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 March 31, 2021

 

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 Johnson Avenue

Bohemia, NY 11716

(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 accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act:

 

Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated filer	☒	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 May 12 2021, the registrant had 9,343,671 shares of common stock, par value $0.001 per share, issued and outstanding.

 

  

AMPLITECH GROUP, INC.

 

QUARTERLY REPORT ON FORM 10-Q

March 31, 2021

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		29
Item 3.	Quantitative and Qualitative Disclosures About Market Risk		33
Item 4.	Controls and Procedures		33
PART II - OTHER INFORMATION
Item 1.	Legal Proceedings		34
Item 1A.	Risk Factors		34
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds		34
Item 3.	Default Upon Senior Securities		34
Item 4.	Mine Safety Disclosures		34
Item 5.	Other Information		34
Item 6.	Exhibits		35
SIGNATURES			36

  

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Table of Contents

  

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” are to the combined business of AmpliTech Group, Inc. and its consolidated subsidiaries, AmpliTech, Inc. and Specialty Microwave.

 

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.

 

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PART I – FINANCIAL INFORMATION

   

Item 1. Financial Statements

  

AmpliTech Group, Inc.

Condensed Consolidated  Balance Sheets

  

		March 31,				December 31,
		2021				2020
		(Unaudited)
Assets
Current Assets
Cash and cash equivalents		$	9,855,238			$	199,536
Accounts receivable, net			421,455				357,055
Inventories, net			790,296				517,338
Prepaid expenses			212,062				322,124
Total Current Assets			11,279,051				1,396,053
Property and equipment, net			290,065				289,251
Right of use operating lease assets			321,549				347,156
Intangible assets, net			622,089				632,209
Goodwill			120,136				120,136
Security deposits			26,707				26,707
Total Assets		$	12,659,597			$	2,811,512
Liabilities and Stockholders' Equity
Current Liabilities
Accounts payable and accrued expenses			348,438			$	113,541
Customer deposits			149,870				15,300
Current portion of financing lease			32,478				32,084
Current portion of operating lease			84,991				87,930
Current portion of notes payable			213,357				205,592
Line of credit			-				200,000
Total Current Liabilities			829,134				654,447
Long Term Liabilities
Finance lease, net of current portion			42,890				51,159
Operating lease, net of current portion			244,845				267,050
Notes payable, net of current portion			1,346,180				1,398,574
Total Liabilities			2,463,049				2,371,230
Commitments and Contingencies			-				-
Stockholders' Equity
Series A convertible preferred stock, par			-				-
value $0.001, 1,000,000 shares authorized,
0 issued and outstanding
Common Stock, par value $0.001, 500,000,000 shares authorized,
6,579,771 and 4,839,448 shares issued and outstanding, respectively			6,580				4,839
Additional paid-in capital			12,938,271				2,303,815
Accumulated deficit			(2,748,303	)			(1,868,372	)
Total Stockholders' Equity			10,196,548				440,282
Total Liabilities and
Stockholders' Equity		$	12,659,597			$	2,811,512

 

                        See accompanying notes to the condensed consolidated financial statements

 

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AmpliTech Group, Inc.

Condensed Consolidated Statements of Operations

(Unaudited)

 

		For The Three Months Ended
		March 31,				March 31,
		2021				2020
Revenue		$	472,974			$	755,948
Cost of goods sold			417,993				516,634
Gross Profit			54,981				239,314
Selling, general and administrative expense			908,554				538,561
Loss From Operations			(853,573	)			(299,247	)
Other Expenses
Interest expense, net			(26,358	)			(23,714	)
Loss Before Income Taxes			(879,931	)			(322,961	)
Provision For Income Taxes			-				-
Net Loss		$	(879,931	)		$	(322,961	)
Net Loss Per Share;
Basic		($0.16)				($0.13)
Diluted		($0.16)				($0.13)
Weighted Average Shares Outstanding;
Basic			5,568,350				2,476,816
Diluted			5,568,350				2,476,816

 

See accompanying notes to the condensed consolidated financial statements

 

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AmpliTech Group, Inc.

Condensed Consolidated Statements of Cash Flows

(Unaudited)

 

		For The Three				For The Three
		Months Ended				Months Ended
		March 31,				March 31,
Cash Flows from Operating Activities:		2021				2020
Net Loss		$	(879,931	)		$	(322,961	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization			24,306				21,167
Amortization of prepaid consulting			113,742				32,648
Amortization of right-of-use operating lease asset			25,607				32,753
Stock based compensation			54,000				11,847
Changes in Operating Assets and Liabilities:
Accounts receivable			(64,400	)			131,468
Inventories			(272,958	)			1,488
Prepaid expenses			28,542				(25,704	)
Accounts payable and accrued expenses			202,675				80,724
Operating lease liability			(25,144	)			(31,635	)
Customer deposits			134,570				(7,990	)
Net cash used in operating activities			(658,991	)			(76,195	)
Cash Flows from Investing Activities:
Purchase of equipment			(15,000	)			(8,088	)
Net cash used in investing activities			(15,000	)			(8,088	)
Cash Flows from Financing Activities:
Proceeds received from private placement, net of expenses			9,449,597				-
Proceeds received from exercise of warrants			1,132,600				-
Repayment of line of credit, net			(200,000	)			-
Repayments on finance lease			(7,875	)			(7,633	)
Repayment of notes payable			(44,629	)			(36,549	)
Net cash provided by financing activities			10,329,693				(44,182	)
Net change in cash and cash equivalents			9,655,702				(128,465	)
Cash and Cash Equivalents, Beginning of Period			199,536				574,712
Cash and Cash Equivalents, End of Period		$	9,855,238			$	446,247
Supplemental disclosures:
Cash paid for interest expense		$	25,550			$	23,714
Cash paid for income taxes		$	-			$	-
Non-Cash Investing and Financing Activities
Promissory note on equipment		$	-			$	58,192
Finance agreement in exchange for prepaid assets		$	32,222			$	-

   

See accompanying notes to the condensed consolidated financial statements

 

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Amplitech Group, Inc.

Condensed Consolidated Statements of Stockholders' Equity

(Unaudited)

 

		For the three months ended March 31, 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				2,454,317			$	2,454			$	24,480			$	1,909,551			$	(842,813	)		$	1,093,673
Stock based compensation			-				-				-				-				-				11,847				-				11,847
Net loss for the three months ended March 31, 2020			-				-				-				-				-				-				(322,961	)			(322,961	)
Balance, March 31, 2020			1,000			$	1				2,454,317			$	2,454			$	24,480			$	1,921,398			$	(1,165,774	)		$	782,559
		For the three months ended March 31, 2021
Balance, December 31, 2020			-			$	-				4,839,448			$	4,839			$	-			$	2,303,815			$	(1,868,372	)		$	440,282
Common stock issued in private placement			-				-				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	)							-
Common stock issued upon exercise of warrants			-				-				161,800				162				-				1,132,438								1,132,600
Stock based compensation																							54,000								54,000
Net loss for the three months ended March 31, 2021			-				-				-				-				-				-			$	(879,931	)			(879,931	)
Balance, March 31, 2021			-			$	-				6,579,771			$	6,580			$	-			$	12,938,271			$	(2,748,303	)		$	10,196,548

 

See accompanying notes to the condensed consolidated financial statements

 

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AmpliTech Group, Inc.

Notes To Condensed Consolidated Financial Statements

For The Three Months Ended March 31, 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 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.

 

On February 17, 2021, Amplitech 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.

 

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), 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 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.

 

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AmpliTech Group, Inc.

 Notes To Condensed Consolidated Financial Statements

For The Three Months Ended March 31, 2021 and 2020

 

The COVID-19 Pandemic

 

The COVID-19 pandemic has caused significant worldwide disruption throughout the course of 2020 and into 2021 and resulted in the imposition of various public and private sector measures to try to contain the virus, on a local, state, national and international level, such as travel bans and restrictions, quarantines, shelter-in-place/stay-at-home and social distancing orders, and shutdowns. These measures have temporarily impacted our workforce and operations and some 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 impact our ability to meet customer demand, and thus decrease revenues into 2021 and negatively impact our financial condition and results of operations.

 

(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 months ended March 31, 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.

 

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AmpliTech Group, Inc.

Notes To Condensed Consolidated Financial Statements

For The Three Months Ended March 31, 2021 and 2020

 

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.

 

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.

 

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, 2021, the Company’s cash and cash equivalents were deposited in two financial institutions.

 

Accounts Receivable

 

Trade accounts receivable 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 $125,400 has been recorded at March 31, 2021 and December 31, 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.

 

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AmpliTech Group, Inc.

Notes To Condensed Consolidated Financial Statements

For The Three Months Ended March 31, 2021 and 2020

 

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
Machinery and equipment	5 to 10 years	Straight-line
Computer equipment	3 to 7 years	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; 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.

 

Goodwill and Intangible Assets

 

Intangibles assets include goodwill, trademarks, intellectual property and customer base acquired through the asset purchase of Specialty Microwave. 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.

 

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AmpliTech Group, Inc.

Notes To Condensed Consolidated Financial Statements

For The Three Months Ended March 31, 2021 and 2020

 

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.

 

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, our 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.

 

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AmpliTech Group, Inc.

Notes To Condensed Consolidated Financial Statements

For The Three Months Ended March 31, 2021 and 2020

 

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 March 31, 2021 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.

 

Reserves are recorded as a reduction in net sales and are not considered material to our condensed consolidated statements of income for the three months ended March 31, 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. Research and development costs for the three months ended March 31, 2021 and 2020 were $ 7,229 and $ 20,026.

 

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 March 31, 2021, the Company had no material unrecognized tax benefits.

 

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AmpliTech Group, Inc.

Notes To Condensed Consolidated Financial Statements

For The Three Months Ended March 31, 2021 and 2020

 

 

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 March 31, 2021 and 2020, there were 1,415,342 and 2,155,000, respectively potentially dilutive shares that need to be considered as common share equivalents.

 

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 March 31, 2021:
Basic EPS		$	(879,931	)			5,568,350			$	(0.16	)
Effect of dilutive stock options, warrants and series A shares
Diluted EPS		$	(879,931	)			5,568,350			$	(0.16	)
For the three months ended March 31, 2020:
Basic EPS		$	(322,961	)			2,476,816			$	(0.13	)
Effect of dilutive stock options, warrants and series A shares
Diluted EPS		$	(322,961	)			2,476,816			$	(0.13	)

 

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AmpliTech Group, Inc.

Notes To Condensed Consolidated Financial Statements

For The Three Months Ended March 31, 2021 and 2020

 

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:

 

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.

 

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. Accounts at each institution are insured by the Federal Deposit Insurance Corporation (“FDIC”) up to $250,000. At March 31, 2021 and December 31, 2020, the Company had $8,855,238 and $0 in excess of the FDIC insured limit, respectively.

 

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AmpliTech Group, Inc.

Notes To Condensed Consolidated Financial Statements

For The Three Months Ended March 31, 2021 and 2020

 

Recent Accounting Pronouncements

 

In August 2018, the FASB issued ASU 2018-13, “Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement.” ASU 2018-13 modifies the fair value measurements disclosures with the primary focus to improve effectiveness of disclosures in the notes to the financial statements that is most important to the users. The new guidance modifies the required disclosures related to the valuation techniques and inputs used, uncertainty in measurement, and changes in measurements applied. The adoption of this standard became effective for us on January 1, 2020 and did not have a material impact on our consolidated financial statements.

 

In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes, which is intended to simplify various aspects related to accounting for income taxes. This ASU removes certain exceptions to the general principles in Topic 740 and clarifies and amends existing guidance to improve consistent application. This 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 effective for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years, with an early adoption permitted. The adoption of this standard became effective for us on January 1, 2021 and did not 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.

 

(3) Revenues

 

The following table presents sales disaggregated based on geographic regions and for the three months ended:

 

		March 31, 2021				March 31, 2020
Domestic sales		$	403,510			$	620,203
International sales			69,464				135,745
Total sales		$	472,974			$	755,948

 

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AmpliTech Group, Inc.

Notes To Condensed Consolidated Financial Statements

For The Three Months Ended March 31, 2021 and 2020

 

(4) Inventories

 

The inventory value at March 31, 2021 and December 31, 2020 were as follows:

 

		March 31,				December 31,
		2021				2020
Raw Materials		$	401,636			$	325,251
Work-in Progress			310,602				129,882
Finished Goods			141,332				128,479
Engineering Models			3,726				3,726
Subtotal		$	857,296			$	587,338
Less: Reserve for Obsolescence			(67,000	)			(70,000	)
Total		$	790,296			$	517,338

  

(5) Property and Equipment

 

Property and Equipment consisted of the following at March 31, 2021 and December 31, 2020:

 

		March 31,				December 31,
		2021				2020
Lab Equipment		$	880,414			$	865,414
Manufacturing Equipment			25,000				25,000
Automobiles			19,527				19,527
Furniture and Fixtures			36,165				36,165
Subtotal			961,106				946,106
Less: Accumulated Depreciation			(671,041	)			(656,855	)
Total		$	290,065			$	289,251

 

Depreciation expense for the three months ended March 31, 2021 and 2020 was $14,186 and $10,869 respectively.

 

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AmpliTech Group, Inc.

Notes To Condensed Consolidated Financial Statements

For The Three Months Ended March 31, 2021 and 2020

 

(6) Intangible Assets

 

Goodwill

 

The goodwill is related to the acquisition of Specialty Microwave Corp. on September 12, 2019 and 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 March 31, 2021, goodwill is valued at $120,136.

 

Other Intangible Assets

 

Intangible assets with an estimated useful life of fifteen years consisted of the following at March 31, 2021:

 

		Gross Carrying				Accumulated								Weighted
		Amount				Amortization				Net				Average Life
Trade name		$	70,233			$	-			$	70,233				Indefinite
Customer relationships			412,860				42,681				370,179				13.0
Intellectual Property			202,771				21,094				181,677				13.0
Total		$	685,864			$	63,775			$	622,089

   

Amortization expense for the years ended March 31, 2021 and 2020 was $10,120 and $10,298 respectively.

 

Annual amortization of intangible assets are as follows:

 

2021			30,922
2022			41,042
2023			41,042
2024			41,042
2025			41,042
Thereafter			356,766
		$	551,856

 

(7) Line of Credit

 

On November 20, 2020, AmpliTech entered into a business line of credit for $750,000 maturing on November 1, 2021. 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.

 

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AmpliTech Group, Inc.

Notes To Condensed Consolidated Financial Statements

For The Three Months Ended March 31, 2021 and 2020

 

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.

 

As of March 31, 2021, and December 31, 2020, the outstanding balance on the line of credit was $0 and $200,000, respectively.

 

(8) 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.

 

The following was included in our balance sheet as of March 31, 2021:

 

Operating leases		March 31,  2021
Assets
ROU operating lease assets		$	321,549
Liabilities
Current portion of operating lease		$	84,991
Operating lease, net of current portion		$	244,845
Total operating lease liabilities		$	329,836
Finance leases
Assets
Property and equipment, gross		$	157,184
Accumulated depreciation			(61,751	)
Property and equipment, net		$	95,433
Liabilities
Current portion of financing lease		$	32,478
Finance lease, net of current portion			42,890
Total operating lease liabilities		$	75,368

  

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AmpliTech Group, Inc.

Notes To Condensed Consolidated Financial Statements

For The Three Months Ended March 31, 2021 and 2020

 

The weighted average remaining lease term and weighted average discount rate at March 31, 2021 were as follows:

 

Weighted average remaining lease term (years)		March 31, 2021
Operating leases			3.61
Finance leases			2.25
Weighted average discount rate
Operating leases			6.29	%
Finance leases			4.89	%

 

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 March 31, 2021:

 

2021			28,334
2022			37,778
2023			18,889
Total lease payments			85,001
Less imputed interest			(4,375	)
Less sales tax			(5,258	)
Total lease obligations			75,368
Less current obligations			(32,478	)
Long-term lease obligations		$	42,890

 

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AmpliTech Group, Inc.

Notes To Condensed Consolidated Financial Statements

For The Three Months Ended March 31, 2021 and 2020

 

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.

 

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.

 

On November 27, 2019, the Company entered a 39-month agreement to lease an automobile with a monthly payment of $420

 

The following table reconciles future minimum operating lease payments to the discounted lease liability as of March 31, 2021:

 

2021			76,286
2022			104,497
2023			102,741
2024			79,948
2025			3,645
Total lease payments			367,117
Less imputed interest			(37,281	)
Total lease obligations			329,836
Less current obligations			(84,991	)
Long-term lease obligations		$	244,845

  

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AmpliTech Group, Inc.

Notes To Condensed Consolidated Financial Statements

For The Three Months Ended March 31, 2021 and 2020

 

(9) 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. 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 March 31, 2021, the balance of this promissory note was $354,832. Principal payments of $14,684 along with interest expense of $3,743 was paid during the three months ended March 31, 2021. 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. As of March 31, 2021, the balance of the loan was $889,777. Interest expense paid for the three months ended March 31, 2021 was $14,900. This loan is collateralized by all Company assets.

 

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”). The PPP Loan bears an interest at 1.00% per annum and will mature two years from the Disbursement Date. The Company plans to apply for PPP Loan forgiveness. The PPP Loan may be prepaid at any time prior to maturity with no prepayment penalties. Funds from the PPP Loan may only be used by the Company for 2020 payroll costs, mortgage interest payments, rent and utilities. This has helped to offset some of the adverse effects of this pandemic and allowed us to serve our customers at a reduced capacity but without experiencing any cancellation of our open orders. 

 

In addition, on September 12, 2019, the Company was approved for a $250,000 equipment leasing facility. 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 $ 1,736 at an interest rate of 5.26%. The balance as of March 31, 2021 was $33,256.
	·	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, 2021 was $19,411.
	·	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 March 31, 2021 was $30,061.

 

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AmpliTech Group, Inc.

Notes To Condensed Consolidated Financial Statements

For The Three Months Ended March 31, 2021 and 2020

 

Future principal payments over the term of the loans as of March 31, 2021 are as follows:

 

		Payments
2021			158,875
2022			453,950
2023			200,967
2024			186,035
2025			103,254
Thereafter			456,456
Total remaining payments		$	1,559,537

 

(10) 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.

 

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.

 

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AmpliTech Group, Inc.

Notes To Condensed Consolidated Financial Statements

For The Three Months Ended March 31, 2021 and 2020

 

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.

 

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AmpliTech Group, Inc.

Notes To Condensed Consolidated Financial Statements

For The Three Months Ended March 31, 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:

 

(a)

The Company will issue to Maxim or its designees 100,000 shares of the Company’s Common Stock (“Common Stock”) based on the following schedule:

 

	i.	27,500 restricted shares of Common Stock upon the execution of the Agreement implying a price per share of $0.10. These shares were valued on October 15, 2019 at $0.054 with a value of $29,920. The full amount of $29,920 was expensed as consulting fees in 2020 and the shares were issued on January 13, 2020.
	ii.	$54,000 payable in 22,500 restricted shares of Common Stock six months from the date of the Agreement implying a price per shares of $0.12. These shares were valued on October 15, 2019 at a price of $0.054 with a value of $24,480 and classified as common stock subscription payable as they had not been issued. On July 9, 2020, Maxim was issued 22,500 shares of common stock in exchange for the common stock subscription payable. The full amount of consulting fees was expensed in 2019.
	iii.	50,000 restricted shares of Common Stock 90 days following the placement agency agreement dated April 15, 2021. These shares were valued on October 15, 2019 at a price of $0.054 with a value of $54,000 and expensed as consulting fees for the three months ended March 31, 2021.

 

On July 9, 2020, Maxim was issued 22,500 shares of common stock in exchange for common stock payable.

 

On July 28, 2020, Wayne Homschek elected to exercise 150,000 of his cashless warrants and 102,632 of common stock was issued.

 

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AmpliTech Group, Inc.

Notes To Condensed Consolidated Financial Statements

For The Three Months Ended March 31, 2021 and 2020

 

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 March 31, 2021, $24,559 of expense had been recognized and $83,441 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 March 31, 2021, $18,000 of expense had been recognized and $9,000 remained as a prepaid to be amortized over nine months.

 

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.

 

On February 24, 2021, Maxim Group LLC exercised its overallotment option to purchase an additional 205,714 shares of common stock.

 

From March 8 to March 12, 2021, 161,800 warrants were exercised at a price of $7.00 and 161,800 shares of common stock were issued. Total cash proceeds received were $1,132,600.

 

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AmpliTech Group, Inc.

Notes To Condensed Consolidated Financial Statements

For The Three Months Ended March 31, 2021 and 2020

  

Options:

 

During 2014, the Company granted the chief executive officer of the Company an immediately exercisable option to purchase an aggregate of 400,000 shares of Series A at an exercise price of $0.0206 per share. There is no expiration date for this option and the related expense has been recorded in prior years. On November 20, 2020 cash proceeds of $8,241 were received and the options were exercised for 2,000,000 shares of common stock. As of December 31, 2020, there are no stock options outstanding.

 

Warrants:

 

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 and partially exercised its overallotment option to purchase 205,714 warrants at the public offering price.

 

From March 8 to March 12, 2021, 161,800 warrants were exercised at a price of $7.00 and 161,800 shares of common stock were issued.

 

						Weighted
		Number of				Average Exercise
		Warrants				Price ($)
Outstanding at December 31, 2020			-				-
Granted			1,577,142			$	7.00
Exercised			(161,800	)		$	(7.00	)
Expired			-				-
Outstanding at March 31, 2021			1,415,342			$	7.00

 

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AmpliTech Group, Inc.

Notes To Condensed Consolidated Financial Statements

For The Three Months Ended March 31, 2021 and 2020

 

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 common stock of the Company 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.

 

(11) Commitments and Contingencies: None applicable

 

(12) Subsequent events

 

In accordance with ASC 855-10, Company management reviewed all material events through the date of this report.

 

On April 1, 2021, the Company filed a shelf registration statement with the SEC allowing us the capability to offer and sell any combination of securities in one or more offerings up to a total aggregate offering of $200,000,000.

 

From April 1 through April 6, 2021, 48,900 warrants were exercised at an exercise price of $7.00. 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 April 15, 2021, the Company entered into an agreement with an independent contractor to assist in product sales and distribution. The independent contractor will be paid a 10% commission on any sales that result in new business to the Company. Amplitech will provide a two (2) month draw of $5,000 per month, against commission for booked sales. Draws will commence April 15, 2021 to June 15, 2021.

 

On April 20, 2021, SBA approved the PPP loan forgiveness of $232,200.

 

On May 10, 2021, the Company paid off the balance of the seven year term loan of $883,416 plus interest of $3,478.

 

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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 designs, engineers and assembles micro-wave component-based amplifiers that meet individual customer specifications. Our products consist of radio frequency (“RF”) amplifiers and related subsystems, operating at multiple frequencies from 50kHz to 44GHz, including low noise amplifiers, medium power amplifiers, cryogenic amplifiers, and custom assembly designs for the aerospace, governmental, defense and commercial satellite 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 both domestic and international customers.

 

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 our research and development initiative to expand our product line of low noise amplifiers to include our new 5G and wireless infrastructure products is progressing significantly. We have introduced new products that will be manufactured through our SMW acquisition. The combined engineering and manufacturing resources is expected to complement the new product development of subsystems for satellite, wireless, and 5G infrastructures, as well as advanced military and commercial market.

 

Corporate Information

 

Our principal executive offices are located at 620 Johnson Avenue Bohemia, NY 11716. 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 April 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.

 

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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.

 

Results of Operations

 

For the Three Months Ended March 31, 2021 and March 31, 2020

 

Revenues

 

Sales decreased from $755,948 for the three months ended March 31, 2020 to $472,974 for three months ended March 31, 2021, a decrease of $282,974 or approximately 37.4%. The Company was forced to shut down in January as a result of the COVID-19 virus which caused a disruption in our shipments and sales bookings. We are also still experiencing supply chain disruptions as well. While we have been able to continue our operations through a combination of work-from-home and social distancing policies implemented to protect employees, this has resulted in reduced shipments and our ability to meet customer demand temporarily for the first quarter of 2021. Our RFQ (Request for Quote) activity remains strong as our backlog is approximately $2,000,000 which should translate to increased sales in the 2^nd and 3^rd quarters of 2021.

 

Cost of Goods Sold and Gross Profit

 

Cost of Goods Sold decreased from $516,634 for the three months ended March 31, 2020 to $417,993 for the three months ended March 31, 2021, a decrease of $98,641 or approximately 19%. As a result, the gross profit was $54,981 for the three months ended March 31, 2021 compared to $239,314 for the three months ended March 31, 2020, a decrease of $184,333 or 77%. Gross profit as a percentage of sales decreased to 11.6% from 31.7%. These decreases are primarily a result in the decrease in sales as shipments were delayed due to the reduced work force availability at our sites, while still incurring fixed production costs. In addition, the Company has increased salary expense with the hiring of a director of operations to oversee production and to help meet company growth objectives.

  

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Selling, General and Administrative Expenses

 

Selling, general and administrative expenses increased to $908,554 for the three months ended March 31, 2021 from $538,561 for the three months ended March 31, 2020, an increase of $369,993 or approximately 68.0%. The Company experienced an increase of approximately $200,000 in parent company expenses, such as stock compensation, directors insurance, consulting fees, legal fees, accounting fees and regulatory filing fees relating to the public offering.  A majority of these expenses are non-recurring and related to the public offering.

 

Income (Loss) From Operations

 

As a result of the above, the Company has a loss from operations of $853,573 and $299,247 for the three months ended March 31, 2021 and 2020, respectively.

 

Other Income (Expenses)

 

Interest expense increased by $2,614 or 11.5%, when comparing the three months ended March 31, 2021 to the three months ended March 31, 2020. The increase was primarily due to the additional borrowing on the Company’s line of credit.

 

Net Income

 

The Company reported a net loss of $879,931 for the three months ended March 31, 2021, compared to a net loss of $322,961 for the three months ended March 31, 2020.

 

Liquidity and Capital Resources

 

Operating Activities

 

The net cash used in operating activities for the three months ended March 31, 2021 was $658,991, resulting primarily from the net loss and the operating changes in accounts receivable, inventories, and the operating lease liability.

 

The net cash used in operating activities for the three months ended March 31, 2020 was $76,915 resulting primarily from the net loss and operating changes in accounts receivable, accounts payable and accrued expenses and operating lease liability.

 

Investing Activities

  

The net cash used in investing activities for the three months ended March 31, 2021 and 2020 was $15,000 and $8,088, respectively for the purchase of equipment.

  

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Financing Activities

 

The net cash provided by financing activities for the three months ended March 31, 2021 was $10,329,693 which includes $10,582,197 million from new issuances of common stock and warrants, netted against the repayment of the line of credit.

 

The net cash used by financing activities for the three months ended March 31, 2020 was $44,182, a result primarily from the repayment of the lease financing and notes payable.

 

We have historically financed our operations by the issuance of 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, 2021, we had cash and cash equivalents of $9,855,238, a working capital of $10,449,916 and an accumulated deficit of $2,748,303.

 

As of December 31, 2020, we had cash and cash equivalents of $199,536, a working capital of $741,606 and an accumulated deficit of $1,868,372.

 

We intend to continue to finance our internal growth with cash on hand, cash provided from 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’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 three month period ended March 31, 2021, 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.

 

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 March 31, 2021, 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 April 15, 2021, the Company agreed to issue to certain 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. The exercise price of the warrants and the number of shares of the common stock issuable upon the exercise of the warrants will be 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 will be exercisable on a “cashless” basis in certain circumstances. The Company has agreed to file a prospectus supplement or registration statement on Form S-3 providing for the resale of the shares of common stock issuable upon the exercise of the warrants, at which point such warrants may no longer be exercised on a cashless basis

 

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 Link base Document
101. DEF		XBRL Taxonomy Extension Definition Link base Document
101. LAB		XBRL Taxonomy Extension Label Link base Document
101. PRE		XBRL Taxonomy Extension Presentation Link base 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.
Date: May 17, 2021	By:	/s/ Fawad Maqbool
		Fawad Maqbool
		President and Chief Executive Officer (Principal Executive Officer)

 

Date: May 17, 2021	By:	/s/ Louisa Sanfratello
		Louisa Sanfratello Chief Financial Officer (Principal Financial and Accounting Officer)

 

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