AmpliTech Group, Inc 10-K for FY2023
AmpliTech Group, Inc. (AMPG)
About this 10-K
AmpliTech Group, Inc filed this 10-K on April 1, 2024, covering the fiscal year ended December 31, 2023 (FY2023).
Headline figures
Fiscal year ended December 31, 2023, as reported in this filing, compared with the same period a year earlier where the filing states it.
- Revenue
- $15.58M
- down 19.6% from $19.39M a year earlier
- Net loss
- $2.47M
- compared with a net loss of $677.11K a year earlier
- Diluted EPS
- -$0.26
- compared with -$0.07 a year earlier
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM
(Mark One)
| ANNUAL REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For
the Fiscal Year Ended
or
| TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
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Securities registered pursuant to Section 12(g) of the Exchange Act: Securities registered pursuant to Section 12(b) of the Act:
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The
aggregate market value of the registrant’s common stock, par value $0.001 per share, held by non-affiliates of the registrant,
based on the closing price of the common stock as of the last business day of the registrant’s most recently completed second fiscal
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As of March 27, 2024, the registrant had shares of common stock issued and outstanding.
DOCUMENTS INCORPORATED BY REFERENCE:
AMPLITECH GROUP, INC.
ANNUAL REPORT ON FORM 10-K
TABLE OF CONTENTS
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Use of Certain Defined Terms
Except as otherwise indicated by the context, references in this report to “we,” “us,” “our,” “our Company”, or “the Company” are to the combined business of the Company, its subsidiary AmpliTech, Inc. and the Company’s divisions, Specialty Microwave, Spectrum Semiconductor Materials, AmpliTech Group MMIC Design Center and AmpliTech Group True G Speed Services.
Forward-Looking Statements
This Annual Report on Form 10-K 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 Annual Report on Form 10-K 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 Annual Report on Form 10-K. All subsequent written and oral forward-looking statements concerning other matters addressed in this Annual Report on Form 10-K 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 Annual Report on Form 10-K.
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
ITEM 1. BUSINESS
Business Overview
AmpliTech Group Inc. (“AMPG,” “AmpliTech” or the “Company”), incorporated in 2010 in the state of Nevada, is the parent company of AmpliTech, Inc., and the Company’s divisions, Specialty Microwave, Spectrum Semiconductor Materials, AmpliTech Group MMIC Design Center (“AGMDC”) and AmpliTech Group True G Speed Services (“AGTGSS”).
AmpliTech, Inc. 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 (“LNA”), medium power amplifiers, cryogenic amplifiers, and custom assembly designs for the global satellite communications, telecom (5G & IoT), space, defense, and quantum computing markets. We also offer non-recurring engineering services on a project-by-project basis, for a predetermined fixed contractual amount, or on a time plus material basis. We have both domestic and international customers in such industries as aerospace, governmental, defense and commercial satellite.
Specialty Microwave designs and manufactures state-of- the-art precision SATCOM microwave components, RF subsystems and specialized electronic assemblies for the military and commercial markets, flexible and rugged waveguides, wave guide adapters and more.
On November 19, 2021, AMPG entered into an Asset Purchase Agreement with Spectrum Semiconductor Materials Inc. (“SSM”), a globally authorized distributor of integrated circuit (IC) packaging and lids for semiconductor device assembly, prototyping, testing, and production requirements founded in 1990 and headquartered in San Jose, CA, pursuant to which AMPG acquired substantially all of the assets of the Company (the Acquisition). The Acquisition was completed on December 15, 2021.
In 2021, the Company opened AGMDC, a monolithic microwave integrated circuits (“MMIC”) chip design center, in Texas and has started to implement several of its proprietary amplifier designs into MMIC components. MMICs are semiconductor chips used in high-frequency communications applications. MMICs are widely desired for power amplification solutions to service emerging technologies, such as phased array antennas and quantum computing. MMICs carry a smaller footprint enabling them to be incorporated into a broader array of systems while reducing costs. AGMDC designs, develops and manufactures state-of-the-art signal processing components for satellite and 5G communications networks, defense, space and other commercial applications, allowing the Company to market its products to wider base of customers requiring high technology in smaller packages.
In August 2022, we formed our AGTGSS division to enable “true G speeds” to the industry. AGTGSS’ main function will be to plan and configure 5G radio systems and make them O-RAN compliant. AGTGSS will implement AmpliTech’s low noise amplifier devices in these systems to promote greater coverage, longer range and faster speeds.
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.
The Company’s research and development initiative to expand its product line of low noise amplifiers to include its new 5G and wireless infrastructure products, cryogenic amplifiers and MMIC designs is progressing significantly. Our combined engineering and manufacturing resources are expected to complement the development of new subsystems for satellite, wireless, and 5G infrastructures, as well as advanced military and commercial markets.
Our Corporate History and Structure
AmpliTech Group Inc. 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 893,750 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.
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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 substantially all of the assets of Specialty Microwave Corporation, a privately held company based in Ronkonkoma, NY. The purchase included all inventory, orders, customers, property and equipment, and goodwill. Following the closing of the asset purchase, we hired all eight team members of SMW. In connection with the acquisition, the Company began using the trade name “Specialty Microwave”. 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%.
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.’s common stock and warrants commenced trading on NASDAQ under the symbols “AMPG” and “AMPGW,” respectively. 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. All share amounts have been retroactively re-stated to reflect the reverse split.
On November 19, 2021, AmpliTech Group, Inc. entered into an Asset Purchase Agreement with SSM, pursuant to which AmpliTech would acquire substantially all of the assets of SSM. SSM, located in Silicon Valley (San Jose, CA), was a global authorized distributor of IC packaging and lids for semiconductor device assembly, prototyping, testing, and production requirements. The aggregate purchase price for the acquisition was $10,123,276, subject to certain working capital and other adjustments. $665,200 of the aggregate purchase price was paid by the issuance of 188,442 unregistered shares of AmpliTech common stock at the closing of the acquisition. The acquisition was completed on December 15, 2021.
In 2021, the Company opened a MMIC chip design center in Texas and has started to implement several of its proprietary amplifier designs into MMIC components. MMICs are semiconductor chips used in high-frequency communications applications. MMICs are widely desired for power amplification solutions to service emerging technologies, such as phased array antennas and quantum computing. MMICs carry a smaller footprint enabling them to be incorporated into a broader array of systems while reducing costs. AGMDC designs, develops and manufactures state-of-the-art signal processing components for satellite and 5G communications networks, defense, space and other commercial applications, allowing the Company to market its products to a wider base of customers requiring high technology in smaller packages.
In August 2022, our AGTGSS division was founded to serve and provide complete system integration and ORAN compliant O-RU’s (Radio Units) for telcos, enabling the industry to access ‘True 5G Speeds’. AGTGSS provides Managed Services, Cyber Security, Cloud Services, Data Sciences and Telco Cloud Services. AGTGSS will also be providing full installation of Private 5G Networks (P5G) which includes the deployment of AmpliTech Group developed radio units. AGTGSS will implement AmpliTech’s low noise amplifier devices in these systems to promote greater coverage, longer range and faster speeds.
Our Products and Services
Our core AmpliTech Inc. division offers products consisting of connectorized RF amplifiers and related subsystems, operating at 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.
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Our fully operational AGMDC division in Texas has successfully transferred our proprietary technology from connectorized products into monolithic microwave integrated circuits, (MMICs) and is offering in chip form, LNA’s, power amplifiers, filters, attenuators, thru lines and has the ability to provide custom design projects. Over 25 new MMIC chip technology products were released during 2023.
In connection with the acquisition of our Specialty Microwave Division (SMW), we began designing and manufacturing passive microwave components and related subsystems that meet individual customer specifications for both domestic and international customers.
Our SSM division is a globally authorized distributor of IC packaging and lids for semiconductor device assembly, prototyping, testing, and production requirement.
Through our AGTGSS division, we are actively developing and currently manufacturing our newest product line of Open Radio Unit For Sub 6GHz expecting full deployments in late 2024. This new phase array product supports 3.4-4.0 GHz and 2.496-2.69 GHz, with 8 x 4 x 2 = 64 Active Phased Array Elements. It is Digital Beam Forming Compliant With O-RAN/Keysight O-DU. This product uses proprietary technology comprised of existing core LNA products as well as MMICs from our AGMDC division in Texas.
Low Noise Amplifiers
Low Noise Amplifiers, or LNAs, are amplifiers used in receivers of almost every type of communication system (Wi-Fi, radar, satellite, base station, cell phone, radio, etc.) to improve signal strength and increase sensitivity and range of receivers.
Medium Power Amplifiers
Medium Power Amplifiers, or MPAs, provide increased output power and gain in transceiver chains to increase signal power and maintain dynamic range and linearity in radars, base-stations, wireless networks, and almost every communication system.
Satellite Access Point Block Downconverter (BDC)
The Specialty Microwave BDC assembly is used as a test device on Satellite Access Point (SAP) antennas located worldwide. The BDC assembly converts a Ka band signal, 17.7 GHz to 19.7 GHz, from the LNAs on either polarization of the antenna to between 950 and 2150 MHz using a high and low band block downconverter.
1:2 Tx Protection Switch Panel Subsystem
The Specialty Microwave 1:2 Tx Protection Switch panel is a logic panel used in satellite communications earth stations. The system mechanism operates waveguide and coaxial switches to operator desired positions.
Desktop/Benchtop and Compact Wideband Power Amplifiers
These products are utilized over a frequency range of .1 to 40 GHz used in SATCOM rack mount systems as well as test equipment used in integrators and manufacturers of various communications systems such as cellular base stations, simulators, and point to point wireless radios.
Waveguide to Coaxial Adapters
These adapters are used in all SATCOM and satellite internet gateway systems from S band to K band, or 2GHz to 50 GHz.
Cryogenic Amplifiers
Our line of cryogenic amplifiers is designed to operate at temperatures as low as 4K that offer much lower noise figures than our standard models. Consuming as little DC power as +0.5V DC@8mA, the light weight, compact housings provide excellent performance while generating very little heat. These amplifiers are very useful for applications that require the absolute minimum amounts of noise injection for the growing market of low temperature applications, such as quantum computing, medical applications, RF imaging, research & development, space communications, accelerators, radiometry and telephony.
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Our re-designed cryogenic 4.0 – 8.0 GHz amplifiers for quantum computing have been tested and validated by a third-party laboratory for performance.
Cryogenic and Non-Cryogenic 4g/5g Small Cell Subsystems
These products are utilized in private and public high-speed networks and airline WI-FI systems.
IC Packaging
Integrated circuit (“IC”) packaging is the case or enclosure that contains the semiconductor device, protecting it from corrosion or physical damage. The IC packaging also supports the electrical contacts, which connect the semiconductor device to a circuit board. IC packaging often gets sealed with lids, which creates an airtight seal to prevent contaminants, particles, liquids, or gases from entering the packaging to ensure the proper operation of the device. The Company offers multiple IC packaging and lids product lines according to desired product specifications, device performance, dimensions, resistances, and tolerances.
PHEMT MMIC Technology LNA’s
AmpliTech’s new line of low noise amplifiers introduces high performance, high reliability MMIC-based designs. These new products will cover widely used standard frequency ranges in the 2.0 – 4 GHz, 4.0 – 8.00 GHz and 2-18 GHz offering unparalleled low noise figure and featuring its proprietary low noise MMIC technology by our AGMDC Division.
Coaxial In-Line Low Noise Amplifiers
A new product line of competitively priced low noise amplifiers, featuring AmpliTech’s MMIC Technology from our AGMDC Division. These amplifiers offer a very competitive gain performance, exceptional low noise figures, and DC bias through the RF output. These coaxial in-line LNA’s can be used for a wide range of design applications and are suitable for Military and Commercial applications when cost considerations are paramount. Their compact design and outstanding electrical performance make them an indispensable asset in RF design and experimentation.
Coaxial In-Line Band Pass Filters
These bandpass filters cover industry standard frequency ranges, I.e., 17.52-21.45 GHz with 50Ω matched DC blocked RF ports. These products can be used for a wide range of design applications and are suitable for military and commercial applications when cost considerations are paramount. They are also covered by our standard 3-year warranty. Their compact design and outstanding electrical performance make them an indispensable asset in RF design and experimentation.
Ka Band LNB (Low-Noise Block Down Converter Unit)
Featuring its proprietary AmpliTech LNA low noise technology, this Ka Band LNB was designed for superior performance in small sats, LEO, MEO, GEO and portable or fixed Ka-Band teleport applications.
Directional Couplers
AmpliTech’s new line of directional couplers presents a high-performance solution in signal splitting and monitoring technology. Designed with precision and engineered for high performance, these couplers provide accurate power division while maintaining signal integrity. With a wide range of coupling ratios and frequency options, these directional couplers are ideal for a variety of applications, including telecommunications, radar systems, and aerospace technology.
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Power Dividers
Our power dividers stand as a testament to AmpliTech’s commitment to delivering innovative solutions through a strategic research and development business plan. Built to handle high-power RF signals, these dividers ensure minimal signal loss during distribution. Whether for in-building wireless systems or distributed antenna systems, these power dividers offer unparalleled efficiency and signal fidelity, making them an essential choice for RF engineers and system integrators.
Quadrature Hybrid 90-degree Couplers
Quadrature hybrid 90-degree coupler components pave the way for seamless integration in phase-critical applications. These hybrids excel in creating two signals with precisely controlled phase separation, making them indispensable for quadrature modulators, demodulators, and phase shifters. Their compact design and outstanding electrical performance make them an indispensable asset in RF design and experimentation.
5G Network in a Box (NIB)
This single box is essentially a “plug-n-play” solution for P5G and local carriers and is another innovative product from our AGTGSS division. A 5G NIB offers several benefits to customers, including rapid deployment, flexibility, cost-effectiveness, localized high-speed connectivity, enhanced security, and interoperability.
Massive MIMO, 64T64R ORAN, CAT B Radio Network
The Massive MIMO, 64T64R ORAN, CAT B Radio Network is expected to become the company’s flagship product. With 16 Layers DL/ 8 Layers UL, CSI-RS and SRS beamforming capabilities and beam steering technology, this radio provides true 5G speeds with improved signal strength, enhanced coverage, increased user capacity and adheres to the ORAN specifications promoting openness and interoperability in radio access networks.
Our Technology
Our products are supported by hybrid design topologies that create highly linear RF products that amplify and transform signals with minimal addition of noise, achieving high Signal to Noise Ratio (“SNR”) and increased receiver sensitivity and range, at a low cost and low power consumption. Our hybrid design topologies include:
| ● | Discrete Microwave Integrated Circuit (MIC) | |
| ● | Pseudomorphic High Electron Mobility Transistor (PHEMT) | |
| ● | MIC and Low Noise MIC |
We believe the discrete topology that we utilize provides various advantages:
| ● | Can easily optimize Voltage Standing Wave Ratio (VSWR) and Noise Figure | |
| ● | Flexibility of design; can easily adapt to change of specs, technology, etc. | |
| ● | Low DC power consumption | |
| ● | Can control and optimize gain flatness due to discrete gain stages | |
| ● | Optimum use of MIC technology and experience |
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| ● | Use of negative bias is not necessary | |
| ● | Specially selected components with specific parameters that yield proprietary results due to use in a particular configuration |
Research and Development
To date, our research and development activities have primarily been conducted on new product designs to the extent as requested by the customers. The cost of our research and development activities is incorporated into the unit selling prices and, as such, is borne directly by the customers. In addition to the research and development for our customers, we invest in research and development for new products on emerging technologies such as 5G/6G, cryogenic, cybersecurity, MMICs, IoT and wireless products for the future. Research and development costs for the years ended December 31, 2023 and 2022 were $2,341,845 and $1,024,127, respectively.
Industry and Competition
Market Overview
We operate our business in the industry of high-power RF semiconductors. We believe that the RF semiconductor industry has the following features:
High demand for complex, next-generation wireless signal processing applications.
| ● | Mass adoption of internet and web-based applications, and other high-band width applications | |
| ● | Ability to combine analog and digital signal processing into more integrated RF solutions | |
| ● | Widespread application of low-cost, high-performance and functionality wireless networks | |
| ● | Emergence of 5G/6G, WI-FI 6e, satellite and advanced wireless network infrastructure rollouts |
Growing opportunity for advanced RF subsystems, modules and components.
| ● | Demand for precise, high-speed signal conditioning interfaces between analog and digital | |
| ● | Combining analog/digital signal processing capabilities into more highly integrated solutions | |
| ● | Widespread application of low-cost, high-performance wireless network systems | |
| ● | Convergence of computing, communications, and consumer electronics with state-of-the-art signal processing capability with less power consumption |
Complements original equipment manufacturer, or OEM, design, and manufacturing capabilities.
| ● | Deliver high quality and feature improvements that service provider requires |
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| ● | Lower production costs and shorten product development cycles | |
| ● | Adhere to flexibility, performance, streamlined procurement processes and value requirements |
Current and Future Target Markets.
| ● | High speed terrestrial and satellite terminals (SATCOM, “Internet in the Sky”) | |
| ● | 5G/Wi-Fi6E and 6G wireless infrastructure (Cellular Base Stations, Small Cells, Private Wi-Fi Networks) | |
| ● | IoT (Internet of Things) | |
| ● | Cloud farms, big data and MEC architecture | |
| ● | Quantum supercomputers/Quantum research | |
| ● | Deep space astronomy | |
| ● | Autonomous self-driving vehicles | |
| ● | Telemedicine, AR/VR (Augmented and Virtual Reality) | |
| ● | Drones, UAVs (Unmanned aerial vehicles) | |
| ● | Cyber-security | |
| ● | Military/Defense ECM/EW |
Competition
We face competition in the amplifier industry from many established players. Some of our competitors have longer operating histories and significantly greater financial, research and development, marketing and other resources than us. As a result, some of these competitors can devote greater resources to the development, promotion, sale and support of their products. These competitors may also provide discounted pricing on their products to gain market share. In addition, consolidation in the amplifier industry could intensify the competitive pressures that we face. Many of our existing and potential competitors may be better positioned than we are to acquire other companies, technologies or products. We compete based on technology, cost, and design flexibility.
Our ability to compete successfully depends on numerous factors, including our ability to:
| ● | maintain and increase our market share and the strength of our brand in amplifiers; | |
| ● | maintain and expand our relationships with channel partners; | |
| ● | secure products in large volume in a cost-effective and timely manner from our suppliers; | |
| ● | develop innovative, differentiated, high-performance products relative to our competitors’ solutions; and | |
| ● | protect our intellectual property. |
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We cannot assure you that our solutions will compete favorably or that we will be successful in the face of increasing competition from new products and enhancements introduced by our existing competitors or new companies entering our market. In addition, we cannot assure you that our competitors do not have or will not develop processes or product designs that currently or in the future will enable them to produce competitive products at lower costs than ours.
Our Strategy
Our objective is to become a premier designer, manufacturer and distributor of high quality and state-of-the-art cryogenic microwave amplifiers, RF designs and applications for wireless networks and the future of wireless communication with true 5G performance of or close to 1Gbs per second. Key elements of our strategy include the following:
| ● | Reorganization to have our shares traded on a national exchange to improve access to capital resources and a much broader customer base with higher volumes, as well as better access to large OEMs | |
| ● | New product development | |
| ● | Commercializing of existing core technology into specific high-volume technology sectors and obtaining patent on such technology |
Manufacturing and Distribution
On April 1, 2022, we relocated our manufacturing facility and corporate office to Hauppauge, New York, while maintaining our distribution center in San Jose, California, and our MMIC design center in Plano, Texas. Our manufacturing process in Hauppauge involves the assembly of numerous individual components and precise fine-tuning by production technicians. Our new manufacturing facility more than triples our capacity and still has room for expansion. With our already established supply chain, internal capacity and local contract manufacturing sources, we expect to have sufficient capacity to process small and large size orders (thousand + units per month).
We rely on our sales representatives to channel our products throughout the Americas as well as to countries in Europe, the Middle East and South Asia.
On April 1, 2023, the Company announced its partnership with NGK Electronic Devices, to become their US distributor for NGK’s state-of-the-art RF Microwave products. This partnership marks NGK’s first distribution agreement with a US partner, presenting a significant opportunity for both parties. NGK Electronic Devices, based in Japan, is a world leader in the development and manufacturing of ceramic semiconductor packages. These advanced products play a crucial role in the semiconductor packaging industry, addressing key concerns such as heat management and electrical insulation. AmpliTech’s semiconductor distribution division, Spectrum Semiconductor, will leverage its extensive distribution network and expertise to ensure that NGK’s RF Microwave Packages product line is readily available to customers across the United States, further expanding NGK’s global presence.
The Company is ISO 9001:2015 and AS9120B certified for the Distribution of Semiconductor Materials for the Assembly Phase of Integrated Circuit Manufacturing, as well as in compliance with the Conflict Minerals Reporting Template (“CMRT”), the European Union’s Restriction of Hazardous Substances (“RoHS”) and Registration, Evaluation, Authorization, and Restriction of Chemicals (“REACH”) directives, as well as registered with the U.S. Government’s System for Award Management (“SAM”).
Raw Materials
We purchase a variety of raw materials, primarily consisting of high temperature alloy sheet metal and castings, forgings, pre-plated metals and electrical components from various vendors. The materials used by our operations are generally available from several sources and in sufficient quantities to meet current requirements subject to normal lead times. However, recent cost inflation and potential supply chain disruptions may lead to higher material costs in fiscal 2024. Additionally, we are subject to rules promulgated by the Securities Exchange Commission pursuant to the Dodd-Frank Wall Street Reform and Consumer Protection Act regarding the use of certain materials (tantalum, tin, gold and tungsten), known as conflict minerals, which are mined from the Democratic Republic of the Congo and adjoining countries. These rules may impose additional costs and may introduce new risks related to our ability to verify the origin of any conflict minerals used in our products.
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Suppliers
Our material consists of purchased component parts used in our assembly process or distributed. The following table describes supplier concentration based upon the percentage of materials purchased from each supplier for 2023:
| Supplier A | $ | 1,751,735 | 33.14 | % | ||||
| Supplier B | 908,273 | 17.18 | % | |||||
| Supplier C | 800,132 | 15.14 | % | |||||
| Supplier D | 363,554 | 6.88 | % | |||||
| Supplier E | 236,303 | 4.47 | % | |||||
| All other suppliers (approximately 104) | 1,226,485 | 23.19 | % | |||||
| Total | $ | 5,286,482 | 100 | % |
Marketing
We employ an aggressive and focused approach to market our products, at various venues including trade shows, strategic alliances, websites and trade magazines. We target specific types of customers such as system integrators, defense contractors, cellular and wireless service providers but it should be noted that we are also focused on expanding our customer base to include users of consumer applications and products. We continue our online and print ads as well as our virtual meetings and conferences.
In February 2018, the Company entered into an advisory agreement with Sunbiz Holding Corp to promote market awareness in Asia and the Middle East. The advisory agreement had been extended for an additional two years ending in 2022.
Trade Shows
We attend trade shows such as IMS (International Microwave Symposium), European Microwave Symposium, MWC (Mobile World Congress) and the Satellite Show in Washington D.C. We also sponsor some trade shows to gain recognition and presence.
Strategic Alliances
We explore opportunities with global OEMs by seeking out strategic alliances that improve sales and presence in the marketplace and expand our product line and capabilities, thereby broadening our customer base.
Website
We maintain a dynamic website to capture more business via worldwide customer searches for our products on the internet. Our website has also been updated to include an e-commerce dashboard with access to purchase our products. Our website is available at www.amplitechgroup.com.
Trade Magazines
We advertise our products in Microwave Product Digest and Microwave Journal.
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Customers
We serve a diverse customer base located primarily in the United States, Europe and South Asia, in the aerospace, governmental defense, commercial satellite and wireless industries. Some of our customers include Viasat, L3 Harris Technologies, CPI, Lockheed Martin, Microsemi, Cett Technology and Universal Enterprise. As of December 31, 2023, there was one customer that accounted for 8.45% of our total revenue. We have both direct and indirect relationships with these customers domestically and abroad via exclusive and non-exclusive sales representatives.
Government Regulation
We are subject to the local, state and national laws and regulations of the jurisdictions where we operate that affect companies generally, including laws and regulations around commerce, intellectual property, trade, health and safety, commerce and contracts, privacy and communications, consumer protection, web services, tax, and state corporate laws and securities laws; and specifically those conducting business of electronics, many of which are still evolving and could be interpreted in ways that could harm our business. Existing and future laws and regulations may impede our growth. These regulations and laws may change over time. Unfavorable regulations and laws could diminish the demand for our products and services and increase our cost of doing business.
In addition, our operations are subject to extensive, and frequently changing, federal, state and local environmental laws and substantial related regulation by government agencies, including the Environmental Protection Agency. Among other matters, these regulatory authorities impose requirements that regulate the operation, handling, transportation and disposal of hazardous materials; protect the health and safety of workers; and require us to obtain and maintain licenses and permits in connection with our operations. This extensive regulatory framework imposes significant compliance burdens and risks on us. Notwithstanding these burdens, we believe that we are in material compliance with all federal, state and local environmental laws and regulations governing our operations.
There has been no material adverse effect to our consolidated financial statements nor competitive positions because of these government and environmental regulations.
Intellectual Property
We regard domain names, tradenames, customer relationships, trade secrets, proprietary technologies and similar intellectual property important to our success.
We rely on contractual restrictions to protect our proprietary rights in products and services. It is our policy to enter into confidentiality and invention assignment agreements with our employees and contractors as well as nondisclosure agreements with our suppliers and strategic partners to limit access to and disclosure of our proprietary information. We cannot assure you that these contractual arrangements or the other steps taken by us to protect our intellectual property will prove enough to prevent misappropriation of our technology or to deter independent third-party development of similar technologies. We plan to use the information obtained from the IP story to file additional patents relating to our intellectual property and trade secrets.
Employees
As of March 13, 2023, we have forty-six (46) full time employees. From time to time, we may hire additional workers on a contract basis as the need arises.
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ITEM 1A. RISK FACTORS
RISK FACTORS
An investment in our securities involves a high degree of risk. You should carefully consider all of the risks described below, together with the other information contained in this report, including the financial statements, before making a decision to invest in our common stock. If any of the following events occur, our business, financial condition and operating results may be materially and adversely affected. In that event, the trading price of our securities could decline, and you could lose all or part of your investment. The risk factors described below are not necessarily exhaustive and you are encouraged to perform your own investigation with respect to us and our business.
Risks Relating to our Business
Our revenue, earnings, margins and other operating results have fluctuated significantly in the past and may fluctuate significantly in the future. If demand for our products fluctuates, because of economic conditions or for other reasons, our revenue and profitability could be impacted. We incurred net losses of $2,465,439 in 2023 and $677,107 in 2022. As of December 31, 2023, we had an accumulated deficit of $9,769,723. These losses and our accumulated deficit reflect the substantial investments we have made to develop our products. Our future operating results will depend on many factors affecting our new market segments, including the following, many of which are out of our control: the continued market acceptance of our current and new products for 5G, cryogenic quantum computing, internet of things (IoT) and MMICs. Although hard to predict under the current global environment, we believe our core LNA product line, as well as Spectrum Semiconductor Material and 5G product lines will continue to be in demand and generate top line revenue and cash flow to sustain ongoing activities.
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The Company is dependent on the global supply chain and has experienced supply chain constraints, as well as increased costs on components and shipping. The Company has experienced supply chain constraints which have slowed down production and will negatively impact the timing of deploying ASRs (Available Supply Rate) to our clients. These supply constraints include, but are not limited to, semiconductor shortages as well as shortages of certain commodities. Extended lead times on certain parts as well as a lack of immediate availability may delay our ability to deploy ASRs, and consequently, may delay our ability to recognize revenue. In addition, the Company has also faced increased costs of components and freight. Further, current or future governmental policies may increase the risk of inflation, which could further increase the costs of raw materials and components for our business. Similarly, if the costs of goods continue to increase, our suppliers may seek price increases from us. If we are unable to mitigate the impact of supply chain constraints and inflationary pressure through price increases or other measures, our results of operations and financial condition could be negatively impacted. Even if we can raise the prices of our products, consumers might react negatively to such price increases, which could have a material adverse effect on, among other things, our brand, reputation, and sales. If our competitors substantially lower their prices, we may lose customers and mark down prices. Our profitability may be impacted by lower prices, which may negatively impact gross margins. Even though we are working to alleviate supply chain constraints through various measures, we are unable to predict the impact of these constraints on the timing of revenue and operating costs of our business in the near future. Raw material supply shortages and supply chain constraints, including cost inflation, have impacted and could continue to negatively impact our ability to meet increased demand, which in turn could impact on our net sales revenues and market share. The increased cost of components and freight as well as ongoing delays in production are likely to have an impact on sales and profitability throughout 2024.
Our market is very competitive. If we fail to compete successfully, our business and operating results will suffer. We face significant competition in the amplifier industry from both established and emerging players such as Lucix, Erzia, and Narda-Miteq. Some of our competitors have longer operating histories and significantly greater financial, research and development, marketing and other resources than us. As a result, some of these competitors can devote greater resources to the development, promotion, sale and support of their products. These competitors may also provide discounted pricing on their products to gain market share. In addition, consolidation in the amplifier industry could intensify the competitive pressures that we face. Many of our existing and potential competitors may be better positioned than we are to acquire other companies, technologies or products.
Some of our customers may also maintain diverse supplier bases to enhance competition and maintain multiple providers of amplifier products. Our ability to increase order sizes from these customers and maintain or increase our market share would be constrained by these policies. In addition, any decline in the quality or availability of our products or any increase in the number of suppliers that such a customer use may decrease demand for our products and adversely affect our operating results, business and prospects.
Our ability to compete successfully depends on numerous factors, including our ability to:
| ● | maintain and increase our market share and the strength of our brand in amplifiers; | |
| ● | maintain and expand our relationships with channel partners; | |
| ● | secure products in large volume in a cost-effective and timely manner from our suppliers; | |
| ● | develop innovative, differentiated, high-performance products relative to our competitors’ solutions; and | |
| ● | protect our intellectual property. |
We cannot assure you that our solutions will compete favorably or that we will be successful in the face of increasing competition from new products and enhancements introduced by our existing competitors or new companies entering our market. In addition, we cannot assure you that our competitors do not have or will not develop processes or product designs that currently or in the future will enable them to produce competitive products at lower costs than ours. Any failure to compete successfully would materially adversely affect our business, prospects, operating results and financial condition.
Global economic uncertainty and financial market volatility caused by political instability, changes in international trade relationships and conflicts, such as the conflict in the Middle East or the conflict between Russia and Ukraine, could make it more difficult for us to access financing and could adversely affect our business and operations. Our abilities to raise capital and operate our business are subject to the risk of adverse changes in the market value of our securities. Periods of macroeconomic weakness or recession and heightened market volatility caused by adverse geopolitical developments could increase these risks, potentially resulting in adverse impacts on our ability to raise further capital on favorable terms. The impact of geopolitical tension, such as a deterioration in the bilateral relationship between the US and China, the war in the Middle East or an escalation in conflict between Russia and Ukraine, including any resulting sanctions, export controls or other restrictive actions that may be imposed by the US and/or other countries against governmental or other entities in, for example, Russia, also could lead to disruption, instability and volatility in global trade patterns, which may in turn impact our ability to source necessary reagents, raw materials and other inputs for our operations.
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Economic conditions may adversely impact our business, operating results and financial condition. Economic conditions, market and political instability, changes in trade agreements and conflicts, such as the conflict in the Middle East or the conflict between Russia and Ukraine, could adversely affect global markets and transactions and may adversely affect our customers and suppliers. Any adverse financial or economic impact to our customers may impact their ability to pay in a timely manner or result in their inability to pay. It may also impact their ability to fund future purchases or increase the sales cycles which could lead to a reduction in revenue and accounts receivable. Our suppliers may increase their prices or may be unable to supply the necessary raw materials on a timely basis which could result in our inability to meet customers’ demand or affect our gross margins. Our suppliers may also impose more stringent payment terms on us. The timing and nature of any recovery from the effects of adverse economic conditions or market and political instability on credit and financial markets is uncertain, and there can be no assurance that market conditions will improve in the near future or that our results will not be materially and adversely affected.
Changes in our product mix could cause our overall gross margin to decline, which may adversely affect our operating results and financial condition. Our gross margin is dependent on product mix. A shift in sales mix away from our higher margin products could adversely affect our gross margins, and there can be no assurance that we will be able to maintain our historical gross margins. In addition, as our product mix becomes more customer specific and diversified, our cost of manufacturing has increased. If revenue from LNAs and customer-specific products continues to grow relative to our other products and services, our company-wide gross margin will likely decline. Additionally, increased competition and the existence of product alternatives, weaker than expected demand and other factors may lead to further price erosion, lower revenue and lower margins for us in the future, adversely affecting our operating results and financial condition.
Our products must meet exact technical and quality specifications. Defects, errors in or interoperability issues with our products or the failure of our products to operate as expected could affect our reputation, result in significant costs to us and impair our ability to sell our products. Our products may contain defects or errors or not operate as expected, which could materially and adversely affect our reputation, result in significant costs to us and impair our ability to sell our products in the future. Our customers have demanding specifications for quality, performance and reliability that our tag and reader products must meet. Our products are highly technical and designed to be deployed in large and complex systems, networks and other settings under a wide variety of conditions. Customers and end users may discover errors, defects or incompatibilities in our products only after they have been fully deployed. In addition, users of our products may experience compatibility or interoperability issues between our products and their enterprise software systems or networks, or between our products and other amplifying products they use.
We may also experience quality problems with our products that are combined with or incorporated into products from other vendors, such as tags produced by our inlay manufacturers, or that are assembled by subcontractors. We may have difficulty identifying and correcting the source of problems when third parties are combining, incorporating or assembling our products.
If we are unable to fix errors or other problems, we could experience:
| ● | loss of customers or customer orders; | |
| ● | lost or delayed market acceptance and sales of our products; | |
| ● | loss of market share; | |
| ● | damage to our brand and reputation; |
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| ● | impaired ability to attract new customers or achieve market acceptance; | |
| ● | diversion of development resources; | |
| ● | increased service and warranty costs; | |
| ● | replacement costs; | |
| ● | legal actions by our customers; and | |
| ● | increased insurance costs. |
We may be required to indemnify our customers against liabilities arising from defects in our products or their solutions which incorporate our products. These liabilities may also include costs incurred by our customers or end users to correct the problems or replace our products.
While we test our products for defects or errors prior to product release, defects or errors are occasionally identified by our customers. Such defects or errors have occurred in the past and may occur in the future. To the extent product failures are material, they could adversely affect our business, operating results, customer relationships, reputation and prospects.
We may face claims of intellectual property infringement, which could be time consuming, costly to defend or settle and result in the loss of significant rights. Our industry is characterized by companies that hold large numbers of patents and other intellectual property rights and which may vigorously pursue, protect and enforce their intellectual property rights. We may in the future be required to license patents and other intellectual property rights to technologies that are important to our business, which may be costly or prohibitively expensive to our business operations. We may also receive assertions against us, our customers or distributor, claiming that we infringe patent or other intellectual property rights. Claims that our products, processes, technology or other aspects of our business infringe third-party intellectual property rights, regardless of their merit or resolution, could be costly to defend or settle and could divert the efforts and attention of our management and technical personnel. If we decline to accept an offer, the offering party may allege that we infringe such patents, which could result in litigation.
In addition, many of our customer agreements require us to indemnify and defend our customers from third-party infringement claims and pay damages in the case of adverse rulings. Moreover, we may not know whether we are infringing a third party’s rights, due to the large number of patents related to amplifiers or to other systemic factors. For instance, patent applications in the United States are maintained in confidence for up to 18 months after their filing or, in some cases, for the entire time prior to issuance as a patent. Thus, we would not be able to account for such rights before publication. Competitors may also have filed patent applications or received patents and may obtain additional patents and proprietary rights that block or compete with our patents. Claims of this sort could harm our relationships with our customers or distributor and might deter future customers from doing business with us. We do not know whether we will prevail in any such future proceedings given the complex technical issues and inherent uncertainties in intellectual property litigation. If any pending or future proceedings result in an adverse outcome, we could be required to:
| ● | cease the manufacture, use or sale of the infringing products, processes or technology; | |
| ● | pay substantial damages for infringement; | |
| ● | expend significant resources to develop non-infringing products, processes or technology; | |
| ● | license technology from the third-party claiming infringement, which license may not be available on commercially reasonable terms, or at all; |
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| ● | cross-license our technology to a competitor to resolve an infringement claim, which could weaken our ability to compete with that competitor; or | |
| ● | pay substantial damages to our customers or end users to discontinue their use of or to replace infringing technology sold to them with non-infringing technology. |
Any of the foregoing results could have a material adverse effect on our business, financial condition and operating results.
We may incur substantial costs enforcing or acquiring intellectual property rights and defending against third-party claims as a result of litigation or other proceedings. We may incur substantial costs enforcing or acquiring intellectual property rights and defending against third-party claims as a result of litigation or other proceedings. In connection with the enforcement of our own intellectual property rights, the acquisition of third-party intellectual property rights or disputes related to the validity or alleged infringement of third-party intellectual property rights, including patent rights, we may be subject to claims, negotiations or complex, protracted litigation. Intellectual property disputes and litigation may be costly and can be disruptive to our business operations by diverting the attention and energies of management and key technical personnel, and by increasing our costs of doing business. If we fail to prevail in any future litigation and disputes, it could adversely affect our results of operations and financial condition. Third-party intellectual property claims asserted against us could subject us to significant liabilities, require us to enter into royalty and licensing arrangements on unfavorable terms, prevent us from assembling or licensing certain of our products, subject us to injunctions restricting our sale of products, cause severe disruptions to our operations or the marketplaces in which we compete or require us to satisfy indemnification commitments with our customers, including contractual provisions under various license arrangements. In addition, we may incur significant costs in acquiring the necessary third-party intellectual property rights for use in our products. Any of these could seriously harm our business.
If we are unable to obtain patent protection for our products or otherwise protect our intellectual property rights, our business could suffer. Our success depends, in part, on our ability to obtain patent protection for or maintain as trade secrets our proprietary products, technologies and inventions and to maintain the confidentiality of our trade secrets and know-how, operate without infringing upon the proprietary rights of others and prevent others from infringing upon our business proprietary rights. Despite our efforts to protect our proprietary rights, it is possible that competitors or other unauthorized third parties may obtain, copy, use or disclose our technologies, inventions, processes or improvements. We cannot assure you that any of our existing or future patents or other intellectual property rights will be enforceable, will not be challenged, invalidated or circumvented, or will otherwise provide us with meaningful protection or any competitive advantage. In addition, our pending patent applications may not be granted. If our patents do not adequately protect our technology, our competitors may be able to offer additive manufacturing systems or other products like ours. Our competitors may also be able to develop similar technology independently or design around our patents, and we may not be able to detect the unauthorized use of our proprietary technology or take appropriate steps to prevent such use. Any of the foregoing events would lead to increased competition and lower revenues or gross margins, which could adversely affect our operating results.
Confidentiality agreements with employees and third parties may not prevent unauthorized disclosure of trade secrets and other proprietary information, and our inability to maintain the confidentiality of that information, due to unauthorized disclosure or use, or other events, could have a material adverse effect on our business. In addition to the protection afforded by patents, we seek to rely on trade secret protection and confidentiality agreements to protect proprietary know-how that is not patentable or that we elect not to patent, processes for which patents are difficult to enforce, and any other elements of our product discovery and development processes that involve proprietary know-how, information, or technology that is not covered by patents. Trade secrets, however, may be difficult to protect. We seek to protect our proprietary processes, in part, by entering into confidentiality agreements with our employees, consultants, advisors, contractors and collaborators. Although we use reasonable efforts to protect our trade secrets, our employees, consultants, advisors, contractors, and collaborators might intentionally or inadvertently disclose our trade secret information to competitors. In addition, competitors may otherwise gain access to our trade secrets or independently develop substantially equivalent information and techniques. Furthermore, the laws of some foreign countries do not protect proprietary rights to the same extent or in the same manner as the laws of the United States. As a result, we may encounter significant problems in protecting and defending our intellectual property both in the United States and abroad. If we are unable to prevent unauthorized material disclosure of our intellectual property to third parties, or misappropriation of our intellectual property by third parties, we will not be able to establish or maintain a competitive advantage in our market, which could materially adversely affect our business, operating results and financial condition.
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We are subject to order and shipment uncertainties. Inaccuracies in our estimates of customer demand and product mix could negatively affect our inventory levels, sales and operating results. We derive revenue primarily from customer purchase orders rather than long-term purchase commitments. To ensure the availability of our products, in some cases we start manufacturing based on forecasts provided by customers in advance of receiving purchase orders from them. In some cases, our supply chain has been affected by both tariffs and by the COVID-19 pandemic. Some of our products are manufactured according to our estimates of customer demand, which requires us to make demand forecast assumptions for every customer, and which may introduce significant variability into our aggregate estimate. We typically sell to channel partners and end users, and we consequently have limited visibility into future end-user demand, which could adversely affect our revenue forecasts and operating margins. Additionally, we sometimes receive soft commitments for larger order sizes which do not materialize. If we manufacture more products than we can sell to our customers or channel partners, we will incur losses and our results of operation and financial condition will be harmed.
Our sales and marketing efforts may be unsuccessful in maintaining and expanding existing sales channels, developing new sales channels and increasing the sales of our products. To grow our business, we must add new customers for our products in addition to retaining and increasing sales to our current customers. Our ability to attract new customers will depend in part on the success of our sales and marketing efforts. There can be no guarantee that we will be successful in implementing our sales and marketing strategy. If suitable sales channels do not develop, we may not be able to sell certain of our products in significant volumes and our operating results, business and prospects may be harmed.
Our business would be adversely affected by the departure of members of our executive management team. Our success depends, in large part, on the continued contributions of Fawad Maqbool, our Chairman, President and Chief Executive Officer. Mr. Maqbool is not bound by any employment contract to remain with us for a specified period. Although we have additional engineering, technical and sales personnel, the loss of Mr. Maqbool’s service could harm our ability to implement our business strategy and respond to the rapidly changing market conditions in which we operate.
If we are unable to attract, train and retain qualified personnel, especially our design and technical personnel, we may not be able to effectively execute our business strategy. Our future success depends on our ability to attract, retain and motivate qualified personnel, including our management, sales and marketing, finance and especially our design and technical personnel. For example, we currently have a limited number of personnel for the assembling and testing processes. We do not know whether we will be able to retain all these personnel as we continue to pursue our business strategy. As the source of our technical and product innovations, our design and technical personnel are a significant asset. The competition for qualified personnel in the New York area where we are headquartered constrains our ability to attract qualified personnel. The loss of the services of one or more of our key employees, especially of our key design and technical personnel, or our inability to attract, retain and motivate qualified personnel could have a material adverse effect on our business, financial condition and operating results.
Failure to remediate a material weakness in internal accounting controls could result in material misstatements in our financial statements. Our management has identified material weaknesses in our internal control over financial reporting related to lack of segregation of duties resulting from our limited personnel and ineffective control over financial statement disclosure as controls were not designed and in place to ensure that all disclosures required were originally addressed in our financial statements and has concluded that, due to such material weakness, our disclosure controls and procedures were not effective as of December 31, 2023. If not remediated, or if we identify further material weaknesses in our internal controls, our failure to establish and maintain effective disclosure controls and procedures and internal control over financial reporting could result in material misstatements in our financial statements and a failure to meet our reporting and financial obligations, each of which could have a material adverse effect on our financial condition and the trading price of our common stock.
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If we fail to implement proper and effective internal controls, our ability to produce accurate financial statements would be impaired, which could adversely affect our operating results, our ability to operate our business and our stock price. We must ensure that we have adequate internal financial and accounting controls and procedures in place to produce accurate financial statements on a timely basis. We have tested our internal controls and identified two material weaknesses and may find additional areas for improvement in the future. Remediating these material weaknesses will require us to hire and train additional personnel. Implementing any future changes to our internal controls may require compliance training of our directors, officers and employees, entail substantial costs to modify our accounting systems and take a significant period to complete. Such changes may not, however, be effective in establishing the adequacy of our internal control over financial reporting, and our failure to produce accurate financial statements on a timely basis could increase our operating costs and could materially impair our ability to operate our business. In addition, investors’ perceptions that our internal control over financial reporting is inadequate or that we are unable to produce accurate financial statements may materially adversely affect our stock price.
We may need to raise additional capital, which may not be available on favorable terms, if at all, and which may cause dilution to holders of our common stock, restrict our operations or adversely affect our ability to operate our business. If we need to raise additional funds due to material expenditures or if our operating results are worse than expected, we cannot be certain that we will be able to obtain additional financing on favorable terms, if at all, and any additional financings could result in additional dilution to holders of our common stock. Debt financing, if available, may involve agreements that include covenants limiting or restricting our ability to take specific actions such as incurring additional debt, expending capital or declaring dividends, or which impose financial covenants on us that limit our ability to achieve our business objectives. If we need additional capital and cannot raise it on acceptable terms, we may not be able to meet our business objectives, our stock price may fall, and you may lose some or all your investment.
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Breaches of network or information technology security, natural disasters or terrorist attacks could have an adverse effect on our business. Cyber-attacks or other breaches of network or information technology (IT) security, natural disasters, terrorist acts or acts of war may cause equipment failures or disrupt our systems and operations. We may be subject to attempts to breach the security of our networks and IT infrastructure through cyber-attacks, malware, computer viruses and other means of unauthorized access. We have previously been subject to the unauthorized use of certain company credentials that were used to issue a false press release in April 2018. While we were able to have the false press release withdrawn, any similar unauthorized use of company credentials or other information could compromise our systems and operations, materially adversely impact our financial condition and subject us to scrutiny and/or litigation from regulators and our customers. A failure to protect the privacy of customer and employee confidential data against breaches of network or IT security could result in damage to our reputation.
The unfavorable outcome of any future litigation or administrative action could negatively impact us. Our financial results could be negatively impacted by unfavorable outcomes in any future litigation or administrative actions. We cannot assure favorable outcomes in litigation or administrative proceedings. Costs associated with litigation and administrative proceedings are very high and could negatively impact our financial results.
Non-compliance with, or changes in, the legal and regulatory environment in the countries in which we operate could increase our costs or reduce our net operating revenues. Our business is subject to various laws and regulations in the US and in the countries throughout the world in which we do business, including laws and regulations relating to commerce, intellectual property, trade, environmental, health and safety, commerce and contracts, privacy and communications, consumer protection, web services, tax and state corporate laws and securities laws, and specifically those conducting business of electronics, many of which are still evolving and could be interpreted in ways that could harm our business. There is no assurance that we will be completely effective in ensuring our compliance with all applicable laws and regulations. Changes in applicable laws or regulations or evolving interpretations thereof, including increased government regulation, may result in increased compliance costs, capital expenditures and other financial obligations for us and could affect our profitability or impede the production or distribution of our products, which could affect our net operating revenues.
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U.S. government audits and investigations could adversely affect our business. Federal government agencies, including the Defense Contract Audit Agency and the Defense Contract Management Agency, routinely audit and evaluate government contracts and government contractors’ administrative processes and systems. These agencies review the Company’s performance on contracts, pricing practices, cost structure, financial capability and compliance with applicable laws, regulations and standards. These agencies also review the adequacy of the Company’s internal control systems and policies, including the Company’s purchasing, accounting, estimating, compensation and management information processes and systems. Any costs found to be improperly allocated to a specific contract will not be reimbursed, while such costs already reimbursed must be refunded. If an audit or investigation of our business were to uncover improper or illegal activities, then we could be subject to civil and criminal penalties and administrative sanctions, including termination of contracts, forfeiture of profits, suspension of payments, fines and suspension or prohibition from doing business with the U.S. government. In addition, responding to governmental audits or investigations may involve significant expenses and divert management attention.
Acquisitions may expose us to additional risks. We may acquire or make investments in businesses, technologies or products, whether complementary or otherwise, to expand our business, if appropriate opportunities arise. There can be no assurance that we will be able to identify suitable candidates or consummate these transactions on favorable terms. If required, the financing for these transactions could result in an increase in our indebtedness, dilute the interests of our stockholders or both. The purchase price for some acquisitions may include additional amounts to be paid in cash in the future, a portion of which may be contingent on the achievement of certain future operating results of the acquired business. If the performance of any such acquired business exceeds such operating results, then we may incur additional charges and be required to pay additional amounts. Acquisitions including strategic investments or alliances entail numerous risks, which may include:
| ● | difficulties in integrating acquired operations or products, including the loss of key employees from, or customers of, acquired businesses; | |
| ● | diversion of management’s attention from our existing businesses; | |
| ● | adverse effects on existing business relationships with suppliers and customers; | |
| ● | adverse impacts of margin and product cost structures different from those of our current mix of business; and | |
| ● | conforming standards, controls, procedures, accounting and other policies, business cultures, and compensation structures between the two companies. |
Many of these factors are outside of our control and any one of these factors could result in, among other things, increased costs and decreases in the amount of expected revenues, which could materially adversely impact our business, financial condition, and results of operations. In addition, even if we can successfully integrate acquired businesses, the full benefits, including the synergies, cost savings, revenue growth, or other benefits that are expected, may not be achieved within the anticipated time frame, or at all. All of these factors could decrease or delay the expected accretive effect of the acquisitions, and negatively impact our business, operating results, and financial condition.
Our revenue and operating results can fluctuate from period to period. We derive revenue primarily from customer purchase orders rather than long-term purchase commitments. Our revenue from period to period can significantly fluctuate for a variety of reasons, including, without limitation, our supply chain as well as receipt of customer orders. Such fluctuations may have a material adverse impact on our results of our operations.
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Risks Relating to our Common Stock and our Listed Warrants
The price of our common stock could be volatile and could decline at a time when you want to sell your holdings. Numerous factors, many of which are beyond our control, may cause the market price of our common stock to fluctuate significantly. These factors include:
| ● | quarterly variations in our results of operations or those of our competitors; | |
| ● | delays in end-user deployments of products; | |
| ● | announcements by us or our competitors of acquisitions, new products, significant contracts, commercial relationships or capital commitments; | |
| ● | intellectual property infringements; | |
| ● | our ability to develop and market new and enhanced products on a timely basis; | |
| ● | commencement of, or our involvement in, litigation; | |
| ● | major changes in our Board of Directors or management, including the departure of Mr. Maqbool; | |
| ● | changes in governmental regulations; | |
| ● | changes in earnings estimates or recommendations by securities analysts; | |
| ● | the impact of the political instability, changes in international trade relationships and conflicts, such as the conflict in the Middle East or the conflict between Russia and Ukraine; | |
| ● | our failure to generate material revenues; | |
| ● | our public disclosure of the terms of any financing which we may consummate in the future; | |
| ● | any acquisitions we may consummate; | |
| ● | announcements by us or our competitors of significant contracts, new services, acquisitions, commercial relationships, joint ventures or capital commitments; | |
| ● | cancellation of key contracts; | |
| ● | short selling activities; | |
| ● | changes in market valuations of similar companies; and | |
| ● | general economic conditions and slow or negative growth of end markets. |
Securities class action litigation is often instituted against companies following periods of volatility in their stock price. This type of litigation could result in substantial costs to us and divert our management’s attention and resources.
Moreover, securities markets may from time-to-time experience significant price and volume fluctuations for reasons unrelated to operating performance of companies, such as rising inflation and interest rates and the rapidly developing conflict in Ukraine. These market fluctuations may adversely affect the price of our common stock and other interests in our company at a time when you want to sell your interest in us.
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Future sales or perceived sales of our common stock could depress our stock price. If the holders of our currently outstanding shares of common stock were to attempt to sell a substantial amount of their holdings at once, the market price of our common stock could decline. Moreover, the perceived risk of this potential dilution could cause shareholders to attempt to sell their shares and investors to short the common stock, a practice in which an investor sells shares that he or she does not own at prevailing market prices, hoping to purchase shares later at a lower price to cover the sale. As each of these events would cause the number of shares of our common stock being offered for sale to increase, our common stock market price would likely further decline. All of these events could combine to make it very difficult for us to sell equity or equity-related securities in the future at a time and price that we deem appropriate.
Our common stock may be affected by limited trading volume and price fluctuations, which could adversely impact the value of our common stock. Our common stock has experienced, and is likely to experience in the future, significant price and volume fluctuations, which could adversely affect the market price of our common stock without regard to our operating performance. In addition, we believe that factors such as quarterly fluctuations in our financial results and changes in the overall economy or the condition of the financial markets could cause the price of our common stock to fluctuate substantially. These fluctuations may also cause short sellers to periodically enter the market in the belief that we will have poor results in the future. We cannot predict the actions of market participants and, therefore, can offer no assurances that the market for our common stock will be stable or appreciate over time.
Provisions in our articles of incorporation and bylaws could discourage a change in control, or an acquisition of us by a third party, even if the acquisition would be favorable to you, thereby adversely affecting existing shareholders. Our articles of incorporation and bylaws contain provisions that may have the effect of making it more difficult or delaying attempts by others to obtain control of our Company, even when these attempts may be in the best interests of our shareholders. For example, our articles of incorporation authorize our Board of Directors, without stockholder approval, to issue one or more series of preferred stock, which could have voting and conversion rights that adversely affect or dilute the voting power of the holders of common stock. These provisions and others that could be adopted in the future could deter unsolicited takeovers or delay or prevent changes in our control or management, including transactions in which stockholders might otherwise receive a premium for their shares over then-current market prices. These provisions may also limit the ability of stockholders to approve transactions that they may deem to be in their best interests.
The ability of Fawad Maqbool, our Chairman, to sell his stake in us and speculation about any such sale may adversely affect the market price of our common stock. Mr. Maqbool owns a significant number of shares of our outstanding common stock, and he may sell any or all of his shares at any time without approval by other shareholders. Speculation by the press, stock analysts, our shareholders or others regarding the intention of Mr. Maqbool to dispose of his shares could adversely affect the market price of our common stock. Moreover, the market price of our common stock may be adversely impacted by the fact that the public float of our common stock is relatively small.
Because Fawad Maqbool, our Chairman controls a significant number of shares of our voting capital stock, he has the ability to influence actions requiring stockholder approval. As of the date of this report, Fawad Maqbool, our Chairman, President Chief Executive Officer, held 29.07% of our outstanding shares of common stock. As a result, Mr. Maqbool could significantly influence the outcome of matters submitted to our stockholders for approval, including the election of directors and any merger, consolidation or sale of all or substantially all of our assets. In addition, Mr. Maqbool could influence the management and affairs of our company. Accordingly, any investors who purchase shares will likely be minority shareholders and as such will have little to no say in the direction of us and the election of directors. Additionally, this concentration of ownership might harm the market price of our common stock by:
| ● | delaying, deferring or preventing a change in corporate control; | |
| ● | impeding a merger, consolidation, takeover or other business combination involving us; or | |
| ● | discouraging a potential acquirer from making a tender offer or otherwise attempting to obtain control of us. |
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Because we do not intend to pay cash dividends on our shares of common stock, any returns will be limited to the value of our shares. We currently anticipate that we will retain future earnings for the development, operation and expansion of our business and do not anticipate declaring or paying any cash dividends for the foreseeable future. Any return to stockholders will therefore be limited to the increase, if any, of our share price that stockholders may be able to realize if they sell their shares.
There can be no assurance that we will be able to comply with the continued listing standards of the Nasdaq Capital Market, a failure which could result in the de-listing of our common stock. The Nasdaq Capital Market requires that the trading price of its listed stocks remain above one dollar for the stock to remain listed. If a listed stock trades below one dollar for more than 30 consecutive trading days, then it is subject to delisting from the Nasdaq Capital Market. In addition, to maintain a listing on the Nasdaq Capital Market, we must satisfy minimum financial and other continued listing requirements and standards, including those regarding director independence and independent committee requirements, minimum stockholders’ equity and certain corporate governance requirements. If we are unable to satisfy these requirements or standards, we could be subject to delisting, which would have a negative effect on the price of our common stock and would impair your ability to sell or purchase our common stock when you wish to do so. In the event of a delisting, we would expect to take actions to restore our compliance with the listing requirements, but we can provide no assurance that any such action taken by us would allow our common stock to become listed again, stabilize the market price or improve the liquidity of our common stock, prevent our common stock from dropping below the minimum bid price requirement or prevent future non-compliance with the listing requirements.
The Listed Warrants are speculative in nature. The Listed Warrants do not confer any rights of common stock ownership on their holders, such as voting rights or the right to receive dividends, but rather merely represent the right to acquire shares of our common stock at a fixed price for a limited period of time. Specifically, commencing on the date of issuance, holders of the Listed Warrants may exercise their right to acquire the common stock and pay an exercise price of $7.00 per share, prior to five years from the date of issuance, after which date any unexercised Listed Warrants will expire and have no further value. In addition, there can be no assurance that an active trading market for the Listed Warrants will develop.
Holders of the Listed Warrants will have no rights as common stockholders until they acquire our common stock. Until holders of the Listed Warrants acquire shares of our common stock upon exercise of the Listed Warrants, the holders will have no rights with respect to shares of our common stock issuable upon exercise of the Listed Warrants. Upon exercise of the Listed Warrants, the holder will be entitled to exercise the rights of a common stockholder as to the security exercised only as to matters for which the record date occurs after the exercise.
Provisions of the Listed Warrants could discourage an acquisition of us by a third party. Certain provisions of the Listed Warrants could make it more difficult or expensive for a third party to acquire us. The Listed Warrants prohibit us from engaging in certain transactions constituting “fundamental transactions” unless, among other things, the surviving entity assumes our obligations under the Listed Warrants. These and other provisions of the Listed Warrants offered by this prospectus could prevent or deter a third party from acquiring us even where the acquisition could be beneficial to you.
ITEM 1B. UNRESOLVED STAFF COMMENTS
Smaller reporting companies are not required to provide the information required by this item.
ITEM 1C. CYBERSECURITY
Cybersecurity Risk Management and Strategy
The Company depends on the proper functioning, availability and security of its information systems, including financial, data processing, communications and operating systems. Several information systems are software applications provided by third parties. Although risks from cybersecurity threats have to date not materially affected, and we do not believe they are reasonably likely to materially affect, us, our business strategy, results of operations or financial condition, like other companies in our industry, we could, from time to time, experience threats and security incidents related to our and our third-party vendors’ information systems, including attempts to gain unauthorized access to our confidential data, and other electronic security breaches. Such cybersecurity attacks can range from individual attempts to gain unauthorized access to our information technology systems to more sophisticated security threats. While we employ a number of measures to prevent, detect and mitigate these threats, there is no guarantee such efforts will be successful in preventing a cybersecurity attack. A cybersecurity attack could compromise the confidential information of our employees, customers and vendors. A successful cybersecurity attack could disrupt and otherwise adversely affect our business operations.
Assessment, identification and management of cybersecurity related risks are integrated into our overall risk management process. Cybersecurity related risks are included in the risk universe we evaluate to assess top risks to the Company at least annually. To the extent our processes identify a heightened cybersecurity related risk, risk owners are assigned to develop risk mitigation plans, which are then tracked to completion.
Cybersecurity Governance
Our Board of Directors considers cybersecurity risk as part of its risk oversight function and has delegated oversight of cybersecurity risk strategy and governance and of other information technology risks to the Audit Committee of the Board of Directors (the “Audit Committee”). The Audit Committee reports to the full Board of Directors regarding its activities, including those related to cybersecurity. Senior management, including the Company’s Chief Executive Officer, Chief Financial Officer and Chief Operating Officer, is responsible for assessing and managing cybersecurity risk, and provides briefings regarding the assessment and management of such risk to the Audit Committee, which then reports, as necessary, to the Board of Directors.
Although members of our senior management do not have direct cybersecurity expertise obtained through certifications, their experience managing the Company, which includes consulting and coordinating as necessary with in-house information-technology specialists, enables them to effectively assess and manage material risks from cybersecurity threats.
The Company relies on in-house information-technology specialists to assist in managing relevant risks. Any cybersecurity incident would be reported promptly to management and material and potentially material incidents would be assessed by management and the Audit Committee for remediation and future prevention and detection.
The Company, at least annually, updates its policies or procedures that could help mitigate cybersecurity risks. Notwithstanding the extensive approach we take to cybersecurity, we may not be successful in preventing or mitigating a cybersecurity incident that could have a material adverse effect on us. The Company has incorporated cybersecurity coverage in its insurance policies; however, there is no assurance that the insurance the Company maintains will cover all cybersecurity breaches or that policy limits will be sufficient to cover all related losses.
ITEM 2. PROPERTIES
As of April 1, 2022, our principal executive office is located at 155 Plant Avenue, Hauppauge, NY. The property at this location is leased by the Company at a monthly rental expense of $28,854 for a term of seven years and two months. The yearly base rent of $346,248 shall increase at a rate of 2.75% per year to begin on the first anniversary of the lease commencement date and each year thereafter. In the event the landlord decides to sell the property, the Company shall have the right of first offer to purchase subject property. Our wholly owned subsidiary, AmpliTech, Inc., and the Company’s divisions, Specialty Microwave and AGTGSS, also operate out of our principal executive office. This property is used for administrative offices and for manufacturing.
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On September 15, 2019, the Company entered a five- year lease on property located at 120 Raynor Avenue, Ronkonkoma, NY with an option to buy the property during the first two years of the lease for $1.2 mm and then at fair market value for the remainder of the lease term. The option to buy the property has expired and was not exercised. The lease commenced with a monthly rental expense of $7,500, with annual rent increases by 3% in each successive lease year beginning on January 1, 2021. This property was used by Specialty Microwave for manufacturing and engineering services. On April 13, 2023, this lease was terminated subject to the terms of a Surrender Agreement between the Company and landlord. As a result, a gain on termination of right-of-use operating lease was recognized of $8,461.
On December 15, 2021, the Company assumed the SSM lease agreement for office and warehouse space in San Jose, CA, with the same lease terms and conditions as previously stipulated in the lease agreement prior to the lease assumption. The lease term will expire on January 31, 2025, with a monthly base rent of $24,234 for the first 12 months and increase by approximately 3% every year.
As of December 31, 2023, all the facilities described above were in good operating condition, well maintained and in regular use. We believe that our existing facilities are sufficient to meet our operational needs for the foreseeable future.
On January 15, 2024, the Company entered a triple net lease agreement for a 1,900 square foot facility in Allen, Texas for a term of five years and one month. The yearly base rent of $53,675 shall increase at a rate of 2.5% per year to begin on the first anniversary lease commencement date and each year thereafter. The first month’s rent shall be abated following the commencement lease date. Upon lease execution, the Company paid two months of rent as a security deposit and one month’s rent totaling $17,999. The Company expects to be fully operational at the new MMIC division facility May 1, 2024.
ITEM 3. LEGAL PROCEEDINGS
There are no pending legal proceedings to which we are a party or of which any of our property is the subject. From time to time, we may become involved in various lawsuits and legal proceedings which arise in the ordinary course of business. Litigations are subject to inherent uncertainties and an adverse result in these, or other matters may arise from time to time and harm our business.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
PART II
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
Market Information
Up through February 16, 2021, our common stock traded on the over-the-counter market and was quoted on the OTCQB market under the symbol “AMPG”. Our common stock and warrants have been approved for listing on the NASDAQ Capital Market, or NASDAQ, under the symbols “AMPG” and “AMPGW”, respectively, and commenced trading on the NASDAQ on February 17, 2021.
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Holders
As of March 27, 2024, there were 44 holders of record of our common stock. This does not reflect the number of persons or entities who held stock in nominee or street name through various brokerage firms.
Dividend Policy
We have never declared or paid dividends on our common stock. We do not anticipate paying any dividends on our common stock in the foreseeable future. We currently intend to retain all available funds and any future earnings to fund the development and growth of our business. Any future determination to declare dividends will be subject to the discretion of our Board of Directors and will depend on various factors, including applicable laws, our results of operations, financial condition, future prospects and any other factors deemed relevant by our Board of Directors.
ITEM 6. [RESERVED]
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
This Management’s Discussion and Analysis of Financial Condition and Results of Operations is intended to provide a reader of our financial statements with a narrative from the perspective of our management on our financial condition, results of operations, liquidity, and certain other factors that may affect our future results. The following discussion and analysis should be read in conjunction with our audited consolidated financial statements and the accompanying notes thereto included in “Item 8. Financial Statements and Supplementary Data.”
Forward-Looking Statements
In addition to historical financial information, the following discussion and analysis contains forward-looking statements that involve risks, uncertainties and assumptions. See “Forward-Looking Statements.” Our results and the timing of selected events may differ materially from those anticipated in these forward-looking statements as a result of many factors.
Non-GAAP Financial Measures
We believe that presenting non-GAAP financial measures provides management and investors with useful measures to evaluate the performance and trends of the total company and its businesses. This includes adjustments in recent periods to GAAP financial measures to increase period-to-period comparability following actions to strengthen our overall financial position and how we manage our business.
Business Overview
AmpliTech Group Inc. (“AMPG,” “AmpliTech” or the “Company”), incorporated in 2010 in the state of Nevada, is the parent company of AmpliTech, Inc., and the Company’s divisions Specialty Microwave, Spectrum Semiconductor Materials, AmpliTech Group MMIC Design Center (“AGMDC”) and AmpliTech Group True G Speed Services (“AGTGSS”).
AmpliTech Inc. designs, engineers and assembles micro-wave component-based amplifiers that meet individual customer specifications. Our products consist of RF amplifiers and related subsystems, operating at multiple frequencies from 50kHz to 44GHz, including low noise amplifiers (“LNA”), medium power amplifiers, cryogenic amplifiers, and custom assembly designs for the global satellite communications, telecom (5G & IoT), space, defense, and quantum computing markets. We also offer non-recurring engineering services on a project-by-project basis, for a predetermined fixed contractual amount, or on a time plus material basis. We have both domestic and international customers in such industries as aerospace, governmental, defense and commercial satellite.
Specialty Microwave designs and manufactures state-of- the-art precision SATCOM microwave components, RF subsystems and specialized electronic assemblies for the military and commercial markets, flexible and rugged waveguides, wave guide adapters and more.
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On November 19, 2021, AMPG entered into an Asset Purchase Agreement with Spectrum Semiconductor Materials Inc. (“SSM”), a globally authorized distributor of integrated circuit (IC) packaging and lids for semiconductor device assembly, prototyping, testing, and production requirements founded in 1990 and headquartered in San Jose, CA, pursuant to which AMPG acquired substantially all of the assets of the Company (the Acquisition). The Acquisition was completed on December 15, 2021.
In 2021, the Company opened a monolithic microwave integrated circuits (“MMIC”) chip design center in Texas and has started to implement several of its proprietary amplifier designs into MMIC components. MMICs are semiconductor chips used in high-frequency communications applications. MMICs are widely desired for power amplification solutions to service emerging technologies, such as phased array antennas and quantum computing. MMICs carry a smaller footprint enabling them to be incorporated into a broader array of systems while reducing costs. AGMDC designs, develops and manufactures state-of-the-art signal processing components for satellite and 5G communications networks, defense, space and other commercial applications, allowing the Company to market its products to wider base of customers requiring high technology in smaller packages.
In August 2022, the AGTGSS division was formed to enable “true G speeds” to the industry. AGTGSS’ main function will be to plan and configure 5G radio systems and make them O-RAN compliant. AGTGSS will implement AmpliTech’s low noise amplifier devices in these systems to promote greater coverage, longer range and faster speeds.
Results of Operations
As of December 31, 2023, the Company had a working capital of $15,649,254 and an accumulated deficit of $9,769,723. The Company recorded a net loss of $2,465,439 and $677,107 for the years ended December 31, 2023 and December 31, 2022, respectively.
For Years Ended December 31, 2023 and December 31, 2022
Revenues
Sales decreased from $19,394,492 for the year ended December 31, 2022 to $15,584,577 for the year ended December 31, 2023, a decrease of $3,809,915 or approximately 19.64%. Spectrum sales decreased by $4,328,316 or 32.0%, a decline attributable primarily due to a decrease in international sales. The effect COVID placed on the supply chain in 2021 and 2022 triggered higher demand for our integrated circuit, or IC, products. With COVID restrictions and worldwide supply chain concerns easing, the demand for IC packaging has decreased. Sales in the manufacturing and engineering divisions increased by $518,401 or 8.83%, primarily in the telecommunication applications.
Cost of Goods Sold and Gross Profit
Cost of goods sold decreased to $8,308,949 in 2023 from $10,469,628 in 2022, a decrease of $2,160,679 or approximately 20.64%. This decrease is directly related to the decline in sales. As a result, the gross profit was $7,275,628 for 2023 compared to $8,924,864 for 2022, a decrease of $1,649,236 or 18.48%. Gross profit as a percentage of sales increased to 46.69% from 46.02%. Spectrum reported a gross profit margin of 48.42% while AmpliTech’s gross profit margin was 44.19%.
Selling, General and Administrative Expenses
Selling, general and administrative expenses decreased to $7,511,319 in 2023 from $7,629,644 in 2022, a decrease of $118,325, or approximately 1.55%. The Company experienced a decrease in parent company expenses, such as accounting, legal and stock compensation. Other expenses such as sales commissions and relocation expenses have decreased as well.
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Goodwill impairment
As of December 31, 2022, goodwill related to the acquisition of Specialty was deemed impaired in the amount of $120,136. There were no indicators of goodwill impairment for the year ended December 31, 2023.
Research and Development Expenses
Research and development expenditures are charged to operations as incurred. The major components of research and development costs include employee salaries and benefits, consultants, outside service, and supplies.
The Company’s research and development initiative to expand its product line of low noise amplifiers to include its new 5G and wireless infrastructure products and MMIC designs is progressing significantly. Our combined engineering and manufacturing resources are expected to complement the development of new subsystems for satellite, wireless, and 5G infrastructure, as well as advanced military and commercial markets.
Research and development costs for the years ended December 31, 2023 and 2022 were $2,341,845 and $1,024,127, respectively. Research and development expenses have increased by $1,317,718, or by 128.67%, a result of hiring additional personnel for the AGMDC division as it completes its MMIC design releases. The company’s research and development costs include the launch of over 75 new products, such as passive products and the new MMIC based LNA’s, Coaxial in line low noise amplifiers as well as Coaxial in line band pass filters. In addition, research and development costs were incurred for cryogenic amplifiers for quantum computing and 5G CAT B 64T64R ORAN Radios.
Income (Loss) From Operations
As a result of the above, the Company has a loss from operations of $2,577,536 and income from operations of $150,957 for the year ended December 31, 2023 and 2022, respectively.
Other Income (Expenses)
As part of the acquisition of Spectrum Microwave, the purchase agreement contained a revenue adjustment. The revenue adjustment was determined to be an amount equal to 25% of two years’ net revenues minus $20,000,000. The fair value of the revenue adjustment was determined to be $2,180,826 an increase of $815,788 as previously recorded in December 31, 2021. As such, a loss on contingent revenue earnout of $815,788 was recorded for the year ended December 31, 2022. On March 20, 2023, the revenue earnout of $2,180,826 was paid to the Seller.
Due to market fluctuations, the Company recorded an unrealized gain on investments of $1,697 and $2,343 for the years ended December 31, 2023 and 2022, respectively.
Interest income and interest expense, net for December 31, 2023 and 2022, were $19,281 and $13,013, respectively.
Realized gain on investments, resulting from the redemption of treasury bills, was $131,522 for the year ended December 31, 2023.
Loss on disposal of property and equipment was $16,403 and $1,606 for the years ended December 31, 2023 and 2022, respectively.
Net Loss
The Company reported a net loss of $2,465,439 and $677,107 in 2023 and 2022, respectively.
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Liquidity and Capital Resources
Operating Activities
The net cash used in operating activities for the year ended December 31, 2023 was $3,470,890 resulting primarily from net loss and the operating changes in accounts receivable, inventories, prepaid expenses, accounts payable and accrued expenses as well as customer deposits and operating lease liability.
The net cash used in operating activities for the year ended December 31, 2022 was $3,425,246 resulting primarily from net loss and the operating changes in accounts receivable, inventories, prepaid expenses, accounts payable and accrued expenses as well as customer deposits and operating lease liability.
Investing Activities
The net cash used in investing activities for the year ended December 31, 2023 was $725,899 for the purchase of property and equipment offset with the net investments in marketable securities.
The net cash used in investing activities for the year ended December 31, 2022 was $1,079,183 for the purchase of property and equipment, net investment in marketable securities and SN2N.
Financing Activities
The net cash used in financing activities for the year ended December 31, 2023 was $2,367,420, for the repayment of financing lease liabilities, notes payable and the revenue earnout.
The net cash used in financing activities for the year ended December 31, 2022 was $224,223, for the repayment of financing lease liabilities and notes payable.
We have historically financed our operations by the issuance of debt from third party lenders, equity offerings, notes issued to various private individuals and personal funds advanced from time to time by our largest shareholder, who is also the President and Chief Executive Officer of the Company.
As of December 31, 2023, we had cash and cash equivalents of $6,726,013, working capital of $15,649,254 and an accumulated deficit of $9,769,723.
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.
The discussion and analysis of our financial condition and results of operations is based upon our financial statements that 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, the impairment analysis of intangible assets and goodwill, the valuation of stock-based compensation, 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.
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We cannot predict what future laws and regulations might be passed that could have a material effect on the 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.
Basis of Accounting
The accompanying consolidated financial statements have been prepared using the accrual basis of accounting.
Principles of Consolidation
The accompanying consolidated financial statements include the accounts of the Company and its subsidiaries. All intercompany accounts and transactions have been eliminated in consolidation.
Use of Estimates
The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses for the periods presented. Actual results could differ from those estimates.
Reclassifications
Certain reclassifications have been made to the prior years’ financial statements to conform to the current year’s presentation. Certain expenses were reclassed from selling, general and administrative expenses to other income/ expenses. These reclassifications have no effect on previously reported results of operations.
Cash and Cash Equivalents
The Company considers deposits that can be redeemed on demand and investments and marketable securities that have original maturities of less than three months, when purchased, to be cash equivalents. As of December 31, 2023, the Company’s cash and cash equivalents were deposited in five financial institutions.
The Company’s policy is to place its cash and cash equivalents with high-quality, major financial and investment institutions in order to limit the amount of credit exposure. Accounts at each financial institution are insured by the Federal Deposit Insurance Corporation (“FDIC”) up to $250,000. Additionally, cash and cash equivalents maintained with investment institutions are insured by the Securities Investor Protection Corporation (“SIPC”) up to $500,000, which includes a $250,000 limit for cash. In addition, the investment institution provides additional “excess of SIPC” coverage, which insures up to $600 million. The Company has not experienced any losses to date resulting from this policy. At December 31, 2023 and 2022, the Company had $3,170,500 and $12,040,022 in excess of FDIC, SIPC, and excess SIPC insured limits, respectively. The Company has not experienced any losses in such accounts.
Accounts Receivable
Accounts receivable consist of trade receivables arising from credit sales to customers in the normal course of business. These receivables are recorded at the time of sale, net of an allowance for current expected credit losses. In accordance with ASC Topic 326, “Financial Instruments – Credit Losses,” the Company estimates expected credit losses based on historical bad debt experience, the aging of accounts receivable, the current creditworthiness of our customers, prevailing economic conditions, and reasonable and supportable forward-looking information.
An allowance of $ 0 has been recorded at December 31, 2023 and 2022, respectively.
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 methods.
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Inventories
Inventories, which consists primarily of raw materials, work in progress and finished goods, are stated at the lower of cost (first-in, first-out basis) or market (net realizable value).
Inventory quantities and related values are analyzed at the end of each fiscal quarter to determine those items that are slow moving and obsolete. An inventory reserve is recorded for those items determined to be slow moving with a corresponding charge to cost of goods sold. Inventory items that are determined obsolete are written off currently with a corresponding charge to cost of goods sold.
As of December 31, 2023 and 2022, the reserve for inventory obsolescence was $1,146,000 and $1,128,000, respectively.
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 | 3 to 7 years | Straight-line | ||||
| Machinery and equipment | 7 to 10 years | Straight-line | ||||
| Computer equipment and software | 1 to 7 years | Straight-line | ||||
| Vehicles | 5 years | Straight-line | ||||
| Leasehold improvements | 7 years | Straight-line |
Intangible Assets
Definite-lived intangible assets including customer relationships and intellectual property are subject to amortization. Intangible assets are amortized over their estimated useful life on a straight-line basis. Estimated useful lives are determined considering the period the assets are expected to contribute to future cash flows. Indefinite-lived intangible assets are not subject to amortization.
Intangible assets are amortized as follows:
| Description | Useful Life | Method | ||||
| Trade names | Indefinite | N/A | ||||
| Customer relationships | 15 to 20 years | Straight-line | ||||
| Intellectual property | 15 years | Straight-line |
Long-Lived Assets
The Company reviews the carrying value of long-lived assets such property and equipment, right-of-use (“ROU”) assets, and definite-lived intangible assets 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.
The 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. During the years ended December 31, 2023 and 2022, there were no impairments of long-lived assets.
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Goodwill and Indefinite-Lived Intangible Assets
We follow the acquisition method of accounting to record the assets and liabilities of acquired businesses at their estimated fair value at the date of acquisition. We initially record goodwill for the amount the consideration transferred exceeds the acquisition-date fair value of net tangible and identifiable intangible assets acquired.
Goodwill and intangible assets deemed to have indefinite lives are not amortized, but are tested for impairment annually on December 31, or more frequently when events or circumstances indicate an impairment may have occurred. When assessing the recoverability of goodwill and indefinite-lived intangible assets, the Company may first assess qualitative factors in determining whether it is more likely than not that the fair value of a reporting unit, including goodwill, or an indefinite-lived intangible asset is less than its carrying amount. The qualitative assessment is based on several factors, including the current operating environment, industry and market conditions, and overall financial performance. The Company may elect to bypass this qualitative assessment for some or all of its reporting units or other indefinite-lived intangible assets and perform a quantitative assessment, based on management's judgment.
If we quantitatively test goodwill and indefinite-lived intangible assets for possible impairment, we calculate the fair value for the reporting unit and indefinite-lived assets and compare the amount to their carrying amount. If the fair value of a reporting unit and indefinite-lived asset exceeds their carrying amount, the reporting unit and indefinite-lived assets are not considered impaired. If the carrying amount of the reporting unit and indefinite-lived assets exceeds their fair value, the reporting unit and indefinite-lived assets are considered to be impaired, and an impairment charge is recognized for the difference.
We estimate the fair value of our reporting units and indefinite-lived intangible assets based on the present value of estimated future cash flows. Considerable management judgment is necessary to evaluate the impact of operating and macroeconomic changes and to estimate the future cash flows used to measure fair value. Our estimates of future cash flows consider past performance, current and anticipated market conditions and internal projections and operating plans. Additional assumptions include forecasted growth rates, estimated discount rates, and estimated royalty rates for our indefinite-lived intangible assets.
During the years ended December 31, 2023 and 2022, we recorded goodwill impairments of $0 and $120,136, respectively. During the years ended December 31, 2023 and 2022, there were no impairments of indefinite-lived intangible assets.
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 considerable 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 influence 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 $348,250 of investments without readily determinable fair values at December 31, 2023 (see Note 9). These investments are included in other assets on the consolidated balance sheets. There were no indicators of impairment during the year ended December 31, 2023.
Leases
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.
| 33 |
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 December 31, 2023 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. We 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.
Cost of Sales
We include product costs such material, direct labor, overhead costs, production-related depreciation expense, outside labor and production supplies in cost of sales.
Shipping and Handling
Shipping and handling charges are generally incurred at the customer’s expense. However, when billed to our customers, shipping and handling charges are included in net sales for the applicable period, and the corresponding shipping and handling expense is reported in cost of sales.
Research and Development
Research and development expenditures are charged to operations as incurred. The major components of research and development costs include payroll, consultants, outside service, and supplies.
| 34 |
Research and development costs for the years ended December 31, 2023 and 2022 were $2,341,845 and $1,024,127, respectively.
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 December 31, 2023 and 2022, 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 December 31, 2023 and 2022, there were 4,545,442 and 4,235,442, respectively, potentially dilutive shares that need to be considered as common share equivalents. As a result of the net loss, the potentially dilutive shares that need to be considered as common share equivalents, for the years ended December 31, 2023 and 2022, are anti-dilutive.
Fair Value Measurements
The fair value of a financial instrument is the amount that could be received upon the sale of an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Financial assets are marked to bid prices and financial liabilities are marked to offer prices. Fair value measurements do not include transaction costs. A fair value hierarchy is used to prioritize the quality and reliability of the information used to determine fair values. Categorization within the fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement. The fair value hierarchy is defined in the following three categories:
Level 1: Unadjusted quoted prices that are available in active markets for identical assets or liabilities at the measurement date.
Level 2: Significant other observable inputs available at the measurement date, other than quoted prices included in Level 1, either directly or indirectly.
Level 3: Significant unobservable inputs that cannot be corroborated by observable market data and reflect the use of significant management judgment.
Cash and cash equivalents, receivables, inventory, prepaid expenses, accounts payable, accrued expenses, and customer deposits approximate fair value, due to their short-term nature. The carrying value of notes payable and short and long-term debt also approximates fair value since these instruments bear market rates of interest.
Assets and liabilities that are measured at fair value on a nonrecurring basis relate primarily to long-lived assets, intangible assets, and goodwill, which are remeasured when the derived fair value is below carrying value in the consolidated balance sheets.
| 35 |
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 credit risk consist primarily of cash and cash equivalents, marketable securities and accounts receivable.
The Company places its cash and cash equivalents and marketable securities with high-quality, major financial and investment institutions in order to limit the amount of credit exposure. For accounts receivable, the Company performs ongoing credit evaluations of its customers and maintains allowances for potential credit losses.
Sales to the Company’s largest customer represented approximately 8.45% of total sales for the year ended December 31, 2023. As of December 31, 2022, there were two customers that each accounted for 25.98% and 10.60% of total revenue.
As of December 31, 2023 and 2022, there were two vendors that accounted for 33.14% and 17.18% and 44.15% and 29.29%, respectively, of total component parts purchased.
Recent Accounting Pronouncements
In June 2016, the FASB issued ASU 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. The amendments in this update, among other things, require the measurement of all expected credit losses for financial assets held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts. Financial institutions and other organizations will now use forward-looking information to better inform their credit loss estimates. As a smaller reporting company, the guidance was effective for our fiscal years beginning after December 15, 2022. The adoption of this guidance did not have an impact on our consolidated financial statements.
In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, which enhances the transparency and decision usefulness of income tax disclosures by requiring; (1) consistent categories and greater disaggregation of information in the rate reconciliation and (2) income taxes paid disaggregated by jurisdiction. It also includes certain other amendments to improve the effectiveness of income tax disclosures. ASU 2023-09 is effective for fiscal years beginning after December 15, 2025, with early adoption permitted. These amendments are to be applied prospectively, with retrospective application permitted. We are currently evaluating the impact this standard will have on our consolidated financial statement disclosures.
In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures, which requires a public entity to disclose significant segment expenses and other segment items on an annual and interim basis and to provide in interim periods all disclosures about reportable segment’s profit or loss and assets that are currently required annually. ASU 2023-07 is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024, with early adoption permitted. These amendments are to be applied retrospectively. We are currently evaluating the impact this standard will have on our consolidated financial statement disclosures.
In August 2023, the FASB issued ASU 2023-05, Business Combinations—Joint Venture Formations (Subtopic 805-60): Recognition and Initial Measurement, which requires a newly-formed joint venture to apply a new basis of accounting to its contributed net assets, resulting in the joint venture initially measuring its contributed net assets at fair value on the formation date. ASU 2023-05 is effective for all joint venture formations with a formation date on or after January 1, 2025, with early adoption permitted. These amendments are to be applied prospectively, with retrospective application permitted for joint ventures formed before the effective date. We are currently evaluating the impact this standard will have on our consolidated financial statement disclosures.
Off Balance Sheet Transactions
As of December 31, 2023, we did not have any off-balance sheet arrangements.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Smaller reporting companies are not required to provide the information required by this item.
| 36 |
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
AmpliTech Group, Inc.
Index to Consolidated Financial Statements
For the Years Ended December 31, 2023 and 2022
| 37 |
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Shareholders of AmpliTech Group, Inc.:
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of AmpliTech Group, Inc. (“the Company”) as of December 31, 2023 and 2022, the related consolidated statements of operations, stockholders’ equity, and cash flows for each of the years in the two-year period ended December 31, 2023 and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2023 and 2022, and the results of its operations and its cash flows for each of the years in the two-year period ended December 31, 2023, in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matters
The critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) related to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgements. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.
Long-Lived Asset Impairment Assessment
Critical Audit Matter Description
As described in note 2 to the consolidated financial statements, the Company performs impairment testing for its long-lived assets when events or changes in circumstances indicate that its carrying amount may not be recoverable and exceeds its fair value. Due to challenging industry and economic conditions, the Company tested the recoverability of its long-lived asset group that comprises the AmpliTech Inc. division during the year as of December 31, 2023. The Company’s evaluation of the recoverability of this long-lived asset group involved comparing the undiscounted future cash flows expected to be generated by this long-lived asset groups to its respective carrying amount. The Company’s recoverability analysis requires management to make significant estimates and assumptions related to forecasted sales growth rates and cash flows over the remaining useful life of this long-lived asset group.
We identified the evaluation of the recoverability analysis for this long-lived asset group as a critical audit matter because of the significant estimates and assumptions management used in the related cash flow analysis. Performing audit procedures to evaluate the reasonableness of these estimates and assumptions required a high degree of auditor judgment and an increased extent of effort.
How the Critical Audit Matter Was Addressed in the Audit
Our audit procedures related to the following:
| ● | Testing management’s process for developing the test for recoverability. | |
| ● | Evaluating the appropriateness of the cash flow model used by management. | |
| ● | Testing the completeness and accuracy of underlying data used in the cash flow model. | |
| ● | Evaluating the significant assumptions used by management related to revenues, EBITDA, and future capital asset and working capital needs to discern whether they are reasonable considering (i) the current and past performance of the entity; (ii) the consistency with external market and industry data; and (iii) whether these assumptions were consistent with evidence obtained in other areas of the audit. | |
| ● | Professionals with specialized skill and knowledge were utilized by the Firm to assist in the evaluation of the discounted cash flow model and discount rate assumptions. |
/s/
We have served as the Company’s auditor since 2013.
April 1, 2024
| F-1 |
AmpliTech Group, Inc.
Consolidated Balance Sheets
| December 31, | December 31, | |||||||
| 2023 | 2022 | |||||||
| Assets | ||||||||
| Current Assets | ||||||||
| Cash and cash equivalents | $ | $ | ||||||
| Accounts receivable | ||||||||
| Inventories, net | ||||||||
| Marketable securities | ||||||||
| Prepaid expenses | ||||||||
| Total Current Assets | ||||||||
| Property and equipment, net | ||||||||
| Operating lease right of use assets | ||||||||
| Intangible assets, net | ||||||||
| Goodwill | ||||||||
| Cost method investment | ||||||||
| Security deposits | ||||||||
| Total Assets | $ | $ | ||||||
| Liabilities and Stockholders’ Equity | ||||||||
| Current Liabilities | ||||||||
| Accounts payable and accrued expenses | $ | |||||||
| Customer deposits | ||||||||
| Current portion of financing lease obligations | ||||||||
| Current portion of operating lease obligations | ||||||||
| Current portion of notes payable | ||||||||
| Revenue earnout | ||||||||
| Total Current Liabilities | ||||||||
| Long-term Liabilities | ||||||||
| Financing lease obligations, net of current portion | ||||||||
| Operating lease obligations, net of current portion | ||||||||
| Deferred tax liability | ||||||||
| Notes payable, net of current portion | ||||||||
| Total Liabilities | ||||||||
| Commitments and Contingencies | ||||||||
| Stockholders’ Equity | ||||||||
| Common stock, par value $, shares authorized, and shares issued and outstanding, respectively | ||||||||
| Additional paid-in capital | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Total Stockholders’ Equity | ||||||||
| Total Liabilities and Stockholders’ Equity | $ | $ | ||||||
See accompanying notes to the consolidated financial statements
| F-2 |
AmpliTech Group, Inc.
Consolidated Statements of Operations
For the Years Ended December 31, 2023 and 2022
| 2023 | 2022 | |||||||
| Revenues | $ | $ | ||||||
| Cost of Goods Sold | ||||||||
| Gross Profit | ||||||||
| Operating Expenses | ||||||||
| Selling, general and administrative | ||||||||
| Goodwill impairment | ||||||||
| Research and development | ||||||||
| Total Operating Expenses | ||||||||
| Income (Loss) From Operations | ( | ) | ||||||
| Other Income (Expenses) | ||||||||
| Loss on contingent revenue earnout | ( | ) | ||||||
| Loss on disposal of property and equipment | ( | ) | ( | ) | ||||
| Unrealized gain on investments | ||||||||
| Realized gain on investments | ||||||||
| Interest Income (expense), net | ( | ) | ||||||
| Total Other Income (Expenses) | ( | ) | ||||||
| Net Loss Before Income Taxes | ( | ) | ( | ) | ||||
| Provision For Income Taxes | ||||||||
| Net Loss | $ | ( | ) | $ | ( | ) | ||
| Net Loss Per Share; | ||||||||
| Basic and diluted | $ | ) | $ | ) | ||||
| Weighted Average Common Shares Outstanding; | ||||||||
| Basic and diluted | ||||||||
See accompanying notes to the consolidated financial statements
| F-3 |
AmpliTech Group, Inc.
Consolidated Statements of Stockholders’ Equity
For The Years Ended December 31, 2023 and 2022
| Common Stock | Additional | Total | ||||||||||||||||||
| Number of | Par | Paid-In | Accumulated | Stockholders’ | ||||||||||||||||
| Shares | Value | Capital | Deficit | Equity | ||||||||||||||||
| Balance, December 31, 2021 | $ | $ | $ | ( |
) | $ | ||||||||||||||
| Stock based compensation | - | |||||||||||||||||||
| Common stock issued for vesting of RSU’s | ( |
) | ||||||||||||||||||
| Net loss for the year ended December 31, 2022 | - | ( |
) | ( |
) | |||||||||||||||
| Balance, December 31, 2022 | $ | $ | $ | ( |
) | $ | ||||||||||||||
| Balance | $ | $ | $ | ( |
) | $ | ||||||||||||||
| Stock based compensation | - | |||||||||||||||||||
| Common stock issued for vesting of RSU’s | ( |
) | ||||||||||||||||||
| Net loss for the year ended December 31, 2023 | - | ( |
) | ( |
) | |||||||||||||||
| Balance, December 31, 2023 | $ | $ | $ | ( |
) | $ | ||||||||||||||
| Balance | $ | $ | $ | ( |
) | $ | ||||||||||||||
See accompanying notes to the consolidated financial statements
| F-4 |
AmpliTech Group, Inc.
Consolidated Statements of Cash Flows
For The Years Ended December 31, 2023 and 2022
| December 31, | December 31, | |||||||
| 2023 | 2022 | |||||||
| Cash Flows from Operating Activities: | ||||||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
| Depreciation and amortization | ||||||||
| Amortization of prepaid consulting | ||||||||
| Operating lease costs | ||||||||
| Stock based compensation | ||||||||
| Loss on disposal of property and equipment | ||||||||
| Inventory reserve | ||||||||
| Change in fair value of marketable securities | ( | ) | ||||||
| Gain on termination of right-of-use operating lease | ( | ) | ||||||
| Loss on contingent revenue earnout adjustment | ||||||||
| Deferred tax liability | ||||||||
| Impairment of goodwill | ||||||||
| Changes in Operating Assets and Liabilities: | ||||||||
| Accounts receivable | ( | ) | ( | ) | ||||
| Other receivable | ||||||||
| Inventories | ( | ) | ||||||
| Prepaid expenses | ( | ) | ( | ) | ||||
| Security deposits | ||||||||
| Accounts payable and accrued expenses | ( | ) | ( | ) | ||||
| Operating lease obligations | ( | ) | ( | ) | ||||
| Customer deposits | ( | ) | ( | ) | ||||
| Net cash used in operating activities | ( | ) | ( | ) | ||||
| Cash Flows from Investing Activities: | ||||||||
| Purchase of property and equipment | ( | ) | ( | ) | ||||
| Net investment in marketable securities | ( | ) | ||||||
| Purchase of cost method investment | ( | ) | ||||||
| Net cash used in investing activities | ( | ) | ( | ) | ||||
| Cash Flows from Financing Activities: | ||||||||
| Repayment on financing lease liabilities | ( | ) | ( | ) | ||||
| Proceeds from notes payable | ||||||||
| Repayment of notes payable | ( | ) | ( | ) | ||||
| Payment of revenue earnout | ( | ) | ||||||
| Net cash used in financing activities | ( | ) | ( | ) | ||||
| Net change in cash and cash equivalents | ( | ) | ( | ) | ||||
| Cash and Cash Equivalents, Beginning of the Period | ||||||||
| Cash and Cash Equivalents, End of the Period | $ | $ | ||||||
| Supplemental disclosures: | ||||||||
| Cash paid for interest expense | $ | $ | ||||||
| Cash paid for income taxes | $ | $ | ||||||
| Non-Cash Investing and Financing Activities: | ||||||||
| Common Stock issued on vesting of RSUs | $ | $ | ||||||
| Gain on termination of right-of-use operating lease | $ | $ | ||||||
| Loss on disposal of fixed assets | $ | $ | ||||||
| Equipment received for prepaid assets | $ | $ | ||||||
| Financed purchases of property and equipment | $ | $ | ||||||
| Operating lease right of use asset and liability initial investment | $ | $ | ||||||
See accompanying notes to the consolidated financial statements
| F-5 |
AmpliTech Group, Inc.
Notes To Consolidated Financial Statements
For the Years Ended December 31, 2023 and 2022
(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 shares of the Company’s common stock to
the shareholders of AmpliTech, Inc. in exchange for
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 (“Specialty”), a privately held company based in Ronkonkoma, NY. The purchase included all inventory, orders, customers, property and equipment, and all intellectual property. The assets also included all eight team members of Specialty.
Specialty designs and manufactures passive microwave components and related subsystems that meet individual customer specifications for both domestic and international customers for use in satellite communication ground networks.
On
February 17, 2021, 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
In 2021, the Company opened AGMDC, a monolithic microwave integrated circuits (“MMIC”) chip design center in Texas and has started to implement several of its proprietary amplifier designs into MMIC components. MMICs are semiconductor chips used in high-frequency communications applications. MMICs are widely desired for power amplification solutions to service emerging technologies, such as phased array antennas and quantum computing. MMICs carry a smaller footprint enabling them to be incorporated into a broader array of systems while reducing costs. AGMDC designs, develops and manufactures state-of-the-art signal processing components for satellite and 5G communications networks, defense, space and other commercial
| F-6 |
AmpliTech Group, Inc.
Notes To Consolidated Financial Statements
For the Years Ended December 31, 2023 and 2022
applications, allowing the Company to market its products to a wider base of customers requiring high technology in smaller packages.
On November 19, 2021, AmpliTech Group, Inc. entered into an Asset Purchase Agreement (the “Purchase Agreement”) with Spectrum Semiconductor Materials Inc. (the “Seller” or “SSM”), pursuant to which AmpliTech would acquire substantially all the assets of the Company (the “Acquisition”). The Acquisition was completed on December 15, 2021.
Spectrum Semiconductor Materials (“SSM”), located in Silicon Valley (San Jose, CA), is a global authorized distributor of integrated circuit (“IC”) packaging and lids for semiconductor device assembly, prototyping, testing, and production requirements.
In August 2022, AmpliTech Group’s True G Speed Services (AGTGSS) division was founded to serve and provide complete system integration and ORAN compliant O-RU’s (Radio Units) for telcos, enabling the industry to access ‘True 5G Speeds’. AGTGSS provides Managed Services, Cyber Security, Cloud Services, Data Sciences and Telco Cloud Services. AGTGSS will also be providing full installation of Private 5G Networks (P5G) which includes the deployment of AmpliTech Group developed radio units. AGTGSS will implement AmpliTech’s low noise amplifier devices in these systems to promote greater coverage, longer range and faster speeds.
(2) Summary of Significant Accounting Policies
Basis of Accounting
The accompanying consolidated financial statements have been prepared using the accrual basis of accounting.
Principles of Consolidation
The accompanying consolidated financial statements include the accounts of the Company and its subsidiaries. All intercompany accounts and transactions have been eliminated 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.
| F-7 |
AmpliTech Group, Inc.
Notes To Consolidated Financial Statements
For the Years Ended December 31, 2023 and 2022
Reclassifications
Certain reclassifications have been made to the prior years’ financial statements to conform to the current year’s presentation. These reclassifications have no effect on previously reported results of operations.
Cash and Cash Equivalents
The Company considers deposits that can be redeemed on demand and investments and marketable securities that have original maturities of less than three months, when purchased, to be cash equivalents. As of December 31, 2023, the Company’s cash and cash equivalents were deposited in five financial institutions.
The
Company’s policy is to place its cash and cash equivalents with high-quality, major financial and investment institutions in order to
limit the amount of credit exposure. Accounts at each financial institution are insured by the Federal Deposit Insurance Corporation
(“FDIC”) up to $
Accounts Receivable
Accounts receivable consist of trade receivables arising from credit sales to customers in the normal course of business. These receivables are recorded at the time of sale, net of an allowance for current expected credit losses. In accordance with ASC Topic 326, “Financial Instruments – Credit Losses,” the Company estimates expected credit losses based on historical bad debt experience, the aging of accounts receivable, the current creditworthiness of our customers, prevailing economic conditions, and reasonable and supportable forward-looking information.
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.
Inventories
Inventories, which consists primarily of raw materials, work in progress and finished goods, are 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.
| F-8 |
AmpliTech Group, Inc.
Notes To Consolidated Financial Statements
For the Years Ended December 31, 2023 and 2022
As
of December 31, 2023 and 2022, the reserve for inventory obsolescence was $
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:
Schedule of property and equipment depreciated
| Description | Useful Life | Method | ||
| Office equipment | ||||
| Machinery/shop equipment | ||||
| Computer equipment/software | ||||
| Vehicles | ||||
| Leasehold improvements |
Intangible Assets
Definite-lived intangible assets including customer relationships and intellectual property are subject to amortization. Intangible assets are amortized over their estimated useful life on a straight-line basis. Estimated useful lives are determined considering the period the assets are expected to contribute to future cash flows. Indefinite-lived intangible assets are not subject to amortization.
Intangible assets are amortized as follows:
Schedule of Intangible Assets
| Description | Useful Life | Method | ||
| Trade names | Indefinite | N/A | ||
| Customer relationships | ||||
| Intellectual property |
Long-Lived Assets
The Company reviews the carrying value of long-lived assets such property and equipment, right-of-use (“ROU”) assets, and definite-lived intangible assets 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.
The 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. During the years ended December 31, 2023 and 2022, there were no impairments of long-lived assets.
| F-9 |
AmpliTech Group, Inc.
Notes To Consolidated Financial Statements
For the Years Ended December 31, 2023 and 2022
Goodwill and Indefinite-Lived Intangible Assets
We follow the acquisition method of accounting to record the assets and liabilities of acquired businesses at their estimated fair value at the date of acquisition. We initially record goodwill for the amount the consideration transferred exceeds the acquisition-date fair value of net tangible and identifiable intangible assets acquired.
Goodwill and intangible assets deemed to have indefinite lives are not amortized, but are tested for impairment annually on December 31, or more frequently when events or circumstances indicate an impairment may have occurred. When assessing the recoverability of goodwill and indefinite-lived intangible assets, the Company may first assess qualitative factors in determining whether it is more likely than not that the fair value of a reporting unit, including goodwill, or an indefinite-lived intangible asset is less than its carrying amount. The qualitative assessment is based on several factors, including the current operating environment, industry and market conditions, and overall financial performance. The Company may elect to bypass this qualitative assessment for some or all of its reporting units or other indefinite-lived intangible assets and perform a quantitative assessment, based on management's judgment.
If we quantitatively test goodwill and indefinite-lived intangible assets for possible impairment, we calculate the fair value for the reporting unit and indefinite-lived assets and compare the amount to their carrying amount. If the fair value of a reporting unit and indefinite-lived asset exceeds their carrying amount, the reporting unit and indefinite-lived assets are not considered impaired. If the carrying amount of the reporting unit and indefinite-lived assets exceeds their fair value, the reporting unit and indefinite-lived assets are considered to be impaired, and an impairment charge is recognized for the difference.
We estimate the fair value of our reporting units and indefinite-lived intangible assets based on the present value of estimated future cash flows. Considerable management judgment is necessary to evaluate the impact of operating and macroeconomic changes and to estimate the future cash flows used to measure fair value. Our estimates of future cash flows consider past performance, current and anticipated market conditions and internal projections and operating plans. Additional assumptions include forecasted growth rates, estimated discount rates, and estimated royalty rates for our indefinite-lived intangible assets.
During
the years ended December 31, 2023 and 2022, we recorded goodwill impairments of $ and $
| F-10 |
AmpliTech Group, Inc.
Notes To Consolidated Financial Statements
For the Years Ended December 31, 2023 and 2022
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 considerable 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 influence 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 $
Leases
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.
| F-11 |
AmpliTech Group, Inc.
Notes To Consolidated Financial Statements
For the Years Ended December 31, 2023 and 2022
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. Our contracts with customers do not include multiple performance obligations to be completed over a period.
Our performance obligations 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 December 31, 2023 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. We 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.
| F-12 |
AmpliTech Group, Inc.
Notes To Consolidated Financial Statements
For the Years Ended December 31, 2023 and 2022
Cost of Sales
We include product costs such material, direct labor, overhead costs, production-related depreciation expense, outside labor and production supplies in cost of sales.
Shipping and Handling
Shipping and handling charges are generally incurred at the customer’s expense. However, when billed to our customers, shipping and handling charges are included in net sales for the applicable period, and the corresponding shipping and handling expense is reported in cost of sales.
Research and Development
Research and development expenditures are charged to operations as incurred. The major components of research and development costs include payroll, consultants, outside service, and supplies.
Research
and development costs for the years ended December 31, 2023 and 2022 were $
Income Taxes
The Company’s deferred tax assets and liabilities for the expected future tax consequences of events 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 December 31, 2023 and 2022, the Company had no material unrecognized tax benefits.
| F-13 |
AmpliTech Group, Inc.
Notes To Consolidated Financial Statements
For the Years Ended December 31, 2023 and 2022
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 December 31, 2023 and 2022, there were and , respectively, potentially dilutive shares that need to be considered as common share equivalents. As a result of the net loss, the potentially dilutive shares that need to be considered as common share equivalents, for the years ended December 31, 2023 and 2022, are anti-dilutive.
Fair Value Measurements
The fair value of a financial instrument is the amount that could be received upon the sale of an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Financial assets are marked to bid prices and financial liabilities are marked to offer prices. Fair value measurements do not include transaction costs. A fair value hierarchy is used to prioritize the quality and reliability of the information used to determine fair values. Categorization within the fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement. The fair value hierarchy is defined in the following three categories:
Level 1: Unadjusted quoted prices that are available in active markets for identical assets or liabilities at the measurement date.
Level 2: Significant other observable inputs available at the measurement date, other than quoted prices included in Level 1, either directly or indirectly.
Level 3: Significant unobservable inputs that cannot be corroborated by observable market data and reflect the use of significant management judgment.
Cash and cash equivalents, receivables, inventories, prepaid expenses, accounts payable, accrued expenses, and customer deposits approximate fair value, due to their short-term nature. The carrying value of notes payable and short and long-term debt also approximates fair value since these instruments bear market rates of interest.
Assets and liabilities that are measured at fair value on a nonrecurring basis relate primarily to long-lived assets, intangible assets, and goodwill, which are remeasured when the derived fair value is below carrying value in the consolidated balance sheets.
| F-14 |
AmpliTech Group, Inc.
Notes To Consolidated Financial Statements
For the Years Ended December 31, 2023 and 2022
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 credit risk consist primarily of cash and cash equivalents, marketable securities and accounts receivable.
The Company places its cash and cash equivalents and marketable securities with high-quality, major financial and investment institutions in order to limit the amount of credit exposure. For accounts receivable, the Company performs ongoing credit evaluations of its customers and maintains allowances for potential credit losses.
Sales
to the Company’s largest customer represented approximately
As of December 31, 2023 and 2022, there were two vendors that accounted for % and % and % and %, respectively, of total component parts purchased.
Recent Accounting Pronouncements
In June 2016, the FASB issued ASU 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. The amendments in this update, among other things, require the measurement of all expected credit losses for financial assets held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts. Financial institutions and other organizations will now use forward-looking information to better inform their credit loss estimates. As a smaller reporting company, the guidance was effective for our fiscal years beginning after December 15, 2022. The adoption of this guidance did not have an impact on our consolidated financial statements.
In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, which enhances the transparency and decision usefulness of income tax disclosures by requiring; (1) consistent categories and greater disaggregation of information in the rate reconciliation and (2) income taxes paid disaggregated by jurisdiction. It also includes certain other amendments to improve the effectiveness of income tax disclosures. ASU 2023-09 is effective for fiscal years beginning after December 15, 2025, with early adoption permitted. These amendments are to be applied prospectively, with retrospective application permitted. We are currently evaluating the impact this standard will have on our consolidated financial statement disclosures.
In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures, which requires a public entity to disclose significant segment expenses and other segment items on an annual and interim basis and to provide in interim periods all disclosures about reportable segment’s profit or loss and assets that are currently required annually. ASU 2023-07 is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024, with early adoption permitted. These amendments are to be applied retrospectively. We are currently evaluating the impact this standard will have on our consolidated financial statement disclosures.
| F-15 |
AmpliTech Group, Inc.
Notes To Consolidated Financial Statements
For the Years Ended December 31, 2023 and 2022
In August 2023, the FASB issued ASU 2023-05, Business Combinations—Joint Venture Formations (Subtopic 805-60): Recognition and Initial Measurement, which requires a newly-formed joint venture to apply a new basis of accounting to its contributed net assets, resulting in the joint venture initially measuring its contributed net assets at fair value on the formation date. ASU 2023-05 is effective for all joint venture formations with a formation date on or after January 1, 2025, with early adoption permitted. These amendments are to be applied prospectively, with retrospective application permitted for joint ventures formed before the effective date. We are currently evaluating the impact this standard will have on our consolidated financial statement disclosures.
(3) Revenues
The following table presents sales disaggregated based on geographic regions and for the years ended:
Schedule of disaggregated revenue
| December 31, 2023 | December 31, 2022 | |||||||
| AmpliTech Inc. and Specialty Microwave | ||||||||
| Domestic sales | $ | $ | ||||||
| International sales | ||||||||
| Total sales | $ | $ | ||||||
| Spectrum | ||||||||
| Domestic sales | $ | $ | ||||||
| International sales | ||||||||
| Total sales | $ | $ | ||||||
Total
sales for the year ended December 31, 2023 and 2022, were $
(4) Segment Reporting
ASC 280, “Segment Reporting”, establishes standards for reporting information about operating segments on a basis consistent with the Company’s internal organizational structure as well as information about geographical areas, business segments and major customers in financial statements for details on the Company’s business segments. The Company has two reportable segments, the manufacturing and engineering segment, which is operated by AmpliTech Inc. and Specialty Microwave: and the distribution segment, which is operated by Spectrum. The manufacturing and engineering segment assembles microwave components, and the distribution segment is a global distributor of integrated circuits packages and lids. The Company provides general corporate services to its segments; however, these services are not considered when making operating decisions and assessing segment performance. These services are reported under “Corporate” below and include costs associated with executive management, financing activities and public company compliance.
| F-16 |
AmpliTech Group, Inc.
Notes To Consolidated Financial Statements
For the Years Ended December 31, 2023 and 2022
The following table presents summary information by segment for the year ended December 31, 2023:
Schedule of Segment Reporting
| AmpliTech Inc. and Specialty | Spectrum | Corporate | Total | |||||||||||||
| Revenue | $ | $ | $ | |||||||||||||
| Cost of Goods Sold | ||||||||||||||||
| Net Income (Loss) | ( | ) | ( | ) | ( | ) | ||||||||||
| Total Assets | ||||||||||||||||
| Depreciation and Amortization | ||||||||||||||||
| Interest Income, net | ( | ) | ||||||||||||||
The following table presents summary information by segment for the year December 31, 2022:
| AmpliTech Inc. and Specialty | Spectrum | Corporate | Total | |||||||||||||
| Revenue | $ | $ | $ | |||||||||||||
| Cost of Goods Sold | ||||||||||||||||
| Net Income (Loss) | ( | ) | ( | ) | ( | ) | ||||||||||
| Total Assets | ||||||||||||||||
| Depreciation and Amortization | ||||||||||||||||
| Interest Expense, net | ( | ) | ||||||||||||||
| F-17 |
AmpliTech Group, Inc.
Notes To Consolidated Financial Statements
For the Years Ended December 31, 2023 and 2022
(5) Marketable Securities
The following table is a summary of marketable securities at December 31, 2023:
Schedule of Marketable Securities
Adjusted Cost | Unrealized Gains | Unrealized Losses | Fair Value | |||||||||||||
| Level 1 (1) | ||||||||||||||||
| Money Market Fund | $ | $ | ||||||||||||||
| US Treasury Bills | ||||||||||||||||
| Total | $ | $ | ||||||||||||||
The following table is a summary of marketable securities at December 31, 2022:
Adjusted Cost | Unrealized Gains | Unrealized Losses | Fair Value | |||||||||||||
| Level 1 (1) | ||||||||||||||||
| Money Market Fund | $ | $ | ||||||||||||||
| US Treasury Bills | ||||||||||||||||
| Total | $ | $ | ||||||||||||||
Cash
and cash equivalents at December 31, 2023 and 2022 was $
| (1) |
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 December 31, 2023 and 2022, the Company does not consider any of its investments to be impaired.
| F-18 |
AmpliTech Group, Inc.
Notes To Consolidated Financial Statements
For the Years Ended December 31, 2023 and 2022
(6) Inventories
The inventory consists of the following at December 31, 2023 and 2022:
Schedule of Inventory
| December 31, | December 31, | |||||||
| 2023 | 2022 | |||||||
| Raw Materials | $ | $ | ||||||
| Work-in Progress | ||||||||
| Finished Goods | ||||||||
| Subtotal | $ | $ | ||||||
| Less: Reserve for | ||||||||
| Obsolescence | ( | ) | ( | ) | ||||
| Total | $ | $ | ||||||
(7) Property and Equipment
Property and Equipment consisted of the following at December 31, 2023 and 2022:
Schedule of Property and Equipment
| December 31, | December 31, | |||||||
| 2023 | 2022 | |||||||
| Lab Equipment | $ | $ | ||||||
| Manufacturing Equipment | ||||||||
| Automobiles | ||||||||
| Computer Equipment and Software | ||||||||
| Leasehold Improvements | ||||||||
| Furniture and Fixtures | ||||||||
| Subtotal | ||||||||
| Less: Accumulated Depreciation | ( | ) | ( | ) | ||||
| Total | $ | $ | ||||||
Depreciation
expense for the years ended December 31, 2023 and 2022 was $
Property
and equipment purchased in the amount of $
| F-19 |
AmpliTech Group, Inc.
Notes To Consolidated Financial Statements
For the Years Ended December 31, 2023 and 2022
(8) Goodwill and Intangible Assets
Goodwill
Goodwill
is related to the acquisition of Specialty Microwave Corporation on September 12, 2019 and the acquisition of Spectrum Semiconductor
Materials Inc. on December 15, 2021. Goodwill is primarily related to expected improvements and technology performance and functionality,
as well as 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 and financial statement purposes. As of December
31, 2022, goodwill related to the acquisition of Specialty was deemed impaired in the amount of $
Other Intangible Assets
Intangible assets with an estimated useful life of fifteen and twenty years consisted of the following at December 31, 2023:
Schedule of Intangible Assets
| Gross Carrying | Accumulated | Weighted | ||||||||||||||
| Amount | Amortization | Net | Average Life | |||||||||||||
| Trade name | $ | $ | - | $ | Indefinite | |||||||||||
| Customer relationships | ||||||||||||||||
| Intellectual Property | ||||||||||||||||
| Total | $ | $ | $ | |||||||||||||
Amortization
expense for the years ended December 31, 2023 and 2022 was $
Annual amortization of intangible assets are as follows:
Schedule of Amortization of Assets
| 2023 | ||||
| 2024 | ||||
| 2025 | ||||
| 2026 | ||||
| 2027 | ||||
| Thereafter | ||||
| Total | $ |
| F-20 |
AmpliTech Group, Inc.
Notes To Consolidated Financial Statements
For the Years Ended December 31, 2023 and 2022
(9) 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 $
(10) Leases
The following was included in our balance sheet as of December 31, 2023 and 2022:
Schedule of Lease Assets and Liabilities
December 31, 2023 | December 31, 2022 | |||||||
| Operating leases | ||||||||
| Assets | ||||||||
| ROU operating lease assets | $ | $ | ||||||
| Liabilities | ||||||||
| Current portion of operating lease | $ | $ | ||||||
| Operating lease, net of current portion | $ | $ | ||||||
| Total operating lease liabilities | $ | $ | ||||||
Financing leases | ||||||||
| Assets | ||||||||
| Property and equipment, gross | $ | $ | ||||||
| Accumulated depreciation | ( | ) | ( | ) | ||||
| Property and equipment, net | $ | $ | ||||||
| Liabilities | ||||||||
| Current portion of financing lease | $ | $ | ||||||
| Financing lease, net of current portion | $ | $ | ||||||
| Total financing lease liabilities | $ | $ | ||||||
| F-21 |
AmpliTech Group, Inc.
Notes To Consolidated Financial Statements
For the Years Ended December 31, 2023 and 2022
The weighted average remaining lease term and weighted average discount rate at December 31, 2023 and 2022 were as follows:
Schedule of Weighted Average Remaining Lease Term and Weighted Average Discount Rate
| Weighted average remaining lease term (years) | December 31, 2023 | December 31, 2022 | ||||||
| Operating leases | ||||||||
| Financing leases | ||||||||
| Weighted average discount rate | ||||||||
| Operating leases | % | % | ||||||
| Financing leases | % | % | ||||||
Financing Lease
The following table reconciles future minimum financing lease payments to the discounted lease liability as of December 31, 2023:
Schedule Of Future Minimum Lease Payments For Finance Lease
| 2024 | ||||
| 2025 | ||||
| 2026 | ||||
| 2027 | ||||
| Total lease payments | ||||
| Less imputed interest | ( | ) | ||
| Total lease obligations | ||||
| Less current obligations | ( | ) | ||
| Long-term lease obligations | $ |
| F-22 |
AmpliTech Group, Inc.
Notes To Consolidated Financial Statements
For the Years Ended December 31, 2023 and 2022
Operating Leases
On
December 4, 2015,
On
September 12, 2019,
On
November 27, 2019, the Company entered a 39-month agreement to lease an automobile with a monthly payment of $
On
December 15, 2021, the Company assumed the SSM lease agreement for office and warehouse space in San Jose, CA, with the same terms and
conditions. Effective February 1, 2020, the lease term will expire on January 31, 2025 with a base rent of $
On
October 15, 2021, the Company entered a new lease for a
| F-23 |
AmpliTech Group, Inc.
Notes To Consolidated Financial Statements
For the Years Ended December 31, 2023 and 2022
The following table reconciles future minimum operating lease payments to the discounted lease liability as of December 31, 2023:
Schedule of Future Minimum Operating Lease Payments
| 2024 | ||||
| 2025 | ||||
| 2026 | ||||
| 2027 | ||||
| 2028 | ||||
| Thereafter | ||||
| 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, 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 Specialty. The total consideration paid was $
Loan Payable:
On
September 12, 2019, the Company was approved for a $
| ● | On December 20, 2019, the
Company borrowed $ |
| F-24 |
AmpliTech Group, Inc.
Notes To Consolidated Financial Statements
For the Years Ended December 31, 2023 and 2022
| ● | On May 14, 2020, the Company
borrowed $ |
| ● | On June 10, 2020, the Company
borrowed $ |
| ● | On May 6, 2022, the Company
borrowed $ |
As
of March 14, 2023, the Company closed the equipment line of credit of $
In
January 2022, the Company purchased machinery for $
Future principal payments over the term of the loans as of December 31, 2023 are as follows:
Schedule of Future Principal and Interest Payments
| Payments | ||||
| 2024 | $ | |||
| Total remaining payments | $ | |||
(12) Income Taxes
As
of December 31, 2023 and 2022, the Company had net operating loss carry forwards of $
The components for the provision of income taxes include the following:
Schedule of Components for the Provision of Income Taxes
| December 31, 2023 | December 31, 2022 | |||||||
| Current federal and state | $ | $ | ||||||
| Deferred federal and state | ||||||||
| Total provision for income taxes | $ | $ | ||||||
A reconciliation of the statutory US federal income tax rate to the Company’s effective income tax rate is as follows:
Schedule of Effective Income Tax Rate
| December 31, 2023 | December 31, 2022 | |||||||
| Federal tax | % | % | ||||||
| State tax | % | % | ||||||
| Permanent items | ( | )% | ( | )% | ||||
| Change in rate | % | % | ||||||
| Valuation Allowance | ( | )% | ( | )% | ||||
| Effective income tax rate | ( | )% | % | |||||
| F-25 |
AmpliTech Group, Inc.
Notes To Consolidated Financial Statements
For the Years Ended December 31, 2023 and 2022
Deferred
income taxes reflect the net tax effect of temporary differences between amounts recorded for financial reporting purposes and amounts
used for tax purposes. The Company has a net cumulative current deferred tax asset of $
Schedule of Components of Deferred Tax Assets and Liabilities
| December 31, 2023 | December 31, 2022 | |||||||
| Deferred tax assets | ||||||||
| Inventory obsolescence | $ | $ | ||||||
| Allowance for bad debt | ||||||||
| ROU Assets | ||||||||
| Stock-based compensation | ||||||||
| Research and development | ||||||||
| Loss carryforward | ||||||||
| Valuation Allowance | ( | ) | ( | ) | ||||
| Total deferred tax assets | $ | $ | ||||||
| Deferred tax liabilities | ||||||||
| Fixed assets | $ | ( | ) | $ | ( | ) | ||
| Cost method investment | ( | ) | ||||||
| Intangible assets | ( | ) | ( | ) | ||||
| Total deferred tax liabilities | $ | ( | ) | $ | ( | ) | ||
| Total net deferred income tax liabilities | $ | ( | ) | $ | ||||
| F-26 |
AmpliTech Group, Inc.
Notes To Consolidated Financial Statements
For the Years Ended December 31, 2023 and 2022
(13) Stockholders’ Equity
The total number of shares of stock this Corporation is authorized to issue shall be five hundred one million () shares, par value $ per share. Our authorized capital stock consists of shares of common stock and 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 shares of Preferred Stock, par value $ 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 shares, $ per share.
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 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.
| F-27 |
AmpliTech Group, Inc.
Notes To Consolidated Financial Statements
For the Years Ended December 31, 2023 and 2022
Common Stock:
The Company originally authorized shares of common stock with a par value of $. Effective May 20, 2014, the Company increased its authorized shares of common stock from to .
On February 17, 2021, AmpliTech Group Inc., common stock and warrants under the symbols “AMPG” and “AMPGW”, respectively, commenced trading on NASDAQ.
On August 18, 2023, the Company granted restricted stock awards under the Company’s 2020 Plan to directors of the Company for an aggregate of shares of common stock ( each) valued at $. These restricted stock awards vested immediately.
On December 20, 2023, the Company granted restricted stock units at an exercise price of $ under the Company’s 2020 Plan to a consultant. This restricted stock award vested immediately and the stock compensation was recorded under research and development.
On May 20, 2022, restricted stock units at an exercise price of $ were issued to a board advisor. Vesting will occur in equal quarterly installments of shares beginning on May 20, 2022. As of December 30, 2023 and 2022, and shares of common stock were issued, respectively.
On June 17, 2022, the Company granted restricted stock awards under the Company’s 2020 Plan to directors of the Company for an aggregate of shares of common stock ( each) valued at $. These restricted stock awards vested immediately.
| F-28 |
AmpliTech Group, Inc.
Notes To Consolidated Financial Statements
For the Years Ended December 31, 2023 and 2022
2020 Equity Incentive Plan:
In 2023, the Board and the shareholders adopted the Company’s Amended and Restated 2020 Equity Incentive Plan (the “Amended and Restated Plan”), effective as of December 11, 2023. The Amended and Restated Plan is substantially similar to the 2020 Plan except that it increases the shares of our common stock available for issuance thereunder to shares of common stock.
Stock Options:
On February 27, 2023, the Company granted one employee ten-year stock options to purchase shares of common stock according to the Company’s 2020 Plan. The stock options vest in equal quarterly installments over five years commencing on May 27, 2023, with an exercise price of $ per share. The Company has calculated these options estimated fair market value at $ using the Black-Scholes model, with the following assumptions: expected term of years, stock price of $, exercise price of $, volatility of , risk-free rate of , and no forfeiture rate.
On May 1, 2023, the Company granted one employee ten-year stock options to purchase shares of common stock according to the Company’s 2020 Plan. The stock options vest in equal quarterly installments over five years commencing on August 1, 2023, with an exercise price of $ per share. The Company has calculated these options estimated fair market value at $ using the Black-Scholes model, with the following assumptions: expected term of years, stock price of $, exercise price of $, volatility of , risk-free rate of , and no forfeiture rate.
On June 5, 2023, the Company granted one employee ten-year stock options to purchase shares of common stock according to the Company’s 2020 Plan. The stock options vest in equal quarterly installments over three years commencing on September 5, 2023, with an exercise price of $ per share. The Company has calculated these options estimated fair market value at $ using the Black-Scholes model, with the following assumptions: expected term of years, stock price of $, exercise price of $, volatility of , risk-free rate of , and no forfeiture rate.
| F-29 |
AmpliTech Group, Inc.
Notes To Consolidated Financial Statements
For the Years Ended December 31, 2023 and 2022
On June 12, 2023, the Company granted one employee ten-year stock options to purchase shares of common stock according to the Company’s 2020 Plan. The stock options vest in equal quarterly installments over three years commencing on September 12, 2023, with an exercise price of $ per share. The Company has calculated these options estimated fair market value at $ using the Black-Scholes model, with the following assumptions: expected term of years, stock price of $, exercise price of $, volatility of , risk-free rate of , and no forfeiture rate.
On August 18, 2023, the Company granted one employee ten-year stock options to purchase shares of common stock according to the Company’s 2020 Plan. The stock options vest in equal quarterly installments over five years commencing on November 18, 2023, with an exercise price of $ per share. The Company has calculated these options estimated fair market value at $ using the Black-Scholes model, with the following assumptions: expected term of years, stock price of $, exercise price of $, volatility of , risk-free rate of , and no forfeiture rate.
On September 25, 2023, the Company granted one employee ten-year stock options to purchase shares of common stock according to the Company’s 2020 Plan. The stock options vest in equal quarterly installments over five years commencing on December 25, 2023, with an exercise price of $ per share. The Company has calculated these options estimated fair market value at $ using the Black-Scholes model, with the following assumptions: expected term of years, stock price of $, exercise price of $, volatility of , risk-free rate of , and no forfeiture rate.
On October 2, 2023, the Company granted one employee ten-year stock options to purchase shares of common stock according to the Company’s 2020 Plan. The stock options vest in equal quarterly installments over five years commencing on January 2, 2024, with an exercise price of $ per share. The Company has calculated these options estimated fair market value at $ using the Black-Scholes model, with the following assumptions: expected term of years, stock price of $, exercise price of $, volatility of , risk-free rate of , and no forfeiture rate.
On December 20, 2023, the Company granted Mr. Maqbool ten-year stock options to purchase shares of common stock according to the Company’s 2020 Plan. In addition, Ms. Sanfratello and Mr. Flores were each granted stock options to purchase shares of common stock. The stock options vest in quarterly installments over a 5-year period with an exercise price of $ per share. The Company has calculated these options estimated fair market value at $ using the Black-Scholes model, with the following assumptions: expected term of years, stock price of $, exercise price of $, volatility of , risk-free rate of , and no forfeiture rate.
| F-30 |
AmpliTech Group, Inc.
Notes To Consolidated Financial Statements
For the Years Ended December 31, 2023 and 2022
On December 20, 2023, the Company granted two employees and one consultant ten-year stock options to purchase shares of common stock according to the Company’s 2020 Plan. The stock options vest in quarterly installments over a 5-year period with an exercise price of $ per share. The Company has calculated these options estimated fair market value at $ using the Black-Scholes model, with the following assumptions: expected term of years, stock price of $, exercise price of $, volatility of , risk-free rate of , and no forfeiture rate.
On
May 20, 2022, the Company granted four employees five-year stock options to purchase shares of common stock (totaling ) according
to the Company’s 2020 Plan. The stock options vest in equal quarterly installments over five years commencing on the grant date,
with an exercise price of $ per share. The Company also granted two employees five-year stock options to purchase shares of common
stock (totaling ) according to the Company’s 2020 Plan. The stock options vest one year from date of grant at an exercise
price of $. In addition, the Company granted two advisors to the Board, ten-year stock options to purchase shares of common stock
(totaling ) according to the Company’s 2020 Plan. Twenty-five thousand () stock options vest immediately on date of
grant at an exercise price of $
On June 14, 2022, the Company granted Mr. Maqbool five-year stock options to purchase shares of common stock according to the Company’s 2020 Plan. In addition, Ms. Sanfratello and Mr. Flores were each granted five-year stock options to purchase shares of common stock. The stock options vest in quarterly installments over a 5-year period with an exercise price of $ per share. The Company has calculated these options estimated fair market value at $ using the Black-Scholes model, with the following assumptions: expected term of years, stock price of $, exercise price of $, volatility of , risk-free rate of , and no forfeiture rate.
On August 22, 2022, the Company granted Daniel Mazziota five-year stock options to purchase shares of common stock according to the Company’s 2020 Plan. The stock options vest in quarterly installments over a 5-year period with an exercise price of $ per share. The Company has calculated these options estimated fair market value at $ using the Black-Scholes model, with the following assumptions: expected term of years, stock price of $, exercise price of $, volatility of , risk-free rate of , and no forfeiture rate.
On December 19, 2022, the Company granted one employee ten-year stock options to purchase shares of common stock according to the Company’s 2020 Plan. The stock options vest in equal quarterly installments over three years commencing on March 31, 2023 with an exercise price of $ per share. The Company has calculated these options estimated fair market value at $ using the Black-Scholes model, with the following assumptions: expected term of years, stock price of $, exercise price of $, volatility of , risk-free rate of , and no forfeiture rate.
| F-31 |
AmpliTech Group, Inc.
Notes To Consolidated Financial Statements
For the Years Ended December 31, 2023 and 2022
On December 20, 2022, the Company granted Mr. Maqbool ten-year stock options to purchase shares of common stock according to the Company’s 2020 Plan. In addition, Ms. Sanfratello and Mr. Flores were each granted stock options to purchase shares of common stock. The stock options vest in quarterly installments over a 5-year period with an exercise price of $per share. The Company has calculated these options estimated fair market value at $using the Black-Scholes model, with the following assumptions: expected term of years, stock price of $, exercise price of $, volatility of , risk-free rate of , and no forfeiture rate.
On December 20, 2022, the Company granted Matthew Kappers, Andrew Lee and Daniel Mazziota ten-year stock options to purchase , and shares of common stock respectively according to the Company’s 2020 Plan. The stock options vest in quarterly installments over a 5-year period with an exercise price of $ per share. The Company has calculated these options estimated fair market value at $ using the Black-Scholes model, with the following assumptions: expected term of years, stock price of $, exercise price of $, volatility of , risk-free rate of , and no forfeiture rate.
On December 20, 2022, the Company granted eleven employees and one Board Advisor ten-year stock options to purchase shares of common stock according to the Company’s 2020 Plan. The stock options vest in quarterly installments over a 5-year period with an exercise price of $ per share. The Company has calculated these options estimated fair market value at $ using the Black-Scholes model, with the following assumptions: expected term of years, stock price of $, exercise price of $, volatility of , risk-free rate of , and no forfeiture rate
Below is a table summarizing the changes in stock options outstanding for the year ended December 31, 2023:
Schedule of Stock Options Outstanding
| Number of | Weighted Average | |||||||
| Options | Exercise Price ($) | |||||||
| Outstanding at December 31, 2022 | $ | |||||||
| Granted | $ | |||||||
| Exercised | ||||||||
| Expired | ||||||||
| Outstanding at December 31, 2023 | $ | |||||||
| Exercisable at December 31, 2023 | $ | |||||||
| F-32 |
AmpliTech Group, Inc.
Notes To Consolidated Financial Statements
For the Years Ended December 31, 2023 and 2022
As of December 31, 2023, all outstanding stock options were issued according to the Company’s 2020 Plan, and there remains shares of common stock available for future issuance under the 2020 Plan.
Stock-based
compensation expense related to stock options of $ and $ was recorded for the years ended December 31, 2023 and 2022, respectively.
As of December 31, 2023, the remaining unrecognized compensation cost related to non-vested stock options is $and is expected
to be recognized over years. The outstanding stock options have a weighted average remaining contractual life of years and
a total intrinsic value 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,
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 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
On
July 20, 2021, in connection with a product development agreement with an unrelated party, the Company issued warrants to purchase
shares of common stock. The warrants vest in one year from issuance, with an exercise price of $ per share. The Company has calculated
these warrants estimated fair market value at $
| F-33 |
AmpliTech Group, Inc.
Notes To Consolidated Financial Statements
For the Years Ended December 31, 2023 and 2022
Below is a table summarizing the changes in warrants outstanding for the year ended December 31, 2023:
Schedule of Warrants Outstanding
| Number of | Weighted Average | |||||||
| Warrants | Exercise Price ($) | |||||||
| Outstanding at December 31, 2022 | $ | |||||||
| Granted | ||||||||
| Exercised | ||||||||
| Expired | ||||||||
| Outstanding at December 31, 2023 | $ | |||||||
| Exercisable at December 31, 2023 | $ | |||||||
Stock-based compensation expense related to warrants of $ and $ was recorded for the years ended December 31, 2023 and 2022, respectively. As of December 31, 2023, the remaining unrecognized compensation cost related to non-vested warrants is $. The outstanding warrants have a weighted average remaining contractual life of years and a total intrinsic value of $.
Restricted Stock Units:
On August 18, 2023, the Company granted restricted stock awards under the Company’s 2020 Plan to directors of the Company for an aggregate of shares of common stock ( each) valued at $. These restricted stock awards vested immediately.
On December 20, 2023, restricted stock units at an exercise price of $ were issued to a consultant. This restricted stock award vested immediately.
On
May 20, 2022, restricted
stock units at an exercise price of $were
issued to a board advisor. Vesting will occur in equal quarterly installments of
On June 17, 2022, the Company granted restricted stock awards under the Company’s 2020 Plan to directors of the Company for an aggregate of shares of common stock ( each) valued at $. These restricted stock awards vested immediately.
| F-34 |
AmpliTech Group, Inc.
Notes To Consolidated Financial Statements
For the Years Ended December 31, 2023 and 2022
Schedule of Changes in Restricted Stock Units Outstanding
| Number of | Weighted Average | |||||||
| RSU’s | Exercise Price ($) | |||||||
| Outstanding at December 31, 2022 | ||||||||
| Granted | $ | |||||||
| Exercised | ( | ) | $ | |||||
| Expired | ||||||||
| Outstanding at December 31, 2023 | $ | |||||||
| Exercisable at December 31, 2023 | ||||||||
Stock-based compensation expense related to restricted stock units of $ and $ was recorded for the years ended December 31, 2023 and 2022, respectively. As of December 31, 2023, the remaining unrecognized compensation cost related to non-vested restricted stock units is $. The outstanding restricted stock units have a weighted average remaining contractual life of years and a total intrinsic value of $.
| F-35 |
AmpliTech Group, Inc.
Notes To Consolidated Financial Statements
For the Years Ended December 31, 2023 and 2022
(14) Commitments and Contingencies
On November 19, 2021, AmpliTech Group, Inc. entered into an Asset Purchase Agreement (the “Purchase Agreement”) with Spectrum Semiconductor Materials Inc. (the “Seller” or “SSM”), pursuant to which AmpliTech would acquire substantially all of the assets of the Company (the “Acquisition”). The Acquisition was completed on December 15, 2021.
The
purchase agreement contained a revenue earnout adjustment. Within forty (40) days after December 31, 2022, AmpliTech prepared and delivered
to Seller a statement setting forth its calculation of Two Years Net Revenues of the business, or the “Revenue Statement”.
(15) Subsequent events
On
January 15, 2024, the
On January 20,2024, the current Board of Directors renewed their directors’ agreements and shall be issued restricted stock units (RSU’s) pursuant to the Company’s 2020 Equity Incentive Plan.
On March 20, 2024, the Company amended the employment agreement with Jorge Flores to extend its term to March 20, 2027. The amendment was effective March 20, 2024.
| F-36 |
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.
ITEM 9A. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
Our management, including our chief executive officer and chief financial officer, evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) or 15d-15(e) under the Exchange Act as of the end of the period covered by this report. Our management does not expect that our disclosure controls and procedures will prevent all error and all fraud. In designing and evaluating the disclosure controls and procedures, management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives.
Based on the evaluation as of December 31, 2023, for the reasons set forth below, 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.
Management’s Annual Report on Internal Control Over Financial Reporting.
Our management is responsible for establishing and maintaining adequate internal control over financial reporting. Our internal control system was designed to, in general, provide reasonable assurance to our management and the Board of Directors regarding the preparation and fair presentation of published financial statements, but because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.
| 38 |
The framework used by management in making that assessment was the criteria set forth in the document entitled “Internal Control – Integrated Framework” issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO 2013). Based on that re-evaluation due to material weakness identified below, our management, including our chief executive officer and chief financial officer, concluded that our disclosure controls and procedures were not effective as of December 31, 2023 to ensure that information required to be disclosed in our Exchange Act reports was (1) recorded, processed, summarized and reported in a timely manner, and (2) accumulated and communicated to our management, including our chief executive officer and chief financial officer, as appropriate to allow timely decisions regarding required disclosure, because of material weaknesses in our internal controls over financial reporting. We have identified the following material weaknesses.
1. As of December 31, 2023, our management has identified material weaknesses in our internal control over financial reporting related to lack of segregation of duties resulting from our limited personnel and has concluded that, due to such material weakness, our disclosure controls and procedures were not effective.
2. As of December 31, 2023, we did not maintain effective controls over financial statement disclosure. Specifically, controls were not designed and in place to ensure that all disclosures required were originally addressed in our financial statements. Accordingly, management has determined that this control deficiency constitutes a material weakness.
Because of these material weaknesses, management has concluded that the Company did not maintain effective internal control over financial reporting as of December 31, 2023 based on the criteria established in “INTERNAL CONTROL-INTEGRATED FRAMEWORK” issued by the COSO.
A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the Company’s annual or interim financial statements will not be prevented or detected on a timely basis.
The Company is taking steps to remediate the material weakness listed above by implementing the following:
| ● | Developing written policies and procedures for accounting processes. | |
| ● | Monitoring written policies and procedures to ensure effectiveness. | |
| ● | Hiring and training additional personnel with the intent to provide segregation of duties and eliminate excessive amount of control over a process. | |
| ● | Requiring dual authorization on all ACH payments and bank wires. | |
| ● | Requiring management to review and approve all expenses. |
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.
ITEM 9B. OTHER INFORMATION
None.
| 39 |
ITEM 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS.
Not applicable.
PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
Our executive officers and directors are as follows:
| Name | Age | Position | ||
| Fawad Maqbool | 63 | Chairman, President, Chief Executive Officer, Treasurer, Director | ||
| Louisa Sanfratello | 58 | Chief Financial Officer and Secretary, Director | ||
| Jorge Flores (1) | 56 | Chief Operating Officer | ||
| Matthew Kappers | 59 | Director | ||
| Andrew Lee | 40 | Director | ||
| Daniel Mazziota | 86 | Director |
| (1) | Promoted February 21, 2022. |
A brief description of the background and business experience of our executive officer and directors for the past five years is as follows:
Fawad Maqbool, age 63, has served as the Company’s President, Chief Executive Officer and Chairman of the Board of Directors since founding AmpliTech, Inc. in 2002. Prior to founding AmpliTech, Inc., Mr. Maqbool was the President of Aeroflex Amplicomm, Inc. for 2000 and 2001. His duties included, among other things, overseeing the design and development of amplifiers specifically for fiber optic communication applications. Mr. Maqbool was with MITEQ, Inc. from 1987 through 1999 where he began as an Engineering Group Leader and ultimately held the title of Department Head responsible for a staff of thirty-two consisting of engineers, technicians, assemblers and support personnel. His professional career began with the Hazeltine Corporation in 1983 where he was a Microwave Design Engineer through 1986. Mr. Maqbool received a bachelor’s degree in electrical engineering (major in microwaves and RF) and biomedical engineering from the City College of New York. He subsequently earned a master’s degree in electrical engineering (major in microwaves and RF) from Polytechnic University, now the New York University Tandon School of Engineering. Through his prior service, Mr. Maqbool possesses the knowledge and experience in microwaves and RF electrical engineering that aids him in efficiently and effectively identifying and executing the Company’s strategic priorities. As our Chief Executive Officer, Chairman and founder, Mr. Maqbool brings to the Board of Directors extensive knowledge of the Company’s products, structure, history, and culture as well as years of expertise in the industry.
Louisa Sanfratello, CPA, age 58, has been an accountant, servicing numerous clients in various industries since 1987. Her professional career began with the public accounting firm of Holtz Rubenstein & Co, where she gathered audit experience for several years and moved on to more challenging positions in both the public and private sector. She served as a Controller for The New Interdisciplinary School for over 10 years. Her responsibilities included overseeing the accounting department in addition to working directly with the NYS Department of Education. Ms. Sanfratello was also employed by the Make A Wish Foundation of Suffolk County as chief accountant working directly with the President and CFO. She joined AmpliTech, Inc. in 2012 as Chief Financial Officer, where she manages the company’s finances and SEC filings. Her responsibilities also include assisting the CEO in developing new business, maintaining operating budgets and ensuring adequate cash flow. Ms. Sanfratello was appointed to the Board of Directors for her extensive knowledge of the Company’s products and her financial and accounting expertise.
| 40 |
Jorge Flores, age 56, joined AmpliTech at the end of March in 2021 as Executive Director of Operations, bringing with him over 30 years of combined operations and program management experience. Prior to joining AmpliTech’s executive leadership team, Mr. Flores served in various roles at Comtech Telecommunications (Nasdaq: CMTL), a corporation with over 2,000 employees and revenues of over $600M. Most recently, Mr. Flores served as Comtech’s Director of Program Management from August 2014 to May 2021. Mr. Flores holds an MBA with concentration in Operations Management and Leadership from Dowling College, NY and a BS in Business Administration, Major in Operations Management from NYIT. Mr. Flores was promoted to Chief Operating Officer in 2022. As COO, Mr. Flores leads critical initiatives to further streamline operations, drive growth, and take ownership of creating an enhanced experience for AmpliTech’s valued customers.
Matthew Kappers, age 59, has served as a director of the Company since January 2021. Mr. Kappers serves as the chairman of the Nominating and Corporate Governance Committee. Mr. Kappers was recently appointed as the Chief Executive Officer and Director of the Cortec Group, Inc. Since 2011, Mr. Kappers has been a Managing Director at Concordia Financial Group, an investment bank and consulting firm. He has experience in completing mergers and acquisitions, as well as post-acquisition operations. Prior to Concordia Financial Group, he was in the corporate development group for two multi-billion-dollar NYSE companies (Republic Services, Inc. and Loewen Group International, Inc.). In addition to his M&A background, he has been the COO and CFO for several small to medium-sized privately held companies. Mr. Kappers earned a B.A. degree from Vanderbilt University and a M.B.A. degree from Miami University. Mr. Kappers’ financial and operational knowledge and experience qualifies him to serve on our Board of Directors.
Andrew Lee, age 40, has served as a director of the Company since January 2021. Mr. Lee serves as the chairman of the Audit Committee. Mr. Lee is a licensed CPA and holds his MBA degree from Washington State University. Mr. Lee received his Bachelor of Business Administration, with concentrations in Finance and Accounting, from Walla Walla University. Mr. Lee began working at RealWear in 2017 as a CFO. Prior to joining RealWear, Mr. Lee led Finance and Operations as the CFO of Ryonet Corporation, a high-growth firm in Vancouver, Washington. Mr. Lee’s finance and accounting experience qualifies him to serve on our Board of Directors.
Daniel Mazziota, age 86, has served as a director of the Company since January 2021. He serves as the chairman of the Compensation Committee. Mr. Mazziota founded Microwave Power Devices, Inc. in 1967, which he sold in 1981 to Macom Technology Solutions, a Nasdaq listed developer and producer of radio, microwave, and millimeter wave semiconductor devices and components. He served as the President of Microwave Power Devices, Inc. until his retirement in 1988. He is currently president of IDM Consulting, which provides consulting services to the microwave component and sub system industry. He received his BEE and MSEE degrees from New York Polytechnic Institute and is a fellow of the Institute. Mr. Mazziota’s microwave component and subsystem industry experience qualifies him to serve on our Board of Directors.
Term of Office
Our directors are appointed for a one-year term to hold office until the next annual general meeting of our stockholders or until removed from office in accordance with our bylaws. Our officers are appointed by our Board of Directors and hold office until removed by the Board of Directors.
Family Relationships
There are no family relationships between any of our directors or executive officers.
Involvement in Legal Proceedings
To our knowledge, there have been no material legal proceedings that would require disclosure under the federal securities laws that are material to an evaluation of the ability of our director or executive officers.
Potential Conflicts of Interest
We are not aware of any current or potential conflicts of interest with our director or executive officers.
| 41 |
Board Committees
Effective January 20, 2021, we formed an Audit Committee, a Compensation Committee, and a Nominating and Corporate Governance Committee, each of which is comprised of our three independent directors. Mr. Kappers was appointed chairman of the Nominating and Corporate Governance Committee, Mr. Lee as the chairman of the Audit Committee and Mr. Mazziota as the chairman of the Compensation Committee. Mr. Lee’s finance and accounting experience qualifies him as the audit committee financial expert.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act requires that our directors and executive officers and persons who beneficially own more than 10% of our common stock (referred to herein as the “reporting persons”) file with the SEC various reports as to their ownership of and activities relating to our common stock. Such reporting persons are required by the SEC regulations to furnish us with copies of all Section 16(a) reports they file. Based solely on our review of copies of the reports filed with the SEC and the written representations of our directors and executive officers, we believe that all reporting requirements for fiscal year 2023 were complied with by each person who at any time during the 2023 fiscal year was a director or an executive officer or held more than 10% of our common stock.
Code of Ethics
We have adopted a code of ethics that applies to our officers, employees and directors, including our Chief Executive Officer and Chief Financial Officer. Our code of ethics is available on our website.
ITEM 11. EXECUTIVE COMPENSATION
Summary Compensation Table
The following summary compensation table sets forth all compensation awarded to, earned by, or paid to, the named person, during the years ended December 31, 2023 and 2022:
Summary Compensation of Named Executive Officers
| Name and Principal Position | Fiscal Year | Salary ($) | Bonus ($) | Stock Awards ($) | Option Awards ($) | All Other Compensation ($) | Total ($) | |||||||||||||||||||||
| Fawad Maqbool | 2023 | 500,000 | - | - | 157,797 | - | 657,797 | |||||||||||||||||||||
| Chairman, President and Chief Executive Officer | 2022 | 496,335 | - | - | 330,787 | - | 827,122 | |||||||||||||||||||||
| Louisa Sanfratello | 2023 | 275,000 | - | - | 78,898 | - | 353,898 | |||||||||||||||||||||
| Chief Financial Officer, Secretary | 2022 | 273,558 | - | - | 165,393 | - | 438,951 | |||||||||||||||||||||
| Jorge Flores | 2023 | 275,000 | - | - | 78,898 | - | 353,898 | |||||||||||||||||||||
| Chief Operating Officer | 2022 | 272,408 | - | - | 165,393 | - | 437,801 | |||||||||||||||||||||
On February 21, 2022, the Company’s Board of Directors approved an increase in salary, effective as of January 1, 2022, for Mr. Maqbool, to $500,000 per year, and for Ms. Sanfratello and Mr. Flores to $275,000 per year.
| 42 |
Pursuant to the terms of his employment agreement entered into on February 21, 2022, Mr. Flores will receive a base annual salary of $275,000 and is eligible to participate in the Company’s 2020 Equity Incentive Plan or successor to such plan. The agreement contains a perpetual confidentiality covenant as well as non-competition and employee and customer non-solicitation covenants that apply during his employment and for a period of one year following his termination. The agreement was amended on March 27, 2023 to extend its term to March 20, 2024 and again on amended on March 20, 2024 to extend its term to March 20, 2027.
Outstanding Equity Awards at Fiscal Year End
On December 20, 2023, the Company granted Mr. Maqbool ten-year stock options to purchase 100,000 shares of common stock according to the Company’s 2020 Plan. In addition, Ms. Sanfratello and Mr. Flores were each granted stock options to purchase 50,000 shares of common stock. The stock options vest in quarterly installments over a 5-year period with an exercise price of $1.73 per share. The Company has calculated these options estimated fair market value at $315,593 using the Black-Scholes model, with the following assumptions: expected term of 7.36 years, stock price of $1.73, exercise price of $1.73, volatility of 120.7%, risk-free rate of 3.88%, and no forfeiture rate.
On June 14, 2022, the Company granted Mr. Maqbool stock options to purchase 100,000 shares of common stock according to the Company’s 2020 Plan. In addition, Ms. Sanfratello and Mr. Flores were each granted stock options to purchase 50,000 shares of common stock. The stock options vest in quarterly installments over a 5-year period with an exercise price of $1.72 per share. The Company has calculated these options estimated fair market value at $304,148 using the Black-Scholes model, with the following assumptions: expected term of 4.9years, stock price of $1.72, exercise price of $1.72, volatility of 138.3%, risk-free rate of 3.61%, and no forfeiture rate.
On December 20, 2022, the Company granted Mr. Maqbool stock options to purchase 100,000 shares of common stock according to the Company’s 2020 Plan. In addition, Ms. Sanfratello and Mr. Flores were each granted stock options to purchase 50,000 shares of common stock. The stock options vest in quarterly installments over a 5-year period with an exercise price of $1.92 per share. The Company has calculated these options estimated fair market value at $357,425 using the Black-Scholes model, with the following assumptions: expected term of 7.5 years, stock price of $1.92, exercise price of $1.92, volatility of 127.5%, risk-free rate of 3.79%, and no forfeiture rate.
The following table sets forth the outstanding equity awards for our named executive officers as of the fiscal year ended December 31, 2023.
OUTSTANDING EQUITY AWARDS AT FISCAL YEAR END
| Name | Grant Date | Number of Securities Underlying Unexercised Options (#) Exercisable | Number of Securities Underlying Unexercised Options (#) Unexercisable | Equity Incentive Plan Awards: Number of Securities Underlying Unexercised Unearned Options (#) | Option Exercise Price ($) | Option Expiration Date | ||||||||||||||
| Fawad Maqbool | ||||||||||||||||||||
| December 20,2023 | -0- | 100,000 | -0- | $ | 1.73 | December 20, 2033 | ||||||||||||||
| June 14, 2022 | 35,000 | 65,000 | -0- | $ | 1.72 | June 14, 2027 | ||||||||||||||
| December 20, 2022 | 20,000 | 80,000 | -0- | $ | 1.92 | December 20, 2032 | ||||||||||||||
| Louisa Sanfratello | ||||||||||||||||||||
| December 20,2023 | -0- | 50,000 | -0- | $ | 1.73 | December 20, 2033 | ||||||||||||||
| June 14, 2022 | 17,500 | 32,500 | -0- | $ | 1.72 | June 14, 2027 | ||||||||||||||
| December 20, 2022 | 10,000 | 40,000 | -0- | $ | 1.92 | December 20, 2032 | ||||||||||||||
| Jorge Flores | ||||||||||||||||||||
| December 20,2023 | -0- | 50,000 | -0- | $ | 1.73 | December 20, 2033 | ||||||||||||||
| June 14, 2022 | 17,500 | 32,500 | -0- | $ | 1.72 | June 14, 2027 | ||||||||||||||
| December 20, 2022 | 10,000 | 40,000 | -0- | $ | 1.92 | December 20, 2032 | ||||||||||||||
| 43 |
Directors Compensation
| Name | Fiscal Year | Fees earned or paid in cash ($) | Stock awards ($) | Option awards ($) | Non-equity incentive plan compensation ($) | Nonqualified deferred compensation earnings ($) | All other compensation ($) | Total ($) | |||||||||||||||||||||||
| Matthew Kappers | 2023 | - | 27,600 | - | - | - | 27,600 | ||||||||||||||||||||||||
| 2022 | - | 29,550 | 8,936 | - | - | - | 38,486 | ||||||||||||||||||||||||
| Andrew Lee | 2023 | - | 27,600 | - | - | - | 27,600 | ||||||||||||||||||||||||
| 2022 | - | 29,550 | 8,936 | - | - | - | 38,486 | ||||||||||||||||||||||||
| Daniel Mazziota | 2023 | - | 27,600 | - | - | - | 27,600 | ||||||||||||||||||||||||
| 2022 | - | 29,550 | 61,190 | - | - | - | 90,740 | ||||||||||||||||||||||||
In connection with their respective appointments, each of Matthew Kappers, Andrew Lee and Daniel Mazziota entered into director agreements with the Company, providing for, among other things that each of the directors shall be entitled to fees for attendance at virtual meetings and reimbursement of expenses for attending meetings.
On August 18, 2023, the Company granted restricted stock awards under the Company’s 2020 Plan to directors of the Company for an aggregate of 45,000 shares of common stock (15,000 each) valued at $82,800. These restricted stock awards vested immediately.
On June 17, 2022, the Company granted restricted stock awards under the Company’s 2020 Plan to directors of the Company for an aggregate of 45,000 shares of common stock (15,000 each) valued at $88,650. These restricted stock awards vested immediately.
On August 22,2022, the Company granted Daniel Mazziota stock options to purchase 25,000 shares of common stock according to the Company’s 2020 Plan. The stock options vest in quarterly installments over a 5-year period with an exercise price of $2.23 per share. The Company has calculated these options estimated fair market value at $47,787 using the Black-Scholes model, with the following assumptions: expected term of 4.5 years, stock price of $2.23, exercise price of $2.23, volatility of 134.5%, risk-free rate of 3.17%, and no forfeiture rate.
On December 20, 2022, the Company granted Matthew Kappers, Andrew Lee and Daniel Mazziota stock options to purchase 5,000, 5,000 and 7,500 shares of common stock respectively according to the Company’s 2020 Plan. The stock options vest in quarterly installments over a 5-year period with an exercise price of $1.92 per share. The Company has calculated these options estimated fair market value at $31,275 using the Black-Scholes model, with the following assumptions: expected term of 7.5 years, stock price of $1.92, exercise price of $1.92, volatility of 127.5%, risk-free rate of 3.79%, and no forfeiture rate.
2020 Equity Incentive Plan
In October 2020, the Board of Directors and shareholders adopted 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. In 2023, the Board and the shareholders adopted the Company’s Amended and Restated 2020 Equity Incentive Plan (the “Amended and Restated Plan”), effective as of December 11, 2023. The Amended and Restated Plan is substantially similar to the 2020 Plan except that it increases the shares of our common stock available for issuance thereunder to 2,250,000 shares of common stock.
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In December 2023, the Board of Directors and shareholders amended and restated the current plan to increase the number of shares available for issuance under the plan to 2,250,000 shares of common stock.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
The following table summarizes information about our equity compensation plans as of December 31, 2023:
| Number of securities to be issued upon exercise of outstanding options, warrants, and rights | Weighted-average price of outstanding options, warrants and rights | Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a)) | ||||||||||
| (a) | (b) | (c) | ||||||||||
| Equity compensation plans approved by security holders | 1,236,000 | $ | 2.30 | 869,000 | ||||||||
| Equity compensation plans not approved by security holders | - | - | - | |||||||||
| Total | 1,236,000 | $ | 2.30 | 869,000 | ||||||||
The following table sets forth certain information with respect to the beneficial ownership of our voting securities by (i) each director and named executive officer, (ii) all executive officers and directors as a group; and (iii) each shareholder known to be the beneficial owner of 5% or more of the outstanding common stock of the Company as of March 13, 2024. Beneficial ownership is determined in accordance with the rules of the SEC. Generally, a person is considered to beneficially own securities: (i) over which such person, directly or indirectly, exercises sole or shared voting or investment power, and (ii) of which such person has the right to acquire beneficial ownership at any time within 60 days (such as through exercise of stock options or warrants). For purposes of computing the percentage of outstanding shares held by each person or group of persons, any shares that such person or persons has the right to acquire within 60 days are deemed to be outstanding but are not deemed to be outstanding for the purpose of computing the percentage ownership of any other person. The inclusion herein of any shares listed as beneficially owned does not constitute an admission of beneficial ownership. Unless otherwise indicated below, the address of each person listed in the table below is c/o 155 Plant Avenue, Hauppauge, NY 11788.
| Amount and Nature of Beneficial Ownership | ||||||
| Common Stock (1) | ||||||
| Name and Address of Beneficial Owner | No. of Shares | % of Class | ||||
| Directors and Officers | ||||||
| Fawad Maqbool, Chairman, President, and Chief Executive Officer | 2,824,504 | (2) | 29.07 | % | ||
| Louisa Sanfratello, Chief Financial Officer | 97,500 | (3) | 1.0 | % | ||
| Jorge Flores | 76,917 | (4) | * | % | ||
| Daniel Mazziota | 237.618 | (5) | 2.45 | % | ||
| Matthew Kappers | 43,750 | (6) | * | |||
| Andrew Lee | 43750 | (6) | * | |||
| All officers and directors as a group (6 persons) | 3,324,039 | 34.22 | % | |||
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| * | Less than 1% |
| 1) | Based on 9,717,113 shares of common stock issued and outstanding. |
| 2) | Includes options to purchase 175,000 shares of common stock, |
| 3) | Includes 87,500 options to purchase shares of common stock. |
| 4) | Includes 62,917 options to purchase shares of common stock. |
| 5) | Includes 34,375 options to purchase shares of common stock |
| 6) | Includes 13,750 options to purchase of common stock |
ITEM 13. CERTAIN RELATIONSHIP AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE.
We had no transactions since the beginning of the fiscal year of 2022, or any currently proposed transaction, in which the Company was to be a participant and the amount involved exceeded or exceeds $120,000 and in which any related person had or will have a direct or indirect material interest (other than compensation described under “Executive Compensation”).
Director Independence
Mr. Kappers, Mr. Lee and Mr. Mazziota are independent using the definition of independence under NASDAQ Listing Rule 5605 (a) (2).
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
The following table shows the aggregate fees we paid for professional services provided to us for 2023 and 2022:
| 2023 | 2022 | |||||||
| Audit Fees | $ | 113,600 | $ | 130,062 | ||||
| Audit-Related Fees | $ | 36,500 | $ | 71,548 | ||||
| Tax Fees | $ | 6,665 | $ | 3,420 | ||||
| All Other Fees | - | - | ||||||
| Total | $ | 156,765 | $ | 205,030 | ||||
Audit Fees
For the years ended December 31, 2023 and 2022, we paid $113,600 and $130,062 respectively for professional services rendered for the audit and review of our financial statements.
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Audit Related Fees
For the years ended December 31, 2023 and 2022, we paid approximately $36,500 and $71,548, respectively, for audit related services.
Tax Fees
For our years ended December 31, 2023 and 2022, we paid $6,665 and $3,420 respectively, for professional services rendered for tax compliance, tax advice, and tax planning.
All Other Fees
We did not incur any other fees related to services rendered by our independent registered public accounting firm for the years ended December 31, 2023 and 2022.
Pre-Approval Policies and Procedures
As of January 20, 2021, the Board of Directors appointed three independent directors to a newly appointed audit committee and appointed Andrew Lee as the chairman of the audit committee. In its capacity, the audit committee pre-approves all audits (including audit-related) and permitted non-audit services to be performed by the independent auditors. The audit committee will annually approve the scope and fee estimates for the year-end audit to be performed by the Company’s independent auditors for the fiscal year. With respect to other permitted services, the audit committee pre-approves specific engagements, projects and categories of services on a fiscal year basis, subject to individual projects and annual maximums. To date, the Company has not engaged its auditors to perform any non-audit related service.
The Audit Committee pre-approved all services provided by our independent registered public accounting firm. All the above services and fees during 2023 were pre-approved by our Audit Committee. All the above services in 2023 were reviewed and approved by our Audit Committee either before or after the respective services were rendered.
Item 15. Exhibits and Financial Statement Schedules.
(a) Documents filed as part of this Annual Report.
| 1. | Report of Independent Registered Public Accounting Firm (PCAOB ID 3627) |
| 2. | Financial Statement Schedules |
Exhibits:
| 47 |
ITEM 16. FORM 10-K SUMMARY
None.
| 48 |
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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: April 1, 2024 | By: | /s/ Fawad Maqbool |
| Fawad Maqbool | ||
President and Chief Executive Officer (Principal Executive Officer) |
||
Pursuant to the requirements of the Securities Exchange Act of 1934 this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
| Name | Title | Date | ||
| /s/ Fawad Maqbool | President, Chief Executive Officer and | April 1, 2024 | ||
| Fawad Maqbool | Chairman of the Board of Directors (Principal Executive Officer) | |||
| /s/ Louisa Sanfratello | Chief Financial Officer and Secretary | April 1, 2024 | ||
| Louisa Sanfratello | (Principal Financial and Accounting Officer) | |||
| /s/ Andrew Lee | Director | April 1, 2024 | ||
| Andrew Lee | ||||
| /s/ Daniel Mazziota | Director | April 1, 2024 | ||
| Daniel Mazziota | ||||
| /s/ Matthew Kappers | Director | April 1, 2024 | ||
| Matthew Kappers |
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Exhibit 4.2
AMPLITECH GROUP, INC.
and
VSTOCK TRANSFER, LLC, as
Warrant Agent
Warrant Agency Agreement
Dated as of February 14, 2024
WARRANT AGENCY AGREEMENT
WARRANT AGENCY AGREEMENT, dated as of February 14, 2024 (“Agreement”), between AmpliTech Group, Inc., a corporation organized under the laws of the State of Nevada (the “Company”), and VStock Transfer, LLC, a California limited liability company (the “Warrant Agent”).
W I T N E S S E T H
WHEREAS, the Company previously entered into a certain warrant agency agreement with Manhattan Transfer Registrar Co. (“Manhattan Transfer Agent”) dated February 16, 2021 (the “Manhattan Warrant Agency Agreement”) pursuant to a registered offering by the Company of 1,371,428 Units (the “Offering”), with each Unit consisting of one (1) share of the Company’s common stock, par value $0.001 per share (the “Common Stock”) and one (1) warrant (the “Warrants”) to purchase one (1) share of Common Stock (the “Warrant Shares”) at a price of $7.00 per share (or 100% of the price of each Unit sold in the Offering); and
WHEREAS, pursuant to the Offering the Company granted an over-allotment option to purchase up to 15% of the aggregate number of Units sold, including warrants to purchase an additional 205,714 shares of Common Stock (the “Over-Allotment Option”) to the Underwriters, which over-allotment option was fully exercised; and
WHEREAS, upon the terms and conditions set forth in the Manhattan Warrant Agency Agreement and pursuant to the effective registration statements on Form S-1, as amended (File No. 333-251260) and Form S-1MEF, as amended (File No. 333-253177) (collectively, the “Registration Statement”), and the terms and conditions of the Warrant Certificate, the Company previously issued the Warrants in book entry form entitling the respective holders of the Warrants (the “Holders,” which term shall include a Holder’s transferees, successors and assigns and “Holder” shall include, if the Warrants are held in “street name,” a Participant (as defined below) or a designee appointed by such Participant); and
WHEREAS, the shares of Common Stock and Warrants previously issued in connection with the Offering were issued separately; and
WHEREAS, the Common Stock and Warrants have been approved for listing on the NASDAQ Capital Market, under the symbols “AMPG” and “AMPGW”, respectively, and commenced trading on the NASDAQ on February 17, 2021; and
WHEREAS, on [ ], 2024, the Warrant Agent was engaged as the Company’s new transfer agent; and
WHEREAS, the Company wishes the Warrant Agent to act on behalf of the Company, and the Warrant Agent is willing so to act, in connection with the issuance, registration, transfer, exchange, exercise and replacement of the Warrants and, in the Warrant Agent’s capacity as the Company’s transfer agent, the delivery of the Warrant Shares (as defined below).
NOW, THEREFORE, in consideration of the premises and the mutual agreements herein set forth, the parties hereby agree as follows:
Section 1. Certain Definitions. For purposes of this Agreement, all capitalized terms not herein defined shall have the meanings hereby indicated:
(a) “Affiliate” has the meaning ascribed to it in Rule 12b-2 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”).
| 2 |
(b) “Business Day” means any day except any Saturday, any Sunday, any day which is a federal legal holiday in the United States or any day on which the Nasdaq Stock Market is authorized or required by law or other governmental action to close.
(c) “Close of Business” on any given date means 5:00 p.m., New York City time, on such date; provided, however, that if such date is not a Business Day it means 5:00 p.m., New York City time, on the next succeeding Business Day.
(d) “Person” means an individual, corporation, association, partnership, limited liability company, joint venture, trust, unincorporated organization, government or political subdivision thereof or governmental agency or other entity.
(e) “Warrant Certificate” means a certificate in substantially the form attached as Exhibit 1 hereto, representing such number of Warrant Shares as is indicated therein, provided that any reference to the delivery of a Warrant Certificate in this Agreement shall include delivery of a Definitive Certificate or a Global Warrant (each as defined below).
All other capitalized terms used but not otherwise defined herein shall have the meaning ascribed to such terms in the Warrant Certificate.
Section 2. Appointment of Warrant Agent. The Company hereby appoints the Warrant Agent to act as agent for the Company in accordance with the terms and conditions hereof, and the Warrant Agent hereby accepts such appointment.
Section 3. Global Warrants.
(a) The Warrants shall be registered securities and shall be evidenced by a global warrant (the “Global Warrants”), in the form of the Warrant Certificate, which shall be deposited with the Warrant Agent and registered in the name of Cede & Co., a nominee of The Depository Trust Company (the “Depositary”), or as otherwise directed by the Depositary. Ownership of beneficial interests in the Warrants shall be shown on, and the transfer of such ownership shall be effected through, records maintained by (i) the Depositary or its nominee for each Global Warrant or (ii) institutions that have accounts with the Depositary (such institution, with respect to a Warrant in its account, a “Participant”).
(b) If the Depositary subsequently ceases to make its book-entry settlement system available for the Warrants, the Company may instruct the Warrant Agent regarding other arrangements for book-entry settlement. In the event that the Warrants are not eligible for, or it is no longer necessary to have the Warrants available in, book-entry form, the Warrant Agent shall provide written instructions to the Depositary to deliver to the Warrant Agent for cancellation each Global Warrant, and the Company shall instruct the Warrant Agent to deliver to each Holder a Warrant Certificate.
(c) A Holder has the right to elect at any time or from time to time a Warrant Exchange (as defined below) pursuant to a Warrant Certificate Request Notice (as defined below). Upon written notice by a Holder to the Company and the Warrant Agent for the exchange of some or all of such Holder’s Global Warrants for a separate certificate in the form attached hereto as Exhibit 1 (such separate certificate, a “Definitive Certificate”) evidencing the same number of Warrants, which request shall be in the form attached hereto as Exhibit 2 (a “Warrant Certificate Request Notice” and the date of delivery of such Warrant Certificate Request Notice by the Holder, the “Warrant Certificate Request Notice Date” and the surrender by the Holder to the Warrant Agent of a number of Global Warrants for the same number of Warrants evidenced by a Warrant Certificate, a “Warrant Exchange”), the Company and the Warrant Agent shall promptly effect the Warrant Exchange and the Company shall promptly issue and deliver to the Holder a Definitive Certificate for such number of Warrants in the name set forth in the Warrant Certificate Request Notice. Such Definitive Certificate shall be dated the original issue date of the Warrants, shall be manually executed by an authorized signatory of the Company, shall be in the form attached hereto as Exhibit 1 and shall be reasonably acceptable in all respects to such Holder. In connection with a Warrant Exchange, the Company agrees to deliver the Definitive Certificate to the Holder within ten (10) Business Days of the Warrant Certificate Request Notice pursuant to the delivery instructions in the Warrant Certificate Request Notice (“Warrant Certificate Delivery Date”). If the Company fails for any reason to deliver to the Holder the Definitive Certificate subject to the Warrant Certificate Request Notice by the Warrant Certificate Delivery Date, the Company shall pay to the Holder, in cash, as liquidated damages and not as a penalty, for each $1,000 of Warrant Shares evidenced by such Definitive Certificate (based on the VWAP (as defined in the Warrants) of the Common Stock on the Warrant Certificate Request Notice Date), $10 per Business Day for each Business Day after such Warrant Certificate Delivery Date until such Definitive Certificate is delivered or, prior to delivery of such Warrant Certificate, the Holder rescinds such Warrant Exchange. The Company covenants and agrees that, upon the date of delivery of the Warrant Certificate Request Notice, the Holder shall be deemed to be the holder of the Definitive Certificate and, notwithstanding anything to the contrary set forth herein, the Definitive Certificate shall be deemed for all purposes to contain all of the terms and conditions of the Warrants evidenced by such Warrant Certificate and the terms of this Agreement, other than Sections 3(c), 3(d) and 9 herein, shall not apply to the Warrants evidenced by the Definitive Certificate. Notwithstanding anything herein to the contrary, the Company shall act as warrant agent with respect to any Definitive Certificate requested and issued pursuant to this section. Notwithstanding anything to the contrary contained in this Agreement, in the event of inconsistency between any provision in this Agreement and any provision in a Definitive Certificate, as it may from time to time be amended, the terms of such Definitive Certificate shall control.
| 3 |
(d) A Holder of a Definitive Certificate (pursuant to a Warrant Exchange or otherwise) has the right to elect at any time or from time to time a Global Warrants Exchange (as defined below) pursuant to a Global Warrants Request Notice (as defined below). Upon written notice by a Holder to the Company for the exchange of some or all of such Holder’s Warrants evidenced by a Definitive Certificate for a beneficial interest in Global Warrants held in book-entry form through the Depositary evidencing the same number of Warrants, which request shall be in the form attached hereto as Exhibit 3 (a “Global Warrants Request Notice” and the date of delivery of such Global Warrants Request Notice by the Holder, the “Global Warrants Request Notice Date” and the surrender upon delivery by the Holder of the Warrants evidenced by Definitive Certificates for the same number of Warrants evidenced by a beneficial interest in Global Warrants held in book-entry form through the Depositary, a “Global Warrants Exchange”), the Company shall promptly effect the Global Warrants Exchange and shall promptly direct the Warrant Agent to issue and deliver to the Holder Global Warrants for such number of Warrants in the Global Warrants Request Notice, which beneficial interest in such Global Warrants shall be delivered by the Depositary’s Deposit or Withdrawal at Custodian system to the Holder pursuant to the instructions in the Global Warrants Request Notice. In connection with a Global Warrants Exchange, the Company shall direct the Warrant Agent to deliver the beneficial interest in such Global Warrants to the Holder within ten (10) Business Days of the Global Warrants Request Notice pursuant to the delivery instructions in the Global Warrant Request Notice (“Global Warrants Delivery Date”). If the Company fails for any reason to deliver to the Holder Global Warrants subject to the Global Warrants Request Notice by the Global Warrants Delivery Date, the Company shall pay to the Holder, in cash, as liquidated damages and not as a penalty, for each $1,000 of Warrant Shares evidenced by such Global Warrants (based on the VWAP (as defined in the Warrants) of the Common Stock on the Global Warrants Request Notice Date), $10 per Business Day for each Business Day after such Global Warrants Delivery Date until such Global Warrants are delivered or, prior to delivery of such Global Warrants, the Holder rescinds such Global Warrants Exchange. The Company covenants and agrees that, upon the date of delivery of the Global Warrants Request Notice, the Holder shall be deemed to be the beneficial holder of such Global Warrants.
Section 4. Form of Warrant Certificates. The Warrant Certificate, together with the form of election to purchase Common Stock (“Notice of Exercise”) and the form of assignment to be printed on the reverse thereof, shall be in the form of Exhibit 1 hereto.
Section 5. Countersignature and Registration. The Global Warrant shall be executed on behalf of the Company by its Chief Executive Officer, Chief Financial Officer or Vice President, by facsimile signature, and have affixed thereto the Company’s seal or a facsimile thereof which shall be attested by the Secretary or an Assistant Secretary of the Company, by facsimile signature. The Global Warrant shall be countersigned by the Warrant Agent by facsimile signature and shall not be valid for any purpose unless so countersigned. In case any officer of the Company who shall have signed any of the Global Warrant shall cease to be such officer of the Company before countersignature by the Warrant Agent and issuance and delivery by the Company, such Global Warrant, nevertheless, may be countersigned by the Warrant Agent, issued and delivered with the same force and effect as though the person who signed such Global Warrant had not ceased to be such officer of the Company; and any Global Warrant may be signed on behalf of the Company by any person who, at the actual date of the execution of such Global Warrant, shall be a proper officer of the Company to sign such Global Warrant, although at the date of the execution of this Warrant Agreement any such person was not such an officer.
| 4 |
The Warrant Agent will keep or cause to be kept, at one of its offices, or at the office of one of its agents, books for registration and transfer of the Global Warrants issued hereunder. Such books shall show the names and addresses of the respective Holders of the Global Warrant, the number of warrants evidenced on the face of each of such Global Warrant and the date of each of such Global Warrant. The Warrant Agent will create a special account for the issuance of Global Warrants. The Company will keep or cause to be kept at one of its offices, books for the registration and transfer of any Definitive Certificates issued hereunder and the Warrant Agent shall not have any obligation to keep books and records with respect to any Definitive Warrants. Such Company books shall show the names and addresses of the respective Holders of the Definitive Certificates, the number of warrants evidenced on the face of each such Definitive Certificate and the date of each such Definitive Certificate.
Section 6. Transfer, Split Up, Combination and Exchange of Warrant Certificates; Mutilated, Destroyed, Lost or Stolen Warrant Certificates. With respect to the Global Warrant, subject to the provisions of the Warrant Certificate and the last sentence of this first paragraph of Section 6 and subject to applicable law, rules or regulations, or any “stop transfer” instructions the Company may give to the Warrant Agent, at any time after the closing date of the Offering, and at or prior to the Close of Business on the Termination Date (as such term is defined in the Warrant Certificate), any Global Warrant or Global Warrants may be transferred, split up, combined or exchanged for another Global Warrant or Global Warrants, entitling the Holder to purchase a like number of shares of Common Stock as the Global Warrant or Global Warrants surrendered then entitled such Holder to purchase. Any Holder desiring to transfer, split up, combine or exchange any Global Warrant shall make such request in writing delivered to the Warrant Agent, and shall surrender the Global Warrant to be transferred, split up, combined or exchanged at the principal office of the Warrant Agent. Any requested transfer of Warrants, whether in book-entry form or certificate form, shall be accompanied by reasonable evidence of authority of the party making such request that may be required by the Warrant Agent. Thereupon the Warrant Agent shall, subject to the last sentence of this first paragraph of Section 6, countersign and deliver to the Person entitled thereto a Global Warrant or Global Warrants, as the case may be, as so requested. The Company may require payment from the Holder of a sum sufficient to cover any tax or governmental charge that may be imposed in connection with any transfer, split up, combination or exchange of Global Warrants. The Company shall compensate the Warrant Agent per the fee schedule mutually agreed upon by the parties hereto and provided separately on the date hereof.
Upon receipt by the Warrant Agent of evidence reasonably satisfactory to it of the loss, theft, destruction or mutilation of a Warrant Certificate, which evidence shall include an affidavit of loss, or in the case of mutilated certificates, the certificate or portion thereof remaining, and, in case of loss, theft or destruction, of indemnity in customary form and amount (but, with respect to any Definitive Certificates, shall not include the posting of any bond by the Holder), and satisfaction of any other reasonable requirements established by Section 8-405 of the Uniform Commercial Code as in effect in the State of Delaware, and reimbursement to the Company and the Warrant Agent of all reasonable expenses incidental thereto, and upon surrender to the Warrant Agent and cancellation of the Warrant Certificate if mutilated, the Company will make and deliver a new Warrant Certificate of like tenor to the Warrant Agent for delivery to the Holder in lieu of the Warrant Certificate so lost, stolen, destroyed or mutilated.
Section 7. Exercise of Warrants; Exercise Price; Termination Date.
(a) The Warrants shall be exercisable commencing on the Initial Exercise Date. The Warrants shall cease to be exercisable and shall terminate and become void as set forth in the Warrant Certificate. Subject to the foregoing and to Section 7(b) below, the Holder of a Warrant may exercise the Warrant in whole or in part upon surrender of the Warrant Certificate, if required, with the executed Notice of Exercise and payment of the Exercise Price, which may be made, at the option of the Holder, by wire transfer or by certified or official bank check in United States dollars, to the Warrant Agent at the principal office of the Warrant Agent or to the office of one of its agents as may be designated by the Warrant Agent from time to time. In the case of the Holder of a Global Warrant, the Holder shall deliver the executed Notice of Exercise and the payment of the Exercise Price as described herein. Notwithstanding any other provision in this Agreement, a holder whose interest in a Global Warrant is a beneficial interest in a Global Warrant held in book-entry form through the Depositary (or another established clearing corporation performing similar functions), shall effect exercises by delivering to the Depositary (or such other clearing corporation, as applicable) the appropriate instruction form for exercise, complying with the procedures to effect exercise that are required by the Depositary (or such other clearing corporation, as applicable). Delivery of the Warrant Shares shall be made by the Warrant Share Delivery Date. The Company acknowledges that the bank accounts maintained by the Warrant Agent in connection with the services provided under this Agreement will be in its name and that the Warrant Agent may receive investment earnings in connection with the investment at Warrant Agent risk and for its benefit of funds held in those accounts from time to time. Neither the Company nor the Holders will receive interest on any deposits or Exercise Price. No ink-original Notice of Exercise shall be required, nor shall any medallion guarantee (or other type of guarantee or notarization) of any Notice of Exercise be required. The Company hereby acknowledges and agrees that, with respect to a holder whose interest in a Global Warrant is a beneficial interest in a Global Warrant held in book-entry form through the Depositary (or another established clearing corporation performing similar functions), upon delivery of irrevocable instructions to such holder’s Participant to exercise such warrants, that solely for purposes of Regulation SHO that such holder shall be deemed to have exercised such warrants.
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(b) Upon receipt of a Notice of Exercise for a Cashless Exercise the Company will promptly calculate and transmit to the Warrant Agent the number of Warrant Shares issuable in connection with such Cashless Exercise and deliver a copy of the Notice of Exercise to the Warrant Agent, which shall issue such number of Warrant Shares in connection with such Cashless Exercise.
(c) Upon the exercise of the Warrant Certificate pursuant to the terms of Section 2 of the Warrant Certificate, the Warrant Agent shall cause the Warrant Shares underlying such Warrant Certificate or Global Warrant to be delivered to or upon the order of the Holder of such Warrant Certificate or Global Warrant, registered in such name or names as may be designated by such Holder, no later than the Warrant Share Delivery Date (as such term is defined in the Warrant Certificate). If the Company is then a participant in the DWAC system of the Depositary and either (A) there is an effective registration statement permitting the issuance of the Warrant Shares to or resale of the Warrant Shares by Holder or (B) the Warrant is being exercised via Cashless Exercise, then the certificates for Warrant Shares shall be transmitted by the Warrant Agent to the Holder by crediting the account of the Holder’s broker with the Depositary through its DWAC system. For the avoidance of doubt, if the Company becomes obligated to pay any amounts to any Holders pursuant to Section 2(d)(i) or 2(d)(iv) of the Warrant Certificate, such obligation shall be solely that of the Company and not that of the Warrant Agent. Notwithstanding anything else to the contrary in this Agreement, except in the case of a Cashless Exercise, if any Holder fails to duly deliver payment to the Warrant Agent of an amount equal to the aggregate Exercise Price of the Warrant Shares to be purchased upon exercise of such Holder’s Warrant as set forth in Section 7(a) hereof by the Warrant Share Delivery Date, the Warrant Agent will not obligated to deliver such Warrant Shares (via DWAC or otherwise) until following receipt of such payment, and the applicable Warrant Share Delivery Date shall be deemed extended by one day for each day (or part thereof) until such payment is delivered to the Warrant Agent.
(d) The Warrant Agent shall deposit all funds received by it in payment of the Exercise Price for all Warrants in the account of the Company maintained with the Warrant Agent for such purpose (or to such other account as directed by the Company in writing) and shall advise the Company via email at the end of each day on which notices of exercise are received or funds for the exercise of any Warrant are received of the amount so deposited to its account.
Section 8. Cancellation and Destruction of Warrant Certificates. All Warrant Certificates surrendered for the purpose of exercise, transfer, split up, combination or exchange shall, if surrendered to the Company or to any of its agents, be delivered to the Warrant Agent for cancellation or in canceled form, or, if surrendered to the Warrant Agent, shall be canceled by it, and no Warrant Certificate shall be issued in lieu thereof except as expressly permitted by any of the provisions of this Agreement. The Company shall deliver to the Warrant Agent for cancellation and retirement, and the Warrant Agent shall so cancel and retire, any other Warrant Certificate purchased or acquired by the Company otherwise than upon the exercise thereof. The Warrant Agent shall deliver all canceled Warrant Certificates to the Company, or shall, at the written request of the Company, destroy such canceled Warrant Certificates, and in such case shall deliver a certificate of destruction thereof to the Company, subject to any applicable law, rule or regulation requiring the Warrant Agent to retain such canceled certificates.
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Section 9. Certain Representations; Reservation and Availability of Shares of Common Stock or Cash.
(a) This Agreement has been duly authorized, executed and delivered by the Company and, assuming due authorization, execution and delivery hereof by the Warrant Agent, constitutes a valid and legally binding obligation of the Company enforceable against the Company in accordance with its terms, and the Warrants have been duly authorized, executed and issued by the Company and, assuming due authentication thereof by the Warrant Agent pursuant hereto and payment therefor by the Holders as provided in the Registration Statement, constitute valid and legally binding obligations of the Company enforceable against the Company in accordance with their terms and entitled to the benefits hereof; in each case except as enforceability may be limited by bankruptcy, insolvency, reorganization, moratorium and other similar laws relating to or affecting creditors’ rights generally or by general equitable principles (regardless of whether such enforceability is considered in a proceeding in equity or at law).
(b) As of the date hereof, the authorized capital stock of the Company consists of (i) five hundred million (500,000,000) shares of common stock, of which approximately 9,689,613 shares of Common Stock are issued and outstanding as of February 8, 2024, and 1,366,442 shares of Common Stock are reserved for issuance upon exercise of the Warrants, and (ii) one million (1,000,000) shares of preferred stock, par value $0.001 per share, of which no shares are issued and outstanding. Except as disclosed in the Registration Statement, there are no other outstanding obligations, warrants, options or other rights to subscribe for or purchase from the Company any class of capital stock of the Company.
(c) The Company covenants and agrees that it will cause to be reserved and kept available out of its authorized and unissued shares of Common Stock or its authorized and issued shares of Common Stock held in its treasury, free from preemptive rights, the number of shares of Common Stock that will be sufficient to permit the exercise in full of all outstanding Warrants.
(d) The Warrant Agent will create a special account for the issuance of Common Stock upon the exercise of Warrants.
(e) The Company further covenants and agrees that it will pay when due and payable any and all federal and state transfer taxes and charges which may be payable in respect of the original issuance or delivery of the Warrant Certificates or certificates evidencing Common Stock upon exercise of the Warrants. The Company shall not, however, be required to pay any tax or governmental charge which may be payable in respect of any transfer involved in the transfer or delivery of Warrant Certificates or the issuance or delivery of certificates for Common Stock in a name other than that of the Holder of the Warrant Certificate evidencing Warrants surrendered for exercise or to issue or deliver any certificate for shares of Common Stock upon the exercise of any Warrants until any such tax or governmental charge shall have been paid (any such tax or governmental charge being payable by the Holder of such Warrant Certificate at the time of surrender) or until it has been established to the Company’s reasonable satisfaction that no such tax or governmental charge is due.
Section 10. Common Stock Record Date. Each Person in whose name any certificate for shares of Common Stock is issued (or to whose broker’s account is credited shares of Common Stock through the DWAC system) upon the exercise of Warrants shall for all purposes be deemed to have become the holder of record for the Common Stock represented thereby on, and such certificate shall be dated, the date on which submission of the Notice of Exercise was made, provided that the Warrant Certificate evidencing such Warrant is duly surrendered (but only if required herein) and payment of the Exercise Price (and any applicable transfer taxes) is received on or prior to the Warrant Share Delivery Date; provided, however, that if the date of submission of the Notice of Exercise is a date upon which the Common Stock transfer books of the Company are closed, such Person shall be deemed to have become the record holder of such shares on, and such certificate shall be dated, the next succeeding day on which the Common Stock transfer books of the Company are open.
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Section 11. Adjustment of Exercise Price, Number of Shares of Common Stock or Number of the Company Warrants. The Exercise Price, the number of shares covered by each Warrant and the number of Warrants outstanding are subject to adjustment from time to time as provided in Section 3 of the Warrant Certificate. In the event that at any time, as a result of an adjustment made pursuant to Section 3 of the Warrant Certificate, the Holder of any Warrant thereafter exercised shall become entitled to receive any shares of capital stock of the Company other than shares of Common Stock, thereafter the number of such other shares so receivable upon exercise of any Warrant shall be subject to adjustment from time to time in a manner and on terms as nearly equivalent as practicable to the provisions with respect to the shares contained in Section 3 of the Warrant Certificate and the provisions of Sections 7, 11 and 12 of this Agreement with respect to the shares of Common Stock shall apply on like terms to any such other shares. All Warrants originally issued by the Company subsequent to any adjustment made to the Exercise Price pursuant to the Warrant Certificate shall evidence the right to purchase, at the adjusted Exercise Price, the number of shares of Common Stock purchasable from time to time hereunder upon exercise of the Warrants, all subject to further adjustment as provided herein.
Section 12. Certification of Adjusted Exercise Price or Number of Shares of Common Stock. Whenever the Exercise Price or the number of shares of Common Stock issuable upon the exercise of each Warrant is adjusted as provided in Section 11 or 13, the Company shall (a) promptly prepare a certificate setting forth the Exercise Price of each Warrant as so adjusted, and a brief statement of the facts accounting for such adjustment, (b) promptly file with the Warrant Agent and with each transfer agent for the Common Stock a copy of such certificate and (c) instruct the Warrant Agent to send a brief summary thereof to each Holder of a Warrant Certificate.
Section 13. Fractional Shares of Common Stock.
(a) The Company shall not issue fractions of Warrants or distribute Warrant Certificates which evidence fractional Warrants. Whenever any fractional Warrant would otherwise be required to be issued or distributed, the actual issuance or distribution shall reflect a rounding of such fraction to the nearest whole Warrant (rounded down).
(b) The Company shall not issue fractions of shares of Common Stock upon exercise of Warrants or distribute stock certificates which evidence fractional shares of Common Stock. Whenever any fraction of a share of Common Stock would otherwise be required to be issued or distributed, the actual issuance or distribution in respect thereof shall be made in accordance with Section 2(d)(v) of the Warrant Certificate.
Section 14. Conditions of the Warrant Agent’s Obligations. The Warrant Agent accepts its obligations herein set forth upon the terms and conditions hereof, including the following to all of which the Company agrees and to all of which the rights hereunder of the Holders from time to time of the Warrant Certificates shall be subject:
| (a) | Compensation and Indemnification. The Company agrees promptly to pay the Warrant Agent the compensation detailed on Exhibit 4 hereto for all services rendered by the Warrant Agent and to reimburse the Warrant Agent for reasonable out-of-pocket expenses (including reasonable counsel fees) incurred without gross negligence or willful misconduct finally adjudicated to have been directly caused by the Warrant Agent in connection with the services rendered hereunder by the Warrant Agent. The Company also agrees to indemnify the Warrant Agent for, and to hold it harmless against, any loss, liability or expense incurred without gross negligence, or willful misconduct on the part of the Warrant Agent, finally adjudicated to have been directly caused by Warrant Agent hereunder, including the reasonable costs and expenses of defending against any claim of such liability. The Warrant Agent shall be under no obligation to institute or defend any action, suit, or legal proceeding in connection herewith or to take any other action likely to involve the Warrant Agent in expense, unless first indemnified to the Warrant Agent’s satisfaction. The indemnities provided by this paragraph shall survive the resignation or discharge of the Warrant Agent or the termination of this Agreement. Anything in this Agreement to the contrary notwithstanding, in no event shall the Warrant Agent be liable under or in connection with the Agreement for indirect, special, incidental, punitive or consequential losses or damages of any kind whatsoever, including but not limited to lost profits, whether or not foreseeable, even if the Warrant Agent has been advised of the possibility thereof and regardless of the form of action in which such damages are sought, and the Warrant Agent’s aggregate liability to the Company, or any of the Company’s representatives or agents, under this Section 14(a) or under any other term or provision of this Agreement, whether in contract, tort, or otherwise, is expressly limited to, and shall not exceed in any circumstances, one (1) year’s fees received by the Warrant Agent as fees and charges under this Agreement, but not including reimbursable expenses previously reimbursed to the Warrant Agent by the Company hereunder. |
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| (b) | Agent for the Company. In acting under this Warrant Agreement and in connection with the Warrant Certificates, the Warrant Agent is acting solely as agent of the Company and does not assume any obligations or relationship of agency or trust for or with any of the Holders of Warrant Certificates or beneficial owners of Warrants. |
| (c) | Counsel. The Warrant Agent may consult with counsel satisfactory to it, which may include counsel for the Company, and the written advice of such counsel shall be full and complete authorization and protection in respect of any action taken, suffered or omitted by it hereunder in good faith and in accordance with the advice of such counsel. |
| (d) | Documents. The Warrant Agent shall be protected and shall incur no liability for or in respect of any action taken or omitted by it in reliance upon any Warrant Certificate, notice, direction, consent, certificate, affidavit, statement or other paper or document reasonably believed by it to be genuine and to have been presented or signed by the proper parties. |
| (e) | Certain Transactions. The Warrant Agent, and its officers, directors and employees, may become the owner of, or acquire any interest in, Warrants, with the same rights that it or they would have if it were not the Warrant Agent hereunder, and, to the extent permitted by applicable law, it or they may engage or be interested in any financial or other transaction with the Company and may act on, or as depositary, trustee or agent for, any committee or body of Holders of Warrant Securities or other obligations of the Company as freely as if it were not the Warrant Agent hereunder. Nothing in this Warrant Agreement shall be deemed to prevent the Warrant Agent from acting as trustee under any indenture to which the Company is a party. |
| (f) | No Liability for Interest. Unless otherwise agreed with the Company, the Warrant Agent shall have no liability for interest on any monies at any time received by it pursuant to any of the provisions of this Agreement or of the Warrant Certificates. |
| (g) | No Liability for Invalidity. The Warrant Agent shall have no liability with respect to any invalidity of this Agreement or the Warrant Certificates (except as to the Warrant Agent’s countersignature thereon). |
| (h) | No Responsibility for Representations. The Warrant Agent shall not be responsible for any of the recitals or representations herein or in the Warrant Certificate (except as to the Warrant Agent’s countersignature thereon), all of which are made solely by the Company. |
| (i) | No Implied Obligations. The Warrant Agent shall be obligated to perform only such duties as are herein and in the Warrant Certificates specifically set forth and no implied duties or obligations shall be read into this Agreement or the Warrant Certificates against the Warrant Agent. The Warrant Agent shall not be under any obligation to take any action hereunder which may tend to involve it in any expense or liability, the payment of which within a reasonable time is not, in its reasonable opinion, assured to it. The Warrant Agent shall not be accountable or under any duty or responsibility for the use by the Company of any of the Warrant Certificates authenticated by the Warrant Agent and delivered by it to the Company pursuant to this Agreement or for the application by the Company of the proceeds of the Warrant Certificate. The Warrant Agent shall have no duty or responsibility in case of any default by the Company in the performance of its covenants or agreements contained herein or in the Warrant Certificates or in the case of the receipt of any written demand from a Holder of a Warrant Certificate with respect to such default, including, without limiting the generality of the foregoing, any duty or responsibility to initiate or attempt to initiate any proceedings at law. |
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Section 15. Purchase or Consolidation or Change of Name of Warrant Agent. Any corporation into which the Warrant Agent or any successor Warrant Agent may be merged or with which it may be consolidated, or any corporation resulting from any merger or consolidation to which the Warrant Agent or any successor Warrant Agent shall be party, or any corporation succeeding to the corporate trust business of the Warrant Agent or any successor Warrant Agent, shall be the successor to the Warrant Agent under this Agreement without the execution or filing of any paper or any further act on the part of any of the parties hereto, provided that such corporation would be eligible for appointment as a successor Warrant Agent under the provisions of Section 17. In case at the time such successor Warrant Agent shall succeed to the agency created by this Agreement any of the Warrant Certificates shall have been countersigned but not delivered, any such successor Warrant Agent may adopt the countersignature of the predecessor Warrant Agent and deliver such Warrant Certificates so countersigned; and in case at that time any of the Warrant Certificates shall not have been countersigned, any successor Warrant Agent may countersign such Warrant Certificates either in the name of the predecessor Warrant Agent or in the name of the successor Warrant Agent; and in all such cases such Warrant Certificates shall have the full force provided in the Warrant Certificates and in this Agreement.
In case at any time the name of the Warrant Agent shall be changed and at such time any of the Warrant Certificates shall have been countersigned but not delivered, the Warrant Agent may adopt the countersignature under its prior name and deliver such Warrant Certificates so countersigned; and in case at that time any of the Warrant Certificates shall not have been countersigned, the Warrant Agent may countersign such Warrant Certificates either in its prior name or in its changed name; and in all such cases such Warrant Certificates shall have the full force provided in the Warrant Certificates and in this Agreement.
Section 16. Duties of Warrant Agent. The Warrant Agent undertakes the duties and obligations imposed by this Agreement upon the following terms and conditions, by all of which the Company, by its acceptance hereof, shall be bound:
(a) The Warrant Agent may consult with legal counsel reasonably acceptable to the Company (who may be legal counsel for the Company), and the opinion of such counsel shall be full and complete authorization and protection to the Warrant Agent as to any action taken or omitted by it in good faith and in accordance with such opinion.
(b) Whenever in the performance of its duties under this Agreement the Warrant Agent shall deem it necessary or desirable that any fact or matter be proved or established by the Company prior to taking or suffering any action hereunder, such fact or matter (unless other evidence in respect thereof be herein specifically prescribed) may be deemed to be conclusively proved and established by a certificate signed by the Chief Executive Officer, Chief Financial Officer or Vice President of the Company; and such certificate shall be full authentication to the Warrant Agent for any action taken or suffered in good faith by it under the provisions of this Agreement in reliance upon such certificate.
(c) Subject to the limitation set forth in Section 14, the Warrant Agent shall be liable hereunder only for its own gross negligence or willful misconduct, or for a breach by it of this Agreement.
(d) The Warrant Agent shall not be liable for or by reason of any of the statements of fact or recitals contained in this Agreement or in the Warrant Certificate (except its countersignature thereof) by the Company or be required to verify the same, but all such statements and recitals are and shall be deemed to have been made by the Company only.
(e) The Warrant Agent shall not be under any responsibility in respect of the validity of this Agreement or the execution and delivery hereof (except the due execution hereof by the Warrant Agent) or in respect of the validity or execution of any Warrant Certificate (except its countersignature thereof); nor shall it be responsible for any breach by the Company of any covenant or condition contained in this Agreement or in any Warrant Certificate; nor shall it be responsible for the adjustment of the Exercise Price or the making of any change in the number of shares of Common Stock required under the provisions of Section 11 or 13 or responsible for the manner, method or amount of any such change or the ascertaining of the existence of facts that would require any such adjustment or change (except with respect to the exercise of Warrants evidenced by the Warrant Certificates after actual notice of any adjustment of the Exercise Price); nor shall it by any act hereunder be deemed to make any representation or warranty as to the authorization or reservation of any shares of Common Stock to be issued pursuant to this Agreement or any Warrant Certificate or as to whether any shares of Common Stock will, when issued, be duly authorized, validly issued, fully paid and nonassessable.
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(f) Each party hereto agrees that it will perform, execute, acknowledge and deliver or cause to be performed, executed, acknowledged and delivered all such further and other acts, instruments and assurances as may reasonably be required by the other party hereto for the carrying out or performing by any party of the provisions of this Agreement.
(g) The Warrant Agent is hereby authorized to accept instructions with respect to the performance of its duties hereunder from the Chief Executive Officer, Chief Financial Officer or Vice President of the Company, and to apply to such officers for advice or instructions in connection with its duties, and it shall not be liable and shall be indemnified and held harmless for any action taken or suffered to be taken by it in good faith in accordance with instructions of any such officer, provided Warrant Agent carries out such instructions without gross negligence or willful misconduct.
(h) The Warrant Agent and any shareholder, director, officer or employee of the Warrant Agent may buy, sell or deal in any of the Warrants or other securities of the Company or become pecuniarily interested in any transaction in which the Company may be interested, or contract with or lend money to the Company or otherwise act as fully and freely as though it were not Warrant Agent under this Agreement. Nothing herein shall preclude the Warrant Agent from acting in any other capacity for the Company or for any other legal entity.
(i) The Warrant Agent may execute and exercise any of the rights or powers hereby vested in it or perform any duty hereunder either itself or by or through its attorney or agents, and the Warrant Agent shall not be answerable or accountable for any act, default, neglect or misconduct of any such attorney or agents or for any loss to the Company resulting from any such act, default, neglect or misconduct, provided reasonable care was exercised in the selection and continued employment thereof.
Section 17. Change of Warrant Agent. The Warrant Agent may resign and be discharged from its duties under this Agreement upon 30 days’ notice in writing sent to the Company and to each transfer agent of the Common Stock, and to the Holders of the Warrant Certificates. The Company may remove the Warrant Agent or any successor Warrant Agent upon 30 days’ notice in writing, sent to the Warrant Agent or successor Warrant Agent, as the case may be, and to each transfer agent of the Common Stock, and to the Holders of the Warrant Certificates. If the Warrant Agent shall resign or be removed or shall otherwise become incapable of acting, the Company shall appoint a successor to the Warrant Agent. If the Company shall fail to make such appointment within a period of 30 days after such removal or after it has been notified in writing of such resignation or incapacity by the resigning or incapacitated Warrant Agent or by the Holder of a Warrant Certificate (who shall, with such notice, submit his Warrant Certificate for inspection by the Company), then the Holder of any Warrant Certificate may apply to any court of competent jurisdiction for the appointment of a new Warrant Agent, provided that, for purposes of this Agreement, the Company shall be deemed to be the Warrant Agent until a new warrant agent is appointed. Any successor Warrant Agent, whether appointed by the Company or by such a court, shall be a corporation organized and doing business under the laws of the United States or of a state thereof, in good standing, which is authorized under such laws to exercise corporate trust powers and is subject to supervision or examination by federal or state authority and which has at the time of its appointment as Warrant Agent a combined capital and surplus of at least $50,000,000. After appointment, the successor Warrant Agent shall be vested with the same powers, rights, duties and responsibilities as if it had been originally named as Warrant Agent without further act or deed; but the predecessor Warrant Agent shall deliver and transfer to the successor Warrant Agent any property at the time held by it hereunder, and execute and deliver any further assurance, conveyance, act or deed necessary for the purpose. Not later than the effective date of any such appointment, the Company shall file notice thereof in writing with the predecessor Warrant Agent and each transfer agent of the Common Stock, and mail a notice thereof in writing to the Holders of the Warrant Certificates. However, failure to give any notice provided for in this Section 17, or any defect therein, shall not affect the legality or validity of the resignation or removal of the Warrant Agent or the appointment of the successor Warrant Agent, as the case may be.
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Section 18. Issuance of New Warrant Certificates. Notwithstanding any of the provisions of this Agreement or of the Warrants to the contrary, the Company may, at its option, issue new Warrant Certificates evidencing Warrants in such form as may be approved by its Board of Directors to reflect any adjustment or change in the Exercise Price per share and the number or kind or class of shares of stock or other securities or property purchasable under the several Warrant Certificates made in accordance with the provisions of this Agreement.
Section 19. Notices. Notices or demands authorized by this Agreement to be given or made (i) by the Warrant Agent or by the Holder of any Warrant Certificate to or on the Company, (ii) subject to the provisions of Section 17, by the Company or by the Holder of any Warrant Certificate to or on the Warrant Agent or (iii) by the Company or the Warrant Agent to the Holder of any Warrant Certificate shall be deemed given (a) on the date delivered, if delivered personally, (b) on the first Business Day following the deposit thereof with Federal Express or another recognized overnight courier, if sent by Federal Express or another recognized overnight courier, (c) on the fourth Business Day following the mailing thereof with postage prepaid, if mailed by registered or certified mail (return receipt requested), and (d) the time of transmission, if such notice or communication is delivered via facsimile or email attachment at or prior to 5:30 p.m. (New York City time) on a Business Day and (e) the next Business Day after the date of transmission, if such notice or communication is delivered via facsimile or email attachment on a day that is not a Business Day or later than 5:30 p.m. (New York City time) on any Business Day, in each case to the parties at the following addresses (or at such other address for a party as shall be specified by like notice):
| (a) | If to the Company, to: |
AmpliTech Group, Inc.
620 Johnson Avenue
Bohemia, NY 11716
E-mail: fmaqbool@amplitechinc.com
Attention: Fawad Maqbool, President and Chief Executive Officer
Copy to:
Sichenzia Ross Ference Carmel LLP
1185 Avenue of the Americas
New York, New York 10036
e-mail: gsichenzia@srfc.law
Attention: Gregory Sichenzia, Esq.
| (b) | If to the Warrant Agent, to: |
VStock Transfer, LLC
18 Lafayette Place
Woodmere, New York 11598
For any notice delivered by email to be deemed given or made, such notice must be followed by notice sent by overnight courier service to be delivered on the next business day following such email, unless the recipient of such email has acknowledged via return email receipt of such email.
(c) If to the Holder of any Warrant Certificate to the address of such Holder as shown on the registry books of the Company. Any notice required to be delivered by the Company to the Holder of any Warrant may be given by the Warrant Agent on behalf of the Company. Notwithstanding any other provision of this Agreement, where this Agreement provides for notice of any event to a Holder of any Warrant, such notice shall be sufficiently given if given to the Depositary (or its designee) pursuant to the procedures of the Depositary or its designee.
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Section 20. Supplements and Amendments.
(a) The Company and the Warrant Agent may from time to time supplement or amend this Agreement without the approval of any Holders of Global Warrants in order to add to the covenants and agreements of the Company for the benefit of the Holders of the Global Warrants or to surrender any rights or power reserved to or conferred upon the Company in this Agreement, provided that such addition or surrender shall not adversely affect the interests of the Holders of the Global Warrants or Warrant Certificates in any material respect.
(b) In addition to the foregoing, with the consent of Holders of Warrants entitled, upon exercise thereof, to receive not less than a majority of the shares of Common Stock issuable thereunder, the Company and the Warrant Agent may modify this Agreement for the purpose of adding any provisions to or changing in any manner or eliminating any of the provisions of this Warrant Agreement or modifying in any manner the rights of the Holders of the Global Warrants; provided, however, that no modification of the terms (including but not limited to the adjustments described in Section 11) upon which the Warrants are exercisable or the rights of Holders of Warrants to receive liquidated damages or other payments in cash from the Company or reducing the percentage required for consent to modification of this Agreement may be made without the consent of the Holder of each outstanding Warrant Certificate affected thereby; provided further, however, that no amendment hereunder shall affect any terms of any Warrant Certificate issued in a Warrant Exchange. As a condition precedent to the Warrant Agent’s execution of any amendment, the Company shall deliver to the Warrant Agent a certificate from a duly authorized officer of the Company that states that the proposed amendment complies with the terms of this Section 20.
Section 21. Successors. All covenants and provisions of this Agreement by or for the benefit of the Company or the Warrant Agent shall bind and inure to the benefit of their respective successors and assigns hereunder.
Section 22. Benefits of this Agreement. Nothing in this Agreement shall be construed to give any Person other than the Company, the Holders of Warrant Certificates and the Warrant Agent any legal or equitable right, remedy or claim under this Agreement. This Agreement shall be for the sole and exclusive benefit of the Company, the Warrant Agent and the Holders of the Warrant Certificates. Notwithstanding anything to the contrary contained herein, to the extent any provision of a Warrant Certificate conflicts with any provision of this Agreement, the provisions of the Warrant Certificate shall govern and be controlling.
Section 23. Governing Law. This Agreement and each Warrant Certificate and Global Warrant issued hereunder shall be governed by, and construed in accordance with, the laws of the State of New York, without giving effect to the conflicts of law principles thereof. Any action brought by any party hereto shall be brought within the State of New York, Suffolk Country.
Section 24. Counterparts. This Agreement may be executed in any number of counterparts and each of such counterparts shall for all purposes be deemed to be an original, and all such counterparts shall together constitute but one and the same instrument.
Section 25. Captions. The captions of the sections of this Agreement have been inserted for convenience only and shall not control or affect the meaning or construction of any of the provisions hereof.
Section 26. Information. The Company agrees to promptly provide to the Holders of the Warrants any information it provides to the holders of the Common Stock, except to the extent any such information is publicly available on the EDGAR system (or any successor thereof) of the Securities and Exchange Commission.
[SIGNATURE PAGE FOLLOWS]
| 13 |
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed as of the day and year first above written.
| AMPLITECH GROUP, INC. | ||
| By: | /s/ Fawad Maqbool | |
| Name: | Fawad Maqbool | |
| Title: | Chief Executive Officer | |
| By: | /s/ Louisa Sanfratello | |
| Name: | Louisa Sanfratello | |
| Title: | Chief Financial Officer | |
| VSTOCK TRANSFER, LLC | ||
| By: | /s/ | |
| Name: | ||
| Title: | ||
Exhibit 1
Form of Warrant Certificate
Exhibit 2
Form of Warrant Certificate Request Notice
WARRANT CERTIFICATE REQUEST NOTICE
To: VStock Tranfer, LLC, as Warrant Agent for AmpliTech Group, Inc. (the “Company”)
The undersigned Holder of Common Stock Purchase Warrants (“Warrants”) in the form of Global Warrants issued by the Company hereby elects to receive a Warrant Certificate evidencing the Warrants held by the Holder as specified below:
| 1. | Name of Holder of Warrants in form of Global Warrants: _____________________________ |
| 2. | Name of Holder in Warrant Certificate (if different from name of Holder of Warrants in form of Global Warrants): ________________________________ |
| 3. | Number of Warrants in name of Holder in form of Global Warrants: ___________________ |
| 4. | Number of Warrants for which Warrant Certificate shall be issued: __________________ |
| 5. | Number of Warrants in name of Holder in form of Global Warrants after issuance of Warrant Certificate, if any: ___________ |
| 6. | Warrant Certificate shall be delivered to the following address: |
______________________________
______________________________
______________________________
______________________________
The undersigned hereby acknowledges and agrees that, in connection with this Warrant Exchange and the issuance of the Warrant Certificate, the Holder is deemed to have surrendered the number of Warrants in form of Global Warrants in the name of the Holder equal to the number of Warrants evidenced by the Warrant Certificate.
[SIGNATURE OF HOLDER]
Name of Investing Entity: ____________________________________________________
Signature of Authorized Signatory of Investing Entity: ______________________________
Name of Authorized Signatory: ________________________________________________
Title of Authorized Signatory: _________________________________________________
Date: _______________________________________________________________
Exhibit 3
Form of Global Warrant Request Notice
GLOBAL WARRANT REQUEST NOTICE
To: VStock Transfer, LLC, as Warrant Agent for AmpliTech Group, Inc. (the “Company”)
The undersigned Holder of Common Stock Purchase Warrants (“Warrants”) in the form of Warrants Certificates issued by the Company hereby elects to receive a Global Warrant evidencing the Warrants held by the Holder as specified below:
| 1. | Name of Holder of Warrants in form of Warrant Certificates: _____________________________ |
| 2. | Name of Holder in Global Warrant (if different from name of Holder of Warrants in form of Warrant Certificates): ________________________________ |
| 3. | Number of Warrants in name of Holder in form of Warrant Certificates: ___________________ |
| 4. | Number of Warrants for which Global Warrant shall be issued: __________________ |
| 5. | Number of Warrants in name of Holder in form of Warrant Certificates after issuance of Global Warrant, if any: ___________ |
| 6. | Global Warrant shall be delivered to the following address: |
______________________________
______________________________
______________________________
______________________________
The undersigned hereby acknowledges and agrees that, in connection with this Global Warrant Exchange and the issuance of the Global Warrant, the Holder is deemed to have surrendered the number of Warrants in form of Warrant Certificates in the name of the Holder equal to the number of Warrants evidenced by the Global Warrant.
[SIGNATURE OF HOLDER]
Name of Investing Entity: ____________________________________________________
Signature of Authorized Signatory of Investing Entity: ______________________________
Name of Authorized Signatory: ________________________________________________
Title of Authorized Signatory: _________________________________________________
Date: _______________________________________________________________
Exhibit 4
Warrant Agent Fee Schedule
EXHIBIT 23.1
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We consent to the incorporation by reference in Registration Statements (No. 333-251332 and No. 333-276902) on Form S-8, and Registration Statements (No. 333-255656, No. 333-254969, No. 333-251260 and No. 333-264420) on Form S-3 of AmpliTech Group, Inc. of our report dated April 1, 2024, with respect to our audits of the consolidated financial statements of AmpliTech Group Inc. as of and for the years ended December 31, 2023, and 2022, which appears in this Form 10-K.
/s/ Sadler, Gibb & Associates, LLC
Draper, UT
April 1, 2024
EXHIBIT 31.1
CERTIFICATION OF CHIEF EXECUTIVE OFFICER
PURSUANT TO SECTION 302(a) OF THE SARBANES-OXLEY ACT OF 2002
I, Fawad Maqbool, President and Chief Executive Officer of AmpliTech Group, Inc. (the “Company”), certify that:
1. I have reviewed this annual report on Form 10-K of the Company for the year ended December 31, 2023;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
Date: April 1, 2024
| By: | /s/ Fawad Maqbool | |
| Fawad Maqbool | ||
President and Chief Executive Officer (Principal Executive Officer) |
EXHIBIT 31.2
CERTIFICATION OF CHIEF FINANCIAL OFFICER
PURSUANT TO SECTION 302(a) OF THE SARBANES-OXLEY ACT OF 2002
I, Louisa Sanfratello, Chief Financial Officer and Secretary of AmpliTech Group, Inc. (the “Company”), certify that:
1. I have reviewed this annual report on Form 10-K of the Company for the year ended December 31, 2023;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
Date April 1, 2024
| /s/ Louisa Sanfratello | |
|
Louisa Sanfratello, CPA Chief Financial Officer and Secretary (Principal Financial and Accounting Officer) |
EXHIBIT 32.1
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
The undersigned, Fawad Maqbool, President and Chief Executive Officer, of AmpliTech Group, Inc. (the “Registrant”) certifies, under the standards set forth and solely for the purposes of 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that the Annual Report on Form 10-K of the Registrant for the year ended December 31, 2023 (the “Report”):
| (1) | fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and | |
| (2) | the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Registrant. |
Dated: April 1, 2024
| By: | /s/ Fawad Maqbool | |
| Fawad Maqbool | ||
|
President and Chief Executive Officer (Principal Executive Officer) |
A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.
EXHIBIT 32.2
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
The undersigned, Louisa Sanfratello, Chief Financial Officer and Secretary of AmpliTech Group, Inc. (the “Registrant”) certifies, under the standards set forth and solely for the purposes of 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that the Annual Report on Form 10-K of the Registrant for the year ended December 31, 2023 (the “Report”):
| (1) | fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and | |
| (2) | the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Registrant. |
Dated: April 1, 2024
| /s/ Louisa Sanfratello | |
|
Louisa Sanfratello, CPA Chief Financial Officer and Secretary (Principal Financial and Accounting Officer) |
A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.
Exhibit 97.1
AMPLITECH GROUP, INC.
CLAWBACK POLICY
EFFECTIVE NOVEMBER 16, 2023
| 1. | Purpose. The purpose of this AmpliTech Group Inc. (the “Company“) Clawback Policy (this “Policy“) is to enable the Company to recover Erroneously Awarded Compensation from Covered Executive Officers in the event that the Company is required to prepare an Accounting Restatement. This Policy is designed to comply with, and shall be interpreted to be consistent with, Section 954 of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, as codified in Section 10D of the Securities Exchange Act of 1934, as amended (the “Exchange Act“), Rule 10D-1 promulgated under the Exchange Act (“Rule 10D-1“) and Listing Rule 5608 of the corporate governance rules of The Nasdaq Stock Market (“Nasdaq“) (the “Listing Standards“). Unless otherwise defined in this Policy, capitalized terms shall have the meaning ascribed to such terms in Section 2. |
| 2. | Definitions. As used in this Policy, the following capitalized terms shall have the meanings set forth below. |
| a. | “Accounting Restatement“ means an accounting restatement of the Company’s financial statements due to the Company’s material noncompliance with any financial reporting requirement under the securities laws, including any required accounting restatement to correct an error in previously issued financial statements that is material to the previously issued financial statements (i.e., a “Big R“ restatement), or to correct an error that is not material to the previously issued financial statements, but that would result in a material misstatement if the error were corrected in the current period or left uncorrected in the current period (i.e., a “little r“ restatement). |
| b. | “Accounting Restatement Date“ means the earlier to occur of (i) the date the Board, a committee of the Board, or the officer or officers of the Company authorized to take such action if the Board’s action is not required, concludes, or reasonably should have concluded, that the Company is required to prepare an Accounting Restatement and (ii) the date a court, regulator, or other legally authorized body directs the Company to prepare an Accounting Restatement. |
| c. | “Applicable Period“ means, with respect to any Accounting Restatement, the three completed fiscal years immediately preceding the Accounting Restatement Date, as well as any transition period (that results from a change in the Company’s fiscal year) within or immediately following those three completed fiscal years (except that a transition period that comprises a period of at least nine months shall count as a completed fiscal year). |
| d. | “Board“ means the board of directors of the Company. |
| e. | “Code“ means the U.S. Internal Revenue Code of 1986, as amended. Any reference to a section of the Code or regulation thereunder includes such section or regulation, any valid regulation or other official guidance promulgated under such section, and any comparable provision of any future legislation or regulation amending, supplementing, or superseding such section or regulation. |
| f. | “Covered Executive Officer“ means an individual who is currently or previously served as the Company’s principal executive officer, principal financial officer, principal accounting officer (or, if there is no such accounting officer, the controller), vice president of the Company in charge of a principal business unit, division, or function (such as sales, administration, or finance), an officer who performs (or performed) a policy-making function, or any other person who performs (or performed) similar policy-making functions for the Company or is otherwise determined to be an executive officer of the Company pursuant to Item 401(b) of Regulation S-K. An executive officer of the Company’s parent or subsidiary is deemed a “Covered Executive Officer“ if the executive officer performs (or performed) such policy- making functions for the Company. |
| g. | “Erroneously Awarded Compensation“ means, in the event of an Accounting Restatement, the amount of Incentive-Based Compensation previously received that exceeds the amount of Incentive-Based Compensation that otherwise would have been received had it been determined based on the restated amounts in such Accounting Restatement, and must be computed without regard to any taxes paid by the relevant Covered Executive Officer; provided, however, that for Incentive-Based Compensation based on stock price or total stockholder return, where the amount of Erroneously Awarded Compensation is not subject to mathematical recalculation directly from the information in an Accounting Restatement: (i) the amount of Erroneously Awarded Compensation must be based on a reasonable estimate of the effect of the Accounting Restatement on the stock price or total stockholder return upon which the Incentive-Based Compensation was received and (ii) the Company must maintain documentation of the determination of that reasonable estimate and provide such documentation to Nasdaq. |
| h. | “Financial Reporting Measure“ means any measure that is determined and presented in accordance with the accounting principles used in preparing the Company’s financial statements and any measure that is derived wholly or in part from such measure. A Financial Reporting Measure is not required to be presented within the Company’s financial statements or included in a filing with the U.S. Securities and Exchange Commission to qualify as a “Financial Reporting Measure.“ |
| i. | “Incentive-Based Compensation“ means any compensation that is granted, earned, or vested based wholly or in part upon the attainment of a Financial Reporting Measure. Incentive-Based Compensation is deemed “received“ for purposes of this Policy in the Company’s fiscal period during which the Financial Reporting Measure specified in the Incentive-Based Compensation award is attained, even if the payment or grant of such Incentive-Based Compensation occurs after the end of that period. |
| 3. | Administration. This Policy shall be administered by the Board, the Compensation Committee of the Board (the “Compensation Committee“), the Audit Committee of the Board (the “Audit Committee“) or a special committee comprised of members of the Compensation Committee and Audit Committee. For purposes of this Policy, the body charged with administering this Policy shall be referred to herein as the “Administrator.“ The Administrator is authorized to interpret and construe this Policy and to make all determinations necessary, appropriate or advisable for the administration of this Policy, in each case, to the extent permitted under the Listing Standards and in compliance with (or pursuant to an exemption from the application of) Section 409A of the Code. All determinations and decisions made by the Administrator pursuant to the provisions of this Policy shall be final, conclusive and binding on all persons, including the Company, its affiliates, its stockholders and Covered Executive Officers, and need not be uniform with respect to each person covered by this Policy. |
| In the administration of this Policy, the Administrator is authorized and directed to consult with the full Board or such other committees of the Board as may be necessary or appropriate as to matters within the scope of such other committee’s responsibility and authority. Subject to any limitation at applicable law, the Administrator may authorize and empower any officer or employee of the Company to take any and all actions necessary or appropriate to carry out the purpose and intent of this Policy (other than with respect to any recovery under this Policy involving such officer or employee). Any action or inaction by the Administrator with respect to a Covered Executive Officer under this Policy in no way limits the Administrator’s decision to act or not to act with respect to any other Covered Executive Officer under this Policy or under any similar policy, agreement or arrangement, nor shall any such action or inaction serve as a waiver of any rights the Company may have against any Covered Executive Officer other than as set forth in this Policy. | |
| 4. | Application of this Policy. This Policy applies to all Incentive-Based Compensation received by a person: (a) after beginning service as a Covered Executive Officer; (b) who served as a Covered Executive Officer at any time during the performance period for such Incentive-Based Compensation; (c) while the Company had a listed class of securities on a national securities exchange; and (d) during the Applicable Period. For the avoidance of doubt, Incentive-Based Compensation that is subject to both a Financial Reporting Measure vesting condition and a service-based vesting condition shall be considered received when the relevant Financial Reporting Measure is achieved, even if the Incentive-Based Compensation continues to be subject to the service-based vesting condition. |
| 5. | Recovery Erroneously Awarded Compensation. In the event of an Accounting Restatement, the Company must recover Erroneously Awarded Compensation reasonably promptly, in amounts determined pursuant to this Policy. The Company’s obligation to recover Erroneously Awarded Compensation is not dependent on the filing of restated financial statements. Recovery under this Policy with respect to a Covered Executive Officer shall not require the finding of any misconduct by such Covered Executive Officer or such Covered Executive Officer being found responsible for the accounting error leading to an Accounting Restatement. In the event of an Accounting Restatement, the method for recouping Erroneously Awarded Compensation shall be determined by the Administrator in its sole and absolute discretion, to the extent permitted under the Listing Standards and in compliance with (or pursuant to an exemption from the application of) Section 409A of the Code. |
Recovery may include, without limitation, (i) reimbursement of all or a portion of any incentive compensation award, (ii) cancellation of incentive compensation awards and (iii) any other method authorized by applicable law or contract.
The Company is authorized and directed pursuant to this Policy to recover Erroneously Awarded Compensation in compliance with this Policy unless the Compensation Committee has determined that recovery would be impracticable solely for the following limited reasons, and subject to the following procedural and disclosure requirements:
| a. | The direct expenses paid to a third party to assist in enforcing this Policy would exceed the amount to be recovered. Before reaching such conclusion, the Administrator must make a reasonable attempt to recover such Erroneously Awarded Compensation, document such reasonable attempt(s) to recover, and provide that documentation to Nasdaq; |
| b. | Recovery would violate home country law where that law was adopted prior to November 28, 2022. Before reaching such conclusion, the Administrator must obtain an opinion of home country counsel, acceptable to Nasdaq, that recovery would result in such a violation, and must provide such opinion to Nasdaq; or |
| c. | Recovery would likely cause an otherwise tax-qualified retirement plan, under which benefits are broadly available to employees of the Company, to fail to meet the requirements of Section 401(a)(13) or Section 411(a) of the Code. |
| 6. | Prohibition on Indemnification and Insurance Reimbursement. The Company is prohibited from indemnifying any Covered Executive Officer against the loss of any Erroneously Awarded Compensation. Further, the Company is prohibited from paying or reimbursing a Covered Executive Officer for the cost of purchasing insurance to cover any such loss. The Company is also prohibited from entering into any agreement or arrangement whereby this Policy would not apply or fail to be enforced against a Covered Executive Officer. |
| 7. | Required Policy-Related Disclosure and Filings. The Company shall file all disclosures with respect to this Policy in accordance with the requirements of the federal securities laws, including disclosures required by U.S. Securities and Exchange Commission filings. A copy of this Policy and any amendments hereto shall be posted on the Company’s website and filed as an exhibit to the Company’s annual report on Form 10-K. |
| 8. | Acknowledgement. Each Covered Executive Officer shall sign and return to the Company within thirty (30) calendar days following the later of (i) the effective date of this Policy set forth below or (ii) the date such individual becomes a Covered Executive Officer, the Acknowledgement Form attached hereto as Exhibit A, pursuant to which the Covered Executive Officer agrees to be bound by, and to comply with, the terms and conditions of this Policy. |
| 9. | Amendment; Termination. The Board may amend this Policy from time to time in its sole and absolute discretion and shall amend this Policy as it deems necessary to reflect the Listing Standards or to comply with (or maintain an exemption from the application of) Section 409A of the Code. The Board may terminate this Policy at any time; provided, that the termination of this Policy would not cause the Company to violate any federal securities laws, or rules promulgated by the U.S. Securities and Exchange Commission or the Listing Standards. |
| 10. | Other Recovery Obligations; General Rights. The Board intends that this Policy shall be applied to the fullest extent of the law. To the extent that the application of this Policy would provide for recovery of Incentive- Based Compensation that the Company already recovered pursuant to Section 304 of the Sarbanes-Oxley Act or other recovery obligations, any such amount recovered from a Covered Executive Officer will be credited to any recovery required under this Policy in respect of such Covered Executive Officer. |
| 11. | Effective Date. This Policy shall be effective as of November 16, 2023. The terms of this Policy shall apply to any Incentive- Based Compensation that is received by Covered Executive Officers on or after October 2, 2023, even if such Incentive-Based Compensation was approved, awarded or granted to Covered Executive Officers prior to such date. |
This Policy shall not limit the rights of the Company to take any other actions or pursue other remedies that the Company may deem appropriate under the circumstances and under applicable law, in each case, to the extent permitted under the Listing Standards and in compliance with (or pursuant to an exemption from the application of) Section 409A of the Code.
This Policy is binding and enforceable against all Covered Executive Officers and their beneficiaries, heirs, executors, administrators or other legal representatives.
EXHIBIT A
AMPLITECH GROUP, INC. CLAWBACK POLICY
ACKNOWLEDGEMENT FORM
By signing below, the undersigned acknowledges and confirms that the undersigned has received and reviewed a copy of the AmpliTech Group, Inc. (the “Company“) Clawback Policy (the “Policy“).
By signing this Acknowledgement Form, the undersigned acknowledges and agrees that the undersigned is and will continue to be subject to the Policy and that the Policy will apply both during and after the undersigned’s employment or service with the Company. Further, by signing below, the undersigned agrees to abide by the terms of the Policy, including, without limitation, by returning any Erroneously Awarded Compensation (as defined in the Policy) to the Company to the extent required by, and in a manner consistent with, the Policy.
| EXECUTIVE OFFICER | ||
| Signature | ||
| Print Name | ||
| Date |