financial officer, evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) or 15d-15(e) under the Exchange Act as of the end of the period covered by this report. Our management does not expect that our disclosure controls and procedures will prevent all error and all fraud. In designing and evaluating the disclosure controls and procedures, management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives.
Based on that evaluation, as of September 30, 2021,March 31, 2022, our chief executive officer and chief financial officer concluded that our disclosure controls and procedures were not effective to provide reasonable assurance that information we are required to disclose in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our chief executive officer and chief financial officer, as appropriate, to allow timely decisions regarding required disclosure.
Changes in Internal Control over Financial Reporting
There were no changes that have affected, or are reasonably likely to materially affect, our internal control over financial reporting (as defined in Rules 13a-15(f) or 15d-15(f) under the Exchange Act) during the period covered by this report.
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PART II — OTHER INFORMATION
Item 1. Legal Proceedings.
To the best of our knowledge, there are no pending legal proceedings to which we are a party or of which any of our property is the subject.
Item 1A. Risk Factors.
Smaller reporting companies are not required to provide the information required by this item.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
On July 20, 2021, in connection with a product development agreement with an unrelated party, the Company issued warrants to purchase 30,000 shares of common stock. The warrants vest in one year from issuance, with an exercise price of $5.00 per share.None.
Item 3. Defaults Upon Senior Securities.
None.
Item 4. Mine Safety Disclosures.
Not applicable
Item 5. Other Information.
None.
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Item 6. Exhibits.
(a) Exhibits
Exhibit No. | Description | |||
Rule 13a-14(a)/ 15d-14(a) Certification of Principal Executive Officer | ||||
Rule 13a-14(a)/ 15d-14(a) Certification of Principal Financial Officer | ||||
| XBRL Instance Document | |||
| XBRL Taxonomy Extension Schema Document | |||
| XBRL Taxonomy Extension Calculation Link base Document | |||
| XBRL Taxonomy Extension Definition Link base Document | |||
| XBRL Taxonomy Extension Label Link base Document | |||
| XBRL Taxonomy Extension Presentation Link base Document | |||
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Table of Contents |
SIGNATURES
Pursuant to the requirements 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.
AmpliTech Group, Inc. | |||
Date: | By: | /s/ Fawad Maqbool | |
Fawad Maqbool | |||
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President and Chief Executive Officer (Principal Executive Officer) |
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Date: | By: | /s/ Louisa Sanfratello | |
Louisa Sanfratello Chief Financial Officer (Principal Financial and Accounting Officer) |
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