AmpliTech Group, Inc 10-Q for FY2021 Q3
AmpliTech Group, Inc. (AMPG)
About this 10-Q
AmpliTech Group, Inc filed this 10-Q on November 15, 2021, covering the quarter ended September 30, 2021 (FY2021 Q3).
Headline figures
Quarter ended September 30, 2021, as reported in this filing, compared with the same period a year earlier where the filing states it.
- Revenue
- $1.06M
- down 8.2% from $1.15M a year earlier
- Net loss
- $592.85K
- compared with net income of $17.01K a year earlier
- Diluted EPS
- -$0.06
- compared with $0.00 a year earlier
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM
For the quarterly period ended September 30, 2021
or
For the transition period from to
Commission File Number
(Exact name of registrant as specified in its charter) |
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(State or other jurisdiction of incorporation or organization) |
| (I.R.S. Employer Identification Number) |
(Address of principal executive offices) (Zip Code)
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(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class |
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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.
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).
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 | ☐ |
☒ | Smaller reporting company | ||
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| 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
As of November 11, 2021, the registrant had
AMPLITECH GROUP, INC.
QUARTERLY REPORT ON FORM 10-Q
September 30, 2021
TABLE OF CONTENTS
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Management’s Discussion and Analysis of Financial Condition and Results of Operations |
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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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| Table of Contents |
PART I – FINANCIAL INFORMATION
Item 1. Financial Statements
AmpliTech Group, Inc. | |||||||||
Condensed Consolidated Balance Sheets |
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Assets |
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Current Assets |
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Cash and cash equivalents |
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Accounts receivable, net |
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Marketable Securities, net |
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Inventories, net |
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Prepaid expenses |
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Total Current Assets |
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Property and equipment, net |
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Right of use operating lease assets |
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Intangible assets, net |
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Goodwill |
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Cost-method-investment |
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Security deposits |
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Total Assets |
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Liabilities and Stockholders' Equity |
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Current Liabilities |
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Accounts payable and accrued expenses |
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Customer deposits |
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Current portion of financing lease |
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Current portion of operating lease |
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Current portion of notes payable |
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Line of credit |
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Total Current Liabilities |
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Long Term Liabilities |
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Finance lease, net of current portion |
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Operating lease, net of current portion |
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Notes payable, net of current portion |
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Total Liabilities |
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Commitments and Contingencies |
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Stockholders' Equity |
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Series A convertible preferred stock, par |
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value $ |
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Common Stock, par value $ |
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issued and outstanding, respectively |
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Additional paid-in capital |
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Accumulated deficit |
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Total Stockholders' Equity |
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Total Liabilities and |
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Stockholders' Equity |
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See accompanying notes to the condensed consolidated financial statements
| 4 |
| Table of Contents |
AmpliTech Group, Inc. | ||||||||
Condensed Consolidated Statements of Operations | ||||||||
(Unaudited) |
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| Revenue |
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| Cost of goods sold |
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| Gross Profit |
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| Selling, general and administrative expense |
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| Income (Loss) From Operations |
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| Other Income (Expenses) |
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| Gain on extinguishment of debt |
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| Unrealized gain (loss) on investments |
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| Interest expense, net |
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Total other income (expense) |
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| Income (Loss) Before Income Taxes |
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| Provision For Income Taxes |
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| Net Income (Loss) |
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| Net Income (Loss) Per Share; |
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| Diluted |
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| Weighted Average Shares Outstanding; |
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See accompanying notes to the condensed consolidated financial statements
| 5 |
| Table of Contents |
AmpliTech Group, Inc. | ||||||||||
Condensed Consolidated Statements of Stockholders' Equity | ||||||||||
(Unaudited) | ||||||||||
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| For the three months ended September 30, 2021 |
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| Series A Convertible Preferred |
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Balance, June 30, 2021 |
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Stock based compensation |
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Net loss for the three months ended September 30, 2021 |
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| Balance, September 30, 2021 |
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Balance, December 31, 2020 |
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| Common stock issued in private placement |
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| Common stock issued in public offering |
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| Additional shares issued in connection to reverse split due to rounding |
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Common stock issued upon exercise of warrants |
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Stock based compensation |
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Net loss for the nine months ended September 30, 2021 |
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| Balance, September 30, 2021 |
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| 6 |
| Table of Contents |
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| For The Three Months Ended September 30, 2020 |
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| Series A Convertible Preferred |
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| Common Stock |
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| Total |
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| Par |
|
| Number of |
|
| Par |
|
| Stock |
|
| Paid-In |
|
| Accumulated |
|
| Stockholders' |
| ||||||||
|
| Shares |
|
| Value |
|
| Shares |
|
| Value |
|
| Payable |
|
| Capital |
|
| Deficit |
|
| Equity |
| ||||||||
|
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|
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|
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| ||||||||
Balance, June 30, 2020 |
|
|
|
| $ |
|
|
|
|
| $ |
|
| $ |
|
| $ |
|
| $ | ( | ) |
| $ |
| |||||||
|
|
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|
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|
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|
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|
|
|
|
|
|
|
|
|
|
|
|
Common Stock issued for common stock payable |
|
| - |
|
|
| - |
|
|
|
|
|
|
|
|
| ( | ) |
|
|
|
|
| - |
|
|
| - |
| |||
|
|
|
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|
|
|
|
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|
|
|
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|
|
|
|
|
|
|
|
Stock based compensation |
|
| - |
|
|
|
|
|
| - |
|
|
|
|
|
|
|
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|
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| ||||||
|
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|
|
|
Common stock issued upon exercise of warrants |
|
| - |
|
|
|
|
|
|
|
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|
|
|
|
|
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| ( | ) |
|
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| ||||||
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|
|
|
|
|
|
|
Net income for the three months ended September 30, 2020 |
|
| - |
|
|
|
|
|
| - |
|
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| ||||||
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|
|
|
| Balance, September 30, 2020 |
|
|
|
| $ |
|
|
|
|
| $ |
|
| $ |
|
| $ |
|
| $ | ( | ) |
| $ |
| |||||||
|
| For The Nine Months Ended September 30, 2020 |
| |||||||||||||||||||||||||||||
|
| Series A Convertible Preferred |
|
| Common Stock |
|
| Common |
|
| Additional |
|
|
|
| Total |
| |||||||||||||||
|
| Number of |
|
| Par |
|
| Number of |
|
| Par |
|
| Stock |
|
| Paid-In |
|
| Accumulated |
|
| Stockholders' |
| ||||||||
|
| Shares |
|
| Value |
|
| Shares |
|
| Value |
|
| Payable |
|
| Capital |
|
| Deficit |
|
| Equity |
| ||||||||
|
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| ||||||||
Balance, December 31, 2019 |
|
|
|
| $ |
|
|
|
|
| $ |
|
| $ |
|
| $ |
|
| $ | ( | ) |
| $ |
| |||||||
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|
|
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|
|
|
|
|
|
|
|
|
|
|
|
Common Stock issued for common stock payable |
|
| - |
|
|
| - |
|
|
|
|
|
|
|
|
| ( | ) |
|
|
|
|
| - |
|
|
| - |
| |||
|
|
|
|
|
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|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock based compensation |
|
| - |
|
|
| - |
|
|
| - |
|
|
|
|
|
|
|
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|
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| |||||
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|
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|
|
|
|
|
Common stock issued upon exercise of warrants |
|
| - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ( | ) |
|
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|
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|
| ||||||
|
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|
|
|
|
|
|
|
|
|
|
|
|
Net loss for the nine months ended September 30, 2020 |
|
| - |
|
|
|
|
|
| - |
|
|
|
|
|
|
|
|
|
|
|
| ( | ) |
|
| ( | ) | ||||
|
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|
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|
|
|
|
|
|
|
|
|
|
|
|
| Balance, September 30, 2020 |
|
|
|
| $ |
|
|
|
|
| $ |
|
| $ |
|
| $ |
|
| $ | ( | ) |
| $ |
| |||||||
See accompanying notes to the condensed consolidated financial statements
| 7 |
| Table of Contents |
AmpliTech Group, Inc. | ||
Condensed Consolidated Statements of Cash Flows | ||
(Unaudited) | ||
|
| For The Nine |
|
| For The Nine |
| ||
|
| Months Ended |
|
| Months Ended |
| ||
|
| September 30, |
|
| September 30, |
| ||
Cash Flows from Operating Activities: |
| 2021 |
|
| 2020 |
| ||
|
|
|
|
|
|
| ||
Net Loss |
| $ | ( | ) |
| $ | ( | ) |
Adjustments to reconcile net loss to |
|
|
|
|
|
|
|
|
net cash used in operating activities: |
|
|
|
|
|
|
|
|
Depreciation and amortization |
|
|
|
|
|
| ||
Amortization of prepaid consulting |
|
|
|
|
|
| ||
Amortization of right-of-use operating lease asset |
|
|
|
|
|
| ||
Stock based compensation |
|
|
|
|
|
| ||
Gain on forgiveness of debt |
|
| ( | ) |
|
|
| |
Change in fair value of marketable securities |
|
|
|
|
|
| ||
Loss on disposal of vehicle |
|
|
|
|
|
| ||
Changes in Operating Assets and Liabilities: |
|
|
|
|
|
|
|
|
Accounts receivable |
|
| ( | ) |
|
| ( | ) |
Inventories |
|
| ( | ) |
|
| ( | ) |
Prepaid expenses |
|
| ( | ) |
|
| ( | ) |
Accounts payable and accrued expenses |
|
|
|
|
|
| ||
Operating lease liability |
|
| ( | ) |
|
| ( | ) |
Customer deposits |
|
|
|
|
|
| ||
Net cash used in operating activities |
|
| ( | ) |
|
| ( | ) |
|
|
|
|
|
|
|
|
|
Cash Flows from Investing Activities: |
|
|
|
|
|
|
|
|
Purchase of equipment |
|
| ( | ) |
|
| ( | ) |
Purchase of short term investments, net |
|
| ( | ) |
|
|
| |
Purchase of cost method investment |
|
| ( | ) |
|
|
| |
Net cash used in investing activities |
|
| ( | ) |
|
| ( | ) |
|
|
|
|
|
|
|
|
|
Cash Flows from Financing Activities: |
|
|
|
|
|
|
|
|
Proceeds received from private placement, net of expenses |
|
|
|
|
|
| ||
Proceeds received from public offering, net of expenses |
|
|
|
|
|
|
| |
Proceeds received from exercise of warrants |
|
|
|
|
|
| ||
Proceeds from notes payable |
|
|
|
|
|
|
|
|
Proceeds (Repayment) of line of credit, net |
|
| ( | ) |
|
|
| |
Repayments on finance lease |
|
| ( | ) |
|
| ( | ) |
Proceeds from notes payable |
|
|
|
|
|
| ||
Repayment of notes payable |
|
| ( | ) |
|
| ( | ) |
Net cash provided by financing activities |
|
|
|
|
|
| ||
|
|
|
|
|
|
|
|
|
Net change in cash and cash equivalents |
|
|
|
|
| ( | ) | |
|
|
|
|
|
|
|
|
|
Cash and Cash Equivalents, Beginning of Period |
|
|
|
|
|
| ||
|
|
|
|
|
|
|
|
|
Cash and Cash Equivalents, End of Period |
| $ |
|
| $ |
| ||
|
|
|
|
|
|
|
|
|
Supplemental disclosures: |
|
|
|
|
|
|
|
|
Cash paid for interest expense |
| $ |
|
| $ |
| ||
Cash paid for income taxes |
| $ |
|
| $ |
| ||
|
|
|
|
|
|
|
|
|
Non-Cash Investing and Financing Activities |
|
|
|
|
|
|
|
|
Promissory note on equipment |
| $ |
|
| $ |
| ||
Finance agreement in exchange for prepaid assets |
| $ |
|
| $ |
| ||
Equipment received for prepaid assets |
| $ |
|
| $ |
| ||
Common stock issued for common stock payable |
| $ |
|
| $ |
| ||
Cashless exercise of warrants |
| $ |
|
| $ |
| ||
See accompanying notes to the condensed consolidated financial statements
| 8 |
| Table of Contents |
AmpliTech Group, Inc.
Notes To Condensed Consolidated Financial Statements
For The Nine Months Ended September 30, 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
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.
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
| 9 |
| Table of Contents |
AmpliTech Group, Inc.
Notes To Condensed Consolidated Financial Statements
For The Nine Months Ended September 30, 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 and nine months ended September 30, 2021 are not necessarily indicative of the results to be expected for the year ending December 31, 2021. The accompanying unaudited interim condensed consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements and notes related thereto for the years ended December 31, 2020 and 2019 included in Form 10-K filed with the SEC.
| 10 |
| Table of Contents |
AmpliTech Group, Inc.
Notes To Condensed Consolidated Financial Statements
For The Nine Months Ended September 30, 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 and marketable securities that have original maturities of less than three months, when purchased, to be cash equivalents. As of September 30, 2021, the Company’s cash and cash equivalents were deposited in three 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 $
Marketable Securities
The Company’s investments in marketable securities are classified based on the nature of the securities and their availability for use in current operations. The Company’s marketable securities are stated at fair value with all realized and unrealized gains and losses on investments in marketable equity securities recognized in other income, net. The realized and unrealized gains and losses on marketable securities are determined using specific identification method.
| 11 |
| Table of Contents |
AmpliTech Group, Inc.
Notes To Condensed Consolidated Financial Statements
For The Nine Months Ended September 30, 2021 and 2020
Inventories
Inventories, which consist primarily of raw materials, work in progress and finished goods, is stated at the lower of cost (first-in, first-out basis) or market (net realizable value).
Inventory quantities and related values are analyzed at the end of each fiscal quarter to determine those items that are slow moving and obsolete. An inventory reserve is recorded for those items determined to be slow moving with a corresponding charge to cost of goods sold. Inventory items that are determined obsolete are written off currently with a corresponding charge to cost of goods sold.
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 |
|
|
| ||
Machinery and equipment |
|
|
| ||
Computer equipment |
|
|
| ||
Vehicles |
|
|
|
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.
| 12 |
| Table of Contents |
AmpliTech Group, Inc.
Notes To Condensed Consolidated Financial Statements
For The Nine Months Ended September 30, 2021 and 2020
Investment Policy-Cost Method
Investments consist of non-controlling equity investments in privately held companies. The Company elected the measurement alternative for these investments without readily determinable fair values and for which the Company does not control or have the ability to exercise significant influence over operating and financial policies. These investments are accounted for under the cost method of accounting. Under the cost method of accounting, the non-marketable equity securities are carried at cost less any impairment, adjusted for observable price changes of similar investments of the same issuer. Fair value is not estimated for these investments if there are no identified events or changes in circumstances that may have an effect on the fair value of the investment. Under this method, the Company’s share of the earnings or losses of such investee companies is not included in the consolidated balance sheet or consolidated statements of operations. The Company held $
Goodwill and Intangible Assets
Intangible 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.
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.
| 13 |
| Table of Contents |
AmpliTech Group, Inc.
Notes To Condensed Consolidated Financial Statements
For The Nine Months Ended September 30, 2021 and 2020
Revenue Recognition
We sell our products through a combination of a direct sales force in the United States and independent sales representatives in international markets. Revenue is recognized when a customer obtains control of promised goods based on the consideration we expect to receive in exchange for these goods. This core principle is achieved through the following steps:
Identify the contract with the customer. A contract with a customer exists when (i) we enter into an enforceable contract with a customer that defines each party’s rights regarding the goods to be transferred and identifies the payment terms related to these goods, (ii) the contract has commercial substance and, (iii) we determine that collection of substantially all consideration for services that are transferred is probable based on the customer’s intent and ability to pay the promised consideration. We do not have significant costs to obtain contracts with customers. For commissions on product sales, we have elected the practical expedient to expense the costs as incurred.
Identify the performance obligations in the contract. Generally, 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.
Determine the transaction price. Payment by the customer is due under customary fixed payment terms, and we evaluate if collectability is reasonably assured. None of our contracts as of September 30, 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.
| 14 |
| Table of Contents |
AmpliTech Group, Inc.
Notes To Condensed Consolidated Financial Statements
For The Nine Months Ended September 30, 2021 and 2020
Reserves are recorded as a reduction in net sales and are not considered material to our condensed consolidated statements of operations for the nine months ended September 30, 2021 and 2020.
Research and Development
Research and development expenditures are charged to operations as incurred. The major components of research and development costs include consultants, outside service, and supplies. Research and development costs for the nine months ended September 30, 2021 and 2020 were $
Income Taxes
The Company’s deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements or tax returns. Under this method, deferred tax assets and liabilities are determined based on the differences between the financial statement carrying amounts and tax bases of certain assets and liabilities using enacted tax rates in effect in the years in which the differences are expected to reverse. The deferred tax assets and liabilities are classified according to the financial statement classification of the assets and liabilities generating the differences. Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized. The ASC prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. The ASC provides guidance on de-recognition, classification, interest and penalties, accounting in interim periods, disclosure and transition. At September 30, 2021, the Company had no material unrecognized tax benefits.
Earnings Per Share
Basic earnings per share (“EPS”) are determined by dividing the net earnings by the weighted-average number of shares of common shares outstanding during the period. Diluted EPS is determined by dividing net earnings by the weighted average number of common shares used in the basic EPS calculation plus the number of common shares that would be issued assuming conversion of all potentially dilutive securities outstanding under the treasury stock method. As of September 30, 2021 and 2020, there were
| 15 |
| Table of Contents |
AmpliTech Group, Inc.
Notes To Condensed Consolidated Financial Statements
For The Nine Months Ended September 30, 2021 and 2020
The computation of weighted average shares outstanding and the basic and diluted earnings per share consisted of the following:
|
| Net (Loss) Income |
|
| Shares |
|
| Per Share Amount |
| |||
|
|
|
|
|
|
|
|
|
| |||
For the three months ended September 30, 2021: |
|
|
|
|
|
|
|
|
| |||
|
|
|
|
|
|
|
|
|
| |||
Basic EPS |
| $ | ( | ) |
|
|
|
| $ | ( | ) | |
Effect of dilutive stock options, warrants and series A shares |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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Diluted EPS |
| $ | ( | ) |
|
|
|
| $ | ( | ) | |
For the three months ended September 30, 2020: |
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Basic EPS |
| $ |
|
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| $ |
| |||
Effect of dilutive stock options, warrants and series A shares |
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| |
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Diluted EPS |
| $ |
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| $ |
| |||
|
| Net (Loss) Income |
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| Shares |
|
| Per Share Amount |
| |||
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For the nine months ended September 30, 2021: |
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| |||
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| |||
Basic EPS |
| $ | ( | ) |
|
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|
| $ | ( | ) | |
Effect of dilutive stock options, warrants and series A shares |
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Diluted EPS |
| $ | ( | ) |
|
|
|
| $ | ( | ) | |
For the nine months ended September 30, 2020: |
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Basic EPS |
| $ | ( | ) |
|
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| $ | ( | ) | |
Effect of dilutive stock options, warrants and series A shares |
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Diluted EPS |
| $ | ( | ) |
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| $ | ( | ) | |
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:
| 16 |
| Table of Contents |
AmpliTech Group, Inc.
Notes To Condensed Consolidated Financial Statements
For The Nine Months Ended September 30, 2021 and 2020
Level 1. Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities. Cash and cash equivalents are valued using inputs in Level 1.
Level 2. Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly, including quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets or liabilities in markets that are not active; inputs other than quoted prices that are observable for the asset or liability (e.g., interest rates); and inputs that are derived principally from or corroborated by observable market data by correlation or other means.
Level 3. Inputs that are both significant to the fair value measurement and unobservable. These inputs rely on management's own assumptions about the assumptions that market participants would use in pricing the asset or liability. The unobservable inputs are developed based on the best information available in the circumstances and may include the Company's own data.
Fair Value of Marketable Securities
The fair value of a financial instrument is the amount that could be received upon the sale of an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Fair value measurements do not include transaction costs.
A fair value hierarchy is used to prioritize the quality and reliability of the information used to determine fair values. Categorization within the fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement. The fair value hierarchy is divided into the following three categories:
Level 1. Quoted market prices in active markets for identical assets or liabilities.
Level 2. Observable market-based inputs or inputs that are corroborated by market data.
Level 3. Unobservable inputs that are not corroborated by market data.
Fair value estimates of financial instruments are made at a specific point in time, based on relevant information about financial markets and specific financial instruments. As these estimates are subjective in nature, involving uncertainties and matters of significant judgment, they cannot be determined with precision. Changes in assumptions can significantly affect estimated fair value. Management is of the opinion that the Company is not exposed to significant interest or credit risks arising from financial instruments and any declines in the value of investments are temporary in nature. Money market funds and certificates of deposits are shown at cost on the balance sheet and their adjusted cost approximates their fair value.
| 17 |
| Table of Contents |
AmpliTech Group, Inc.
Notes To Condensed Consolidated Financial Statements
For The Nine Months Ended September 30, 2021 and 2020
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 $
Recent Accounting Pronouncements
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.
| 18 |
| Table of Contents |
AmpliTech Group, Inc.
Notes To Condensed Consolidated Financial Statements
For The Nine Months Ended September 30, 2021 and 2020
(3) Revenues
The following table presents sales disaggregated based on geographic regions and for the three and nine months ended:
|
| For the three months ended |
|
| For the nine months ended |
| ||||||||||
|
| Sept. 30, 2021 |
|
| Sept. 30, 2020 |
|
| Sept. 30, 2021 |
|
| Sept. 30, 2020 |
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Domestic sales |
| $ |
|
| $ |
|
| $ |
|
| $ |
| ||||
International sales |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Total sales |
| $ |
|
| $ |
|
| $ | 2,553,982 |
|
| $ | 2,567,379 |
| ||
(4) Marketable Securities
The following table is a summary of marketable securities at September 30, 2021:
|
| Adjusted Cost |
|
| Unrealized Gains |
|
| Unrealized Loss |
|
| Fair Value |
| ||||
Level 1 (1) |
|
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|
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|
| ||||
Money Market Funds |
|
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|
|
|
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|
| ||||
Marketable Equity Securities |
|
|
|
|
|
|
|
| ( | ) |
|
|
| |||
|
|
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|
|
|
Total |
| $ |
|
| $ |
|
| $ | ( | ) |
| $ |
| |||
Cash and cash equivalents at September 30, 2021 was $
(1) | Level 1 fair value estimates are based on quoted prices in active markets for identical assets or liabilities. |
When evaluating an investment for impairment, the Company reviews factors including the length of time and extent to which fair value has been below cost basis, the financial condition of the issuer, changes in market interest rates and whether it is more likely than not the Company will be required to sell the investment before recovery of the investment’s cost basis. As of September 30, 2021, the Company does not consider any of its investments to be impaired.
| 19 |
| Table of Contents |
AmpliTech Group, Inc.
Notes To Condensed Consolidated Financial Statements
For The Nine Months Ended September 30, 2021 and 2020
(5) Inventories
The inventory value at September 30, 2021 and December 31, 2020 were as follows:
|
| September 30, |
|
| December 31, |
| ||
|
| 2021 |
|
| 2020 |
| ||
|
|
|
|
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| ||
| Raw Materials |
| $ |
|
| $ |
| ||
| Work-in Progress |
|
|
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| ||
| Finished Goods |
|
|
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|
| ||
| Engineering Models |
|
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| ||
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| Subtotal |
| $ |
|
| $ |
| ||
| Less: Reserve for |
|
|
|
|
|
|
|
|
| Obsolescence |
|
| ( | ) |
|
| ( | ) |
|
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|
|
|
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| Total |
| $ |
|
| $ |
| ||
(6) Property and Equipment
Property and Equipment consisted of the following at September 30, 2021 and December 31, 2020:
|
| September 30, |
|
| December 31, |
| ||
|
| 2021 |
|
| 2020 |
| ||
|
|
|
|
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| ||
| Lab Equipment |
| $ |
|
| $ |
| ||
| Manufacturing Equipment |
|
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| ||
| Automobiles |
|
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| ||
| Furniture and Fixtures |
|
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| ||
|
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|
| Subtotal |
|
|
|
|
|
| ||
| Less: Accumulated Depreciation |
|
| ( | ) |
|
| ( | ) |
|
|
|
|
|
|
|
|
|
| Total |
| $ |
|
| $ |
| ||
Depreciation expense for the nine months ended September 30, 2021 and 2020 was $
| 20 |
| Table of Contents |
AmpliTech Group, Inc.
Notes To Condensed Consolidated Financial Statements
For The Nine Months Ended September 30, 2021 and 2020
(7) 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 September 30, 2021 and December 31, 2020, goodwill was valued at $
Other Intangible Assets
Intangible assets with an estimated useful life of fifteen years consisted of the following at September 30, 2021:
|
| Gross Carrying |
|
| Accumulated |
|
|
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|
| Weighted |
| ||||
|
| Amount |
|
| Amortization |
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| Net |
|
| Average Life |
| ||||
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| ||||
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| ||||
| Trade name |
| $ |
|
| $ | - |
|
| $ |
|
| |
| |||
| Customer relationships |
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| ||||
| Intellectual Property |
|
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| ||||
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|
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| Total |
| $ |
|
| $ |
|
| $ |
|
|
|
|
| |||
Amortization expense for the years ended September 30, 2021 and 2020 was $
Annual amortization of intangible assets are as follows:
| 2021 |
|
|
| |
| 2022 |
|
|
| |
| 2023 |
|
|
| |
| 2024 |
|
|
| |
| 2025 |
|
|
| |
| Thereafter |
|
|
| |
|
| $ |
|
| 21 |
| Table of Contents |
AmpliTech Group, Inc.
Notes To Condensed Consolidated Financial Statements
For The Nine Months Ended September 30, 2021 and 2020
(8) Cost Method Investment
On June 10, 2021, the Company entered into a membership interest purchase agreement with SN2N, LLC for an aggregate purchase price of $
(9) Line of Credit
On November 20, 2020, AmpliTech entered into a business line of credit for $
In connection with the loan, the Company granted the lender a security interest in all of its respective assets. In addition, the President and CEO, has agreed to guarantee the loan.
The Company made cash payments of $
As of September 30, 2021, and December 31, 2020, the outstanding balance on the line of credit was $
(10) Leases
We adopted ASC 842 “Leases” using the modified retrospective approach, electing the practical expedient that allows us not to restate our comparative periods prior to the adoption of the standard on January 1, 2019. As such, the disclosures required under ASC 842 are not presented for periods before the date of adoption.
| 22 |
| Table of Contents |
AmpliTech Group, Inc.
Notes To Condensed Consolidated Financial Statements
For The Nine Months Ended September 30, 2021 and 2020
The following was included in our balance sheet as of September 30, 2021:
Operating leases |
| Sept. 30, 2021 |
| |
|
|
|
| |
Assets |
|
|
| |
ROU operating lease assets |
| $ |
| |
|
|
|
|
|
Liabilities |
|
|
|
|
Current portion of operating lease |
| $ |
| |
Operating lease, net of current portion |
| $ |
| |
Total operating lease liabilities |
| $ |
| |
|
|
|
|
|
Finance leases |
|
|
|
|
Assets |
|
|
|
|
Property and equipment, gross |
| $ |
| |
Accumulated depreciation |
|
| ( | ) |
Property and equipment, net |
| $ |
| |
Liabilities |
|
|
|
|
Current portion of financing lease |
| $ |
| |
Finance lease, net of current portion |
|
|
| |
Total operating lease liabilities |
| $ |
| |
The weighted average remaining lease term and weighted average discount rate at September 30, 2021 were as follows:
Weighted average remaining lease term (years) |
| Sept. 30, 2021 |
| |
Operating leases |
|
|
| |
Finance leases |
|
|
| |
Weighted average discount rate |
|
|
|
|
Operating leases |
|
| % | |
Finance leases |
|
| % | |
| 23 |
| Table of Contents |
AmpliTech Group, Inc.
Notes To Condensed Consolidated Financial Statements
For The Nine Months Ended September 30, 2021 and 2020
Finance Lease
The Company entered into a 60-month lease agreement to finance certain laboratory equipment in July 2018 with a purchase option of $1. As such, the Company has accounted for this transaction as a finance lease.
The following table reconciles future minimum finance lease payments to the discounted lease liability as of September 30, 2021:
2021 |
|
|
| |
2022 |
|
|
| |
2023 |
|
|
| |
Total lease payments |
|
|
| |
Less imputed interest |
|
| ( | ) |
Less sales tax |
|
| ( | ) |
Total lease obligations |
|
|
| |
Less current obligations |
|
| ( | ) |
Long-term lease obligations |
| $ |
|
Operating Leases
On December 4, 2015,
On January 15, 2016, the Company entered into a five-year agreement to lease 2 copiers with and annual payment of $
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 $
On November 27, 2019,
| 24 |
| Table of Contents |
AmpliTech Group, Inc.
Notes To Condensed Consolidated Financial Statements
For The Nine Months Ended September 30, 2021 and 2020
The following table reconciles future minimum operating lease payments to the discounted lease liability as of September 30, 2021:
2021 |
|
|
| |
2022 |
|
|
| |
2023 |
|
|
| |
2024 |
|
|
| |
2025 |
|
|
| |
Total lease payments |
|
|
| |
Less imputed interest |
|
| ( | ) |
Total lease obligations |
|
|
| |
Less current obligations |
|
| ( | ) |
Long-term lease obligations |
| $ |
|
(11) 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 $
Loan Payable:
On September 12, 2019, the Company entered a $
| 25 |
| Table of Contents |
AmpliTech Group, Inc.
Notes To Condensed Consolidated Financial Statements
For The Nine Months Ended September 30, 2021 and 2020
On April 20, 2020, the Company entered into a Paycheck Protection Program Promissory Note (“PPP Note”) in the principal amount of $
On April 20, 2021, SBA approved the PPP loan forgiveness of $
In addition, on September 12, 2019, the Company was approved for a $
| · | On December 20, 2019, the Company borrowed $ |
|
|
|
| · | On May 14, 2020, the Company borrowed $ |
|
|
|
| · | On June 10, 2020, the Company borrowed $ |
Future principal payments over the term of the loans as of September 30, 2021 are as follows:
|
| Payments |
| |
2021 |
|
|
| |
2022 |
|
|
| |
2023 |
|
|
| |
2024 |
|
|
| |
| ||||
Total remaining payments |
| $ | $ |
|
(12) Stockholders’ Equity
The total number of shares of stock this Corporation is authorized to issue shall be five hundred one million (
| 26 |
| Table of Contents |
AmpliTech Group, Inc.
Notes To Condensed Consolidated Financial Statements
For The Nine Months Ended September 30, 2021 and 2020
Preferred Stock
On July 10, 2013, the Board of Directors of the Company approved a certificate of amendment to the articles of incorporation and changed the authorized capital stock of the Company to include and authorize
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
On November 20, 2020, the Company issued
On December 23, 2020, the Company filed amended and restated articles of incorporation to keep the authorized shares of Common Stock at
| 27 |
| Table of Contents |
AmpliTech Group, Inc.
Notes To Condensed Consolidated Financial Statements
For The Nine Months Ended September 30, 2021 and 2020
Common Stock:
The Company originally authorized 50,000,000 shares of common stock with a par value of $0.001. Effective May 20, 2014, the Company increased its authorized shares of common stock from 50,000,000 to
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
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 |
| i. | |
|
|
|
| ii. | $ |
|
|
|
| iii. |
| 28 |
| Table of Contents |
AmpliTech Group, Inc.
Notes To Condensed Consolidated Financial Statements
For The Nine Months Ended September 30, 2021 and 2020
On July 28, 2020, Wayne Homschek elected to exercise
On October 12, 2020, the Company engaged service providers for services related to the NASDAQ up list totaling $
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
On October 16, 2020, the Company entered into a public relations service agreement whereby the consultant will be paid compensation of
On November 20, 2020, the Company issued
On December 18, 2020, the Company issued
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,
On February 24, 2021, Maxim Group LLC exercised its overallotment option to purchase an additional
From March 8 to March 12, 2021,
| 29 |
| Table of Contents |
AmpliTech Group, Inc.
Notes To Condensed Consolidated Financial Statements
For The Nine Months Ended September 30, 2021 and 2020
From April 1 through April 6, 2021,
On April 15, 2021, the Company entered into definitive agreements with certain institutional investors for the sale of
2020 Equity Incentive Plan:
In October 2020, the Board of Directors and shareholders adopted the Company's 2020 Equity Incentive Plan (the "2020 Plan"), effective as of December 14, 2020. Under the 2020 Plan, the Company reserved 1,250,000 shares of common stock to grant shares of the Company's common stock to employees and individuals who perform services for the Company. The purpose of the 2020 Plan is to attract and retain the best available personnel for positions of substantial responsibility, to provide incentives to individuals who perform services for the Company, and to promote the success of the Company's business. The 2020 Plan permits the grant of Incentive Stock Options, Nonstatutory Stock Options, Stock Appreciation Rights, Restricted Stock, Restricted Stock Units, Performance Units, Performance Shares, and other stock or cash awards as the Board of Directors may determine.
Stock Options:
On June 30, 2021, the Company granted to each of our Board of Directors (Mr. Lee, Mr. Kappers, and Mr. Mazziota) ten-year nonqualified stock options to purchase
On July 26, 2021, the Company granted three employees, a consultant and two advisors to the Board ten-year stock options to purchase shares of common stock (totaling
| 30 |
| Table of Contents |
AmpliTech Group, Inc.
Notes To Condensed Consolidated Financial Statements
For The Nine Months Ended September 30, 2021 and 2020
expected term
Below is a table summarizing the changes in stock options outstanding during the nine-month period ended September 30, 2021:
|
| Number of |
|
| Weighted Average |
| ||
|
| Options |
|
| Exercise Price ($) |
| ||
Outstanding at December 31, 2020 |
|
| - |
|
|
| - |
|
Granted |
|
|
|
| $ |
| ||
Exercised |
|
| - |
|
|
| - |
|
Expired |
|
| - |
|
|
| - |
|
Outstanding at September 30, 2021 |
|
|
|
| $ |
| ||
Exercisable at September 30, 2021 |
|
|
|
| $ |
| ||
As of September 30, 2021, all outstanding stock options were issued according to the Company's 2020 Plan, and there remain
Stock-based compensation expense related to stock options of $
Warrants:
Effective February 19, 2021, Amplitech Group Inc., common stock and warrants under the symbols "AMPG" and "AMPGW," respectively, commenced trading on NASDAQ. In connection with the public offering, 1,371,428 units sold at an offering price of $7.00 per unit. Each unit issued in the offering consisted of one share of common stock and one warrant. Maxim Group LLC acted as sole book-running manager for the offering and partially exercised its overallotment option to purchase 205,714 warrants at the public offering price. The warrants expire ten years from the date of issuance.
Effective April 16, 2021, the Company entered into definitive agreements with certain institutional investors to sell 2,715,000 shares of common stock in a registered direct offering priced at the market under NASDAQ rules. Concurrently, the Company agreed to issue to the investors, in a private placement, warrants to purchase an aggregate of 1,900,500 shares of common stock at an exercise price of $8.48 per share with a five-year term.
| 31 |
| Table of Contents |
AmpliTech Group, Inc.
Notes To Condensed Consolidated Financial Statements
For The Nine Months Ended September 30, 2021 and 2020
On July 20, 2021, in connection with a product development agreement with an unrelated party, the Company issued warrants to purchase 30,000 shares of common stock.
From March 8 through April 6, 2021, 210,700 warrants were exercised at $
|
| Number of |
|
| Weighted Average |
| ||
|
| Warrants |
|
| Exercise Price ($) |
| ||
Outstanding at December 31, 2020 |
|
|
|
|
| - |
| |
Granted |
|
|
|
| $ |
| ||
Exercised |
|
| ( | ) |
| $ |
| |
Expired |
|
| - |
|
|
| - |
|
Outstanding at September 30, 2021 |
|
|
|
| $ |
| ||
Exercisable at September 30, 2021 |
|
|
|
| $ |
| ||
Stock-based compensation expense related to warrants of $
(13) Commitments and Contingencies: None applicable
(14) Subsequent events
In accordance with ASC 855-10, Company management reviewed all material events through the date of this report.
On October 15, 2021, the Company entered into a new lease for a 20,000 square foot facility on Long Island, New York, for a term of seven years and two months. The yearly base rent of $
| 32 |
| Table of Contents |
AmpliTech Group, Inc.
Notes To Condensed Consolidated Financial Statements
For The Nine Months Ended September 30, 2021 and 2020
On November 1, 2021, the Company opened its MMIC Design Center (AGMDC) in Texas and expects the facility to be fully operational by year-end 2021. The MMIC design center is expected to integrate the Company’s low noise figures into more compact packages that will allow for integration into a larger range of consumer applications.
On November 10, 2021, Maxim was issued
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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.
On June 10, 2021, the Company entered into a membership interest purchase agreement for an aggregate purchase price of $350,000, to be paid in four tranches. Each tranche represents a 5% membership interest, and in aggregate a 20% membership interest. SN2N plans to design and manufacture an un-hackable communications channel that creates a new security paradigm; a state-of-the art signal amplification secured by intelligence-community-caliber hardware encryption. Amplitech would serve as exclusive manufacturer for the low noise amplifier product line used with this encryption technology. As of September 30, 2021, the Company has made an investment of $250,000 for a 15% membership interest.
On July 26, 2021, 52,000 incentive/ non-qualified stock options were issued to various employees and consultants. The options have a strike price of $3.88 and a ten-year term. The options shall vest in equal quarterly installments over a three-year period commencing one year after the date of grant.
Results of Operations
For the Three Months Ended September 30, 2021 and September 30, 2020
Revenues
Overall, the increase in custom amplifier sales during this comparison period, was offset by the decrease in sales in microwave components by our Specialty Microwave division. Combined sales decreased from $1,150,732 for the three months ended September 30, 2020 to $1,056,596 for three months ended September 30, 2021, a decrease of $94,136 or approximately 8.18%. Supply chain disruptions as a result of the global health crisis has posed some challenges to our manufacturing and shipments for the third quarter of 2021.
Cost of Goods Sold and Gross Profit
Cost of goods sold increased from $630,486 for the three months ended September 30, 2020 to $742,983 for the three months ended September 30, 2021, an increase of $112,497 or approximately 17.85%. This increase is directly related to the increase in direct assembly labor and parts as well as with the hiring of a director of operations to oversee production and to help meet company growth objectives.
As a result, the gross profit was $313,613 for the three months ended September 30, 2021 compared to $520,246 for the three months ended September 30, 2020, a decrease of $206,633 or 39.72%. Gross profit as a percentage of sales decreased to 29.68% from 45.21%.
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Selling, General and Administrative Expenses
Selling, general and administrative expenses increased to $850,329 for the three months ended September 30, 2021 from $475,248 for the three months ended September 30, 2020, an increase of $375,081 or approximately 78.92%. The Company experienced an increase in parent company expenses, such as regulatory fees, directors’ insurance, IR/PR and consulting, legal and accounting fees. Additional expenses were incurred in payroll and payroll taxes, sales commissions and promotion.
Income (Loss) From Operations
As a result of the above, the Company has a loss from operations of $536,716 for the three months ended September 30, 2021 and income from operations of $44,998 for the three months ended September 30, 2020.
Other Income (Expenses)
Interest expense decreased by $24,146 or 86.27%, when comparing the three months ended September 30, 2021 to the three months ended September 30, 2020. The decrease was primarily due to the repayment of debt.
The Company also recorded an unrealized loss on investments of $63,807 and other income of $11,520.
Net Income (Loss)
The Company reported a net loss of $592,845 for the three months ended September 30, 2021, compared to a net income of $17,010 for the three months ended September 30, 2020.
For the Nine Months Ended September 30, 2021 and September 30, 2020
Revenues
When comparing sales for the nine months ended September 30, 2021 of $2,553,982, to sales for the nine months ended September 30, 2020 of $2,567,379, sales decreased slightly by $13,397 or approximately .52%. Sales have remained relatively flat year to year, primarily due to the lower sales volume experienced in the first quarter of 2021 as a result of the COVID-19 pandemic and worldwide freight issues causing disruption to the supply chain. Our RFQ (Request for Quote) activity remains strong and as more business restrictions are lifted, this should translate to increased sales for the balance of the year.
Cost of Goods Sold and Gross Profit
Cost of goods sold increased by $258,933 or 16.37% for the nine months ended September 30, 2021 compared to the nine months ended September 30, 2020. This increase is directly related to the increase in direct assembly labor and parts as well as with the hiring of a director of operations to oversee production and to help meet company growth objectives.
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Gross profit decreased by $272,330 or 27.63%, when comparing the first nine months of 2021 to the first nine months of 2020. Gross profit percentage decreased from 38.39% to 27.93%. Overall, the global pandemic and diminished economic activity that resulted from the pandemic impacted our gross profit.
Selling, General and Administrative Expenses
General and administrative expenses increased from $1,456,266 for the first nine months of 2020 compared to $2,802,434 for the first nine months of 2021, an increase of $1,346,168 or approximately 92.44%. The Company experienced an increase in parent company expenses, such as stock compensation, IR/PR fees, consulting fees, legal fees, accounting fees and regulatory filing fees relating to both offerings. Approximately $370,000 of expenses are non-recurring and related to the public offerings. Additional expenses were incurred in payroll and payroll taxes, sales commissions and promotion and recruiting fees.
Income (Loss) From Operations
As a result of the above, the Company had a loss from operations of $2,089,216, for the nine months ended September 30, 2021, compared to the loss from operations of $470,718, for the nine months ended September 30, 2020, an overall increase of $1,618,498.
Other Income (Expenses)
Interest expense decreased from $78,501 for the first nine months of 2020 compared to $36,840 for the first nine months of 2021, a decrease of $41,661 or 53.07%. The decrease was primarily due to the repayment of debt.
In addition, on April 20, 2021, the SBA approved the forgiveness of the Company’s PPP loan of $232,200.
The Company also recorded an unrealized loss on investments of $63,135 and other income of $11,520.
Net Income (Loss)
The Company reported a net loss of $1,945,471 for the nine months ended September 30, 2021, compared to a net loss of $549,219 for the nine months ended September 30, 2020.
Liquidity and Capital Resources
Operating Activities
The net cash used in operating activities for the nine months ended September 30, 2021 was $2,514,509, resulting primarily from the net loss and the operating changes in accounts receivable, inventories, prepaid expenses and the operating lease liability.
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Net cash used in operating activities was $514,298 for the nine months ended September 30, 2020, resulting primarily from the net loss and operating changes in accounts receivable, inventory, prepaid expenses, and the operating lease liability.
Investing Activities
The net cash used in investing activities for the nine months ended September 30, 2021 was $5,413,847, resulting in the purchase of equipment, marketable securities and the 15% membership interest.
The net cash used in investing activities for the nine months ended September 30, 2020 was $11,557, for the purchase of equipment.
Financing Activities
The net cash provided by financing activities for the nine months ended September 30, 2021 was $30,676,693 which includes $31,900,840 million from new issuances of common stock and warrants, netted against the repayment of the line of credit, finance lease and notes payable.
The net cash provided by financing activities for the nine months ended September 30, 2020 was $377,018, a result primarily from the proceeds of the line of credit and PPP loan, netted against lease and notes payable.
We have historically financed our operations by the issuance of debt to third party lenders, equity offerings, notes issued to various private individuals and personal funds advanced from time to time by the majority shareholder, who is also the President and Chief Executive Officer of the Company.
As of September 30, 2021, we had cash and cash equivalents of $22,947,873, working capital of $28,626,181 and an accumulated deficit of $3,813,843.
As of December 31, 2020, we had cash and cash equivalents of $199,536, working capital of $741,606 and an accumulated deficit of $1,868,372.
We intend to continue to finance our internal growth with cash on hand and cash provided from operations. 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.
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The discussion and analysis of our financial condition and results of operations is based upon our financial statements which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets and liabilities. On an on-going basis, we evaluate our estimates including the allowance for doubtful accounts, the salability and recoverability of inventory, income taxes and contingencies. We base our estimates on historical experience and on other assumptions that we believe to be reasonable under the circumstances, the results of which form our basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. The Company believes there have been no significant changes during the nine-month period ended September 30, 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.
Off Balance Sheet Transactions
None.
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
Smaller reporting companies are not required to provide the information required by this item.
Item 4. Controls and Procedures.
Evaluation of Disclosure Controls and Procedures
Our management, including our chief executive officer and chief financial officer, evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) or 15d-15(e) under the Exchange Act as of the end of the period covered by this report. Our management does not expect that our disclosure controls and procedures will prevent all error and all fraud. In designing and evaluating the disclosure controls and procedures, management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives.
Based on that evaluation, as of September 30, 2021, our chief executive officer and chief financial officer concluded that our disclosure controls and procedures were not effective to provide reasonable assurance that information we are required to disclose in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our chief executive officer and chief financial officer, as appropriate, to allow timely decisions regarding required disclosure.
Changes in Internal Control over Financial Reporting
There were no changes that have affected, or are reasonably likely to materially affect, our internal control over financial reporting (as defined in Rules 13a-15(f) or 15d-15(f) under the Exchange Act) during the period covered by this report.
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PART II — OTHER INFORMATION
Item 1. Legal Proceedings.
To the best of our knowledge, there are no pending legal proceedings to which we are a party or of which any of our property is the subject.
Item 1A. Risk Factors.
Smaller reporting companies are not required to provide the information required by this item.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
On July 20, 2021, in connection with a product development agreement with an unrelated party, the Company issued warrants to purchase 30,000 shares of common stock. The warrants vest in one year from issuance, with an exercise price of $5.00 per share.
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 | ||
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| Rule 13a-14(a)/ 15d-14(a) Certification of Principal Executive Officer | |||
| Rule 13a-14(a)/ 15d-14(a) Certification of Principal Financial Officer | |||
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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 | ||
104 | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101) | |||
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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. |
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Date: November 15, 2021 | By: | /s/ Fawad Maqbool |
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| Fawad Maqbool |
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| President and Chief Executive Officer (Principal Executive Officer) |
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Date: November 15, 2021 | By: | /s/ Louisa Sanfratello |
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| Louisa Sanfratello Chief Financial Officer (Principal Financial and Accounting Officer) | |
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