UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

 

FORM 10-Q

  

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended March 31, 2015

 

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 000-54355

 

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)

 

35 Carlough Road. #3

Bohemia, NY 11716

(address of principal executive offices) (Zip Code)

 

631-521-7831

(Registrant’s telephone number, including area code)

 

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 x No ¨

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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 x No ¨ 

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of "large accelerated filer," "accelerated filer," and "smaller reporting company" in Rule 12b-2 of the Exchange Act (Check one):

 

Large accelerated filer	¨	Accelerated filer	¨
Non-accelerated filer	¨	Smaller reporting company	x
(Do not check if a smaller reporting company)

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No x

 

As of May 14, 2015, the registrant had 46,136,326 shares of common stock, par value $0.001 per share, issued and outstanding.

 

 

 

AMPLITECH GROUP, INC.

 

QUARTERLY REPORT ON FORM 10-Q

March 31, 2015

 

TABLE OF CONTENTS

 

			PAGE
PART I - FINANCIAL INFORMATION
Item 1.	Financial Statements (Unaudited)			4
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations			13
Item 3.	Quantitative and Qualitative Disclosures About Market Risk			18
Item 4.	Controls and Procedures			18
PART II - OTHER INFORMATION
Item 1.	Legal Proceedings.			19
Item 1A.	Risk Factors			19
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds			19
Item 3.	Default Upon Senior Securities			19
Item 4.	Mine Safety Disclosures			19
Item 5.	Other Information			19
Item 6.	Exhibits			20
SIGNATURES				21

 

2

 

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 of 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. In light of 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

 

PART I – FINANCIAL INFORMATION

 

Item 1. Financial Statements

 

AmpliTech Group, Inc.

Condensed Consolidated  Balance Sheets

 

					March 31,				December 31,
					2015				2014
					(Unaudited)
Assets
	Current Assets
		Cash and cash equivalents			$	26,555			$	19,162
		Accounts receivable, net				107,738				133,388
		Inventory, net				157,920				163,870
		Prepaid expenses				7,645				6,825
		Total Current Assets				299,858				323,245
	Property and equipment, net					108,496				115,843
	Security deposits					5,375				5,375
			Total Assets		$	413,729			$	444,463
Liabilities and Stockholders' Equity
	Current Liabilities
		Accounts payable and accrued expenses			$	88,351			$	99,078
		Customer deposits				50,259				87,676
		Payroll taxes payable				2,372				665
		Notes payable				26,958				26,958
		Factor financing				73,990				68,836
		Current portion of capital leases				9,626				23,886
		Due to officer				40,291				46,291
		Total Current Liabilities				291,847				353,390
			Total Liabilities			291,847				353,390
	Commitments and Contingencies					-				-
	Stockholders' Equity
		Series A convertible preferred stock, par
		value $.001, 401,000 shares authorized,
		1,000 shares issued and outstanding, respectively				1				1
		Common Stock, par value $.001,
		500,000,000 shares authorized,
		46,136,326 shares issued
		and outstanding, respectively				46,136				46,136
		Additional paid-in capital				1,631,976				1,631,976
		Accumulated deficit				(1,556,231	)			(1,587,040	)
		Total Stockholders'  Equity				121,882				91,073
			Total Liabilities and Stockholders' Equity		$	413,729			$	444,463

 

See accompanying notes to condensed consolidated financial statements

 

4

 

AmpliTech Group, Inc.

Condensed Consolidated Statements of Operations

For The Three Months Ended March 31, 2015 and 2014 (Unaudited)

 

		For The Three Months Ended
		March 31, 2015				March 31, 2014
Sales		$	348,452			$	323,876
Cost of goods sold			141,273				169,797
Gross Profit			207,179				154,079
General and administrative			166,476				188,426
Income (Loss) From Operations			40,703				(34,347	)
Other Income (Expenses);
Interest expense			(9,894	)			(53,343	)
Gain on shares issued for debt and accrued liabilities			-				5,580
Income (Loss) Before Income Taxes			30,809				(82,110	)
Provision  For Income Taxes			-				-
Net Income (Loss)			30,809				(82,110	)
Net Income (Loss ) Per Share-Basic and Diluted		$	0.00			$	(0.00	)
Weighted Average Shares Outstanding;
Basic			46,136,326				22,380,909
Diluted			85,779,616				22,380,909

 

See accompanying notes to condensed consolidated financial statements

 

5

 

AmpliTech Group, Inc.

Condensed Consolidated Statements of Cash Flows

For The Three Months Ended March 31, 2015 and 2014

(Unaudited)

 

					March 31,				March 31,
					2015				2014
Cash Flows from Operating Activities:
	Net Income (Loss)				$	30,809			$	(82,110	)
	Adjustments to reconcile net income (loss) to
	net cash provided by (used in) operating activities:
		Depreciation and amortization				7,347				7,992
		Amortization of beneficial conversion discount				-				25,380
		Accrued interest related to a convertible note				-				7,800
		Gain on shares issued for debt and accrued expenses				-				(5,580	)
		Changes in operating assets and liabilities:
			Accounts receivable			25,650				33,702
			Inventory			5,950				(11,160	)
			Prepaid expenses			(820	)			13,200
			Accounts payable and
			accrued expenses			(10,727	)			64,403
			Customer deposits			(37,417	)			(13,205	)
			Payroll taxes payable			1,707				3,283
		Total Adjustments				(8,310	)			125,815
		Net cash provided by  operating activities				22,499				43,705
Cash Flows from Financing Activities:
	Advances from/(repayments to) factor financing, net					5,154				(23,575	)
	Note and loan repayments					-				(11,151	)
	Capital lease financing repayments					(14,260	)			(8,887	)
	Decrease in due to officer					(6,000	)			-
		Net cash (used in) financing activities				(15,106	)			(43,613	)
Net increase in cash and cash equivalents						7,393				92
Cash and Cash Equivalents, Beginning of Period						19,162				10,623
Cash and Cash Equivalents, End of Period					$	26,555			$	10,715
Supplemental disclosures:
			Cash paid for interest expense		$	9,894			$	16,139
			Cash paid for income taxes		$	-			$	649
Non-cash financing and investing activities
	Conversion of convertible notes payable				$	-			$	60,320
	Note payable and accrued expenses
		exchanged for common stock			$	-			$	27,000
	Beneficial conversion feature on convertible note				$	-			$	25,380

 

See accompanying notes to condensed consolidated financial statements

 

6

AmpliTech Group, Inc.
Notes To Condensed Consolidated Financial Statements
For The Three Months Ended March 31, 2015 and 2014 (Unaudited)

(1) Organization and Basis of Presentation

 

Basis of Presentation

 

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 considered necessary for a fair presentation have been included.

 

The results of operations for the three months ended March 31, 2015 are not necessarily indicative of the results to be expected for the year ending December 31, 2015. 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, 2014 and 2013 included in Form 10-K filed with the SEC.

 

Going Concern Uncertainty

 

The accompanying financial statements have been prepared in conformity with generally accepted accounting principles in the United States of America, which contemplates the Company continuing as a going concern. As of March 31, 2015, the Company had a working capital surplus of $8,011 and an accumulated deficit of $1,556,231. Additionally, there was a net income of $30,809 for the three months ended March 31, 2015 and a net loss of $770,070 for the year ended December 31, 2014. These factors raise substantial doubt as to the Company’s ability of to continue as a going concern. The Company will require additional funding to finance the growth of its current and expected future operations as well as to achieve its strategic objectives. The Company plans to improve operations by pursuing new customers, developing new products and expanding its distribution channels, both domestically and internationally, in order to increase sales and improve cash flow. However, there is no assurance that the Company will be successful in accomplishing these objectives.

 

(2) Summary of Significant Accounting Policies

 

Basis of Accounting

 

The accompanying financial statements have been prepared using the accrual basis of accounting.

 

Principles of Consolidation

 

The accompanying consolidated financial statements include the accounts of the Company and its subsidiaries. All intercompany accounts and transactions have been eliminated in consolidation.

 

Cash and Cash Equivalents

 

The Company considers deposits that can be redeemed on demand and investments that have original maturities of less than three months, when purchased, to be cash equivalents. As of March 31, 2015 and 2014 the Company’s cash and cash equivalents were deposited primarily in one financial institution.

 

7

 

AmpliTech Group, Inc.

 Notes To Condensed Consolidated Financial Statements

 For The Three Months Ended March 31, 2015 and 2014 (Unaudited)

 

Allowance for Doubtful Accounts

 

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 $0 and $8,385 has been recorded at March 31, 2015 and 2014, respectively.

 

Depreciation and Amortization

 

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.

 

Income Taxes

 

The Company accounts for income taxes under the provisions of Financial Accounting Standards Board’s (“FASB”) Accounting Standards Codification (“ASC”) 740 “Income Tax”. ASC 740 requires the recognition of 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 Company has adopted the provisions of FASB ASC 740-10-05 “Accounting for Uncertainty in Income Taxes”. The ASC clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements. 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 March 31, 2015 and 2014, the Company had no material unrecognized tax benefits.

 

Earnings (Loss)Per Share

 

Basic earnings (loss) per share (“EPS”) is determined by dividing net earnings (loss) by the weighted average number of common shares outstanding during the period. Diluted EPS is determined by dividing net earnings (loss) 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 March 31, 2015 and 2014 there were 39,643,290 and 0, respectively potential dilutive common shares that needed to be considered as common share equivalents.

 

Inventory Obsolescence

 

Inventory quantities and related values are analyzed at the end of each fiscal quarter to determine those items that are slow moving or 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.

 

8

 

AmpliTech Group, Inc.

 Notes To Condensed Consolidated Financial Statements

 For The Three Months Ended March 31, 2015 and 2014 (Unaudited)

 

Revenue Recognition

 

Revenues and costs of revenues are recognized during the period in which the products are shipped. The Company applies the provisions of FASB Accounting Standards Codification (“ASC”) 605-10, Revenue Recognition in Financial Statements ASC 605-10, which provides guidance on the recognition, presentation, and disclosure of revenue in financial statements filed with the SEC. ASC 605-10 outlines the basic criteria that must be met to recognize revenue and provides guidance for disclosure related to revenue recognition policies. In general, the Company recognizes revenue for sale of products when (i) persuasive evidence of an arrangement exists, (ii) delivery has occurred, (iii) the fee is fixed or determinable, and (iv) the collectability is reasonably assured.

 

The Company’s sources of revenue are from the sale of various component amplifiers. Revenue is recognizes upon shipment of such products. The Company offers a 100% satisfaction guarantee against defects for 90 days after the sale of their product except for a few circumstances. There are no maintenance or service contracts related to any product sale.

 

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.

 

Recent Accounting Pronouncements

 

Management does not believe that any recently issued, but not yet effective, accounting standard if currently adopted would have a material effect on the accompanying consolidated financial statements.

 

Fair Value of Assets and Liabilities

 

The Company’s financial instruments consist of convertible notes payable, loans payable and a derivative liability. The Company believes all of the financial instruments’ recorded values approximate their fair values because of their nature and respective durations.

 

The Company complies with the provisions of ASC 820-10, “Fair Value Measurements and Disclosures.” ASC 820-10 relates to financial assets and financial liabilities. ASC 820-10 defines fair value, establishes a framework for measuring fair value in accounting principles generally accepted in the United States of America (GAAP), and expands disclosures about fair value measurements. The provisions of this standard apply to other accounting pronouncements that require or permit fair value measurements and are to be applied prospectively with limited exceptions.

 

ASC 820-10 defines fair value 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. ASC 820-10 establishes a fair value hierarchy that distinguishes between (1) market participant assumptions developed based on market data obtained from independent sources (observable inputs) and (2) an entity’s own assumptions, about market participant assumptions, that are developed based on the best information available in the circumstances (unobservable inputs). The fair value hierarchy consists of three broad levels, which gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). The three levels of the fair value hierarchy under ASC 820-10 are described below:

 

9

 

AmpliTech Group, Inc.

 Notes To Condensed Consolidated Financial Statements

  For The Three Months Ended March 31, 2015 and 2014 (Unaudited)

 

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.

 

Application of Valuation Hierarchy

 

A financial instrument's categorization within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement. As such, the Company assessed that the fair value of cash, accounts receivable, prepaid expenses, accounts payable and accrued expenses, customer deposits, convertible notes payable, notes payable, factor financing, current portion of capital leases and loans payable and due to officer approximate their carrying values due to their short-term nature.

 

(3) Inventory

 

Inventory, which consists primarily of raw materials and finished goods, is stated at the lower of cost (first-in, first-out basis) or market (net realizable value). The inventory value at March 31, 2015 and December 31, 2014 was as follows:

 

		March 31,				December 31,
		2015				2014
Raw Materials		$	137,278			$	129,852
Work-in Progress			19,186				33,106
Finished Goods			79,730				75,186
Engineering Models			3,726				3,726
Subtotal		$	239,920			$	241,870
Less: Reserve for Obsolescence			(82,000	)			(78,000	)
Total		$	157,920			$	163,870

 

10

 

AmpliTech Group, Inc.

 Notes To Condensed Consolidated Financial Statements

For The Three Months Ended March 31, 2015 and 2014 (Unaudited)

 

 (4) Notes Payable

 

Notes Payable at March 31, 2015 includes a demand note totaling $26,958 from one corporation, with an interest rate of 8% per annum. Accrued interest related to this note was $6,236 and interest expense for the three months ended March 31, 2015 was $486.

 

(5) Factor Financing

 

The outstanding balance owed to the Factor at March 31, 2015 for financed accounts receivable was $73,990. Interest expense and related costs paid to the Factor for the three months ended March 31, 2015 was $5,395.

 

(6) Capital Lease

 

AmpliTech entered into a thirty-six month lease agreement to finance certain lab equipment in May 2012 with a bargain purchase option of $1. As such, the Company has accounted for this transaction as a capital lease, assuming an imputed 6% annual interest rate. Future lease payments related to this capital lease as of March 31, 2015 are as follows;

 

Total rental payments		$	9,698
Less: Discount at 6%			(72	)
Principal balance		$	9,626

 

 Future twelve months discounted principal payments as of March 31, 2015 are as follows;

 

2015		$	9,626
Total		$	9,626

 

(7) Due to Officer

 

On August 1, 2014, the Chief Executive Officer, who is also the Company’s majority shareholder, paid off $56,291 of the SBA- backed working capital loan balance of on behalf of the Company. The $56,291 is payable on demand and accrues interest at a rate of 8% per annum. Payments will be made for the amount demanded plus accrued interest on the unpaid balance through the demand date. As of March 31, 2015, the Company repaid $16,000 of principal plus accrued interest of approximately $2,431, leaving a balance of $40,291 in principal and $0 in accrued interest.

 

 (8) Capital

 

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.

 

11

 

AmpliTech Group, Inc.

 Notes To Condensed Consolidated Financial Statements

 For The Three Months Ended March 31, 2015 and 2014 (Unaudited)

 

In July 2013, the Board of Directors of the Company designated 140,000 shares of Preferred Stock as Series A Convertible Preferred Stock (or “Series A”). Furthermore, each share of Series A is convertible into 100 shares of common stock at any time after issuance and the holder of each share of Series A is entitled to 100 votes when the vote of holders of the Company’s common stock is sought. In January 2015, the Board of Directors of the Company increased the number of Series A designated from 140,000 to 401,000.

 

In April 2015, the Board of Directors of the Company designated 75,000 shares of Preferred Stock as Series B Convertible Preferred Stock (or “Series B”). The Series B shares are convertible into common stock at a conversion rate of one Series B share for 289 common shares. In addition, a holder of Series B Preferred Stock shall not be entitled to have any voting rights and shall hold a liquidation preference junior to a holder of Series A shares and pari passu with common shareholders.

 

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.

 

During the three months ending March 31, 2015, no shares of common stock were issued.

 

(9) Subsequent Events

 

In April 2015, the Board of Directors of the Company designated 75,000 shares of Preferred Stock as Series B Convertible Preferred Stock (or “Series B”). The holder of Series B Preferred Stock shall not be entitled to have any voting rights.

 

On April 28, 2015, the Company executed a Securities Purchase Agreement pursuant to which it agreed to sell an aggregate of 75,000 shares of Series B Convertible Preferred Stock to a private investment firm for a total purchase price of $500,000. The 75,000 Series B stock is convertible into 21,975,000 shares of common stock. The first installment of $166,667 is expected in May 2015.

 

12

 

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 contains 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

 

We design, engineer and assemble micro-wave component based amplifiers that meet individual customer’s specifications. Our products consists of Radio Frequency (RF) amplifiers and related subsystems, operating at multiple frequencies from 50kHz to 44GHz, including Low Noise Amplifiers, Medium Power Amplifiers, oscillators, filters, and custom assemblies designs. 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.

 

Recent Developments

 

In April 2015, the Board of Directors of the Company designated 75,000 shares of Preferred Stock as Series B Convertible Preferred Stock (or “Series B”). The Series B shares are convertible into common stock at a conversion rate of one Series B share for 289 common shares. In addition, a holder of Series B Preferred Stock shall not be entitled to have any voting rights and shall hold a liquidation preference junior to a holder of Series A shares and pari passu with common shareholders.

 

On April 28, 2015, the Company executed a Securities Purchase Agreement pursuant to which it agreed to sell an aggregate of 75,000 shares of Series B Convertible Preferred Stock to a private investment firm for a total purchase price of $500,000. The 75,000 Series B stock is convertible into 21,975,000 shares of common stock. The first installment of $166,667 is expected in May 2015. 

 

Emerging Growth Company Status

 

We are an “emerging growth company,” as defined in the JOBS Act. For as long as we are an “emerging growth company,” we may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not “emerging growth companies,” including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404(b) of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, and exemptions from the requirements of holding advisory “say-on-pay” votes on executive compensation and shareholder advisory votes on golden parachute compensation.

 

Under the JOBS Act, we will remain an “emerging growth company” until the earliest of:

 

	·	the last day of the fiscal year during which we have total annual gross revenues of $1 billion or more;
	·	the last day of the fiscal year following the fifth anniversary of the completion of this offering;
	·	the date on which we have, during the previous three-year period, issued more than $1 billion in non-convertible debt; and
	·	the date on which we are deemed to be a “large accelerated filer” under the Securities Exchange Act of 1934, or the Exchange Act. We will qualify as a large accelerated filer as of the first day of the first fiscal year after we have (i) more than $700 million in outstanding common equity held by our non-affiliates and (ii) been public for at least 12 months. The value of our outstanding common equity will be measured each year on the last day of our second fiscal quarter.

 

13

 

The Section 107 of the JOBS Act provides that we may elect to utilize the extended transition period for complying with new or revised accounting standards and such election is irrevocable if made. As such, we have made the election to use the extended transition period for complying with new or revised accounting standards under Section 102(b)(1) of the JOBS Act.

 

Results of Operations

 

For The Three Months Ended March 31, 2015 and March 31, 2014

 

Revenues

 

Sales increased by $24,576 or approximately 7%, when comparing sales for the three months ended March 31, 2015 of $348,452 to sales for the three months ended March 31, 2014 of $323,876. This increase was directly related to an increase in production capacity that resulted from more efficient outsourcing of assembly with respect to similar sales orders in 2014.

 

Cost of Goods Sold and Gross Profit

 

Cost of goods sold as a percentage of sales decreased by $28,524 or 16%. This decrease is the direct result of fulfilling the requirements on a significant domestic sales order with an overall significantly lower gross margin. This resulted in a corresponding 34% increase in gross profit as a percentage of sales, or $53,100, when comparing the first three months of 2015 gross profit of $207,179, to the first three months of 2014 gross profit of $154,079.

 

General and Administrative Expenses

 

General and administrative expenses decreased from $188,426 for the first three months of 2014 compared to $166,476 for the first three months of 2015, a decrease of $21,950 or approximately 11%. This resulted from decreases in various general and administrative expenses in both the parent company and operating subsidiary.

 

Income (Loss) From Operations

 

As a result of the above, the Company had a net income from operations of $40,703 for the three months ended March 31, 2015 compared to a loss from operations of $34,347 for the three months ended March 31, 2014, an overall increase of $75,050 or approximately 218%.

 

Other Income (Expenses)

 

Interest expense decreased from $53,343 for the first three months of 2014 compared to $9,894 for the first three months of 2015, a decrease of $43,449 or approximately 81%. The decrease is primarily due to the extinguishment of convertible debt interest in 2014.

 

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Liquidity and Capital Resources

 

We have historically financed our operations by the issuance of convertible promissory notes, debt from third party lenders, 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 March 31, 2015, we had $26,555 in cash and cash equivalents compared to $19,162 in cash and cash equivalents as of December 31, 2014. As of December 31, 2014 and March 31, 2015 we had a working capital deficit of $30,145 and working capital of $8,011, respectively. We had a stockholders’ equity of $91,073 at December 31, 2014 and stockholder’s equity of $121,882 at March 31, 2015.

 

Net cash provided by operating activities was $22,499 for the three months ended March 31, 2015. The net cash used in financing activities for the three months ended March 31, 2015 was $15,106 which results primarily from the repayment of the officer’s loan and the financed capital lease.

 

We intend to finance our internal growth with cash on hand, cash provided from operations, borrowings, debt or equity offerings, or some combination thereof. We are expecting to receive $500,000 from a private investment firm in 2015. We believe that this investment plus our cash provided from operations and cash on hand will provide sufficient working capital to fund our operations for the next twelve months.

 

Going Concern

 

The accompanying financial statements have been prepared in conformity with generally accepted accounting principles in the United States of America, which contemplates the Company continuing as a going concern. As of March 31, 2015, the Company had working capital of only $8,011 and Stockholders’ Equity of only $121,882. Additionally, there was a net loss of $770,070 for the year ended December 31, 2014. These factors raise substantial doubt as to the Company’s ability to continue as a going concern. However, the Company hopes to improve its financial condition by raising working capital from the issuance of additional equity or debt instruments. Also, the Company plans to improve operations by pursuing new customers, developing new products and expanding its distribution channels, both domestically and internationally, in order to increase sales and improve cash flow. However, there is no assurance that the Company will be successful in accomplishing these objectives. The financial statements do not include any adjustments that might be necessary should the Company be unable to continue as a going concern.

 

Critical Accounting Policies, Estimates and Assumptions

 

The SEC defines critical accounting policies as those that are, in management'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.

 

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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Basis of Accounting

 

The accompanying consolidated financial statements have been prepared using the accrual basis of accounting.

 

Principles of Consolidation

 

The accompanying consolidated financial statements include the accounts of the Company and its subsidiaries. All intercompany accounts and transactions have been eliminated.

 

Cash and Cash Equivalents

 

The Company considers deposits that can be redeemed on demand and investments that have original maturities of less than three months, when purchased, to be cash equivalents. Company’s cash and cash equivalents were deposited primarily in one financial institution.

 

Allowance for Doubtful Accounts

 

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.

 

Depreciation and Amortization

 

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. The Company uses other depreciation methods (generally, accelerated depreciation methods) for tax purposes where appropriate. 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.

 

Income Taxes

 

The Company accounts for income taxes under the provisions of Financial Accounting Standards Board’s (“FASB”) Accounting Standards Codification (“ASC”) 740 “Income Tax”. ASC 740 requires the recognition of 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 Company has adopted the provisions of FASB ASC 740-10-05 “Accounting for Uncertainty in Income Taxes”. The ASC clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements. 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.

 

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Earnings (Loss)Per Share

 

Basic earnings (loss) per share (“EPS”) is determined by dividing the net earnings (loss) by the weighted-average number of shares of common shares outstanding during the period. Diluted EPS is determined by dividing net earnings (loss) 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(such as stock options and convertible securities) outstanding under the treasury stock method. There were no dilutive financial instruments issued or outstanding for the periods presented.

  

Inventory Obsolescence

 

Inventory quantities and related values are analyzed at the end of each fiscal quarter to determine those items that are slow moving or 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.

 

Revenue Recognition

 

Revenues and costs of revenues are recognized during the period in which the products are shipped. The Company applies the provisions of FASB Accounting Standards Codification (“ASC”) 605-10, Revenue Recognition in Financial Statements ASC 605-10, which provides guidance on the recognition, presentation, and disclosure of revenue in financial statements filed with the SEC. ASC 605-10 outlines the basic criteria that must be met to recognize revenue and provides guidance for disclosure related to revenue recognition policies. In general, the Company recognizes revenue for sale of products when (i) persuasive evidence of an arrangement exists, (ii) delivery has occurred, (iii) the fee is fixed or determinable, and (iv) the collectability is reasonably assured.

 

The Company’s sources of revenue are from the sale of various component amplifiers. Revenue is recognizes upon shipment of such products. The Company offers a 100% satisfaction guarantee against defects for 90 days after the sale of their product except for a few circumstances. There are no maintenance or service contracts related to any product sale.

 

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.

 

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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 the evaluation as of March 31, 2015, our chief executive officer and chief financial officer concluded that our disclosure controls and procedures were 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.

 

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
31.1		Rule 13a-14(a)/ 15d-14(a) Certification of Principal Executive Officer
31.2		Rule 13a-14(a)/ 15d-14(a) Certification of Principal Financial Officer
32.1		Section 1350 Certification of Principal Executive Officer
32.2		Section 1350 Certification of Principal Financial Officer
101. INS		XBRL Instance Document
101. SCH		XBRL Taxonomy Extension Schema Document
101. CAL		XBRL Taxonomy Extension Calculation Linkbase Document
101. DEF		XBRL Taxonomy Extension Definition Linkbase Document
101. LAB		XBRL Taxonomy Extension Label Linkbase Document
101. PRE		XBRL Taxonomy Extension Presentation Linkbase Document

 

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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.
Dated: May 14, 2015	By:	/s/ Fawad Maqbool
		Fawad Maqbool
		President and Chief Executive Officer (Principal Executive Officer)

 

Dated: May 14, 2015	By:	/s/ Louisa Sanfratello
		Louisa Sanfratello Chief Financial Officer (Principal Financial Officer)

 

 

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